By LOUISE NORDSTROM, Associated Press
STOCKHOLM (AP) — Nordea AB, the largest bank in the Nordic region in terms of market capitalization, on Wednesday said profits soared 17 percent in the second quarter as customers continued to flock to the banking group for loans and deposits despite the market volatility caused by the euro crisis.
The report that net profit rose to €820 million ($1 billion) from €698 million in the same three months a year ago sent the bank's share up almost 3 percent to 62.35 kronor ($8.89).
Net interest income, the bank's main source of income, shot up to €1.46 billion from €1.33 billion. As volumes for both loans and deposits rose in the quarter, margins related to lending increased, while those related to deposits shrank on the back of lower interest rates and stiff competition when it comes to savings deposits customers.
CEO Christian Clausen said the positive development is largely due to the company's "early action" in response to the financial market turmoil that has affected large parts of Europe. Those actions included the launch of a cost savings plan that led to staff reductions and other measures.
"Nordea has maintained a strong rating and thus been able to continue to support customers in developing their family finances or corporate businesses," he said. "We maintained good business momentum and increased return on equity despite continued pressure on interest rates, financial turmoil and the slowdown in European economic activity."
Still, net loan losses grew somewhat in the period, to €217 million from €118 million.
Clausen said the group is continuing to pay particular attention to developments in Denmark and the shipping industry as provisions for future loan losses in those areas "remained at elevated levels." The shipping industry has been hurt by a downturn in global economic growth. Clausen said Nordea maintains "close cooperation with customers facing potential problems."
On Tuesday, trading in the banking group's shares was temporarily suspended on the NASDAQ OMX Nordic stock exchanges after it accidentally released its second-quarter report for its Norwegian operations a day ahead of schedule. Trading in the shares resumed shortly afterward.
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