Danske Bank A/S (DANSKE) cut its profit outlook and lowered its target for how much it will return to investors as Chief Executive OfficerThomas Borgen delivers his first set of results since the board of Denmark’s biggest bank fired his predecessor last month.
The bank cut its outlook for 2013 and now sees profit after tax of 6 billion kroner ($1.1 billion) to 8 billion kroner, compared with a previous goal of 6.5 billion kroner to 9 billion kroner, the Copenhagen-based bank said in a statement today. The bank cut its 2015 return-on-equity target to 9 percent from a previous goal of more than 12 percent.
“While our third-quarter result showed some progress, we continue to operate in a challenging environment,” Borgen said in the statement. “We need to pay more attention to our customers, to simplify our operations and to become much more efficient.”
Danske has lagged behind its Swedish competitors in delivering shareholder returns, and Borgen said in an interview earlier this month the lender’s performance over the past half decade “has not been satisfactory.” Eivind Kolding, who was ousted as CEO in September by ChairmanOle Andersen for lacking financial expertise, was given just 19 months to turn the bank around.
Danske delivered investors a return on equity of 4.3 percent last quarter, up from 4.1 percent a year earlier. The bank will target 12 percent over the “longer term,” Borgen said.
Net income rose to 1.54 billion kroner in the three months through September, from 1.3 billion kroner a year earlier. Analysts surveyed by Bloomberg had foreseen a 2.14 billion-krone profit.
Danske’s management upheaval follows a series of setbacks starting with the lender’s expansion into Ireland at the height of the nation’s property bubble in 2005. The bank’s international ambitions, under then CEO Peter Straarup, put the entire Danish economy at risk, according to a September report by a government-appointed committee investigating the causes of Denmark’s financial crisis.
Under Kolding, who headed the container shipping unit of A.P. Moeller-Maersk A/S (MAERSKB) before becoming CEO at Danske, the bank lost customers after introducing a strategy that rewarded clients 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.
Borgen has said he wants to repair the damage done to Danske’s image and try to win back customers in an effort to raise shareholder returns.
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