Danske Bank A/S (DANSKE), Denmark’s largest lender, fell to the lowest price in seven weeks in Copenhagen trading after its biggest rival Nordea Bank AB (NDA) reported a decline in Danish net interest income.
Danske fell as much as 1.8 percent to 101.80 kroner, the lowest since Aug. 31. The stock retreated 1.6 percent to 102 kroner at 12:13 a.m. in the Danish capital. Investors had traded 368,773 shares; the average six-month daily volume is 1,014,005.
The Danish central bank in July cut below zero the rate on seven-day certificates of deposits to weaken the krone, putting pressure on the banking industry’s interest margins. Nordea, based in Stockholm, reported today net income that missed analyst estimates and said Danish net interest income declined 3 percent in the third quarter from the previous three-month period. Copenhagen-based Danske has more than half of its lending exposure in Denmark, which is teetering on the brink of its second recession in less than a year.
“There’s a negative read-across from Nordea’s interest income that rubs off on Danske,” Mads Thinggaard, an analyst with Nykredit Markets in Copenhagen, said by phone. “We could see this weakness repeated when Danske reports earnings next week.”
Danske is scheduled to publish earnings on Oct. 30 when the bank also will present results of a strategic review. Danske will report third-quarter net interest income of 6.22 billion kroner ($1 billion) and loan losses of 2.96 billion kroner, according to the average estimate in a Bloomberg survey of eight analysts conducted before today. That compares with a net interest income of 6.02 billion kroner and loan losses of 2.8 billion kroner in the third quarter of 2011.
Nordea reported today a 93 percent jump in third-quarter loans losses for its Danish unit.
“Nordea’s loan losses shouldn’t be seen as a bad omen for Danske’s third-quarter report,” Bjoern Schwarz, an analyst with Aabenraa, Denmark-based Sydbank A/S, said by phone. “A big portion of Nordea’s losses derives from the stricter writedowns rules that the Danish Financial Supervisory Authority has introduced and Danske already made those writedowns in the second quarter.”
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