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Danske Bank raises lending rates by 0.25 of a percentage point

Press release

As result of the ongoing turbulence in the financial markets and the consequent increase in funding costs, Danske Bank Denmark has decided to raise lending rates for most of its products by 0.25 of a percentage point with effect from February 29, 2008. The adjustment does not apply to the new 24/7 and 24/7 no-fee product packages, Danske Prioritet and Danske Prioritet Plus.

The Danske Bank Group has decided to raise lending rates now because the Group incurred extra funding costs of about DKr150m in the last months of 2007 and funding costs within the industry appear to have settled at a permanently higher level.

“Apparently, the price of money has shifted to a new and higher level,” says Henrik Normann, head of Danske Bank Denmark. “We respond to this change now. In the same way as oil is crucial to petrol companies, money is crucial to our line of business. When oil prices go up, petrol prices immediately follow, and when the price of money goes up, we have to raise our lending rates.”

Over the past 10 to 15 years, the price of money has seen a constant decline. Interest margins have continued to narrow to the benefit of both the retail and corporate segments. Statistics released by the Danish central bank show that since 1996 the interest margins for both segments have narrowed some 4 percentage points – although slightly more in the retail segment, which has in fact seen a halving of the interest margin.

“Now, the trend is slightly turning around,” Henrik Normann continues. “For example, net monthly interest payments on a loan with a principal of DKr100,000 will increase by 12-14 Danish kroner.”

Danske Bank Denmark has decided to keep its deposit rates unchanged.

“In 2007, we adjusted a number of our rates and fees,” Henrik Normann adds. “One of the most significant changes was our offer of an interest rate of 4.25% on deposits in high-interest savings accounts and Danske Netopsparing accounts. At the same time, we launched our 24/7 product packages, which feature attractive deposit rates on salary accounts. As we lifted deposit rates considerably in 2007, we have decided not to make any adjustments this time. The turbulence in the financial markets has imposed higher funding costs of between 0.25 and 1.2 percentage points on the Bank for debt and subordinated debt, and the announced raise in lending rates will allow us to partially offset this increase. Our hope is, of course, that markets will calm down, but if funding costs do not start to decline, I cannot guarantee that we will not have to introduce further adjustments later in the year.”

Danske Bank A/S
Steen Reeslev

Henrik Normann, head of Danske Bank Denmark, tel. +45 45 14 04 44
Jonas Torp, head of Press Relations, tel. +45 45 14 56 94, mobile +45 25 55 63 25