Jyske Bank A/S, which took over Sparekassen Lolland A/S in January, is looking for more acquisition targets after exceeding proposed capital requirements for Danish lenders deemed too big to fail.
Jyske will continue to look for “selective acquisitions” while keeping its core Tier 1 capital ratio above the level recommended by a committee on systemically important financial institutions, Chief Executive Officer Anders Dam said today. That strategy “has not changed,” he said in a statement.
Jyske, whose assets are equivalent to 14 percent of Denmark’s economy, said today net income jumped 15 percent in the first quarter to 435 million kroner ($77 million), after writedowns fell by almost 40 percent. The bank reported 13.7 percent core Tier 1 capital of risk-weighted assets. The shares climbed as much as 4.9 percent to their highest since June 2011.
Denmark’s banks are showing signs of emerging from a funding crisis that followed the 2011 failure of Amagerbanken A/S. That credit event resulted in the European Union’s first senior creditor losses within a resolution framework, prompting investors to shun all but the safest Danish bank bonds.
Denmark’s bank industry will have lost 30 percent of its branches by the end of this year since 2006, the Financial Services Union estimates. Still, Danish banks are responding to regulatory efforts to clean up the industry, resulting in fewer losses and bigger reserves.
“Transparency is increasing when it comes to Danish banks,” Henrik Arnt and Thomas Hovard, credit analysts at Danske Bank A/S, said today in an investor note. “Loan losses are generally on a downward sloping path and capitalization is generally strong.”
Danske reiterated its buy recommendation for Jyske. The bank has enough capital to make more purchases
“It is worth noting that Jyske Bank on several occasions has tapped the equity market without problems to facilitate acquisitions,” Danske said.
Denmark’s Sifi committee, whose proposals parliament is now considering, recommended the nation’s six biggest banks hold common equity Tier 1 capital of as much as 13.5 percent to protect against collapses that could saddle taxpayers with bail-out costs.
Sydbank said net income fell 46 percent in the first quarter to 137 million kroner, after writedowns climbed 18 percent. The bank, which like Jyske is based in western Denmark, said it had a core Tier 1 capital ratio of 13.7 percent.
Danske Bank, Denmark’s largest lender, is due to report its first-quarter results tomorrow. The Copenhagen-based bank’s net income more than doubled to 1.66 billion kroner in the period from a year earlier, according to the average of a Bloomberg survey of 10 analysts.