Nordea’s stock up after Q3 net profit beats estimates as ROE hits 15.8%

Investing.com -- Nordea Bank (CSE:NDADK) on Thursday reported net profit of €1.23 billion in the third quarter of 2025, beating consensus by 7%, as pre-provision profits and lower-than-expected impairments contributed to stronger returns, sending shares up over 3%. 

Pre-provision profit reached €1.58 billion, 4% above consensus of €1.52 billion. The bank’s return on equity for the quarter was 15.8%, above its 2025 target of over 15% and consensus estimates of 15%.

Net interest income came in 1% ahead of expectations but declined 1% sequentially and 6% year over year. 

The decrease reflected lower deposit, lending, and equity margins, partially offset by higher deposit and lending volumes and a €21 million contribution from the deposit hedge.

The bank now expects the deposit hedge to provide a €135 million tailwind in 2026, up from the previous €100 million estimate.

Commissions and fees were 2% ahead of consensus and up 5% from a year earlier. Savings income increased as assets under management grew €19 billion to €456 billion, including €4.4 billion of flows from the Nordic channel. 

Brokerage and advisory income declined sequentially but was offset by stronger payment and lending fees. 

The quarter included a one-off €10 million gain from a new ATM agreement in Personal Banking Denmark; excluding this, fees were still 1% above consensus.

Trading income totaled €245 million, slightly below the €250 million consensus, reflecting lower customer activity in foreign exchange and rate products.

Expenses were 1% lower than expectations, driven by reduced staff and other costs, and were flat sequentially. 

The cost-to-income ratio stood at 46%. Nordea expects 2025 costs to be around €5.4 billion, compared with consensus at €5.44 billion, implying cost growth of approximately 1% for the year, below previous guidance of 2–2.5%.

Impairments reversed €19 million, equivalent to -2 basis points, compared with a consensus expectation of a 3 basis point charge. 

The reversal reflected low individual provisions and write-offs, reduced provisioning requirements—particularly in the Business Banking portfolio, and a €50 million release from the management judgment buffer, which now totals €291 million.

The bank’s common equity tier 1 ratio improved to 15.9%, 30 basis points higher sequentially and above consensus expectations. 

Profit generation of 80 basis points was partly offset by dividend accruals and volume growth. Collateral management initiatives added 10 basis points by increasing recognized collateral values in the mortgage portfolio.

Jefferies said its modeling already included the EUR 250 million buyback in the third-quarter results, implying a pro forma CET1 ratio of 15.7%, slightly above consensus at 15.6%.

Nordea reiterated its 2025 guidance for a return on equity above 15% and maintained its capital policy, including a 150 basis point management buffer above regulatory requirements and a dividend payout ratio of 60-70%.