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ECONOMY

Danske Bank posts best result since 2008

The bank's shares jumped to a six year high after the release of first half results that were far above last year's mark.

Published: 24 July 2014 11:42 CEST
Danske Bank posts best result since 2008
Photo: Thomas Lekfeldt/Scanpix
Denmark's biggest bank, Danske Bank, on Thursday raised its full-year net profit guidance citing rising income as it posted its strongest quarterly result since the country's housing market
collapsed in 2008.
 
"Our progress thus far in 2014 shows that we are on track to create a more customer-focused, cost-effective and competitive bank," chief executive Thomas Borgen said in a statement.
 
The bank expects annual net profit to be between 10 billion and 13 billion kroner  ($1.8-$2.3 billion) rather than a previous estimate at the higher end of a range of 9-12 billion kroner.
 
Net profit in the three months ending 30 June rose 85 percent to 4.05 billion kroner, driven by a three-percent rise in net interest income, falling loan impairment charges, and a 1.0-billion kroner gain from the sale of the group's stake in payment services provider Nets.
 
"The stronger outlook is owing mainly to positive developments in expenses and impairments as well as the positive effect relating to Nets," Danske Bank said in a statement.
 
The group said a pre-tax loss of 800 million kroner from non-core activities — mainly its operations in Ireland, where it is winding down operations after being hit by a burst property bubble — was in line with expectations.
 
"Interest and fee income is clearly better than expected, and shows that the economy is doing better," Sydbank analyst Bjoern Schwarz told news agency Ritzau.
 
Cost reductions were also "going really well," he added.
 
Shares in Danske Bank were up by 5.2 percent in late morning trading on the Copenhagen bourse, where the main index was 0.5 percent higher. Share prices reached their highest level since May 2008. 

 
Speaking to TV2, Borgen said that Danske Bank’s strong results were a good sign for Denmark. 
 
“Danske Bank is a mirror image of the Danish economy, so the report is a reflection of the fact that both households and businesses are doing better. We are seeing an increase in new activity that is grabbing ahold of the Danish economy,” he said. 
 
The bank’s positive results came just one day after Statistics Denmark’s consumer expectations survey showed that Danes’ level of consumer confidence was at its highest point since before the financial crisis. 

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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