Nordea Bank AB (NDBAY.PK)

Q2 2010 Earnings Call Transcript

July 21, 2010 8:30 am ET


Rodney Alfven – Head, IR

Christian Clausen – President and Group CEO

Fredrik Rystedt – EVP and Group CFO

Ari Kaperi – Group Chief Risk Officer


Geoff Dawes – Macquarie Research

Nick Davey – UBS

Chintan Joshi – Nomura International

Aaron Ibbotson – Goldman Sachs

Matti Ahokas – Handelsbanken

Fridtjof Berents – Arctic Securities



Good day, ladies and gentlemen and welcome to the Nordea second quarter report 2010 international teleconference call. For your information, today's conference is being recorded. At this time, I would like to turn the conference over to your host today, Mr. Rodney Alfven. Please go ahead, sir.

Rodney Alfven

Thank you, and welcome to this telephone conference. Here from Nordea we are represented by CEO and President, Mr. Christian Clausen; Chief Risk Officer, Mr. Ari Kaperi; Chief Financial Officer, Mr. Fredrik Rystedt; and Senior IR Officer, Andreas Larsson. So, please, Christian, go ahead.

Christian Clausen

Yes, welcome, everyone. And I will repeat some of the key messages from today, and then we will go through the slides I'm sure you have in front of you.

The key messages, we are delivering according to our plans and expectations from the beginning of the year and we want to underline the steady, strong customer business growth, which is bringing in more customers and more business. We see lower results from items at fair value, down from very high levels in Q1 and we have improved the outlook.

The story is very much about the development of the customer business because that is quite notable. We have the income in the corporate 10%, the income in the household segment is up 7%, total income is down, reflecting the lower items at fair value, we have a large number of new Gold customers, 73,000, or up 2.5% in the quarter, lending volumes are up nicely, both in the quarter and on year-on-year and we see a stabilization of impaired loans and credit quality in general.

We have made two changes in the outlook statement. The first one is about the macroeconomic development, where we now clearly see that the outlook for the Nordic markets have improved during this year. We expected that, but that has happened, so a steady economic growth is now clear for the Nordic markets. The global development is still fragile, not at least in Europe, but – and, therefore, we have some uncertainties there.

Costs expected to be in line and cost growth in line with '09. Risk-adjusted profits going to be lower this year than last year due to the lower income in treasury and markets we expected. And then the other change is that loan losses are going to be lower this year than last year and the credit quality continues to stabilize, and that is in line with economic recovery.

And now I will hand over to Fredrik who will go through the financials.

Fredrik Rystedt

Thank you, Christian. I will take you through the results. Looking at slide seven in your material, you can see that total income ended up at 2.161 billion, with a flat or slightly increase in net interest income, record level of net fees and commission and then a decline in net results from items of fair value.

Total expenses are in control, and I'll come back to that. Net loan losses are down, in line with our expectations, also including the provisions for the Danish guarantee package.

You can see on the next slide that the currency impact in this particular quarter is quite small. You can see the reported figures, and you can also see with local currencies in the mid column. So the differences there are quite small, but still differences comparing last quarter to this quarter in comparison to 2009 Q2, there the currency impacts are still a little bigger.

So if I take you through the different lines of our income statement, starting with net interest income. As I mentioned, net interest income is up by 1%, and we have a very good and solid trend with the customer operations, lending and deposit volumes are up. I'll come back to that. And margins are largely stable in most of our markets. Of course, on the back of low interest rate levels, it is a subdued level and we also have lower contribution from Group treasury in this quarter, which is directly a consequence of higher average funding cost when we prolong or issue new long-term funding at higher spreads in comparison to existing redeemed issues.

If you look at slide 10, you can see the underlying volume trend, that we have a good volume trend in pretty much all areas. As in previous quarters, the previous four quarters, we have had a good and stable growth in the Nordic household mortgages, as you can see. And that's also the case for consumer lending. What is a little different this time is that consumer – or the corporate lending in the Nordic area has also grown considerably to 2% in the quarter as such. And that is a little different to the slow growth that you have seen in the last three quarters of 2009 so a clear positive trend in the corporate area.

New European Markets continued to grow, and FID and shipping as well. If you look at deposits, you can see that the total deposits is actually slightly down by 1%. The major reason there is we have some more of financial deposits, so to speak, that has been exchanged versus short-term funding. But the underlying trend in Nordic households and corporate is still fine, as you can see.

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