Nordea: Buybacks Delayed So Minor Credit Positive, Similar For Nordic Peers

Nordea spreads are tracking the banks index tighter today (-0.8bp) and results don’t alter views on the issuer much, we feel. Equity is also moving inline. Disappointment around equity buyback timings is crimping the equity move today which would, in our view, have been more positive on the earnings beat. This higher capital level for much of this year should underpin spreads here, though and similarly for the Nordic peers.

• Capital was likely the key talking point of the call. Mgmt indicated news on buybacks “later in the year” as the ECB, which needs to approve buybacks, is still in talks with Nordic regulators around model approvals. This negotiation likely impacts (credit positively) most of the Nordic banks, we feel. Mgmt did hint at smaller buybacks, later this year, therefore, a minor credit positive.
• Mgmt continues to maintain a credit risk buffer which, after very low loss experience in 1Q24, was also questioned. The view given was that there’s still some “irrational” behaviour in some markets and that there remains risk out there in lending markets, such that it prefers to retain a prudent position.
• On revenues, guidance here was a little more positive than consensus, we feel, with margins guided to being higher in 2024 than last year. At least some of this is the shape of Nordea’s hedging but is, nonetheless, a positive.

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