Third-quarter results 2023

Nordea Bank Abp
Interim report (Q1 and Q3)
19 October 2023 at 7:30 EET

Summary of the quarter

Strong operating profit, driven by high income growth. Operating profit increased by 34% year on year. Total income increased by 19% despite continued negative foreign exchange effects. The growth was driven by a 36% increase in net interest income as net interest margins continued to improve. Net commission income decreased by 4% year on year while net insurance result increased by 66%. Net fair value result decreased by 5%. Costs excluding regulatory fees increased by 5%.

Return on equity 17.9% – earnings per share up 41%. Nordea’s return on equity increased to 17.9% from 12.7% a year ago. This was driven by continued income growth, which was substantially ahead of cost growth, and lower net loan losses. The cost-to-income ratio excluding regulatory fees improved to 40% from 45%. Earnings per share increased by 41%, to EUR 0.38.

Continued growth in corporate lending, stable mortgage volumes. Nordea’s corporate lending grew by 2% year on year. Mortgage lending volumes were unchanged as Nordic mortgage market activity remained very low. Retail deposit volumes were stable and corporate deposits decreased by 9%. The lower corporate deposits were mainly due to lower liquidity needs in the energy sector compared with last year, and quarter on quarter corporate deposits grew by 1%. Assets under management increased by 5% and internal net flows remained positive.

Solid credit quality with low net loan losses. Net loan losses and similar net result amounted to EUR 33m or 4bp. Despite the slowing economy, new net provisions for individually assessed exposures remained low at EUR 43m or 5bp. The management judgement buffer was kept unchanged in local currencies (translating to EUR 577m).

Strong capital position supported by continued capital generation. Nordea’s CET1 ratio increased to 16.3% from 16.0% the previous quarter due to solid net profit generation. At the end of the quarter the CET1 ratio was 4.3 percentage points above the current regulatory requirement, demonstrating the bank’s capacity to support its customers. Nordea continues to drive an efficient capital structure and is progressing with its fourth share buy-back programme.

Outlook for 2023 unchanged: return on equity above 15%. Nordea has a strong and resilient business model, with a very well-diversified loan portfolio across the Nordic region. This will support it in continuing to deliver quality earnings, with high profitability and low income volatility, amid the increased economic uncertainty. Nordea still expects return on equity to be comfortably above 15% for 2023.

(For further viewpoints, see the CEO comment on page 2. For definitions, see page 56 in the Q3 2023 report.)

Group quarterly results and key ratios

EURm	Q3 2023	Q3 2022	Chg %	Q2 2023	Chg %	Jan-Sep 2023	Jan-Sep 2022¹	Chg %
Net interest income	1,909	1,407	36	1,831	4	5,505	4,023	37
Net fee and commission income	742	775	-4	751	-1	2,258	2,401	-6
Net insurance result	63	38	66	68	-7	177	126	40
Net fair value result	225	238	-5	290	-22	860	764	13
Other income	13	14	-7	15	-13	28	47	-40
Total operating income	2,952	2,472	19	2,955	0	8,828	7,361	20
Total operating expenses excluding regulatory fees	-1,174	-1,114	5	-1,184	-1	-3,525	-3,316	6
Total operating expenses	-1,194	-1,130	6	-1,205	-1	-3,821	-3,622	5
Profit before loan losses	1,758	1,342	31	1,750	0	5,007	3,739	34
Net loan losses and similar net result	-33	-58		-32		-84	10
Operating profit	1,725	1,284	34	1,718	0	4,923	3,749	31

Cost-to-income ratio excluding regulatory fees, %	39.8	45.1		40.1		39.9	45.1
Cost-to-income ratio with amortised resolution fees, %	42.4	48.3		42.8		42.6	48.3
Return on equity with amortised resolution fees, %	17.9	12.7		18.4		17.8	12.9
Diluted earnings per share, EUR	0.38	0.27	41	0.37	3	1.06	0.76	39

1. Excluding items affecting comparability. See page 5 in the Q3 2023 report for further details.

CEO comment

The third quarter was – yet again – characterised by a fragile macroeconomic and geopolitical environment. Despite the challenging circumstances, Nordea performed strongly, with high-quality earnings growth and steady business volumes.

In recent years, we have consistently improved our performance and profitability. Our franchise continues to deliver good results. This demonstrates the enduring strength and resilience of our pan-Nordic business model.

The Nordic societies have so far weathered the challenging conditions well, but we have now entered a period of more subdued economic activity. We must all be prepared for interest rates normalising above the levels we have seen during the past ten years, and consequently asset prices and investment opportunities need to adapt to a new reality. This tests the resilience of both households and corporates. While employment rates have held up well, growth prospects will most likely be lower for the coming 12–18 months. We need to live with prolonged uncertainty, but I am encouraged to think that the Nordic economies are in a good position to stand the test of time.

Alongside these developments, banks in Europe have improved their profitability, supported by a return to positive interest rates after a long period of low and negative rates. This has attracted the attention of different stakeholders, but it should be recognised that both societies and markets as well as the financial industry are learning to adjust to rates that are in line with historical norms. It is also important to note that banks’ ability to support the needs of society is dependent on investor confidence. Yet the average European bank is still valued below its invested capital due to a variety of concerns related to political and regulatory interventions as well as the economic risks from lower growth. The banking sector turbulence in the spring showed that strong, safe and profitable banks are crucial for societies as they support customers and economic growth in all economic cycles.

In this environment, we continue to fulfil our role and responsibility to ensure that credit is provided to viable business projects and households with the right balance between savings and borrowing. We are investing to further strengthen the bank and drive growth, both organically and through acquisitions – such as those of Topdanmark Life and Danske Bank’s personal customer business in Norway.

We have a strong market position in the Nordic banking sector, supported by a strong balance sheet. Our broad product offering and prudent approach to interest rate risk management will enable us to sustain our leading position.

In the third quarter these qualities helped us to continue building on our performance. We maintained an active customer approach and delivered solid business volumes, which led to a return on equity of 17.9%. Our income grew by 19% year on year, driven primarily by net interest income, despite the negative effects of the weaker Norwegian and Swedish currencies. Operating profit increased by 34% year on year. While costs rose by 5%, our cost-to-income ratio improved to 42.4%, or 39.8% excluding regulatory fees, compared with 48.3%, or 45.1%, a year ago.

Mortgage lending is holding up well given the softer housing markets. Volumes remained stable year on year. Despite the weaker economic outlook in the Nordic region, demand for corporate loans continued to grow, with lending increasing by 2% year on year. We improved our share of the corporate lending market, particularly in Norway and Sweden.

Our risk position and credit quality remain sound. Net loan losses and similar net result for the third quarter amounted to EUR 33m, corresponding to 4bp, in line with the second quarter. We kept our management judgement buffer unchanged in local currencies (translating to EUR 577m). Our diversification has served us well: our loan portfolio is spread across multiple sectors in our four home markets, which continue to show considerable resilience.

All four business areas grew income faster than costs during the quarter. In Personal Banking lending and deposit volumes were stable year on year. Overall, customer savings activity remained lower than a year ago. However, we saw signs of increasing demand for recurring investments, and strong customer demand for our attractive range of deposit products. Our digital offering continues to attract customers. Customer use of the mobile banking app reached an all-time high, and logins and user numbers were up 11% and 7%, respectively, compared with the same period last year.

In Business Banking we grew lending volumes by 3%, led by Norway and Sweden. Deposits were down 2%. Strong demand for the recently introduced sustainability guarantee helped us further grow our sustainable financing portfolio, which accounted for 10% of total lending at the end of the quarter. Despite the slowing economy and lower disposable household income, customer credit quality remained strong, with continued low loan losses.

In Large Corporates & Institutions lending volumes were stable excluding foreign exchange impacts. Deposits increased by 5% quarter on quarter, but decreased by 16% year on year due to lower liquidity needs in the energy sector.

In Asset & Wealth Management lending volumes were stable and deposit volumes decreased by 7%, while assets under management increased by 5%, to EUR 360bn. Volatility in the capital markets continued. Despite this, net flows from internal channels remained positive at EUR 0.6bn and Private Banking continued to attract new customers.

Our capital position is strong and we continue to take actions to create a more efficient capital structure. At the end of the quarter our Group CET1 ratio was 16.3%, which is 4.3 percentage points above the current regulatory requirement.

Sustainability remains at the core of our strategy – and we are pleased to see that our actions in this area are being acknowledged. In the third quarter we received a ‘low risk’ rating for ESG risk in the latest of Morningstar Sustainalytics’ well-established annual rankings. We also improved our position and ranked best among our Nordic peer banks. Our plans to further invest and develop within the area of sustainability are unchanged.

Looking forward, our direction and position are clear, even amid the continued uncertainty: we have a stable, strong and resilient business model, with high-quality earnings and a well-diversified loan portfolio across the Nordic region. We remain committed to delivering great omnichannel customer experiences, driving focused and profitable growth, and improving operational and capital efficiency.

All this will help us continue to deliver strong support to our customers, high profitability and market-leading shareholder returns.

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 2023

Nordea expects a return on equity of above 15%.

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 excluding items affecting comparability¹

EURm	Q3 2023	Q3 2022	Chg %	Q2 2023	Chg %	Jan-Sep 2023	Jan-Sep 2022	Chg %
Net interest income	1,909	1,407	36	1,831	4	5,505	4,023	37
Net fee and commission income	742	775	-4	751	-1	2,258	2,401	-6
Net insurance result	63	38	66	68	-7	177	126	40
Net result from items at fair value	225	238	-5	290	-22	860	764	13
Profit from associated undertakings and joint ventures accounted for under the equity method	4	-3		3	33	-5	-7	-29
Other operating income	9	17	-47	12	-25	33	54	-39
Total operating income	2,952	2,472	19	2,955	0	8,828	7,361	20
Staff costs	-729	-691	5	-725	1	-2,173	-2,072	5
Other expenses	-292	-276	6	-304	-4	-883	-793	11
Regulatory fees	-20	-16	25	-21	-5	-296	-306	-3
Depreciation, amortisation and impairment charges of tangible and intangible assets	-153	-147	4	-155	-1	-469	-451	4
Total operating expenses	-1,194	-1,130	6	-1,205	-1	-3,821	-3,622	5
Profit before loan losses	1,758	1,342	31	1,750	0	5,007	3,739	34
Net loan losses and similar net result	-33	-58	-43	-32	3	-84	10
Operating profit	1,725	1,284	34	1,718	0	4,923	3,749	31
Income tax expense	-380	-283	34	-383	-1	-1,095	-836	31
Net profit for the period	1,345	1,001	34	1,335	1	3,828	2,913	31

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; 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 NordeaÊ¼s dividend or share buy-back capacity.

Ratios and key figures excluding items affecting comparability^1,2

	Q3 2023	Q3 2022	Chg %	Q2 2023	Chg %	Jan-Sep 2023	Jan-Sep 2022	Chg %
Diluted earnings per share (DEPS), EUR	0.38	0.27	41	0.37	3	1.06	0.76	39
EPS, rolling 12 months up to period end, EUR	1.41	1.02	38	1.30	8	1.41	1.02	38
Return on equity with amortised resolution fees, %	17.9	12.7		18.4		17.8	12.9
Return on equity, %	18.5	13.3		19.1		17.6	12.7
Return on tangible equity, %	21.4	15.2		22.2		20.4	14.5
Return on risk exposure amount, %	3.8	2.7		3.8		3.6	2.6
Cost-to-income ratio excluding regulatory fees, %	39.8	45.1		40.1		39.9	45.1
Cost-to-income ratio with amortised resolution fees, %	42.4	48.3		42.8		42.6	48.3
Cost-to-income ratio, %	40.4	45.7		40.8		43.3	49.2
Net loan loss ratio, incl. loans held at fair value, bp	4	7		4		3	0
Return on capital at risk with amortised resolution fees, %	23.5	16.6		23.5		23.6	17.1
Return on capital at risk, %	24.4	17.5		24.3		23.3	16.9

1. See here for more detailed information regarding ratios and key figures defined as alternative performance measures.
2. For details about items affecting comparability, see footnote 1 in the previous table.

Business volumes, key items¹

EURbn	30 Sep 2023	30 Sep 2022	Chg %	30 Jun 2023	Chg %
Loans to the public	343.3	345.9	-1	340.0	1
Loans to the public, excl. repos/securities borrowing	320.3	327.4	-2	316.6	1
Deposits and borrowings from the public	213.9	225.4	-5	217.9	-2
Deposits from the public, excl. repos/securities lending	202.4	215.7	-6	202.9	0
Total assets	609.8	624.7	-2	602.4	1
Assets under management	359.7	341.4	5	363.1	-1
Equity	30.4	30.5	0	29.1	4

1. End of period.

Income statement including items affecting comparability

EURm	Q3 2023	Q3 2022	Chg %	Q2 2023	Chg %	Jan-Sep 2023	Jan-Sep 2022	Chg %
Net interest income	1,909	1,407	36	1,831	4	5,505	4,023	37
Net fee and commission income	742	775	-4	751	-1	2,258	2,401	-6
Net insurance result	63	38	66	68	-7	177	126	40
Net result from items at fair value	225	238	-5	290	-22	860	227
Profit from associated undertakings and joint ventures accounted for under the equity method	4	-3		3	33	-5	-7	-29
Other operating income	9	17	-47	12	-25	33	54	-39
Total operating income	2,952	2,472	19	2,955	0	8,828	6,824	29
Staff costs	-729	-691	5	-725	1	-2,173	-2,072	5
Other expenses	-292	-276	6	-304	-4	-883	-793	11
Regulatory fees	-20	-16	25	-21	-5	-296	-306	-3
Depreciation, amortisation and impairment charges of tangible and intangible assets	-153	-147	4	-155	-1	-469	-451	4
Total operating expenses	-1,194	-1,130	6	-1,205	-1	-3,821	-3,622	5
Profit before loan losses	1,758	1,342	31	1,750	0	5,007	3,202	56
Net loan losses and similar net result	-33	-58	-43	-32	3	-84	-66	27
Operating profit	1,725	1,284	34	1,718	0	4,923	3,136	57
Income tax expense	-380	-283	34	-383	-1	-1,095	-822	33
Net profit for the period	1,345	1,001	34	1,335	1	3,828	2,314	65

Ratios and key figures including items affecting comparability¹

	Q3 2023	Q3 2022	Chg %	Q2 2023	Chg %	Jan-Sep 2023	Jan-Sep 2022	Chg %
Diluted earnings per share, EUR	0.38	0.27	41	0.37	3	1.06	0.60	77
EPS, rolling 12 months up to period end, EUR	1.41	0.87	62	1.30	8	1.41	0.87	62
Share price², EUR	10.41	8.80	18	9.97	4	10.41	8.80	18
Equity per share², EUR	8.56	8.24	4	8.13	5	8.56	8.24	4
Potential shares outstanding², million	3,557	3,714	-4	3,589	-1	3,557	3,714	-4
Weighted average number of diluted shares, million	3,566	3,722	-4	3,588	-1	3,593	3,815	-6
Return on equity with amortised resolution fees, %	17.9	12.7		18.4		17.8	10.3
Return on equity, %	18.5	13.3		19.1		17.6	10.1
Return on tangible equity, %	21.4	15.2		22.2		20.4	11.5
Return on risk exposure amount, %	3.8	2.7		3.8		3.6	2.1
Cost-to-income ratio excluding regulatory fees, %	39.8	45.1		40.1		39.9	48.6
Cost-to-income ratio with amortised resolution fees, %	42.4	48.3		42.8		42.6	52.1
Cost-to-income ratio, %	40.4	45.7		40.8		43.3	53.1
Net loan loss ratio, incl. loans held at fair value, bp	4	7		4		3	3
Common Equity Tier 1 capital ratio^2,3, %	16.3	15.8		16.0		16.3	15.8
Tier 1 capital ratio^2,3, %	18.7	18.2		18.3		18.7	18.2
Total capital ratio^2,3, %	20.7	20.3		20.5		20.7	20.3
Tier 1 capital^2,3, EURbn	26.3	27.1	-3	25.6	3	26.3	27.1	-3
Risk exposure amount², EURbn	140.9	149.4	-6	140.0	1	140.9	149.4	-6
Return on capital at risk with amortised resolution fees, %	23.5	16.6		23.5		23.6	13.7
Return on capital at risk, %	24.4	17.5		24.3		23.3	13.4
Net interest margin, %	1.77	1.23		1.69		1.68	1.18
Number of employees (FTEs)²	29,266	27,649	6	29,317	0	29,266	27,649	6
Economic capital², EURbn	22.0	22.5	-2	21.9	1	22.0	22.5	-2

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

This release is a summary of Nordea’s Q3 2023 report. The complete report is attached to this release and can also be found on the below link on our website.

Nordea Group Q3 2023 Report

A webcast for media, investors and equity analysts will be held on 19 October at 11.00 EET (10.00 CET), during which Frank Vang-Jensen, President and Group CEO, will present the results. The presentation will be 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.

The event will be webcast live and the presentation slides will be posted on www.nordea.com/ir.

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 contacts set out above, at 07.30 EET (06.30 CET) on 19 October 2023.

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.