Nordea benefits from economic boom despite rising costs

The Nordea Bank AB logo is seen at the SIBOS Banking and Financial Conference in Toronto, Ontario, Canada, October 19, 2017. REUTERS / Chris Helgren / File Photo

  • Net profit of 1.03 billion euros compared to analysts forecast of 868 million
  • Positive adjustment on loans
  • Costs up to $ 4.6 billion vs. previous forecast less than $ 4.6 billion
  • Pending payment of the dividend (0.72 euro), preparation of share buybacks
  • Equities up 3%

STOCKHOLM, July 21 (Reuters) – Nordea Bank (NDAFI.HE) beat second quarter earnings expectations on Wednesday as a booming mortgage market and higher assets under management offset rising costs of the major lender in the Nordic region.

Swedish banks have all seen increased demand for wealth management and strong business activity, particularly in real estate and card payments, as the vaccine rollout has blunted the coronavirus, paving the way for a return to normal operations .

“Restrictions are easing, vaccination programs are progressing well and a return to more normal activity is underway,” CEO Frank Vang-Jensen said in a statement.

Second-quarter net profit reached 1.03 billion euros ($ 1.21 billion) from 243 million a year ago, beating the average forecast of 868.5 million expected by analysts, according to data from Refinitiv Eikon.

The bank reported a positive adjustment of 51 million euros on loans against losses of 696 million a year earlier and analysts’ expectations for losses of 81 million.

The lender’s shares were up 3% at 10:08 a.m. GMT, just ahead of the European banking index which was up 2.4%.

Provisions for loan losses have become a closely watched figure in the economic slump caused by the pandemic.

Nordea has increased its cost forecast for 2021 to around 4.6 billion euros after previously declaring it will be below 4.6 billion due to the acquisition of Nordea Finance Equipment and the increase in the compensation of the staff due to a strong performance during the quarter.

Fees and commissions rose from 673 million to 878 million euros, exceeding the 823 million expected by analysts, as assets under management reached record levels and card payments increased.

Interest income, which includes income from mortgage loans, rose from 1.09 billion to 1.2 billion euros, in line with the 1.21 billion noted by analysts.

“Another really solid result,” said Robin Rane, analyst at Kepler Cheuvreux, noting interest income, fees and the unexpected positive adjustment on loans.

Rane said he expected investors to reward Nordea despite a recent lack of appetite to buy shares in banks that posted strong second quarter results.

Vang-Jensen said Nordea was ready to distribute unpaid dividends for 2019 and 2020 for a total of 0.72 euros per share once regulators allow payments to shareholders.

He also said the bank had asked to start a share buyback process.

Nordea shares are up 46% this year.

($ 1 = € 0.8495)

Reporting by Colm Fulton; edited by Niklas Pollard and Jason Neely

Our Standards: Thomson Reuters Trust Principles.

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