Nordic Banks: Net Interest Income Likely Peaked; Asset Quality Holding Up

DBRS Morningstar has released a commentary discussing the Q3 2023 results of the six large Nordic banks (Svenska Handelsbanken, Swedbank, SEB, Nordea, Danske Bank and Nordea). Summary highlights from the commentary include:

• All banks reported strong results in Q3 2023 mainly driven by the positive impact on net interest income of the two additional interest rate hikes carried out by the relevant central banks in this quarter and a well-contained cost structure despite high inflation.
• The banks’ asset quality continues to hold up as the Nordic countries benefit from solid fiscal frameworks and high levels of employment despite the ongoing uncertainty regarding global economic growth.

“We believe NII might have already reached its peak as future interest rate rises are less likely, lending volumes remain flat or even decreasing and overall deposit volumes are decreasing and betas increasing. Yet, we note that some positive impact could still materialize in Q4 2023” notes Maria Parra, Vice President, Global FIG at DBRS Morningstar. “Despite the fact we have seen some slowdown in asset quality deterioration overall, we continue to closely follow segments like the real estate market developments due to the increased uncertainty in the economic environment and weaker macroeconomic projections for end-2023 and 2024”