UPDATE 2-Danske Bank lifts profit outlook after best results since global crisis

Thu May 1, 2014 6:45am EDT

Related Topics

* Q1 earnings lifted by fall in costs and writedowns

* Pretax 3.63 bln Danish crowns vs f'cast 3.5 billion

* 2014 net seen at higher end of 9 bln-12 bln guidance (Adds details, comments from CEO, share movement)

By Ole Mikkelsen

COPENHAGEN, May 1 (Reuters) - Danske Bank raised its full-year profit guidance on Thursday after it posted its highest quarterly earnings since the global financial crisis, beating expectations thanks to cost cuts and lower writedowns on loans.

The first-quarter results contrasted with figures released the day before from domestic rivals Jyske Bank and Sydbank which missed analyst forecasts.

Danske, Denmark's biggest listed bank, said it expected 2014 net profit to be at the higher end of a previously forecast range of between 9 billion crowns and 12 billion crowns, the guidance given in February.

Its pretax profit for the first three months of 2014 rose 64 percent to 3.63 billion Danish crowns ($674.3 million), year-on-year, beating the average forecast of 3.5 billion in a Reuters poll of analysts.

It was the best quarterly total since the second quarter of 2008, just before the bank was hit by the financial and economic crisis that began in the third quarter that year.

It marks a promising start to the year for Danske, which lost around 110,000 customers in Denmark in 2013 after it was widely pilloried on social media over an advertising campaign which used the image of an "Occupy" anti-capitalist protester to promote the bank.

The lender managed to cut its total costs by 6 percent from a year ago - while Sydbank reported a 7 percent increase and Jyske Bank's costs were largely flat.

Danske's costs fell 18 percent to 5.4 billion crowns in the first quarter following a savings drive launched in the fourth quarter of 2013 which aims to reduce costs to about 23 billion crowns for 2014 from 24.3 billion last year.

BUBBLE BURST

Danish banks have been hit by bad loans since a property bubble burst in 2009 and problems in they key farming sector that left Denmark on the edge of recession in 2012 and 2013.

However Danske's loan impairment charges fell 55 per cent in the first quarter compared with the same period last year and were 30 percent lower than the fourth quarter of 2013.

Analyst Jesper Christensen at Alm. Brand also noted an improvement in the bank's Irish unit.

"Danske Bank's core division is improving, but their non-core division in Ireland is also better than expected. It is a result of a generally better Irish economy, and better conditions for selling Danske Bank's Irish (property) portfolio," he said.

After 13 years with huge losses on its Irish unit the bank decided last November to close down the parts of the business dealing with retail customers and small and medium size corporate clients.

The bank stuck to its 2015 target for a return of equity after tax of 9 percent.

Danske said limited growth in the Danish economy - the central banks and most economists expect it to grow by 1.4 percent this year - meant it would be tough to increase revenue.

"That's why it's crucial for us to continue to be diligent on costs and continue to develop alternative products and solutions for clients," Chief Executive Thomas F. Borgen told Reuters in a phone interview.

With a market share of around 30 percent the bank is the sector leader. "We are very comfortable with that market share. We do not see a need to grow it," Borgen said.

He added Danske had a good platform for further growth in Norway and Sweden. He dismissed media speculation of a divestment of its units in the two countries.

The bank's shares were up 1.0 percent at 153.50 Danish crowns at 1040 GMT, outperforming the main Copenhagen blue-chip index.

($1 = 5.3831 Danish Crowns) (Additional reporting by Annabella Pultz Nielsen; Editing by Pravin Char)

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