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Nordea profit miss overshadows rise in return on equity goals

FILE PHOTO: The Nordea Bank AB logo is seen at the SIBOS banking and financial conference in Toronto

By Anne Kauranen

HELSINKI (Reuters) - Shares in Nordea Bank fell more than 4% on Monday as disappointment over its fourth-quarter profit overshadowed its move to raise its return on equity goals to match regional rivals.

The Nordic region's biggest bank reported fourth-quarter operating profit of 1.42 billion euros ($1.53 billion) down from 1.61 billion a year earlier and below the mean forecast of 1.64 billion euros in an LSEG poll of analysts.

The lack of a new share buy back programme and inflation in Nordea's risk exposure amount also weighed on the shares, JPMorgan analysts said.

The Finnish lender said it was targeting a return on equity (RoE) of more than 15% in 2024, and upped its 2025 target to 15% from 13%, which the JPMorgan analysts saw to be "in line with market expectations".

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Nordea and its peers such as SEB and Swedbank have been racking up hefty profits over the past two years on the back of soaring interest rates, which are expected to begin falling this year.

"Our confidence is grounded in the progress we have made over the past four years," CEO Frank Vang-Jensen told a conference call, referring to the upgraded 2025 target.

The bank said its full-year RoE increased to 16.9% in 2023 from 13.8% in 2022.

Last month, SEB reported a full-year RoE of 17.9% for 2023 and said its long-term target is to reach 15%, similar to Swedbank, which targets "a return on equity of at least 15 per cent".

Nordea's board of directors proposed a dividend of 0.92 euros per share for 2023, a year-on-year increase of 15%, below analysts' mean forecast of 0.95 euros per share.

"We think it's important to continue to show progress in dividend per share," Nordea Chief Financial Officer Ian Smith told a conference call.

Nordea said its net fee and commission income decreased by 3% year-on-year and net insurance result fell 15%, while regulatory fees rose 25%, reflecting an increase in the Swedish bank tax.

Shares in the company were 4.4% lower at 1000 GMT.

In December, Norway's competition authority approved Nordea's plan to acquire Danish rival Danske Bank's Norwegian personal customer business, which will raise Nordea's share of the Norwegian mortgage market to 16% from 11%.

Nordea said the deal, which includes 285,000 customers, 22 billion euros ($24.71 billion) in lending and deposit volumes, as well as managed assets worth 2 billion euros, is still expected to close in late 2024.

($1 = 0.9279 euros)

(Reporting by Anne Kauranen, editing by Terje Solsvik, Varun H K and Andrew Heavens)