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UPDATE 2-Danske Bank shares hit six-year high after raised outlook
July 24, 2014 / 7:12 AM / 3 years ago

UPDATE 2-Danske Bank shares hit six-year high after raised outlook

* Q2 pretax 5 bln crowns vs f‘cast 4.87 bln

* Sees FY net between 10 bln 13 bln, vs prev f‘cast 9-12 bln

* Aims to increase market share in Sweden and Norway

* Share rise to highest level since May 2008 (Adds analyst comments, CEO comment, share price)

By Ole Mikkelsen

COPENHAGEN, July 24 (Reuters) - Danske Bank A/S has raised its 2014 net profit forecast after posting its best quarterly result since the start of the global financial crisis in 2008, sending its shares up 4.5 percent to a six-year high.

Denmark’s largest lender said it now expected to earn between 10 billion Danish crowns ($1.8 billion) and 13 billion in net profit in 2014, against a previous forecast of hitting the higher end of a 9 to 12 billion crown range.

The bank was hit hard by the European financial crisis, especially its exposure to Ireland, the sluggish Danish economy and a collapse in its domestic housing market. Its results have been recovering, but only slowly, since 2013.

Executive Thomas Borgen said Danske Bank would invest in Norway and Sweden where it wants to grow in coming years. Its focus previously had been more on trimming costs rather than expansion and investment.

“We have a 4 percent market share in both Norway and Sweden. We can see that with some investment we can really be a challenger in those markets,” Borgen told Reuters. “We will unquestionably be in those markets and develop those businesses further.”

Shares in the bank rose by as much as 4.5 percent to 162.50 crowns, their highest since May 2008.

“They are doing well on cutting costs ... Costs were lower than expected and so were loan impairment charges. So the bank can really reap the benefits of its initiatives in this quarter,” said Bjorn Schwartz, chief analyst at Sydbank.

“I think we could (see) another upgrade later in the year if the general development continues along the lines we have seen so far this year,” Schwartz said, adding that the bank could reach a net result of between 11 and 14 billion crowns.

BETTER THAN EXPECTED

The company posted a pretax profit of 5 billion crowns in the second quarter compared with 2.7 billion in the same quarter a year ago. Net profit amounted to 4 billion crowns against 2.2 billion a year ago.

Analysts had on average forecast a pretax profit of 4.87 billion crowns and a net 3.69 billion.

The latest results were boosted by 1 billion crowns from the sale of a stake in Nets Holding, a payment services company.

Danske Bank was formerly the Nordic region’s top financial institution by stock market value, before slipping to sixth place as the financial crisis took its toll.

Its performance began to recover as of 2013, as it trimmed back on loan losses and initiated cost-cutting programmes. Its shares have outperformed Nordic peers so far this year.

In the second quarter of this year, its loan impairment charges amounted to 626 million crowns, less than analysts’ expectations of 713 million and the 813 million it booked in charges a year ago.

However Danske is the lowest-valued stock among the biggest Nordic banks, with a price-to-book ratio of 1.08, according to Reuters data.

Handelsbanken is the highest valued with a ratio of 1.87, Swedbank is second with 1.85, SEB has a 1.66 ratio, Nordea a 1.41 ratio while Norwegian DNB is second lowest on 1.29.

Shares in Danish lenders have gained 25 percent so far this year, strongly outperforming their five Nordic peers which are between little changed for Swedbank and just over 9 percent higher for Handelsbanken.

$1 = 5.5411 Danish Crowns Additional reporting by Teis Jensen; Writing by Sabina Zawadzki; Editing by Pravin Char and David Holmes

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