REG - Nordea Bank Abp - Nordea Fourth-quarter and full-year results 2023
05/02/2024 08:15
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RNS Number : 0028C Nordea Bank Abp 05 February 2024
Fourth-quarter and full-year results 2023
Nordea Bank Abp
Financial Statement Release
5 February 2024 at 7:30 EET
Summary of the quarter
Continued high-quality income growth. Total income was up 1% despite continued
negative foreign exchange effects. The growth was driven by a 19% increase in
net interest income as net interest margins continued to improve. Net fee and
commission income decreased by 3% year on year and net insurance result was
15% lower. Net fair value result was very low following a strong quarter last
year. Excluding regulatory fees and EUR 177m in write-offs of intangible
assets, underlying costs increased by 2%, in line with Nordea's plan.
Return on equity 15.9% - excluding write-offs. Nordea's return on equity
excluding write-offs was 15.9% in the fourth quarter, compared with 16.3% a
year ago. The decrease was driven by the very low net fair value result,
impacted by interest rate volatility and negative revaluations in the
liquidity portfolio. The cost-to-income ratio excluding regulatory fees and
write-offs was 42%, up from 41%. Earnings per share were EUR 0.31, down from
EUR 0.35, driven by the write-offs and lower net fair value result.
Volumes stable in a slow market. Nordea's corporate lending increased by 1%
year on year. Mortgage lending volumes were unchanged as mortgage markets
remained slow. Retail deposit volumes were stable. Corporate deposits
decreased by 3% year on year, but grew by 4% quarter on quarter. Assets under
management increased by 5% and internal net flows amounted to EUR 1.9bn.
Strong credit quality, continued low net loan losses. Net loan losses and
similar net result amounted to EUR 83m or 10bp, a year-on-year increase mainly
attributable to lower reversals and a small increase in new provisions. The
requirement to automatically provide in full for aged non-performing retail
loans was implemented in the quarter. As a result, EUR 74m was transferred
from the structural management judgement buffer to collective provisions, as
planned. Overall provisioning levels and coverage were maintained, and the
total management judgement buffer now stands at EUR 495m.
Continued strong capital generation and increased dividend. Nordea's CET1
ratio increased to 17.0% from 16.3% the previous quarter, supported by solid
net profit generation. This is 4.9 percentage points above the current
regulatory requirement, which demonstrates the bank's strong capacity to
support its customers. Nordea continues to drive an efficient capital
structure and is progressing with its fourth share buy-back programme.
Nordea's Board has proposed a dividend of EUR 0.92 per share for 2023, an
increase of 15% compared with 2022.
Outlook for 2025 updated: return on equity above 15%. Nordea has a strong and
resilient business model, with a very well-diversified loan portfolio across
the Nordic region. This enables the bank to support its customers and deliver
high-quality earnings, with high profitability and low volatility, through the
economic cycle. For 2024, Nordea expects a return on equity above 15%.
(For further viewpoints, see the CEO comment on page 2. For definitions, see
page 56 in the Q4 2023 report.)
Group quarterly results and key ratios
EURm Q4 2023 Q4 2022 Chg % Q3 2023 Chg % Jan-Dec 2023 Jan-Dec 2022(1) Chg %
Net interest income 1,946 1,641 19 1,909 2 7,451 5,664 32
Net fee and commission income 763 785 -3 742 3 3,021 3,186 -5
Net insurance result 40 47 -15 63 -37 217 173 25
Net fair value result 154 396 -61 225 -32 1,014 1,160 -13
Other income 12 28 -57 13 -8 40 75 -47
Total operating income 2,915 2,897 1 2,952 -1 11,743 10,258 14
Total operating expenses excluding regulatory fees -1,397 -1,196 17 -1,174 19 -4,922 -4,512 9
Total operating expenses -1,417 -1,212 17 -1,194 19 -5,238 -4,834 8
Profit before loan losses 1,498 1,685 -11 1,758 -15 6,505 5,424 20
Net loan losses and similar net result -83 -59 -33 -167 -49
Operating profit 1,415 1,626 -13 1,725 -18 6,338 5,375 18
Cost-to-income ratio excluding regulatory fees, % 47.9 41.3 39.8 41.9 44.0
Cost-to-income ratio with amortised resolution fees, % 50.6 44.0 42.4 44.6 47.1
Return on equity with amortised resolution fees, % 14.1 16.3 17.9 16.9 13.8
Diluted earnings per share, EUR 0.31 0.35 -11 0.38 -18 1.37 1.10 25
1. Excluding items affecting comparability. See page 5 in the Q4 2023 report
for further details.
CEO comment
2023 was another strong year for Nordea. Despite the weakening economic
environment, we maintained good business momentum, made continued progress in
line with our business plan and delivered solid financial results. Full-year
return on equity increased to 16.9% from 13.8% in 2022.
In the current economic climate, many households and businesses understandably
feel more uncertain about the future. Rising prices and higher interest rates
have dampened economic activity. In general, our customers have adjusted well
to the new environment and the Nordic economies have shown considerable
resilience.
Our priority is always to proactively support our customers. As one of the
strongest and most profitable banks in Europe, we have demonstrated a great
capacity to do this. At the same time, we have seen that our customers
continue to show trust and confidence in Nordea as their financial partner.
Our engagement resulted in improved customer satisfaction scores in 2023.
Our omnichannel customer experience, combining excellent digital solutions and
high-quality advice, continues to be effective and appreciated by our
customers. The use of our digital services again rose significantly - 13% year
on year - reaching a record high of 1.4 billion logins. We also held more than
one million advisory meetings, up 9% on 2022.
We continue to work with our customers to reduce environmental risk and since
our baseline year of 2019 we have lowered our financed emissions by
approximately 25%, clearly demonstrating our commitment to reach our 40-50%
reduction target by 2030.
In the fourth quarter we continued our proactive approach to supporting our
customers and maintained solid underlying profitability despite the very low
net fair value result. This was supported by a 19% year-on-year increase in
net interest income and continued robust levels of lending. Our underlying
costs were up 2% year on year. During the quarter we wrote off intangible
assets of EUR 177m, primarily due to a change in the treatment of development
costs related to digital services (now expensed as incurred). Without these
write-offs, our return on equity was 15.9%.
The housing market remained subdued in the quarter, though we maintained a
stable level of mortgage lending. In Denmark, Finland and Norway, we
maintained our market shares in mortgage lending, and we continued to grow in
Sweden. Corporate lending increased by 1% year on year, with market shares
increasing in our prioritised segments.
Our credit quality remains strong. As expected, impacts from higher interest
rates and inflation are now materialising to some degree and we have made a
small number of specific provisions against lending to corporate customers.
Net loan losses and similar net result was EUR 83m, or 10bp. Our loan
portfolio is diversified across multiple sectors in our four Nordic markets,
which continue to show considerable resilience. Moreover, we have a
substantial management judgement buffer to cover additional potential losses.
Each of our four business areas performed well in the fourth quarter. In
Personal Banking we supported our customers proactively through our
market-leading digital offering and advisory services. We continued to see
increases in recurring investments and monthly savings top-ups. Deposit
volumes increased by 1%. Customer use of the mobile banking app grew, with
private users and logins up 8% and 12%, respectively, compared with the fourth
quarter of 2022.
In Business Banking we continued to enhance our services and delivered a
strong financial performance. Despite the slowing corporate market, lending
volumes grew by 1%, driven by Norway and Sweden. In the 2023 Prospera customer
satisfaction survey we ranked first for both SME and mid corporate banking in
Sweden, indicating solid progress with our strategy. Deposit volumes grew by
1% and we saw increasing demand for our savings and fixed-term deposit
products. In November we expanded our sustainability offering by launching a
Net-Zero Commitment Loan together with the non-profit global initiative SME
Climate Hub.
In Large Corporates & Institutions we continued to actively support our
Nordic customers in a more challenging environment. Lending was broadly stable
and customer activity remained high. Market-making result was lower,
particularly compared with the very high level seen a year ago. In the
Prospera survey we ranked first for large corporate banking in Denmark for the
fifth time and maintained a high corporate banking score at the Nordic level.
In Asset & Wealth Management we grew our private banking business, a key
focus in our savings strategy. Our efforts have gained widespread recognition:
we were named the best private bank in the Nordics by Prospera, Professional
Wealth Management and Global Finance in their respective rankings. We further
broadened our product range, and assets under management increased by 5% year
on year, to EUR 378.5bn, supported by net flows of EUR 1.9bn from internal
channels.
In December the Norwegian Competition Authority approved our acquisition of
Danske Bank's Norwegian personal customer business. Subject to regulatory
approval, the transaction is expected to close in late 2024.
Our strategy, pan-Nordic business model and well-diversified business
portfolio are serving us well. We continue to drive high capital generation.
Given our strong financial position and full-year results, our Board of
Directors has proposed a dividend of EUR 0.92 per share for 2023, a
year-on-year increase of 15%. Including our share buy-backs over the past
year, the total distribution to our shareholders will amount to approximately
EUR 1.27 per share, or 11% of our market capitalisation. During the fourth
quarter we increased our CET1 ratio to 17.0% - 4.9 percentage points above the
current regulatory requirement.
As previously communicated, we have updated our financial target for 2025: we
are now targeting a return on equity of above 15%, against our original target
of above 13%. Our upgraded 2025 target reflects the significant structural
improvements made across the Group over the past four years, which support the
delivery of high-quality earnings, with high profitability and low volatility.
In 2024 we aim to again grow our income faster than our costs - albeit with
narrower positive jaws than in 2023 - and to deliver a return on equity above
15% for the full year.
Every day, we work to earn the trust and loyalty of our customers and
shareholders. I would like to thank them for their support, and also all our
employees for their great efforts and relentless drive forward during 2023.
Our focus is unchanged - to be the preferred partner for customers in need of
a broad range of financial services.
Frank Vang-Jensen
President and Group CEO
Outlook (new)
Financial target for 2025
Nordea's financial target for 2025 is a return on equity of above 15%.
The target will be supported by a cost-to-income ratio of 44-46%, an annual
net loan loss ratio of around 10bp and the continuation of Nordea's
well-established capital and dividend policies.
Financial outlook for 2024
Nordea expects a return on equity of above 15%.
Capital policy
A management buffer of 150bp above the regulatory CET1 requirement.
Dividend policy
Nordea's dividend policy stipulates a dividend payout ratio of 60-70%,
applicable to profit for the financial year. Nordea will continuously assess
the opportunity to use share buy-backs as a tool to distribute excess capital.
Outlook (old)
Financial target for 2025
Nordea's financial target for 2025 is a return on equity above 13%.
The target will be supported by a cost-to-income ratio of 45-47%, an annual
net loan loss ratio of around 10bp and the continuation of Nordea's
well-established capital and dividend policies.
Financial outlook for 2023
Nordea expects a return on equity of above 15%.
Capital policy
A management buffer of 150-200bp above the regulatory CET1 requirement.
Dividend policy
Nordea's dividend policy stipulates a dividend payout ratio of 60-70%,
applicable to profit for the financial year. Nordea will continuously assess
the opportunity to use share buy-backs as a tool to distribute excess capital.
Dividend for 2023
On 31 December 2023 Nordea Bank Abp's distributable earnings, including profit
for the financial year − after subtracting capitalised development expenses
− were EUR 17,855m and other unrestricted equity amounted to EUR 4,575m.
Nordea's Board of Directors has decided to propose that the Annual General
Meeting (AGM) of 21 March 2024 authorise it to decide on a dividend payment of
a maximum of EUR 0.92 per share. This corresponds to approximately 66% of the
net profit for the year. The intention is for the Board to decide on a
dividend payment in a single instalment based on the authorisation immediately
after the AGM. The dividend will not be paid for shares held by Nordea on the
dividend record date.
Income statement excluding items affecting comparability(1)
EURm Q4 2023 Q4 2022 Chg % Q3 2023 Chg % Jan-Dec 2023 Jan-Dec 2022 Chg %
Net interest income 1,946 1,641 19 1,909 2 7,451 5,664 32
Net fee and commission income 763 785 -3 742 3 3,021 3,186 -5
Net insurance result 40 47 -15 63 -37 217 173 25
Net result from items at fair value 154 396 -61 225 -32 1,014 1,160 -13
Profit from associated undertakings and joint ventures accounted for under the 2 -1 4 -50 -3 -8 -63
equity method
Other operating income 10 29 -66 9 11 43 83 -48
Total operating income 2,915 2,897 1 2,952 -1 11,743 10,258 14
Staff costs -735 -721 2 -729 1 -2,908 -2,793 4
Other expenses -323 -315 3 -292 11 -1,206 -1,108 9
Regulatory fees -20 -16 25 -20 0 -316 -322 -2
Depreciation, amortisation and impairment charges of tangible and intangible -339 -160 -153 -808 -611 32
assets
Total operating expenses -1,417 -1,212 17 -1,194 19 -5,238 -4,834 8
Profit before loan losses 1,498 1,685 -11 1,758 -15 6,505 5,424 20
Net loan losses and similar net result -83 -59 41 -33 -167 -49
Operating profit 1,415 1,626 -13 1,725 -18 6,338 5,375 18
Income tax expense -309 -353 -12 -380 -19 -1,404 -1,189 18
Net profit for the period 1,106 1,273 -13 1,345 -18 4,934 4,186 18
1. Excluding the following items affecting comparability in the first quarter
of 2022: a non-deductible loss from the recycling of EUR 529m in accumulated
foreign exchange losses related to operations in Russia; EUR 8m (EUR 6m after
tax) in losses on fund investments in Russia, recognised in "Net result from
items at fair value"; and EUR 76m (EUR 64m after tax) in credit losses on
direct exposures to Russian counterparties, recognised in "Net loan losses and
similar net result". There was no impact on equity, own funds or capital from
the recycling of the accumulated foreign exchange losses, as a corresponding
positive item was recorded in "Other comprehensive income". Consequently, this
item has no impact on Nordeaʼs dividend or share buy-back capacity.
Ratios and key figures excluding items affecting comparability(1,2)
Q4 2023 Q4 2022 Chg % Q3 2023 Chg % Jan-Dec 2023 Jan-Dec 2022 Chg %
Diluted earnings per share (DEPS), EUR 0.31 0.35 -11 0.38 -18 1.37 1.10 25
EPS, rolling 12 months up to period end, EUR 1.37 1.11 23 1.41 -3 1.37 1.11 23
Return on equity with amortised resolution fees, % 14.1 16.3 17.9 16.9 13.8
Return on equity, % 14.7 16.9 18.5 16.9 13.8
Return on tangible equity, % 16.9 19.5 21.4 19.4 15.9
Return on risk exposure amount, % 3.2 3.5 3.8 3.5 2.9
Cost-to-income ratio excluding regulatory fees, % 47.9 41.3 39.8 41.9 44.0
Cost-to-income ratio with amortised resolution fees, % 50.6 44.0 42.4 44.6 47.1
Cost-to-income ratio, % 48.6 41.8 40.4 44.6 47.1
Net loan loss ratio, incl. loans held at fair value, bp 10 7 4 5 1
Return on capital at risk with amortised resolution fees, % 19.2 21.7 23.5 22.5 18.3
Return on capital at risk, % 20.0 22.6 24.4 22.5 18.3
1. See here for more detailed information regarding ratios and key figures
defined as alternative performance measures
(https://www.nordea.com/en/investor-relations/reports-and-presentations/group-interim-reports)
.
2. For details about items affecting comparability, see footnote 1 in the
previous table.
Business volumes, key items(1)
EURbn 31 Dec 2023 31 Dec 2022 Chg % 30 Sep 2023 Chg %
Loans to the public 344.8 345.7 0 343.3 0
Loans to the public, excl. repos/securities borrowing 324.0 327.3 -1 320.3 1
Deposits and borrowings from the public 210.1 217.5 -3 213.9 -2
Deposits from the public, excl. repos/securities lending 202.6 210.8 -4 202.4 0
Total assets 584.7 594.7 -2 609.8 -4
Assets under management 378.5 358.9 5 359.7 5
Equity 31.2 30.8 1 30.4 3
1. End of period.
Income statement including items affecting comparability
EURm Q4 2023 Q4 2022 Chg % Q3 2023 Chg % Jan-Dec 2023 Jan-Dec 2022 Chg %
Net interest income 1,946 1,641 19 1,909 2 7,451 5,664 32
Net fee and commission income 763 785 -3 742 3 3,021 3,186 -5
Net insurance result 40 47 -15 63 -37 217 173 25
Net result from items at fair value 154 396 -61 225 -32 1,014 623 63
Profit from associated undertakings and joint ventures accounted for under the 2 -1 4 -50 -3 -8 -63
equity method
Other operating income 10 29 -66 9 11 43 83 -48
Total operating income 2,915 2,897 1 2,952 -1 11,743 9,721 21
Staff costs -735 -721 2 -729 1 -2,908 -2,793 4
Other expenses -323 -315 3 -292 11 -1,206 -1,108 9
Regulatory fees -20 -16 25 -20 0 -316 -322 -2
Depreciation, amortisation and impairment charges of tangible and intangible -339 -160 -153 -808 -611 32
assets
Total operating expenses -1,417 -1,212 17 -1,194 19 -5,238 -4,834 8
Profit before loan losses 1,498 1,685 -11 1,758 -15 6,505 4,887 33
Net loan losses and similar net result -83 -59 41 -33 -167 -125 34
Operating profit 1,415 1,626 -13 1,725 -18 6,338 4,762 33
Income tax expense -309 -353 -12 -380 -19 -1,404 -1,175 19
Net profit for the period 1,106 1,273 -13 1,345 -18 4,934 3,587 38
Ratios and key figures including items affecting comparability(1)
Q4 2023 Q4 2022 Chg % Q3 2023 Chg % Jan-Dec 2023 Jan-Dec 2022 Chg %
Diluted earnings per share, EUR 0.31 0.35 -11 0.38 -18 1.37 0.94 46
EPS, rolling 12 months up to period end, EUR 1.37 0.96 43 1.41 -3 1.37 0.96 43
Share price(2), EUR 11.23 10.03 12 10.41 8 11.23 10.03 12
Proposed/actual dividend per share, EUR 0.92 0.80 15
Equity per share(2), EUR 8.86 8.46 5 8.56 4 8.86 8.46 5
Potential shares outstanding(2), million 3,528 3,654 -3 3,557 -1 3,528 3,654 -3
Weighted average number of diluted shares, million 3,534 3,674 -4 3,566 -1 3,579 3,782 -5
Return on equity with amortised resolution fees, % 14.1 16.3 17.9 16.9 11.8
Return on equity, % 14.7 16.9 18.5 16.9 11.8
Return on tangible equity, % 16.9 19.5 21.4 19.4 13.6
Return on risk exposure amount, % 3.2 3.5 3.8 3.5 2.5
Cost-to-income ratio excluding regulatory fees, % 47.9 41.3 39.8 41.9 46.4
Cost-to-income ratio with amortised resolution fees, % 50.6 44.0 42.4 44.6 49.7
Cost-to-income ratio, % 48.6 41.8 40.4 44.6 49.7
Net loan loss ratio, incl. loans held at fair value, bp 10 7 4 5 4
Common Equity Tier 1 capital ratio(2,3), % 17.0 16.4 16.3 17.0 16.4
Tier 1 capital ratio(2,3), % 19.4 18.7 18.7 19.4 18.7
Total capital ratio(2,3), % 22.2 20.8 20.7 22.2 20.8
Tier 1 capital(2,3), EURbn 26.8 27.2 -1 26.3 2 26.8 27.2 -1
Risk exposure amount(2), EURbn 138.7 145.3 -5 140.9 -2 138.7 145.3 -5
Return on capital at risk with amortised resolution fees, % 19.2 21.7 23.5 22.5 15.7
Return on capital at risk, % 20.0 22.6 24.4 22.5 15.7
Net interest margin, % 1.83 1.45 1.77 1.72 1.25
Number of employees (FTEs)(2) 29,153 28,268 3 29,266 0 29,153 28,268 3
Economic capital(2), EURbn 21.9 21.9 0 22.0 0 21.9 21.9 0
1. See here for more detailed information regarding ratios and key figures
defined as alternative performance measures
(https://www.nordea.com/en/investor-relations/reports-and-presentations/group-interim-reports)
.
2. End of period.
3. Including the result for the period.
2023 publications
Nordea's Annual Report for the financial year 2023, which includes the Audited
Financial Statements, the Board of Directors' Report and the Corporate
Governance Statement as well as the sustainability reporting, will be
published in week 9 by way of stock exchange release and will also be
available at www.nordea.com.
This release is a summary of Nordea's Q4 and full-year results 2023. The
complete report is attached to this release and can also be found on the below
link on our website.
Nordea Group Q4 2023 Report
(https://www.nordea.com/en/investor-relations/reports-and-presentations/latest-interim-results/)
http://www.rns-pdf.londonstockexchange.com/rns/0028C_1-2024-2-5.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/0028C_1-2024-2-5.pdf)
A webcast will be held on 5 February at 11.00 EET (10.00 CET), during which
Frank Vang-Jensen, President and Group CEO, will present the Q4 2023 results.
Frank Vang-Jensen will then present a target update together with Ian Smith,
Group CFO. The presentations will be followed by a Q&A audio session for
investors and analysts with Frank Vang-Jensen, Ian Smith and Ilkka Ottoila,
Head of Investor Relations.
The event will be webcast live and the presentation slides will be posted on
www.nordea.com/ir.
For further information:
Frank Vang-Jensen, President and Group CEO, +358 503 821 391
Ian Smith, Group CFO, +45 5547 8372
Ilkka Ottoila, Head of Investor Relations, +358 9 5300 7058
Ulrika Romantschuk, Head of Brand, Communication and Marketing, +358 10 416
8023
The information provided in this stock exchange release was submitted for
publication, through the agency of the contacts set out above, at 07.30 EET
(06.30 CET) on 5 February 2024.
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