Danske still writing off bad loans here despite upturn at home
Denmark’s biggest listed bank has had to cut staff and close branches to recover from the financial crisis, when it was hit hard by its exposure to Ireland as well as the sluggish Danish economy and a collapse in the country’s housing market.
Danske said it is aiming to pay out 40pc of net profit in dividends next year after its earnings almost doubled in the third quarter due to flat costs, lower bad loan charges and a rise in fee income.
Danske, the last big Nordic bank to report third-quarter results, made pretax profit of DKK 4.5bn.
It now expects to earn net profit of between DKK 11.5bn and 13.5bn this year against a previous outlook of between 10bn and 13bn.
Last November, Danske Bank announced that it was exiting retail banking and most business banking in the Republic of Ireland following years of losses.
It will retain a small specialist bank based in Dublin, servicing large corporate clients.
The bank stopped paying dividends from 2008 to 2010 because the Danish government provided a guarantee for all deposits and other unsecured obligations of banks.
In return for this, the bank was not allowed to pay dividends.
The bank’s results have been rebounding and in July the bank raised its 2014 net profit forecast and raised it again yesterday.
“We have become much more efficient and maintained a low level of impairments,” chief executive Thomas Borgen told financial newswire Reuters.
Loan impairment charges amounted to DKK 668m in the quarter, in line with expectations of DKK 671m and well below the DKK 959m in the same quarter last year.
“It’s actually a positive surprise after the AQR (asset quality review) announcement on Sunday,” Nordea analyst Christian Hede said, referring to the results of a health check on Europe’s banks.
Danske said on Sunday it would book an additional DKK 700m in loan impairments in the fourth quarter after a stress test by the Danish Financial Services Authority conducted alongside the European-wide checks.
The four Danish banks all passed both stress tests.
Danske had a common equity tier 1 ratio – which measures financial strength – of 11.7pc well above the 5.5pc failure level.
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