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Higher loan losses and costs hit Nordea

THE Nordic region's biggest financial group, Nordea Bank AB, yesterday posted a 9-percent drop in first-quarter profit, chiefly due to higher loan losses and rising staff costs.

The Stockholm-based banking group kept its outlook for 2009 unchanged, but warned of the uncertain development of loan losses, which in the quarter included provisions for the Baltic countries and the shipping sector.

Net profit in the quarter fell to 627 million euros (US$827 million), down from 687 million euros in the same three months last year, mainly on the back of higher loan losses due to the global financial meltdown.

Nordea's net interest income, its main source of revenue, increased by around 15 percent however, reaching 1.4 billion euros from 1.2 billion euros in the first quarter in 2008. It said that although deposits were slowing, this trend has been offset by lending margins and loan volumes.

Lending to the public rose 3 percent in the three-month period, and deposits around 1 percent.

Nordea was the last out of Sweden's four main banks to report its quarterly earnings, and despite its profit drop, the result pleased the market amid concerns of Swedish banks' exposure to the economic slump in the Baltic nations of Latvia, Lithuania and Estonia.

Sweden's SEB AB and Swedbank AB have particularly suffered from the credit crunch in the Baltic region.

Group Chief Executive Christian Clausen said he was satisfied with the results, but noted that "higher loan losses are inevitable when the economy is contracting at an unprecedented speed."


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