Nordea Earnings: Improving Economic Outlook Drives Small Overlay Releases

Nordea reported a good second quarter with a return on equity of 17.9%. Operating expenses increased to EUR 1.26 billion, up 6% compared with a year ago, driven by planned investments into Nordea's IT infrastructure and financial crime prevention systems. The higher spending was offset entirely by good income development, up 3% to EUR 3.03 billion, and operating leverage working in Nordea's favor. Net interest income, up 4%, benefitted from widening lending margins, while mortgage volumes were flat and corporate volumes declined 1%. An improving economic outlook allowed Nordea to release EUR 30 million of its remaining EUR 464 million in management overlays for credit losses. The bank booked EUR 68 million or 8 basis points in net credit costs. Excluding the released overlay, the charge would have been closer to 12 basis points of loans outstanding. This aligns with Nordea's target of around 10 basis points for 2025.