Translation: Original published in Finnish on 10/16/2025 at 8:50 pm EET.

Nordea's Q3 report was slightly better than market expectations, and changes to forecasts remained marginal. The earnings outlook for the coming years is stable and the dividend outlook is abundant. The share's expected return is still sufficient, even though the bar for earnings development is higher than before due to the strong share price increase. We reiterate our EUR 15.0 target price and Accumulate recommendation.

Strong Q3 report

Nordea's operational figures in Q3 were slightly better than market expectations across the board. Credit demand picked up slightly from the previous quarter, and this partially offset the impact of falling interest rates on margins. Regarding fee and commission income, wealth management sales performed well again, and with strong market development, assets under management rose to an all-time high.

Costs were slightly lower than market expectations and the growth rate slowed significantly from the H1 level, as previously communicated. The company also continued to release discretionary loan loss provisions as expected, and the quality of the loan portfolio remained strong. Overall, Nordea's Q3 operating profit was 1,597 MEUR, exceeding our and consensus estimates by some 6%. Earnings per share were EUR 0.36 and return on equity remained strong at 15.8%. The company also announced, as expected, a new 250 MEUR share buyback program.

Only marginal revisions to earnings forecasts

We have made only marginal forecast changes following the Q3 report. We expect Nordea's EBIT to decline moderately in the coming years in line with interest rates. In our forecasts, the bank's return on equity will decrease to roughly 15.5% this year, which is in line with the bank's guidance. From next year onwards, Nordea's return on equity will stabilize in our forecasts at just over 14%, which we consider a sustainable level for Nordea even in an environment of lower market interest rates. We note that the profitability level according to our forecasts is still excellent for the bank and clearly exceeds its cost of capital. As a result of significant share buybacks, EPS will remain flat in 2026 and begin to grow cautiously in 2027. Profit distribution will otherwise remain abundant, and in addition to a growing ordinary dividend, significant share buybacks are expected in the coming years. Nordea is organizing a Capital Markets Day on November 5, and based on the company's comments, cost efficiency in particular will be one of the cornerstones of the strategy update.

Profitability outlook justifies high valuation

With a slightly brighter economic outlook and stabilizing interest rate forecasts, we believe it is now more reasonable to rely on profitability assumptions that clearly exceed historical levels. In our previous update, we raised our long-term forecasts for Nordea, and with these, our estimate of Nordea's fair value has increased.

Using our valuation methods, we arrive at a fair value for Nordea of EUR 14-16.3 (acceptable P/B 1.5-1.8x). In this context, the current valuation is still not too demanding, although it is worth noting that the rise in the share price has raised the bar for earnings growth, increasing valuation risk. Consequently, the valuation can no longer be justified purely on the basis of profit distribution (~9%), but earnings growth must also gradually support the expected return. However, the economic outlook in key operating countries is decent, and Nordea's own figures support the general assessment of a gradual economic recovery. In addition to volume development, a key forecast risk relates to interest rate developments, which are difficult to predict, as a decline in interest rates would weaken the bank's net interest income. We also consider it possible that earnings growth forecasts will gain more credibility from the CMD in a couple of weeks.