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Danske Bank Q2 result expected to be the best since 2008
July 21, 2014 / 11:22 AM / 3 years ago

Danske Bank Q2 result expected to be the best since 2008

COPENHAGEN, July 21 (Reuters) - Denmark’s biggest financial institution Danske Bank is expected to report its best quarterly result since the global financial crisis began in 2008, boosted by a one-off item from the sale of a stake in payment services company Nets Holding.

Danske Bank’s share price has outperformed Nordic peers so far his year and analysts expect more to come after a strong quarterly result on Thursday.

“I see opportunity for an upgrade of the full-year guidance,” Sydbank analyst Bjorn Schwarz said. Like other analysts, he expects management to continue to bring down loan losses and cut costs.

Danske Bank, the biggest Nordic financial institution by market capitalisation a decade ago but now lying in sixth place, was hit hard by a property market collapse in Ireland, where it bought a bank before the crisis, and by a sluggish Danish economy.

It is now expected to report pretax profit of 4.87 billion Danish crowns ($885 million) and a net profit of 3.69 billion crowns according to a Reuters poll. Even without the one-off of around 1 billion crowns, the pretax profit would be the best since 2008.

The quarterly results would have been helped by money saved on interest payments after Danske Bank repaid a 24 billion crown state loan in April.

The bank began recovering since early 2013 driven by lower loan losses. Analysts are now looking for cost-cutting programmes.

“Business review news about new cost-saving initiatives or the divestment of less profitable business units could fuel a positive share price reaction,” analyst Christian Hede from Nordea wrote in a note to clients.

Danske Bank is the lowest valued stock among the biggest Nordic banks with a price-to-book ratio of 1.07. Handelsbanken is the highest valued with a price-to-book ratio of 1.84, Swedbank is third with 1.80, SEB with 1.63, Nordea with 1.39 while Norwegian DNB is second lowest with 1.30.

Media report have suggested that Danske Bank wants to sell its Swedish unit but Chief Executive Thomas Borgen told Reuters in May that the bank was fully committed to Norway and Sweden.

Analysts, however, are still looking at the Swedish business due to strong competition there.

“We expect management to explain further about the strategy for Sweden - as the current market share of 5 percent for the Swedish Retail Banking unit does not provide sufficient economies of scale,” analyst Thomas Eskildsen from Jyske Bank wrote in a note.

Share prices for Danish lenders have gone up 23 percent so far this year, strongly outperforming their five Nordic peers which are between 2.1 and 7.4 percent higher. Shares in Swedbank are down 2.9 percent for the year.

$1 = 5.5092 Danish crowns Reporting by Ole Mikkelsen Editing by Jeremy Gaunt

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