Fourth Quarter and Full Year Results 2018

Nordea Bank Abp – Stock exchange release – Financial Statement Release

CEO Casper von Koskull’s comments on the results:
“2018 has been characterised by key deliveries in our transformation journey: Nordea is now a more focused, simpler and resilient bank – operating in the banking union – with a much improved risk and compliance platform following considerable investments. We are also delivering on the cost efficiency plans; credit quality remains strong and the balance sheet is robust. Thus, we are prepared to manage the bank successfully through the cycle.

At the same time, the results for 2018 are not where we want them to be, featuring a challenging revenue development; driven by margin pressure in household lending, muted volume growth, and pressure on savings and market making revenues. Towards the end of the year, margins stabilised, but the difficult market conditions in the fourth quarter further impacted our asset management and net fair value revenues negatively.

For 2019, our priorities are very clear. We are now well placed to intensify our client efforts and increase business momentum while at the same time continuing to drive structural cost efficiency. It is now all about execution.”

The Nordea Bank Board is going to propose a dividend per share of EUR 0.69.

Full year 2018 vs. Full year 2017 (Fourth quarter 2018 vs. Fourth quarter 2017)  

• Net interest income EUR 4,324m, -7%; -5% in local currencies (2%, 3% in local currencies)
• Total operating income EUR 9,005m, -5%; -3% in local currencies (-6%, -4% in local currencies)
• Total expenses EUR 4,879m, -4%; -2% in local currencies (2%, 3% in local currencies)
• Profit before loan losses EUR 4,126m, -6%; -4% in local currencies (-17%, -16% in local currencies)
• Net loan losses EUR 173m, -53%; -51% in local currencies (-58%, -57% in local currencies)
• Operating profit EUR 3,953m, -1%; 1% in local currencies (-13%, -13% in local currencies)
• Common Equity Tier 1 capital ratio 15.5% vs.19.5% (15.5% vs. 19.5%)
• Cost/income ratio 54% vs. 54% (66% vs. 61%)
• Loan loss ratio of 7bps vs. 12bps (5bps vs. 9bps)
• Return on equity 9.7% vs 9.5% (6.1% vs. 7.7%)
• Diluted EPS EUR 0.76 vs. EUR 0.75 (EUR 0.12 vs. EUR 0.15)

Exchange rates used for Q4 2018 for income statement items are for DKK 7.4533, NOK 9.6033 and SEK 10.2608.

Outlook

Key drivers of the outlook
Throughout Nordea we are intensifying our efforts to increase business momentum and each business area has identified a number of initiatives to drive client value and revenue growth. Examples include investments in Private Banking in Norway and Sweden, acquisition of Gjensidige Bank, new distribution channels within Asset management and Wholesale banking and clear plans to regain momentum on mortgages where we already start to see results.

The key drivers behind the structural cost efficiency are increased usage of automation and robotics, ongoing ramp-up in Poland and Estonia and outsourcing of Group Technology mainframe to IBM. We are also simplifying through harmonizing products and services and leveraging scale by further consolidating common units, for instance global operations and services. At the end of the day, it is now all about execution.

Cost
For 2021, we expect the cost base in constant currencies to be approximately 3% below the 2018 cost base excluding items affecting comparability in 2018*and cash costs are expected to be down 5-10% in constant currencies over the same period.

Costs for 2019 are expected to be lower in constant currencies compared to 2018 excluding items affecting comparability in 2018 and 2019** and total cash cost expected to be lower in in constant currencies over the same period.

*EUR141m in goodwill impairment in 2018 related to Russia
**EUR141m in goodwill impairment related to Russia and approximately EUR 90m in 2019 related to divestment of Luminor-shares and acquisition of Gjensidige Bank

Credit quality
Our expectation for the coming quarters is that net losses will remain low and around the average level for 2018.

Capital policy
Given the implementation of transitional arrangements agreed with the ECB following Nordea’s transfer to the Banking Union and with the aim to maintain the same nominal management buffer, Nordea Board of Directors decided to adjust the Groups capital policy to reflect the transitional capital regime on the meeting on 5 February 2019. The management buffer has been adjusted from 50-150bps to a range of 40 – 120 bps. This is mainly a technical adjustment therefore the management buffer remains largely unchanged in nominal EUR amounts. The current level of the management buffer is approximately EUR 2.5bn (160bps). The ambition is to achieve a yearly increase in the dividend per share, while maintaining a strong capital position in line with the capital policy.

The entire report can be found on the below link on our website.
Nordea Group Q4 and FY 2018 Report

The Annual report 2018, including the report by the Board of Directors and the audited annual accounts, will be published in week 9. The annual report will be available at www.nordea.com/ir

For further information:

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 6 February 2019.
  
  
We build strong and close relationships through our engagement with customers and society. Whenever people strive to reach their goals and realise their dreams, we are there to provide relevant financial solutions. We are the largest bank in the Nordic region and among the ten largest financial groups in Europe in terms of total market capitalisation with around 11 million customers. The Nordea share is listed on the Nasdaq Helsinki, Nasdaq Copenhagen and Nasdaq Stockholm exchanges. Read more about us on nordea.com.

Tags: