Sweden’s Nordea Bank Sees Profit of €40 Million From Russian Investments…..Russian Lending Rose 8.2%

Posted: December 9, 2014 in Econ 101, Sanctions on Russia Meaningless

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Nordea’s Russian Profits Rise as Ruble Slump Hits Firms

Nordea Bank AB (NDA), the Nordic region’s largest lender, is benefiting from European sanctions against Russia as a weaker ruble helps its profitability in the country.

“We’re probably more profitable there today than ever before because of the lower ruble as our income is in dollars and euros,” Casper von Koskull, who heads Nordea’s wholesale banking, said in an interview in Stockholm on Dec. 5.

The ruble has plunged amid a 30 percent-plus drop in crude prices since June and the imposition of European and U.S. sanctions, which have hurt growth. Other European companies with assets in Russia, including utilities EON SE and Fortum Oyj, may take a hit from the ruble’s slump as a weaker currency pares the converted value of their Russian sales, according to Bloomberg Intelligence analyst Elchin Mammadov.

Nordea’s total lending in Russia rose 8.2 percent over the third quarter to 6.6 billion euros ($8.1 billion), mainly helped by appreciation of the U.S. dollar, which makes up about 70 percent of the lending portfolio. It reported an operating profit of 40 million euros in Russia in the third quarter.

“It’s about maintaining that and we have a robust credit portfolio,” von Koskull said. The bank is planning to retain its portfolio in Russia rather than growing it, he said, adding that the developments in Russia have so far had limited impact on the Russian operations, which focus on Nordic companies.

In its third-quarter report published on Oct. 22, Nordea said that “in Russia, customer activity was at a satisfactory level, despite a slowdown in the economy and low capital investments, caused by the geopolitical uncertainty and ruble volatility.” Nordea “closely monitors the development and is well prepared in case of further escalation.”

The sanctions and the Russian slowdown could still have indirect effects on other markets where Nordea operates, such as Finland, von Koskull said. If the situation escalates it could also start hurting the big European economies, such as Germany, he said.

“I think we’ll see a prolonged downturn in Russia even in a good scenario,” he said. The situation in Russia is “a geopolitical risk for European growth and confidence.”

SOURCE: http://www.bloomberg.com/news/2014-12-08/nordea-s-russian-profits-advance-as-ruble-slump-hits-other-firms.html

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