Danske Bank Warns of Elevated Costs Ahead as Net Profit Fell 6.8%
July 18 2019 - 3:08AM
Dow Jones News
By Dominic Chopping
Danske Bank AS (DANSKE.KO) reported on Thursday a 6.8% fall in
second-quarter net profit as it warned that the cost of its
intensified focus on compliance and anti-money laundering
activities will remain high.
The bank is being investigated by Estonia, Denmark, France and
the U.S. over allegations that around $230 billion in suspicious
funds from Russia and other former Soviet states entered Europe
through its tiny branch in Estonia. It said Thursday that no
material developments regarding the case took place in the second
quarter, but that it continues to have a negative impact in terms
of customer satisfaction and outflow among retail customers in
Denmark.
The lender made a quarterly net profit of 3.84 billion Danish
kroner ($576.1 million) compared with DKK4.11 billion in the
year-earlier period. The Copenhagen-based bank was expected to
deliver a net profit of DKK3.87 billion, according to a poll of
analysts provided by FactSet.
Net interest income fell to DKK6.98 billion from DKK7.21
billion.
The decline in net profit was due primarily to lower net
interest income, lower trading income, higher expenses, especially
for anti-money laundering investments and compliance, as well as an
anticipated in-crease in impairments due to fewer reversals from
the allowance account.
Danske also saw a negative impact from the estimated
compensation payable from the previously announced mismanagement of
a financial product that overcharged its customers.
The bank said it now expects the generally slow momentum in
income to continue, driven mainly by margin pressure and
challenging conditions in the financial markets.
New Chief Executive Chris Vogelzang said his focus in the coming
weeks and months will be on analysis of the business and
strategy.
"Later this year, we will come back with an update on how we
will make sure that Danske Bank can continue to deliver an
excellent customer experience, make a positive societal impact, be
a great place to work for our employees and create long-term value
for our shareholders," he said.
Danske reiterated its recently downgraded full-year guidance for
net profit of DKK13 billion-DKK15 billion and expenses of DKK25.5
billion-DKK26 billion.
Danske Bank's common equity Tier 1 ratio--a key measure of
financial strength--rose to 16.6% at the end of the quarter, up
from 15.9% a year earlier.
Write to Dominic Chopping at dominic.chopping@wsj.com;
@domchopping @WSJNordics
(END) Dow Jones Newswires
July 18, 2019 02:53 ET (06:53 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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