(Bloomberg) -- Nordea Bank Abp rose the most in more than two years after improving its outlook for the full year and outlining a new program of share buybacks.
The shares gained as much as 5.9% at 10:12 a.m. in Helsinki on Thursday, adding about €2.1 billion ($2.3 billion) of market value for the Nordic region’s biggest bank.
Nordea raised its estimate for 2024 return on equity to above 16%, having previously estimated return on equity of more than 15% this year, a number that it still targets for 2025.
Earlier in the day, Nordea said it will start a new €250 million program of share buybacks after receiving approval from the European Central Bank, with purchases due to begin Monday. It’s already bought back €5.5 billion worth of its own stock since late 2021 across four programs, unwinding excess capital accumulated during the pandemic when its regulator prohibited shareholder payouts.
The buybacks, while small relative to Nordea’s capitalization, confirm that “the capital worries are in the rear-view mirror,” Citigroup Inc. analysts led by Shrey Srivastava said in a note. “A broadly in-line set of results, but we believe the new buyback and 2024 ROE guidance upgrade should be taken positively, with the latter leading to low-single digit consensus upgrades.”
The bank also reported net interest income for the third quarter matched estimates. The difference between what Nordea earns from lending and what it pays for deposits fell 1% from a year ago to €1.88 billion, the Helsinki-based lender said on Thursday. Net fee and commission income of €774 million topped estimates by 6%.
“Profitability was again at a good level, and our return on equity has clearly exceeded 15% for the past eight quarters,” Chief Executive Officer Frank Vang-Jensen said in a statement. “Given our strong performance through this year, we have updated our outlook.”
Nordea’s net interest income peaked in the first three months of the year, having enjoyed an industry-wide boost as a result of tighter monetary policy, reversed now by both the ECB and the Riksbank as the pace of inflation slows down.
The economic backdrop remains subdued, with Sweden’s economy near stagnation for the past three years and Finland enduring a contraction. Growth has also eased in Norway while Denmark continues to be helped by its successful drugmakers.
“Lending volumes were relatively stable in what continued to be slow markets,” Nordea said, adding that corporate customers were “focused more on refinancing loans rather than increasing borrowing to invest in new growth.”
During the quarter, customers increased their savings and investment activity, as shown in demand for deposit products, and mortgage lending “remained stable in subdued housing markets,” Nordea said.
The decline in net interest income last quarter was driven by lower deposit margins, partly offset by higher household lending margins and higher deposit volumes, Nordea said.
Net loan losses at €51 million were lower than analysts had estimated. The bank also released a further €30 million from its management judgment buffer, which now stands at €435 million, saying that its “risk position is sound, and credit quality continues to be strong and in line with” long-term expectations.
Geopolitical Situation
The bank also said it “recognizes an increase in cyber risk as a consequence of the geopolitical situation.”
Over the past month, Nordea has faced widespread cyber attacks across the Nordic region that have prevented many customers from accessing their online bank. The distributed denial of service attacks have seen the bank carpeted by as many as 15 million requests per second, compared with the about 1 million requests its web service have previously faced under such onslaughts, Head of Personal Banking Sara Mella told newspaper Helsingin Sanomat on Tuesday.
--With assistance from Anton Wilen, Christopher Jungstedt, Stephen Treloar and Thomas Hall.
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