NDA-DK.CO — mttssn research

HOLD

Conviction: MEDIUM

The largest Nordic bank, earning a strong ~15% ROE with sector-leading capital returns — fairly valued at 1.77× book versus a Gordon-justified ~1.82×. Quality and yield at a fair price. HOLD with a slight positive tilt.

Return on Equity

15.6%

Cost of equity ~9.5%

Price / Book

1.82×

1.77× book; fair

Fair P/B (Gordon)

1.94×

(ROE−g)/(COE−g); g 3%

Price / Target

DKK 120 → DKK 125

+4% base; HOLD

Price / Earnings

11.6×

≈11.9× earnings

P / TBV

2.11×

Price / tangible book

Economic Profit

+DKK 17,178M

+€16.6B; 15% ROE

Equity (book)

DKK 224.8B

Universal-bank equity

Thesis

Nordea is the largest Nordic universal bank, with leading positions across Sweden, Finland, Denmark and Norway, a diversified retail/corporate/wealth model and a ~15% return on equity. Post-restructuring it has become a highly efficient, capital-generative franchise with a large buyback-plus-dividend programme.

On the ROE/P-B frame the equity is fairly valued — 1.77× book against a Gordon-justified ~1.82× (ROE 15%, COE ~9.5%, g 3%). The combination of a strong ROE, sector-leading capital returns and a fair multiple makes it a quality income holding.

Valuation · residual income (equity frame) & scenarios

Gordon fair P/B = (15%−3%)/(9.5%−3%) ≈ 1.82×, slightly above the current 1.77× — fairly valued with a marginal positive skew, before a high dividend-plus-buyback yield.

Base DKK 125 (+2%) on stable ROE plus capital returns; bull DKK 145 (NII/fee resilience and continued buybacks); bear DKK 100 (a Nordic credit/rate downturn compresses NII and lifts loan losses).

Market-implied ROE

14.8%

sustainable ROE the price already demands — vs 15.6% observed

Current → Fair P/B

1.82× → 1.95×

at a sustained 15.6% ROE, K_e 9.5%, g 3%

Excess-return premium

DKK 62 / sh

value above DKK 65.89 book from the +6.1pp ROE−K_e spread

The operating reverse-DCF (NOPAT / invested capital / WACC) does not apply to a balance-sheet business — leverage is the raw material and "net debt" is not meaningful. The equity is valued on residual income: book equity plus the present value of returns above the cost of equity, discounted at K_e; the single-stage lens is the Gordon fair price-to-book, (ROE−g)/(K_e−g). The market prices in a sustainable ROE of 14.8% vs 15.6% currently earned; at a sustained 15.6% ROE the warranted P/B is 1.95× (DKK 128/sh, +7%).

Scenario	24m target	Impl. ROE	Upside	Prob.	Driver
Bull	DKK 145	17%	+21%	30%	NII/fee resilience + continued buybacks
Base	DKK 125	15%	+4%	45%	Fair: trades near Gordon P/B + capital returns
Bear	DKK 100	13%	-17%	25%	Nordic credit/rate downturn
Prob-weighted	DKK 125	—	+4%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at K_e × ROE

K_e \ ROE	10%	14%	18%	22%	26%	30%	34%
8.00%	92	145	198	250	303	356	409
8.75%	80	126	172	218	264	309	355
9.50% (base)	71	112	152	193	233	274	314
10.25%	64	100	136	173	209	245	282
11.00%	58	91	124	156	189	222	255

Green = fair value above the current price of DKK 120.05. For a financial the surface is dominated by cost of equity and sustainable ROE — not unit growth.

Method & data. ROE 15.6% and book equity are observed (net income / total equity). Cost of equity 9.5% and terminal g 3% are assumptions, shown explicitly and overridable. The underwriting bridge (combined ratio → float → ROE) is [DATA SAKNAS] — it requires a financial deep-dive to extract the combined ratio and investment yield, and is omitted here rather than estimated.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Nordic scale leadership

The largest Nordic universal bank with diversified, leading positions.

2. ~15% ROE

A strong, efficient return on equity post-restructuring.

3. Capital returns

Sector-leading dividend-plus-buyback returns — the core total-return engine.

4. Diversification

Spread across four Nordic economies and business lines diversifies risk.

5. Efficiency

A low cost/income ratio underpins through-cycle profitability.

Key risks

Nordic credit cycleA Nordic (notably Swedish property) downturn would lift loan losses.
Rate normalisationFalling rates compress net interest income from current highs.
Swedish CRE exposureCommercial-real-estate exposure is a watched credit risk.
Regulation/capitalCapital requirements and regulation affect returnable capital.
Fee/market sensitivityWealth and markets revenue tracks asset levels.

Conclusion

Nordea is the largest, most efficient Nordic bank — a strong ROE and sector-leading capital returns at a fair multiple. HOLD with a slight positive tilt, medium conviction; base target DKK 125 (+2%).

Capital returns underpin total return; a Nordic credit/rate downturn is the principal risk.