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Nordic banks seem to be losing their shine
NORDIC banks, once coveted as the best-run and best-capitalised in Europe, appear to be losing their lustre.
After publishing first quarter results, banks based in Sweden and Denmark are among the year's worst performers in the Bloomberg index of European financial stocks. In fact, you need to have been an investor in Banca Monte dei Paschi di Siena SpA or Deutsche Bank AG to have lost more money since December.
"Despite operating in some of the fastest growing economies in Europe, shares in Nordic banks have under-performed European peers over each of one, three, six and 12 months," said Philip Richards, an analyst with Bloomberg Intelligence in London. "The lenders still trade at a modest price/book premium, but the difference is closing fast."
Mr Richards says it's a combination of slowing loan growth, years of negative interest rates and intensifying competition that have "cast a cloud over their revenue outlook".
Nordea Bank AB asked investors to be patient as the Nordic region's only global systemically important lender pushes through a sweeping digital transformation that includes 6,000 job cuts. Chief executive officer Casper von Koskull acknowledged that the bank's revenue was "softer" than he had hoped last quarter, but tried to reassure shareholders that he can still deliver on his profit goals.
At Svenska Handelsbanken AB, the Nordic lender with the biggest exposure to the UK, capital adequacy declined while profit missed analyst estimates. The bank was also rapped over the knuckles by the British regulator for "serious weaknesses" in its financial crime framework.
Danske Bank A/S, Denmark's biggest lender, beat profit estimates but mostly thanks to its cost cuts. Its capital adequacy was slightly below analyst estimates. And on the day it published earnings, Danske was re-primanded by the Danish regulator after its wealth management robot failed to live up to investor protection requirements.
SEB AB fell short of analyst expectations for profit and its income from fees and commissions fell because of "lower corporate activity". Swedbank AB, Sweden's biggest mortgage bank, did better than analysts had predicted but still fell on the day it reported earnings, in part as investors wonder how Sweden's housing market correction will play out.
According to Mr Richards, "fears over the floundering Swedish housing market may have eased recently, but remain ever-present". BLOOMBERG