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Investing.com -- Barclays (LON:BARC) downgraded Nordea Bank Abp (CSE:NDADK) to “underweight” from "equal weight,” citing weaker earnings expectations and revenue pressure.
The brokerage cut its price target on the stock to €11.80 from €13.30, reflecting an 11% reduction and a 13% downside from the August 20 closing price of €13.56.
“Despite our view that Nordea can beat consensus costs over FY26e-27e by 1%, our EPS estimates are 3-6% below consensus, driven by lower revenue expectations.” Barclays said.
The analysts expect revenue to come in 2% to 3% below market estimates, citing two main pressures, namely, competition squeezing lending margins and pricing concerns in asset management.
In Norway, Nordea’s retail funds are priced 55 to 75 basis points above the cheapest peers, while in Denmark and Finland the gap ranges from 13 to 26 basis points. Barclays said these pricing differences are unlikely to be sustainable over time.
The brokerage also flagged competitive mortgage and lending dynamics in Denmark, Norway and Sweden as headwinds for Nordea’s net interest income.
For example, DNB and Swedbank have already cut rates in Norway, and muted volumes in Sweden are expected to keep margins subdued.
While Nordea may be able to achieve some cost efficiencies, Barclays expects them to be back-end loaded.
The brokerage forecasts cost growth of about 1% annually between 2025 and 2028, with some savings from automation in financial crime compliance. Still, it said the near-term revenue outlook overshadows potential cost reductions.
In terms of profitability, Barclays projects a 15% return on equity for 2028, which it said is not exceptional compared to other European banks.
Eleven peers under its coverage are targeting 15% or higher. At an estimated 10x price-to-earnings ratio for 2027, Nordea’s shares are seen as expensive relative to the European sector average of 8.5x.