Nordea Bank Abp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andreas Hakansson - SEB - Analyst : Two questions on net interest income. And if we start with the country drivers in retail banking and personal banking, Sweden is down 8%. Could you tell us is that mainly due to the much discussed timing effects on the funding side? And then on the flip side, the Danish NII is holding up very nicely, even though your volumes are slightly down. So could you just tell us a little bit on what's driving the different NIIs in these countries please?

Question: Andreas Hakansson - SEB - Analyst : And then, Ian, you were very helpful at the time at the Q4 result that you said that you were comfortable with the consensus NII for the year, which I think was just over EUR7.1 billion at the time and it's still around just over EUR7.1 billion. I think I can't remember exactly where market rates were for ECB, but it was probably a fair bit north of 2% and today, it's just over 1.5%. So could you tell us if we're moving towards the market rates, how should we be looking at the net interest income?

Question: Gulnara Saitkulova - Morgan Stanley - Analyst : So my first question is on the trade tensions and the tariffs and the impact of it on your business. Given that you have a pan-Nordic footprint and a strong corporate exposure, which of your core markets, Finland, Sweden, Norway, or Denmark, do you see as the most sensitive to raising tariffs under global trade tensions? And how do you anticipate these factors might influence the lending volumes and the client activity in those regions for the remainder of this year? Are you seeing a noticeable change in the client behavior so far? And what are the early signals about the economic confidence heading into the second half of the year?

Question: Gulnara Saitkulova - Morgan Stanley - Analyst : And the second question on the capital return. Given you have a strong capital position, how are you thinking about the potential for interim dividend this year? Would it be something under consideration for you, or would you prefer to retain the flexibility until the year end?

Question: Magnus Andersson - ABG Sundal Collier - Analyst : Just on cost efficiency, given the current uncertainty, I mean obviously, Q1 was really solid, but this turmoil we are in right now had hardly even started when the quarter ended. So I was just wondering if -- I agree with you, Ian, that the rate outlook is highly uncertain and there are forces in both directions. So obviously, difficult to have a view. But if you would assume that equity markets stay around where they are, which would have a negative impact on your assets under management and activity generally slows down, which impacts also other fee related items, what levers would you have on the cost side, if any, to offset that to stay within your 44% to 46% cost-to-income ratio target or is it I mean yeah, you could please elaborate on that or is it the fact that the 2% to 2.5% stands for the year almost regardless of what happens? That's the first one. And the second one just more detailed on asset quality now the mechanics. I guess your economists will come out -- I don't know when your economists come out, but typically, they all come out in May with this economic outlook reports where they most likely will lower their GDP growth expectations. There will be all kinds of negative stuff in that report most likely. Will that force you to do anything to your management overlays or do you have enough? It's still quite substantial at least relative to your peers?

Question: Magnus Andersson - ABG Sundal Collier - Analyst : And on asset quality? The management overlays, the macro scenario?

Question: Martin Ekstedt - Handelsbanken Capital Markets - Analyst : So back to NII please, if I may. Swedish personal banking lending volumes, they were up 6% quarter on quarter, which is well above where the market is growing, but at the same time, your net interest margin in that business was down 15 bps quarter on quarter. So statistically and data seems to indicate that one of your competitors in Sweden is advancing in early 2025 in that segment. So has the competition on Swedish retail heated up further in the face of perhaps slower corporate lending growth and or am I reading too much into this? Please let us know what you see in that market. And then secondly, my second question, in terms of perhaps available levers for cost reduction, could you give us an update on your progress in reducing the number of IT applications in Nordea? I believe the numbers were from 3,700 to 1,500 or something like that.

Question: Namita Samtani - Barclays - Analyst : Just firstly, I'm just looking at consensus, which has a flat dividend year on year in 2025. Do you still believe you can achieve a progressive growing dividend? Are you a growing dividend in 2025 versus the EUR0.94 achieved in 2024? And secondly, just on net interest income. The treasury impact was positive again this quarter. Can you explain what's driving this? And do you expect this to reverse anytime soon or does this continue as long as the yield curves deepens? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 8:00AM, NDAFI.HE - Q1 2025 Nordea Bank Abp Earnings Call

Question: Shrey Srivastava - Citi - Analyst : My first is on the sort of 8% decline in NII and personal banking Sweden. Just clarifying upon an earlier point you made. I think you said there was a front loading of the funding benefit, but you also had the deposit hedge kicking in. And hence the decline was that much more exaggerated. But just thinking about this. If you exclude the deposit hedge, my thought would be that that the decline would be greater than the 8% since that you presumably also saw a benefit this quarter. So if you could just clarify on that first, if that's all right.

Question: Shrey Srivastava - Citi - Analyst : And the second question I have is on this EUR36 million other benefit you can see in the presentation in the quarter on quarter bridge. If you could provide any color on what exactly that is, and if there's any way we can model that going forward?

Question: Patrick Nelson - Goldman Sachs - Analyst : I just had a question on risk weighted assets. So I remember you providing a very helpful slide last year in the second quarter on the moving parts on the risk exposure amounts. And many of those sort of headwinds are now behind us while you also noted that there would be some benefits beyond 2025. So I was just wondering if there is any change there or if we could expect these benefits beyond 2025 to lead to sort of your risk exposure amounts growing at a slower pace compared to maybe your lending volumes or if that's -- or if there are any other moving parts that we should consider when thinking about the development going forward beyond 2025.

Question: Riccardo Rovere - Mediobanca - Analyst : Thanks for taking my couple of questions if I may. The first one relates to the risk cost. If I remember correctly, during your Capital Markets Day, you have always stated you're through the cycle. Risk costs is about 10 basis points, but over the past few years, you have been running well below these levels. So I'm wondering what would you need to see the risk costs going back to the through the cycle in the 10 basis points area. Would you need the recession? Would you need stagnation or maybe prolonged stagnation from tariffs or do you believe that 10 basis points is hard to beat? As I asked and can see them that you still have some overlays to be used. And the second question I have somehow related to this is is I might be wrong, but my feeling, my perception is that you are a little bit downplaying the risk related to tariffs, and I was -- which is a bit surprising to me because Nordics are open economies, heavily reliant on exports and so on. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 16, 2025 / 8:00AM, NDAFI.HE - Q1 2025 Nordea Bank Abp Earnings Call So I was wondering why -- what makes you so confident that this, okay, may be not great and not helpful at all, but you can easily weather it. So I was just wondering why you're downplaying this risk a bit. Yeah, that's my feeling.

Question: Riccardo Rovere - Mediobanca - Analyst : Just a quick follow up if I may. When you stated that now your models incorporate 100% scenario related to tariffs. Now when you recalibrate your models under this scenario, do your internal models foresee an asset quality deterioration from tariffs to have an impact after maybe 12 18, 24 months or so after that you're going to see something, or are they calibrated in a way that after only 3 months or maybe 6 months, you're going to see something? Just because this is new to everybody. There was something sitting not only at the end doesn't even after three months, not much. So I was just wondering what you had in mind. Did you need to see a lot of time before seeing an impact or it could be quick?