Net items lift Swedish bank results, Nordea NII less resilient

Nordea and Svenska Handelsbanken first quarter results announced on Wednesday echoed those with which SEB kicked off the Nordic bank reporting season the previous Thursday, showing strong net financial items, although Nordea fell behind its peers on net interest income (NII) that for SEB and Handelsbanken proved resilient.

Handelsbanken’s net interest income came in at Skr6.9bn (Eu730m), 1% ahead of expectations and up 2% year-on-year, but Nordea’s was 3% below consensus expectations at Eu1.288bn. However, Nordea’s net financial items was 67% head of expectations at Eu644m, helping revenues come in 9% ahead of expectations at Eu2.7bn and pre-tax profit 22% ahead of expectations at Eu1.4bn, up from
Eu1.1bn a year earlier.
“The main driver is trading gains,” said Mats Anderson, equity research analyst at Kepler Cheuvreux. “The next interest income is less resilient than seen in the Swedish competitors.”
Nordea CEO Christian Clausen said that the exceptionally low interest rate environment put pressure on net interest margins, but also created higher demand for the bank’s products and services.
“The increased volatility leads to greater need for our risk management solutions among our corporate and institutional customers, and we continue to see very strong interest in our savings and investment offerings throughout Europe,” he said.
As well as its NII coming in 1% ahead of consensus expectations, Handelsbanken’s net times came in 15% ahead at Skr428m and commission generation was 6% ahead at Skr2.3bn, up 12% year-on-year. Its pre-tax profit was 4% higher than expectations at Skr4.9bn, the same as the first quarter of 2014.
Anderson at Kepler Cheuvreux noted that pre-tax profit in Sweden was up 14% year-on year despite NII in the country having shrunk 1% on the back of the several Riksbank rate cuts and negative rates.
Danske Bank unveiled stronger than expected results on Thursday, with pre-tax profits coming in 23% higher than consensus expectations at Dkr6.4bn, versus Dkr4.2bn a year earlier.
According to an equity analyst, the performance was driven by not only trading gains, but also commissions and loan loss provisioning, while net interest income coming in 3% below suggested resilience in the faced of Denmark’s difficult interest rate environment. He noted that the bank has been able to compensate for negative interest rates of minus 75bp in Denmark and minus 25bp in Sweden by better funding, rising lending margins and lending volume growth.
NII was Dkr5.3bn, versus Dkr5.2bn a year in the first quarter of 2014, while net financial items were up from Dkr1.9bn to Dkr2.7bn, 32% better than forecast. Commission generation at Dkr3bn was 7% ahead of expectations and up 19% year-on-year.
“In the first quarter of 2015, we saw the benefit of our diversified business model and posted strong earnings despite the adverse effect of low interest rates on net interest income,” said Thomas Borgen, Danske Bank CEO. “We saw very high customer activity within mortgage refinancing and in the financial markets, and all in all, we made a good start to the year.”
DNB on Thursday announced pre-tax profits 3% ahead of consensus expectations at Nkr8.7bn, versus Nkr7.3% a year earlier. Trading games came in 13% ahead of expectations at Nkr3.4bn, versus Nkr2.1bn in the first quarter of 2014, while NII was 1% ahead at Nkr8.6bn, up 12% year-on-year.