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EQS-News: Nordea Bank Abp: Half-year Report

EQS Group-News: Nordea Bank Abp / Key word(s): Half Year Results
Nordea Bank Abp: Half-year Report

21.07.2021 / 08:30

Half-year results 2021

Nordea Bank Abp
Half year financial report
21 July 2021 at 7:30 EET

Summary of the quarter:
Strong result, with high income growth. Operating profit increased to EUR 1,338m from EUR 306m in the same period last year, driven by a significant increase in total operating income, strong cost control and low loan losses. Net interest income grew by 13% and net fee and commission income increased by 30%. Net fair value result was solid and at a more normalised level than in the first quarter.

Continued strong growth in customer business volumes across Nordics. Nordea drove high levels of business activity and gained market shares across the Nordics. Mortgage volumes continued to grow significantly, increasing by 6%, year on year, and SME lending increased by 8%. Assets under management increased by 24% to an all-time high of EUR 387bn, driven by strong performance and continued solid net inflows, especially into retail funds and Private Banking.

Underlying costs unchanged - outlook updated due to significantly higher business activity. Total costs excluding resolution fees increased by 9% due to the inclusion of Nordea Finance Equipment, higher variable pay linked to strong performance and exchange rate effects. Adjusted for these items, costs were unchanged. Given this, costs for 2021 are now expected to be around EUR 4.6bn (previously below EUR 4.6bn).

Strong credit quality with net loan loss reversals. Net loan losses and similar net result amounted to net reversals of EUR 51m or 6bp in the quarter, compared with a 85bp charge in the same quarter last year. Realised net loan losses remained at low levels. Net loan losses in 2021 are expected to be significantly below the 2020 level.

Cost-to-income ratio and profitability improving. Nordea's cost-to-income ratio improved to 49% from 52% a year ago, supported by strong income growth and improved cost efficiency. Return on equity increased to 11.4%, despite the very high equity base arising from undistributed dividends and excess capital. Earnings per share increased to EUR 0.25 from EUR 0.06.

Strong capital generation - capital position among best in Europe. Nordea's CET1 ratio increased to 18.0% from 15.8% a year ago, even after the deduction of the unpaid dividends for 2019-20 and the accrued 2021 dividend. As previously disclosed, Nordea is ready to distribute the unpaid 2019-20 dividends (totalling EUR 0.72 per share) in October, after the current restrictions are repealed. Nordea also plans to start share buy-backs and has commenced the application process.

On track to meet 2022 financial targets. Nordea continues to focus on its three key priorities: to create great customer experiences, drive income growth initiatives and optimise operational efficiency. Nordea is progressing well towards consistent delivery of its financial targets: a cost-to-income ratio of 50% and a return on equity above 10%.

(For further viewpoints, see the CEO comment on page 2. For definitions, see page 54 in the Half-Year Financial Report 2021)


Group quarterly results and key ratios, Q2 2021

 Q2 2021Q2 2020Chg %Q1 2021Chg %Jan-Jun 2021Jan-Jun 2020Chg %
Net interest income1,2321,091131,21222,4442,20011
Net fee and commission income8786733082761,7051,43819
Net fair value result278316-12370-2564842652
Other income3010 11 412846
Total operating income2,4182,090162,42004,8384,09218
Total operating expenses excluding resolution fees-1,131-1,0399-1,0953-2,226-2,1344
Total operating expenses-1,131-1,0884-1,319-14-2,450-2,3365
Profit before loan losses1,2871,002281,101172,3881,75636
Net loan losses and similar net result51-696 -52 -1-851 
Operating profit1,338306 1,049282,387905 
Cost-to-income ratio with amortised resolution fees, %4952 48 4855 
Return on equity with amortised resolution fees, %11.43.0 11.0 11.25.0 
Diluted earnings per share, EUR0.250.06 0.19 0.440.17 


CEO comment
"Over the past few months we have witnessed Nordic societies gradually start to open up. Restrictions are easing, vaccination programmes are progressing well, and a return to more normal activity is under way. However, we still need to be mindful of potential setbacks due to unpredictable virus variants. At Nordea we continue to support our customers in transitioning to a post-pandemic environment. The fundamentals of our business are constant: everything we do starts and ends with our customers.

We are making good progress in developing our omnichannel banking model. The mobile bank app now has more than one billion logins annually and we are continually adding new functionalities. For example, customers can apply for a mortgage via the app and receive a digital loan promise within minutes. They can also sign mortgage agreements digitally and switch between variable and fixed interest periods with a few taps. Savings product sales through digital channels now correspond to 65% of all retail savings. On the corporate side, we have rolled out our new netbank to over 50% of customers and will consistently add new functionalities going forward.

In the second quarter we continued to grow business and customer activity significantly, and further increased market shares across the Nordics. Mortgage volumes increased by 6%, year on year, and lending to small and medium-sized enterprises increased by 8%. Assets under management (AuM) increased by 24% to EUR 387bn, supported by quarterly net inflows of EUR 1.8bn into retail funds and EUR 2.0bn into Private Banking, and solid market performance.

These positive developments led to strong quarterly results. Operating profit increased to EUR 1,338m from EUR 306m in the same period last year due to strong income growth, firm cost control and a significant decrease in net loan losses. Return on equity increased to 11.4%. Income grew by 16%, year on year, and net interest income increased by 13%, the highest growth rate in ten years. Net fee and commission income increased by 30%, mainly driven by higher savings and advisory commission income. Net fair value result was solid, supported by high levels of customer activity and valuation gains.

We remain focused on continuously growing revenues faster than costs. In the second quarter we made further progress, improving our cost-to-income ratio to 49% from 52% a year ago. The significantly higher business activity in the quarter led to higher revenues and profits, but also somewhat higher operating costs, including provisions for variable pay. Our full-year 2021 cost outlook is therefore now around, rather than below, EUR 4.6bn. Our prime focus is, and will remain, not on absolute costs but on costs relative to income.

Our credit quality remained strong in the second quarter. Realised loan losses were low and we recorded EUR 51m in net loan loss reversals. We expect net loan losses in 2021 to be significantly below the 2020 level. However, we have kept our management judgement buffer largely unchanged while the full impact of the pandemic on Nordea's customers remains uncertain.

We continue to implement our new sustainability strategy across the bank. Customer demand for sustainable banking services remains very strong. Drawing on our expertise as a leading bank for sustainability, we are advising and supporting our customers in transitioning to a more sustainable future. In particular, we are working with customers in sectors especially vulnerable to climate-related risks, developing detailed and time-bound transition plans.

All of our business areas are deli...

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