Finnish bank Nordea reported second-quarter operating earnings just below expectations on Monday and said higher income partly offset increased expenses and net loan losses.

Operating profit at the Nordic region's biggest lender eased 2% from a year earlier to 1.68 billion euros ($1.83 million), against a mean forecast of 1.71 billion euros in an LSEG poll of analysts.

Shares in the company were down 2.6% at 10.68 euros by 0703 GMT.

Net interest income rose 4% year on year to 1.9 billion euros, driven by improved lending and deposit margins, higher deposit volumes and rising treasury income, a little short of a poll forecast of 1.92 billion euros.

Net fee and commission rose 6% in the quarter owing to increased activity in savings and investments and continued strength in debt capital markets.

"Inflation and continued significant investments in technology, data and risk-management capabilities resulted in a cost increase of 6%, in line with Nordea's plan," the company said in a statement.

Net loan losses and related financial adjustments for the quarter were 68 million euros, driven by new provisions for small corporate customers, despite good credit quality overall and an improved macroeconomic outlook.

Return on equity (RoE) was 17.9% and the bank reiterated guidance for full-year RoE of more than 15% despite falling interest rates.

The European Central Bank (ECB) has signalled that further rate cuts can be expected this year if price pressures ease, but officials have also warned that the pace of any cuts could be slow in case of inflation surprises.

Nordea, which operates mostly in the Nordic and Baltic regions, said it has initiated discussions with the ECB to resume share buyback programmes from early 2025. ($1 = 0.9182 euros)

(Reporting by Elviira Luoma and Jesus Calero Editing by Anna Ringstrom, Mrigank Dhaniwala and David Goodman)