Nordea confident of resilient performance despite rate falls

By Anne Kauranen

HELSINKI (Reuters) -Finland's Nordea reported first-quarter profits above expectations on Thursday and said its strong performance would continue this year and next, despite falling interest rates.

The Nordic region's biggest bank said first quarter return on equity (RoE) was 18.1%, in line with its goal of above 15% in 2024 and 2025, and a similar return to its regional rivals.

The European Central Bank (ECB) has flagged an interest rate cut for June 6 and is debating the schedule and need for more.

Nordea cited its hedging and improving mortgage margins for some of the dynamics that CEO Frank Vang-Jensen said will support the bank's "resilience" in the downward rate cycle.

"Usually the mortgage margins will, when rates start to decline and activity starts to revert, come to more decent levels than today," Vang-Jensen said.

Nordea's Chief Financial Officer Ian Smith told analysts on a webcast that subject to how rivals react, that the ECB's initial rate cuts would be "relatively margin-insensitive compared to what we might see later in the cycle".

Helsinki-based Nordea had noted activity picking up in the Norwegian mortgage market in particular, the executives said, calling it the most active in the Nordics at present.

"As our first-quarter results demonstrate, we continue to be one of the best-performing banks in Europe," Vang-Jensen said in a results statement.

Nordea's first-quarter operating profit rose to 1.76 billion euros ($1.88 billion) against a year-earlier 1.48 billion and a mean forecast in an LSEG poll of analysts of 1.59 billion euros.

Its net interest income (NII) rose 11% year-on-year to 1.95 billion euros, its highest level in five years and slightly ahead of a poll forecast of 1.93 billion.

Nordea gave no update on its capital distribution plans, saying it was awaiting ECB approval on its new capital models for retail exposures. Nordea said it would maintain its 505 million euro management judgement buffer, a provision it has kept high since the COVID pandemic to cover possible losses.

The bank's shares were up 0.75% at 0930 GMT.

($1 = 0.9366 euros)

(Reporting by Anne Kauranen in Helsinki, editing by Terje Solsvik and Alexander Smith)