Nordea expects higher 2022 costs but better profitability

FILE PHOTO: The Nordea Bank AB logo is seen at the SIBOS banking and financial conference in Toronto
FILE PHOTO: 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

February 3, 2022

By Anne Kauranen

HELSINKI (Reuters) – Nordea Bank unveiled more ambitious profitability targets on Thursday but the Nordic region’s biggest lender also said it expects costs to rise this year.

The Helsinki-based bank is now aiming for a return on equity (RoE) above 13% for 2025 and raised its 2022 target to above 11% from 10% as it benefits from a boom in mortgage lending and growing assets under management.

However, Nordea said costs in 2022 would be higher than 2021, and shares in the company lost some 2.5%, with the Helsinki market down 1.2% around noon.

“…the 49-50% cost income target would include investments for growth and higher regulatory costs which include the Swedish bank tax. This compares with consensus currently at 48% according to Visible Alpha consensus,” Credit Suisse analysts wrote in a note.

Nordea is playing catch-up with Handelsbanken on its profitability targets. The Swedish bank reported a RoE of 11.5% in October for the first three quarters of 2021 and a RoE of 12.4% for the third quarter.

Danish peer Danske Bank has a RoE target of 8.5-9% for 2023.

“I’m happy that we have surpassed our 2022 financial targets one year ahead of schedule and that all of our business areas have met their respective targets,” Nordea Chief Executive Frank Vang-Jensen said in a statement.

The group reported better-than-expected earnings for the fourth quarter.

Nordea’s fourth-quarter net profit rose to 1.02 billion euros ($1.15 billion) from 725 million euros a year ago, beating the mean forecast of 949.1 million seen by analysts, according to Refinitiv data.

“Our mortgage lending grew by 6%, SME (small and medium enterprise) lending by 6% and assets under management… by 17%, reaching all-time-high levels.”

Nordea’s board proposed a dividend of about 0.69 euros per share for 2021, up 77% from 0.39 euros per share for 2020.

“Our capital position is one of the strongest in Europe,” Vang-Jensen told a conference call.

($1=0.8851 euros)

(The story has been refiled to add Nordea’s Finnish RIC)

(Reporting by Anne Kauranen; Editing by Clarence Fernandez, Shailesh Kuber, Carmel Crimmins and Kim Coghill)