Nordea Bank’s Earnings Call Highlights Strong Growth Amid Challenges

Nordea Bank (OTC) ((NRDBY)) has held its Q2 earnings call. Read on for the main highlights of the call.

Nordea Bank’s recent earnings call revealed a positive sentiment, underscored by strong performance in key areas such as mortgage lending, asset management, and profitability. The bank showcased a robust capital position and exceptional asset quality, despite facing challenges like a decline in net interest income and market volatility. Overall, Nordea remains well-positioned to meet its full-year guidance amidst a challenging market environment.

Strong Profitability and Growth in Key Metrics

Nordea Bank reported impressive profitability with a return on equity of 16.2% and earnings per share of EUR 0.35. The bank saw a 6% increase in mortgage lending and an 8% rise in retail deposits. Corporate lending and deposits also grew by 5% year-on-year, while assets under management surged by 9% to EUR 437 billion.

Exceptional Asset and Credit Quality

The bank’s asset and credit quality were highlighted by a net reversal of EUR 21 million in net loan losses, indicating strong credit performance. Additionally, EUR 60 million was released from the management judgment buffer, further emphasizing the bank’s solid asset quality.

Strong Capital Position

Nordea’s CET1 ratio stood at 15.6%, which is 1.9 percentage points above the regulatory requirement. This strong capital position allows the bank to support lending growth and engage in buyback programs, reinforcing its financial stability.

Positive Developments in Personal and Business Banking

In Personal Banking, mortgage lending increased by 6%, driven by growth in Sweden. Business Banking also experienced a 4% growth in lending volumes, with significant contributions from Sweden and Norway, and a 10% increase in deposits year-on-year.

Successful Integration of Norwegian Acquisition

The integration of the Norwegian acquisition has been successful, contributing to strong growth in Norway. This has resulted in cross-selling revenue synergies, enhancing Nordea’s market position in the region.

Decline in Net Interest Income

Despite the overall positive performance, Nordea faced a 6% year-on-year decline in net interest income, attributed to a declining interest rate environment and increased competition, particularly in the corporate sector.

Market Volatility Impact

Market volatility affected Nordea’s net fee and commission income, which remained stable year-on-year but was impacted by lower corporate finance and debt capital markets activity. The subdued equity markets, due to macroeconomic uncertainty, also played a role.

Challenges in Specific Segments

The Large Corporates & Institutions segment saw an 8% decline in total income, driven by lower rates and market volatility affecting equity capital markets and M&A activities. Competitive pressures were also noted in retail deposits and Business Banking in Denmark.

Forward-Looking Guidance

Nordea remains on track to achieve its full-year guidance, aiming for a return on equity above 15%. This is supported by strategic investments and strong capital generation, despite the challenges posed by a 6% decline in net interest income. The bank’s operating profit reached EUR 1.6 billion, with a cost-to-income ratio of 46.1%, and credit quality remains robust.

In conclusion, Nordea Bank’s earnings call reflected a strong performance with a positive outlook, despite facing some challenges. The bank’s robust capital position, exceptional asset quality, and strategic growth in key areas position it well to meet its full-year targets. Investors and market watchers can remain optimistic about Nordea’s ability to navigate the current market environment successfully.