(Bloomberg) --
Higher prices are here to stay and society needs to start preparing for an era of rate hikes, according to the chief executive officer of the Nordic region's biggest bank.
“We will see elevated inflation for a while,” Nordea Bank Abp's Frank Vang-Jensen said in an interview with Dani Burger and Manus Cranny on Bloomberg TV on Thursday. “We also believe it will probably come down somewhat in the following years, but stay on a higher level than pre-the-pandemic.”
Nordea's home markets include Norway, where the central bank has already embarked on a rate-raising path, boosting its benchmark rate in September and flagging a further increase in March. Nordea is assuming that rates will begin to rise in its other core markets -- Sweden, Denmark and euro member Finland -- “toward the end of its strategy period” that runs until 2025, Chief Financial Officer Ian Smith told analysts on a conference call.
The bank flagged no specific action to respond to inflation, touting the quality of its credit portfolio. Nordea is also keeping intact a so-called management-judgment buffer of 610 million euros ($690 million) in case of losses. Dutch peer ING Groep NV on Thursday set aside more than expected to cover the cost of loans going sour as inflation emerges as a new risk.
Read More: ING Cites Inflation Fears After Setting Aside More for Bad Loans
“Inflation is clearly ticking up also in the eurozone and we do see it in the Nordics as well,” Vang-Jensen said. “We should, as society, prepare for higher interest rates in Europe, that's my assessment.”
The bank on Thursday unveiled fresh financial targets that will see the Nordic region's biggest lender seek to boost profitability and efficiency, after reporting fourth-quarter earnings that beat estimates.
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