Half-year results 2024

Nordea Bank Abp
Half year financial report
15 July 2024 at 7:30 EET

Summary of the quarter

Continued high-quality income growth. Net interest income grew 4% and net fee and commission income returned to growth, up 6%. Net insurance result and net fair value result were solid, following a strong second quarter last year. Total income improved, up 3%. Inflation and continued significant investments in technology, data and risk management capabilities resulted in a cost increase of 6%, in line with Nordea’s plan. Operating profit held up well, 2% lower compared to a year ago.

Return on equity 17.9% – earnings per share EUR 0.37. Nordea’s return on equity remained very strong at 17.9% in the second quarter, reflecting Nordea’s resilience and continued high performance. The cost-to-income ratio with amortised resolution fees remained stable at 43% compared with a year ago. Earnings per share were EUR 0.37, unchanged from a year ago.

Mortgage lending stable and growing deposit volumes. The Nordic mortgage and corporate lending markets remained slow. Mortgage lending volumes were unchanged and corporate lending volumes decreased slightly. Retail and corporate deposit volumes increased by 1% and 5%, respectively, year on year. Assets under management increased by 10% and Nordic net flows amounted to EUR 1.9bn in the quarter.

Solid credit quality, net loan losses increase mainly driven by a few single corporate exposures. Net loan losses and similar net result amounted to EUR 68m or 8bp. EUR 30m was released from the management judgement buffer reflecting improved macroeconomic outlook. Total management judgment buffer now stands at EUR 464m.

Continued strong capital position. Nordea’s CET1 ratio increased to 17.5%, 4.4 percentage points above the current regulatory requirement, which demonstrates the bank’s continued strong underlying capital generation and capacity to support its customers. In July, Nordea received ECB approval for new capital models for retail exposures, and the new models are expected to go live in Q3 this year. The impact on REA*, after adjusting for prospective rule changes recently proposed by the Norwegian FSA, is broadly in line with Nordea’s expectations.

Outlook for 2024 unchanged: return on equity above 15%. Nordea has a strong and resilient business model with a very well-diversified loan portfolio across the Nordic region. This enables the bank to support its customers and deliver high-quality earnings, with high profitability and low volatility, through the economic cycle.

*For further details see the capital section in the Q2 2024 report on page 13

(For further viewpoints, see the CEO comment on page 2. For definitions, see page 54 in the Q2 2024 report.)

Group quarterly results and key ratios

EURm	Q2 2024	Q2 2023	Chg %	Q1 2024	Chg %	Jan-Jun 2024	Jan-Jun 2023	Chg %
Net interest income	1,904	1,831	4	1,954	-3	3 858	3 596	7
Net fee and commission income	795	751	6	763	4	1 558	1 516	3
Net insurance result	63	68	-7	61	3	124	114	9
Net fair value result	247	290	-15	291	-15	538	635	-15
Other income	21	15	40	16	31	37	15
Total operating income	3,030	2,955	3	3,085	-2	6 115	5 876	4
Total operating expenses excluding regulatory fees	-1,260	-1,184	6	-1,226	3	-2 486	-2 351	6
Total operating expenses	-1,278	-1,205	6	-1,289	-1	-2 567	-2 627	-2
Profit before loan losses	1,752	1,750	0	1,796	-2	3 548	3 249	9
Net loan losses and similar net result	-68	-32		-33		-101	-51
Operating profit	1,684	1,718	-2	1,763	-4	3 447	3 198	8
Cost-to-income ratio excluding regulatory fees, %	41.6	40.1		39.7		40,7	40,0
Cost-to-income ratio with amortised resolution fees, %	42.6	42.8		40.7		41,6	42,7
Return on equity with amortised resolution fees,  %	17.9	18.4		18.1		18,0	17,8
Diluted earnings per share, EUR	0.37	0.37	0	0.38	-3	0,75	0,68	10

 

CEO comment

This was another strong quarter for Nordea. Second-quarter return on equity reached 17.9%, led by growth in both net interest and net fee and commission income. Our results show that despite the slow economy, we continue to make good progress on our strategic priorities and deliver industry-leading financial performance.

Macroeconomic uncertainty remains high due to the challenging geopolitical climate. Nevertheless, household and business sentiment in the Nordics has recently shown signs of improvement. Inflation has fallen, and during the quarter we saw the first policy rate cuts in three of our four home markets. These cuts, along with further anticipated reductions this year, should help brighten the picture for the Nordic economies.

Total income for the quarter was EUR 3.0bn, an increase of 3% year on year. Year-on-year net interest income improved by 4%. We also grew net fee and commission income by 6%, driven by higher activity in savings and investments and continued outstanding performance in debt capital markets.

We continue to engage extensively with our customers across all touch points. During the quarter, we assisted customers in 259,000 advisory meetings, 7% more than a year ago. Furthermore, use of our digital banking services reached another record high. We have further strengthened our digital services, adding more personalisation, self-service features as well as improved protection against fraud. Good customer satisfaction scores show that our efforts are appreciated.

Cost development was as planned and reflected the significant investments we continue to make into our technology infrastructure, data and AI, digital offering, financial crime prevention and other risk management capabilities, as well as integration costs related to our Norwegian acquisition. The lower resolution fees this year have given us the opportunity to further increase overall investment capacity. Excluding regulatory fees, costs increased by 6% year on year, while our cost-to-income ratio with amortised resolution fees was stable at 43%. Operating profit was stable at EUR 1.7bn.

Net interest margin continued to improve year on year, and remained stable for the third quarter in a row. We improved lending margins, with mortgage lending volumes stable year on year, and corporate lending down 1%. Retail and corporate deposit volumes increased, respectively, by 1% and 5%, with resilient deposit margins. The positive development in deposit volumes demonstrates resilience among our household and business customers in the face of higher living and operating costs.

Our risk position is sound, and credit quality continues to be strong and in line with our long-term expectations. Net loan losses and similar net result were EUR 68m, or 8bp, mainly driven by provisions for a few single corporate client exposures. Reflecting the improved macroeconomic outlook, we released EUR 30m from our management judgement buffer, which now stands at EUR 464m.

Our four business areas did well. In Personal Banking we continued to see good customer savings activity. We have expanded our range of deposit products, which contributed to a 2% year-on-year increase in deposit volumes in local currencies. While the Nordic housing markets were subdued, we delivered stable mortgage lending volumes. In the latter part of the quarter we saw the first small signs of improvement as demand for new loan promises grew. Customers continued to take advantage of our digital services, with the number of private app users and logins up 5% and 12%, respectively, year on year. Fraud is a growing problem for societies and we have continued to strengthen the measures that keep our customers safe. Alongside increased monitoring, we have implemented enhanced security features, such as delayed withdrawals and transaction limits, and continue to raise awareness about fraud through active dialogue in society and our marketing.

In Business Banking we worked closely with our customers to help them address the current economic challenges and growth opportunities. Our lending volumes were stable year on year in local currencies, as overall market demand remained subdued. Deposit volumes increased by 1%. Activity in the capital markets increased and we supported our customers in securing both equity and bond market funding in the more stable interest rate environment.

In Large Corporates & Institutions we kept up the good momentum from the first quarter, actively supporting our Nordic customers with their investment plans. Lending volumes decreased by 2%, and deposit volumes increased by 12% year on year. In debt capital markets, activity remained high. We supported our customers with more than 150 transactions, as issuers are keen to front-load their funding plans in the current favourable market. Activity in the equity capital markets also showed signs of picking up.

In Asset & Wealth Management we further grew our Private Banking business and secured positive net flows of EUR 2.0bn. In line with our growth strategy, we reached an all-time-high customer intake during the quarter in Norway and Sweden. Assets under management increased by 10% year on year to EUR 400bn. We continued to grow with strong momentum in our life insurance and pension business. In Denmark, our local life insurance company was awarded pension company of the year by Finanswatch and EY. Gross written premiums reached new record highs, increasing to EUR 2.9bn from EUR 2.2bn a year ago.

Capital generation remains strong, and we further reinforced our capital position. At the end of the quarter, our CET1 ratio stood at 17.5%, or 4.4 percentage points above the capital requirement. In July we received ECB approval for new capital models for retail exposures. The net impact on our REA, after adjusting for prospective rule changes recently proposed by the Norwegian FSA, is broadly in line with our expectations. Following the approval, we have initiated a dialogue with the ECB regarding a resumption of share buy-back programmes from early 2025.

Our results for the second quarter keep us on track to deliver strong profitability in 2024. We expect to achieve a return on equity of above 15% for the full year, and also target a return of equity of above 15% for 2025. We are determined to push forward with our strategic priorities and further improve customer experience and operational performance.

Our ambition remains unchanged – to be the preferred financial partner for customers in need of a broad range of financial services.

Frank Vang-Jensen
President and Group CEO

 

Outlook (unchanged)

Financial target for 2025

Nordea’s financial target for 2025 is a return on equity of above 15%.

The target will be supported by a cost-to-income ratio of 44–46%, an annual net loan loss ratio of around 10bp and the continuation of Nordea’s well-established capital and dividend policies.

Financial outlook for 2024

Nordea expects a return on equity of above 15%.

Capital policy

A management buffer of 150bp 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

EURm	Q2 2024	Q2 2023	Chg %	Q1 2024	Chg %	Jan-Jun 2024	Jan-Jun 2023	Chg %
Net interest income	1,904	1,831	4	1,954	-3	3 858	3 596	7
Net fee and commission income	795	751	6	763	4	1 558	1 516	3
Net insurance result	63	68	-7	61	3	124	114	9
Net result from items at fair value	247	290	-15	291	-15	538	635	-15
Profit from associated undertakings and joint ventures accounted for under the equity method	2	3	-33	7	-71	9	-9
Other operating income	19	12	58	9		28	24	17
Total operating income	3,030	2,955	3	3,085	-2	6 115	5 876	4
Staff costs	-761	-725	5	-749	2	-1 510	-1 444	5
Other expenses	-361	-304	19	-338	7	-699	-591	18
Regulatory fees	-18	-21	-14	-63	-71	-81	-276	-71
Depreciation, amortisation and impairment charges of tangible and intangible assets	-138	-155	-11	-139	-1	-277	-316	-12
Total operating expenses	-1,278	-1,205	6	-1,289	-1	-2 567	-2 627	-2
Profit before loan losses	1,752	1,750	0	1,796	-2	3 548	3 249	9
Net loan losses and similar net result	-68	-32		-33		-101	-51	98
Operating profit	1,684	1,718	-2	1,763	-4	3 447	3 198	8
Income tax expense	-381	-383	-1	-402	-5	-783	-715	10
Net profit for the period	1,303	1,335	-2	1,361	-4	2 664	2 483	7

 

Business volumes, key items1

EURbn	30 Jun 2024	30 Jun 2023	Chg %	31 Mar 2024	Chg %
Loans to the public	346.9	340.0	2	346.2	0
Loans to the public, excl. repos/securities borrowing	319.7	316.6	1	319.8	0
Deposits and borrowings from the public	223.8	217.9	3	216.0	4
Deposits from the public, excl. repos/securities lending	208.1	202.9	3	200.3	4
Total assets	606.8	602.4	1	604.9	0
Assets under management	400.3	363.1	10	391.2	2

1. End of period. 

Ratios and key figures including items affecting comparability1

	Q2 2024	Q2 2023	Chg %	Q1 2024	Chg %	Jan-Jun 2024	Jan-Jun 2023	Chg %
Diluted earnings per share, EUR	0.37	0.37	0	0.38	-3	0,75	0,68	10
EPS, rolling 12 months up to period end, EUR	1.44	1.30	11	1.44	0	1,44	1,30	11
Share price2, EUR	11.12	9.97	12	10.47	6	11,12	9,97	12
Equity per share2, EUR	8.67	8.13	7	8.25	5	8,67	8,13	7
Potential shares outstanding2, million	3,506	3,589	-2	3,506	0	3 506	3 589	-2
Weighted average number of diluted shares, million	3,502	3,588	-2	3,508	0	3 506	3 607	-3
Return on equity with amortised resolution fees, %	17.9	18.4		18.1		18,0	17,8
Return on equity, %	18.0	19.1		17.8		17,9	17,1
Return on tangible equity, %	20.8	22.2		20.3		20,6	19,8
Return on risk exposure amount, %	3.7	3.8		3.9		3,8	3,5
Cost-to-income ratio excluding regulatory fees, %	41.6	40.1		39.7		40,7	40,0
Cost-to-income ratio with amortised resolution fees, %	42.6	42.8		40.7		41,6	42,7
Cost-to-income ratio, %	42.2	40.8		41.8		42,0	44,7
Net loan loss ratio, incl. loans held at fair value, bp	8	4		4		6	3
Common Equity Tier 1 capital ratio2,3, %	17.5	16.0		17.2		17,5	16,0
Tier 1 capital ratio2,3, %	19.8	18.3		19.5		19,8	18,3
Total capital ratio2,3, %	23.0	20.5		22.4		23,0	20,5
Tier 1 capital2,3, EURbn	27.6	25.6	8	27.1	2	27,6	25,6	8
Risk exposure amount2, EURbn	139.3	140.0	0	138.6	1	139,3	140,0	0
Net interest margin, %	1.83	1.69		1.83		1,83	1,64
Number of employees (FTEs)2	29,680	29,317	1	29,478	1	29,680	29,317	1
Equity2, EURbn	30.4	29.1	4	28.9	5	30,4	29,1	4

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 Q2 results 2024. The complete report is attached to this release and can also be found on the below link on our website.

Nordea Group Q2 2024 Report

A webcast will be held on 15 July at 11.00 EET (10.00 CET). Frank Vang-Jensen, President and Group CEO, will present the results followed by a Q&A audio session for investors and analysts with Frank Vang-Jensen, Ian Smith, Group CFO and Ilkka Ottoila, Head of Investor Relations.

The event will be webcast live and the recording and 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
Ilkka Ottoila, Head of Investor Relations, +358 9 5300 7058
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 15 July 2024.

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.