Nordea’s Profit Rises 4.7% as Biggest Nordic Bank Cuts Costs

Nordea Bank AB (NDA) said profit rose 4.7 percent in the first quarter as the Nordic region’s largest bank cut costs and saw fewer losses on its loans.

Net income was 831 million euros ($1.15 billion) versus 794 million euros a year earlier, the Stockholm-based bank said in a statement today. That missed the average 850 million-euro estimate in a Bloomberg survey of analysts. Nordea reported a common equity Tier 1 ratio of 14.6 percent of risk-weighted assets, based on Basel III rules.

Sweden’s banks, which face some of Europe’s strictest reserve rules, have increased buffers by cutting costs and retaining earnings to become the best capitalized in the region. Nordea, SEB AB, Svenska Handelsbanken AB (SHBA) and Swedbank AB already exceed a 12 percent minimum requirement for core Tier 1 capital due to take effect in Sweden next year. All four banks used excess capital to raise dividends for 2013.

“Lending demand is subdued and interest rates remain at very low levels,” Nordea Chief Executive Officer Christian Clausen said in today’s statement. “In this environment we continue to execute on our cost and capital efficiency programs and capture business opportunities with our customers.” The bank’s corporate advisory operations picked up in the beginning of 2014, he said.

Shares Gain

Nordea shares rose 3.3 percent to 93.55 kronor as of 9:53 a.m. in Stockholm trading, their steepest intraday advance since July last year. Trading volume was at 26 percent of the daily average in the past three months.

Nordea will probably raise its dividend to match the 75 percent of profit paid out by Swedbank, the Nordic lender that returns the most to its shareholders, Chairman Bjoern Wahlroos said in an interview on April 7.

The 56 percent of profit Nordea delivered shareholders in 2013 “will not be sufficient to prevent an excessive increase in core Tier 1 capital,” Wahlroos said then.

On average, Sweden’s four biggest banks paid out 66 percent of profits to shareholders for 2013. Nordea raised its 2013 dividend by 26 percent to 0.43 euro a share. Handelsbanken paid 53 percent more than in 2012, SEB raised its shareholder payout by 45 percent and Swedbank increased its by 2 percent.

Net interest income at Nordea was little changed at 1.36 billion euros in the three months through March while net fee and commission income rose 13 percent to 704 million euros. Total costs fell 2.4 percent to 1.24 billion euros.

Job Cuts

Nordea said on Jan. 29 it will need to cut more than the 2,500 jobs already axed to adjust to slow growth. In its fourth-quarter report, the bank raised its cost-cutting target to 900 million euros through 2015, compared with a previous cost-saving goal announced in 2012 of 450 million euros. “We must expect to see the number of employees coming down,” Clausen said then.

“Cost-efficiency measures have proceeded according to plan in the first quarter,” the bank said today. “An annualized gross reduction in total expenses of 45 million euros has been conducted in the first quarter and 255 million euros from the beginning of 2013,” it said.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Tasneem Hanfi Brogger, Christian Wienberg

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