Analyst Note| Niklas Kammer, CFA |
No-moat Nordea reported second-quarter operating profits of EUR 1,361 million, up 2% compared with the same period a year ago. Net interest income, up 6%, was supported by strong volume growth of 4% slightly offset by weaker lending margins. The rapid rise in reference rates has driven up funding costs faster than lending rates could adjust, squeezing lending margins. Deposit margins on the other hand have started to benefit from higher policy rates in Norway and Sweden. All European banks are exposed to similar margin mechanics at this point in time. We anticipate Nordea to benefit from the currently higher interest rate outlook after lending margins start to rebalance and the full benefit on the deposit side trickles through.