Nordea Upgrades Dividend Amid Profit Rise

STOCKHOLM--Nordea Bank AB (NDA.SK), the Nordic region's biggest bank, Wednesday reported a 13% rise in fourth-quarter net profit, driven by higher fee and commission income and lower operating expenses, and said it aimed to increase its pay-out ratio in 2015 while cutting costs further.

Net profit at the Stockholm-based bank rose to EUR877 million in the three months to Dec. 31, up from EUR773 million in the year-earlier period and against expectations for EUR872.2 million according to analyst estimates complied by SIX.

Faced with some of the world's toughest capital requirements and a downward trend in interest rates, Nordea--like its Nordic peers--has focused on cutting costs and boosting operational efficiency to keep up profit growth.

"For 2015 we are prepared for another year with low growth and low interest rates, and continued changed customer behaviour," Chief Executive Christian Clausen said in a statement. "Thus, we will deliver on our cost and capital efficiency plans to secure our strong financial foundation."

The bank plans to have reduced costs by 5% in 2015 compared to 2013. Some analysts expected it to expand its cost-cutting program because of continued sluggish economic growth.

The board proposed a dividend of EUR0.62 per share compared to a dividend of EUR0.42 per share last year and equivalent to a pay-out ratio of 70% of net profit.

Nordea has exposure to a number of struggling industries and geographies including the recession-hit Finnish economy, the sluggish oil sector in Norway and the turmoil in Russia, both through its own operations and through loans to Nordic clients doing business with Russia.

Fourth-quarter net interest income dipped to EUR1.36 billion compared to EUR1.39 billion a year ago. Net loan losses shrunk to EUR129 million from EUR180 million in the same period, but increased in Russia to EUR12 million from very low levels.

Next of the Nordic banks to report fourth quarter earnings is Skandinaviska Enskilda Banken AB (SEB-A.SK), which will disclose its results on Thursday.

-Write to Anna Molin at [e-mail]; Twitter: @AnnaWSJ

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