Translation: Original published in Finnish on 07/17/2026 at 08:23 am EEST

Nordea's Q2 went well, with both the credit portfolio and assets under management continuing to grow. The outlook is also good, which is why we slightly raised our earnings estimates for the next few years. We revise our target price to EUR 17.5 (was 16.5)  in line with our earnings estimates, but lower our recommendation to Reduce (was Accumulate) as the share price increase has eaten up the best of the expected returns.

Bottom of net interest income is, as expected, in the rearview mirror

Nordea reported better-than-expected Q2 earnings. As anticipated, net interest income turned to quarterly growth due to the increase in the credit portfolio. Fee and commission income also developed strongly, with assets under management increasing by almost 10%. However, the largest income beat compared to our estimates came from insurance operations and fair value changes. Operating expenses, on the other hand, grew in line with our expectations, as wage inflation and technology investments offset the impact of the decrease in personnel. Ultimately, due to higher-than-expected returns and more moderate loan losses than we anticipated, Nordea's result exceeded our estimate by approximately 5%. In connection with the earnings report, Nordea made a small positive revision to its 2026 earnings guidance and now expects its cost-to-income ratio to be 44–45% (was "around 45%").

Profitability outlook is strong

We have revised our fee and commission income estimates upwards following the strong growth in assets under management. We also slightly raised our credit portfolio growth estimate. Our loan loss estimates for the current year, in turn, decreased. Overall, our earnings forecasts for the next few years rose by 2–3%.

We expect Nordea's comparable earnings to return to growth in 2026, particularly driven by fee and commission income. Going forward, our estimates anticipate stable earnings growth (averaging ~4% annually) due to increasing incomes and good cost control. We believe that the bottom of net interest income has been seen on a quarterly basis, in addition to which we expect fee and commission income to continue growing. Growth in fee and commission income is primarily driven by asset management, which we expect will continue to grow faster than other banking activities. We expect loan losses to remain moderate and approximately at the normal level estimated by the company (0.10% of the credit portfolio annually).

Our earnings and profitability estimates are below Nordea's targets, which we find ambitious (EUR ~2 EPS and clealry over 15% return on equity by 2030). We expect Nordea's profitability to remain above 15% and gradually improve, which we consider an excellent level in the competitive banking sector. We estimate that shareholder distributions will remain generous, as the bank supplements its dividend distributions with regular share buyback programs (total shareholder distribution ~85% of the result).

The best returns are now behind us

Based on our forecasts of a 15–16% return on equity and a required return of 9.5%, we have approved a P/B ratio of 1.8–1.9x for Nordea, which, given the bank's current equity capital, justifies a share price of EUR 16–18. Our target price is closer to the upper end of the range, as the outlook for both loan demand and asset management is generally positive despite geopolitical uncertainty. However, in our view, the pricing of the share has turned neutral after the share price increase, and the expected return for the coming years is roughly at the level of the required return in our calculations. While the expected return is not bad, we believe waiting for a better entry point is warranted at this stage. Compared to its peer group, Nordea's valuation is not tight, considering its better profitability outlook, but in our view, the significantly increased valuation levels in the banking sector already warrant caution.