Nordea Bank Abp

Good morning and welcome to Nordea's second quarter 2026 results. I'm Ilkka Ottala, head of investor relations. As usual, we'll start with a presentation by Group CEO Frank van Jensen, followed by a Q&A session with Frank and Group CFO Ian Smith. Please remember to dial into the teleconference to ask questions. With that, Frank, please go ahead.

Good morning. Today we have published our results for the second quarter of 2026. This was again a strong quarter for Nordea. We drew good momentum across business. We attracted new customers and deepened existing relationships. And we achieved strong growth in savings and investments. All of this ensured we were firmly back to year-on-year income growth for the quarter. In fact, total income exceeded 3 billion euros and we were last there in 2024 at the peak of the higher rate environment. This highlights not only the strength of our diversified business model, but also our focused, growth-oriented 2030 strategy. We generated strong fee income and utter ancillary income. And importantly, net interest income has now started to move in the right direction. Moreover, this quarter, we also grew with income faster than cost, which is always our aim. It's good to be back to positive jaws. We're now six months into implementing our 2030 strategy, and our progress is starting to show through in our performance. I'll touch on some examples during the call. Of course, the world around us remains uncertain. The conflict in the Middle East continues to raise risks for the global economy. European countries in general, and the Nordics in particular, have so far navigated higher energy costs and other challenges remarkably well. Perhaps most in currency, we are seeing a greater willingness among companies to invest. The structural changes on the way in Europe's economy are creating significant opportunities. And Nordic corporates are well positioned to capture them in technology, energy, defense and infrastructure. as well as in the industries that have long been a mainstay of the Nordic economies like forestry, mining and steel. Equally, Nordea is uniquely placed to help our customers address the opportunities using our large balance sheet, Nordic scale and sector expertise and customer offering. We did just that in the second quarter, supporting high levels of customer activity and driving strong growth in business volumes. Let's take a look at the highlights. Beginning with our return on equity, which was very strong at 15.9%. Earnings per share were up 3% year-on-year at €0.36. Total income was up 4%, supported by an 11% increase in net fee and commission income and a very strong net fair value result. Strong demand for our savings and investment products, along with excellent performance of our funds, helped us increase assets under management by 16% to a record high, €505 billion. Net interest income development was also positive in the second quarter. We increased corporate lending and deposits both by 9%, building on the strong start to the year. In households, mortgage volumes increased by 2% year-on-year and retail deposits were up 4%. While down 1% year-on-year, NII was up 1% quarter-on-quarter. increasing for the first time since policy rates started coming down two years ago. Net fair value result was up 11%, a very strong result. Costs were flat year-on-year, excluding foreign exchange effects. Our credit quality remains very strong. Net loan losses and similar net result amounted to 61 million euros or six basis points, well below our long-term expectation of around 10 basis points. Likewise, our capital position is strong and we continue to deploy capital to drive profitable growth. Our CC1 ratio was 15.7% at the end of the quarter, which is 1.9 percentage points above the current regulatory requirement. Our strong performance and position is reflected in the improved full-year 2026 guidance we are publishing today. We reaffirm our ROE guidance of greater than 15%, but expect an improved cost-to-income ratio of 44% to 45%. Let's then look at the results in more detail, starting with the income lines. As mentioned, net interest income development was positive in Q2, supported by the higher business volumes. The effects of earlier rate cuts now appear to have worked their way through. During Q2, lending and deposit growth was strongest among corporates both up 9% from a year ago. We are pleased with the strong first half across our corporate businesses. The higher activity shows confidence among Nordic businesses, but it is also a direct outcome of our strategy. We have built strong relationships with our customers, which means we are almost always at the table when opportunities arise. At the same time, we continue to invest to ensure we have a strong capacity to support our customers. Household customers are also increasing their activity. Across the Nordics, more broadly, households remained focused on strengthening their savings and investments, and that contributed to higher retail deposits, which were up 4%. Mortgage volumes in Q2 were up 2% in the market that were still otherwise slow and only gradually picking up. In Sweden, our fastest growing market, we increased mortgage lending by 5%. While the move broadly remains cautious, there are clear signs that consumer confidence is on the rise. Finland in particular showed some encouraging signs this quarter, with confidence reaching the highest level since early 2022. Our net interest margin for the quarter was 1.54% compared with 1.57% in Q1. Net fee and commission income was up 11% year-on-year, with growth in all fee categories. This is encouraging, as growing cross-sales, especially in savings, is a key part of our 2030 strategy. Demand for savings and investment products remains strong, and our expanded advisory coverage is delivering good results. During Q2, customers continued to invest through our retail funds and pension products. And we welcomed a significant number of new private banking customers, which led to solid net flows. Asset management were up 16%, surpassing 500 billion euros for the first time. Our focus is on offering customers products that are relevant to their needs. Nordea's Empower Europe Fund is a good example. We identified a long-term investment opportunity in Europe's transformation and created a solution that brings together expertise across Nordea. A year on from its launch, the fund has now reached over €816 million in assets under management. making it one of our most successful launches ever and reflecting strong customer interest in themes such as energy resilience, reshoring and defense. Savings fee income was up 13% driven by the higher AUM and positive net flows in investment products. Our international channels, which have generally performed well since last summer, saw some outflows during the quarter amid geopolitical uncertainty and increasing rage. Q2 net fair value results was very strong, up 11% year-on-year and a clear improvement on Q1, when conditions were more difficult. Customer activity was high through most of the quarter, especially in foreign exchange and interest rate products. Activity in equities and securities financing was also at a good level. Market making was much stronger this quarter as the interest rates environment normalized. So with customer activity back to normal, we continue to expect net fair value to generate roughly 1 billion euro in annual income. Costs were flat year on year, excluding foreign exchange effects. The stable cost development reflects the structural improvements we have made in recent years. These continue to support productivity and efficiency across the group. And we are, of course, not stopping here. Under our 2030 strategy, we are continuing to simplify processes, improve productivity and make better use of our Nordic scale, while also making focused investments towards our strategic growth priorities. The realized savings give us the capacity to absorb inflation and continue investing significantly in the business while keeping overall costs under control, as we did in Q2. We're in a strong position to continue delivering positive jobs also in the second half, when year-on-year cost growth will likely slightly pick up against a very strong second half last year. The Q2 cost to income ratio improved to 44% from 45.1%. And that keeps us nicely on the path to where we want to be in 2030 with our target of 40 to 42%. Credit and asset quality remains very strong. The resilience of the Nordic economies continues to be reflected in our customer base. Households remain financially solid, while large corporates are generally well positioned, prudently funded and well capitalized. At the same time, we continue to grow in a disciplined way, supported by a diversified portfolio. Our underwriting and credit management approach has done us proud over the years and remains consistent also in this environment with higher corporate activity. Our loan losses are very low and are expected to be contained within our long-term expectation of 10 basis points. For Q2, net loan losses and similar net results amounted to 61 million euros, or six basis points, driven by a small number of corporate exposures. Our capital position remains strong and is comfortable supporting our good lending growth. At the end of the quarter, our CT1 ratio was 15.7%, 1.9 percentage points above our current regulatory requirement. As previously communicated, we will pay dividends twice a year going forward. Our board of directors has decided to pay a mid-year dividend in August of 34 euro cents per share, amounting to approximately 50% of our net profit for the first half of 2026. The mid-year dividend is the first part of the total dividend distribution under our dividend policy, which stipulates a 60 to 70% payout ratio on full year profit. And now turning to our business areas. In personal banking, we delivered solid lending growth and generated strong fee income. Our mortgage growth, 2% in the second quarter, was led by Sweden and Norway, two of our strategic growth areas. In Sweden, where we again increased our mortgage market share, we are clearly maintaining good momentum. We do not take that growth for granted. However, we remain focused on attracting customers through better service, higher availability and a stronger customer experience. Across the Nordics, housing markets are recovering gradually. Customer caution remains, but further increased applications for loan promises suggest demand this building beneath the surface. Competition for mortgages remains high, which creates some margin pressure. This is not new to us, and we continue to manage it carefully while capturing opportunities to grow. Total lending volumes increased by 1% and local currencies year on year. Deposits were up 4%. More customers are choosing Nordea for a broader range of the financial niche, which is supporting our deposit growth and enabling cross-selling opportunities across the group. During the quarter, we launched the new Nordic Index Fund, designed to broaden our savings offering. The fund offers a simple and cost-effective way for customers to invest in Nordic companies and gain exposure to the long-term growth potential of the Nordic region. We believe products like Lease will help us attract, in particular, young and self-directed savers, and over time, support a stickier and more resilient fee income base. The share of customers with recurring savings has been increasing over the past three years, and during the quarter, recurring savings inflows were up 8% year on year. Net fee and commission income increased by 11%, mainly driven by the higher savings, payments and card fee income. Total income decreased by 2% year-on-year, but was up 2% quarter-on-quarter. Return on allocated equity was 14%, and the cost-to-income ratio was 51%. In asset and wealth management, we continue to drive robust growth in income and asset under management. We had another strong quarter in private banking, one of our six strategic growth areas. Here, we attracted many more new customers and drove net flows of 1 billion euros. We continue to invest in our advisory capabilities and have now completed the Nordic rollout of our direct advisory service, which was first developed in Norway and has delivered encouraging results. We're also implementing our plan of hiring advisors, the teams that bring in and take care of our customers every day. Their onboarding is progressing well and they are getting up to speed in the new roles. Investment Products AOM was up 17% year-on-year. Our international channels saw some outflow amid uncertainty in the Middle East and increasing interest rates. This mainly related to a single client reducing its holding in sustainability products. Wholesale net flows remained broadly resilient and were marginally negative for the quarter, but showed a pickup in June. Life and pension is another important strategic growth area for us, and we continue to make good progress. Here we are supporting customers with their long-term savings, pension and protection needs, while making the solution a natural part of the broader Nordea relationship. We maintain good momentum across all four home markets. Life and pension assets on the management increased 23% year-on-year. while gross written premiums in the quarter amounted to 3.6 billion euros, up from 3 billion a year ago. Total income was up 12% year on year. Return on allocated equity was 38%. The cost-to-income ratio improved by 1 percentage point to 44%. In business banking, we performed very well, delivering strong fee income and volume growth across all home markets. Lending volumes increased by 6% in local currencies year-on-year, led by Denmark, Norway and Sweden, while growth also picked up in Finland. Deposit volumes grew by 3% and were also up in all markets. We have seen increased intensity within capital markets, and we supported several customers in executing successful IPOs. During the quarter, we continued to invest in our digital capabilities to make Nordea the leading digital bank for small and mid-sized businesses. We are seeing good traction. Customer growth accelerated this quarter, A big part of that came from the improvements we have made this year to our onboarding process. It is more user-friendly, leaner and more automated and helps entrepreneurs and small businesses get up and running with us more quickly. In addition, our Nordea Business mobile app reached an all-time high in Nordic rating with a number of users up by more than 10% from a year ago. Total income in the second quarter increased by 4% year-on-year, driven by volume growth and higher ancillary income, while AOM were up 23%. Return on allocated equity was up 16%, and the cost-to-income ratio improved to 43% from 45% a year ago. In large corporate institutions, we continued to proactively support customers with their growth plans, delivering strong results while building out our capabilities that will support future growth. During the quarter, we launched a new supply chain financing solution, continued to increase AI adoption, and made further upgrades to our markets platform. Together, these investments are helping us serve customers better and win a larger share of the business. We could see that in the quarter with solid ancillary income, growth across product lines. Lending growth, which was strong in the first quarter, stayed strong, increasing by 14% year on year. Denmark, Norway and Sweden all contributed to the growth. deposits were up 17%. Activity in our capital markets business likewise remained strong. In debt capital markets, we arranged more than 200 transactions during the quarter for a broad range of issuers. Our capabilities are also increasingly earning us the right to support customers on their most important strategic moves, including a number of significant transactions in our markets. For example, we acted as sole financial advisor and book runner in the acquisition by Kesko, the Finnish retail group of Senko Bank's specialist distribution business in the Nordics. Overall, sentiment in the equity capital market also improved, with Nordea facilitating several high-profile transactions and securing a leading position in the Nordic initial public offering league table year-to-date. Nordic companies are getting firmly into growth mode, and we are pleased to be supporting them across a broad range of financing and advisory needs. Total income was up 15% year on year, driven by strong net results from items at fair value and improving net interest income. Return on allocated equity was 16%. The cost to income ratio improved to 38% from 42%. To sum up, this was again a strong quarter with high business activity and income, flat costs and a very good result, all in line with our 2030 strategy ambitions. We go into the second half of the year with confidence. The business is performing well and our strategy execution is on course with visible progress across all key initiatives. The Nordic economies are also showing their strength and we are well placed to support customers as they pursue new growth opportunities. Our strong performance and position are reflected in our full year 2026 guidance. We continue to expect a return on equity of greater than 15%, while we now expect a cost-to-income ratio of 44% to 45%. Our ambition is to become the undisputed best performing financial services group in the Nordics. The progress we made in the second quarter shows that we are moving steadily in that direction. Thank you.

operator we're not ready to take questions if you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key 6 on your telephone keypad the next question comes from Magnus Anderson from a BGSC please go ahead