Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Danske Bank AS (DNKEY, Financial) reported a strong financial performance with a 15% increase in profit before loan impairment charges compared to the previous year.
- The bank's net profit for the first nine months was DKK17.6 billion, with a return on equity of 13.9% in Q3, marking the highest quarterly return in over six years.
- Core banking income lines increased by 7% year-over-year, driven by strong customer activity and corporate lending demand.
- The bank maintained a strong capital position with a CET1 capital ratio of 19.1% at the end of Q3.
- Danske Bank AS (DNKEY) raised its net profit outlook for the full year to between DKK22.5 billion and DKK23.5 billion, reflecting better-than-expected developments in operating expenses and loan impairment charges.
Negative Points
- Lending demand in the retail business remained subdued due to low housing market activity.
- Net interest income (NII) is expected to be slightly lower due to lower market rates and competitive pricing adjustments.
- Fee income in Q3 was impacted by seasonally lower customer activity and a positive one-off item in Q2.
- Operating expenses were slightly up compared to the first nine months of last year, despite cost management efforts.
- The macroeconomic outlook remains uncertain, with mixed stability across Nordic countries, potentially impacting future growth.
Q & A Highlights
Q: Can you remind us of the priorities for excess capital and your thoughts on buybacks, dividends, and M&A?
A: We are committed to distributing our 2024 earnings via dividends at the higher end of our range and buybacks for the remainder. Excess capital will be addressed after the DOJ probation period ends next year. We are open to inorganic growth opportunities in core business lines across the Nordics, focusing on wholesale banking, SME customers, and retail banking in Denmark and Finland. - Carsten Rasch Egeriis, CEO
Q: Could you discuss the impact of the new ruling on credit and the outlook for net interest income (NII) in 2025 and 2026?
A: The credit ruling is positive for market openness and potential consolidation, though it won't have a short-term impact. For NII, we agree with the current 2025 consensus. The average yield on our hedge is slightly below the current Central Bank rate, and the hedge is just under DKK150 billion. - Carsten Rasch Egeriis, CEO
Q: Why is Danica Pension changing its strategy, and is the group adequately provisioned for the DKK800 million loan to Northvolt?
A: The strategy update follows the appointment of a new CEO and aligns with our group strategy. Danica is integral to the group, focusing on increasing business between Danske Bank and Danica. The Northvolt investment is part of pension savings, impacting customer returns rather than requiring provisioning. - Carsten Rasch Egeriis, CEO
Q: What needs to happen to return to an 8 bps risk cost, and why is money transfer fee income volatile?
A: Risk costs depend on single-name risks and macro events. We are in a soft landing economy, which may lead to further PMA adjustments. Our guidance for an 8 bps loan loss rate through the cycle remains. Fee income volatility is minimal; we see robust, consistent year-on-year increases in activity-driven fees. - Carsten Rasch Egeriis, CEO
Q: How does the current rate path affect your long-term revenue outlook?
A: We remain comfortable with our 2026 income target of DKK56 billion. The path has been slightly different, with more muted lending growth offset by stronger deposit and savings growth. We expect lending growth to return as rates decrease. - Carsten Rasch Egeriis, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
