(Bloomberg) -- Danske Bank A/S, the largest lender in Denmark, is set for a record profit after raising its 2024 guidance to reflect lower operating expenses, smaller impairment charges and a strong domestic economy.
The Copenhagen-based bank on Thursday said net income for 2024 is expected to come in between 22.5 billion kroner to 23.5 billion kroner ($3.3 billion to $3.4 billion), more than estimated by analysts. Its previous record profit was 21.3 billion kroner in 2023.
The new outlook reflects “continually strong credit quality and reversals of impairment charges,” the bank said in a statement, adding that a solid economic backdrop further boosted profits.
“Among the Nordic countries, the macroeconomic outlook is especially positive in Denmark where the labor market remains strong, inflation is low and economic growth is expected to be solid, even without the significant contribution from the pharmaceutical sector,” the bank said.
Chief Executive Officer Carsten Egeriis said the bank is interested in takeovers in the Nordic region, leaning into a current trend of consolidation in the European banking sector.
“We’re certainly open for inorganic opportunities as we look across the Nordics, as long as it’s within of our core focus areas, which is to grow our wholesale business, including asset management, to grow our SME business across the Nordics, and then private banking and retail banking in Denmark and Finland,” he said in a phone interview.
Egeriis’ comments echo those of Sydbank CEO Mark Luscombe, who Wednesday said Denmark’s third-largest listed bank is “very interested” in acquisitions to help consolidate the local financial sector.
Danske shares rose as much as 4.1% in Copenhagen, extending full-year gains to more than 12%.
The lender’s profitability has soared in recent years after resolving a money laundering scandal that cost it more than 16 billion kroner in settlements with US authorities and clients. The final case related to the suspicious money flows through its former Estonian branch was settled in September, ending a seven-year ordeal which led to the ouster of top officials and a customer exodus.
What Bloomberg Intelligence Says:
“Danske Bank’s upgraded 2024 net income guidance is likely to spur consensus upgrades, with the guidance midpoint 4% above market expectations. Still it may not affect 2025 earnings as the guidance is driven mainly by an expected near-zero loan-impairment charge this year (vs. a 2 basis-point cost-of-risk consensus) that isn’t likely to be repeated. Consensus-beating profit (7%) in 3Q was largely due to loan-impairment reversals, but revenue was lowered by weaker-than-expected fee income.”
— Mar’yana Vartsaba, BI banking analyst
Earlier this year Danske started its first share-buyback program in six years, and said it intends to distribute 5.5 billion kroner in the fourth quarter after exiting its Norwegian retail banking business. Additionally, Danske has pledged more than 50 billion kroner in dividends by 2026.
Danske had previously guided for net income of 21 billion kroner to 23 billion kroner this year. Operating expenses for the full year will be around 25.8 billion kroner, down from a range of 26 billion kroner to 26.5 billion kroner previously, the bank said in a statement.
The bank reported third-quarter net interest income of 9.17 billion kroner, missing expectations from analysts, who had noted ahead of the earnings statement that the lender is likely to feel pressure from falling interest rates. The Danish central bank has cut borrowing costs three times this year in line with the European Central Bank, leaving its key interest rate at 2.85%.
Egeriis, however, said he’s not concerned about the declining interest rates, stressing that the cuts have been in line with the bank’s earnings forecasts and are expected to boost the economy and thereby help Danske’s clients.
“We expect to see an increase in lending as we go into next year,” he said. “We have also seen growth across our corporate customers in the third quarter and that will offset some of the decrease in NII that comes from falling rates.”
(Updates with CEO comments from fifth paragraph)
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