Nordea Fourth-quarter and full-year results 2022

Fourth-quarter and full-year results 2022

Nordea Bank Abp
Financial Statement Release
2 February 2023 at 7:30 EET

Summary of the quarter

Continued growth in business volumes, driven by strong corporate lending despite higher economic uncertainty. Nordea continued to win market shares across the region, with mortgage lending up 3%. However, higher economic uncertainty and rising inflation led to slower growth in mortgage volumes in the fourth quarter. Nordea also grew its corporate lending by 9%. Assets under management (AuM) were down 13% year on year, although up 5% from the previous quarter with continued positive flows from internal channels.

Income and operating profit growth. Fourth-quarter operating profit was up 26% at EUR 1,609m. Total income was up 19%, driven by a 31% increase in net interest income that was supported mainly by growth in corporate lending, deposit volumes and higher deposit margins. Net commission income decreased by 12% due to lower average AuM and continued lower capital markets activity. Net fair value result increased by 69%, driven by strong customer activity. Costs increased by 10%, excluding regulatory fees. The higher-than-normal increase was driven by inflation, additional technology and risk management investments and certain items not present in the comparative figures, including transaction costs related to the acquisition of Topdanmark Life. In the fourth quarter the increased investments in risk management included financial crime prevention capabilities and IT resilience.

Strong credit quality with low net loan losses. Net loan losses and similar net result amounted to EUR 59m or 7bp in the quarter. Despite the economic slowdown, individual net loan losses remained low and amounted to EUR 40m or 6bp. Following an assessment of the increased inflation, interest rate hikes and the overall deterioration of the macroeconomic outlook, the management judgment buffer was increased by EUR 20m to EUR 585m.

Return on equity at 15.9% - earnings per share up 31%. Nordea's return on equity (RoE) increased to 15.9% from 11.3%, year on year. Cost-to-income ratio excluding regulatory fees improved to 41.9% from 45.2%. Earnings per share increased by 31% to EUR 0.34.

Dividend proposal increased to EUR 0.80 per share - CET1 ratio at 16.4% with continued capital generation. Nordea's Board has proposed a dividend per share of EUR 0.80 for 2022 - up 16% from EUR 0.69 for 2021. This represents a 70% payout ratio in line with the upper end of Nordea's dividend policy range. In addition, Nordea distributed EUR 0.75 per share to shareholders in the form of share buy-backs during 2022. Quarter on quarter, the CET1 ratio increased by 60bp to 16.4% and is 5.3 percentage points above the regulatory requirement.

2023 outlook: return on equity above 13%. Nordea has a resilient business model that will enable it to weather the higher macroeconomic uncertainty in the Nordic countries. Nordea aims to continue to improve profitability and for 2023, Nordea expects a RoE above 13%.

(For further viewpoints, see the CEO comment on page 2. For definitions, see page 54 in the Q4 2022 report.)

 

 

Group quarterly results and key ratios, Q4 2022

EURm Q4 2022 Q4 2021 Chg % Q3 2022 Chg % Jan-Dec 2022¹ Jan-Dec 2021 Chg % Net interest income 1,641 1,255 31 1,407 17 5,664 4,925 15 Net fee and commission income 812 920 -12 816 0 3,336 3,495 -5 Net fair value result 417 247 69 264 58 1,258 1,119 12 Other income 28 16   14   75 81   Total operating income 2,898 2,438 19 2,501 16 10,333 9,620 7 Total operating expenses excluding regulatory fees -1,214 -1,101 10 -1,130 7 -4,581 -4,425 4 Total operating expenses -1,230 -1,101 12 -1,146 7 -4,903 -4,649 5 Profit before loan losses 1,668 1,337 25 1,355 23 5,430 4,971 9 Net loan losses and similar net result -59 -56   -58   -49 -35   Operating profit 1,609 1,281 26 1,297 24 5,381 4,936 9                   Cost-to-income ratio excluding regulatory fees, % 41.9 45.2   45.2   44.3 46.0   Cost-to-income ratio with amortised resolution fees, % 44.7 47.5   48.4   47.5 48.3   Return on equity with amortised resolution fees,  % 15.9 11.3   12.7   13.5 11.2   Diluted earnings per share, EUR 0.34 0.26 31 0.27 26 1.10 0.95 16

1. Excluding items affecting comparability. See page 5 in the Q4 2022 report for further details.

CEO comment

2022 turned out to be an extraordinary year. We witnessed Russia's invasion of Ukraine, causing significant human suffering and creating societal and financial uncertainty across Europe. In the financial markets, we saw the worst combined returns across bond and equity markets since the late 1960s, as inflation and interest rates shifted materially higher. Despite the turbulent environment, Nordea had yet another strong year. We stood by our customers and the societies that we serve.

We grew our income faster than our costs, which enabled us to deliver operating profits of EUR 5.4bn in 2022 - up 9% from 2021. Our return on equity increased to 13.5% in 2022 from 11.2% in 2021.

In the fourth quarter we continued to focus on driving high business activity by broadening our savings offering and supporting our customers with their financing and risk management needs in turbulent markets. We sought to proactively serve our customers and for example saw a 50% year-on-year increase in their interactions with personalised digital messages in our mobile and netbank. This proactive approach enabled us to maintain strong business momentum, and our operating profit was up 26% at EUR 1,609m. Our deposit margins benefitted from the return to a more normal interest rate environment after a decade of extremely expansive monetary policy. Combined with our lending growth, this supported a 31% increase in net interest income. We expect that our net interest income will continue to benefit from the higher policy rates in 2023.

The rising cost of living and greater economic uncertainty has had an adverse impact on the Nordic mortgage market, leading to lower transaction volumes and lending margins across the board. On the other hand, lending demand among our corporate customers has remained high. Our deposit volumes also continued to increase, up 7%, year on year. In turbulent financial markets, our assets under management (AuM) decreased 13%, year on year, although increased 5%, quarter on quarter. We focused strongly on our internal channels, where we continued to see inflow.

Similar to our customers, higher inflation is leading to increased cost pressure in our businesses. In addition, we continued to invest in selected areas, mainly digital and other technology and risk management. In the fourth quarter we hired more employees and invested EUR 50m to increase our financial crime prevention capabilities and to make our IT infrastructure even more resilient. In 2022 our income growth allowed us to make these investments while still increasing our profitability. For 2023 our plan is to remain focused on maintaining strict cost control and growing revenues faster than costs while continuing to invest to strengthen the bank.

Our credit quality remains strong and we are well positioned for the continued economic uncertainty. Net loan losses and similar net result was 7bp in the fourth quarter and 1bp in 2022. Following an assessment of the potential impact of higher costs and reduced consumer spending on our customers, the management judgment buffer was increased by EUR 20m to EUR 585m.

Our business areas continued to deliver strong performances. In Personal Banking we continued to grow our market shares across the Nordics. Mortgage lending grew by 2% despite market activity slowing down. Central bank policy rate hikes continued to support deposit margins. We saw increased demand in deposit products and a slowdown in customers' investment activity. In response, we broadened our deposit savings offering and further expanded our digital self-service savings features.

Business Banking delivered solid financial results. Lending volumes were up 5%. Deposit income increased, particularly in Sweden and Finland, while debt and equity markets activity remained subdued. During the quarter we engaged with customers in more than 50,000 meetings and supported them with their financing needs.

Large Corporates & Institutions grew lending volumes by 12% with customer activity remaining high, as we continued to support our Nordic customers with their financing and risk management needs. This was especially important as access to debt and equity markets remained challenging in many segments.

In Asset and Wealth Management we continued to grow our Private Banking business, with especially strong results in Sweden. We continued to attract new customers and increase lending and deposit volumes. AuM increased by 5%, quarter on quarter, to EUR 359bn, driven by strong Private Banking net inflows, improving markets and EUR 11bn derived from the Topdanmark Life acquisition.

We are a leading bank in shareholder distributions. With over 565,000 private individuals, pension funds and other investors as shareholders, our dividend payments support the societies we operate in. Reflecting our strong financial performance in 2022, our Board has proposed a dividend of EUR 0.80 per share - an increase of 16% from 2021. Together with our share buy-backs during 2022, the distribution to our shareholders will be more than EUR 1.5 per share, or 15% of the current market capitalisation. Our high shareholder distributions were enabled by continued capital generation. Nordea's capital position remains very strong, with a CET1 ratio of 16.4% - 5.3 percentage points above the regulatory requirement.

Sustainability remains at the core of our strategy. Our financed emissions have reduced by more than 15% demonstrating our clear commitment to reach the 40-50% emission reduction target by 2030. In 2022 we facilitated EUR 58bn of sustainable financing contributing to our target of more than EUR 200bn by 2025.

Entering 2023, macroeconomic uncertainty remains high. We expect the challenging environment to continue during the coming quarters. Nordea has a resilient business model and the Nordic societies are well positioned to weather the challenging conditions. We are committed to delivering on our key priorities and 2025 financial target. We aim to continue to improve our profitability and expect our return on equity to remain above 13% in 2023. This is already in line with our financial target for 2025 and we expect to provide a target update by the end of 2023 should the environment become more predictable.

We would not have been able to support our customers and achieve strong results without our very skilled and dedicated employees. I would like to thank all of them for their great efforts. Our primary focus is - and always will be - to serve our customers to the best of our ability. We recognise that without the trust and loyalty of our customers, we would not be where we are today. That is also our way forward - to be the preferred partner for our customers. In both good and challenging times.

Frank Vang-Jensen
President and Group CEO

Outlook

Financial target for 2025

Nordea's financial target for 2025 is a return on equity above 13%.

The target will be supported by a cost-to-income ratio of 45-47%, an annual net loan loss ratio of around 10bp and the continuation of Nordea's well-established capital and dividend policies.

Financial outlook for 2023 (new)

Nordea expects a return on equity of above 13%.

Capital policy

A management buffer of 150-200bp above the regulatory CET1 requirement.

Dividend policy

Nordea's dividend policy stipulates a dividend payout ratio of 60-70%, applicable to profit for the financial year. Nordea will continuously assess the opportunity to use share buy-backs as a tool to distribute excess capital.

Dividend for 2022

On 31 December 2022 Nordea Bank Abp's distributable earnings, including profit for the financial year, amounted to EUR 17,300m and other unrestricted equity amounted to EUR 4,593m.

Nordea's Board has decided to propose that the Annual General Meeting (AGM) on 23 March 2023 authorise it to decide on a dividend payment of a maximum of EUR 0.80 per share. This corresponds to approximately 70% of the net profit for the year. The intention is for the Board to decide on a dividend payment in a single instalment based on the authorisation immediately after the AGM. The dividend will not be paid for shares held by Nordea on the dividend record date.

 

 

Income statement excluding items affecting comparability1

EURm Q4 2022 Q4 2021 Chg % Q3 2022 Chg % Jan-Dec 2022 Jan-Dec 2021 Chg % Net interest income 1,641 1,255 31 1,407 17 5,664 4,925 15 Net fee and commission income 812 920 -12 816 0 3,336 3,495 -5 Net result from items at fair value 417 247 69 264 58 1,258 1,119 12 Profit from associated undertakings and joint ventures accounted for under the equity method -1 -4 -75 -3 -67 -8 -6 33 Other operating income 29 20 45 17 71 83 87 -5 Total operating income 2,898 2,438 19 2,501 16 10,333 9,620 7 Staff costs -732 -670 9 -701 4 -2,835 -2,759 3 Other expenses -322 -241 34 -282 14 -1,135 -1,002 13 Regulatory fees -16 -   -16 0 -322 -224 44 Depreciation, amortisation and impairment charges of tangible and intangible assets -160 -190 -16 -147 9 -611 -664 -8 Total operating expenses -1,230 -1,101 12 -1,146 7 -4,903 -4,649 5 Profit before loan losses 1,668 1,337 25 1,355 23 5,430 4,971 9 Net loan losses and similar net result -59 -56 5 -58 2 -49 -35 40 Operating profit 1,609 1,281 26 1,297 24 5,381 4,936 9 Income tax expense -349 -264 32 -285 22 -1,187 -1,105 7 Net profit for the period 1,260 1,017 24 1,012 25 4,194 3,831 9

1. Excluding the following items affecting comparability in the first quarter of 2022: a non-deductible loss from the recycling of EUR 529m in accumulated foreign exchange losses related to operations in Russia and EUR 8m (EUR 6m after tax) in losses on fund investments in Russia, recognised in "Net result from items at fair value"; and EUR 76m (EUR 64m after tax) in credit losses on direct exposures to Russian counterparties, recognised in "Net loan losses and similar net result". There was no impact on equity, own funds or capital from the recycling of the accumulated foreign exchange losses, as a corresponding positive item was recorded in "Other comprehensive income". Consequently, this item has no impact on Nordeaʼs dividend or share buy-back capacity.

Ratios and key figures excluding items affecting comparability1,2

	Q4 2022	Q4 2021	Chg %	Q3 2022	Chg %	Jan-Dec 2022	Jan-Dec 2021	Chg %
Diluted earnings per share (DEPS), EUR	0.34	0.26	31	0.27	26	1.10	0.95	16
EPS, rolling 12 months up to period end, EUR	1.10	0.95	16	1.02	8	1.10	0.95	16
Return on equity, %	16.5	11.8		13.4		13.5	11.2
Return on tangible equity, %	19.0	13.2		15.2		15.6	12.6
Return on risk exposure amount, %	3.5	2.7		2.7		2.9	2.5
Return on equity with amortised resolution fees, %	15.9	11.3		12.7		13.5	11.2
Cost-to-income ratio, %	42.5	45.2		45.8		47.5	48.3
Cost-to-income ratio with amortised resolution fees, %	44.7	47.5		48.4		47.5	48.3
Cost-to-income ratio excluding regulatory fees, %	41.9	45.2		45.2		44.3	46.0
Net loan loss ratio, incl. loans held at fair value, bp	7	7		7		1	1
Return on capital at risk, %	22.3	17.3		17.7		18.3	16.5
Return on capital at risk with amortised resolution fees, %	21.5	16.6		16.8		18.3	16.5

1. Excluding the following items affecting comparability in the first quarter of 2022: a non-deductible loss from the recycling of EUR 529m in accumulated foreign exchange losses related to operations in Russia and EUR 8m (EUR 6m after tax) in losses on fund investments in Russia, recognised in "Net result from items at fair value"; and EUR 76m (EUR 64m after tax) in credit losses on direct exposures to Russian counterparties, recognised in "Net loan losses and similar net result". There was no impact on equity, own funds or capital from the recycling of the accumulated foreign exchange losses, as a corresponding positive item was recorded in "Other comprehensive income". Consequently, this item has no impact on Nordeaʼs dividend or share buy-back capacity.
2. See here for more detailed information regarding ratios and key figures defined as alternative performance measures.

Business volumes, key items1

EURbn	31 Dec 2022	31 Dec 2021	Chg %	30 Sep 2022	Chg %
Loans to the public	345.7	345.0	0	345.9	0
Loans to the public, excl. repos/securities borrowing	327.3	328.3	0	327.4	0
Deposits and borrowings from the public	217.5	205.8	6	225.4	-4
Deposits from the public, excl. repos/securities lending	210.8	203.2	4	215.7	-2
Total assets	594.8	570.4	4	624.8	-5
Assets under management	358.9	411.3	-13	341.4	5
Equity	31.4	33.5	-6	31.0	1

1. End of period.

 

 

 Income statement including items affecting comparability

EURm	Q4 2022	Q4 2021	Chg %	Q3 2022	Chg %	Jan-Dec 2022	Jan-Dec 2021	Chg %
Net interest income	1,641	1,255	31	1,407	17	5,664	4,925	15
Net fee and commission income	812	920	-12	816	0	3,336	3,495	-5
Net result from items at fair value	417	247	69	264	58	721	1,119	-36
Profit from associated undertakings and joint ventures accounted for under the equity method	-1	-4	-75	-3	-67	-8	-6	33
Other operating income	29	20	45	17	71	83	87	-5
Total operating income	2,898	2,438	19	2,501	16	9,796	9,620	2
Staff costs	-732	-670	9	-701	4	-2,835	-2,759	3
Other expenses	-322	-241	34	-282	14	-1,135	-1,002	13
Regulatory fees	-16	-		-16	0	-322	-224	44
Depreciation, amortisation and impairment charges of tangible and intangible assets	-160	-190	-16	-147	9	-611	-664	-8
Total operating expenses	-1,230	-1,101	12	-1,146	7	-4,903	-4,649	5
Profit before loan losses	1,668	1,337	25	1,355	23	4,893	4,971	-2
Net loan losses and similar net result	-59	-56	5	-58	2	-125	-35
Operating profit	1,609	1,281	26	1,297	24	4,768	4,936	-3
Income tax expense	-349	-264	32	-285	22	-1,173	-1,105	6
Net profit for the period	1,260	1,017	24	1,012	25	3,595	3,831	-6

 

Ratios and key figures including items affecting comparability1

	Q4 2022	Q4 2021	Chg %	Q3 2022	Chg %	Jan-Dec 2022	Jan-Dec 2021	Chg %
Diluted earnings per share, EUR	0.34	0.26	31	0.27	26	0.95	0.95	0
EPS, rolling 12 months up to period end, EUR	0.95	0.95	0	0.87	9	0.95	0.95	0
Share price2, EUR	10.03	10.79	-7	8.80	14	10.03	10.79	-7
Proposed/actual dividend per share, EUR						0.80	0.69	16
Equity per share2, EUR	8.62	8.51	1	8.40	3	8.62	8.51	1
Potential shares outstanding2, million	3,654	3,966	-8	3,714	-2	3,654	3,966	-8
Weighted average number of diluted shares, million	3,674	3,978	-8	3,722	-1	3,782	4,025	-6
Return on equity, %	16.5	11.8		13.4		11.6	11.2
Return on tangible equity, %	19.0	13.2		15.2		13.3	12.6
Return on risk exposure amount, %	3.5	2.7		2.7		2.5	2.5
Return on equity with amortised resolution fees, %	15.9	11.3		12.7		11.6	11.2
Cost-to-income ratio, %	42.5	45.2		45.8		50.1	48.3
Cost-to-income ratio with amortised resolution fees, %	44.7	47.5		48.4		50.1	48.3
Net loan loss ratio, incl. loans held at fair value, bp	7	7		7		4	1
Common Equity Tier 1 capital ratio2,3, %	16.4	17.0		15.8		16.4	17.0
Tier 1 capital ratio2,3, %	18.7	19.1		18.2		18.7	19.1
Total capital ratio2,3, %	20.8	21.2		20.3		20.8	21.2
Tier 1 capital2,3, EURbn	27.2	29.0	-6	27.1	0	27.2	29.0	-6
Risk exposure amount2, EURbn	145.3	151.9	-4	149.4	-3	145.3	151.9	-4
Return on capital at risk, %	22.3	17.3		17.7		15.7	16.5
Return on capital at risk with amortised resolution fees, %	21.5	16.6		16.8		15.7	16.5
Net interest margin, %	1.46	1.14		1.23		1.25	1.14
Number of employees (FTEs)2	28,268	26,894	5	27,649	2	28,268	26,894	5
Economic capital2, EURbn	21.9	23.2	-6	22.5	-3	21.9	23.2	-6

1. See here for more detailed information regarding ratios and key figures defined as alternative performance measures.
2. End of period. 
3. Including the result for the period.

2022 publications

Nordea's Annual Report for the financial year 2022, which includes the Audited Financial Statements, the Board of Directors' Report and the Corporate Governance Statement as well as the sustainability reporting, will be published in week 9 by way of stock exchange release and will also be available at www.nordea.com.

This release is a summary of Nordea's Q4 2022 report. The complete report is attached to this release and can also be found on the below link on our website.

Nordea Group Q4 2022 Report

Full report as PDF: http://www.rns-pdf.londonstockexchange.com/rns/7132O_1-2023-2-2.pdf

A webcast for media, investors and equity analysts will be held on 2 February at 11.00 EET (10.00 CET), during which Frank Vang-Jensen, President and Group CEO, will present the results followed by a Q&A audio session for investors and analysts with Frank Vang-Jensen, Ian Smith, Group CFO, and Matti Ahokas, Head of Investor Relations.

The event will be webcast live and the presentation slides will be posted on www.nordea.com/ir.

For further information:

Frank Vang-Jensen, President and Group CEO, +358 503 821 391
Ian Smith, Group CFO, +45 5547 8372
Matti Ahokas, Head of Investor Relations, +358 405 759 178
Ulrika Romantschuk, Head of Brand, Communication and Marketing, +358 10 416 8023

The information provided in this stock exchange release was submitted for publication, through the agency of the contacts set out above, at 07.30 EET (06.30 CET) on 2 February 2023.

 

 

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