Danske Bank A/S, Denmark’s largest lender, said it will cut 2,000 jobs to survive a tougher operating climate after it reported its first quarterly loss since the height of the crisis more than two years ago.
Danske shares fell the most in nearly a month after it reported a third-quarter net loss of 384 million kroner ($71 million), missing the average estimate for a 763 million-krone profit in a Bloomberg survey of analysts. The Copenhagen-based lender posted a profit of 887 million kroner a year earlier.
Danske Bank shares have plunged 47 percent this year, burdened by lackluster growth in the Danish economy and continued loan losses at its Irish business. Denmark’s economy has underperformed neighboring Sweden and Norway as a housing slump and banking crisis weigh on consumer demand, while bailout-reliant Ireland is still struggling to emerge from its burst property bubble.
“The global economy remains very fragile, and growth rates in the Western world are expected to be low in the remainder of 2011,” Chief Executive Officer Peter Straarup said in the report. “Structural challenges in the economies of southern Europe and Ireland and a heavy budget deficit in the U.S. are constraining economic growth and affecting the stability of the financial markets.”
Danske also said that Straarup, 60, wishes to retire as CEO in accordance with the terms of his employment contract. The board has started to look for a successor and Straarup will stay until a replacement is found, Danske said.
Shares in Danske slumped as much as 9.3 percent and were trading 6 percent lower at 70.05 kroner at 10:38 a.m. in Copenhagen. The 46-member Bloomberg Europe Banks and Financial Services Index lost 5 percent.
The job cuts will allow Danske to reduce costs by 2 billion kroner over the next three years, the bank said.
“We’ve had a cost plan for about two years where we have been running down costs,” Straarup said in a phone interview after the report. “We think we need to go further.”
Straarup said the Irish economy will continue to face challenges, adding the lender would “continue to be plagued by higher impairment charges” a “couple quarters into 2012.” Danske bought the National Irish Bank in 2005.
‘Sweating It Out’
“That was an unfortunate acquisition, but there are many fine qualities in this institution and once the Irish calamity has been sweated out, I think the bank will prove itself to do very well,” he said.
Danske said the slowing global economy could lead to higher loan impairment charges in the fourth quarter than in the third, adding the charges for 2011 are still expected to be lower than 2010. Loan losses in the third quarter were 2.8 billion kroner, compared with 3.08 billion kroner a year earlier.
Net interest income, the difference between what the bank earns from lending and what it pays on deposits, slipped 5.9 percent to 8.21 billion kroner in the quarter, while its fee income retreated 3.4 percent to 2.75 billion kroner.
“We prefer to avoid Danske on these results and on the lack of any short term cause for optimism,” Prateek Datta, a London-based analyst at Royal Bank of Scotland Plc, said in a note. “However, our core view remains that Danske has a strong enough balance sheet to weather the difficult market situation and the problems with failed small lenders in Denmark.”