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By Jesus Calero
(Reuters) -Finnish lender Nordea Bank reported fourth-quarter operating earnings slightly above estimates on Thursday, saying that while lower interest rates did help the housing market, the Nordic mortgage and corporate lending markets remained "slow".
Having previously benefited from high rates across the region, Nordea now faces a shifting landscape as central banks pivot to easing, with lower lending income and pressure on profitability from reduced rates on the horizon.
In addition, U.S. President Donald Trump's trade policies have heightened the uncertainty for European banks, as U.S. deregulation could squeeze profits and hinder their growth ambitions in 2025.
"Nordic mortgage and corporate lending markets remained slow, though demand for new loan promises again increased, indicating that housing markets are improving," Nordea said in a statement.
The Nordic region's biggest lender said it expects its return on equity to stay above 15% this year.
Brokerage Inderes said that despite rising deposit costs, Nordea is well-positioned to deliver on this target.
J.P. Morgan, though, took a more cautious stance, noting the challenges in sustaining earnings momentum amid competitive pressures and evolving market conditions.
Nordea's operating profit rose 5% year-on-year to 1.47 billion euros ($1.53 billion) in the quarter ended Dec. 31, beating analysts' average estimate of 1.45 billion euros, according to LSEG data.
Its net interest income fell 5% to 1.85 billion euros due to the European Central Bank's rate cuts but beat analysts' estimates of 1.84 billion euros.
Nordea CEO Frank Vang-Jensen said that despite financial pressures, its corporate and retail customers held fort, noting strong deposit activity and continued low credit losses.
Sweden, Nordea's biggest market, is poised to recover from a sluggish year, helped by lower rates and stronger household purchasing power.
The bank proposed raising its dividend to 0.94 euros per share for 2024 from 0.92 euros the previous year.
Last week, peer Swedbank's also beat fourth-quarter expectations and raised its dividend, although SEB missed forecasts and disappointed by not hiking its dividend. ($1 = 0.9599 euros)
(Reporting by Jesus Calero; Editing by Rashmi Aich and Savio D'Souza)
