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First half of 2018 characterised by lending growth and uncertainty in the financial markets

Net profit of DKK 9.1 billion and return on equity of 11.9%

Danske Bank has announced its financial results for the first half of 2018.

Thomas F. Borgen, Chief Executive Officer, comments on the financial results:

In the first half of 2018, the positive momentum in our lending activities continued, while developments in the financial markets had an adverse effect as the global uncertainty and investor reticence contributed in particular to a weaker development in net trading income,” says Thomas F. Borgen, Chief Executive Officer. "The decline was partially offset by lending growth, rising net interest income and solid credit quality, which made it possible for us to continue to reverse impairments. Our efforts to improve the customer experience continued, and we launched a number of innovations within mobile solutions, sustainable investments and home finance. Overall, we maintain our expectations of a net profit of between DKK 18 and DKK 20 billion for the full year. Due to the developments in the financial markets, we now expect net profit to be at the lower end of the range.

The interim report is available at
Highlights are shown below:

First half 2018 vs first half 2017
Danske Bank posted a net profit of DKK 9.1 billion in the first half of 2018, a decrease of 12% from the level in the first half of 2017. The result reflects a continuation of good lending growth but also weak trading income and lower fee income due to uncertainty in the financial markets.

The return on shareholders’ equity after tax was 11.9%, against 13.5% in the first half of 2017.

Total income amounted to DKK 22.3 billion, a decrease of 8% from the level in the first half of 2017. The decrease was caused by a decline mainly in net trading income, but we also saw lower net fee income. Income benefited from continued growth in net interest income.
  • Net interest income rose 2% to DKK 11.8 billion. Net interest income benefited from loan growth, primarily in Sweden and Norway. In Denmark and Finland, net interest income was stable, although with a particularly good development at Business Banking.

  • Uncertainty in the financial markets in the first half of 2018 affected in particular income at Corporates & Institutions and Wealth Management. Accordingly, net fee income fell 3% to DKK 7.5 billion, and net trading income fell 40% to DKK 2.5 billion.

  • Other income fell 45% to DKK 0.5 billion. The reasons for the decline were that the first half of 2017 benefited from income from Krogsveen, the Norwegian real-estate agency chain, which was sold in the first quarter of 2018, and the first half of 2018 was adversely affected by a lower risk result from the health and accident business at Wealth Management.

Operating expenses amounted to DKK 11.4 billion, a decrease of 1% from the level in the first half of 2017. The expense level benefited from lower activity and ongoing efficiency measures but was adversely affected by higher costs for compliance, including costs related to Estonia, and continued investments in our digital platforms.

Stable macroeconomic conditions and solid credit quality resulted in net loan impairment reversals of DKK 707 million for the first half of 2018.

At the end of June 2018, total lending was up 2% from the level at the end of June 2017. Lending grew in almost all markets. Total deposits were up 1%.

Developments at business units
Personal Banking posted a profit before tax of DKK 2.7 billion, an increase of 6% relative to the level for the first half of 2017. The result was driven by a continued increase in business volumes, especially in Sweden and Norway, lower operating expenses and net impairment reversals.

Business Banking posted a profit before tax of DKK 4.2 billion, an increase of 3% from the level in the first half of 2017. The increase was the result of good business momentum and increasing lending volumes in all our Nordic markets. Operating expenses rose 4%, among other things due to higher IT investments and costs related to compliance. At DKK 451 million, net impairment reversals were high.

Corporates & Institutions posted a profit before tax of DKK 2.6 billion, a decrease of 28% from the level in the first half of 2017, when trading income was high due to favourable market conditions and high customer activity. Operating expenses decreased 3% due to lower performance-based compensation and a continuous focus on cost efficiency.

Wealth Management posted a profit before tax of DKK 1.6 billion, a decrease of 24% from the level in the first half of 2017. The financial performance was adversely affected by uncertainty in the financial markets, causing a significantly lower investment result in the health and accident business and lower fee income. Operating expenses increased from the level in the first half of 2017, partly due to regulatory costs and costs related to SEB Pension Danmark.

Despite macroeconomic uncertainty, Danske Bank in Northern Ireland continued to experience growth in lending and deposits. Profit before tax declined 30% (in local currency), however, on the basis of loan impairment charges in the first quarter of 2018.

Strong capital ratios
The Board of Directors has reassessed Danske Bank’s solvency need to ensure adequate capital coverage of compliance and reputational risks following the order from the Danish FSA issued on 3 May 2018. This has led to an increase in the total capital requirement of 0.7 percentage points to 16.1% and in the CET1 capital requirement of 0.4 percentage points to 11.1%.

Our capital position remains strong, with a total capital ratio of 21.6% and a CET1 capital ratio of 15.9%. Following the order from the Danish FSA, our target for total capital has been revised from around 19% to above 19% in the short to medium term. Our CET1 capital target of 14-15% is unchanged.

Investigations into the Estonian branch
The investigations into the issues related to the now closed down non-resident portfolio at our Estonian branch between 2007 and 2015 continue to progress according to plan. The investigations are comprehensive, covering a period of 9 years and a large quantity of data, including more than 9 million emails, 7,000 documents and millions of transactions.

While it is still too early to conclude as to the extent of suspicious transactions, it is clear that Danske Bank has failed to live up to our own standards and the expectations of society at large in terms of preventing our Estonian branch from being used for potentially illegitimate activities.

As well as being committed to transparency with respect to the findings of the investigations, including a clear account of the issues, causes and accountabilities, the Board of Directors and the Executive Board are also determined that Danske Bank should not benefit financially from such suspicious transactions in the Estonian non-resident portfolio. Consequently, it is Danske Bank’s intention to make the gross income generated from such transactions in the period from 2007 to 2015 available for efforts that support the interest of the societies in which we operate, such as combating international financial crime.

As the comprehensive investigations, which are anchored in the Board of Directors, have not been finalised, it is too early to determine the amount to be made available. For reference, the total gross income from the non-resident portfolio between 2007 and 2015 has been estimated at around DKK 1.5 billion. Conclusions from the investigations will be reported by September 2018. The amount and the way in which it will be made available will be decided after we have concluded on the investigations.

We expect net profit for 2018 to be in the range of DKK 18-20 billion. Based on trading income in the first half of 2018, we currently expect net profit to be at the lower end of the range.

We maintain our ambition to rank in the top three among our Nordic peers in terms of return on shareholders’ equity.

Yours faithfully
Danske Bank

Journalists are also welcome to contact our Press Office by phone +45 45 14 14 00.