Danske Bank A/S Net Profit Of Dkk 10.0 Billion Earned During A Period Of Continuing Challenges. Return On Equity Of 8.5%. New...
November 01 2019 - 2:30AM
Dow Jones News
TIDMDANSKE
Company announcement Holmens Kanal 2-12
DK-1092 København K
Tel. +45 45 14 14 00
1 November 2019
Net profit of DKK 10.0 billion earned during a period of continuing
challenges.
Return on equity of 8.5%. New ambitions to be realised by 2023.
Outlook for 2019 net profit narrowed to lower end of range.
Danske Bank A/S has announced its financial results for the first nine
months of 2019.
Chris Vogelzang, Chief Executive Officer, comments on the financial
results:
"The first nine months of 2019 were characterised by challenging
interest rate levels and margins as well as higher impairment levels and
an increase in costs, related especially to compliance. We saw a good
underlying business with high customer activity and lending growth, but
overall, our performance is under pressure. Therefore, we today present
a new set of ambitions for 2023 and the key elements of the plan that
will enable us to realise them. Through diligent cost management,
significant investments in digitalisation and in our organisation as
well as disciplined execution, we are committed to becoming a better
bank for all our stakeholders: customers, employees, society and
shareholders."
The report is available at danskebank.com. Highlights are shown below:
First nine months of 2019 vs first nine months of 2018
In the first nine months of 2019, Danske Bank delivered a net profit of
DKK 10.0 billion, a decrease of 14% from the level in the first nine
months of 2018. The challenging trends of the first half of the year
continued into the third quarter and had a negative effect on the
results. Customer activity was good, and the underlying business remains
solid, but performance is under pressure.
The return on shareholders' equity after tax in the first nine months of
2019 was 8.5%, against 10.1% in the first nine months of 2018.
Total income amounted to DKK 32.8 billion, a decrease of 2% from the
level in the first nine months of 2018:
-- Net interest income totalled DKK 16.3 billion, a decrease of 8%. Lending
grew (in local currency) in all markets, but this was more than offset by
higher funding costs and margin pressure.
-- Net fee income amounted to DKK 11.7 billion, an increase of 3% from the
level in the first nine months of 2018 and 11% from the level in the
second quarter of 2019. Net fee income benefited from significant
remortgaging activity in Denmark and the inclusion of SEB Pension Danmark,
but was adversely affected by the provision for the compensation payable
in relation to the Flexinvest Fri case made in the second quarter of
2019.
-- Net trading income totalled DKK 2.9 billion, a decrease of 22% from the
level in the first nine months of 2018 as the challenging conditions on
the financial markets continued.
-- Other income amounted to DKK 1.9 billion, against DKK 0.7 billion in the
first nine months of 2018. The increase was due mainly to the sale of
Danica Pension Sweden.
Operating expenses amounted to DKK 19.2 billion, an increase of 2% from
the level in the first nine months of 2018. The increase was primarily a
result of higher compliance costs, including costs for our anti-money
laundering activities, as well as investments in further digitalisation.
Our strong focus on maintaining a high-quality loan book meant that
credit quality remained strong. Loan impairments recorded a charge of
DKK 813 million in the first nine months of 2019, against a net reversal
of DKK 607 million in the first nine months of 2018. The increase was
driven mainly by increased impairments against a few single-name
exposures and lower reversals in Denmark. In addition, loan impairments
were adversely affected by a minor deterioration of the macroeconomic
outlook.
Total lending was up 3% and total deposits were up 4% from the levels at
the end of December 2018. Lending increased (in local currency) in all
core markets.
Developments at business units in the first nine months of 2019
At Banking DK, profit before tax was DKK 4.4 billion for the first nine
months of 2019, a decrease of 21% from the level in 2018. The strong
competition and the increase in regulatory costs and compliance
investments continued into the third quarter of the year, adversely
affecting the result. As expected, we also continued to see higher
impairments. However, these effects were somewhat mitigated by
significant remortgaging activity, fuelled by historically low interest
rates, increasing business activity and lending growth.
Banking Nordic delivered a profit before tax of DKK 3.3 billion,
equivalent to a decrease of 22% from the level in the same period in
2018. The decrease was caused mainly by a decline in net interest income
due to margin pressure as well as an increase in operating expenses
caused by investments in compliance and higher costs for regulatory
requirements.
Corporates & Institutions contributed a profit before tax of DKK 1.9
billion in the first nine months of 2019, a decrease of 48% from the
same period last year. The decline was driven by increased loan
impairment charges, lower trading income and negative developments in
value adjustments. Operating expenses were unchanged from the same
period in 2018 despite an underlying cost pressure from regulatory
compliance-related activities.
At Wealth Management, profit before tax amounted to DKK 3.6 billion, an
increase of 39% from the level in the first nine months of 2018, due
mainly to the gain of DKK 1.3 billion from the sale of Danica Pension
Sweden. Net fee income benefited from the inclusion of SEB Pension
Danmark. Trading income saw a negative impact from a regulatory change
to the discount curve for life insurance provisions in the first quarter
of 2019. The increase in operating expenses was due mainly to the
operation of SEB Pension Danmark and the provision for the compensation
payable to certain Flexinvest Fri customers.
At Danske Bank Northern Ireland, profit before tax was DKK 648 million,
up 16% from the level in the same period last year, despite continued
Brexit uncertainty. The increase reflects a combination of higher income,
reduced costs and lower loan impairment charges.
Capital position still solid
Danske Bank continues to have a solid capital position, with a total
capital ratio of 21.0%, and a CET1 capital ratio of 16.4%. Our targets
in the short to medium term are to have a total capital ratio of above
20% and a CET1 capital ratio of above 16%.
On the basis of fully phased-in rules, our CET1 capital ratio stood at
16.3% versus our current fully phased-in regulatory CET1 capital
requirement of 14.8%. Consequently, we meet both regulatory requirements
and our own targets.
As expected, the Danish FSA has required us to reassess our solvency
need to reflect general product governance risk following the Flexinvest
Fri investigation and increased risk following an inspection of our IT
governance structure. As of the third quarter of 2019, we have increased
our Pillar II add-ons by DKK 4 billion, leading to a 0.5 percentage
points increase of the solvency need and a 0.3 percentage points
increase of our CET1 capital requirement.
Outlook for 2019
On the basis of trends in the first nine months of the year, we now
expect a net profit for 2019 at the lower end of the DKK 13-15 billion
range announced in the report for the first half of 2019.
The outlook is subject to uncertainty and macroeconomic developments.
Ambitions for the period towards 2023
As promised when we published our report for the first half of 2019, we
have spent the past three months looking at how to improve our
performance.
In this connection, we have set the following ambitions to be realised
by 2023:
-- We want, on average, to be among the top two on customer satisfaction in
everything we do.
-- More than 90% of employees should be "engaged" (as measured in our
Employee Engagement Index).
-- We operate sustainably, ethically and transparently, and we measure
progress across seven identified focus categories (Sustainable Investing,
Sustainable Financing, Governance, Diversity & Inclusion, Environmental
Footprint, Entrepreneurship and Financial Literacy).
-- We must achieve a return on shareholders' equity of 9-10% and a
cost/income ratio in the low 50s by continuously improving the
profitability level -- leveraging our full potential. Unchanged dividend
policy of 40-60%.
To support our ambitions to develop our business in the period towards
2023, we will, among other initiatives, invest considerably in further
digitisation of core processes across the bank and extensive
simplification of our products, operations and processes. This is
described in more detail in Conference call presentation -- first nine
months 2019.
The planned investments will have a significant effect on the result for
2020, for which we expect a return on shareholders' equity in the range
of 5-6%.
Danske Bank
Contact: Karl Kjær Bang, Acting Group Press Officer, tel. +45 45 14
14 00
More information about Danske Bank's financial results is available at
danskebank.com/reports.
Attachments
-- Danske Bank company announcement 1 November 2019
https://ml-eu.globenewswire.com/Resource/Download/a01d3134-6d17-4e9a-b6e9-5f2cc0d3014c
-- Danske Bank Interim report first nine months 2019
https://ml-eu.globenewswire.com/Resource/Download/ae581351-4702-4076-8c5b-9620bb75e86a
(END) Dow Jones Newswires
November 01, 2019 03:15 ET (07:15 GMT)
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