Danish Bank Mergers May Stall as Buyers Shun Property Risks

Denmark’s bank industry may not get the merger wave the country’s financial regulator says it needs as potential buyers recoil from small lenders struggling with bad property loans.

The country’s banks, which have a quarter of their corporate loans tied to construction and commercial property, need to consolidate after the Feb. 6 failure of regional lender Amagerbanken A/S triggered rating downgrades and threatened to send funding costs higher, according to Ulrik Noedgaard, the head of the country’s Financial Supervisory Authority. Two banks that last month identified themselves as potential buyers are now signaling they may abandon plans to snap up the lender.