Nordea posts 11 pct drop in 2Q net, raises outlook

STOCKHOLM - The Nordic region's biggest financial group, Nordea Bank AB, on Tuesday reported an 11 percent drop in second-quarter net profit, mainly due to higher loan losses and staff costs, but raised its full-year outlook.

Net profit in the quarter fell to euro616 million ($874 million), down from euro692 million in the same quarter last year. The bank said costs grew in the three-month period, with net loan loss provisions reaching euro425 million.

The Stockholm-based bank nevertheless raised its forecast for 2009 risk-adjusted profit — or profit before loan losses, expected losses and standard tax — saying it expects it to be higher than last year. In the first quarter, it had forecast it to remain unchanged.

Nordea said that the second-quarter loan loss ratio was broadly in line with its loan loss outlook and that both loan losses and impaired loans stemmed from a large number of smaller and medium-sized exposures rather than from a few large exposures.

In the troubled Baltic countries, gross impaired loans, including both performing and non-performing loans, came to euro418 million, it said. Costs, mainly staff expenses, also rose in the quarter because of pension costs and a higher allocation to its employee profit-sharing scheme.

Nordea's net interest income — its main source of revenue — rose to euro1.3 billion from euro1.2 billion a year earlier. Net fee and commission income increased to euro412 million from 518 million.

"Our credit situation is solid, with loan losses having developed in line with our expectations," said Group Chief Executive Christian Clausen.

In its 2009 forecast, the bank said costs are expected to be "slightly lower" than last year. However, it warned that "since global and Nordic economies have contracted clearly beyond general expectations at the beginning of the year," uncertainty over the effects the recession will have on customers — and in turn Nordea's lending book — has increased.

"Therefore, the risk has increased for a somewhat higher loan loss ratio for the full year compared to the annualized level in the first half of the year," it said.

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