Nordea Bank (NRDEF.PK) reported a significant rise in its Q3 net profit to 1.34 billion euros, up from last year's 1.00 billion euros, as announced on Thursday. The bank's earnings per share also increased to 0.38 euros from the previous year's 0.27 euros, despite items affecting comparability. The bank's recent performance is reflected in its current P/E ratio of 8.02, according to InvestingPro data, indicating a low price-to-earnings ratio relative to near-term earnings growth.
The bank attributed this robust performance to a 36% surge in net interest income, which rose to 1.91 billion euros from the prior year's 1.41 billion euros. However, net fee and commission income experienced a slight dip, falling to 742 million euros from 775 million euros last year.
Operating profit for the third quarter showed a notable increase of 34% YoY due to high-income growth. Despite negative foreign exchange effects, total income rose by 19%. Meanwhile, the net insurance result jumped by an impressive 66%.
Nordea Bank also reported a rise in return on equity to 17.9% from 12.7%, driven by significant income growth and lower net loan losses. The cost-to-income ratio improved to 40% from 45%, excluding regulatory fees. This aligns with InvestingPro Tips indicating that stockholders have been receiving high returns on book equity.
Corporate lending grew by 2% YoY, particularly in Norway and Sweden, while mortgage lending volumes remained stable amidst low Nordic mortgage market activity. Retail deposit volumes held steady, but corporate deposits decreased by 9% due to reduced liquidity needs in the energy sector.
Net loan losses were recorded at EUR 33m or 4bp, and new net provisions for individually assessed exposures remained low at EUR 43m or 5bp despite the economic slowdown. The management judgment buffer remained at EUR 577m.
The bank's CET1 ratio rose to 16.3% from 16.0%, demonstrating its capacity to support its customers. Nordea is also progressing with its fourth share buy-back program. InvestingPro data shows that Nordea's market cap stands at 39.51B USD, further emphasizing its financial strength.
Looking forward, Nordea has set ambitious targets. The bank foresees a return on equity exceeding 15% in 2023 and aims for a return on equity above 13% in 2025. These targets are supported by a projected cost-to-income ratio of 45-47%, an annual net loan loss ratio of around 10bp, and the continuation of Nordea's capital and dividend policies.
In recognition of its achievements, the bank received a 'low risk' ESG risk rating in Morningstar Sustainalytics' annual rankings. This is in line with InvestingPro Tips, which note that despite poor earnings and cash flow potentially forcing dividend cuts, Nordea still pays a significant dividend to shareholders, with a dividend yield of 6.34% as per InvestingPro data. For more investment insights, consider exploring InvestingPro which offers additional tips.
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