Nordic Banks: Net Interest Income Offsets Higher Cost of Risk in H1 2023; Signs of Asset Quality Deterioration

DBRS Morningstar has released a commentary discussing the H1 2023 results of the six large Nordic banks (Svenska Handelsbanken, Swedbank, SEB, Nordea, Danske Bank and Nordea).

Key points:

• The six banks reported strong results in first half of 2023 mainly driven by significant net interest income growth despite an overall increase in operating expenses and significantly higher loan loss provisions year-over-year.

• Overall asset quality metrics for all Nordic Banks remained strong at end-H1 2023 and compare favourably with most of their European peers. However, there are early signs of asset quality deterioration, especially in the Commercial Real Estate sector for Swedish banks.

• The capital positions for all six banks remained strong in Q2 2023, with all Banks reporting significant capital buffers well above their minimum requirements.

“We believe the Nordic Banks are well positioned to cope with the still uncertain and challenging economic environment, especially in Sweden and its Real Estate Sector, due to their strong capital buffers over minimum regulatory requirements and their overall robust earning generation capacity”, notes Maria Parra, Vice President, Global FIG at DBRS Morningstar. “Nevertheless, DBRS Morningstar will continue to closely monitor the developments in the Swedish Commercial Real Estate sector and how the Banks respond to these challenges.”