COPENHAGEN Denmark's Jyske Bank (JYSK.CO) has agreed to buy the country's fourth-largest mortgage credit institution BRFkredit for around 7.4 billion Danish crowns ($1.4 billion) in shares and cash, it said on Monday.
The takeover, which needs approval from shareholders and the authorities, will create Denmark's fourth-largest banking and mortgage group and compete with Danske Bank (DANSKE.CO), Nykredit FRNYKR.UL and Nordea (NDA.ST).
"The distribution strength and the extended client base will offer good opportunities of stronger organic growth during a period of time when the general credit demand is still declining," Jyske Bank said in the statement.
A main challenge for BRFkredit's has been to attract new customers as its distribution network is considerably smaller than its competitors. Jyske Bank says the deal brings a high growth potential from cross-selling between the bank and the mortgage-credit client base.
Jyske Bank said the merger would also pave the way for cost efficiencies and support its credit rating.
"The takeover makes perfect sense. The two parties fit well," said senior business analyst Lars Krull from Aalborg University. "It gives new opportunities for both BRFkredit and Jyske Bank".
Krull pointed out that many takeovers in Denmark's financial sector have been between banks, and not as in this case between a bank and a mortgage credit institution.
The combined group will have around 900,000 clients, 149 branches and 4,600 employees. The balance sheet will be around 480 billion crowns, of which loans are around 335 billion.
Denmark's largest mortgage credit institution Nykredit said in a press release it was ready to meet the stronger competition, and that it expected Jyske Bank to withdraw from their Totalkredit partnership.
The seller of the BRFkredit shares, holding company BRFholding, will become the largest shareholder in Jyske Bank after the deal with a 25 percent holding. The deal is expected to be completed in the second quarter of 2014.
Jyske Bank also reported a bigger-than-expected rise in fourth quarter pretax profit on Monday. Pretax profit rose to 591 million Danish crowns in the quarter from 434 million a year earlier and above a forecast for 572 million in a Reuters poll.
Loan provisions rose to 289 million crowns from 283 million in the year-ago quarter and above a forecast for 236 million in the poll.
($1 = 5.4365 Danish crowns)
(Editing by Mark Potter and David Evans)