TIDM49IO
RNS Number : 6692X
Nordea Bank Abp
27 April 2023
First-quarter results 2023
Nordea Bank Abp
Interim report (Q1 and Q3)
27 April 2023 at 7:30 EET
Summary of the quarter
Strong profitability in a slower market. The increases in
interest rates and weaker economic activity continued in the first
quarter. Nevertheless, Nordea's income growth continued to drive
higher operating profit, which increased by 34%, year on year, to
EUR 1,480m, despite substantial depreciations of the Swedish and
Norwegian currencies. Total income increased by 19%, mainly driven
by growth in net interest income. Net interest margins improved,
supported by deposit income. Net commission income decreased by 8%,
mainly due to subdued capital markets activity and lower savings
income. Net fair value result and net insurance result were up 27%
and 31%, respectively. Total costs excluding regulatory fees
increased by 6%, year on year, which is in line with Nordea's
plan.
Business volume growth driven by corporate lending. Mortgage
lending volume growth slowed during the quarter in all countries
but remained positive. Corporate lending grew by 5%. Nordea
continued to increase its market share in deposits - especially in
the large corporate segment. Assets under management were down 7%,
year on year, but up 1% on the previous quarter. Net flows from
internal channels remained positive despite seasonal net outflows
overall.
Strong credit quality and low net loan losses. Net loan losses
and similar net result amounted to EUR 19m or 2bp. Despite the
Nordic economies slowing, individual net loan losses remained low
at EUR 15m or 2bp. The management judgement buffer was kept
unchanged at EUR 585m.
Return on equity at 17.1% - earnings per share up 48%. Nordea's
return on equity increased to 17.1% from 12.6% a year ago,
supported by strong income growth. The cost-to-income ratio
excluding regulatory fees improved to 40% from 45%. Earnings per
share increased by 48% to EUR 0.31.
Strong capital position enabling high dividends and continued
buy-backs. Nordea's CET1 ratio decreased to 15.7% from 16.4% due to
the capital optimisation associated with the latest share
buy-backs. At the end of the quarter the CET1 ratio was 4
percentage points above the current regulatory requirement.
Nordea's Annual General Meeting of 23 March approved the dividend
of EUR 0.80 per share for 2022. The work to implement an efficient
capital structure continues: the Board of Directors decided to
launch a new ECB-approved EUR 1bn buy-back programme, to commence
on 28 April or as soon as possible thereafter.
Outlook maintained: return on equity above 13%. Nordea has a
resilient business model and a well-diversified loan portfolio
across countries and sectors. This will enable the bank to weather
the macroeconomic uncertainty and volatile financial markets.
Nordea aims to continue improving its profitability and expects
return on equity to remain above 13% in 2023.
(For further viewpoints, see the CEO comment on page 2. For
definitions, see page 58 in the Q1 2023 report.)
Group quarterly results and key ratios
EURm Q1 Q1 Chg Q4 Chg
2023 2022(1) % 2022 %
Net interest income 1,765 1,308 35 1,641 8
------- --------- ---- ------- ----
Net fee and commission income 765 829 -8 785 -3
------- --------- ---- ------- ----
Net insurance result 46 35 31 47 -2
------- --------- ---- ------- ----
Net fair value result 345 272 27 396 -13
------- --------- ---- ------- ----
Other income 0 17 28
------- --------- ---- ------- ----
Total operating income 2,921 2,461 19 2,897 1
------- --------- ---- ------- ----
Total operating expenses excluding
regulatory fees -1,167 -1,098 6 -1,196 -2
------- --------- ---- ------- ----
Total operating expenses -1,422 -1,370 4 -1,212 17
------- --------- ---- ------- ----
Profit before loan losses 1,499 1,091 37 1,685 -11
------- --------- ---- ------- ----
Net loan losses and similar
net result -19 12 -59
------- --------- ---- ------- ----
Operating profit 1,480 1,103 34 1,626 -9
------- --------- ---- ------- ----
Cost-to-income ratio excluding
regulatory fees, % 39.9 44.6 41.3
------- --------- ---- ------- ----
Cost-to-income ratio with
amortised resolution fees,
% 42.7 47.9 44.0
------- --------- ---- ------- ----
Return on equity with amortised
resolution fees, % 17.1 12.6 16.3
------- --------- ---- ------- ----
Diluted earnings per share,
EUR 0.31 0.21 48 0.35 -11
------- --------- ---- ------- ----
1. Excluding items affecting comparability. See page 5 in the Q1
2023 report for further details.
CEO comment
The first quarter of the year was characterised by turbulence in
the financial markets and continued high macroeconomic uncertainty.
Recent developments, including problems faced by a few specific
banks in other countries, have reminded us all of the importance of
a safe and trusted banking sector.
Nordea is one of the most stable and profitable banks in Europe.
Our resilient and diversified business model, sound financial risk
position, strong balance sheet and high profitability make us a
safe and strong partner for customers, employees, shareholders and
broader society.
Despite the weaker economic environment, we are pleased to
report yet another strong set of results in the first quarter. We
continued to drive a solid business performance, underpinned by our
financial strength. Our operating profit increased by 34%, year on
year, and our return on equity improved to 17.1% from 12.6%.
Our position of strength is evident in the trust and confidence
our Nordic customers continue to show in us. All this is reflected
in improved external customer ratings, higher market shares in
prioritised segments and increased deposits in particular: this
quarter, deposits grew by 5%, year on year. Despite slowing
economic activity, our lending volumes continued to develop
positively. Corporate lending grew by 5% and mortgage lending by
1%. Reflecting our proactive customer approach, Swedish SMEs for
the first time ranked us highest for both small and mid-corporate
banking in the annual Prospera survey.
In all our businesses, income has grown faster than costs and
our aim is to continue to deliver these positive jaws. Our total
income grew by 19% and our cost-to-income ratio excluding
regulatory fees improved to 40% from 45% a year ago.
The same higher inflation affecting our customers and society in
general is leading to increased cost pressure in our business. We
are also continuing to invest in selected strategic areas, mainly
digital technology, other technology and risk management, to
strengthen the resilience and attractiveness of our business even
further. Costs excluding regulatory fees increased by 6%, year on
year, which is in line with our plan for 2023.
Our risk position is sound and our credit quality strong. We
have a well-diversified loan portfolio across countries and
sectors. Net loan losses and similar net result for the first
quarter was EUR 19m, corresponding to 2bp. The management judgement
buffer was kept unchanged at EUR 585m given the continued
uncertainty in the market.
The Nordic economies are strong and well positioned to weather
the challenging conditions. Our customers are in good shape
overall, with solid financial positions. However, macroeconomic
uncertainty remains high and we expect the challenging environment
- with lower growth and consumption, tightened financial
conditions, continued high inflation and higher interest rates - to
continue in coming quarters.
All business areas continued to deliver solid performances in
the first quarter. In Personal Banking lending and deposit volumes
grew by 1% and 2%, respectively, and higher policy rates supported
our net interest income development. We maintained proactive
support for our customers and drove a 32% year-on-year increase in
personalised interactions in our digital channels.
In Business Banking we grew lending volumes by 4% and deposit
volumes by 3%. Fixed-term deposits showed particularly strong
growth. We continued to develop our digital offering and saw
improved customer ratings for both the net bank and mobile app.
In Large Corporates & Institutions we grew lending volumes
by 1%, year on year. In local currencies, lending grew by 8%. We
continued to support our Nordic customers in meeting their
financing and risk management needs in turbulent markets. Customer
confidence was evidenced by a 4% deposit inflow during the quarter.
Equity capital markets activity remained subdued and debt markets
activity stable.
In Asset & Wealth Management we generated positive net flows
of EUR 1.3bn from our internal channels and maintained strong
momentum in our private banking business. We attracted further new
customers from across the Nordics and increased lending and deposit
volumes by 4% and 11%, respectively. Assets under management
increased by 1%, quarter on quarter, to EUR 362bn.
Our capital position is among the best in Europe. The
quarter-end CET1 ratio was 15.7% or 4 percentage points above the
current regulatory requirement. At the beginning of March we
received regulatory approval for our fourth share buy-back
programme. Our Board of Directors decided to launch the EUR 1bn
programme, which will commence on 28 April or as soon as possible
thereafter.
In March, our Annual General Meeting approved the dividend of
EUR 2.9bn or EUR 0.80 per share for 2022, up 16% on 2021. Our
ability to deliver market-leading shareholder returns is a result
of the successful implementation of our strategy. It is a pleasure
to see our dividend payments to our 560,000 shareholders supporting
economic activity, driving growth and channelling funding towards
innovation, education, health care and other forms of support for
society.
We are committed to meeting our 2025 financial target - even in
an uncertain macroeconomic environment. We aim to continue to
improve our profitability and expect our return on equity to remain
above 13% in 2023. This is already in line with our financial
target for 2025. We plan to provide a target update by the end of
2023, when the economic outlook will hopefully be clearer.
Meeting our financial target requires us to keep delivering on
our three key priorities: creating the best omnichannel customer
experience, driving focused and profitable growth, and increasing
operational and capital efficiency.
In an uncertain environment, safety and trustworthiness are
highly appreciated from various businesses - not least banks. A
strong and profitable bank like Nordea promotes stability and can
deliver attractive services to serve and support customers and
society. In both good and challenging times.
Frank Vang-Jensen
President and Group CEO
Outlook (unchanged)
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 13%.
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.
Income statement excluding items affecting comparability(1)
EURm Q1 Q1 Chg Q4 Chg
2023 2022 % 2022 %
Net interest income 1,765 1,308 35 1,641 8
------- ------- ---- ------- ----
Net fee and commission
income 765 829 -8 785 -3
------- ------- ---- ------- ----
Net insurance result 46 35 31 47 -2
------- ------- ---- ------- ----
Net result from items at
fair value 345 272 27 396 -13
------- ------- ---- ------- ----
Profit from associated
undertakings and joint
ventures accounted for
under the equity method -12 0 -1
------- ------- ---- ------- ----
Other operating income 12 17 -29 29 -59
------- ------- ---- ------- ----
Total operating income 2,921 2,461 19 2,897 1
------- ------- ---- ------- ----
Staff costs -719 -692 4 -721 0
------- ------- ---- ------- ----
Other expenses -287 -259 11 -315 -9
------- ------- ---- ------- ----
Regulatory fees -255 -273 -7 -16
------- ------- ---- ------- ----
Depreciation, amortisation
and impairment charges
of tangible and intangible
assets -161 -146 10 -160 1
------- ------- ---- ------- ----
Total operating expenses -1,422 -1,370 4 -1,212 17
------- ------- ---- ------- ----
Profit before loan losses 1,499 1,091 37 1,685 -11
------- ------- ---- ------- ----
Net loan losses and similar
net result -19 12 -59
------- ------- ---- ------- ----
Operating profit 1,480 1,103 34 1,626 -9
------- ------- ---- ------- ----
Income tax expense -332 -245 36 -353 -6
------- ------- ---- ------- ----
Net profit for the period 1,148 858 34 1,273 -10
------- ------- ---- ------- ----
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 had no impact on
Nordea s dividend or share buy-back capacity.
Ratios and key figures excluding items affecting
comparability(1,2)
Q1 Q1 Chg Q4 Chg
2023 2022 % 2022 %
Diluted earnings per share
(DEPS), EUR 0.31 0.21 48 0.35 -11
------ ------ ---- ------ ----
EPS, rolling 12 months up to
period end, EUR 1.21 0.97 25 1.11 9
------ ------ ---- ------ ----
Return on equity with amortised
resolution fees, % 17.1 12.6 16.3
------ ------ ---- ------ ----
Return on equity, % 15.3 10.8 16.9
------ ------ ---- ------ ----
Return on tangible equity,
% 17.6 12.2 19.5
------ ------ ---- ------ ----
Return on risk exposure amount,
% 3.2 2.2 3.5
------ ------ ---- ------ ----
Cost-to-income ratio excluding
regulatory fees, % 39.9 44.6 41.3
------ ------ ---- ------ ----
Cost-to-income ratio with amortised
resolution fees, % 42.7 47.9 44.0
------ ------ ---- ------ ----
Cost-to-income ratio, % 48.7 55.7 41.8
------ ------ ---- ------ ----
Net loan loss ratio, incl.
loans held at fair value, bp 2 -1 7
------ ------ ---- ------ ----
Return on capital at risk with
amortised resolution fees,
% 23.7 17.5 21.7
------ ------ ---- ------ ----
Return on capital at risk,
% 21.2 14.9 22.6
------ ------ ---- ------ ----
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 had no impact on
Nordea s dividend or share buy-back capacity.
2. See here for more detailed information regarding ratios and
key figures defined as alternative performance measures .
Business volumes, key items(1)
31
31 Mar 31 Mar Chg Dec Chg
EURbn 2023 2022 % 2022 %
Loans to the public 339.7 351.9 -3 345.7 -2
------- ------- ---- ------ ----
Loans to the public, excl. repos/securities
borrowing 319.3 333.1 -4 327.3 -2
------- ------- ---- ------ ----
Deposits and borrowings from
the public 217.7 221.1 -2 217.5 0
------- ------- ---- ------ ----
Deposits from the public, excl.
repos/securities lending 210.7 212.0 -1 210.8 0
------- ------- ---- ------ ----
Total assets 604.1 624.5 -3 594.7 2
------- ------- ---- ------ ----
Assets under management 362.4 389.4 -7 358.9 1
------- ------- ---- ------ ----
Equity 28.2 30.3 -7 30.8 -8
------- ------- ---- ------ ----
1. End of period.
Income statement including items affecting comparability
Q1 Q1 Chg Q4 Chg
EURm 2023 2022 % 2022 %
Net interest income 1,765 1,308 35 1,641 8
------- ------- ---- ------- ----
Net fee and commission
income 765 829 -8 785 -3
------- ------- ---- ------- ----
Net insurance result 46 35 31 47 -2
------- ------- ---- ------- ----
Net result from items at
fair value 345 -265 396 -13
------- ------- ---- ------- ----
Profit from associated
undertakings and joint
ventures accounted for
under the equity method -12 0 -1
------- ------- ---- ------- ----
Other operating income 12 17 -29 29 -59
------- ------- ---- ------- ----
Total operating income 2,921 1,924 52 2,897 1
------- ------- ---- ------- ----
Staff costs -719 -692 4 -721 0
------- ------- ---- ------- ----
Other expenses -287 -259 11 -315 -9
------- ------- ---- ------- ----
Regulatory fees -255 -273 -7 -16
------- ------- ---- ------- ----
Depreciation, amortisation
and impairment charges
of tangible and intangible
assets -161 -146 10 -160 1
------- ------- ---- ------- ----
Total operating expenses -1,422 -1,370 4 -1,212 17
------- ------- ---- ------- ----
Profit before loan losses 1,499 554 1,685 -11
------- ------- ---- ------- ----
Net loan losses and similar
net result -19 -64 -70 -59 -68
------- ------- ---- ------- ----
Operating profit 1,480 490 1,626 -9
------- ------- ---- ------- ----
Income tax expense -332 -231 44 -353 -6
------- ------- ---- ------- ----
Net profit for the period 1,148 259 1,273 -10
------- ------- ---- ------- ----
Ratios and key figures including items affecting
comparability(1)
Q1 Q1 Chg Q4 Chg
2023 2022 % 2022 %
Diluted earnings per share,
EUR 0.31 0.06 417 0.35 -11
------- ------- ---- ------- ----
EPS, rolling 12 months up to
period end, EUR 1.21 0.82 48 0.96 26
------- ------- ---- ------- ----
Share price(2) , EUR 9.84 9.38 5 10.03 -2
------- ------- ---- ------- ----
Equity per share(2) , EUR 7.84 7.89 -1 8.46 -7
------- ------- ---- ------- ----
Potential shares outstanding(2)
, million 3,605 3,860 -7 3,654 -1
------- ------- ---- ------- ----
Weighted average number of
diluted shares, million 3,622 3,894 -7 3,674 -1
------- ------- ---- ------- ----
Return on equity with amortised
resolution fees, % 17.1 5.1 16.3
------- ------- ---- ------- ----
Return on equity, % 15.3 3.2 16.9
------- ------- ---- ------- ----
Return on tangible equity,
% 17.6 3.6 19.5
------- ------- ---- ------- ----
Return on risk exposure amount,
% 3.2 0.7 3.5
------- ------- ---- ------- ----
Cost-to-income ratio with amortised
resolution fees, % 42.7 61.2 44.0
------- ------- ---- ------- ----
Cost-to-income ratio, % 48.7 71.2 41.8
------- ------- ---- ------- ----
Net loan loss ratio, incl.
loans held at fair value, bp 2 7 7
------- ------- ---- ------- ----
Common Equity Tier 1 capital
ratio(2,3) , % 15.7 16.3 16.4
------- ------- ---- ------- ----
Tier 1 capital ratio (2,3)
, % 18.0 18.4 18.7
------- ------- ---- ------- ----
Total capital ratio (2,3) ,
% 20.1 20.5 20.8
------- ------- ---- ------- ----
Tier 1 capital(2,3) , EURbn 25.5 28.3 -10 27.2 -6
------- ------- ---- ------- ----
Risk exposure amount(2) , EURbn 142.0 154.0 -8 145.3 -2
------- ------- ---- ------- ----
Return on capital at risk with
amortised resolution fees,
% 23.7 7.1 21.7
------- ------- ---- ------- ----
Return on capital at risk,
% 21.2 4.5 22.6
------- ------- ---- ------- ----
Net interest margin, % 1.58 1.17 1.45
------- ------- ---- ------- ----
Number of employees (FTEs)(2) 28,922 27,076 7 28,268 2
------- ------- ---- ------- ----
Economic capital(2) , EURbn 22.2 23.4 -5 21.9 1
------- ------- ---- ------- ----
1. See here for more detailed information regarding ratios and
key figures defined as alternative performance measures .
2. End of period.
3. Including the result for the period.
This release is a summary of Nordea's Q1 2023 report. The
complete report is attached to this release and can also be found
on the below link on our website.
Nordea Group Q1 2023 Report
First-quarter results 2023 PDF:
http://www.rns-pdf.londonstockexchange.com/rns/6692X_1-2023-4-27.pdf
A webcast for media, investors and equity analysts will be held
on 27 April at 11.00 EET (10.00 CET), during which Frank
Vang-Jensen, President and Group CEO, will present the results. The
presentation will be followed by a Q&A audio session for
investors and analysts with Frank Vang-Jensen, Ian Smith, Group
CFO, and Matti Ahokas, 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
Matti Ahokas, Head of Investor Relations, +358 405 759 178
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 27 April 2023.
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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