Nordea Stays Afloat Amid Sinking Rates—But Investors Remain Wary
Despite facing pressure from falling interest rates across Europe, Nordea has delivered a modest earnings beat—yet the market remains unconvinced.
On Thursday, the Nordic region's largest lender posted a second-quarter operating profit of €1.60 billion, just edging past analyst expectations of €1.58 billion. But behind the headline beat lies a more sobering reality: net interest income—a core driver of banking profitability—dropped 6% year-on-year to €1.80 billion, dragged down by successive rate cuts from the European Central Bank and Sweden's Riksbank.
That metric fell short of the €1.81 billion analysts had penciled in, underscoring the mounting pressure on Nordic banks as the rate cycle turns. While peers Swedbank and SEB also surpassed profit forecasts this week, their interest income told a similar story—compression, not expansion.
For foreign investors eyeing Europe's traditionally stable north as a haven, Nordea's results offer both reassurance and a note of caution. On one hand, the bank's earnings held up better than feared. Higher lending volumes, robust deposit growth, and prudent deposit hedging helped buffer some of the rate-induced squeeze. On the other, the stock slid 3.7% in Helsinki trading by mid-morning, suggesting that the market remains skeptical of the quality of the earnings beat.
“The outperformance came largely from reversing earlier provisions,” noted Inderes analyst Kasper Mellas. “That's a one-off and not necessarily a sign of underlying strength.” In other words, the beat may be more optical than operational.
Sweden remains Nordea's biggest market—a fact that links the bank's fate closely to the Riksbank's monetary moves. As inflation cools and policymakers loosen their grip, interest income across the region is likely to remain under pressure.
Still, CEO Frank Vang-Jensen struck a cautiously optimistic tone. While he acknowledged that global trade disruptions “clearly carry risks,” he argued that the Nordic economies are better equipped than most to navigate turbulent waters. “We also expect the lower inflation and interest rates to further support increasing activity levels as confidence returns,” he added.
For now, Nordea walks a tightrope: resilient, but not invincible. Investors will be watching closely to see whether this modest beat is the beginning of a turnaround—or merely a pause before the next squeeze.
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