Nordea Initiates Share Buybacks As The Nordic Banking Sector Recovers

Nordea (NDAFI.HE) of Finland and Swedbank (SWEDa.ST) of Sweden both reported increased third-quarter earnings on Thursday, as banks throughout the region recovered quickly from the pandemic’s impact and moved extra capital to shareholders.

Nordic banks, like their European counterparts, have profited from increased corporate and consumer activity, as well as a glut of mergers and acquisitions (M&A) and initial public offers (IPOs), which have provided rich pickings for their investment banking divisions.

Following this week’s forecast-beating profits from Sweden’s SEB (SEBa.ST) and Handelsbanken (SHBa.ST), Nordea, the region’s largest lender, saw its quarterly operating profit jump to 1.27 billion euros ($1.48 billion), in line with market forecasts, from 1.09 billion a year ago.

In an announcement, Nordea Chief Executive Frank Vang-Jensen said that they have started a new stage of recovery from the epidemic and, as a bank, they have achieved so from a position of strength.

Swedbank, Sweden’s oldest retail bank, reported a net profit of 5.50 billion crowns, up from 5.26 billion crowns a year ago, exceeding analysts’ forecasts of 5.10 billion crowns in a Refinitiv poll.

Swedbank CEO Jens Henriksson told reporters “The quarter has been marked by a steady return to the new normal. “Not least in Sweden, we see a significant comeback.”

DNB (DNB.OL), Norway’s largest bank, recorded its best-ever third-quarter results and announced that it would pay a dividend in 2020, capping off a flurry of banking earnings.

Nordea’s profit was in line with forecasts, according to Andreas Hakansson, banking analyst at Danske Bank, although somewhat lower on key income lines such as net interest income and commission income.

“So it’s possibly a little weaker than expectations from that standpoint,” he said. “Swedbank exceeded expectations on a number of key lines, and I believe the stock will rise as a result.”

Concerns about sour debts as a result of the pandemic have faded quickly, and financial regulators have eased temporary restrictions on shareholder dividends, resulting in robust increases for stocks throughout the industry.

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Nordea stated it would transfer extra cash to shareholders by beginning to purchase back its own shares on October 22 at the latest, on top of a 0.72 euro dividend payout in October.

Nordea also stated that it plans to submit to the European Central Bank for authorization of a new buyback programme in early 2022.

SEB announced a new dividend and the start of share repurchases earlier this week, joining its Nordic rivals in increasing payouts.

Several of the region’s banks’ attempts to maintain costs under control remain a source of concern.

Nordea boosted its cost projection for 2021 to around 4.6 billion euros in July, after previously stating that it would be lower, due to the purchase of Nordea Finance Equipment and greater staff compensation as a result of the quarter’s good performance.

On Thursday, the Helsinki-based lender, like Swedbank, maintained its cost forecast, despite increased legal costs coming from money-laundering probes in its Baltic operations in recent years.

The buy-back scheme will begin on October 22, 2021, or as soon as practicable thereafter, and will terminate on April 30, 2022. The programme is implemented in compliance with the Board of Directors’ authority provided by the Annual General Meeting in 2021.

Nordea has hired a third-party broker who, based on irreversible instructions, will decide on the buyback of shares in complete independence, including in terms of timing and compliance with applicable price and volume limits, as well as the program’s parameters.

Prior to the start of the buy-back programme, Nordea held 7,112,244 treasury shares for pay reasons.

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