COPENHAGEN, Denmark and HELSINKI, Finland and OSLO, Norway and STOCKHOLM, Sweden, July 17, 2020 (GLOBE NEWSWIRE) —
Summary of the quarter:
- Solid result − high activity resulted in revenues largely unchanged. Profit before loan losses was 4% higher than last year. Net interest income increased by 2%, supported by volume growth, especially in mortgages, in all countries. Net fair value result recovered, increasing 12%, mainly from improved trading activities. However, the lockdowns and market turbulence had a negative financial impact, primarily affecting net fee and commission income which declined by 9%. Costs decreased by 8%. Operating profit was EUR 306m − significantly impacted by loan loss provisions.
- Continued progress according to business plan. Cost to income ratio improved to 52%, down from 58% in the same quarter last year. Return on equity was significantly impacted by increased loan loss provisions.
- Strong financial position maintained. Nordea entered the COVID-19 pandemic with a strong financial position, which is maintained. Common equity tier 1 ratio of 15.8%, which is 5.6%-points above the regulatory requirement. Nordea has undertaken an additional severe stress test confirming the ability to continue supporting customers, while maintaining dividend capacity.
- Full year net loan losses estimated to be below EUR 1bn. As communicated in the first quarter report, Nordea has updated macro-economic scenarios, analysed the impact of the economic downturn and concluded a thorough review of the loan book. As a result, Nordea also updated the credit quality outlook and estimates total net loan losses for the full year 2020 to be below EUR 1bn.
- The credit quality of Nordea’s loan book remains strong. Underlying net loan losses were EUR 310m impacted by individual provisions, particularly for the Oil, Gas and Offshore sector, and updated macro-economic scenarios in the IFRS 9 provisioning models.
- Significant buffer to cover for future loan losses. Based on different models and scenarios, the management judgement buffer has been increased by EUR 388m, leading to total Q2 net loan losses of EUR 698m. Nordea now has a management judgement buffer of EUR 650m in place to cover for future loan losses, IFRS 9 model improvements and the European Central Bank’s new guidance on non-performing loans. Nordea deems this proactive approach to be prudent and provides predictability, given the current economic uncertainty.
- Committed to delivering on business plan and financial targets for 2022. It is too early to conclude on the longer-term consequences of the COVID-19 pandemic. Nordea remains committed to delivering on targets whilst supporting customers, employees and stakeholders through the crisis.
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