Nordea, a banking group, experienced a decrease in its operating result in the final quarter of the previous year, contrasting with the year prior and failing to meet expectations. Despite this, the bank’s net interest income saw a substantial increase due to a raised interest rate, although business expenses also appeared to grow.
During October to December, Nordea’s operating profit dipped by 13 percent, falling from 1.63 billion euros to 1.42 billion euros compared to the same period the previous year. This result was below the consensus forecast of 1.56 billion euros, as compiled by Bloomberg news agency and analyzed by Inderes, a research company.
Nordea’s CEO, Frank Vang-Jensen, commented on the situation in the interim report bulletin, stating that despite a significantly weakened net result from items valued at fair value, profitability remained stable. This stability was largely due to an increase in net interest income compared to the previous year and ongoing strong lending.
Net interest income, a crucial source of income at Nordea, saw an increase of nearly a fifth to 1.95 billion euros. This increase was larger than anticipated and was largely due to improved interest margins on loans provided by Nordea. The bank, along with others, has seen its net interest income inflate since the start of the year due to a rise in interest rates, although this growth rate is expected to decelerate.
In the Nordic region, Nordea’s market shares of mortgage loans remained steady in Finland, Denmark, and Norway. However, the bank experienced a continuous increase in market share in Sweden. Furthermore, lending to companies saw a 1% increase from the previous year.
Despite a sluggish housing market in the final quarter, Nordea managed to maintain stable mortgage loan volumes, according to CEO Vang-Jensen. On the other hand, Nordea’s fee income saw a decrease of three percent to 763 million euros from the previous year. This occurred despite strong market developments in the latter part of the year. However, assets under management did increase by five percent.
Total revenues saw a slight increase of one percent to 2.92 billion euros. Conversely, expenses increased by 17 percent to 1.42 billion euros. Nordea attributes this increase primarily to the write-down of development costs related to digital services. Excluding these write-downs, expenses saw a more modest increase of two percent.
Credit losses at Nordea were on the rise. Net credit losses in the October to December period were 83 million euros, in contrast to 59 million euros the previous year. CEO Vang-Jensen noted that the impacts of rising interest rates and accelerated inflation were starting to become apparent, leading to the recording of small, targeted loan loss provisions for loans from corporate customers.
In terms of dividends, the Nordic board proposes a dividend of 0.92 euros per share be paid to shareholders from the previous year’s result. This proposed dividend is a significant increase from the 0.80 euros paid for 2022. However, it fell slightly short of market expectations of 0.93 euros per share.
Nordea anticipates a return on equity of over 15 percent this year and has decided to raise its outlook for the following year. The bank now estimates that its return on equity will continue to be over 15 percent next year. This is an increase from the bank’s previous prediction of a return on equity of more than 13 percent.