Company announcement for the first quarter of 2024
Company announcement for the first quarter of
2024
Kamilla Hammerich Skytte, CEO, comments on the first quarter of
2024:
“In the first quarter of 2024, Realkredit Danmark recorded a
stable result of DKK 1,005 million. The positive development in the
top line was attributable to the rise in interest rate levels. Net
profit for the period was down DKK 58 million because of an
increase in model-based loan impairment charges.
As expected, housing market activity was low early in the year
as a consequence of the property tax reform, which meant that many
housing trades had been brought forward to late 2023. Towards the
end of the first quarter of 2024, however, we saw an increase in
the number of housing trades. We expect to see moderate rises in
general house prices across Denmark in 2024. A fair increase in
salaries and the consequent recovery in consumer purchasing power
combined with low unemployment and prospects of reasonable economic
activity in society will have a positive effect on the housing
market. Conversely, the interest rate level is significantly higher
than a few years ago, just as purchasing power has not yet
recovered to the level before the substantial rise in inflation,
which will contribute to putting a damper on price developments and
housing market activity.
As in the private market, the business market has been
characterised by falling activity recently, and buyers and sellers
have found it difficult to meet. In the first quarter, there was a
decline in demand for green financing of commercial property, which
to some extent is connected to few investment property transactions
and fewer constructions being completed. Our business customers
increasingly focus on the green transition, ESG reporting
requirements and the EBPD directive recently adopted by the EU
Commission. In the first quarter, we contributed to the launch of
an industry initiative to standardise ESG reporting for property
companies to make reporting easier and cheaper for the individual
property owner – an initiative that we continue to support. We
continue our efforts to strengthen our advisory services regarding
green financing for personal customers.
As part of the Danske Bank Group’s Forward ’28 strategy, we are
working, among other things, to strengthen our advisory services
and financial solutions across home financing from bank and
mortgage institution to ensure that customers get the best and most
competitive solutions.”
Mortgage credit marketAs other European
countries, Denmark is essentially in a state of economic
stagnation, with the one caveat that pharma giant Novo Nordisk’s
growth is pushing the overall activity level up, while much of the
remaining industrial sector and housing construction have
contracted.
Despite the stalled economy, employment has continued to rise,
boosting overall household incomes, and the inflationary pressure
has abated. However, the underlying inflationary pressure is still
relatively high in Denmark and in the euro area, and this means
that a significant drop in mortgage interest rates is hardly just
around the corner.
The housing market went into reverse in January, with a decline
in activity and falling house prices. This was as expected
given the fact that the property tax reform had brought forward
activity to 2023. However, activity improved somewhat in February,
and prices of single-family houses showed a stable trend while
prices in the market for owner-occupied flats saw a small increase
– also in Copenhagen.
This highlights the fact that the housing market appears to be
developing reasonably in the wake of the transition to the new
housing tax system. This also supports our expectation that
house prices will generally rise across Denmark in 2024. It is
still too early, however, to write off the risk of price falls in
the Copenhagen market for owner-occupied flats – especially in the
first half of 2024. This is due to prices having gone up by
just over 10% over the past year and the combination of the hunt
for tax rebates in 2023, higher housing taxes for new buyers in
2024 and a housing expense ratio that is close to a record-high
level.
On the commercial real estate market, activity remains
relatively low. The rise in interest rates has increased the
uncertainty around the valuation of the properties, and potential
buyers and sellers are challenged in terms of finding each other in
the market. However, a sound macroeconomic environment supports
both vacancy rates and rental prices.
First quarter of 2024 The Realkredit Danmark
Group recorded a net profit of DKK 1,005 million in the first
quarter of 2024 (Q1 2023: DKK 1,063 million). The topline
increased, driven by the higher interest rate levels, although this
increase was more than offset by model-based loan impairment
charges.
Expenses increased to DKK 278 million (Q1 2023: DKK 252
million), due primarily to ongoing compliance efforts.
Credit quality remained solid. Loan impairment charges amounted
to DKK 199 million in the first quarter of 2024 (Q1 2023:
DKK 52 million). Loan impairment charges were affected by a
planned model change of DKK 100 million and a net increase in
post-model adjustments of DKK 40 million, which related mainly
to the agriculture segment to counter potential CO2 taxation. At 31
March 2024, the total allowance account amounted to DKK 2,898
million (31 December 2023: DKK 2,738 million).
The rise in mortgage rates has fuelled remortgaging activity,
however, activity is stagnating. Our customers reduced nominal
outstanding debt by DKK 0.8 billion in the first quarter of
2024. Mortgage lending at nominal value decreased DKK 5.0
billion in the first quarter of 2024. Gross lending amounted to
DKK 23 billion (Q1 2023: DKK 31 billion). Total green
bond lending amounted to DKK 27.3 billion at 31 March
2024.
Realkredit Danmark has a proprietary portfolio of DKK 51.8
billion, of which DKK 31.6 billion is managed through a
hold-to-collect portfolio. This portfolio is reported at amortised
cost, and at 31 March 2024, the market value was DKK 0.9
billion lower (31 December 2023: DKK 0.8 billion).
The Systemic Risk Council has recommended that a systemic buffer
of 7% be introduced for exposures to property companies. As a
result, Realkredit Danmark will face increasing capital buffer
requirements in 2024, although the exact impact is uncertain.
Dividend for 2023 is consequently withheld until later in 2024 in
order to ensure that Realkredit Danmark has the best possible
capital structure.
Realkredit Danmark expects net profit in 2024 to be somewhat
below net profit in 2023, primarily due to normalised impairment
levels.
Contact: Kamilla Hammerich Skytte, CEO, tel. +45 45 13 20
82.
Financial highlights – Realkredit Danmark Group
|
INCOME STATEMENT |
Q1 |
Q1 |
Index |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Full year |
|
(DKK millions) |
2024 |
2023 |
24/23 |
2024 |
2023 |
2023 |
2023 |
2023 |
2023 |
|
Administration margin |
1,387 |
1,410 |
98 |
1,387 |
1,393 |
1,394 |
1,396 |
1,410 |
5,593 |
| Net interest
income |
367 |
158 |
232 |
367 |
390 |
314 |
252 |
158 |
1,114 |
| Net fee
income |
50 |
52 |
96 |
50 |
15 |
-87 |
-50 |
52 |
-70 |
| Income from
investment portfolios |
11 |
86 |
13 |
11 |
44 |
42 |
11 |
86 |
183 |
|
Other income |
20 |
19 |
105 |
20 |
22 |
23 |
20 |
19 |
84 |
|
Total income |
1,835 |
1,725 |
106 |
1,835 |
1,864 |
1,686 |
1,629 |
1,725 |
6,904 |
|
Expenses |
278 |
252 |
110 |
278 |
289 |
250 |
264 |
252 |
1,055 |
|
Profit before loan impairment charges |
1,557 |
1,473 |
106 |
1,557 |
1,575 |
1,436 |
1,365 |
1,473 |
5,849 |
|
Loan impairment charges |
199 |
52 |
383 |
199 |
-96 |
-4 |
-66 |
52 |
-114 |
|
Profit before tax |
1,358 |
1,421 |
96 |
1,358 |
1,671 |
1,440 |
1,431 |
1,421 |
5,963 |
|
Tax |
353 |
358 |
99 |
353 |
495 |
363 |
353 |
358 |
1,569 |
|
Net profit for the period |
1,005 |
1,063 |
95 |
1,005 |
1,176 |
1,077 |
1,078 |
1,063 |
4,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET (END OF PERIOD) |
|
|
|
|
|
|
|
|
|
|
(DKK millions) |
|
|
|
|
|
|
|
|
|
|
Due from credit institutions etc. |
16,632 |
13,491 |
123 |
16,632 |
11,618 |
13,759 |
6,877 |
13,491 |
11,618 |
| Mortgage
loans |
746,880 |
729,966 |
102 |
746,880 |
753,624 |
726,741 |
725,360 |
729,966 |
753,624 |
| Bonds and
shares |
53,949 |
47,668 |
113 |
53,949 |
49,580 |
45,827 |
47,559 |
47,668 |
49,580 |
|
Other assets |
2,888 |
1,834 |
157 |
2,888 |
1,441 |
1,803 |
1,470 |
1,834 |
1,441 |
|
Total assets |
820,349 |
792,959 |
103 |
820,349 |
816,263 |
788,130 |
781,266 |
792,959 |
816,263 |
|
Due to credit institutions etc. |
2,005 |
2,000 |
100 |
2,005 |
2,000 |
2,000 |
2,000 |
2,000 |
2,000 |
| Issued
mortgage bonds |
760,589 |
737,694 |
103 |
760,589 |
756,509 |
728,989 |
725,714 |
737,694 |
756,509 |
| Other
liabilities |
6,529 |
6,312 |
103 |
6,529 |
7,531 |
8,064 |
5,548 |
6,312 |
7,531 |
|
Shareholders' equity |
51,226 |
46,953 |
109 |
51,226 |
50,223 |
49,077 |
48,004 |
46,953 |
50,223 |
|
Total liabilities and equity |
820,349 |
792,959 |
103 |
820,349 |
816,263 |
788,130 |
781,266 |
792,959 |
816,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIOS AND KEY FIGURES |
|
|
|
|
|
|
|
|
|
|
Net profit for the period as % p.a. |
|
|
|
|
|
|
|
|
|
| of average
shareholders' equity |
7.9 |
8.8 |
|
7.9 |
9.5 |
8.9 |
9.1 |
8.8 |
8.8 |
| Impairment
charges as % p.a. |
|
|
|
|
|
|
|
|
|
| of mortgage
lending |
0.11 |
0.03 |
|
0.11 |
-0.05 |
-0.01 |
-0.04 |
0.03 |
-0.02 |
| Cost/income
ratio (%) |
15.1 |
14.6 |
|
15.1 |
15.5 |
14.8 |
16.2 |
14.6 |
15.3 |
| Total capital
ratio (%) |
31.4 |
28.8 |
|
31.4 |
31.5 |
29.3 |
29.1 |
28.8 |
31.5 |
| Tier 1 capital
ratio (%) |
31.4 |
28.3 |
|
31.4 |
31.1 |
28.8 |
28.6 |
28.3 |
31.1 |
| Mortgage
loans, nominal value |
801,172 |
802,883 |
|
801,172 |
806,154 |
807,956 |
804,362 |
802,883 |
806,154 |
|
Full-time-equivalent staff (end of period) |
224 |
228 |
|
224 |
229 |
231 |
229 |
228 |
229 |
The company announcement for the first quarter of 2024 is not
presented in accordance with IAS 34, Interim Financial Reporting,
as adopted by the EU, and additional Danish disclosure requirements
for interim reports of issuers of listed bonds.
- Realkredit Danmark Company announcement first quarter 2024