Nordea Reports Decent Third-Quarter Results as Deposit Margins Widen and Loan Losses Remain Low

Nordea reported third-quarter operating profit of EUR 1,297 million, 2% ahead of its earnings release in the same period a year ago. Wider deposit margins owing to higher interest rates and a strong demand for corporate loans stood out positively in the quarter, pushing net interest income up 15%. On the other hand, net fee and commission income declined 6%, driven by 4% lower assets under management as well as lower capital market activity. A 7% increase in total income to EUR 2,501 million in the quarter was still decent, however. Higher investments pushed operating expenses up 4% in the quarter, but given the good income performance, the cost/income ratio still came in at a respectable 45%. Even with further investments in the business in the last quarter of the year, the new guidance for the cost/income ratio of between 48% and 49% for 2022 looks achievable. For the first nine months of the year, the ratio stood at 49%. Loan losses of EUR 58 million, or 7 basis points, were low considering the historical context as well as the uncertain macroeconomic outlook borrowers face. We maintain our SEK 114 fair value estimate and no-moat rating.