Danske Tops Profit Bets as Bank Makes More Money on Trading

  • Bank said it continued to win business in Norway and Sweden
  • Return on equity was 14.4%, exceeding long-term 12.5% target

Danske Bank CFO Says Nordic Fixed Income Very Strong

The Nordic region’s best-performing bank said first-quarter profit jumped 12 percent, a better result than analysts had expected, as income from trading grew.

Danske Bank A/S reported net income of 5.53 billion kroner ($808 million) for the period, compared with a 4.52 billion-krone estimate in a survey of analysts compiled by Bloomberg. Net interest income rose 9 percent, while income from trading jumped 69 percent. The Copenhagen-based bank wrote back 235 million kroner in impaired loans. Danske maintained its full-year net income forecast.

Jacob Aarup-Andersen, CFO at Danske, discusses the bank’s 1Q earnings, fixed income and negative interest rates.

Daybreak: Europe." (Source: Bloomberg)

Shares in the bank opened about 2 percent higher in Copenhagen, and traded at 246.40 kroner as of 9:05 a.m. local time. The Bloomberg index of European financial stocks rose 0.1 percent.

“The first three months of the year were characterized by high customer activity at all business units, and this resulted in higher income, driven in particular by increased activity in the financial markets and increased lending to our customers,” Chief Executive Officer Thomas Borgen said in the statement. “The Nordic economies are generally doing better, and this benefited our performance. Impairments remained at a very low level.”

After years as the Nordic banking industry’s underdog, Danske has emerged as the region’s top performer. Its shares have climbed about 13 percent this year, more than three times the increase in Nordea Bank AB, Scandinavia’s biggest lender.

Danske said return on average shareholders’ equity was 14.4 percent, up from 13.1 percent a year earlier, while the ratio of common equity Tier 1 capital was 15.5 percent of risk-weighted assets, compared with 15 percent a year earlier.

Management repeated an earlier outlook for net interest income to be higher than it was in 2016, while profit will be “in the range of” 17-19 billion kroner, it said.

The bank said earlier this month that it’s accumulated enough capital to meet whatever minimum standards global regulators set. Nordic countries are fighting a proposed so-called output floor that would raise banks’ requirements, arguing the measure doesn’t take into account the region’s low loan losses.

Negotiations inside the Basel Committee on Banking Supervision have stalled as members disagree over minimum levels for banks using their own models for estimating asset risk. Denmark’s government has said it’s also looking into ways to roll back financial regulation to protect the industry from what it characterizes as an overly complex web of rules.

Borgen, a Norwegian national, has deepened Danske’s reach into the Nordic region outside Denmark.

“We continued to attract new customers, especially in Norway and Sweden, and we also saw a positive trend in the volume of business with existing customers,” he said in the statement. “Overall, we had a good start to the year.”

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