Nordea, the Nordic region's biggest bank by market value, reported second quarter earnings below forecasts due to higher costs and low loan growth, and said it would decide whether to move its headquarters out of Sweden in September. Nordea's second-quarter operating profit was 5 percent below analysts' expectations, after rivals Swedbank, Handelsbanken and beat forecasts. Nordea said it was considering moving its head office out of Sweden after it opposed a government proposal to raise fees lenders pay to a resolution fund that will help lenders in need. Sweden has since scrapped the proposal.
The bank, which also said it needed to assess how a European banking union would affect the region's finance industry before deciding on a shift, said studying any such move had helped drive up Nordea's costs during the quarter. "We have had tremendous activity in our transformation programme," said CEO Caspar von Koskull. "This is reflected in the cost picture, as has been expected." Nordea raised its cost growth guidance to 3-5 percent in 2017 compared to 2016 from a previous 2-3 percent increase.
Nordea's income also disappointed. Net interest income, including income from mortgages and loans to companies, rose marginally to 1.18 billion euros from 1.17 billion euros a year earlier but was lower than the expected 1.21 billion euros. "Our volume growth has been very low," Koskull said. "We focus on risk and profitability, that comes before volume growth."
Sweden and Denmark have said recently they are mulling joining the European banking union. However, Denmark will only take a decision in 2019 after Brexit and Sweden will undertake a thorough analysis before deciding. "As new initiatives have surfaced in Scandinavia about exploring to join the banking union, we would like to process this information before making a final decision (on moving Nordea's headquarters) in September," Koskull said. The banking union covers all countries in the euro zone, but European Union countries outside the currency area can join.