October 30, 2019 / 11:01 AM / 23 days ago

CORRECTED-UPDATE 1-Jyske Bank lowers outlook, Sydbank expands negative rates

(Corrects headline to read “expands negative rates”)

COPENHAGEN, Oct 30 (Reuters) - Shares in Jyske Bank shed more than 5% after the Danish lender cut its full-year profit outlook, while rival Sydbank said it would charge more on deposits, as negative interest rates dampened quarterly results on Wednesday.

European banks have struggled with earnings under negative rates imposed by central banks, and Danish banks have been among the first to transfer costs on to private clients.

Jyske, Denmark’s third largest bank, saw profits drop by 27% in the first nine months of 2019. It said it now expects profit after tax of approximately 2 billion Danish crowns ($298 million), lowering a previous estimate of 2-3.3 billion.

“The negative rate level is hitting us with full force,” Jyske CEO Anders Dam told Reuters, adding next year looked “very unpleasant”.

Dam said one-off gains from divestments and value adjustments had shielded the bank from negative rates up until now.

Sydbank, which also published third-quarter results on Wednesday, said it would now charge minus 0.75% interest on amounts exceeding $111,000, down from an earlier threshold of $1.12 million.

It will also initiate a cost-cutting programme, including staff reductions, so costs in 2020 would equal slightly rising costs this year.

“We believe it is time to lower our deposit rates in the corporate and retail segments so as to adapt our business model to market conditions,” Sydbank CEO Karen Froesig said.

The bank said the interest rate changes and other measures would net the bank an additional 200 million crowns annually.

Danish lenders Jyske, Sydbank, Spar Nord and Ringkjoebing Landbobank have imposed negative rates on both private and corporate deposits.

Jyske, the first Danish lender to announce negative rates on client deposits, said 11,000 clients would be affected by negative interest rates as of Dec 1, amounting to about 10 billion crowns.

It expected deposits to decline by 3-4 billion crowns as a result.

Anders Dam said he could not rule out imposing further negative rates on the remaining 50 billion crowns worth of private deposits currently standing at zero interest.

“I hope not, but I cannot promise, that it will not happen”.

The bank posted a pretax profit for the first nine months of 1.83 billion crowns, down 27% from a year earlier, and saw net interest income fall 7% to 3.97 billion.

“There is a lack of concrete initiatives to lower costs, not just a little, but markedly, to counter the very real pressure on earnings,” Nordnet analyst Per Hansen said in a note on Jyske.

The bank said it would propose no ordinary dividend but raise its existing share buyback programme by 500 million crowns and extend it until March 31, 2020.

Shares in Jyske Bank were down 5.06% at 1031 GMT, while Sydbank shares were down 1.99%.

$1 = 6.7200 Danish crowns Reporting by Nikolaj Skydsgaard; editing by Jason Neely

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