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Nordea, Handelsbanken report strong earnings
July 17, 2013 / 7:13 AM / 4 years ago

Nordea, Handelsbanken report strong earnings

STOCKHOLM (Reuters) - Nordic banks Nordea (NDA.ST) and Handelsbanken (SHBa.ST) reported robust second quarter earnings on Wednesday, buoyed by brisk growth in Sweden.

The banks are some of Europe’s strongest and have escaped some of the problems other banks have faced since the financial crisis. But Nordic banks are now coming under pressure from regulators over the way they assess risk.

Nordea, the region’s biggest bank, posted quarterly earnings largely in line with expectations while profits at Handelsbanken, the second biggest by market value, rose a forecast-beating 7 percent.

Nordea’s Chief Executive Christian Clausen said the bank, which has suffered from losses in a struggling shipping sector and a burst property bubble in Denmark, saw further stabilization of its credit quality.

“Loan losses declined to 22 basis points in the second quarter 2013,” he said. “Loan losses in Denmark and shipping declined.”

The two banks’ earnings follow results from corporate-focused SEB (SEBa.ST), which beat all forecasts, and Swedbank (SWEDa.ST) which was hit by unexpected one-off items in the quarter.

Nordea and Handelsbanken both reported solid core Tier 1 capital ratios - a measure of financial strength. Handelsbanken reported a 17.8 percent ratio and Nordea 14.0 percent based on new global capital rules known as Basel III.

The banks are facing increased scrutiny from regulators over how they calculate their risks.

In a recent crackdown on mortgage risk weights - at the low end of Europe - Sweden’s financial regulator said it was introducing a 15 percent floor in order to get them more in line with peers. Norway is considering a 35 percent floor.

Handelsbanken, one of Europe’s most conservative lenders, said on Wednesday the Swedish decision entailed a capital requirement of approximately 7 billion Swedish crowns ($1.1 billion).

Nordea, the region’s biggest bank, is also reassessing its capital position.

“We continue to refine our calculations of the effect from Basel III, from our efficiency initiatives and regulatory impact from higher risk-weights in Norway,” CEO Clausen said.

He said profitability was high enough to support growth, dividends and boost its capital ratios.

There have been hopes Swedish banks would start offloading some surplus capital via special dividends or share buy-backs. But the current debate over their risk assessment methods is likely to create uncertainty over when and how much they can return to shareholders.

Nordea has been waiting for an approval from the regulator of certain models used for its corporate loan book. This was originally expected in the second quarter but the bank said on Wednesday it would be delayed a few months.

Swedbank is also waiting for a green light from the regulator and has said an approval could free up several billion for shareholders.

Nordea’s operating profit for the second quarter was 1.05 billion euros ($1.38 billion), just above a mean forecast for 1.04 billion seen in a Reuters poll.

Handelsbanken’s operating profits in the quarter reached 4.72 billion Swedish crowns ($714 million), topping a mean forecast for 4.45 billion seen in a Reuters poll of analysts and compared with 4.41 billion in the year-earlier period.

Editing by Jane Merriman

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