Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Danske Bank A/S (DNKEY, Financial) reported a net profit of DKK11.5 billion for the first half of 2024, equivalent to a payout ratio of 56%.
- The Board of Directors has decided to distribute an interim dividend of DKK7.5 per share.
- The bank saw an increase in customer activity, particularly in corporate lending and investment products.
- Danske Bank A/S (DNKEY) maintained a CET1 target of above 16% by the end of 2026.
- The bank's asset management business continued to show positive trends with net sales for retail customers and institutional mandates.
Negative Points
- Net trading income was lower compared to the same period last year due to exceptionally high customer activity in Q1 2023.
- Operating expenses increased slightly due to wage inflation and investment ramp-ups.
- The bank's stock of residential lending in Denmark was impacted by redemptions and amortization.
- There was a subdued housing market activity impacting fee income from lending activities.
- The bank's CET1 capital requirement remains high at 14.5%, including retail exposures in Norway.
Q & A Highlights
Q: How should we think about net interest income (NII) for the full year, and are you still comfortable with the guidance of around DKK37 billion?
A: We continue to feel comfortable with the trend and the guidance around NII being roughly around the consensus. Growth was more muted in the first half but improved in the second quarter. We expect NII to peak sometime in the second half, depending on the timing of rate changes.
Q: How should we think about the Danica deduction going forward and its impact on core equity Tier 1?
A: The reduction in the statutory deduction for insurance subsidiaries is permanent and defines a new lower level of deduction. However, the volatility component will still be present going forward.
Q: Why didn't you tighten the dividend payout ratio target range, and why are you abandoning the interim dividend policy?
A: We plan to pay at the upper end of the 40% to 60% range to maintain flexibility. The interim dividend was a clear signal of our strong capital base, but our general policy is to pay an annual dividend.
Q: Could you clarify your capital distribution plans for 2024?
A: We plan to distribute all of 2024 earnings, and what we don't do as a dividend, we will distribute otherwise. Additionally, we will distribute the capital from the sale of the Norway retail business as an extraordinary dividend when the deal closes.
Q: What is your outlook for risk exposure amount (REA) growth until 2026?
A: We have largely front-loaded the Basel 4 impacts, and we expect growth rates to be within reach. The growth will be supported by our strategy and ongoing earnings.
Q: How do you see lending margin pressure in different countries?
A: We expect flattish net interest margins overall, with slightly increasing lending margins and slight pressures on deposit margins. This assumption holds across different markets.
Q: What should we pencil in as the expected run rate on income from the insurance business?
A: We previously indicated roughly DKK1.6 billion of earnings from Danica through the strategy period, which remains a reasonable amount to use.
Q: Why are you maintaining post-model adjustments (PMAs) despite net reversals in loan impairment charges?
A: While the soft landing has developed well, it's still early days to call the final part of the transmission mechanism from higher rates. We will continue to monitor and adjust PMAs as necessary.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
