Third-quarter results 2021

Nordea Bank Abp
Interim report (Q1 and Q3)
21 October 2021 at 7:30 EET

Summary of the quarter:
Continued growth in customer business volumes across Nordics. Mortgage lending volumes increased by 6%, year on year, supported by market share growth across the region. SME lending growth accelerated to 9%. Assets under management increased by 21% to an all-time high of EUR 393bn, supported by continued high net inflows, with all channels contributing.

Strong result, supported by quality income growth and good cost management. Operating profit increased by 17% to EUR 1,268m, mainly driven by a 9% increase in total income. Net interest income increased by 7% and net fee and commission income increased by 19%. Net fair value result decreased by 13% due to weaker trading conditions in the quarter. Costs increased by 1% due to the inclusion of Nordea Finance Equipment and exchange rate effects. Before these items, costs were down 1%, driven by good cost management. The full-year 2021 cost outlook is unchanged at around EUR 4.6bn.

Strong credit quality with very low net loan losses. Net loan losses and similar net result amounted to a EUR 22m (3bp) reversal in the quarter, compared with a reversal of EUR 19m (2bp) in the third quarter of 2020. Realised net loan losses remained at very low levels. The management judgement buffer was kept unchanged.

Cost efficiency and return on equity improving. Nordea's cost-to-income ratio improved to 49% from 53% a year ago, supported by quality income growth and continued cost discipline. Return on equity for the quarter was 10.8%, up from 10.1% a year ago. Earnings per share increased to EUR 0.25 from EUR 0.21.

Unpaid dividends distributed to shareholders and share buy-back initiated. Nordea has paid out the remaining 2019-20 dividends (totalling EUR 0.72 per share) and is implementing a share buy-back of up to EUR 2bn, in line with its commitment to an efficient capital structure and sustainable shareholder returns. Due to the capital deduction associated with the buy-back, the CET1 ratio decreased to 16.9% from 18.0% in the second quarter. This is 6.7 percentage points above the current regulatory requirement. Excluding the deduction, the CET1 ratio increased by 20bp, quarter on quarter.

New financial targets to be announced alongside fourth-quarter 2021 results. Nordea has progressed well towards its 2022 financial targets. Nordea plans to publish new targets alongside its 2021 full-year and fourth-quarter results on 3 February 2022.

(For further viewpoints, see the CEO comment on page 2. For definitions, see page 54 in the Q3 2021 Report)

Group quarterly results and key ratios, Q3 2021

	Q3 2021	Q3 2020	Chg %	Q2 2021	Chg %	Jan-Sep 2021	Jan-Sep 2020	Chg %
EURm
Net interest income	1,226	1,146	7	1,232	0	3,670	3,346	10
Net fee and commission income	870	729	19	878	-1	2,575	2,167	19
Net fair value result	224	257	-13	278	-19	872	683	28
Other income	24	23	4	30	-20	65	51	27
Total operating income	2,344	2,155	9	2,418	-3	7,182	6,247	15
Total operating expenses excluding resolution fees	-1,098	-1,089	1	-1,131	-3	-3,324	-3,223	3
Total operating expenses	-1,098	-1,089	1	-1,131	-3	-3,548	-3,425	4
Profit before loan losses	1,246	1,066	17	1,287	-3	3,634	2,822	29
Net loan losses and similar net result	22	19		51		21	-832
Operating profit	1,268	1,085	17	1,338	-5	3,655	1,990	84
Cost-to-income ratio with amortised resolution fees, %	49	53		49		49	54
Return on equity with amortised resolution fees, %	10.8	10.1		11.4		11.1	6.7
Diluted earnings per share, EUR	0.25	0.21		0.25		0.69	0.37

 

 

CEO comment

"In recent months we have witnessed many encouraging developments. Nordic societies have been reopening, enabling millions to resume a more normal way of life. We have entered a new phase of recovery from the pandemic and, as a bank, we have done so from a position of strength.

In the third quarter we continued to make good progress in implementing our business plan and again delivered a strong performance.

Net interest income and net fee and commission income were the main income drivers during the quarter, increasing by 7% and 19%, respectively, year on year. Operating profit increased by 17%, despite more challenging financial markets.

We maintained our strong customer focus while continuing to develop our omnichannel model, a combination of high-quality digital and in-person services. Mortgage lending volumes increased by 6%, year on year, supported by market share growth across the Nordics. It was especially encouraging to see our lending to small and medium-sized enterprises increase by 9%. Assets under management increased by 21% to an all-time high of EUR 393bn, supported by continued high net inflows, with all channels contributing.

As the year progresses, we continue to develop our digital offering to meet our customers' demand for smooth and relevant service. This quarter, our efforts delivered a 7% increase in mobile bank users and 14% more mobile bank logins than a year ago. This means that we had on average 88 million customer logins per month during the quarter. Savings product sales through digital channels increased to 66% of all retail savings. Our mobile banking app remains popular, particularly among customers aspiring to purchase a property.

We remain focused on growing revenues faster than costs. Strong income growth and continued cost discipline resulted in an improved cost-to-income ratio of 49%, down from 53% a year ago, in line with our promise to improve operational efficiency. Return on equity increased to 10.8% from 10.1%.

Our credit quality remains strong. Early indications show that our customers are, in general, emerging from pandemic restrictions in good shape. As a result, the third-quarter net loan losses were very low and we recorded EUR 22m in net loan loss reversals, demonstrating the strength of our well-diversified lending portfolio. However, we kept our management judgement buffer unchanged. This prudent approach ensures we have the resilience to overcome potential setbacks in the recovery from the pandemic.

All of our business areas continued to deliver strong performances. In Personal Banking we continued to drive business activity, supported by our omnichannel model and new digital functionalities. Mortgage volumes and market shares further increased across the Nordic region. Savings income was up 21% due to very high customer activity and retail fund net inflows. The cost-to-income ratio improved to 50% from 54%.

In Business Banking growth in customer lending volumes accelerated to 9% during the quarter. Business activity was high, with particularly strong momentum in Norway and Sweden. We also continued to see good business momentum within savings and investments. Our sustainability-linked lending grew by 13%, quarter on quarter, and we continued to develop our digital offering. The cost-to-income ratio improved to 47% from 51%.

In Large Corporates & Institutions we maintained our leading market positions across the Nordics and continued to work closely with customers across our focus segments. This was particularly reflected in event-related transactions in Debt Capital Markets and high activity in public offerings and mergers and acquisitions, despite the seasonally slow quarter. Return on capital at risk was 12%, at a similar level to last year.

In Asset & Wealth Management we continued to grow our customer business volumes and increase market shares. Customer activity remained at very high levels across all channels. Net inflows into retail funds were strong, particularly in Denmark and Finland. Sustainability products continued to be the primary driver of our growth, generating high interest among all customer groups. During the quarter we further expanded our offering with alternative investments and launched our new Global Climate and Social Impact Fund. The cost-to-income ratio improved to 47% from 51%.

We are actively implementing our sustainability plan. Since the beginning of 2020 we have reduced our exposure to, and emissions associated with, climate-vulnerable sectors and are working together with our customers to help drive a low-carbon economy. We carry out an ESG assessment for all relevant corporate credit applications, and are seeing increasing numbers of transition financing proposals. Total green corporate lending was up 22% in the quarter. We are determined to support our customers' transition and ensure progress towards our 2030 emissions objectives.

On 30 September the European Central Bank withdrew its recommendation for banks to limit dividends. Accordingly, earlier this month we distributed a total of EUR 2.9bn in dividends to our shareholders, including more than 500,000 private individuals and several pension funds across the Nordic countries. Our dividend payments will give a boost to the Nordic economies and help support the post-pandemic economic recovery.

We continue to generate capital each quarter, reinforcing our strong capital position. Share buy-backs are a tool to maintain an efficient capital structure and distribute excess capital. We received supervisory approval in September for a buy-back of up to EUR 2bn - and were among the first banks in Europe to do so. The Board has now decided to initiate the programme. We are also in dialogue with the ECB about a follow-up programme and expect to make a formal application in early 2022.

Over the past few quarters we have consistently delivered on our key priorities: to create great customer experiences, drive income growth initiatives and optimise operational efficiency. This has led to a solid development in our financial performance, which in turn has enabled us to make decisive progress towards our 2022 financial targets.

Given this progress, we are now preparing updates to our financial targets and business plan. We intend to publish new financial targets alongside our fourth-quarter and full-year results on 3 February 2022."

Frank Vang-Jensen
President and Group CEO

Income statement

	Q3 2021	Q3 2020	Chg %	Q2 2021	Chg %	Jan-Sep 2021	Jan-Sep 2020	Chg %
EURm
Net interest income	1,226	1,146	7	1,232	0	3,670	3,346	10
Net fee and commission income	870	729	19	878	-1	2,575	2,167	19
Net result from items at fair value	224	257	-13	278	-19	872	683	28
Profit from associated undertakings and joint ventures accounted for under the equity method	9	6	50	3		-2	-6	-67
Other operating income	15	17	-12	27	-44	67	57	18
Total operating income	2,344	2,155	9	2,418	-3	7,182	6,247	15
Staff costs	-702	-686	2	-705	0	-2,089	-2,030	3
Other expenses	-237	-245	-3	-262	-10	-985	-967	2
Depreciation, amortisation and impairment charges of tangible and intangible assets	-159	-158	1	-164	-3	-474	-428	11
Total operating expenses	-1,098	-1,089	1	-1,131	-3	-3,548	-3,425	4
Profit before loan losses	1,246	1,066	17	1,287	-3	3,634	2,822	29
Net loan losses and similar net result	22	19	16	51	-57	21	-832	-103
Operating profit	1,268	1,085	17	1,338	-5	3,655	1,990	84
Income tax expense	-267	-248	8	-313	-15	-841	-450	87
Net profit for the period	1,001	837	20	1,025	-2	2,814	1,540	83

 

 

Business volumes, key items¹

	30 Sep 2021	30 Sep 2020	Chg %	30 Jun 2021	Chg %
EURbn
Loans to the public	342.6	320.5	7	338.4	1
Loans to the public, excl. repos/securities borrowing	319.5	298.0	7	317.2	1
Deposits and borrowings from the public	210.8	190.0	11	204.6	3
Deposits from the public, excl. repos/securities lending	202.1	183.7	10	196.2	3
Total assets	614.5	574.8	7	586.8	5
Assets under management	392.9	324.5	21	384.2	2
Equity	36.6	32.6	12	35.5	3

 

 

Ratios and key figures²

	Q3 2021	Q3 2020	Chg %	Q2 2021	Chg %	Jan-Sep 2021	Jan-Sep 2020	Chg %
Diluted earnings per share, EUR	0.25	0.21	19	0.25	0	0.69	0.37	86
EPS, rolling 12 months up to period end, EUR	0.87	0.56	55	0.83	5	0.87	0.56	55
Share price1, EUR	11.24	6.49	73	9.40	20	11.24	6.49	73
Equity per share1, EUR	9.06	8.06	12	8.79	3	9.06	8.06	12
Potential shares outstanding1, million	4,050	4,050	0	4,050	0	4,050	4,050	0
Weighted average number of diluted shares, million	4,042	4,040	0	4,041	0	4,041	4,039	0
Return on equity, %	11.3	10.6		11.9		10.9	6.5
Return on tangible equity, %	12.6	12.0		13.4		12.3	7.4
Return on risk exposure amount, %	2.6	2.2		2.7		2.4	1.3
Return on equity with amortised resolution fees, %	10.8	10.1		11.4		11.1	6.7
Cost-to-income ratio, %	47	51		47		49	55
Cost-to-income ratio with amortised resolution fees, %	49	53		49		49	54
Net loan loss ratio, incl. loans held at fair value, bp	-3	-2		-6		-1	35
Common Equity Tier 1 capital ratio1,3, %	16.9	16.4		18.0		16.9	16.4
Tier 1 capital ratio1,3, %	18.9	18.2		19.5		18.9	18.2
Total capital ratio1,3, %	21.0	19.9		21.3		21.0	19.9
Tier 1 capital1,3, EURbn	28.8	27.4	5	29.6	-3	28.8	27.4	5
Risk exposure amount1, EURbn	152.6	150.6	1	152.2	0	152.6	150.6	1
Return on capital at risk, %	17.2	13.9		17.7		16.2	8.2
Return on capital at risk with amortised resolution fees, %	16.4	13.2		17.0		16.4	8.4
Number of employees (FTEs)1	27,126	27,880	-3	27,510	-1	27,126	27,880	-3
Economic capital1, EURbn	23.1	23.7	-2	23.2	0	23.1	23.7	-2

 

1. End of period.
2. See here for more detailed information regarding ratios and key figures defined as alternative performance measures.
3. Including the result for the period.
 

Outlook

Key priorities to meet 2022 financial targets
Nordea's business plan focuses on three key priorities to meet its 2022 financial targets: 1) to optimise operational efficiency, 2) to drive income growth initiatives, and 3) to create great customer experiences.

Financial targets for 2022
Nordea's financial targets for 2022 are:

• a return on equity above 10%
• a cost-to-income ratio of 50%

Costs (operating expenses)
Total costs for 2021 are expected to be around EUR 4.6bn.

Capital policy
A management buffer of 150-200bp above the regulatory CET1 requirement, from 1 January 2021.

Dividend policy
Nordea's dividend policy stipulates a dividend payout ratio of 60-70%, applicable to profit generated from 1 January 2021. Nordea will continuously assess the opportunity to use share buy-backs as a tool to distribute excess capital.

Credit quality
Net loan losses in 2021 are expected to be significantly below the 2020 level.

http://www.rns-pdf.londonstockexchange.com/rns/7891P_1-2021-10-21.pdf

The entire report can be found on the below link on our website.

Nordea Group Q3 2021 Report

For further information:
Frank Vang-Jensen, President and Group CEO, +358 503 821 391
Ian Smith, Group CFO, +45 5547 8372
Matti Ahokas, Head of Investor Relations, +358 405 759 178
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 contact persons set out above, at 07.30 EET (06.30 CET) on 21 October 2021.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.