Danske Bank Raises Forecast as Recovery Curbs Loan Losses

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Danske Bank A/S raised its full-year forecast after profit climbed as a recovering economy helped to reduce loan losses and generate more business from non-retail customers.

Denmark’s biggest bank said it expects net income to exceed 16 billion kroner ($2.3 billion) this year, about 2 billion kroner more than it had previously estimated. The bank is benefiting as more corporate and institutional customers use it for their funding and deals, Chief Executive Officer Thomas Borgen said.

“We can see our customers have a more positive outlook and are doing more transactions and activity,” Borgen said by phone. “Movements in currencies, commodities and interest rates also bring with them activity in general.”

Net income rose 8 percent to 4.5 billion kroner last quarter from a year earlier, beating the average 3.8 billion-krone estimate of analysts surveyed by Bloomberg. The bank was able to reverse 219 million kroner in provisions set aside for impairments, after losing 626 million kroner a year earlier.

Borgen has raised fees, closed branches and shed non-core operations to boost earnings and buy back shares even as he grapples with the lowest central bank rates in history.

He’s succeeded in raising Danske’s earnings to match its competitors, Standard & Poor’s said this month, as it raised the bank’s outlook to stable, after taking into account a reduced likelihood of government support.

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Danske shares rose as much as 3.9 percent in Copenhagen trading to 214.40 kroner, their highest since 2007. That brings the bank’s price gain this year to 27 percent, beating the 17 percent increase in the 45-member Bloomberg index of European financial stocks.

Like other banks in the Nordic region, Danske is struggling to generate revenue after policy interest rates sank well below zero. The bank said net interest income slipped about 3 percent to 5.5 billion kroner in the second quarter. Net trading income sank 32 percent while income from fees rose 17 percent.

Danske said it will start treating its operations in Northern Ireland as a “standalone business unit” and no longer include it in its personal banking and business banking.

“We have made a business review that concluded that synergies between the Northern Irish market and the Nordic markets are limited,” Danske said. The bank will send separate accounts for the unit, starting Jan. 1, it said.

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