July 19, 2018 / 5:41 AM / a month ago

Nordea beats second quarter forecasts but trims 2018 revenue outlook

STOCKHOLM (Reuters) - Nordea (NDA.ST) beat quarterly forecasts helped by cost cuts on Thursday, sending shares in the biggest Nordic bank higher despite its warning that like-for-like 2018 revenue would likely fall.

FILE PHOTO: A flag flutters over the Nordea bank headquarters in Helsinki, Finland, May 5, 2017. REUTERS/Ints Kalnins/File Photo

The bank, which has spent two years scaling back in sectors such as offshore oil and shipping, said it had seen signs of firmer business momentum but that household lending margins remained under pressure.

Operating profit rose to 1.33 billion euros ($1.55 billion) from 1.01 billion and topped the 1.29 billion forecast by analysts in a poll.

Nordea shares were up 2.7 percent at 0900 GMT as traders focused on the earnings rather than the revenue forecast.

Swedish banking stocks have been dented over the past year by worries over a slump in Sweden’s housing market and niche players taking market share in mortgages, weighing on lending margins.

Nordea’s results showed interest income and commissions roughly in line with forecast, but lower costs helped it beat consensus.

FILE PHOTO: A Nordea bank sign is seen at its headquarters in Helsinki, Finland, May 5, 2017. REUTERS/Ints Kalnins/File Photo

The results were also buoyed by previously announced capital gains from the sales of its Danish life and pensions business and a stake in credit information agency UC.

Nordea, whose shares are down more than 12 percent this year, cautioned in April that unexpectedly weak underlying revenue in the first quarter had left its goal of a slight rise in revenue this year more challenging.

On Thursday, guidance was further dampened.

“Although we expect some modest growth for the remainder of the year, given the slower first half of 2018, it is unlikely that repeating revenue in 2018 will reach the 2017 level,” CEO Casper von Koskull said in a statement.

Nordea still expects a rise in net profit this year and remains on track to meet cost guidance of 4.9 billion euros in 2018, von Koskull said, adding that lending volumes had stabilized and were picking up.

“On net interest income, we really have positive volume development in most sectors,” he told a news conference.

“We do have pressure on particularly the Norwegian and Swedish lending margins. This is predominantly on the personal banking or mortgage side.”

HELSINKI MOVE

“We have seen that revenues have been under pressure for quite some time and that looks to have continued,” Exane BNO Paribas analyst Andreas Hakansson said.

“I’m not that surprised, but I think the market may have underestimated how great the problems are on the revenue side.”

The bank said its quarterly interest income, which includes revenue from mortgage lending, fell 9 percent to 1.07 billion euros, in line with analysts’ expectations.

Nordea in October is moving its headquarters to Helsinki, where it will fall under the supervision of the European Central Bank rather than Sweden’s financial watchdog.

The move will cut Nordea’s costs to comply with tough and shifting Swedish regulations but has raised concerns it may alienate customers and weigh on its business in Sweden.

Several of Sweden’s biggest trade unions have pulled their business from Nordea over the move.

($1 = 0.8587 euros)

Reporting by Niklas Pollard; Editing by Richard Pullin and Keith Weir

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