Nordea Bank’s operating profit tanks 66% as COVID-19 fuels loan losses in Q2

Written by: Wajeeh Khan
July 17, 2020
  • Nordea Bank’s operating profit tanks 66% as COVID-19 fuels loan losses in Q2.
  • The group now anticipates less than £910 million of credit losses for the full year.
  • Nordea will announce its decision on 36 pence a share of dividend after 1st October.

Nordea Bank (OTCMKTS: NBNKF) said on Friday that its operating in the second quarter came in worse than expected. The largest Nordic lender attributed the decline to the Coronavirus pandemic that fuelled loan losses in recent months. Its peer, Danske Bank, topped analysts’ estimates for net profit in Q2 on Friday.

Shares of the company opened about 1.5% down on Friday but jumped 3% in the next hours. At £6.18 per share, Nordea Bank is currently 10% down year to date in the stock market after recovering from an even lower £4.44 per share in late March. Learn more about how do people make money on the stock market.

Nordea Bank falls shy of the analysts’ estimates for operating profit in Q2

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Nordea has been committed to pulling out of the riskier markets like Baltics and Russia. At £278.72 million, its operating profit marked a 66% decline as compared to £819.78 million in the same quarter last year. Analysts had anticipated the company to print £806.11 million in operating profit in the recent quarter. Nordea bought Norway’s Frende occupational pension portfolio earlier this month.

Loan losses, as per Nordea Bank, surged to £635.78 million from a much lower £140.27 million last year and experts’ forecast of £288.74 million. Nordea also reported COVID-19 to have weighed on its net income from fee and commissions, resulting in a 9% decline in Q2 to £613 million versus the year-ago figure of £676.77 million.

In terms of net interest income, however, the Helsinki-based company saw a 2% increase in the recent quarter to £990 million versus £970 million in the comparable quarter of last year. It attributed the gain to lower funding costs and increased lending in Q2.

Nordea Bank estimates less than £910 million of credit losses for the full year

For the full year, the European financial services group now anticipates less than £910 million of credit losses. In 2019, its credit losses excluding non-recurring items were noted at £231.36 million.

According to the Nordic lender, it is considering reinstating an up to 36 pence a share of dividend but will announce its final decision after 1st October. CEO Frank Vang Jensen, however, expressed confidence that the financial strength of the bank was sufficient to make dividend payments and cater to its customers.

Nordea Bank performed only slightly upbeat in the stock market last year with an annual gain of roughly 2%. At the time of writing, it is valued at £24.98 billion and has a price to earnings ratio of 17.81.