Danske Bank Shareholder Realdania to Cut Stake to Limit Risk
Realdania, a philanthropic organization based in Copenhagen, last cut its stake in March to 4.87 percent from more than 10 percent in an accelerated book-build that raised 5.46 billion kroner ($1.01 billion). Even after that sale, the group’s Danske holding accounts for too large a share of its portfolio, Chief Executive Officer Jesper Nygaard said.
“We still have about 25 percent to 28 percent of our equity placed in Danske Bank, and from a strategic perspective, that’s too much,” Nygaard said in an interview. “The process needs to be normalized, but I can’t say how or when this will happen.”
Realdania is revealing its intention to keep selling shares in Danske a little more than month after the bank fired Eivind Kolding, arguing he lacked the banking expertise to continue as CEO. His successor, Thomas F. Borgen, will present Danske’s third-quarter earnings on Oct. 31.
Danske has struggled to compete with its Swedish rivals in delivering shareholder returns after the Copenhagen-based bank lost customers. Danske was also hurt by property bubbles in its home market and in Ireland, which the bank entered in 2005 just before the nation’s housing bust sent impairments soaring.
Danske shares fell as much as 1.6 percent to 123.90 kroner today, the lowest since Oct. 21. The stock declined 1.1 percent to 124.50 kroner at 9.44 a.m. in Copenhagen.
“We’re now under 5 percent in Danske,” Nygaard said. “We no longer need to flag what we want do with the stake and we’ll continue to keep that private.”
Realdania’s holding in Danske is tied to the bank’s home-loan arm. Danske bought Realdania’s mortgage and retail banks Realkredit Danmark A/S and BG Bank in 2000. In exchange, Realdania received a 19 percent stake in the merged bank and became a philanthropic organization dedicated to spending the dividends from its investments on not-for-profit projects.
Realdania cut its Danske stake to 15 percent by 2001 and reduced it further to 10 percent over the next decade.
“We’ve always been very aware of diversifying risk, and before selling the 52 million shares this year, selling Danske Bank shares was always done gradually to avoid influencing the price,” Nygaard said.
Borgen, who became CEO after leading Danske’s corporate and institutional banking unit, said in an interview this month the lender’s performance over the past five years “has not been satisfactory” as he unveiled a set of measures to revive business. Danske, overseen by Chairman Ole Andersen, also this month fired Group Treasurer Steen Blaafalk, who had been with the bank for three decades.
Realdania “won’t carry out any active ownership in Danske,” Nygaard said. “We leave that to the board, which we have full confidence in.”
Realdania sold Danske shares at 105 kroner a piece on March 6. Since then, Danske shares have gained 17 percent compared, with a 6 percent increase in the Copenhagen 20 benchmark index of the country’s most traded shares.
Danske shares traded at 71.78 kroner in 2000, when Realdania became a holder, and peaked at 252.63 kroner in February 2007. The shares hit a 14-year low of 31 kroner in March 2009.
A “large part” of the 52 million Danske shares Realdania sold in March was bought by Cevian Capital AB, the Swedish fund said at the time. Cevian now owns about 9 percent of Danske, second only to A.P. Moeller-Maersk A/S (MAERSKB), Denmark’s biggest company, which has about 23 percent.
Realdania makes donations to charity and research in architecture, housing and energy efficiency. It manages 698 projects, from sponsoring books to office building construction in central Copenhagen and has donated about 14 billion kroner in the last 13 years.
The organization in March used proceeds from its Danske share sale to buy equities in the U.S., emerging markets and in Europe on an assumption the debt crisis will pass and growth will again accelerate, Chief Investment Officer Gert Poulsen said in an interview.
Realdania invested 13.9 billion kroner in equities at the start of the year. Its investment in Danske is the only stock it publicly identifies in a portfolio of 14 of listed shares.
Realdania had 57 percent of its investment portfolio in listed shares at the start of 2013. The organization says it has no plans to become an activist investor, using its position to influence corporate decisions, or to become a majority shareholder in any of its holdings, Poulsen said.
“If we can make a decent return on plain vanilla investments, why bother more than we have to with structured investments or anything even more complicated,” he said.
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