Danske Bank Gains as Loan Loss Improvement Drives Profit

Danske Bank A/S said profit rose 46 percent last quarter after loan losses at Denmark’s biggest bank dropped as the economies of its main markets picked up.

Danske shares rose as much as 8.2 percent, the biggest gain in more than six months, to 111.80 kroner and traded at that level at 11:40 a.m. in Copenhagen. The bank said net income rose to 2.18 billion kroner ($388 million), beating a 1.68 billion-krone average estimate in a Bloomberg survey, after loan losses fell 45 percent to 924 million kroner. Profit last quarter was the highest in five years.

The bank will be able to maintain the current level of impairments in coming quarters, Chief Financial Officer Henrik Ramlau-Hansen said in an interview with Bloomberg Television.

Danske, which has navigated its way through burst property bubbles in Ireland and Denmark, said loan losses declined to their lowest level since the second quarter of 2008. Denmark is showing signs of emerging from its housing slump as property prices start to rise, while the economies of Norway and Sweden, where Danske also operates, are growing at a faster rate than the rest of Europe.

‘Good Report’

“Danske Bank has published a good report for the second quarter, with especially loan losses surprising positively,” Nordea Private Banking, a unit of Nordea Bank AB, said in a note to clients today. The bank’s decision to cut its 2013 outlook as market turbulence hit trading income “was expected,” Nordea said.

Danske now sees net income from 6.5 billion kroner to 9 billion kroner for 2013, compared with a previous range of 7.5 billion kroner to 10 billion kroner. Net interest income slipped 3.7 percent to 5.5 billion kroner. Trading income dropped 26 percent to 2.15 billion kroner.

“The difficult macroeconomic environment with low interest rate levels combined with the volatility in the financial markets in June have led us to revise our guidance for full-year 2013,” Chief Executive Officer Eivind Kolding said.

Danica Pension, Danske’s pension and life insurance unit, reported a loss of 346 million kroner, its first since the third quarter of 2011. Kolding, speaking to reporters after presenting the bank’s earnings, ruled out talk of a sale of Danica.

Even after today’s share price gains, Danske has lagged behind its biggest rivals in the Nordic region, delivering a 17 percent increase this year. That compares with a 34 percent surge at Nordea and a 29 percent advance at Svenska Handelsbanken AB of Sweden.

Danske hasn’t paid a dividend since 2007, a trend the bank says it will reverse once reserves are big enough. Chief Financial Officer Henrik Ramlau-Hansen has said that the lender plans to pay a dividend for 2013 if the bank meets its targeted results.

“As it looks now, with high capital, liquidity, improving results, it might be that we will be able to pay dividends for 2013,” Kolding said in an interview today. “But this is not something that is decided yet. It’s a board decision. We will not make a decision before we know the actual result for this year.”

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