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Nordea Bank AB (NDA), the Nordic region’s largest lender, said second-quarter profit jumped 17 percent after interest income increased in Sweden, Norway, Finland and Denmark and beat estimates on higher trading earnings.
Net income rose to 820 million euros ($1 billion) from 698 million euros a year earlier, the Stockholm-based bank said in a statement. That beat the 722 million-euro average estimate of 14 analysts surveyed by Bloomberg. Net interest income, the difference between what it makes from lending and pays for deposits, increased 10 percent to 1.46 billion euros, the company said.
Sweden’s banks have largely steered clear of the European debt crisis and their balance sheets aren’t weighed down by assets linked to the region’s most indebted nations, giving them better access to funding than many European peers and allowing them to increase lending to their Nordic clients. Nordea’s loans to the public increased 8 percent in the year through June.
“We maintained good business momentum and increased return on equity despite continued pressure on interest rates, financial turmoil and the slowdown in European economic activity,” Chief Executive Officer Christian Clausen said.
Nordea rose as much as 1.95 kronor, or 3.2 percent, to 62.55 kronor in Stockholm trading, its highest intraday price since March 22. The stock was up 2.9 percent at 62.35 kronor at 10:34 a.m. local time. Nordea has gained 17 percent this year, making it the eighth-best performer on the 38-company Bloomberg Europe Banks and Financial Services Index, which has risen 0.2 percent.
“Nordea reported second-quarter 2012 pretax profit 13 percent ahead of consensus, driven by better than expected trading income and lower loan losses,” Claire Kane and Fiona Swaffield, analysts at RBC Capital Markets in London, wrote in a note to clients today. “Loan losses are stable versus the first quarter 2012, with a flat loan loss ratio of 26 basis points.”
Trading income at Nordea advanced 39 percent to 494 million euros in the second quarter, while net credit losses increased 84 percent from a year earlier to 217 million euros, the Swedish lender said.
Svenska Handelsbanken AB (SHBA), Sweden’s No. 2 lender, also saw a rise in second-quarter profit amid rising business volumes and higher interest income. Stockholm-based Handelsbanken’s profit rose to 3.41 billion kronor ($489 million) in the three months through June, from 3.14 billion kronor a year earlier as net interest income jumped 16 percent to 6.58 billion kronor.
Sweden, whose bank industry is four times the size of the economy, is pushing through tougher capital rules than elsewhere, requiring its lenders to target 10 percent core Tier 1 buffers of their risk-weighted assets from January and 12 percent from 2015. That compares with the Basel Committee’s core capital target of at least 7 percent, while the European Banking Authority has set a temporary 9 percent target for some banks.
Nordea had a core Tier 1 capital ratio of 11.8 percent, excluding so-called transition rules to new regulation, at the end of the second quarter, the Swedish lender said. Nordea’s return on equity stood at 12.1 percent at the end of June, beating the estimate of 10.8 percent.
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