Nordea profit tops forecast as interest income gives boost

By Niklas Pollard

STOCKHOLM (Reuters) - Finnish banking group Nordea posted third-quarter operating earnings just above market expectations on Thursday on rising interest income, improving slightly its outlook for costs and income for the full year.

Rampant inflation and rapidly tightening monetary policy are lifting interest income for Nordic banks, while mounting costs for households and businesses and slumping real estate markets have yet to translate into higher loan losses.

The Nordic region's biggest bank reported an operating profit of 1.30 billion euros ($1.27 billion) in the quarter, up from 1.27 billion a year ago, beating the mean forecast of 1.26 billion euros in a Refinitiv poll of analysts.

"We think these will be seen as a solid set of numbers albeit one that is unlikely to shift expectations much in one direction or another today," Credit Suisse analysts said in a note to clients.

Interest income at Nordea, which has sizeable operations in Norway, Denmark, Finland and Sweden, rose 15% on the year to 1.41 billion euros in the July-September quarter, coming in above the 1.35 billion seen by analysts.

The Nordic region, however, faced greater macroeconomic uncertainty, rising inflation and weaker growth, it said.

"The visibility is currently low and we expect the challenging environment to continue during the coming quarters," CEO Frank Vang-Jensen said in the earnings report.

"However, we are well positioned to weather this environment and have a resilient business model."

Fees and commissions fell 6% from a year ago to 816 million euros, lagging analysts' expectation of 822 million. Net loan losses of 58 million euros compared to reversals of 22 million in the year-ago quarter.

"Our credit quality remains strong," Vang-Jensen said.

Swedish rival Handelsbanken reported record earnings this week, on a surge in interest income while offering reassurance on credit quality ahead.

"All in all a strong result across the board, and we expect positive revisions of estimates in the wake of the report," Denmark's Jyske Bank said in a research note.

Nordea shares, which were lifted by Handelsbanken's strong results on Wednesday, were up 1% by 0727 GMT, outperforming the broader market with leading Nordic indexes opening in the red.

The Nordea group raised its full-year outlook slightly, forecasting a cost-to-income ratio of 48% to 49% from 49% to 50% earlier. It left unchanged guidance for a return on 2022 equity of above 11%.

($1=1.0238 euros)

(Reporting by Niklas Pollard; Editing by Tom Hogue and Clarence Fernandez)