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...

TIDMDANSKE 
 
 
 
 
Company announcement    Holmens Kanal 2-12 
                         DK-1092 København K 
                         Tel. [phone] 
                         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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