Nordea Q4 2011

Nordea Bank ((OMX: NDA SEK) (OMXH: NDA1V) (OMX: NDA DKK)) posted its highest total quarterly income to date on Q4 2011. This also makes the entire financial year a record. Not everything was quite what the markets were hoping for though as credit losses bucked the recent down trend and total net loan losses increased rather significantly both against Q3 2011 and Q4 2010 to 263 million. Nordea said that the number is slightly higher than expected over the cycle and is mainly related to increases in Denmark and Shipping.

The company touted that its New Normal plan, which basically means major cost reductions in order to reach a spesified profitability goal, has gotten to a very good start. The cost development was flat year-on-year in a time when banks in general face higher costs associated with stricter requirements. Fourth quarter ROE increased to 12.3% with the New Normal target at 15% ROE.

Fourth quarter operating profit was 1.029 billion and risk-adjusted profit 815 million Euros. Full year earnings per share print a cent lower than in 2010 at 65 cents a share. Core Tier 1 ratio has increased 90 pbs over the year to 11.2% excluding transition rules (9.2% with transition rules).

Nordea is cutting its dividend by 10% to allow for a continued increase in the capital ratios, as it plans to meet Swedish authorities requirement for >12% core tier 1 capital by 2015. The report did contain an innuendo on the bank’s worry that the current political impetus to blame the banks on all the ills will cause ever tightening regulations, which in turn will have adverse effects on the whole economy.

Nordea has no direct exposure to the Euro countries facing a crisis but of course is affected indirectly. Nordea said it saw a stabilizing effect in the industry following ECB’s decision to introduce a 3-year liquidity facility. The bank said it has good business momentum with gold and private banking customer numbers at a record high. The stock is down a little more than 1% on all the markets, which is somewhat less the retreat of the indexes on a red morning.