Danske beats consensus as NII holds up, Handelsbanken record

Jul 24th, 2015

Danske Bank announced second quarter pre-tax profits 17% ahead of consensus expectations on Wednesday, with commissions, costs and loan loss provisioning driving the results while net interest income (NII) held up.

DanskeNII came in at Dkr5.5bn (Eu740m) versus Dkr5.7bn in the same period of 2014, but up 3% on the previous quarter and in line with expectations.

“This is good news in the difficult interest rate environment in Denmark,” said an equity analyst, “showing good resilience to the -75bp interest rates. Danske Bank has to a large degree been able to compensate for the negative interest rates in Denmark and Sweden (-25bp) by better funding and rising lending margins.”

The Danish lender’s pre-tax profit came in at Dkr5.8bn, versus Dkr5bn a year previously, and the bank raise its full-year net profit guidance from Dkr14bn-plus to Dkr16bn-plus.

“In the first half of 2015, we benefited from our diversified business model and posted a satisfactory result despite the adverse effect of negative interest rates,” said Danske CEO Thomas F Borgen. “The result is driven by high customer activity, improved macroeconomic conditions and lower impairments.”

Commission generation of Dkr3.1bn was 7% ahead of expectations and up 17% year-on-year, while costs were 5% lower and better than expected. Loan loss provisions in Q2 were Dkr0.2bn, equivalent to 3bp, versus 14bp a year previously.

Svenska Handelsbanken announced results on Tuesday after its leading Swedish peers reported last week. Handelsbanken’s pre-tax profit was Skr5.3bn (Eu570m), 1% ahead of consensus expectations and up on Skr5.1bn in the second quarter of 2014.

The bank highlighted that it achieved the highest quarterly operating profit in the its 143 year history

Driving the upside surprise was net interest income coming in 1% ahead of expectations and 5% year-on-year at Skr7bn, according to an equity analyst, while commission generation was also 1% above expectations and up 10% y-o-y, at Skr2.4bn, and net items also contributed, coming in 15% above expectations at Skr0.5bn.

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