REG - Nordea Bank Abp - First-quarter results 2024

Nordea Bank AbpAnnouncement

18/04/2024 08:15

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RNS Number : 1401L  Nordea Bank Abp  18 April 2024

First-quarter results 2024

Nordea Bank Abp

Interim report (Q1 and Q3)

18 April 2024 at 7:30 EET

Summary of the quarter

Continued high-quality income growth. Total income was up 6%, driven by an 11%
increase in net interest income. Net fee and commission income was stable year
on year and net insurance result increased by 33%. Net fair value result was
solid following a strong first quarter last year. Costs decreased by 9%,
driven by lower resolution fees. Costs excluding regulatory fees increased by
5%, driven by inflation and continued investments in risk management and
technology in line with Nordea's plan. Operating profit was up 19%.

Return on equity 18.1% - earnings per share up 23%. Nordea's return on equity
was 18.1% in the first quarter, compared with 17.1% a year ago. The
cost-to-income ratio excluding regulatory fees was stable at 40%. Earnings per
share increased to EUR 0.38 from EUR 0.31.

Volumes stable in a slow market. Nordea's corporate lending increased by 2%
year on year. Mortgage lending volumes were unchanged as mortgage markets
remained slow. Retail deposit volumes were up 1%. Corporate deposits decreased
by 6% year on year. Assets under management increased by 8% and Nordic net
flows amounted to EUR 1.1bn in the quarter.

Strong credit quality, continued low net loan losses. Net loan losses and
similar net result amounted to EUR 33m or 4bp. Overall provisioning levels and
coverage were maintained, and the total management judgement buffer remained
unchanged in local currencies (translating to EUR 505m).

Continued strong capital position. Nordea's CET1 ratio increased to 17.2%, 5.1
percentage points above the current regulatory requirement, which demonstrates
the bank's continued strong underlying capital generation and capacity to
support its customers. Nordea's Annual General Meeting of 21 March approved
the dividend of EUR 0.92 per share for 2023. Nordea continues to target an
efficient capital structure and completed its fourth share buy-back programme
in March.

Outlook for 2024 unchanged: 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 further viewpoints, see the CEO comment on page 2. For definitions, see
page 54 in the Q1 2024 report.)

 

Group quarterly results and key ratios
 EURm                                                    Q1 2024  Q1 2023  Chg %  Q4 2023  Chg %
 Net interest income                                     1,954    1,765    11     1,946    0
 Net fee and commission income                           763      765      0      763      0
 Net insurance result                                    61       46       33     40       53
 Net fair value result                                   291      345      -16    154      89
 Other income                                            16       0               12       33
 Total operating income                                  3,085    2,921    6      2,915    6
 Total operating expenses excluding regulatory fees      -1,226   -1,167   5      -1,397   -12
 Total operating expenses                                -1,289   -1,422   -9     -1,417   -9
 Profit before loan losses                               1,796    1,499    20     1,498    20
 Net loan losses and similar net result                  -33      -19             -83
 Operating profit                                        1,763    1,480    19     1,415    25

 Cost-to-income ratio excluding regulatory fees, %       39.7     39.9            47.9
 Cost-to-income ratio with amortised resolution fees, %  40.7     42.7            50.6
 Return on equity with amortised resolution fees,  %     18.1     17.1            14.1
 Diluted earnings per share, EUR                         0.38     0.31     23     0.31     23

CEO comment

We had a strong start to the year. Despite the subdued economic environment,
we maintained solid business momentum. Our competitive range of services and
proactive approach continue to be valued by our customers. Profitability was
again at a very good level, with return on equity reaching 18.1% for the
quarter, up from 17.1% a year ago.

Price inflation continued to ease across the Nordics, providing some relief to
households and businesses. However, macroeconomic and geopolitical uncertainty
remains high. Russia's war in Ukraine and the conflict in the Middle East are
constant reminders of the fragile state of the world today.

At Nordea, we are well equipped to navigate uncertainty and support our
customers. Our business franchise is strong, supported by a resilient and
well-diversified business model. We have leading positions in all our markets
and business areas. And, as our first-quarter results demonstrate, we continue
to be one of the best-performing banks in Europe.

Total income for the quarter increased by 6% year on year to EUR 3.1bn, driven
by 11% higher net interest income. Total costs decreased by 9% due to
substantially lower regulatory fees. Our cost-to-income ratio excluding
regulatory fees remained stable at 40%. Operating profit increased by 19% year
on year to EUR 1.8bn.

Alongside the constant development of our digital offering, we continued to be
highly proactive towards our customers, holding more customer meetings than a
year ago. Our approach is working. Although Nordic housing market activity
remained slow, our first-quarter mortgage lending volumes were stable and we
maintained our overall market share. We strengthened our position in corporate
lending, increasing volumes by 2% year on year.

Many of our household customers increased their savings and investment
activity, with deposit volumes up 1% year on year. We have been strengthening
our offering, and during the quarter we introduced new savings deposit
products. In Sweden, for example, Nordea's new high-interest savings account
comes with a built-in fraud prevention feature to help customers safeguard
their savings. Corporate deposit volumes decreased by 6% year on year,
although more stable quarter on quarter.

Nordea's credit quality remains strong. Our loan portfolio is diversified
across sectors and markets and supported by a prudent risk profile. Net loan
losses and similar net result amounted to EUR 33m, or 4bp - a low level given
the challenging economic environment. Nevertheless, we have retained our
management judgement buffer in local currencies (translating to EUR 505m) to
cover additional potential losses.

Our four business areas each delivered good first-quarter results. In Personal
Banking we continued to see increased customer savings activity, supported by
the introduction of our new deposit products, with deposit volumes up 2% in
local currencies. While customer demand for new loan promises was lower than
in the same quarter last year, our mortgage lending volumes were stable.
Customers continued to take advantage of our digital services, with the number
of private app users and logins both up 7% year on year.

In Business Banking we worked closely with our customers to help them tackle
the current economic challenges. Although the overall market demand for
lending continued to be slow, our lending volumes grew by 1% year on year in
local  currencies, driven by Norway and Sweden. Deposit volumes grew by 1%
year on year, and customers continue to choose our attractive fixed-term
deposit products in the higher rate environment. We improved service quality
in digital channels and began the Norwegian rollout of our Nordea Business
app, which enables businesses to manage and purchase products easily through
their smartphones. Nordea Business is now available in all of our home
markets.

In Large Corporates & Institutions we continued to actively support our
Nordic customers with their investment plans. Lending grew by 3% and deposit
volumes decreased by 13% year on year. In debt capital markets, activity was
high and we arranged more than 200 transactions. Our sustainability leadership
was also recognised through several awards by Global Finance magazine,
including best in the world for sustainability-linked bonds. We take great
pride in the role we play in supporting the transition to a low-carbon
economy.

In Asset & Wealth Management we maintained strong momentum in our private
banking business, a key focus in our savings strategy. Customer activity was
high and we welcomed new clients. Assets under management increased by 8% year
on year to EUR 391bn, supported by net flows of EUR 1.1bn in our Nordic
channels, despite seasonal outflows. We continued to see strong traction in
our life insurance and pension business, with gross written premiums reaching
a record high for the first quarter.

We maintain a robust capital position. Our CET1 ratio stood at 17.2%, or 5.1
percentage points above the capital requirement. In March our AGM approved the
dividend for 2023, resulting in a total dividend payment of EUR 3.2bn,
supporting economic growth broadly in the Nordic societies. We also completed
our latest share buy-back programme of EUR 1bn. Our capital policy and our
ambition to deliver market-leading shareholder returns remain unchanged. We
continue to generate capital and expect to be in a position to provide an
update on our capital plans, including buy-backs, later this year after the
ECB approves our new capital models for retail exposures.

Looking ahead, we remain committed to delivering market-leading performance,
supported by focused and profitable growth and improved capital efficiency
through our well-diversified business model. We expect to achieve a return on
equity above 15% for the full year 2024 and target similarly strong
profitability in 2025.

We continue to build for the future. A strong bank is a resilient bank, and we
are always working to strengthen Nordea - building on our robust financial
position and developing every aspect of our operations. We are strengthening
our technology foundation. We are investing in our digital offering to ensure
we can offer our customers the very best services and experiences. And we are
working to protect our customers and societies from financial crime.

A strong bank is also a responsible bank, which is why you can expect us to
maintain our strong focus on reducing financed emissions and supporting our
customers in meeting their climate transition requirements.

This is the way we will fulfil our ambition, which remains 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 (unchanged)
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.

 

Income statement
 EURm                                                                            Q1 2024  Q1 2023  Chg %  Q4 2023  Chg %
 Net interest income                                                             1,954    1,765    11     1,946    0
 Net fee and commission income                                                   763      765      0      763      0
 Net insurance result                                                            61       46       33     40       53
 Net result from items at fair value                                             291      345      -16    154      89
 Profit from associated undertakings and joint ventures accounted for under the  7        -12             2
 equity method
 Other operating income                                                          9        12       -25    10       -10
 Total operating income                                                          3,085    2,921    6      2,915    6
 Staff costs                                                                     -749     -719     4      -735     2
 Other expenses                                                                  -338     -287     18     -323     5
 Regulatory fees                                                                 -63      -255     -75    -20
 Depreciation, amortisation and impairment charges of tangible and intangible    -139     -161     -14    -339     -59
 assets
 Total operating expenses                                                        -1,289   -1,422   -9     -1,417   -9
 Profit before loan losses                                                       1,796    1,499    20     1,498    20
 Net loan losses and similar net result                                          -33      -19      74     -83      -60
 Operating profit                                                                1,763    1,480    19     1,415    25
 Income tax expense                                                              -402     -332     21     -309     30
 Net profit for the period                                                       1,361    1,148    19     1,106    23

Business volumes, key items(1)
 EURbn                                                     31 Mar 2024  31 Mar 2023  Chg %  31 Dec 2023  Chg %
 Loans to the public                                       346.2        339.7        2      344.8        0
 Loans to the public, excl. repos/securities borrowing     319.8        319.3        0      324.0        -1
 Deposits and borrowings from the public                   216.0        217.7        -1     210.1        3
 Deposits from the public, excl. repos/securities lending  200.3        210.7        -5     202.6        -1
 Total assets                                              604.9        604.1        0      584.7        3
 Assets under management                                   391.2        362.4        8      378.5        3

1. End of period.

 

Ratios and key figures including items affecting comparability(1)
                                                          Q1 2024  Q1 2023  Chg %  Q4 2023  Chg %
 Diluted earnings per share, EUR                          0.38     0.31     23     0.31     23
 EPS, rolling 12 months up to period end, EUR             1.44     1.21     19     1.37     5
 Share price(2), EUR                                      10.47    9.84     6      11.23    -7
 Equity per share(2), EUR                                 8.25     7.84     5      8.86     -7
 Potential shares outstanding(2), million                 3,506    3,605    -3     3,528    -1
 Weighted average number of diluted shares, million       3,508    3,622    -3     3,534    -1
 Return on equity with amortised resolution fees, %       18.1     17.1            14.1
 Return on equity, %                                      17.8     15.3            14.7
 Return on tangible equity, %                             20.3     17.6            16.9
 Return on risk exposure amount, %                        3.9      3.2             3.2
 Cost-to-income ratio excluding regulatory fees, %        39.7     39.9            47.9
 Cost-to-income ratio with amortised resolution fees, %   40.7     42.7            50.6
 Cost-to-income ratio, %                                  41.8     48.7            48.6
 Net loan loss ratio, incl. loans held at fair value, bp  4        2               10
 Common Equity Tier 1 capital ratio(2,3), %               17.2     15.7            17.0
 Tier 1 capital ratio(2,3), %                             19.5     18.0            19.4
 Total capital ratio(2,3), %                              22.4     20.1            22.2
 Tier 1 capital(2,3), EURbn                               27.1     25.5     6      26.8     1
 Risk exposure amount(2), EURbn                           138.6    142.0    -2     138.7    0
 Net interest margin, %                                   1.83     1.58            1.83
 Number of employees (FTEs)(2)                            29,478   28,922   2      29,153   1
 Equity(2), EURbn                                         28.9     28.2     2      31.2     -7

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.

This release is a summary of Nordea's Q1 results 2024. The complete report is
attached to this release and can also be found on the below link on our
website.

Nordea Group Q1 2024 Report
(https://www.nordea.com/en/investor-relations/reports-and-presentations/latest-interim-results/)

http://www.rns-pdf.londonstockexchange.com/rns/1401L_1-2024-4-18.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1401L_1-2024-4-18.pdf)

A webcast will be held on 18 April at 11.00 EET (10.00 CET). Frank
Vang-Jensen, President and Group CEO, will present the results followed by a
Q&A audio session for investors and analysts with Frank Vang-Jensen, Ian
Smith, Group CFO and Ilkka Ottoila, Head of Investor Relations.

The event will be webcast live and the recording and 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 18 April 2024.

We are a universal bank with a 200-year history of supporting and growing the
Nordic economies - enabling dreams and aspirations for a greater good. Every
day, we work to support our customers' financial development, delivering
best-in-class omnichannel customer experiences and driving sustainable change.
The Nordea share is listed on the Nasdaq Helsinki, Nasdaq Copenhagen and
Nasdaq Stockholm exchanges. Read more about us at nordea.com.

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