Danske CEO Slams Five Years of Bad Returns in New Strategy

Danske Bank A/S’s new Chief Executive Officer Thomas Borgen criticized what he called unsatisfactory investor returns over the past half-decade and vowed to improve the bank’s performance by winning back customers.

“What we have delivered to our shareholders has not been satisfactory for the last five years, and that we need to improve,” Borgen said in a telephone interview yesterday from Copenhagen. “To improve that, we really need particularly in Denmark to get back the customer focus, to really get that going and working.”

Danske shares have gained just 3.8 percent in the past five years, according to data compiled by Bloomberg. That compares with a 61 percent increase in the Nasdaq OMX Copenhagen 20 index. Danske hasn’t paid its shareholders a dividend in the period and it delivered a return on equity in the first six months of 2013 that was about half a 12 percent target the bank has said it’s working toward.

Danske’s share performance doesn’t reflect what it can do, according to Borgen. The 49-year-old has worked at Danske since 1997, most recently as head of the lender’s corporate and institutional banking.

“Purely objectively, we have very good digital solutions,” he said. “We have very good products and fair pricing, but we have been hammered by not being able to communicate in a good enough manner, and that is something that we need to change.”

Eivind Kolding

Borgen has headed the bank since last month after Danske unexpectedly fired Eivind Kolding saying he lacked the banking expertise to continue as CEO. Since being dragged through housing bubbles in Ireland and Denmark, Danske has met rising capital requirements and record-low interest rates with job cuts and branch closures. Borgen said it was too early to say whether he’d need to fire more employees.

“One of my duties together with the management team is to always look on the cost side and be an efficient bank, so we can deliver good solutions to our clients,” Borgen said. “When I have some more picture, I will of course look through, are we efficient enough and if not we will have to take consequences.”

Borgen declined today to respond to questions on speculation in Swedish media that Danske is looking into merging with Stockholm-based SEB AB. In an interview with Danish broadcaster TV2, Borgen said he doesn’t comment on “rumors.” Dagens Industri reported today the two banks were exploring the option of merging, without providing any details of how it obtained the information.

SEB Rumors

“These rumors circulate on a regular basis and we attribute no value to them,” Alm. Brand Markets said in a note to clients today. “We maintain our buy recommendation on Danske Bank, which continues to be fundamentally undervalued in relation to its Nordic competitors.”

Under Kolding, who led A.P. Moeller-Maersk A/S’s container shipping unit before becoming CEO at Danske just 19 months before he was ousted, Danske introduced a pricing model to reward customers with the most business there. The plan, and an advertising campaign to promote it, was slammed by local media and Danske in June fired its head of communications, Eva Hald.

Economic Risk

Danske’s expansion into Ireland in 2005, under then CEO Peter Straarup, has also hurt its image. The lender, Denmark’s largest with assets equivalent to 182 percent of gross domestic product, was criticized in a report last month by a government-appointed committee investigating the causes of Denmark’s financial crisis. The lender’s international ambitions before the crisis put the entire economy at risk, the committee found.

Borgen isn’t planning to fix Danske’s reputation in Denmark through more advertising campaigns, he said.

“I’m not going to buy any image campaigns,” he said. “It went wrong. It’s about communicating with clients in a direct dialog and that’s what we have to do.”

Danske has lost about 100,000 customers in 12 months, newspaper Jyllands-Posten reported Sept. 17, citing a poll conducted by Voxmeter. About 38 percent of the population said they would never use Danske as their bank, up from 23.1 percent a year earlier, according to the survey.

More Volume

The bank said Aug. 1 it had lost 40,000 customers since introducing its new pricing program in January. The shift didn’t affect Danske’s market share because “we were compensated by the existing customers bringing in more volume,” Kolding said at the time.

Borgen said part of the reason the bank has alienated customers may be that it closed branches too fast. He plans to start a 360 degree service check of the bank to ensure it doesn’t misread client needs in future, he said.

“It’s the sum of many, many things,” Borgen said. “It is not one major thing that we can do. We have historically been criticized for talking not with clients but more to clients and that’s basically what we’re working on. It’s the sum of many things.”

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