“We have started to execute on our new business plan. The focus is to deliver on the financial targets presented at our Capital Markets Day in October – and we are proceeding as planned.
Our customer focus and income initiatives delivered better business momentum in the latter part of 2019, which is also evident in the top line. Compared to the fourth quarter of 2018, revenues increased by 6%. We have also delivered on our cost plans, with costs declining 5%, leading to an improvement in the cost to income ratio from 63% to 57%. While we are heading in the right direction, a lot of work remains to achieve our 50% cost to income target in 2022.
Our customers’ experiences continue to improve and in 2019 we launched our new Nordic mobile banking platform, which has been well-received by our customers. While we are not satisfied, we now have a positive trend in customer satisfaction in all business areas.
I am pleased to report that lending is growing in all business areas and for the fourth consecutive quarter we had net inflows in our asset management operations. Assets under management (AuM) reached an all-time high of EUR 324bn.
Net interest income has shown an improving trend in recent quarters, with volumes increasing and margin pressure gradually levelling off. Fees and commissions increased in the fourth quarter with lending fees remaining at a high level and strong savings fees.
The net result from items at fair value improved somewhat compared to previous quarters, but the trading environment remains challenging.
In line with our new business plan, the number of employees decreased by 2% from the previous quarter, of which a significant part was in the Large Corporate & Institutions business area. We will continue to create a strong cost culture and deliver on our cost plans throughout the year.
Net loan losses were somewhat elevated at 17 bps of lending, due to additional provisions on a couple of specific corporate exposures. Overall credit quality is solid.
The common equity tier 1 (CET1) ratio increased to 16.3%, which is approximately 320 bps above the expected regulatory requirement level of Q1 2020, and approximately 120 bps above the management buffer. The risk weights on commercial real estate in Sweden and Norway decreased from 100% to 50% following an updated decision from the European Central Bank (ECB) as part of the annual supervisory dialogue. We have a strong balance sheet that enables us to meet potential changes in regulatory requirements and capture growth opportunities.
The adjusted return on equity (ROE) in the quarter was 7.6%, compared to our 2022 target of above 10%.
The Board proposes a dividend per share of EUR 0.40, in line with the communication in the third quarter report.
In December, the acquisition of SG Finans was announced to complement Nordea’s existing business and align with our priority to focus on core business in the Nordics.
A topic close to my heart is sustainable banking. We want to lead the way by taking steps to embed sustainability throughout the bank. In 2019, we further expanded green corporate loans and green mortgages. We launched 11 new sustainability funds which have contributed to growth. Furthermore, in September, Nordea was the only Nordic bank among the 30 banks that founded the UN Principles for Responsible Banking.
In Personal Banking, the focus on improving our advisors’ availability and reducing administrative tasks has led to improved business activity, and we continue to regain market share in the area. Compared to the fourth quarter in 2018, lending grew 7% while signs of margin pressure were evident in all countries, although with a stabilising trend in Denmark and Sweden. Revenues were 4% higher than in the fourth quarter in 2018 and costs increased 2% leading to the cost to income ratio decreasing by 1-percentage point to 58%. We are continuously developing our customer offer to create great customer experiences. In December, we launched a CO2 tracker in our mobile banking app, which customers can use to track the CO2 impact of their spending.
In Business Banking, key ratios continued to improve, driven by better business momentum mainly in Norway and Sweden. Volumes increased by 3% compared to the fourth quarter in 2018 and towards the end of the year margins stabilised. Revenues increased by 7% and costs decreased by 3% leading to an improvement of 4-percentage points in the cost to income ratio to 49%.
Large Corporates & Institutions focused on reducing cost and capital consumption. Our capital efficiency initiatives have resulted in a reduction in economic capital of EUR 500m compared to the fourth quarter in 2018. We also reduced the number of employees by 10% during the year. With improving revenues and strict cost discipline, the cost to income ratio improved from 66% to 51%.
Asset & Wealth Management continued to deliver sound investment performance and reported positive net inflows for the fourth consecutive quarter. Revenues increased by 7% compared to the fourth quarter of 2018 and costs decreased by 13%. It is promising that the cost to income ratio decreased by 9-percentage points to 40% in the quarter.
In the last quarter of the year, we announced a new organisational structure with clear roles and responsibilities and full accountability in the business areas. The business areas now have a stronger mandate to determine internal processes and tools, as well as the level of support functions they need and can afford.
There are several promising signs in the beginning of the new phase of Nordea, but we still have a lot of work ahead of us to get to where we want to be. Therefore, we will continue to focus on our three key priorities to deliver on the 2022 financial targets; 1) to optimise operational efficiency, 2) to drive income growth initiatives and 3) to create great customer experiences. We are moving in the right direction and are determined to deliver.”
President and Group CEO
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High levels of customer and business activity led to very strong first-quarter results.
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At this year’s edition of the Morningstar Awards, Nordea Funds brought home no more than six wins in total.