2019 started with a rebound in market sentiment, with the MSCI world index recovering 12% from a 11% drop in Q4 2018. However, the macro economic outlook remains mixed and we continue to be mindful of the economic, geopolitical and market uncertainties that persist. Given the active de-risking, we have carried out in previous years, and with a strong balance sheet, we are in a good position to manage the bank through the cycle.
Nordea’s priorities are very clear – to increase business momentum and at the same time reduce structural costs: we are executing on both. Through the actions we have taken in recent quarters there are now some encouraging signs of improved business momentum, although lending margins are under continued pressure and market making activities remain challenging. Compared to the previous quarter, reported revenues were largely unchanged while revenues excluding items affecting comparability increased by 4%, due to improved fees and commission and net fair value.
Net interest income decreased by 7% compared to the previous quarter, mainly driven by higher regulatory costs, fewer interest days and continuing pressure on household lending margins.
However, volume growth improved in the household sector. Our market share for new net lending in Swedish mortgages steadily increased from October 2018 and is now approximately 10% albeit we are still not where we want to be. In Norway, we continue to grow at approximately 6% and we consolidated Gjensidige Bank in to our business in March, increasing our market share in Norway to approximately 12%. In the corporate segment, volumes continued to improve with end of period volumes increasing 2% this quarter.
Fees and commission improved by 3% from the previous quarter. Our investments in Private Banking Norway and Sweden are bearing fruit and we had a positive net inflow of EUR 0.7bn in the quarter with total new net inflow in Asset and Wealth Management of over EUR 1bn. We have established new partnerships with Affiliated Managers Group and extended distribution channels as well as launched eleven new ESG funds. In Personal Banking, our customer activity is improving and the number of savings advisory sessions with customers increased by 36% compared to same period in 2018, while meetings with Nora, our robot advisor, increased 8 times.
Our capital markets and trading businesses improved significantly from a weak fourth quarter, but trading conditions remain challenging. Net fair value is still somewhat below what we estimate to be the long-term trend. Underlying costs, excluding resolution fees and items affecting comparability(1) decreased by 7% to EUR 1.16bn and 4% from the first quarter of 2018. We are on track to meet the target to reduce costs(2) in constant currencies in 2019 compared to 2018.
Credit quality remained robust and loan losses were 7 bps in the quarter. We continue to expect largely unchanged credit quality in the coming quarters.
Adjusted operating profit(3) increased by 21% from the previous quarter whilst statutory operating profit decreased by 11%.
Net profit decreased by 11% from the previous quarter. Return on equity excluding items affecting comparability and with periodised resolution fees improved 200 bps to 8.1% in the quarter.
The CET1 ratio decreased to 14.6% mainly due to the acquisition of Gjensidige, increased lending volumes and IFRS16. The management buffer is 130bps over the nominal capital commitment made as part of our transition to the banking union.
In Personal Banking, lending volumes increased and market share for new net lending has improved in Sweden. However, income was affected negatively by sustained pressure on lending margins. Adjusted for Intragroup accounting effects, income was down by 2%, and costs(4) decreased by 1%.
Commercial and Business banking income was affected positively by higher lending volumes, higher deposit margins, and good activity in cash management. Adjusted for Intragroup accounting effects, income was down by 2% and costs decreased by 5%.
Wholesale banking income improved driven by stronger customer activity and recovery in market making activities from the low levels seen in Q4. Lending volumes increased across all markets. Revenues increased 9%, while costs4 decreased by 3%.
Asset and Wealth Management saw positive net new inflow of EUR 1bn in the quarter, and the strong market environment lifted the AuM above EUR 300bn again, an increase over 7%. Revenues were largely unchanged while costs4 decreased by 4%.
This quarter, there has been an intense debate about various anti-money laundering (AML) issues. We have previously stated that we expect to be fined in Denmark for our past weak AML processes and procedures, and we are consequently making a provision of EUR 95m for AML-related matters.
We take our responsibility very seriously and have invested more than EUR 700m in risk, compliance and resilience in recent years. However, this is a broader societal issue and we encourage strengthened co-operation between banks and authorities, to prevent financial crime. Harmonisation of anti-money-laundering rules and supervisory practices are necessary, and we would support the creation of an EU-level agency, with the purpose of combating money laundering and financial crime. Our efforts however, will continue unabated and our significant investments underline that Nordea has taken a clear stance on not accepting being used as a platform for financial crime.
In summary, we are confident that our compliance platform is of sounder quality, making us a safe and trusted partner. We are committed to continue to execute on our plans to improve our business momentum and market shares while reducing our structural cost base.
/Casper von Koskull, President and Group CEO
1 Provision of EUR 95m in Q1 2019 and goodwill write-down of EUR 141m in Q4 2018
2 Adjusted for the goodwill write-down of EUR 141m in 2018, transaction costs of EUR 90m in 2019, higher resolution fee in 2019 and provision of EUR 95m in Q1 2019
3 Adjusted for resolution fees (Q418: 167m and Q119: 207m) and items affecting comparability
4 Adjusted for resolution fees
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