Nordea Raises Prospect of Quitting Sweden in Row with Government

Stockholm-based Nordea Bank AB (NDA.SK) fired a shot across the bows of the Swedish government Thursday, saying that it might move to Denmark or Finland in response to Swedish proposals to increase the fee banks pay to help cover the cost of supporting financial institutions that get into trouble.

The lender's warning came as it posted a better-than-expected 8% rise in first-quarter net profit, helped by an improvement in interest income.

"In recent years, the government policy in Sweden has become increasingly unpredictable and deviates significantly from the rest of EU, where most of our competitors are domiciled," Chief Executive Casper von Koskull said.

"The proposal [to increase the fee] will significantly increase the costs for Swedish domiciled banks and their customers, not only in Sweden but also in the other Nordic countries," Mr. Von Koskull said.

"Given that the regulatory situation in Sweden does not offer a level playing field or predictable environment, we will also look at opportunities to move to Denmark or Finland," he said.

The Swedish government said last month that the ample profitability of Swedish banks justified them paying a higher "resolution fee" to ensure the country's growing financial-services industry remains stable in times of crisis.

Opponents to the proposal say that the contributions are far above E.U. requirements and note that the fees will go straight into the state budget, rather than a separate fund.

Net profit at Nordea climbed to 844 million euros ($920.3 million) in the three months ended Mar. 31, from EUR782 million in the same period a year earlier, beating expectations of EUR821 million, according to a FactSet poll.

Net interest income inched higher to EUR1.2 billion from EUR1.17 billion a year ago.

Credit quality remained solid and under strict control, it said, though loan losses rose to EUR113 million from EUR111 million in the same quarter a year earlier.

The bank set aside more money for potential bad debts in the energy, energy-services and shipping sectors in addition to its business in Russia.

"We expect losses in oil and offshore exposures to remain elevated in the coming quarters, and a largely unchanged credit quality at group level," the bank said.

The common equity Tier 1 ratio--a key measure of financial strength--stood at 18.8% at the end of the quarter, up from 16.7% a year ago.

-Write to Dominic Chopping at; Twitter: @domchopping @WSJNordics

(END) Dow Jones Newswires

April 27, 2017 03:45 ET (07:45 GMT)