Nordea Second-Quarter Profit Falls as Lending Income Declines

Nordea Bank AB (NDA), the Nordic region’s largest lender, said profit in the second quarter dropped 5.9 percent after net interest income slid.

Net income fell to 772 million euros ($1.01 billion) from 820 million euros a year earlier, the Stockholm-based lender said in a statement today. That met the average 773 million-euro estimate of nine analysts surveyed by Bloomberg. Profit helped the bank increase its core Tier 1 capital ratio to 14 percent under Basel II rules, from 13.2 percent in the first quarter. Net interest income fell 1.7 percent to 1.39 billion euros.

“Nordea has increased the core tier one ratio by 2.7 percent since 2010,” Chief Executive Officer Christian Clausen said in the statement. “At the same time our lending has grown by approximately 20 percent, and we have paid full dividend during this period. This is an excellent illustration that our profitability is high enough to support growth, dividends and increase our capital ratios.”

Clausen is cutting about 10 percent of Nordea’s workforce to help meet stricter regulations. The pan-Nordic bank, which is lagging behind Swedish rivals Svenska Handelsbanken AB (SHBA), Swedbank AB (SWEDA) and SEB AB in terms of capital ratios, said today that it estimates its core Tier 1 capital ratio under Basel III regulation stands at 13.1 percent.

Nordea said on Jan. 30 that it targets a core Tier 1 capital ratio above 13 percent and a return on equity of 15 percent, under normal interest rate conditions, by 2015.

The bank needs to meet higher capital standards in Sweden than those set elsewhere as the government pledges to protect taxpayers from bank-industry losses. Sweden’s four biggest banks must hold at least 10 percent core Tier 1 capital against their risk-weighted assets this year and a minimum 12 percent by 2015.

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