UPDATE 2-Nordea earnings top forecasts after corporate banking pick-up

Tue Apr 29, 2014 6:32am EDT

Related Topics

* Q1 op profit 1.11 bln euros vs 1.09 bln forecast

* Sees pick-up in corporate advisory business

* Says in low-rate environment still focused on cost cuts

* Shares rise 3 percent, outperform wider Stockholm bourse (Rewrites first paragraph, adds CEO, analyst comments, shares, background)

By Mia Shanley

STOCKHOLM, April 29 (Reuters) - Nordea Bank AB posted forecast-beating first-quarter earnings on the back of a strong performance in its corporate advisory business, saying on Tuesday it saw further growth in activity by companies in its home Nordic markets.

Shares in the Nordic region's biggest lender were up 3.1 percent at 93.4 Swedish crowns by 0855 GMT, outperforming the broader Stockholm blue-chip index and trading not far from a record high of 94.05 crowns set earlier this month.

Analysts see Nordea and other Nordic banks as offering relative stability during uncertainties over factors such as the tensions between Russia and Ukraine.

Equally, buoyant equity markets and returning corporate confidence have led to a flurry of stock market listings and deals in recent months, and Nordic banks are expected to benefit from a pick-up in activity this year.

"Companies are taking in equity, they are refinancing their balance sheets, taking advantage of the favourable conditions in the bond market, and they are also filling up gaps in their activity in terms of buying companies," Nordea Chief Executive Christian Clausen told Reuters.

"We see quite a few Nordic companies doing acquisitions outside of Sweden, even outside Europe actually, and thereby strengthening their business models," Clausen said.

Nordea's first-quarter operating profit rose 6 percent to 1.11 billion euros ($1.5 billion) compared with a mean forecast for 1.09 billion seen in a Reuters poll of analysts.

The bank, which has been grabbing market share from the region's usual go-to corporate bank SEB, saw a 13 percent rise in net commissions and fees - above forecasts - as demand for investment banking services boosted income.

Recent deals which Nordea has been involved in include the purchase of a 26 percent stake in Danish state-owned oil and gas group Dong Energy by Goldman Sachs and two pension funds, as well as the stock market listings of Danish companies ISS and OW Bunker.

LOW LEVELS

Still, Clausen was cautious about the road ahead, saying loan demand remained subdued and interest rates were at very low levels, pressuring the margin between what banks earn on loans and pay in interest.

A focus on keeping costs down have helped most Nordic banks reach double digit profitability, putting them well ahead of their European peers, and Nordea said it would continue to focus on cost cuts to meet targets to create 900 million euros in savings and lift profitability to 13 percent by 2015.

Asked if reaching that profitability target meant more job cuts were in the works, Clausen said: "We are going to come back to that after Q2. Of course we are reducing the number of staff. We have done that in the past three years and we are going to continue in the coming years as well."

Nordea shares are up almost 8 percent so far this year compared with a near 3 percent rise in the wider STOXX Europe 600 Banks index.

Still, a cloud of uncertainty for some Nordic banks is the situation in Russia and Ukraine, something which both SEB and Swedbank - large players in the Baltic region - have noted.

Nordea has a smaller exposure to the Baltics and a 1.8 percent lending exposure to Russia, where it said it had seen minimal impact since sanctions were targeted to a limited number of people.

Nordea is the third Swedish bank to report quarterly earnings, following SEB's stronger-than-forecast results as it got a boost from stronger corporate business and Swedbank's largely in-line earnings.

Handelsbanken reports earnings on Wednesday.

($1 = 0.7319 euros) (Additional reporting by Johan Ahlander, Editing by Kim Coghill and David Holmes)

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