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On Wednesday, Kepler Cheuvreux adjusted its stance on Nordea Bank Abp (NDA:SS) (OTC:NRDBY), downgrading the stock from Buy to Reduce while slightly raising the price target from EUR12.40 to EUR12.70. The revision reflects an anticipation of a market shift from defensive investments to sectors with higher growth potential.
Kepler Cheuvreux noted that while Nordea Bank’s return on tangible equity (ROTE) and low capital requirements relative to its peers are favorable, the stock’s year-to-date total return of approximately 35% has led to what the firm considers an excessive valuation. The bank’s price to tangible book value (P/TBV) now stands at 1.76 times, which Kepler Cheuvreux suggests is too high.
The increase in the price target is attributed to minor adjustments in the firm’s estimates for Nordea Bank. Despite the upgrade to the price target, the downgrade in the stock rating is primarily based on the strong performance of Nordea’s shares so far this year, coupled with an expected shift in investor sentiment towards riskier assets.
Kepler Cheuvreux’s analysis indicates that the market is gradually moving towards a "risk-on" approach, favoring growth-oriented sectors over defensive plays. This shift is a key factor in the firm’s decision to lower the rating for Nordea Bank.
The new price target of EUR12.70 represents a modest increase from the previous target of EUR12.40, suggesting that Kepler Cheuvreux still sees some value in the stock, albeit limited by the recent price appreciation. The firm’s decision to downgrade the rating to Reduce reflects a cautious outlook on the bank’s future stock performance in light of the broader market trends.
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