Jyske Bank Says Cost of BRFkredit Takeover Higher Than Estimated

Jyske Bank A/S said costs related to its takeover of mortgage lender will be higher than first estimated and that competition in the Danish lending industry remains fierce.

Jyske will book as much as 500 million kroner ($92 million) in additional costs from the takeover, Denmark’s second-biggest listed lender said today in a statement. Profit before tax will be 3 billion kroner for the first six months of 2014, up from 1.2 billion kroner in the same period a year earlier, boosted by a one-time gain of 2.36 billion kroner from the BRFkredit purchase, Jyske said.

Jyske shares have lost about 4.1 percent since the lender on Feb. 24 said it agreed to pay 7.4 billion kroner for BRFkredit. The purchase enables Silkeborg, Denmark-based Jyske to compete on more fronts against Danske Bank A/S and Nordea Bank AB, which both have their own mortgage lending units. The takeover has also pitched Jyske against former partner Nykredit Realkredit A/S, Denmark’s biggest mortgage lender.

“Taking away all the one-offs the forecast puts Jyske right where they were in the first quarter, which was disappointing,” Christian Hede, a Copenhagen-based banking analyst at Nordea, said in a phone interview. “This is also below what could be expected but it’s not the end of the world.”

Jyske shares were little changed today at 294.5 kroner at 1:16 p.m. in Copenhagen while Denmark’s index of the 20 largest and most traded shares rose 0.5%.

“We’re hoping that people will start borrowing again soon, but there’s a huge private savings surplus,” Anders Dam, Jyske’s chief executive officer, said by phone. “We don’t dare guide on the full-year with all the turbulence currently.”

Dam said both private and corporate clients were reluctant to borrow. The bank experienced increased demand for private banking services and mortgage lending.

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