Report
Derya Guzel
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Morningstar | Nordea’s First Half Reveals Weak Performance; FVE Maintained

Nordea’s first-half 2018 net income of EUR 1.45 billion, excluding one-offs, indicates a 7% decline in local-currency terms when compared with the first half of last year. For the first half of 2018, its net interest income growth trailed peers, decreasing by 8% (Swedbank increased 4%, Handelsbanken 8%, and SEB 9%). First-half performance in fee-income generation was also worrisome at a 7% decline in local currency, lagging its peers, which posted positive growth. For the time being, we are maintaining our fair value estimate at SEK 116, along with our narrow moat rating.

In the quarter, net interest income was up 2% compared with the previous quarter and down 7% compared with second-quarter 2017. The outperformance compared with last quarter is mainly attributable to the refund of resolution fees in Finland and lower fees in Sweden. Lending margins do not paint a positive picture: personal banking and wealth management margins decreased, while commercial and business banking were flat. Lending volumes were up 2% from the previous quarter, driven by personal banking, commercial and business banking, and wholesale banking. Net fee and commission income increased by 5% in local currencies from the previous quarter, supported by brokerage and lending net commission income, mainly in wholesale banking.

On a positive note, Nordea continues its good cost management. Total costs declined 5% year over year, with other costs down by 14% and staff costs down by 2%. Thanks to good cost management, Nordea’s cost/income ratio declined to 45% from 52% in the previous quarter and 54% in the second quarter of 2017. We forecast a cost/income ratio of 48% for the full year.
Underlying
Nordea Bank AB

Nordea Bank is a financial services group based in Sweden. Co. has three business areas: retail banking, wholesale banking, and wealth management. Retail banking conducts a full service banking operation and serves household and corporate customers in the Nordic markets as well as the Baltic countries. Wholesale banking provides banking and other financial solutions to large Nordic and international corporate, institutional and public companies. Wealth management provides investment, savings and risk management products. It also manages customers' assets and provides financial advice to individuals and institutional investors.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Derya Guzel

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