Nordea Bank Abp: First-quarter results 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 2023 Q1 2022¹ Chg % Q4 2022 Chg % 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 comparability¹

EURm Q1 2023 Q1 2022 Chg % Q4 2022 Chg % 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 Nordeaʼs dividend or share buy-back capacity.

Ratios and key figures excluding items affecting comparability^1,2

	Q1 2023	Q1 2022	Chg %	Q4 2022	Chg %
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 Nordeaʼs 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 items¹

EURbn	31 Mar 2023	31 Mar 2022	Chg %	31 Dec 2022	Chg %
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

EURm	Q1 2023	Q1 2022	Chg %	Q4 2022	Chg %
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 comparability¹

	Q1 2023	Q1 2022	Chg %	Q4 2022	Chg %
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 price2, EUR	9.84	9.38	5	10.03	-2
Equity per share2, EUR	7.84	7.89	-1	8.46	-7
Potential shares outstanding2, 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 ratio2,3, %	15.7	16.3		16.4
Tier 1 capital ratio2,3, %	18.0	18.4		18.7
Total capital ratio2,3, %	20.1	20.5		20.8
Tier 1 capital2,3, EURbn	25.5	28.3	-10	27.2	-6
Risk exposure amount2, 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 capital2, 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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