Copenhagen, Helsinki, Oslo, Stockholm, 6 February 2020
 

Fourth quarter and full year results 2019

Nordea Bank Abp - financial statement release
 

CEO Frank Vang-Jensen's comments on the results:

"We have started to execute on our new business plan. The focus is to deliver on the financial targets presented at our Capital Markets Day in October - and we are proceeding as planned.

Our customer focus and income initiatives delivered better business momentum in the latter part of 2019, which is also evident in the top line. Compared to the fourth quarter of 2018, revenues increased by 6%. We have also delivered on our cost plans, with costs declining 5%, leading to an improvement in the cost to income ratio to 57%. While we are heading in the right direction, a lot of work remains to achieve our 50% cost to income target in 2022.

Our customers' experiences continue to improve and in 2019 we launched our new Nordic mobile banking platform, which has been well-received by our customers. While we are not satisfied, we now have a positive trend in customer satisfaction in all business areas.

I am pleased to report that lending is growing in all business areas and for the fourth consecutive quarter we had net inflows in our asset management operations. Assets under management (AuM) reached an all-time high of EUR 324bn.
The common equity tier 1 (CET1) ratio increased to 16.3%, which is approximately 320 bps above the expected regulatory requirement level of Q1 2020, and approximately 120 bps above the management buffer. This means we have a strong balance sheet that enables us to meet potential changes in regulatory requirements and to capture growth opportunities.

Adjusted return on equity (ROE) in the quarter was 7.6%, compared to our 2022 target of above 10%.

The Board proposes a dividend per share of EUR 0.40, in line with the communication in the third quarter report.

There are several promising signs in the beginning of the new phase of Nordea, but we still have a lot of work ahead of us to get to where we want to be. Therefore, we will continue to focus on our three key priorities to deliver on the 2022 financial targets; 1) to optimise operational efficiency, 2) to drive income growth initiatives and 3) to create great customer experiences. We are moving in the right direction and are determined to deliver."

Full year 2019 vs. full year 2018 results

Net interest income EUR 4,318m, -4%

Total operating income EUR 8,635m, -6%

Total operating income¹ EUR 8,497m, -1%

Total operating expense EUR -5,986m, 19%

Total operating expense¹ EUR -4,877m, -1%

Net loan losses EUR -536m, 210%

Net loan losses¹ EUR -254m, 47%

Operating profit EUR 2,113m, -47%

Adj. operating profit^1,2 EUR 3,366m, -4%

Common Equity Tier 1 capital ratio³ 16.3% vs.15.5%

Cost/income ratio 69% vs. 55%

Cost/income ratio¹ 57% vs. 57%

Cost/income ratio^1,2 57% vs. 57%

Net loan loss ratio, amortised cost 22 bps vs. 7 bps

Return on equity 5.0% vs 9.7%

Return on equity^1,4 8.1% vs 8.5%

Fourth quarter 2019 vs. fourth quarter 2018 results

Net interest income EUR 1,108m, -3%

Total operating income EUR 2,294m, 8%

Total operating income¹ EUR 2,156m, 6%

Total operating expense EUR -1,179m, -15%

Total operating expense¹ EUR -1,179m, -5%

Net loan losses EUR -102m, 240%

Net loan losses¹ EUR -102m, 240%

Operating profit EUR 1,013m, 44%

Adj. operating profit^1,2 EUR 822m, 14%

Common Equity Tier 1 capital ratio³ 16.3% vs.15.5%

Cost/income ratio 51% vs. 65%

Cost/income ratio¹ 57% vs. 61%

Cost/income ratio^1,2 57% vs. 63%

Net loan loss ratio, amortised cost 17 bps vs. 5 bps

Return on equity 9.9% vs 6.3%

Return on equity^1,4 7.6% vs 6.7%

Exchange rates used for Q4 2019 for income statement items are for DKK 7.4661, NOK 9.8499 and SEK 10.5848.
1 Excluding items affecting comparability, see page 6 in Q4 and full year report for further details.
2 Adjusted for resolution fees before tax: In Q4 2019 EUR -53m, in Q3 2019 EUR -52m and in Q4 2018 EUR -42m (amortised on a straight-line basis).
3 The capital ratios are including profit after deduction of accrued dividend. The figures for 2018 are not restated due to changed recognition and presentation
of resolution fees (see Note 1 in the Q4 and full year report for more information).
4 Adjusted for resolution fees after tax: In Q4 2019 EUR -40m, in Q3 2019 EUR -40m and in Q4 2018 EUR -32m (amortised on a straight-line basis).

Outlook

Key priorities to succeed and meet the financial targets
Nordea's plan focusses on three key priorities to deliver on our 2022 financial targets; 1) to optimise operational efficiency, 2) to drive income growth initiatives, and 3) to create great customer experiences.

Financial targets 2022
Nordea's financial targets for 2022 are -

- a return on equity above 10%

- a cost to income ratio of 50%

Costs
In 2020, Nordea expects to reach a cost base of below EUR 4.7bn with planned continued net cost reductions beyond 2020.

Capital policy
A management buffer of 150-200 bps above the regulatory CET1 requirement, from 1 January 2020.

Dividend policy
Our dividend policy stipulates a dividend payout ratio of 60-70%, applicable on profit generated from 1 January 2020. Nordea will continuously assess the opportunity to use share buy-backs as a tool to distribute excess capital.

Credit quality
New: Based on the current macroeconomic environment, Nordea's expectations for the coming quarters is that credit quality will remain largely unchanged.

Previous: Nordea's expectation for the coming quarters is that net losses will be low and around the average level for 2018. However, the macroeconomic outlook is somewhat more uncertain.

Dividend proposal

On 31 December 2019, Nordea Bank Abp's distributable earnings, including profit for the financial year, were EUR 18,166,606,378.45 and the unrestricted equity reserve was EUR 4,590,425,994.62. The Board of Directors proposes to the Annual General Meeting of Nordea Bank Abp to be held on 25 March 2020 that a dividend of EUR 0.40 per share be paid based on the balance sheet to be adopted for the financial year ending 31 December 2019.

Risk weights on commercial real estate

The risk weights on commercial real estate in Sweden and Norway decreased from 100% to 50% following an updated decision from the European Central Bank (ECB) as part of the annual supervisory dialogue.

Pillar 2 requirement (P2R)

Nordea received the final Supervisory Review and Evaluation Process (SREP) decision on 10 December 2019, including a P2R of 1.75%, valid from 1 January 2020.

The entire report can be found on the below link on our website.
Nordea Group Q4 2019 Report

Direct link to Nordea Q4 2019 (entire report as PDF):
http://www.rns-pdf.londonstockexchange.com/rns/1737C_1-2020-2-6.pdf

For further information:

Frank Vang-Jensen, President and Group CEO, +358 503 821 391 Christopher Rees, Group CFO, +45 5547 2377
Rodney Alfvén, Head of Investor Relations, +46 72 235 05 15 Sara Helweg-Larsen, Head of Group Communications, +45 2214 0000

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 2020.

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