Danske Bank A/S, Denmark’s biggest lender, fell the most in five days in Copenhagen trading after Exane BNP Paribas said slow Danish economic growth and high household debt will result in more loan losses.
Danske fell as much as 0.9 percent, the most since Nov. 28, making it today’s biggest loser in the Nasdaq OMX Copenhagen 20 Index which rose 0.5 percent. Danske’s stock retreated 0.5 percent to 97.85 kroner at 10:43 a.m. in the Danish capital with trading volume at 12.3 percent of the three-month daily average.
Denmark’s gross domestic product grew 0.1 percent last quarter, while a contraction in the three months through June was deeper than previously reported, the statistics office in Copenhagen said Nov. 30. Exane said the Danish government and local economists will have to revise down their “overly optimistic” 2012 growth forecasts and repeated an underweight recommendation on Danske shares.
“We don’t expect households to start consuming, having a direct negative impact on GDP and Danish corporate earnings,” Andreas Hakansson, an analyst with Exane in Stockholm, said in a note. “We therefore don’t expect any real improvement in Danish loan loss provisioning.”
Danske, which is based in Copenhagen, on Oct. 30 said third-quarter impairments were little changed at 2.88 billion kroner ($500 million), compared with 2.8 billion kroner in the year-earlier period.
Denmark’s economy will next year face “a toxic combination of too much debt and rising unemployment,” Hakansson said. The country faces “adverse risk to house prices, bank provisions and share prices,” the analyst said.
The Danish economy is suffering from a burst real estate bubble, which has pushed more than a dozen regional lenders into insolvency since 2008. House prices have fallen about 25 percent and will continue to sink this year, according to the government-backed Economic Council.
The private debt burden in Denmark swelled to 322 percent of disposable incomes in 2010, Standard & Poor’s estimates. While that’s backed by a high savings rate in the form of pensions and home equity, those assets can be hard to access when financial markets are stressed, central bank Governor Nils Bernstein has said.