Danske Bank A/S raised its outlook for full-year profit as it expects higher interest income.
(Bloomberg) — Danske Bank A/S raised its outlook for full-year profit as it expects higher interest income.
Denmark’s largest lender raised its projection for net income to as much as 20.5 billion kroner ($3.1 billion) in an earnings release on Friday, against as much as 18.5 billion kroner previously. It also announced a dividend of 7 kroner a share, equivalent to a 59% payout ratio for last year, compared with a previously announced target payout range of 40%-60%.
Second-quarter net interest income was slightly above analyst estimates. However, fee income fell short of estimates, due to a lower housing market activity and assets under management.
Shares were up 2% at 10:28 a.m. in Copenhagen, after earlier falling as much as 2%.
“Despite the miss on fee line, 2023 consensus is expected to move higher driven by lower provisions,” Citi analysts Maria Semikhatova and Guru Prasad Chowdhary said in a separate note. “We expect the market to focus on NII trajectory including sensitivity to further rate hikes and impact of deposit hedges as well as outlook for capital return.”
Danske Bank is the last of the large Nordic banks to present its earnings for the three months through June. Its peers including DNB Bank ASA, Nordea Bank Abp and Swedbank AB all reported earnings that beat estimates as the region’s lenders are supported by corporate sectors that are holding up better than expected as well as rising interest rates.
The dividend announced by Danske is the highest in four years as the Danish lender seeks to draw a line under poor investor payouts in the wake of a money-laundering scandal. It admitted to fraud last year and paid $2 billion to end a long-running US probe into money laundering at its Estonia branch.
Danske last month raised its key target for 2026 profitability and pledged more than 50 billion Danish kroner in dividends by that year. The money laundering affair and another scandal linked to debt collection have cost it more than 16 billion kroner in settlements with US authorities and clients over the past years.
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Second-quarter net interest income rose 47% from a year ago, to 8.52 billion Danish kroner, Danske also said Friday. Analysts had projected 8.47 billion kroner. Net income improved from a year earlier, to 5.01 billion kroner, versus an analyst estimate of 4.54 billion kroner. Fee and commission income came in at 2.74 billion kroner, falling short of the forecast 2.96 billion.
While net income was better than expected, Danske’s fee income “disappointed,” Anders Haulund Vollesen, an analyst at Jyske Bank A/S, said in a note.
“Costs remained stable and loan impairments remained at a very low level on the back of continually strong credit quality,” Chief Executive Officer Carsten Egeriis said in a statement.
As part of a strategy revamp, Danske Bank earlier this week agreed to sell its personal customer business in Norway, with about 285,000 customers, to Nordea. The price will be determined at closing, expected late this year.
(Updates to add shares in fourth paragraph, analyst quotes from fifth)
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