Nordea Bank reports a 28% drop in profits for 1Q16

Nordea Bank - 1Q16 net profit of €782m, down 28% YoY, as volatile financial markets and lower interest rates pressured its revenues.

STOCKHOLM--Nordea Bank AB (NDA.SK) Wednesday posted a 28% drop in first-quarter net profit as volatility on financial markets and lower interest rates pressured revenues.

Net profit at the Stockholm-based bank fell to 782 million euros ($883.7 million) in the three months ending Mar. 31, from EUR1.08 billion in the same period a year earlier, but still beat expectations of EUR760 million, according to an analyst poll by FactSet.

"Customer activity on financial markets held up well in the quarter," Chief Executive Casper von Koskull said. "However, spreads increased due to the turmoil and, in combination with low liquidity, the net result from items at fair value decreased to EUR332 million from the high level of EUR627 million in the first quarter of 2015."

The bank said that net interest income has been under severe pressure due to lower interest rates and low volume growth. Net interest income fell to EUR1.17 billion from EUR1.25 billion a year ago. Lending margins were stable, and going forward, it expects to see improving lending margins, it added.

Swedish banks have seen their income from deposits dwindle due to negative interest rates, which have been imposed by the central bank to bring inflation closer to its 2% target. The negative interest rates force banks to pay to park their customers' deposits overnight at the central bank.

The common equity Tier 1 ratio--a key measure of financial strength--stood at 16.7% at the end of the quarter, up from 15.6% a year ago.

Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @domchopping @WSJNordics