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Nordea starts share buybacks as recovery lifts Nordic banks -Breaking

© Reuters. FILE PHOTO : Nordea Bank AB’s logo can be seen at SIBOS, a banking and financial conference, in Toronto, Ontario Canada, October 19, 2017. REUTERS/Chris Helgren/File photo

Johan Ahlander and Essi Ahlander

HELSINKI/STOCKHOLM – On Thursday, Nordea in Finland and Swedbank in Sweden reported better earnings. This is because banks throughout the region have recovered from the effects of the pandemic. They also transferred excess capital to shareholders.

Helped by the rollout of vaccines, Nordic banks like their peers elsewhere in Europe have benefited from rising corporate and consumer activity while a glut of mergers and acquisitions (M&A) and initial public offerings (IPOs) has yielded rich pickings for their investment banking arms.

Nordea, the largest lender in the region, saw its quarter-end operating profit increase to 1.27 Billion Euros ($1.48Billion) after beating forecasts from Sweden’s SEB, Handelsbanken, and other market estimates.

Frank Vang Jensen (Nordea Chief Executive) stated that the bank has entered a new phase in recovery following the pandemic.

Swedbank (the oldest Swedish retail bank) reported that its net profit increased to 5.50 Billion Crowns, up from 5.26 Billion a year ago. This beat analysts’ estimates of 5.10Billion in a Refinitiv survey.

Jens Henriksson from Swedbank stated that the quarter had been marked by a gradual return towards normal. We see strong recovery in Sweden, as well.”

DNB, Norway’s biggest bank reported their best-ever third quarter earnings. The bank also said that it would make a dividend payment in 2020.

Andreas Hakansson is a bank analyst with Danske Bank. He said that Nordea’s profit was consistent with expectations. However, it had slightly higher income incomes such as net income income and commission income.

“So it’s perhaps less than we expected,” he stated. “Swedbank exceeded expectations in some important areas and the share price will rise on that.”

Pandemic-related worries about soaring debts have quickly subsided. Financial regulators have eased temporary restrictions on payouts to shareholders, allowing for strong stock gains across the sector.

Nordea also announced it would pay out 0.72 euros in October’s dividend and will start to purchase back its shares starting Oct. 22.

Nordea said that in the early 2022, it would apply to the European Central Bank to approve a second buyback program.

The Nordic counterparts of SEB have increased their payouts as well, with SEB announcing a new dividend and beginning share repurchases earlier in the week.

Banks in the region are still trying to control costs, but there is some uncertainty.

Nordea’s 2021 cost guidance was increased to approximately 4.6 billion Euros in July. This is an increase from the previous estimate of a lower figure due to Nordea Finance Equipment being acquired and staff pay increases due to strong quarter performance.

As did Swedbank on Thursday, both the Helsinki-based lender and Swedbank stood behind their cost outlook. Swedbank has also been burdened recently by increased legal costs resulting in part from investigations into money laundering in its Baltic business.

($1 = 0.8581 euros)

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.