Nordea Bank AB (
Q3 2010 Earnings Conference Call
October 27, 2010 3:30 PM ET
Rodney Alfven – Head, IR
Christian Clausen – President and Group CEO
Ari Kaperi – Group Chief Risk Officer
Fredrik Rystedt – EVP and Group CFO
Peter Grabe – Handelsbanken
Magnus Andersson – ABG Sundial Collier
Jan Wolter – Deutsche Bank
Hampus Brodén – SEB Enskilda
Thomas Johansson – Carnegie
Frida Willmansson – Danske Equities
Christian Hall – Swedbank Markets
Ladies and gentlemen, with profound pleasure I welcome you to this Press and Analyst Conference where we will present Nordea’s Third Quarter results. The procedures today will be very much as normal. We will start off with a presentation by the CEO and Group President, Christian Clausen, after that we will have some 10 minutes for questions and after that analysts and investors are kindly requested to move down to Nordea’s hall (ph) to follow with deeper questions and more detailed questions whereas media representatives are welcome to move over to the corner and ask Christian Clausen one-on-one, one sort to say.
As always this press conference is broadcasted also in the other Nordic countries and webcasted. So I would be very happy and grateful if you would state your name and who you represent when you ask questions. The news this time is that also the Analyst Conference will be webcasted so that colleagues to you that are not here can follow that as well. So with that little instruction, I am very happy to leave the floor to Christian Clausen, Group President and CEO of Nordea.
Yes, good morning and welcome. I’m proud today to present strong Q3 from Nordea. It’s based on very high customer activity. We have a strong inflow of new customers and we have a successful execution of our growth initiatives all reflected in our numbers.
As usual the short highlights as you can see, easy to understand. Net interest income up, total income up, operating profit up, number of gold customers up significantly, lending volumes are up and net loan losses are down. And the numbers clearly show this trend. We actually have a new record level on income, 9% up on the quarter with a lower loan losses we also get a very strong operating profit, one of the strongest we ever had and very much also due of course to the lower loan losses which we see down significantly over last year.
Net interest income is up 5%. We still see a very strong trend in our customer business. Lending and deposit volumes are up. We see some increase in deposit margins, but in general it is a rather good result especially thinking about the higher funding cost we are getting like all other banks when we gradually increase the maturity of our wholesale funding. So net interest income holding up well.
Net fee and commission is down a little in the quarter but we have to remember Q3 is normally seasonally a weaker quarter of the summer month. So the income in this area is actually continuing its strong momentum and it’s very much due to the savings area which continues upwards. With assets under management now at EUR180 billion, very strong inflow, 8% of assets in inflow in the quarter, strong performance on institutional business as we can see from the slide but also European fund distribution where we distribute our funds throughout Europe is performing extremely well.
The fair value result is back on the high level. The customer, the blue one, the customer side is continuously delivering even here in Q3 where we have typically lower activity but we see that the income from treasury and other areas are coming back. So this is also back on the high level. And the costs are more or less flat. We have a small increase, but if we adjust for the currency effects and our growth initiatives we actually have the underlying expenses of running the bank down slightly in the quarter and because the income ratio is now 51%.
Credit quality is clearly improving. We have for the first time this quarter a clearly positive rating migration in our loan book. This is reflected in the lower loan losses and if we exclude the payments to the Danish guarantee scheme, we are now down to 22 basis points, down from 27 – 26 last quarter. This is also reflected in our risk-rated assets. You can actually see that the risk rated assets is slightly down mainly due to the rating migration which is having this positive effect. And combined means that the one capital is going up slightly and this is very encouraging. It means that our profitability actually is strong enough to cope with a very strong lending growth which increased risk-rated assets by 8% paying out dividends and so on and still increasing the quarter on rate.
We still strong have a strong position on funding and liquidity. It’s interesting to see here that we have only slightly increased our short-term funding over the last three years but clearly increased our liquidity power, so our short-term funding in the group is today lower than our combined liquidity buffer which is of course also short. And the long funding has been increased significantly so we now have 3.7 years maturity of our long wholesale funding. And this means that we’re very close to our balance between assets and liabilities on behavioral maturities, which is a strong balance sheet, which supports our AA rating and gives a strong position going forward.