On Thursday, Jan 30, Finnish lender Nordea Bank announced fourth-quarter operating earnings slightly above estimates. The bank acknowledged the positive impact of lower interest rates on the housing market but noted that the Nordic mortgage and corporate lending markets remained sluggish.
Having previously benefited from high regional rates, Nordea now faces a changing landscape as central banks shift focus to lower rates, potentially impacting lending income and profitability.
Uncertainty looms for European banks due to U.S. President Donald Trump's trade policies and potential implications of U.S. deregulation, which could affect profits and strategies going forward.
Nordea stated that despite the slow Nordic markets, demand for new loan promises is increasing, hinting at gradual improvements in the housing sector. The bank anticipates a return on equity above 15% this year.
Brokerage Inderes expressed confidence in Nordea's ability to meet its target, highlighting the bank's capacity to navigate rising deposit costs. In contrast, J.P. Morgan voiced caution regarding sustaining earnings momentum amidst market challenges.
In the fourth quarter ended Dec. 31, Nordea's operating profit increased by 5% year-on-year to 1.47 billion euros, outperforming analysts' average projection of 1.45 billion euros. While net interest income declined 5% to 1.85 billion euros due to European Central Bank rate cuts, it surpassed analysts' estimates of 1.84 billion euros.
CEO Frank Vang-Jensen noted that despite financial pressures, Nordea's corporate and retail customers remained resilient, showcasing strong deposit activity and minimal credit losses.
In its largest market, Sweden, Nordea foresees a rebound driven by rates and enhanced household purchasing power. The bank proposed a dividend increase to 0.94 euros per share for 2024, up from 0.92 euros the previous year.
Comparatively, Swedbank exceeded fourth-quarter expectations and raised its dividend, while SEB missed forecasts and refrained from increasing its dividend. ($1 = 0.9599 euros)