Nordea Bank Abp, the biggest bank in the Nordic region, reported better than expected profits from its lending business in the first quarter.
(Bloomberg) — Nordea Bank Abp, the biggest bank in the Nordic region, reported better than expected profits from its lending business in the first quarter.
The Finnish bank on Thursday said its net interest income rose to €1.77 billion ($2 billion) in the quarter. That was a 8% increase from the previous quarter, and above the €1.72 billion average analyst estimate.
“Higher inflation affecting our customers and society in general is leading to increased cost pressure in our business,” Chief Executive Frank Vang-Jensen said in a statement. “In all our businesses, income has grown faster than costs and our aim is to continue to deliver these positive jaws.”
Net income from fees and commissions fell 3% from the prior quarter to €765 million. Analysts had penciled in €800 million. Net income amounted to €1.12 billion, beating estimates, and deposits grew by 5% from a year earlier.
Interest-rate increases by central banks over the past year have boosted the traditional business of banks, as they raise rates on mortgages more than the interest they pay on deposit accounts and pocketing the difference. In neighboring Sweden, Svenska Handelsbanken AB and SEB AB on Wednesday posted better-than-forecast net income from lending activities.
Volatility in financial stocks in March also sent Nordea’s shares falling as the US and Swiss banking crises sent tremors through the industry. Nordea’s shares are now trading roughly 5% higher than their start-of-year levels, having been up about 20% before the turbulence began.
Nordea reiterated its return-on-equity target of 13% for the year as well as the cost-to-income ratio forecast of 45% to 47%. It plans to update 2025 targets by the end of 2023, “when the economic outlook will hopefully be clearer.”
The bank holds a €585 million buffer against future losses and said net loan losses in the first quarter amounted to €19 million.
Nordea on Wednesday announced it plans to launch its fourth program of share buybacks on Friday, worth as much as €1 billion. That comes on top of €4.5 billion worth of shares it’s bought back since September 2021. That’s when its regulator, the European Central Bank, allowed lenders to resume payouts following a pandemic pause.
The Helsinki-based bank in February 2022 projected returning to its owners as much as €17 billion in dividends and share buybacks combined, through 2025. Nordea is likely reach the upper end of that range as keeps shifting out capital, according to Danske Bank A/S analyst Andreas Hakansson.
–With assistance from Anton Wilen, Christopher Jungstedt and Leo Laikola.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.