I’m posting this here as well. UniCredit is a significant peer for Nordea in the eurozone banking sector, although not a direct competitor. Discussion on, among other things, competition in the banking sector, market shares, and consolidation in Europe. UniCredit is an active consolidator and has, over the last couple of years, acquired a 29.9% stake in Germany’s Commerzbank (hoping for a merger) and also tried to buy Banco BPM in a €14bn acquisition, which however fell through in July due to regulatory challenges.
Great company and a good peer. Looks like about 3 years ago the price was at Nordea’s current level, now it’s about €60 higher, looking forward to that .
According to the news summary provided by Finwire (below), Group Technology has over 4,500 employees, so in relation to that, we are talking about approximately 6 percent of its jobs. As I see it, the reduction is understandable, as Nordea has had major IT projects in recent years that have mostly been completed. In this regard, I for one have expected the cost side to decrease.
”Nordea is carrying out a restructuring that means 271 positions will disappear within the bank’s IT department Group Technology. This is reported by the Danish Ekstra Bladet, which has had the information confirmed by the bank via a written statement.
The reductions affect several countries in the Nordic region as well as Poland, but it is not specified how many are affected in Denmark.
According to the bank, the measure is part of a new strategic period to ensure they have the right structure, capacity, and expertise for future needs and long-term growth. Over 4,500 people work within Group Technology.”
It’s quite interesting, as Nordea’s app and services seem to be lagging significantly behind other domestic ones Not to mention the post-Investor tools, which I don’t have experience with myself, but not many people here seem to be praising them.
Asset management firms on the other side of the Atlantic hit the panic button yesterday, and their share prices plunged after Altruist launched the Hazel AI investment tool (see, e.g., @ilkka6’s post on the forum’s “Financial sector as an investment” section). Now, the discussion is spreading regarding what will happen to banks’ AUM (Assets Under Management) units.
While there is a “panic button” atmosphere on Wall Street, the effects could be both negative and positive. Some clients may shift from AUM departments to using AI agents, competition may intensify, and margins may weaken. On the other hand, AI tools also enhance the efficiency and productivity of banks, thereby bringing costs down. For many high-net-worth clients, a personal human advisor is important. AI does not necessarily have to replace current wealth management services entirely; it can also complement them.
AI is already a reality for banks and Nordea today.
Target prices are starting to break the €20 mark. This morning’s news reports that the French investment bank BNP Paribas has raised its Nordea target price from €16.33 to €20.55, maintaining its outperform rating.
In its assessment published today, SEB considers the Nordic banking sector to be undervalued. The outlook is improving, and this is not reflected in share prices. Nordea’s target price is raised to €19.30.
What are these target price increases based on? Earnings are unlikely to rise in the same proportion. It feels as if the market has started pricing Nordic banks with new multiples, as otherwise these target price hikes are hard to understand. Granted, Nordea has been posting strong results, but growing earnings rapidly and sustainably is difficult.
The current share prices of Nordic banks reflect their (good) current condition, and the rise over the past year reflects the correction of long-term undervaluation. The entire European banking sector has benefited from this. For example, the basis for SEB’s view on Nordea, which approaches €20, is additionally that the potentially finally improving economic outlooks have not been priced into the share price.
In addition to this, the valuation difference between banks and the insurance sector has been highlighted. The latter are significantly more expensive, for example, when looking at the P/E ratio. The justification for the difference has especially been the stability and predictability of insurance operators. But now it has been pointed out that healthy Nordic banks have improved by leaps and bounds in this regard. If not quite to the same valuation level as insurance companies, then banks should at least begin to be valued closer to it.
The banks’ strong health is partly due to the fact that it has been made more difficult for ordinary people to get loans. You can’t get a mortgage unless you have a permanent job at a reputable large corporation operating in international markets, nor a renovation loan if the house or housing cooperative is so old that it is actually in need of renovation.
Do they intend to make their profits from deposit margins and service fees in the future?
corona-era loan loss buffers have proven to be necessary for Finland
regulatory overlap (there may be many layers: ECB + national + national [when operating in multiple countries]) causes challenges for the competitive landscape
Asiastudiofi
Vesa Puttonen’s guest is Nina Arkilahti, Head of Business Banking at Nordea, responsible for the Nordic SME sector
”Inderes analyst Kasper Mellas sees that the market is pricing Nordea’s future earnings growth and profitability quite moderately. The Nordic bank is aiming for earnings per share of up to two euros in 2030. If Nordea reaches its targets, the stock has clearly more upside potential than our target price indicates”.
Average target price in the market is a tight €18. If the targets are met, then a twenty-euro-plus stock?
More interesting than the sanction amount (2.26 million = essentially negligible) is the reason for the sanction stated in the article:
”As a result of incorrect reporting, the bank (Nordea Finance Finland, a Nordea subsidiary) exceeded the 25 percent limit set by the EU regarding the maximum amount of a single large exposure relative to the bank’s own funds.”
”In banking supervision, large exposures are one of the key risk management metrics. They aim to prevent a situation where a bank is overly exposed to a single client or group of clients. The key thresholds are 10 percent, above which an exposure is classified as a large exposure. Additionally, 25 percent is the absolute maximum limit for a single counterparty.”
Does this mean that Nordea Finance Finland has a single client or group of clients to whom it has lent more than 25 percent of its own funds?
Now Nordea Finance Finland allocates guaranteed receivables to the debtors instead of the guarantors. As a result, it seems that the debts + guaranteed receivables (i.e., the exposures) exceeded that 25% limit for a certain customer group (e.g., a large listed group).
Of course, due to the guarantee, the risk is actually lower, because if the debtor faces difficulties, the money is recovered from the guarantor.
The finance company likely has leasing operations (e.g., paper mills, power plants, ships) in addition to credit cards, so I don’t consider this a big deal. It was a case of incorrect reporting, not an actual risk, and the operations of the Finnish finance company are likely a very small part of Nordea as a whole.
Interest rates look to be at a level where we should be getting some extra “berries” on top of the dividend treat. The actual dividend will be detached soon, and in a few weeks, it will pay for the family’s summer vacation. Nordea is truly a fantastic cornerstone stock for a portfolio. Always buy when it’s cheap and never sell. If only holding other stocks was this easy.
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Not to mention the post-Investor tools, which I don’t have experience with myself, but not many people here seem to be praising them.
