Release Date: July 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nordea Bank Abp (NRDBY, Financial) reported a strong return on equity of 17.9% for Q2 2024, maintaining a high level of profitability.
- The bank achieved a 3% year-on-year increase in total income, driven by a 4% rise in net interest income and a 6% increase in net fee and commission income.
- Assets under management grew by 10% year-on-year to EUR 400 billion, supported by positive net flows in Nordic channels.
- The bank's CET1 ratio stood at 17.5%, indicating a strong capital position.
- Nordea Bank Abp (NRDBY) is making significant investments in technology, data, AI, and financial crime prevention, which are expected to enhance resilience and growth.
Negative Points
- Net insurance result decreased by 7% year-on-year, and net fair value result was down 15% compared to the previous year.
- Corporate lending volumes decreased by 1% year-on-year, reflecting a slow lending market.
- The bank experienced net loan losses of EUR 68 million, driven by provisions for a few corporate client exposures.
- International channels saw negative net flows of EUR 1.4 billion, mainly due to wholesale distribution.
- Cost development increased by 6% compared to the same quarter last year, with a significant portion attributed to investments and integration costs from the Norway acquisition.
Q & A Highlights
Q: Could you provide more details on lending margins, particularly in the corporate space, and the impact of bond market activity? Also, is there a shift from transaction accounts to savings accounts affecting margins?
A: Ian Smith, Group CFO: Lending margins have been stable, especially in mortgages. The bond market is active, which is beneficial for our corporate finance business rather than putting pressure on margins. Regarding deposits, the mix has been stable, suggesting the shift from transaction to savings accounts has bottomed out.
Q: Why is there a delay in resuming share buybacks, and does this indicate adequate capitalization?
A: Ian Smith, Group CFO: We received ECB approval for new capital models, impacting CET1 trajectory. We're absorbing changes from the Norwegian acquisition and other capital events. We plan to resume buybacks early next year, aligning with ECB discussions.
Q: What are the revenue implications of the Norwegian acquisition, and why hasn't the capital impact changed despite a smaller lending portfolio?
A: Ian Smith, Group CFO: The acquisition will strengthen our business in Norway, though the NII will be lower than the EUR145 million in 2022 due to a smaller portfolio. The capital impact remains as initially estimated, pending final portfolio balances.
Q: Could you clarify the change in cost guidance for 2024 and expectations for cost growth next year?
A: Frank Vang-Jensen, CEO: Costs are expected to be slightly up in 2024 due to investments in technology, digital, and risk management. We aim for positive jaws, but it's challenging to predict for next year. Investments are crucial for long-term resilience and growth.
Q: Why haven't you lowered deposit rates in Finland despite rate cuts in other countries?
A: Frank Vang-Jensen, CEO: The decision was a fine-tuning of pricing. We believe we are well-positioned price-wise across all markets. The approach aligns with our plan for rate cuts and competition.
Q: How do you view the competitive environment in your key markets, especially Sweden?
A: Frank Vang-Jensen, CEO: Activity is picking up, with increased mortgage applications and bond market activity. In Sweden, we are performing well across retail, private banking, and SME segments. The competitive pressure is expected to subside gradually.
Q: Can you elaborate on the Danish AML investigation and its impact on your business in Denmark?
A: Frank Vang-Jensen, CEO: The investigation relates to historical process issues, not money laundering. We've invested significantly in financial crime prevention since 2015. The case should not impact our current business operations.
Q: What are the prospects for international AUM, and how do you view RWA growth from new business?
A: Ian Smith, Group CFO: International AUM outflows are slowing, but it will take time to reverse. RWA growth is expected to be muted this year, with potential improvement next year as rate cuts take effect.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
