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UPDATE 2-Danske Bank to pay first dividend since financial crisis
February 6, 2014 / 7:57 AM / 4 years ago

UPDATE 2-Danske Bank to pay first dividend since financial crisis

* Board proposes first dividend since 2008

* The crisis is over, says CEO

* Weak trading and restructuring costs weigh on results

* Q4 pretax profit up 27 pct

* Shares up 3.7 pct (Adds CEO, analyst, details, background, shares)

By Teis Jensen

COPENHAGEN, Feb 6 (Reuters) - Danske Bank is to pay its first dividend since 2008, signalling that its accelerated restructuring is helping the bank to recover from the financial crisis.

Burst property bubbles in Denmark and Ireland had left Danske Bank lagging behind its Nordic peers, with results stagnating until CEO Eivind Kolding was ousted in September and his replacement Thomas Borgen decided to shut down a large part of the Irish business and cut more jobs than the 3,000 planned by 2015.

Though weak trading income and restructuring costs weighed on fourth-quarter results announced on Thursday, progress in core banking helped it to lift pretax profit by 27 percent and announce a better than forecast dividend of 2 crowns per share.

“The financial and economic crisis is over and done with for Danske Bank,” chief executive Thomas Borgen told reporters.

He acknowledged that results remain unsatisfactory, with customer numbers still falling after a failed advertising campaign in the autumn of 2012, which further damaged the bank’s already bruised image after the crisis. But Borgen pointed out that the decline had slowed in the fourth quarter.

The proposed dividend was higher than the 1.27 crown consensus forecast in a Reuters poll, but Danske’s payout ratio of 28 percent remains lower than its long-term target of 40 percent and well short of the average of 66 percent of earnings paid out by the largest Swedish banks.

“This is just a start of our ambition of reaching 40 percent, but it is also a signal that we are comfortable with our current position,” Borgen said.

The 27 percent rise in fourth-quarter pretax profit to 2.86 billion Danish crowns ($519 million) missed the average forecast of 2.92 billion crowns in a Reuters poll, but net interest and fee income were better than expected.

Loan impairment charges also beat forecasts, falling to 845 million crowns from 1.42 billion a year earlier, against analysts’ expectations of 1.09 billion crowns.

The bank said it expected net profit of between 9 billion crowns and 12 billion crowns in 2014, largely in line with consensus expectations, and kept its long-term guidance of a return on equity (ROE) of 9 percent in 2015.

Its ROE rose to 5.3 percent in the fourth quarter, from 3.5 percent in the same period last year, but still only about half of Nordic peer Nordea’s 10.5 percent in the fourth quarter of 2013.

“Danske Bank still needs to work hard on its profitability to close the gap to its Swedish competitors,” Sydbank analyst Bjorn Schwarz said.

Danske Bank’s shares have been performing almost in line with the STXE 600 European banking index over the past six months, while its Swedish rivals have outperformed.

Shares in Danske Bank were up 3.7 percent by 1205 GMT, against a 1.2 percent rise for the sector index. (Additional reporting by Ole Mikkelsen, Stine Jacobsen and Annabella Nielsen; Editing by Tom Pfeiffer and David Goodman)

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