Nordea Bank Abp
Interim report (Q1 and Q3)
29 April 2021 at 7:30 EET
Summary of the quarter:
Continued growth in business volumes and customer satisfaction across Nordics. Mortgage volumes grew by 6% in local currencies, year on year, and lending to small and medium-sized enterprises increased by 7%. Assets under management increased by 33% to EUR 372bn, driven by market recovery and continued net inflows, especially into retail funds. Customer satisfaction scores continue to increase.
Strong result, driven by high income growth. Operating profit increased by 75%, year on year, mainly driven by significantly higher total operating income, which increased by 21%. Net interest income increased by 9%, net fee and commission income increased by 8% and net fair value result was exceptionally high due to strong financial market activity.
Cost development in line with plan. Increased resolution fees and exchange rate effects resulted in higher costs in the first quarter. Adjusted for those items, and the inclusion of Nordea Finance Equipment (NFE), total costs were down 3%, year on year. In 2021 the full expected resolution fee for the year (EUR 224m) was booked in the first quarter, whereas in 2020 the resolution fee had been booked in two instalments - EUR 153m in the first quarter and EUR 49m in the second. Staff costs were down 2%, even after including the costs from NFE. The full-year 2021 cost outlook is below EUR 4.6bn.
Strong credit quality with low realised net loan losses. Net loan losses and similar net result amounted to EUR 52m or 6bp, compared with EUR 155m or 19bp in the first quarter of 2020. Realised net loan losses were low. The management judgement buffer was maintained at EUR 650m, as the full impact of the COVID-19 pandemic on Nordea's customers remains uncertain.
Profitability improving. Return on equity increased to 11.0% from 6.9%, despite the very high equity base arising from undistributed dividends. Nordea's cost-to-income ratio with amortised resolution fees decreased to 48% from 57%, supported by strong income growth and continued cost efficiency. Earnings per share increased by 73% to EUR 0.19.
Continued capital build - dividend plan confirmed. Nordea's CET1 ratio was up 150bp to 17.5%, 7.3 percentage points above the current regulatory requirement. The Annual General Meeting on 24 March authorised the Board to decide on a dividend payment of a maximum of EUR 0.72 (EUR 0.33 for 2019 and EUR 0.39 for 2020), to be distributed after September 2021, in line with the European Central Bank's guidance.
On track to reach 2022 financial targets. Nordea is progressing towards its financial targets: a cost-to-income ratio of 50% and a return on equity above 10%. Nordea continues to focus on its three key priorities: to create great customer experiences, drive income growth initiatives and optimise operational efficiency.
(For further viewpoints, see the CEO comment on pages 3 and 4. For definitions, see page 53 in the Q1 2021 Report)
Group quarterly results and key ratios, Q1 2021
+---------------------------+-------+-------+-----+-------+-----+
|                           |Q1 2021|Q1 2020|Chg %|Q4 2020|Chg %|
+---------------------------+-------+-------+-----+-------+-----+
|EURm                       |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
|Net interest income        |  1,212|  1,109|    9|  1,169|    4|
+---------------------------+-------+-------+-----+-------+-----+
|Net fee and commission     |    827|    765|    8|    792|    4|
|income                     |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
|Net fair value result      |    370|    110|     |    217|   71|
+---------------------------+-------+-------+-----+-------+-----+
|Other income               |     11|     18|     |     41|     |
+---------------------------+-------+-------+-----+-------+-----+
|Total operating income     |  2,420|  2,002|   21|  2,219|    9|
+---------------------------+-------+-------+-----+-------+-----+
|Total operating expenses   | -1,095| -1,094|    0| -1,218|  -10|
|excluding resolution fees  |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
|Total operating expenses   | -1,319| -1,248|    6| -1,218|    8|
+---------------------------+-------+-------+-----+-------+-----+
|Profit before loan losses  |  1,101|    754|   46|  1,001|   10|
+---------------------------+-------+-------+-----+-------+-----+
|Net loan losses and similar|    -52|   -155|     |    -28|     |
|net result                 |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
|Operating profit           |  1,049|    599|   75|    973|    8|
+---------------------------+-------+-------+-----+-------+-----+
|                           |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
|Cost-to-income ratio with  |     48|     57|     |     57|     |
|amortised resolution fees, |       |       |     |       |     |
|%                          |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
|Return on equity with      |   11.0|    6.9|     |    8.4|     |
|amortised resolution fees, |       |       |     |       |     |
|%                          |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
|Diluted earnings per share,|   0.19|   0.11|   73|   0.18|    6|
|EUR                        |       |       |     |       |     |
+---------------------------+-------+-------+-----+-------+-----+
 
CEO comment
"For society, the first few months of 2021 have been a balancing act between managing ongoing COVID-19 restrictions and preparing exit strategies from the pandemic. At Nordea we are actively supporting and driving a sustainable recovery together with our customers. We have received encouraging feedback for our efforts and customer satisfaction scores continue to increase.
Our performance improved on the back of high levels of business and customer activity, and results in the quarter were strong. We continued to achieve good growth in business volumes across the Nordic region. Mortgage volumes grew by 6%, year on year, and lending to small and medium-sized enterprises increased by 7%. Assets under management (AuM) increased by 33% to EUR 372bn. The growth in AuM was supported not only by positive financial market development but also by a quarterly net inflow of EUR 3.3bn, over half of which was into retail funds.
Our operating profit increased by 75%, year on year, mainly driven by a 21% increase in total operating income. Net interest income grew by 9%, which is the highest growth rate in ten years. Net fee and commission income grew by 8% and was at its highest level since 2017. Net income from lending and savings fees increased, while net income from card fees was still about one-third below normal levels. Exceptionally strong financial market activity and valuation gains supported our net fair value result during the quarter.
We continued to work on our cost base and improve efficiency, while also driving income growth initiatives. Costs in the first quarter were elevated due to increased resolution fees and exchange rate effects. However, excluding these items, costs were lower than a year ago. Staff costs were down 2%, even after including the costs from Nordea Finance Equipment (NFE). We are focused on meeting our full-year target for costs to be below EUR 4.6bn, even though that is becoming more demanding due to high levels of business activity and strengthening exchange rates. Overall, exchange rates had a positive impact on results.
Our credit quality remained strong in the first quarter. Realised loan losses have been very low and net loan losses for the quarter were EUR 52m. However, we have kept our management judgement buffer unchanged at EUR 650m, as the full impact of the COVID-19 pandemic on Nordea's customers remains uncertain.
A combination of exceptionally strong revenue growth and continuous cost discipline drove our cost-to-income ratio down to 48%, compared with 57% a year ago. Return on equity increased to 11.0% from 6.9%, despite the negative impact of the high equity base.
All business areas remain focused on delivering on their targets. In Personal Banking mortgage lending volumes grew by 6%, year on year - the highest growth rate since 2016. Positive net fund inflows continued and savings income grew by 6%. Adjusted for resolution fees, costs increased by 1%, and the cost-to-income ratio improved to 52%. Customer satisfaction continued to increase.
In Business Banking customer lending volumes grew by 7%, year on year. The growth accelerated towards the end of the quarter, with progress in Norway and Sweden in particular. Adjusted for resolution fees, costs increased by 3% due to the inclusion of NFE. I am very glad to see an improvement in customer satisfaction - particularly in Sweden, where, according to the Prospera rankings, we climbed from fifth to first place for personal contact and ranked second overall.
We continue to reposition Large Corporates & Institutions with a view to achieving a more focused and profitable business area. We saw very high levels of customer activity across our focus segments, especially in our capital markets business. In addition, our Markets income was very strong during the quarter. The first quarter of 2021 was the third quarter in a row with a return on capital at risk above 10%.
In Asset & Wealth Management AuM increased by 33%, year on year, to an all-time high of EUR 372bn. It was especially pleasing to see increased momentum in retail fund net inflows, which totalled EUR 1.7bn in the quarter. We saw high levels of interest in our sustainability products, and customer satisfaction remained high.
By the end of the quarter our Group CET1 ratio had increased by 150bp to 17.5%, making us one of the best capitalised banks in Europe. We have a buffer of 7.3 percentage points above the current regulatory requirement, even after having deducted both the 2019 and 2020 dividends and the 2021 dividend accrued thus far.
Our capital position enables us to both support our customers and pay out dividends to our shareholders. Our dividend plan is clear and was confirmed by the Annual General Meeting (AGM) on 24 March. The AGM authorised the Board to decide on a dividend payment of a maximum of EUR 0.72, to be distributed after September 2021, in line with the European Central Bank's guidance.
In addition, our AGM approved the proposal for increased share buy-backs. As communicated earlier, share buy-backs are an important tool to distribute excess capital to our shareholders. We plan to implement buy-backs after the current restrictions are repealed.
We have now been executing our business plan for a year and a half, and are well on track to meet our financial targets for 2022. We are determined to continuously improve our performance by focusing on our three key priorities: to create great customer experiences, drive income growth initiatives and optimise operational efficiency. We will also continue to integrate sustainability into our business strategy and take the necessary steps to become a net-zero emissions bank by 2050 at the latest.
I am confident that we are moving towards brighter times and steadily beating the virus. Nordea will enter the post-pandemic future in a position of strength. Our direction is clear: to be a strong and personal financial partner, a more profitable bank, and a safe and trusted contributor to society."  
Frank Vang-Jensen
President and Group CEO
Income statement
+----------------------------------------------+------+------+-----+-------+-----+
|                                              |    Q1|    Q1|Chg %|Q4 2020|Chg %|
|                                              |  2021|  2020|     |       |     |
+----------------------------------------------+------+------+-----+-------+-----+
|EURm                                          |      |      |     |       |     |
+----------------------------------------------+------+------+-----+-------+-----+
|Net interest income                           | 1,212| 1,109|    9|  1,169|    4|
+----------------------------------------------+------+------+-----+-------+-----+
|Net fee and commission income                 |   827|   765|    8|    792|    4|
+----------------------------------------------+------+------+-----+-------+-----+
|Net result from items at fair value           |   370|   110|     |    217|   71|
+----------------------------------------------+------+------+-----+-------+-----+
|Profit from associated undertakings and joint |   -14|    -2|     |      5|     |
|ventures accounted for under the equity method|      |      |     |       |     |
+----------------------------------------------+------+------+-----+-------+-----+
|Other operating income                        |    25|    20|   25|     36|  -31|
+----------------------------------------------+------+------+-----+-------+-----+
|Total operating income                        | 2,420| 2,002|   21|  2,219|    9|
+----------------------------------------------+------+------+-----+-------+-----+
|Staff costs                                   |  -682|  -699|   -2|   -722|   -6|
+----------------------------------------------+------+------+-----+-------+-----+
|Other expenses                                |  -486|  -419|   16|   -319|   52|
+----------------------------------------------+------+------+-----+-------+-----+
|Depreciation, amortisation and impairment     |  -151|  -130|   16|   -177|  -15|
|charges of tangible and intangible assets     |      |      |     |       |     |
+----------------------------------------------+------+------+-----+-------+-----+
|Total operating expenses                      |-1,319|-1,248|    6| -1,218|    8|
|                                              |      |      |     |       |     |
+----------------------------------------------+------+------+-----+-------+-----+
|Profit before loan losses                     | 1,101|   754|   46|  1,001|   10|
+----------------------------------------------+------+------+-----+-------+-----+
|Net loan losses and similar net result        |   -52|  -155|  -66|    -28|   86|
+----------------------------------------------+------+------+-----+-------+-----+
|Operating profit                              | 1,049|   599|   75|    973|    8|
+----------------------------------------------+------+------+-----+-------+-----+
|Income tax expense                            |  -261|  -139|   88|   -248|    5|
+----------------------------------------------+------+------+-----+-------+-----+
|Net profit for the period                     |   788|   460|   71|    725|    9|
+----------------------------------------------+------+------+-----+-------+-----+
Business volumes, key items[1]
+-------------------+-----------+-----------+-----+-----------+-----+
|                   |31 Mar 2021|31 Mar 2020|Chg %|31 Dec 2020|Chg %|
+-------------------+-----------+-----------+-----+-----------+-----+
|EURbn              |           |           |     |           |     |
+-------------------+-----------+-----------+-----+-----------+-----+
|Loans to the public|      333.6|      324.3|    3|      329.8|    1|
+-------------------+-----------+-----------+-----+-----------+-----+
|Loans to the       |      320.3|      295.4|    8|      317.6|    1|
|public, excl. repos|           |           |     |           |     |
+-------------------+-----------+-----------+-----+-----------+-----+
|Deposits and       |      198.2|      174.0|   14|      183.4|    8|
|borrowings from the|           |           |     |           |     |
|public             |           |           |     |           |     |
+-------------------+-----------+-----------+-----+-----------+-----+
|Deposits from the  |      194.5|      169.2|   15|      182.1|    7|
|public, excl. repos|           |           |     |           |     |
+-------------------+-----------+-----------+-----+-----------+-----+
|Total assets       |      591.1|      600.4|   -2|      552.2|    7|
+-------------------+-----------+-----------+-----+-----------+-----+
|Assets under       |      371.7|      280.4|   33|      353.8|    5|
|management         |           |           |     |           |     |
+-------------------+-----------+-----------+-----+-----------+-----+
|Equity             |       34.5|       31.5|   10|       33.7|    2|
+-------------------+-----------+-----------+-----+-----------+-----+
Ratios and key figures[2]
[][][][][][][][][][]
+-----------------------------+-------+-------+-----+-------+-----+
|                             |Q1 2021|Q1 2020|Chg %|Q4 2020|Chg %|
+-----------------------------+-------+-------+-----+-------+-----+
|Diluted earnings per share,  |   0.19|   0.11|   73|   0.18|    6|
|EUR                          |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|EPS, rolling 12 months up to |   0.64|   0.38|   68|   0.55|   16|
|period end, EUR              |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Share price[1], EUR          |   8.41|   5.13|   64|   6.67|   26|
+-----------------------------+-------+-------+-----+-------+-----+
|Equity per share[1], EUR     |   8.53|   7.79|    9|   8.35|    2|
+-----------------------------+-------+-------+-----+-------+-----+
|Potential shares             |  4,050|  4,050|    0|  4,050|    0|
|outstanding[1], million      |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Weighted average number of   |  4,040|  4,038|    0|  4,039|    0|
|diluted shares, million      |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Return on equity, %          |    9.4|    5.9|     |    8.9|     |
+-----------------------------+-------+-------+-----+-------+-----+
|Return on tangible equity, % |   10.6|    6.6|     |   10.0|     |
+-----------------------------+-------+-------+-----+-------+-----+
|Return on risk exposure      |    2.0|    1.2|     |    1.9|     |
|amount, %                    |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Return on equity with        |   11.0|    6.9|     |    8.4|     |
|amortised resolution fees, % |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Cost-to-income ratio, %      |     55|     62|     |     55|     |
+-----------------------------+-------+-------+-----+-------+-----+
|Cost-to-income ratio with    |     48|     57|     |     57|     |
|amortised resolution fees, % |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Net loan loss ratio,         |      6|     19|     |      3|     |
|amortised cost, bp           |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Common Equity Tier 1 capital |   17.5|   16.0|     |   17.1|     |
|ratio[1,3], %                |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Tier 1 capital ratio[1,3], % |   19.2|   17.8|     |   18.7|     |
+-----------------------------+-------+-------+-----+-------+-----+
|Total capital ratio[1,3], %  |   20.9|   20.2|     |   20.5|     |
+-----------------------------+-------+-------+-----+-------+-----+
|Tier 1 capital[1,3], EURbn   |   29.6|   27.1|    9|   29.1|    2|
+-----------------------------+-------+-------+-----+-------+-----+
|Risk exposure amount[1],     |    154|    152|    1|    155|   -1|
|EURbn                        |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Return on capital at risk, % |   13.6|    7.2|     |   12.1|     |
+-----------------------------+-------+-------+-----+-------+-----+
|Return on capital at risk    |   15.8|    8.4|     |   11.5|     |
|with amortised resolution    |       |       |     |       |     |
|fees, %                      |       |       |     |       |     |
+-----------------------------+-------+-------+-----+-------+-----+
|Number of employees (FTEs)[1]| 27,800| 28,292|   -2| 28,051|   -1|
+-----------------------------+-------+-------+-----+-------+-----+
|Economic capital[1], EURbn   |   23.4|   25.8|   -9|   23.5|   -1|
+-----------------------------+-------+-------+-----+-------+-----+
1. End of period.
2. See here for more detailed information regarding ratios and key figures defined as alternative performance measures (https://www.nordea.com/en/investor-relations/reports-and-presentations/group-interim-reports). 
3. Including the result for the period.
Outlook
Key priorities to meet 2022 financial targets
Nordea's business plan focuses on three key priorities to meet its 2022 financial targets: 1) to optimise operational efficiency, 2) to drive income growth initiatives, and 3) to create great customer experiences.
Financial targets 2022
Nordea's financial targets for 2022 are:
a return on equity above 10%
a cost-to-income ratio of 50%
Costs (operating expenses)
Total costs for 2021 are expected to be below EUR 4.6bn.
Capital policy
A management buffer of 150-200bp above the regulatory CET1 requirement, from 1 January 2021.
Dividend policy
Nordea's dividend policy stipulates a dividend payout ratio of 60-70%, applicable to profit generated from 1 January 2021. Nordea will continuously assess the opportunity to use share buy-backs as a tool to distribute excess capital.
The entire report can be found on the below link on our website.
Nordea Group Q1 2021 Report (https://www.nordea.com/en/investor-relations/reports-and-presentations/latest-interim-results/)
For further information:
Frank Vang-Jensen, President and  Ian Smith, Group CFO, +45 5547 8372
Group CEO, +358 503 821 391
Matti Ahokas, Head of Investor    Ulrika Romantschuk, Head of Brand,
Relations, +358 405 759           Communication and Marketing, +358 10 416
178                               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 29 April 2021.
 
Nordea is a leading Nordic universal bank. We are helping our customers realise their dreams and aspirations - and we have done that for 200 years. We want to make a real difference for our customers and the communities where we operate - by being a strong and personal financial partner. The Nordea share is listed on the Nasdaq Helsinki, Nasdaq Copenhagen and Nasdaq Stockholm exchanges. Read more about us on nordea.com.