February 6, 2019 / 6:16 AM / 7 months ago

Nordea disappoints on revenues, Handelsbanken on dividend

HELSINKI/STOCKHOLM (Reuters) - Nordea, the Nordic region’s biggest bank, reported a 6 percent drop in fourth-quarter revenue on Wednesday, dashing analysts’ hopes of an improvement and overshadowing a smaller-than-expected fall in operating profit thanks to cost cutting.

FILE PHOTO: The Nordea Bank AB logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. Picture taken October 19, 2017. REUTERS/Chris Helgren

Interest income, the bank’s most important income line, has been under pressure over the past year due to fierce competition in mortgages and household loans across the region, while Nordea has been preoccupied with bringing down spending.

“The results for 2018 are not where we want them to be, we have seen a challenging revenue development,” CEO Casper von Koskull said in a conference call.

“We have been inwardly focused.”

Nordea shares were down 2.0 percent at 0832 GMT while those of rival Handelsbanken, which separately proposed a much lower dividend than expected, tumbled 4.8 percent, with both stocks underperforming the European banking index.

Operating profit at Nordea, the Nordic region’s biggest mortgage lender, fell 13 percent from a year earlier to 689 million euros ($785 million), beating the mean forecast of 656 million euros in a Reuters poll of analysts.

However, the result was helped by a one-off correction of regulation fees.

“The P&L was a bit mixed, but overall fairly neutral vs expectations as we see it. But expectations were set low ahead of the quarter, so with that in mind it’s hard to get very excited by the small earnings beat today,” Arctic Securities analyst Roy Tilley said.

“Management seems focused on improving the revenue momentum, but we need to start seeing it soon.”

NO TIME FOR EXCUSES

Christer Gardell, managing partner at activist investor Cevian Capital that has declared a stake of 2.3 percent in Nordea after purchases in recent months, said the results delivered by Nordea were “far too low”.

“The ambition level and pace of profit-enhancing measures must by raised significantly,” he said in a text message to Reuters. “The time for excuses is over. Now management and board need to deliver.”

The Nordic region’s biggest mortgage lender proposed raising its annual dividend slightly to 0.69 euros per share from 0.68 euros a year ago, just below the mean estimate of 0.70 euros seen by analysts.

Nordea’s dividend miss paled in comparison with that of Swedish competitor Handelsbanken.

While fourth-quarter earnings at Handelsbanken came in above market expectations, it proposed a dividend of 5.50 crowns, well below the payout of 6.49 per share seen by analysts and lower than the total 7.50 crowns per share paid out for 2017.

The Swedish Financial Supervisory Authority last year altered the way it weighs risks in Handelsbanken’s mortgage portfolio, putting pressure on its capital ratios.

“The bank’s policy for dividend is linked to the capital target,” Handelsbanken said in a statement.

Operating profit at Handelsbanken rose to 5.29 billion Swedish crowns ($580 million) from a year-ago 5.00 billion, beating a mean forecast for 5.21 billion seen in a Reuters poll of analysts.

Additional reporting by Tarmo Virki in Helsinki and Johannes Hellstrom and Olof Swahnberg in Stockholm; Writing by Niklas Pollard; Editing by Alexandra Hudson and Mark Potter

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