(Bloomberg) -- Nordea Bank Abp signaled new share buybacks are in the works for early next year, letting down some investors who had expected new capital return already this year.
The biggest Nordic lender said on Monday that it has started talks with the European Central Bank on resuming share buybacks in early 2025 after receiving approval for some of its new risk models. It has bought back €5.5 billion ($6 billion) worth of its own stock since late 2021 across four programs.
The timing is a disappointment to the market as many analysts had expected a program before the end of the year. Nordea’s shares fell as much as 3.7% at 10:52 a.m. in Helsinki, the most since March.
The Helsinki-based bank last quarter posted record profits as it continued to benefit from interest rates at their highest levels in about 15 years.
“Nordea writes that it is in dialog with the ECB about starting a share buyback program at the beginning of 2025, which at first seems like a slight disappointment,” Anders Haulund Vollesen, an analyst at Jyske Bank A/S, said in a note, adding that analysts on average had estimated €1.5 billion in buybacks this year.
Tighter monetary policy has boosted what banks earn on lending while the rates they pay customers for deposits have risen much more slowly. That tailwind is easing as both the European Central Bank and Swedish Riksbank have taken first steps toward looser financial conditions.
Nordea’s second-quarter report showed its net interest income peaked in the first three months of the year, in line with many of its Nordic peers. The figure, denoting the difference it earns from lending and pays for deposits, came to €1.9 billion, missing estimates.
Nordea is partially aided by a deposit hedge which smooths out and delays the effects of changes in market rates.
In contrast, income from fees and commissions and net income topped the average analyst estimates.
UBS Group AG analyst Johan Ekblom said investors are likely to focus on the updated guidance around capital and the impact it will have on expectations for payouts.
“There’s a risk that consensus will cut the size of estimated share buybacks up until the end of next year,” he said.
Danish police earlier this month charged the bank in what the country’s National Special Crime Unit calls the biggest money laundering case there to date, following a long investigation into the lender’s anti-money laundering controls in the 2012 to 2015 period. About 26 billion Danish kroner ($3.8 billion) of transactions are under scrutiny. Nordea has said it doesn’t agree with the legal assessment concluded by the Danish authorities.
Nordea could face an estimated maximum fine of 6.5 billion kroner, according to some legal experts. That would be far more than the €95 million the bank has set aside for the penalty, but about half the fine Danske Bank A/S agreed to pay in a US probe into failures to stop €200 billion in suspicious transactions.
Nordea’s net loan losses were in line with estimates and the bank released €30 million from its capital buffer set aside to cover potential future losses. That buffer now stands at €464 million. The bank has previously flagged such losses will start to “normalize” over time, saying near-zero levels are not sustainable in the long run.
--With assistance from Christopher Jungstedt, Anton Wilen, Leo Laikola and Christian Wienberg.
(Updates with shares from third paragraph)
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