A person rides a bicycle past a Danske Bank branch in Copenhagen, Denmark.— Reuters
STOCKHOLM: Danske Bank A/S raises its outlook for full-year profit as it expects higher interest income.
Denmark’s largest lender raised its projection for net income to as much as 20.5 billion kroner (US$3.1bil or RM14.1bil) in an earnings release last Friday, against as much as 18.5 billion kroner (RM13bil) previously.
It also announced a dividend of seven kroner (RM4.77) a share, equivalent to a 59% payout ratio for last year, compared with a previously announced target payout range of 40% to 60%.
The second quarter net interest income was slightly above analyst estimates. However, fee income fell short of estimates, due to lower housing market activity and assets under management.
Shares were up 2% in Copenhagen, after earlier falling as much as 2%.
“Despite the miss on fee line, 2023 consensus is expected to move higher, driven by lower provisions,” Citi analysts Maria Semikhatova and Guru Prasad Chowdhary said in a separate note.
“We expect the market to focus on net interest income trajectory including sensitivity to further rate hikes and impact of deposit hedges as well as the outlook for capital return.”
Danske Bank is the last of the large Nordic banks to present its earnings for the three months through June. Its peers, including DNB Bank ASA, Nordea Bank Abp and Swedbank AB, all reported earnings that beat estimates as the region’s lenders are supported by corporate sectors that are holding up better than expected as well as rising interest rates.
The dividend announced by Danske is the highest in four years as the Danish lender seeks to draw a line under poor investor payouts in the wake of a money laundering scandal. It admitted to fraud last year and paid US$2bil (RM9.12bil) to end a long-running United States probe into money laundering at its Estonia branch.
Danske last month raised its key target for 2026 profitability and pledged more than 50 billion Danish kroner (RM34bil) in dividends by that year.
The money laundering affair and another scandal linked to debt collection have cost it more than 16 billion kroner (RM10.8bil) in settlements with United States authorities and clients over the past years.
Second quarter net interest income rose 47% from a year ago, to 8.52 billion kroner (RM5.82bil), Danske also said last Friday.
Analysts had projected 8.47 billion kroner (RM5.76bil). Net income improved from a year earlier, to 5.01 billion kroner (RM3.4bil), versus an analyst estimate of 4.54 billion kroner (RM3.09bil).
Fee and commission income came in at 2.74 billion kroner (RM1.86bil), falling short of the forecast of 2.96 billion kroner (RM2.02bil).
While net income was better than expected, Danske’s fee income “disappointed”, Anders Haulund Vollesen, an analyst at Jyske Bank A/S, said in a note.
“Costs remained stable and loan impairments remained at a very low level on the back of continually strong credit quality,” chief executive officer Carsten Egeriis said in a statement.
As part of a strategy revamp, Danske Bank earlier agreed to sell its personal customer business in Norway, with about 285,000 customers, to Nordea. The price will be determined at closing, expected late this year. — Bloomberg
