Nordea Bank Abp

The stable outlook on Nordea reflects our expectation that the bank will diligently execute its business plans to sustainably improve income growth, operating profitability, and cost efficiency. We also consider the bank likely to gradually align these performance indicators with those of highly rated peers over the next 12-24 months. The expected economic rebound in Nordea's home markets in 2021, along with the streamlining of its business areas, agility in terms of digital customer offering, and strong financial position, will underpin the bank's lending capacity and earnings generation. We could lower the ratings in the next 12-24 months if Nordea is unable to demonstrate sustainable business generation, further restore its profitability, or meet its key financial targets. Although less probable,

...Nordea has shown strong execution of its business plans to reach its 2022 financial targets. After several years of subdued revenues and profits because of investments in digitalization and organizational streamlining, the bank continues to demonstrate good quarterly progress, closing in on financial targets and Nordic peers. We expect the return on equity (ROE) to reach 11.6% by 2023, after improving to reported 10.7% in the first half (H1) of 2021. We predict the bank's cost-to-income ratio will decrease toward its 50% target by 2022, owing to structural cost changes. That said, we expect the management will aim for further improvements beyond the current 2022 financial targets that are likely to be restated and communicated early next year. Nordea's asset quality has held firm against COVID-19 stress. Even with the challenging 2020 operating environment and gradual wind-down of policy measures, Nordea's asset quality has held steady in H1 2021. Reported nonperforming loans (NPLs) totaled...

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