We have supported and will continue to support our customers in these uncertain times with our expert advisory services. Our specialist knowledge, digital solutions and sustainable offerings were also in demand in the first quarter, and our core banking income continues to show progress and resilience in a very challenging environment, which of course also affects our other income lines. We have confidence in our financial ambitions due to our diversified business model, strong credit quality and continued progress towards becoming a more efficient bank.
We have now begun initial discussions with U.S. and Danish authorities in relation to the Estonia matter. We cannot share any more details about the discussions with the authorities, which are confidential. And we cannot say anything about the timing, outcome or the size of a potential settlement or fine, which is likely to be material. Consequently, the Board has decided that Danske Bank will not to pay out dividends for the first quarter in order to ensure prudent capital management".
CEO, Danske Bank
First quarter 2022 vs first quarter 2021
Continued support of customers
in challenging geopolitical circumstances
In the first quarter, the environment in which we operate was once again changing rapidly. The changes were caused not only by macroeconomic uncertainty and geopolitical turmoil but also by the continuing effects of the pandemic, including supply chain bottlenecks, changed social trends and rising inflation, especially in relation to commodity and energy prices.
We are all deeply dismayed by the tragic events in Ukraine, and we express our deepest compassion with everyone affected by the Russian invasion. Our direct financial exposure is very limited, and our main focus has therefore been on engaging closely with our customers to provide expert advice and support in these challenging times.
As the Nordic societies reopened fully from the lockdowns during the first quarter of 2022, the negative impacts of the pandemic decreased, and business credit demand was solid compared with the level of demand during the same period last year. The pandemic has, however, led to lasting changes, and uncertainty persists.
How the totality of heightened uncertainty will further impact industries and societies in the coming years is unknown. However, critically important, we are confident that Danske Bank, as a well-capitalised financial institution with a high level of expertise and a diversified, agile business model, is in a strong position to both adapt to the prevailing operating environment and, more importantly, to support our customers and societies in the challenging times that likely lie ahead.
Solid core banking performance
in challenging environment
Our diversified and resilient business model has continued to prove valuable in the changing operating environment in the first quarter of this year with solid core banking income.
As we continue to execute on strategic initiatives, the trend in lending volumes and net interest income was positive in the quarter. Net interest income increased for the fifth consecutive quarter benefiting from deposit repricing initiatives implemented during 2021, and loan volumes increased across business units, and especially at Large Corporates & Institutions.
Net fee income was stable as fees from higher activity in our core banking activities made up for lower capital markets activity following the escalation of geopolitical uncertainty. Net trading income decreased due to negative value adjustments caused by the increased volatility, while net income from insurance business was significantly impacted by the turbulent financial markets.
The structural progress towards becoming a more efficient bank continues, and underlying costs trend in a downward direction. The trajectory towards our longer-term financial ambitions is supported, among other things, by lower staff costs. However, remediation costs related to legacy issues have increased, and expenses were also impacted by the Swedish bank tax and a higher resolution fund fee.
Strong credit quality continues to support a low level of impairments, as we have limited direct exposure to Russia and as sufficient buffers remain in place.
Our strong focus on commercial momentum and execution across our priorities is paying off, with for example the positive signs in the retail business in Denmark continuing in the first quarter. While an overall cost focus remains a priority, the downwards trajectory of our underlying costs continues, and we remain committed to reaching our 2023 targets".
CFO, Danske Bank
Profit before tax in the first quarter of 2022 was DKK 2.6 billion, an improvement of 37% from the level in the same period in 2021, due primarily to a one-off gain from the sale of the customer portfolio in Luxembourg and lower loan impairment charges.
Profit before tax in the first three months of 2022 was DKK 1.7 billion, a decline from the same period last year, due to lower trading income amid challenging rates and credit markets.
Due to the turmoil in the financial markets, the result for the first quarter of 2022 was DKK 84 million, driven by negative investment results for life insurance products where Danica Pension has the investment risk as well as by a lower result of the health and accident business. Part of the negative development was due to valuation effects in the quarter.
The underlying business is still healthy, and premiums increased 19% from the level in the same period last year, reflecting a strong position in the market and the fact that more business customers have chosen Danica Pension. The risk result of the health and accident business saw a positive development from the same period last year due to fewer claims.
Outlook for 2022
On the basis of the development seen in the first quarter, we continue to expect net profit to be in the range of DKK 13-15 billion.
Stefan Singh Kailay, Head of Media Relations
Tel. +45 45 14 14 00