Nordea pauses buybacks pending ECB model review, sending shares down

Oct 15 (Reuters) - Nordea Bank said on Thursday it was pausing share buybacks while the European Central Bank reviews its capital models, as those decisions could affect the Finnish lender's risk exposure metrics.

Analysts had expected the Nordic region's biggest bank to launch a new buyback programme before the end of this year.

Nordea's shares fell 5% in early Helsinki trading after it also reported a lower-than-expected operating profit for the third quarter.

"Key negative of the result is that share buybacks are now on pause until (risk-weighted assets) impact from ECB model review is known," Jefferies analysts said in a note.

Nordea does not expect to make decisions before 2027, as it awaits results of the ECB discussions, it said in an earnings presentation.

The bank's operating profit fell 4% to €1.54 billion ($1.73 billion) in the third quarter, while analysts had expected €1.63 billion on average, LSEG data showed. Net interest income was broadly in line with expectations.

RATE HIKES MAY WEIGH ON CONSUMER MOOD

As European banks kick off earnings reporting, investors will be looking for clarity on how quickly interest rate hikes could start feeding into their net interest income and profits.

But Nordea said higher rates may also affect consumers' appetite for loans.

"We are mindful of the recent sharp rises in forward interest rates and the potential for higher rates to affect consumer confidence in the months to come," Nordea CEO Frank Vang-Jensen said in a statement.

Third-quarter lending volumes in Nordea's personal banking unit grew 1% in constant currencies, with mortgages rising 2% mainly on strength in Sweden and Norway. Corporate lending increased 8%.

The ECB raised interest rates for the second time this year in September, a move that should support Nordea in its euro zone markets. Norway's central bank has also increased rates and said it may hike again to contain inflation, while Sweden's Riksbank has so far kept rates unchanged.

Sweden is Nordea's biggest individual market, where key rivals SEB, Handelsbanken and Swedbank are scheduled to report quarterly results later in October.

($1 = 0.8917 euros)

(Reporting by Elviira Luoma in Gdansk, editing by Milla Nissi-Prussak)