The ratings are driven by Nordea’s long track record of strong operating profitability with low levels of non-performing assets and credit losses. The ratings also reflect the Group’s geographic diversification, which partly cushions Nordea from localised macro downturns in the countries where it operates. At the same time, our forward-looking ratings acknowledge the challenges Nordea faces in such a low-interest rate environment, as its net interest margin remains under pressure while inexpensive funding and competition continue to erode its return on assets. However, the asset management business is delivering strong results – which Scope expects to continue to support revenue growth.

Scope notes that the reliance on wholesale funding, including in foreign currency, exposes the bank to sudden changes in the funding environment, which remains favourable at present.

Scope also notes Nordea’s ongoing examination of the options relating to its domicile, with the bank’s management indicating they may favour a country operating within the European Banking Union, which would bring Nordea’s lead bank under ECB supervision. Scope will monitor developments but currently sees no rating implications.

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