February 2, 2018 / 7:34 AM / 10 months ago

CORRECTED-UPDATE 1-Danske Bank beats Q4 pretax expectations, expects lower 2018 net result

(Corrects to read 241 million crowns, paragraph 15)

By Teis Jensen

COPENHAGEN, Feb 2 (Reuters) - Danske Bank on Friday beat fourth-quarter pretax profit expectations, warned of a lower net result in 2018 but said it planned to increase its dividend payouts.

Its pretax profit of 6.73 billion crowns topped the 6.45 billion expected by analysts in a Reuters poll.

This year, Denmark’s largest bank said it expected a net profit of 18 to 20 billion Danish crowns ($3.0-3.4 billion), down from a record-high 20.9 billion 2017 net result. Analysts have forecast a 2018 result of 19.9 billion.

“We experienced a positive development across our business units, which in many areas led to good increases in the number of customers and lending,” Chief Executive Thomas Borgen said in a statement regarding the final quarter of 2017.

Danske’s board proposed a dividend of 10 crowns per share, roughly in line with the 10.1 crowns expected by analysts.

The bank said that in future it would raise its dividend payout ratio to 40-60 percent of net profit from 40-50 percent.

The bank also announced a share buyback programme of 10 billion crowns this year, roughly in line with the 9.84 billion expected by analysts.

It said it aims “to rank in the top three among major Nordic peers in terms of return on shareholders’ equity”.

Formerly it had said it would aim for a return on shareholders’ equity of 12.5 percent.

The bank has had a run of strong quarters, helped by Denmark’s low interest rates, rising house prices and improved profitability in the farming sector.

In November, Danske raised its 2017 net result guidance for the second time to the 19-21 billion crowns range.

The bank increased lending in Sweden and Norway in 2017, aided partly by an agreement with Sweden’s TCO trade union.

But Denmark’s central bank has warned of risks facing the country’s banks from low interest rates, rising property prices and easy credit terms for corporate borrowers.

The central bank said in November that several indicators suggested risks were building up in the financial system, and that some of the largest banks did not have sufficient capital to meet buffer requirements.

Danske Bank’s loan impairment charges showed a net reversal of 241 million crowns in the fourth quarter, marking a fifth consecutive quarter with net reversals.

Analysts have warned that a drop in pork prices might begin to squeeze some Danish farmers’ profits and increase Danske Bank’s writedowns slightly from their current very low levels.

Danske Bank’s exposure to the farming sector represented 2.4 of its total group exposure according to its third-quarter report, but more than 16 percent of its total impairment charges.

Rival Ringkjoebing Landbobank said this week there were “darker clouds” over the farming sector.

($1 = 5.9593 Danish crowns)

Reporting by Teis Jensen; editing by Jason Neely

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