The big American bank Goldman Sachs delivered impressive results on Friday, much better than the already very positive forecasts. Goldman Sachs was just the latest in a series of US banking and financial institutions that performed very well this week. Giants such as Citigroup, Morgan Stanley, Wells Fargo, US Bancorp, Bank of America and JPMorgan Chase have submitted quarterly reports with gold slices.

“Things have gone well this year, and there has been complete failure across the board, with low losses and good financial markets,” said Robert Ness, chief investment officer and director of Nordea Wealth Management.

Borea Asset Management’s portfolio manager Magnus at Sundal agrees.

– Banks are doing well when the economy is doing well otherwise, and there is good momentum in the economy now. Sundal says loan losses are minimal and the investment banking business makes a lot of money from the high volume of transactions.

The banks’ quarterly reports this week ushered in the so-called earnings season in the US, and the good results were a big contributor to Wall Street’s weekend promise.

Waiting for a record quarter

Next week Norwegian banks will start submitting their quarterly reports for the third quarter. Ness believes in exhilarating reading and leaf notation.

It’s time for the best quarter ever for Norwegian banks, says Ness.

Among other things, the Nordea Norge Verde fund is managed, which at the end of August held shares in several Norwegian banks listed on the Oslo Stock Exchange, including DNB. Nordea, where Nice operates, is included in Sweden, Finland and Denmark.

Næss says the improvements in Norwegian bank profits are not significant, with profit improvement expected of around 2% from the second to the third quarter. He points out that there has been progress on all fronts, with low loan losses, good interest margins, healthy financial markets and good velocity in the many collateral liabilities of banks, such as insurance and lending. ‘immovable.

He says some of the bank loan losses that were taken into account last year have been written off this year.

– Everything is going in the right direction, with good conditions for the banks. There are no nasty surprises, says Ness.

Sundal de Poria basically agrees, but thinks the third quarter might be a bit weaker than the second. Unlike the big US banks, most Norwegian banks do not have a profitable investment banking business. The exceptions are the Markets branches of DNB and Sparebank 1 SMN, which are making good profits, and insurance and real estate are also good business for banks.

– Things are going well in the Norwegian economy, as we saw last year. For the third quarter, it will be the same for the banks, but the margins were still under pressure towards rate hikes. In addition, it will be interesting to monitor the contribution of non-life insurance, as well as the possible repercussions of loan losses, says Sundal.

– The numbers will be good. Maybe a little weaker than in the second quarter, but in the future I think they will be even better. Sundal says the keywords will improve interest margins and capital structure.

Norway’s largest bank, DNB, will present its quarterly figures on Thursday next week. The bank is expected to report pre-tax profit of NOK 7.5 billion in the third quarter, according to estimates compiled by Infront for TDN Direkt. This is a significant improvement over the third quarter of last year, when DNB made a profit of NOK 6.9 billion.

At the same time, analysts expect DNB’s loss provisions to drop significantly to NOK 256 million from NOK 776 million in the third quarter of last year.

Hard times ahead

But Ness believes bank managers and bank shareholders shouldn’t believe that growth will continue at the same pace, even if it looks good overall. He believes bank profits peaked in the third quarter and are now leveling off in the fourth quarter and next year.

Since this summer, the benchmark interest rate, Nippur, which is the rate on deposits with banks, has increased significantly from 0.2% to 0.7%. At the same time, rates on loans to customers, including mortgage customers, generally increased by 0.25 percentage points, with a delay of two months.

So bank profits will not be good in the fourth quarter and next year, Ness says.

He says banks should raise interest rates if they want to get back to the same interest margin as in the first half of the year. At the same time, he points out, higher interest rates will also make it attractive to save in the bank again, after a long period of near zero interest rates.

Sundal believes banks will recoup much of the interest margin by raising lending rates in line with Norges Bank, now 0.25%, while deposit rates will not be raised accordingly, maybe only 0.1%.

Næss and Sundal also point out that higher interest rates give banks a higher return on the relatively large proportion of capital that banks must have. Sundal believes that the return on equity of banks will rise from 9.1% in 2020, to between 10 and 11% this year, and for some like Sparebank 1 Nord-Norge, Sparebank 1 SMN and Sparebanken Vest up to 12%.(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We want you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or used in any way with written permission or as permitted by law. For additional conditions look here.