Danske Bank A/S (DANSKE) fired Eivind Kolding as chief executive officer less than two years after he started, as the lender said it wants to put a more experienced banker at its helm.
Kolding, 53, who became CEO of Denmark’s biggest bank in February last year, will be replaced by Thomas F. Borgen, who has worked at the bank since 1997 and is a member of its executive board, responsible for corporate and institutional banking, Copenhagen-based Danske said.
“The board of directors has assessed that, notwithstanding Eivind Kolding’s professional and personal qualities, it is in this phase necessary to have a CEO with stronger qualifications within banking,” Chairman Ole Andersen said in the statement.
Since being dragged through housing bubbles in Ireland and Denmark, Danske has met rising capital requirements and record-low interest rates with cost cuts. Under Kolding, who led A.P. Moeller-Maersk A/S’s container shipping unit before becoming CEO at Danske, the bank introduced a pricing model to reward customers with the most business there. The plan, and an advertising campaign to promote it, was slammed by local media and Danske in June fired its head of communications, Eva Hald.
A February survey showed Danske dropped one level to third place in a Prospera customer satisfaction ranking on Danish corporate banking, published by Borsen. The bank was beaten by Swedish lenders SEB AB and Nordea Bank AB.
“Danske has a difficult task in the coming years in catching up with the Swedish banks, so it’s important that they have the right team,” Christian Hede, an analyst at Jyske Bank A/S, said by phone.
Since Kolding took the helm at Danske 19 months ago, shares in the bank have returned 26 percent, compared with 38 percent for Nordea, Scandinavia’s biggest bank, and 56 percent at SEB. The figures include reinvested dividends, which Danske last paid in 2007.
Kolding was vice chairman of Danske’s board of directors from 2005 until 2011, the year he became chairman.
“It’s not my impression that Eivind Kolding has done a bad job,” Hede said. “He’s had a very specific task: developing and implementing a new way of going about business. I’m not going to change my estimates based on this.”
Andersen said Borgen will help the bank improve its customer focus as the lender seeks to improve its image at home.
Borgen, 49, “is an experienced and customer-oriented banker, who knows how to run a modern bank,” Andersen said. He has “a strong focus on goal-oriented execution in close collaboration with the board of directors, the executive management and the employees.”
Borgen, who was CEO of Danske’s Norwegian unit, Fokus Bank ASA, from 2001 until 2009, was “quite successful” in that role, Hede said. “He doesn’t have anything to do with the bad loans in Ireland or Denmark, so to that extent, he’s clean.”
Danske shares rose 2.6 percent as of 2:38 p.m. in Copenhagen to 119.40 kroner. The stock has gained 25 percent this year, beating a 15 percent increase in the 44-member Bloomberg index of European financial companies.
The change of CEO isn’t a signal that Danske wants to alter its strategy, which will continue to focus on improving its credit rating and profit level, Andersen said by phone. Danske is rated Baa1 at Moody’s Investors Service, A- at Standard & Poor’s and A at Fitch Ratings.
The bank, together with five others, was identified by a government committee in March as systemically important to Denmark’s economy, raising its capital requirements. The Financial Supervisory Authority said in June Danske will need to add about $18 billion to its risk-weighted assets, further adding to its capital burden. At the same time, Danske’s too-big-to-fail designation didn’t bring the assurances of state backing the bank had sought.
“We need to be focused on raising our credit rating,” Andersen said by phone. “It’s been a target up until today and will remain so.”
Danske said Aug. 1 second-quarter net income rose to 2.18 billion kroner ($390 million) after loan losses fell 45 percent to 924 million kroner. Profit last quarter was the bank’s highest in five years. Danske delivered a return on equity of 5.2 percent, compared with a goal of more than 12 percent.
The CEO switch “makes sense,” Jesper Christensen, an analyst at Alm. Brand, said by phone. “The company has been through a transition phase, it has a new strategy in place, and now it just needs someone to implement it. You need someone with deeper operational insight.” Christensen is advising clients to buy Danske shares.
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