Interim Report January-June 2023
Nordea Kredit Realkreditaktieselskab
Grønjordsvej 10, 2300 Copenhagen S, Denmark
Business registration number 15134275
1
Contents
2
We are part of 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.
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8
9
Statement of changes in equity
10
19
2
Financial summary
Key financial figures (DKKm)
Jan-Jun
2023
Jan-Jun
2022
Change %
Income statement
Total operating income
1,554
1,357
15
Total operating expenses
-703
-712
-1
Profit before impairment losses on loans and receivables
851
645
32
Impairment losses on loans and receivables
4
34
-88
Profit before tax
855
680
26
Net profit for the period
640
530
21
30 Jun 2023
31 Dec 2022
Change %
30 Jun 2022
Change %
Balance sheet
Receivables from credit institutions and central banks
45,042
39,264
15
45,564
-1
Loans and receivables at fair value
381,551
385,887
-1
398,185
-4
Loans and receivables at nominal value
1
427,211
433,757
-2
439,943
-3
Debt to credit institutions and central banks
14,589
9,503
54
28,722
-49
Bonds in issue at fair value
386,054
389,737
-1
390,024
-1
Equity
21,845
22,280
-2
21,735
1
Total assets
426,805
425,506
0
444,410
-4
Ratios and key figures
Jan-Jun
2023
Jan-Jun
2022
Return on equity, %
2
5.8
4.8
Cost/income ratio
45.2
52.5
Write-down ratio, basis points
2
-0.2
-1.7
Common equity tier 1 capital ratio, %
3
28.7
26.6
Tier 1 capital ratio, %
3
28.7
26.6
Total capital ratio, %
3
30.8
28.6
Own funds, DKKm
3
22,222
22,116
Tier 1 capital, DKKm
3
20,672
20,566
Risk exposure amount, DKKm
72,125
77,370
Average number of employees (full-time equivalents)
112
116
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2
3
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Board of Directors’ report
Nordea Kredit Realkreditaktieselskab is a wholly owned
subsidiary of Nordea Bank Abp.
Throughout this report the term “Nordea Kredit” refers to
Nordea Kredit Realkreditaktieselskab, “Nordea” refers to the
Nordea Bank Abp Group and “Nordea Bank” refers to the
parent company Nordea Bank Abp.
Continued low activity and strong credit
quality
Sales activity in the housing market stayed at a relatively low
level in the first half of 2023 and remortgaging and lending
activity in general was significantly lower than in recent years.
Total lending at nominal value decreased slightly to DKK
427bn (end-2022: DKK 434bn) at end-June 2023, driven by
the lower activity level and household customers who reduced
their mortgage debt by remortgaging fixed-rate loans.
Furthermore, some household customers chose to replace
their mortgage loan in Nordea Kredit by a mortgage-like bank
loan in Nordea Bank. The loan book remained solid across
the personal and commercial segments. LTVs (loan to value)
increased slightly, primarily driven by lower housing prices.
However, LTVs were still at a very low level compared with
previous years and the years around the financial crisis.
Furthermore, arrears and losses were still at very low levels at
end-June 2023 despite some increases after the historically
low levels during COVID-19.
Results summary January-June 2023
Profit before tax increased by 26% to DKK 855m (DKK 680m)
(the comparative figures in brackets refer to the first half of
2022). Profit before tax exceeded expectations due to a
higher return on own funds, driven by increased interest rate
levels.
Operating income
Net interest income increased by 14% to DKK 1,976m (DKK
1,729m), driven by the higher return on own funds, which was
positively affected by the increase in interest rate levels since
the first half of 2022. Administration margins decreased by
DKK 77m following lower lending volumes and average
margins, driven by lower LTV ratios for the loans remortgaged
since the interest rate level began to increase during first half
of 2022.
Fee and commission income was down by 30% to DKK 199m
(DKK 285m), mainly driven by lower loan processing,
refinancing and pay-out fees as lending activity for all
segments decreased.
Fee and commission expenses decreased by 9% to DKK 57m
to DKK 606m (DKK 663m), mainly related to the lower lending
activity for household customers and lower liquidity support
fees as a result of lower use of the liquidity facility.
Staff and administrative expenses
Total staff and administrative expenses decreased by DKK
9m to DKK 703m (DKK 712m), mainly due to decreased fees
for sales and distribution services provided by Nordea Bank
following lower volumes.
Staff costs were at the same level at DKK 58m (DKK 58m).
The average number of full-time equivalent employees
decreased to 112 (116).
Impairment losses on loans and receivables
Impairment losses on loans and receivables amounted to a
net reversal of DKK 4m (net reversal of DKK 34m), mainly
due to a lower reversal of model-calculated provisions in the
first half of 2023 compared with the first half of 2022.
Overall, the loan portfolio of Nordea Kredit is well diversified
with robust collateral.
The guarantee coverage from Nordea Bank significantly
reduces the risk of impairment losses on loans at Nordea
Kredit. The first loss guarantee covered an unchanged share
of 99% (99% at end-2022) of all loans at Nordea Kredit.
The write-down ratio of the loan portfolio increased to -0.2bp
(-1.7bp) compared with the first half of last year, reflecting the
lower reversals.
Tax
Income tax expense was DKK 216m (DKK 149m) and the
effective tax rate increased to 25.2% (22%) following the
increased tax rate for financial institutions from 22% in 2022
to 25.2% in 2023.
Net profit for the period
Net profit for the period increased to DKK 640m (DKK 530m),
corresponding to a return on equity in the first half of 2023 of
5.8% annually (4.8% annually).
Comments on the balance sheet
Assets
Total assets increased to DKK 426.8bn (DKK 425.5bn at end-
2022).
Receivables from credit institutions and central banks
increased to DKK 45.0bn (DKK 39.3bn at end-2022) due to an
increase in excess liquidity from lending activities.
Loans and receivables at nominal value after loan loss
provisions decreased by 2% to DKK 427.2bn (DKK 433.8bn at
end-2022) and 3% compared with 30 June 2022. The
decrease was mainly related to owner-occupied dwellings,
which were down by DKK 6bn nominal as a result of the lower
activity level and customers remortgaging loans with low fixed
interest rates. Commercial properties increased by DKK 1bn
and agriculture decreased by DKK 1bn nominal. Fair value
decreased to DKK 381.6bn (DKK 385.9bn at end-2022) due
to the above-mentioned decrease in nominal lending.
The arrears rate for owner-occupied dwellings and holiday
homes (the 3.5-month arrears rate) for the March 2023
payment date increased slightly to 0.15% (0.10% at the
December 2022 payment date). The arrears rate for the
sector was 0.15%.
Accumulated loan loss provisions decreased by DKK 12m to
DKK 508m (DKK 520m at end-2022) following decreased
model-calculated provisions. Accumulated loan loss
provisions regarding stages 1, 2 and 3 amounted to DKK 71m
(DKK 70m at end-2022), DKK 222m (DKK 223m at end-2022)
and DKK 214m (DKK 228m at end-2022), respectively.
Assets held temporarily remained at a low level and consisted
of a total of eight repossessed properties at the end of June
2023 (five at end-2022) with a carrying amount of DKK 6m
(DKK 3m at end-2022).
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Debt
Debt to credit institutions and central banks increased by DKK
5.1bn to DKK 14.6bn (DKK 9.5bn at end-2022), mainly due to
increased repurchase agreements with Nordea Bank following
the refinancing auctions in June 2023.
Bonds in issue at fair value were down by DKK 3.6bn to DKK
386.1bn (DKK 389.7bn at end-2022) after offsetting the
portfolio of own bonds. The decrease was mainly due to the
decrease in loans at nominal value.
Equity
Including the net profit for the period, total equity amounted to
DKK 21.8bn at the end of June 2023 compared with DKK
22.3bn at end-2022 and DKK 21.7bn at the end of June 2022.
The property market
The economy
The global economy got off to a good start in 2023. The sharp
fall in energy prices and the surprisingly rapid reopening of
the Chinese economy provided the backdrop for an increase
in confidence indicators for businesses and households
globally.
It is mainly the services sector that benefits from better
conditions as consumers have a pent-up need for leisure
activities after the pandemic, while the manufacturing sector is
more affected by the high inflation and rising interest rates.
The strong demand for services has been decisive for the
labour markets’ resilience to monetary policy tightening.
Consequently, unemployment is still very low in both the US
and Europe and the demand for labour is strong.
A result of the strong labour market is historically high wage
growth in many countries over the coming years, increasing
the risk that high inflation will take hold. There are already
signs that inflation is more stubborn than previously expected.
Headline inflation has for a while been falling sharply in both
the US end Europe thanks to lower energy prices. Underlying
inflation – core inflation – is causing growing concern among
central banks. Monetary policy easing is therefore not
expected until core inflation is also under control and
approaching the 2% target. We expect that this will happen in
2024 as interest rates are expected to be close to the top and
to be lowered in 2024.
We expect global growth in the region of 3% this year,
whereas 2024 will see slightly weaker growth. But these
forecasts are subject to a lot of uncertainty, not least related
to the significant monetary policy tightening. It thus remains
uncertain if central banks will manage to administer just the
right dose of monetary policy tightening to lower inflation
without a hard landing of the economy. If the period of high
inflation is extended, it will delay the recovery of the
households’ purchasing power.
In Denmark, average inflation reached 7.7% in 2022, which is
the highest level since 1982. The peak so far was reached in
October 2022 with an annualised inflation rate of 10.1%.
Subsequently, however, the annual rate of price increase has
fallen back again and was down to only 3.1% in July.
The labour market has continued to surprise positively.
According to Statistics Denmark, employment has increased
almost continuously for the past two years and by nearly
23,000 people during the first six months of 2023 alone. We
expect unemployment to rise slightly in the second half of
2023 as the number of vacancies is falling and companies'
own employment expectations are negative.
Property prices and market activity for owner-occupied
dwellings and holiday homes
During the coronavirus pandemic Danish housing prices rose
steeply. During that period low financing costs, robust growth
in disposable incomes and greater appreciation of homes
were the main drivers of the much stronger housing market
demand.
However, in line with rising interest rates and high consumer
prices, the trend has reversed, and according to Boligsiden.dk
the price of both single-family houses and owner-occupied
flats fell by approx. 10% from spring 2022 to February 2023.
However, in recent months the fall in prices slowed down, and
in many parts of the country prices increased in the period
March to June 2023.
We believe that it is the low supply in particular that prevents
house prices from falling further. Despite lower trading activity
over the past year, there is still not much for sale. This gives
sellers the opportunity to get a better price for their property.
There is great uncertainty about developments in the housing
market in the coming years, but we assess that there is a risk
of a small price fall in the second half of 2023. In 2024 we
expect mortgage interest rates to start falling again, and that,
combined with higher real wages and lower property taxes as
a result of the housing tax reform on 1 January 2024, will
again cause house prices to rise. For apartments in larger
cities we still expect declining prices driven by the negative
effect of the tax reform on these apartments.
Interest rates
The bond market is affected by the macroeconomic trends
and the high inflation. The coupon rate on the fixed-rate 30-
year loans is currently 5%, the same rate as at the beginning
of the year. However, the interest rate has risen sharply since
the beginning of 2021 when the coupon rate was 0.5%.
The interest rate on variable-rate loans has increased in 2023.
At the beginning of 2023 the interest rate on F3 and F5 loans
was approx. 3.6%, while the interest rate at the end of June
2023 was approx. 3.9%.
The interest rate on “Kort Rente” loans has also increased in
2023. In the first half of 2023 the interest rate was set at
approx. 3.0%, while it is up to 4.0% in August. Thus, short-
term mortgage interest rates have risen the most in the first
half of 2023.
The rise in short interest rates is due to the monetary
tightening as both the US Federal Reserve and the European
Central Bank (ECB) have a 2% inflation target. Both central
banks therefore raised their target rates in the first half of
2023.
5
-2
-1
0
1
2
3
4
5
6
7
8
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Long-term DKK rate
Short-term DKK rate
Interest rate, %
Figure 1. Interest rates
Residential rental properties
The market for residential rental properties is still doing well
with rather low vacancy rates. Investors require higher yield
levels as a result of the increased inflation and interest rates.
Office and retail properties
There is still good demand after modern and well-located
office properties in the larger cities. Rent levels are stable and
vacancy rates are rather low and mostly related to older and
not well-located properties. Smaller cities are still seeing
downward pressure on the rent level, causing lower prices.
There has been a minor increase in yield levels but not
everywhere, e.g. not in Copenhagen.
Rising vacancy rates for retail properties have put pressure on
rent levels, resulting in unchanged to lower prices also in the
larger cities. Especially in side streets vacancies are seen.
Investors require higher yields in this segment as well.
Hotels and restaurants have been through a long period when
many have suffered greatly due to the coronavirus pandemic.
Further supply of hotel capacity especially in Copenhagen as
ongoing projects have been completed will put downward
pressure on property prices for this segment for an extended
period. However, 2022 was a really good year for many
hotels.
Warehouses and logistics properties
For several years there has been solid demand for modern
and well-located properties with good infrastructure, which
has caused a large decrease in yield levels, low vacancy
rates and higher rent levels. A decline in private consumption
will impact the segment, but demand for this type of properties
is still good, especially new and well-located properties.
Agricultural properties
The agricultural sector has been in a positive trend in recent
years. Farmers have acted sensibly and many have taken
advantage of the situation to reduce debt and have thus
become more financially robust. The outlook for 2023 looks
acceptable although milk and crop production is affected by
falling prices and the entire agricultural sector by rising
interest costs. The green transition with an expected CO2 tax
and increased focus on biodiversity will affect agriculture in
the coming years and financial robustness is therefore
important.
Trading activity in land and crop properties has been good in
recent years, with rising prices due to better earnings and
demand for land for both energy and nature projects. The
turnover of properties with livestock production is more
restrained, but well-maintained properties with good location
and future-oriented production facilities are traded
satisfactorily. Trading activity is expected to be unchanged in
the coming period. However, the currently relatively high level
of interest rates may put a dampener on the market.
Nordea Kredit’s lending
The loan portfolio
At the end of June 2023 total lending at nominal value after
loan loss provisions amounted to DKK 427.2bn (DKK 433.8bn
at end-2022).
Due to a slow housing market, lending for change of
ownership was relatively low in the first half of 2023.
Household customers did to some extent continue to take
advantage of the higher interest rates to remortgage their
fixed-rate loans, thereby reducing their mortgage debt, but
compared with 2022 and previous years the activity level in
general was significantly lower in the first half of 2023.
Gross new lending in the first half of 2023 amounted to DKK
26bn (DKK 50bn in the first half of 2022), of which DKK 19bn
(DKK 38bn in the first half of 2022) was for owner-occupied
dwellings and holiday homes.
Figure 2. Total loan portfolio by loan type
6
The shift towards adjustable-rate mortgage products
continued but at a slower pace in the first half of 2023 as the
spread between short- and long-term mortgage products
narrowed compared with 2022. By end-June 42% (43% at
end-2022) of the mortgage portfolio was fixed-rate loans.
Two-thirds of gross new lending for household customers
were fixed-rate loans in the first half of 2023. The most
popular adjustable-rate loan type among household
customers was Kort Rente followed by F5 loans in the first
half of 2023.
The 30-year interest-only loan Frihed30 has been attractive
among household customers in recent years. However, since
mid-2022 the shift towards Frihed30 loans in particular and
interest-only loans in general has slowed down. By end-June
2023 Frihed30 for owner-occupied dwellings amounted to
DKK 50bn (DKK 50bn at end-2022). Frihed30 is targeted at
experienced homeowners and is only available to customers
with a maximum LTV ratio of 60%. Interest-only loans in
general accounted for 53% (53% at end-2022) of the loan
portfolio by end-June 2023.
Floating-rate products (for example Cibor6 and Cibor6 Green
loans) are the most popular loan types among corporate
customers, accounting for 49% of the lending portfolio for
corporate customers. Lending in Cibor Green accounted for
DKK 15bn by end-June 2023.
LTV ratios
The LTV ratio for total lending at Nordea Kredit was 49% at
the end of June 2023 (46% at end-2022), primarily driven by
reduced housing prices. Although slightly upwards average
LTVs are still near the lowest level observed since the
introduction of SDO/SDRO in 2007.
The LTV ratio for owner-occupied dwellings and holiday
homes increased by 3% points to 52% in the first half of 2023
(49% at end-2022), while the LTV ratio for rental properties,
agricultural properties and other commercial properties was
42% (42% at end-2022), 43% (44% at end-2022) and 41%
(42% at end-2022), respectively, by end-June 2023.
LTV figures can be found in the quarterly investor
presentations and the European Covered Bond Council
(ECBC) covered bond labelling report. Both reports are
available under Investor information on www.nordeakredit.dk.
Supplementary collateral for loans financed through
covered mortgage bonds
Mortgage institutions issuing loans based on covered
mortgage bonds (SDROs) must provide supplementary
collateral out of their own funds if the statutory LTV limit for
the individual property has been exceeded. The
supplementary collateral required based on the LTV ratios for
the individual loans in capital centre 2 (SDRO bonds) was
DKK 3bn at end-June (DKK 3bn at end-2022).
Funding
Bond issuance
Nordea Kredit adheres to the specific balance principle and
exclusively match-funds its lending by the issuance of bonds.
In general, the bonds issued are highly marketable and the
refinancing auctions demonstrated satisfactory demand.
Bond issuance before redemptions amounted to DKK 62bn
nominal in the first half of 2023 (DKK 100bn in the first half of
2022). The decrease was driven by higher lending activity and
more bond series being refinanced in 2022.
At the end of June 2023 the total nominal value of bonds
issued to finance mortgage loans, before offsetting the
portfolio of own bonds, increased to DKK 461bn (DKK 445bn
at end-2022). At end-June 2023 the fair value of the total
outstanding volume of bonds was DKK 386bn (DKK 390bn)
after offsetting the portfolio of own bonds.
Foreign investors, especially Japanese investors, continued to
sell low-coupon bonds throughout the first half of 2023. On
the other hand, there was good demand for high-yield bonds.
In the first half of 2023 borrowers’ prepayment of low-interest
loans caused negative net issuance, which helped to stabilise
the market and absorb foreign sales. Negative net issuance is
diminishing. However, we began to see selling pressure,
which caused bonds to cheapen further.
Issuance in the first half of 2023 changed so that callable
bonds accounted for 53% compared with 40% in the first half
of 2022. The significant switch in issuance to more long-term
fixed interest rates can be explained by the remortgage
activity (fixed low interest rate to fixed higher interest rate) and
flat yield curve.
Generally, activity was low in the first half of 2023, and
especially price fluctuations in the benchmark 5% 30-year
bond were limited.
At the refinancing auctions in May 2023 Danish mortgage
banks sold a very large amount of bonds. The overall volume
amounted to DKK 107b of which Nordea Kredit accounted for
DKK 27bn. Despite the large volumes the auctions were well
received in the market while a widened price spread was
observed.
Rating
The mortgage bonds issued by Nordea Kredit are rated by the
rating agency Standard & Poor’s.
The bonds are issued through capital centre 1 and capital
centre 2 and have all been assigned the highest rating of
AAA.
Capital adequacy
The Tier 1 capital ratio excluding the net profit for the period
was 28.7% (28.4% at end-2022). The Tier 1 capital ratio
increased due to a decrease in the risk exposure amount
(REA) of DKK 1bn to DKK 72bn (DKK 73bn at end-2022). The
decrease in REA was mainly related to exposures calculated
according to the standardised approach.
The total capital ratio excluding the net profit for the period
increased by 0.3% points to 30.8% (30.5% at end-2022). The
total capital ratio increased due to the above-mentioned
decrease in REA.
Debt buffer
The debt buffer requirement was DKK 7.6bn at the end of
June 2023 (DKK 7.7bn at end-2022). The debt buffer
requirement is fulfilled using Tier 1 and Tier 2 capital
instruments not used for capital requirements and by
unsecured senior debt.
7
Individual solvency needs
Under Danish legislation Nordea Kredit must publish its
adequate capital base as well as its individual solvency need
on a quarterly basis. Information about individual solvency
needs is available on
Liquidity and funding ratios
The common European LCR requirement for Nordea Kredit is
100% of net liquidity outflows over a 30-calendar day stress
period, as specified by the Delegated Act (LCR DA). In
addition, Nordea Kredit has an LCR Pillar 2 add-on, which is a
Danish liquidity requirement applicable to all mortgage
institutions and implemented to capture entity-specific liquidity
risk. Nordea Kredit reports both an LCR DA and an LCR
including Pillar 2 add-on. The latter will always be the most
restrictive and thus binding requirement. At the end of June
2023 the LCR DA was 657% and the LCR including Pillar 2
add-on was 262%.
The net stable funding ratio (NSFR) measures long-term
liquidity risk. The NSFR requirement for Nordea Kredit is
100% according to the CRR. At 30 June 2023 Nordea Kredit’s
NSFR was 719%.
Supervisory diamond
The supervisory diamond for mortgage institutions consists of
five specific benchmarks that mortgage institutions in general
should not exceed. The five benchmarks comprise risk areas
identified by the Danish FSA.
At the end of June 2023 Nordea Kredit complied with the five
benchmarks of the supervisory diamond for mortgage
institutions.
Table 1. The supervisory diamond
30 June
2023
Limit
1. Lending growth
Owner-occupied dwellings and holiday homes
-4%
15%
Residential rental properties
4%
15%
Agriculture
-8%
15%
Other
2%
15%
2. Borrower’s interest rate risk
1
11%
25%
3. Interest-only lending
2
6%
10%
4. Short-term funding
3
Annually
11%
25%
Quarterly
6%
12.5%
5. Large exposures
4
36%
100%
1
Loans for owner-occupied dwellings and holiday homes and residential rental properties
where the LTV ratio exceeds 75% of the lending limit and the interest rate is fixed for less
than two years are limited to 25%.
2
Interest-only lending for owner-occupied dwellings and holiday homes where the LTV ratio
exceeds 75% of the lending limit is limited to 10%.
3
Yearly/quarterly refinancing is limited to 25%/12.5% of the total portfolio.
4
The 20 largest exposures less CRR deductions are limited to 100% of CET1.
Changes to the Board of Directors
On 27 March 2023 Marte Kopperstad left the Board of
Directors and was replaced by Tina Sandvik. On 23 May 2023
Peder Birkebæk Bach was elected to the Bord of Directors.
After the changes the Board of Directors consists of Mads
Skovlund Pedersen (Chair), Anne Rømer (Vice Chair and
external member), Anita Ina Nielsen, Thomas Vedel
Kristensen, Anders Frank-Læssøe, Anders Holkmann Olsen,
Helene Bløcher, Tina Sandvik and Peder Birkebæk Bach.
Risks and uncertainties
See Note 7 for information about risks and uncertainties.
8
Income statement
Note
Jan-Jun
2023
Jan-Jun
2022
Full year
2022
DKKm
Interest income
6,053
3,821
8,512
Interest expenses
-4,077
-2,092
-4,995
Net interest income
2
1,976
1,729
3,517
Fee and commission income
199
285
633
Fee and commission expenses
-606
-663
-1,310
Net interest and fee income
1,569
1,351
2,840
Value adjustments
3
-14
5
-17
Other operating income
-1
0
4
Staff and administrative expenses
-703
-712
-1,424
Depreciation of tangible assets
0
0
0
Impairment losses on loans and receivables
4
4
34
-27
Profit from equity investment in associated undertaking
-
1
1
Profit before tax
855
680
1,377
Tax
-216
-149
-302
Net profit for the period
640
530
1,075
Statement of comprehensive income
Jan-Jun
2023
Jan-Jun
2022
Full year
2022
DKKm
Net profit for the period
640
530
1,075
Other comprehensive income, net of tax
-
-
-
Total comprehensive income
640
530
1,075
9
Balance sheet
Note
2023
2022
2022
DKKm
Assets
Cash in hand and demand deposits with central banks
0
0
0
Receivables from credit institutions and central banks
45,042
39,264
45,564
Loans and receivables at fair value
5
381,551
385,887
398,185
Loans and receivables at amortised cost
0
1
1
Investment in associated undertaking
23
24
23
Tangible assets
0
0
0
Deferred tax assets
3
3
3
Current tax assets
-
7
-
Assets held temporarily
6
3
1
Other assets
136
311
601
Prepaid expenses
43
7
32
Total assets
426,805
425,506
444,410
Debt
Debt to credit institutions and central banks
14,589
9,503
28,722
Bonds in issue at fair value
386,054
389,737
390,024
Current tax liabilities
109
-
38
Other liabilities
2,657
2,426
2,329
Deferred income
1
10
13
Total debt
403,410
401,675
421,125
Subordinated debt
Subordinated debt
1,550
1,550
1,550
Equity
Share capital
1,717
1,717
1,717
Other reserves
24
24
24
Retained earnings
20,104
19,464
19,994
Proposed dividends
-
1,075
-
Total equity
21,845
22,280
21,735
Total equity and debt
426,805
425,506
444,410
Contingent liabilities
Guarantees etc
0
0
0
Credit commitments
1,563
1,694
3,544
Total contingent liabilities
1,563
1,694
3,544
10
Statement of changes in equity
DKKm
Share capital
1
Other reserves
2
Retained
earnings
Proposed
dividends
Total equity
Balance at 1 Jan 2023
1,717
24
19,464
1,075
22,280
Net profit for the period
-
-
639
-
639
Other comprehensive income, net of tax
-
-
-
-
-
Share-based payments
-
-
0
-
0
Dividends paid
-
-
-
-1,075
-1,075
Balance at 30 Jun 2023
1,717
24
20,104
-
21,845
DKKm
Balance at 1 Jan 2022
1,717
23
19,464
1,107
22,311
Net profit for the year
-
1
1,074
-
1,075
Other comprehensive income, net of tax
-
-
-
-
-
Share-based payments
-
-
1
-
1
Dividends paid
-
-
-
-1,107
-1,107
Proposed dividends
-
-
-1,075
1,075
-
Balance at 31 Dec 2022
1,717
24
19,464
1,075
22,280
DKKm
Balance at 1 Jan 2022
1,717
23
19,464
1,107
22,311
Net profit for the period
-
1
530
-
530
Other comprehensive income, net of tax
-
-
-
-
-
Share-based payments
-
-
0
-
0
Dividends paid
-
-
-
-1,107
-1,107
Balance at 30 Jun 2022
1,717
24
19,994
-
21,735
1
2
11
Glossary
The following definitions apply for ratios and key
figures.
Common equity tier 1 capital ratio
Common equity tier 1 capital ratio is calculated as common
equity tier 1 capital as a percentage of risk exposure amount.
Cost/income ratio
Total operating expenses divided by total operating income.
Lending growth
The change in loans and receivables at nominal value during
the period divided by loans and receivables at nominal value
beginning of period.
Leverage ratio
The leverage ratio is the institution’s capital as tier 1 capital
net after deductions divided by that institution’s total leverage
ratio exposure and expressed as a percentage.
Loans/equity ratio
Loans and receivables at fair value divided by equity end of
period.
Operating income
Total of net interest and fee income, value adjustments, other
operating income and profit from equity investment in
associated undertaking.
Operating expenses
Total of staff and administrative expenses and depreciation.
Own funds
Own funds include the sum of the tier 1 capital and the
supplementary capital consisting of subordinated loans, after
deduction of the potential deduction for expected shortfall and
other items.
Return on equity
Net profit for the period as a percentage of average equity for
the period. Average equity is including net profit for the period
and dividend until paid.
Risk exposure amount
Total assets and off-balance sheet items valued on the basis
of the credit and market risks, as well as operational risks in
accordance with regulations governing capital adequacy,
excluding carrying amount of shares which have been
deducted from the capital base and intangible assets.
Tier 1 capital
The tier 1 capital of an institution consists of the sum of the
common equity tier 1 capital and additional tier 1 capital of the
institution. Common equity tier 1 capital includes
shareholders’ equity excluding proposed dividend, deferred
tax assets and the full expected shortfall deduction (the
negative difference between expected losses and provisions).
Tier 1 capital ratio
Tier 1 capital as a percentage of risk exposure amount.
Total capital ratio
Own funds as a percentage of risk exposure amount.
Write-down ratio
Impairment losses on loans and receivables during the period
as a percentage of the closing balance of loans and
receivables before impairment losses on loans and
receivables.
12
Note 1
Basis for presentation
The interim report of Nordea Kredit is prepared in accordance with the Danish Financial Business Act, including the Danish
Financial Supervisory Authority’s Executive Order on Financial Reports for Credit Institutions and Investment Firms etc (the
Executive Order).
The accounting policies and methods of computation are the same as for the annual report for 2022. For more information see
Note 1 in the annual report for 2022.
All figures are rounded to the nearest million Danish kroner (DKK), unless otherwise specified. The totals stated are calculated
on the basis of actual figures prior to rounding. Therefore the sum of individual figures and the stated totals may differ slightly.
The financial statements have not been reviewed or audited.
Note 2
Net interest income
DKKm
Jan-Jun
2023
Jan-Jun
2022
Full year
2022
Interest income
Receivables from credit institutions and central banks
434
10
116
Loans and receivables at fair value
3,888
1,888
4,545
Administration margins
1,727
1,804
3,576
Positive interest expenses
-
112
262
Other interest income
4
7
12
Total interest income
6,053
3,821
8,512
Interest expenses
Debt to credit institutions and central banks
-155
-3
-59
Bonds in issue at fair value
-3,882
-1,956
-4,522
Subordinated debt
-40
-16
-42
Negative interest income
-
-117
-372
Total interest expenses
-4,077
-2,092
-4,995
Net interest income
1,976
1,729
3,517
Note 3
Value adjustments
DKKm
Jan-Jun
2023
Jan-Jun
2022
Full year
2022
Mortgage loans
-3,528
-37,338
-41,479
Foreign exchange gains/losses
0
-
-
Interest rate derivatives
2
-12
-5
Bonds in issue
1
3,540
37,355
41,467
Total
14
5
-17
1
13
Note 4
Impairment losses on loans and receivables
DKKm
Jan-Jun
2023
Jan-Jun
2022
Full year
2022
Stage 1
New and increased impairment charges
-3
-6
-9
Reversals of impairment charges
2
0
0
Impairment losses on loans and receivables, non-credit impaired
-1
-6
-9
Stage 2
New and increased impairment charges
-31
-40
-84
Reversals of impairment charges
31
49
73
Impairment losses on loans and receivables, non-credit impaired
0
9
-11
Stage 3, credit impaired
Realised loan losses
-9
-18
-26
Decrease in impairment charges to cover realised loan losses
7
15
21
Recoveries on previous realised loan losses
2
2
4
New and increased impairment charges
-30
-33
-137
Reversals of impairment charges
36
65
131
Impairment losses on loans and receivables, credit impaired
5
31
-6
Impairment losses on loans and receivables
4
34
-27
14
Note 5
Loans and receivables at fair value
DKKm
30 Jun 2023
31 Dec 2022
30 Jun 2022
Mortgage loans, nominal value
Value at beginning of period
434,277
436,626
436,626
New loans (gross new lending)
26,522
93,379
50,081
Foreign exchange revaluations
5
0
1
Redemptions and prepayments
-28,897
-86,943
-41,873
Net new lending for the period
-2,370
6,436
8,209
Scheduled principal payments
-4,187
-8,785
-4,426
Mortgage loan portfolio at end of period
427,719
434,277
440,408
Mortgage loans, fair value
Nominal value
427,719
434,277
440,408
Adjustment for interest rate risk etc
-45,741
-47,989
-41,899
Adjustment for credit risk (see below)
-508
-520
-465
Mortgage loan portfolio
381,470
385,768
398,045
Mortgage arrears (see below)
81
119
141
Loans and receivables at fair value
381,551
385,887
398,185
DKKm
Stage 1
1
Stage 2
Stage 3
Total
Balance at 1 January 2023
70
223
228
520
Transfer between stages
0
3
5
8
Changes due to changes in credit risk (net)
2
4
-4
2
Changes due to repayments
0
-8
-8
-17
Write-off through decrease in allowance account
-
-
-7
-7
Balance at 30 June 2023
71
222
214
508
DKKm
Stage 1
1
Stage 2
Stage 3
Total
Balance at 1 January 2022
61
211
239
511
Transfer between stages
0
0
-18
-18
Changes due to changes in credit risk (net)
18
119
48
185
Changes due to repayments
-9
-106
-24
-139
Write-off through decrease in allowance account
-
-
-18
-18
Balance at 31 December 2022
70
223
228
520
DKKm
Stage 1
1
Stage 2
Stage 3
Total
Balance at 1 January 2022
61
211
239
511
Transfer between stages
0
9
-4
4
Changes due to changes in credit risk (net)
6
-5
-12
-11
Changes due to repayments
-
-11
-16
-27
Write-off through decrease in allowance account
-
-
-12
-12
Balance at 30 June 2022
67
203
195
465
1
15
Note 5
Forward-looking information
Forward-looking information is used for both assessing significant increases in credit risk and calculating expected credit losses
(ECL). Nordea uses three macroeconomic scenarios: a baseline scenario, a favourable scenario and an adverse scenario. For
the first half of 2023, the scenarios were weighted into the final expected credit losses (ECL) as follows: 50% for the baseline
scenario (50% at end-2022), 40% for the adverse scenario (40% at end-2022) and 10% for the favorable scenario (10% at end-
2022). The weight of the adverse scenario was kept at an elevated level, reflecting continued uncertainty regarding the
macroeconomic outlook.
The macroeconomic scenarios are based on the Oxford Economics Model. The forecast is a combination of modelling and
expert judgement, subject to thorough checks and quality control processes. The model has been built to give a good
description of the historical relationships between economic variables and to capture the key linkages between those variables.
The forecast period in the model is ten years. For periods beyond, a long-term average is used in the ECL calculations.
The macroeconomic scenarios reflect Nordea’s view of how the Nordic economies might develop in light of the war in Ukraine
and the associated sanctions and countersanctions on trade with Russia. They take into consideration the possibility of
continued high inflation and the potential impact of significantly higher interest rates on financial markets and economic activity.
When developing the scenarios and determining the relative weighting between them, Nordea took into account projections
made by the central banks, Nordea Research and the European Central Bank.
The baseline scenario for the Nordic economies foresees modest growth and slightly higher unemployment in the coming years
as the pass-through of higher rates and elevated inflation continues to weigh on economic activity. Inflation is expected to
remain elevated. Following the strong housing market activity and price appreciation during the COVID-19 pandemic, the
downward adjustment in housing prices is expected to continue this year. The risks around the baseline forecast are tilted to the
downside.
Nordea’s two alternative macroeconomic scenarios cover a range of plausible risk factors which may cause growth to deviate
from the baseline scenario. Financial instability may lead to a deep and long recession due to falling private consumption and
investment. In addition, housing prices may see an even larger decline due to high interest rates, a squeeze in household
purchasing power and weak confidence. A stabilisation of energy prices at a low level may on the other hand prevent growth
from turning negative in 2023 and support a stronger recovery going forward.
At the end of the first half of 2023, adjustments to model-based allowances/provisions amounted to DKK 307m, including
management judgements. The management judgements cover expected credit losses not yet adequately captured by the
modelled outcomes of the impairment model. The management judgements are based on applied ICAAP stress tests as the first
year estimated net loan loss.
Scenarios
2023
2024
2025
Probability weight
Favourable scenario
GDP growth, %
1.4
1.8
1.7
10%
Unemployment, %
2.9
2.8
2.8
Change in household consumption, %
0.4
2.1
1.9
Home prices, %
-8.7
0.1
3.2
Baseline scenario
GDP growth, %
0.9
1.2
1.2
50%
Unemployment, %
3.0
3.2
3.3
Change in household consumption, %
0.2
1.8
1.2
Home prices, %
-9.4
-0.3
2.9
Adverse scenario
GDP growth, %
-1.0
-0.6
1.1
40%
Unemployment, %
3.5
4.5
4.6
Change in household consumption, %
-1.3
0
0.7
Home prices, %
-10.7
-4.7
0.3
16
Note 6
Capital adequacy
Summary of items included in own funds
DKKm
30 Jun 2023
1
31 Dec 2022
30 Jun 2022
1
Calculation of own funds
Equity
21,206
22,280
21,205
Proposed/actual dividend
-
-1,075
-
Common equity tier 1 capital before regulatory adjustments
21,206
21,206
21,205
IRB provisions shortfall (-)
-259
-275
-323
Other items, net
-275
-303
-316
Total regulatory adjustments to common equity tier 1 capital
-534
-578
-639
Common equity tier 1 capital (net after deduction)
20,672
20,628
20,566
Tier 1 capital (net after deduction)
20,672
20,628
20,566
Tier 2 capital before regulatory adjustments
1,550
1,550
1,550
Total regulatory adjustments to tier 2 capital
-
-
-
Tier 2 capital
1,550
1,550
1,550
Own funds (net after deduction)
22,222
22,178
22,116
1
Minimum capital requirement and risk exposure amount (REA)
30 Jun
30 Jun
31 Dec
31 Dec
30 Jun
30 Jun
2023
2023
2022
2022
2022
2022
DKKm
Minimum
capital
requirement
Minimum
capital
requirement
Minimum
capital
requirement
Credit risk
5,417
67,699
5,471
68,387
5,841
73,012
73
915
77
957
153
1,907
IRB
4,878
60,976
4,867
60,832
5,166
64,575
- corporate
1,834
22,921
1,828
22,842
1,872
23,394
1,834
22,921
1,828
22,842
1,872
23,394
- retail
3,020
37,750
3,008
37,602
3,240
40,505
2,980
37,254
2,978
37,226
3,210
40,129
40
496
30
376
30
376
- other
24
305
31
388
54
676
Standardised
539
6,723
604
7,555
675
8,437
- central governments or central banks
1
7
0
7
1
7
- institutions
530
6,623
596
7,451
666
8,327
- corporate
-
-
-
-
0
1
- secured by mortgages on immovable properties
6
70
6
73
6
79
- equity
2
23
2
24
2
23
Operational risk
352
4,400
347
4,341
347
4,341
Standardised
352
4,400
347
4,341
347
4,341
Additional risk exposure amount related to Swedish RW
floor due to Article 458 CRR
2
26
2
23
2
17
Total
5,771
72,125
5,820
72,751
6,190
77,370
17
Note 6
Capital adequacy, continued
Minimum capital requirement, pillar 2 requirement and capital buffers
Capital buffers
30 Jun 2023 (%)
capital
require-
ment
require-
ment
CCoB
CCyB
O-SII
SRB
Capital
buffers
total
1
Total
Common equity tier 1 capital
4.5
1.2
2.5
2.5
1.5
-
6.5
12.2
Tier 1 capital
6.0
1.6
2.5
2.5
1.5
-
6.5
14.1
Own funds
8.0
2.2
2.5
2.5
1.5
-
6.5
16.6
30 Jun 2023 (DKKm)
Common equity tier 1 capital
3,246
875
1,803
1,794
1,082
-
4,679
8,800
Tier 1 capital
4,328
1,167
1,803
1,794
1,082
-
4,679
10,173
Own funds
5,770
1,556
1,803
1,794
1,082
-
4,679
12,005
1
Common equity tier 1 available to meet capital buffers
30 Jun
31 Dec
30 Jun
Percentage points of REA
2023
2022
1
2022
Common equity tier 1 capital
22.7
22.4
20.6
30 Jun
31 Dec
30 Jun
Capital ratios (%)
2023
2022
1
2022
Common equity tier 1 capital ratio
28.7
28.4
26.6
Tier 1 capital ratio
28.7
28.4
26.6
Total capital ratio
30.8
30.5
28.6
30 Jun
31 Dec
30 Jun
Leverage ratio
2023
2022
1
2022
Tier 1 capital, DKKm
20,672
20,628
20,566
Leverage ratio exposure, DKKm
427,014
425,831
445,433
Leverage ratio, %
4.8
4.8
4.6
1
18
Note 7
Nordea Kredit’s main risk exposure is credit risk. Nordea Kredit only assumes limited market risks, liquidity risks and
operational risks.
See the risk and liquidity management note in the annual report for 2022 for further information on Nordea Kredit’s
management of risks.
There are significant risks related to the macroeconomic environment due to geopolitical developments and broader
inflationary pressures. Reduced consumer spending and cost increases may particularly impact small and medium-sized
enterprises in certain industries. Depending on future developments, there may be increased credit risk in Nordea Kredit’s
portfolio. Potential future credit risks are addressed in Note 5.
Nordea Kredit is not involved in legal proceedings or disputes which are considered likely to have any significant adverse
effect on Nordea Kredit or its financial position.
Note 8
The Danish Financial Supervisory Authority's ratio system
Jan-Jun
2023
Jan-Jun
2022
Full year
2022
Total capital ratio
30.8
28.6
30.5
Tier 1 capital ratio
28.7
26.6
28.4
Pre-tax return on equity, %
3.9
3.1
6.2
Post-tax return on equity, %
2.9
4.8
4.8
Income/cost ratio
2.2
2.0
1.9
Foreign exchange exposure as % of tier 1 capital
1.3
1.2
1.3
Loans/equity ratio
17.5
18.3
17.3
Lending growth for the period, %
-1.5
0.9
-0.5
Impairment ratio for the period
0.0
0.0
0.0
Return on assets, %
0.2
0.1
0.2
The key figures have been computed in accordance with the Danish Financial Supervisory Authority’s definitions, see the
Executive Order on Financial Reports for Credit Institutions and Investment Firms etc.
19
Statement by the Board of Directors and the
Executive Management
The Board of Directors and the Executive Management have considered and adopted the interim report of Nordea Kredit
Realkreditaktieselskab for the half-year ending 30 June 2023.
The interim report has been prepared in accordance with the Danish Financial Business Act, including the Danish Financial
Supervisory Authority’s Executive Order on Financial Reports for Credit Institutions and Investment Firms etc.
It is our opinion that the financial statements give a true and fair view of the company’s financial position at 30 June 2023
and of the results of the company’s operations for the half-year ending 30 June 2023.
Further, in our opinion, the Board of Directors’ report provides a fair review of the development in the company’s operations
and financial matters, the results of the company’s operations and financial position and describes the material risks and
uncertainties affecting the company.
Copenhagen, 5 September 2023
Board of Directors
Mads Skovlund Pedersen Anne Rømer Anders Frank-Læssøe
(Chair) (Vice Chair)
Anders Holkmann Olsen Anita Ina Nielsen Helene Bløcher
Peder Birkebæk Bach Thomas Vedel Kristensen Tina Sandvik
Executive Management
Morten Boni Claus H. Greve
(Chief Executive Officer) (Deputy Chief Executive Officer)