Lower Income Generation at Nordea in Third Quarter; Fair Value Estimate Maintained

For the third quarter, Nordea reported operating profit of EUR 1.27 billion, 5% below what it had achieved a quarter ago. Income generation was down 3%. Net interest income came in flat at EUR 1.23 billion as higher lending volumes offset lower lending margins and a smaller benefit from the European Central Bank’s targeted longer-term refinancing operation. Net fee and commission income was down 1% to EUR 0.87 billion as higher card and payment income as well as growth in fees from savings and investments could not offset lower brokerage and advisory activity in the quarter. Net results from items at fair value decreased 19% on lower activity across all business units. Improving operating expenses, down 3%, partially counteracted the lower income in the quarter, but due to its operating leverage, Nordea’s profit before tax declined nonetheless. Last, the bank booked another quarter of small loan-loss reversals of EUR 22 million driven by fair value adjustments at Nordea Kredit. Excluding this adjustment, loan losses would have been at an equally benign EUR 4 million. We keep our fair value estimate of SEK 93 per share unchanged.