First-quarter results 2022

Nordea Bank Abp
Interim report (Q1 and Q3)
28 April 2022 at 7:30 EET

Summary of the quarter¹

Resilient performance, continued lending growth. Mortgage lending volumes increased by 7%, year on year, supported by market share growth across the Nordics. SME lending grew by 6% and large corporate lending by 11%. Assets under management decreased by 5% from the record levels of the previous quarter. This was due to financial market turbulence and seasonal net outflows.

Increased income and higher operating profit. First-quarter operating profit increased by 6%, year on year, to EUR 1,114m, supported by lower loan losses. Total income increased by 3% despite the very strong comparison quarter. Net interest income increased by 8% and net fee and commission income by 5%. Net fair value result decreased by 20% following the exceptionally strong first quarter of 2021. Costs increased by 5%, mainly due to regulatory fees, including higher resolution fees and the new Swedish bank tax.

Continued strong credit quality. Net loan losses and similar net result amounted to reversals of EUR 12m or 1bp in the quarter, compared with net loan losses of 7bp in the first quarter of 2021. Realised net loan losses remained low, consistent with previous periods. The management judgement buffer was unchanged at EUR 610m.

Cost-to-income ratio 48% and return on equity 12.5%. Nordea's cost-to-income ratio was 48% (48% in the first quarter of 2021). Return on equity (RoE) increased to 12.5% from 11.0%. Earnings per share increased by 16%, to EUR 0.22 from EUR 0.19.

Strong capital enabling high dividends and continued share buy-backs. Nordea’s CET1 ratio decreased to 16.3% from 17.0% in the previous quarter due to the capital optimisation associated with the share buy-backs. The CET1 ratio remains very strong at 6.1 percentage points above the regulatory requirement.

Nordea’s Annual General Meeting of 24 March approved the dividend of EUR 0.69 per share for 2021, in line with the bank’s dividend policy. Nordea is committed to implementing an efficient capital structure and commenced a new EUR 1bn share buy-back programme on 14 March. Nordea is also in discussions with the European Central Bank regarding potential follow-on share buy-backs in the second half of 2022.

Russia exit completed. In line with previously communicated plans, Nordea initiated the final steps to liquidate its subsidiaries in Russia. During the quarter Nordea also made loan loss provisions for its direct financial exposure to Russian counterparties. The impacts have been classified as items affecting comparability.

Outlook maintained. Despite increased macroeconomic uncertainty, Nordea confirms its outlook for 2022: RoE above 11% and a cost-to-income ratio of 49–50%. During the quarter the Group presented its new key priorities at its Capital Markets Day. Nordea is committed to reaching its 2025 financial target – RoE above 13%.

(For further viewpoints, see the CEO comment on page 2. For definitions, see page 55 in the Q1 2022 report.)

Group quarterly results and key ratios, Q1 2022¹

1. Excluding items affecting comparability. See page 5 in the Q1 2022 report for further details.

CEO comment

The start of 2022 has been truly extraordinary. Within the first couple of months we witnessed a new wave of the pandemic, followed by a peak in cases and a rapid lifting of restrictions. And then the war started in late February, shaking our societal building blocks – peace, security and stability – and bringing turbulence to financial markets.

We strongly condemn Russia’s invasion of Ukraine. Our thoughts are with all who are suffering, fearing for their lives and worried for their loved ones. We are carrying out our role in society, supporting our people and customers, helping the people of Ukraine and ensuring business continuity. We are also ensuring that we comply with all imposed sanctions.

We decided to exit our Russian operations in 2019 and have been winding down our business there since then. This means that our direct exposure to Russia is very low. In the first quarter we assessed the recoverability of this exposure and made provisions of EUR 76m. We also initiated the final steps to liquidate our subsidiaries in Russia. In accordance with accounting requirements, we transferred to the income statement accumulated foreign exchange translation differences of EUR 529m previously recognised in “Other comprehensive income”. This is a technical item that has no impact on our CET1 capital, equity, or dividend and buy-back capacity. These two items related to the exceptional Russia situation are regarded as items affecting comparability. Furthermore, Nordea Asset Management decided to exit all fund investments connected to Russia.

Nordea is a strong bank and continues to be a safe and trusted partner for customers, employees, shareholders and broader society. In these turbulent times, this is more important than ever. The bank’s resilience has been tested and proven in many crises and our strong business momentum continues.

In the first quarter we continued to make steady progress, building on the strong foundation and business development of 2021. We grew our business, customer activity was high and loan losses were close to zero. This enabled us to achieve a return of equity of 12.5% and an operating profit of EUR 1,114m.

Our mortgage lending increased by 7%, following the positive trend seen in previous quarters, and our market shares continued to increase across the Nordics. Our SME lending volumes increased by 6%, driven by growth in Sweden and Norway in particular. Meanwhile, our large corporate lending grew for the second quarter in a row, increasing by 11%, year on year. Our assets under management grew by 6% despite the negative impact from stock markets in the first quarter of 2022.

Our cost-to-income ratio was 48% – unchanged from the first quarter of 2021. Income was up 3% despite an unusually strong comparison quarter. Income growth was mainly driven by an 8% growth in net interest income. Net interest income increased in all business areas, with the largest contributions from SME and large corporate lending. Our operating costs increased, mainly due to higher regulatory costs, including higher resolution fees and the Swedish bank tax. However, costs excluding regulatory fees were up only 2% despite the higher business activity.

While our performance during the quarter was solid, the war in Ukraine has had an impact on our business. Our assets under management decreased by 5%, quarter on quarter, due to market turbulence and seasonal net outflows. The underlying net flow from our internal channels was positive despite the very turbulent markets. In addition, many corporate finance transactions were postponed due to the increased economic uncertainty. Customer activity is picking up again but there is no doubt that economic uncertainty remains high and business and consumer confidence is more fragile than in 2021.

Our credit quality remains strong, with net loan losses amounting to reversals of 1bp during the quarter. There continues to be uncertainty regarding the broader impact of the conflict – including higher energy, food and commodity prices. With our COVID-19 management judgement provisions of EUR 610m, we are well protected against credit losses. We expect to get a clearer picture of the potential effect of the macroeconomic impacts on our customers during the second quarter.

Our capital strength is among the best in Europe, with a CET1 ratio of 16.3%, 6.1 percentage points above the current regulatory requirement.

All in all, Nordea remains stable and strong and continues to grow market shares despite the turbulent external environment. In 2022 we continue to expect to reach a return on equity above 11% and a cost-to-income ratio of 49–50%.

Our Annual General Meeting in March approved the 2021 dividend of EUR 0.69 per share. Including the share buy-backs, we have distributed almost EUR 4bn to our shareholders so far in 2022. We remain highly committed to implementing an efficient capital structure and continue to distribute excess capital to our shareholders, most recently through a new EUR 1bn share buy-back programme launched in March. Moreover, we are in discussions with the European Central Bank regarding potential follow-on share buy-backs in the second half of the year.

We have now entered the new strategy period, 2022–25. We presented our plans at our Capital Markets Day in February. Our new financial target for 2025, a return on equity above 13%, is a firm target that we are committed to meeting. In order to do so, we have reshaped our key priorities, which are: to create the best omnichannel customer experience, to drive focused and profitable growth, and to increase operational and capital efficiency. We are also focusing on two key levers cutting across the entire bank: being a digital leader among our peers and integrating sustainability into the core of our business.

That is our way forward – to be the preferred partner for Nordic customers in need of a broad range of financial services. In both good and challenging times.

Frank Vang-Jensen
President and Group CEO

Outlook (unchanged)

Financial target for 2025

Nordea’s financial target for 2025 is a return on equity above 13%.

The target will be supported by a cost-to-income ratio of 45–47%, an annual net loan loss ratio of around 10bp and the continuation of Nordea’s well-established capital and dividend policies.

Financial outlook for 2022

Nordea expects a return on equity of above 11% and a cost-to-income ratio of 49–50% for 2022.

Capital policy

A management buffer of 150–200bp above the regulatory CET1 requirement.

Dividend policy

Nordea’s dividend policy stipulates a dividend payout ratio of 60–70%, applicable to profit for the financial year. Nordea will continuously assess the opportunity to use share buy-backs as a tool to distribute excess capital.

 Income statement

 
Income statement excluding items affecting comparability¹

1. Excluding the following items affecting comparability in the first quarter of 2022: a non-deductible loss from the recycling of EUR 529m in accumulated foreign exchange losses related to operations in Russia and EUR 8m (EUR 6m after tax) in losses on fund investments in Russia, recognised in “Net result from items at fair value”; and EUR 76m (EUR 64m after tax) in credit losses on direct exposures to Russian counterparties, recognised in “Net loan losses and similar net result”. There was no impact on equity, own funds or capital from the recycling of the accumulated foreign exchange losses, as a corresponding positive item was recorded in “Other comprehensive income”. Consequently, this item has no impact on Nordeaʼs dividend or share buy-back capacity.

Business volumes, key items¹

1. End of period.

Ratios and key figures²

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.

 Ratios and key figures excluding items affecting comparability¹

1. Excluding the following items affecting comparability in the first quarter of 2022: a non-deductible loss from the recycling of EUR 529m in accumulated foreign exchange losses related to operations in Russia and EUR 8m (EUR 6m after tax) in losses on fund investments in Russia, recognised in “Net result from items at fair value”; and EUR 76m (EUR 64m after tax) in credit losses on direct exposures to Russian counterparties, recognised in “Net loan losses and similar net result”. There was no impact on equity, own funds or capital from the recycling of the accumulated foreign exchange losses, as a corresponding positive item was recorded in “Other comprehensive income”. Consequently, this item has no impact on Nordeaʼs dividend or share buy-back capacity.

This release is a summary of Nordea’s first-quarter results 2022 report. The complete report is attached to this release and can also be found on the below link on our website.

Nordea Group Q1 2022 Report

A webcast for media, investors and equity analysts will be held on 28 April at 11.00 EET (10.00 CET), during which Frank Vang-Jensen, President and Group CEO, will present the results.

To participate in the webcast, please use the webcast link or dial one of the following numbers:
+44 330 165 3641, +46 8 5664 2754, +358 9 7479 0572, +45 35 15 81 82, confirmation code 383746, no later than 10.50 EET (09.50 CET).

The webcast will be directly followed by a Q&A audio session for investors and analysts with Frank Vang-Jensen, Ian Smith, Group CFO, and Matti Ahokas, Head of Investor Relations.

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 28 April 2022.
 

We are 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.

Documents

• Presentation Q1 2022 (PDF)
• First Quarter Report 2022 (PDF)