Nordic top-tier banks' earnings remained solid in the second quarter of 2024. Boosted by improving market conditions, net fee and commission income increased by an average of about 7% (see chart 1). In particular, DNB Bank ASA's (DNB's) net fee and commission income increased by over 25% quarter over quarter to an all-time high, driven by stronger results from investment banking services. Only OP Financial Group registered declining income from net fees and commissions, given the exemption of daily banking service charges for owner-customers.
Chart 1
That said, net interest income (NII) continued to recede across top-tier Nordic banks as interest rates across the eurozone and Sweden declined. Only two banks recorded positive NII growth (see chart 2). Svenska Handelsbanken AB's increase in NII was largely due to foreign exchange rate effects and positive developments on the lending margin and funding cost sides, while DNB's NII growth resulted from loan growth and higher customer activity. Overall, top-tier banks' net profits remained solid and increased by 1.4% on average.
Chart 2
Capital Ratios And Asset Quality Remain Strong
Danske Bank A/S announced plans to pay an interim dividend of Danish krone (DKK) 7.5 per share (56% of net profit for the period) on the back of its solid financial performance in the first half of 2024. The bank also intends to distribute the released capital from the exit of its personal customer business in Norway as an extraordinary dividend payment of approximately DKK5.5 billion in the fourth quarter of 2024. Other banks executed on or introduced new share buyback programs to optimize their capital ratios (see chart 3). For example, Skandinaviska Enskilda Banken AB (SEB) announced a new buyback program totaling Swedish krona SEK2.5 billion (about 11.4% of outstanding share capital), which it aims to conclude by Oct. 22, 2024. Similarly, DNB decided to buy back shares worth 1.0% (about Norwegian krone 3.3 billion) of the bank's outstanding share capital.
Chart 3
Despite continuing macroeconomic uncertainties and still-elevated interest rates, top-tier Nordic banks' asset quality remains high (see chart 4). Nonperforming loans remained largely stable in the second quarter and impairments are minimal, with cost of risk of -2 to 14 basis points year to date. Coverage ratios also remained solid.
Chart 4
In July 2024, Denmark's National Special Crime Unit filed a formal charge against Nordea Bank Danmark A/S for weak anti-money-laundering processes in 2015 and prior and commenced court proceedings. Nordea expects a fine but considers it is adequately covered for this legacy matter by provisions made in the first quarter of 2019.
Given its continuously strong profitability and sound asset quality, Danske Bank revised upward its earnings guidance to a net profit of DKK21 billion-DKK23 billion, compared with DKK20 billion-DKK22 billion previously. Other top-tier Nordic banks' financial guidance remained largely unchanged. We continue to expect that larger Nordic banks will deliver robust earnings over the coming quarters.
Table 1
| Selected indicators, as of June 30, 2024 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CET1 ratio (%) | Cost-to-income ratio (%, year to date) | Return on average common equity (%, year to date) | Cost of risk (year to date, basis points) | Net interest income growth (%, quarter over quarter) | Net profit growth (%, quarter over quarter) | |||||||||
|
Danske Bank A/S |
18.5 | 45.8 | 13.0 | -1 | 0.0 | 4 | ||||||||
|
DNB Bank ASA |
19.0 | 35.2 | 17.2 | 9 | 1.9 | 6 | ||||||||
|
Nordea Bank Abp |
17.5 | 42.1 | 17.7 | 6 | -2.6 | -4 | ||||||||
|
OP Financial Group |
20.8 | 46.0 | 11.9 | 14 | -8.5 | 0 | ||||||||
|
Skandinaviska Enskilda Banken AB |
19.0 | 35.5 | 17.2 | 1 | -1.3 | -1 | ||||||||
|
Svenska Handelsbanken AB |
18.9 | 41.9 | 13.4 | -2 | 1.4 | 3 | ||||||||
|
Swedbank AB |
20.1 | 40.7 | 17.1 | -2 | -3.4 | 2 | ||||||||
| CET1--Common equity tier 1. C/I--Cost to income. NII--Net interest income. | ||||||||||||||
This report does not constitute a rating action.
| Primary Credit Analyst: | Alexander Maichel, Frankfurt (49) 69-33-999-267; alexander.maichel@spglobal.com |
| Secondary Contacts: | Salla von Steinaecker, Frankfurt + 49 693 399 9164; salla.vonsteinaecker@spglobal.com |
| Olivia K Grant, Dubai +971 56 680 1008; olivia.grant@spglobal.com | |
| Niklas Dahlstrom, Stockholm +46 84405358; niklas.dahlstrom@spglobal.com | |
| Harm Semder, Frankfurt + 49 693 399 9158; harm.semder@spglobal.com |
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