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    DANSKE   DK0010274414


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Nordea to review targets after tough second quarter for Nordic banks

07/18/2019 | 07:02am EST
FILE PHOTO: FILE PHOTO: The Nordea Bank AB logo is seen at the SIBOS banking and financial conference in Toronto

HELSINKI/COPENHAGEN (Reuters) - Nordea, the biggest bank in the Nordics, said it would review its financial targets in coming months, as the region's lenders struggle with weak growth at home and rising compliance costs from money laundering scandals overseas.

Nordic banks have reported weak quarterly results across the board against the backdrop of low interest rates and tough competition.

Danish peer Danske Bank's quarterly pre-tax profit also missed expectations on Thursday, hurt by low rates and higher costs associated with compliance following a money-laundering scandal at its Estonian bank.

It reported a 15.4% rise in costs from a year earlier, which it said was mainly down to investing in more staff and technology to deal with the Estonia case.

Nordea's net profit fell 11% from a year earlier to 681 million euros (£613.38 million) in its second quarter ended June 30, missing analysts' average expectation of 739 million euros in a poll.

Net interest income, the bank's most important income line, fell 4% to 1.07 billion euros due to fierce competition in mortgages and household loans across the region.

Jefferies analysts said the second quarter result "suggests downgrades to consensus led by net interest income".

Nordea shares were down 6.6% at 1003 GMT, pulling other Nordic banks lower, with SEB, Swedbank and Handelsbanken all down more than 1%. Danske shares dipped 0.9%, having already fallen sharply after the bank gave preliminary data on its earnings on July 8.

"As our performance is not satisfactory, further actions are needed to strengthen the financial results," Nordea Chief Executive Officer Casper von Koskull said in a statement, without elaborating.

The bank said it planned to present new financial targets, including the capital and dividend policies, after third-quarter results.


Earlier this week, peer Swedbank slashed its dividend payout policy to 50% from 75%, aiming to strengthen its capital amid fallout from a Baltic money laundering scandal.

Nordea cited internal reasons such as lowering its risk level and concentrating on Nordic markets as well as external factors for the target revamp.

"Financial environments have also changed with expected lower rates for longer, and we will soon have more clarity on our capital requirements within the banking union," Nordea said.

Nordea has retaken its position as the Nordic region's biggest bank by market capitalisation after Norway's DNB briefly took the crown in June and July. Nordea's market capitalisation at Wednesday's close was 26.82 billion euros, while DNB was at 25.79 billion.

Danske Bank, whose shares have dropped more than 40% over the last year, said it expected to have to add to its capital reserves as Denmark's financial watchdog is investigating a case where retail clients had been overcharged fees in relation to an investment product.

"Overall Danske's core franchise continues to come under pressure whilst the overhang of regulatory investigations persists, with higher capital requirements a potential added headwind today," KBW analysts said in a research note.

(Additional reporting by Stine Jacobsen, Writing by Rachel Armstrong; Editing by Emelia Sithole-Matarise)

By Tarmo Virki and Nikolaj Skydsgaard

© Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
DANSKE BANK A/S 0.13% 112.1 Delayed Quote.11.23%
SVENSKA HANDELSBANKEN AB -1.08% 95.5 Delayed Quote.15.62%
SWEDBANK AB -0.69% 183.76 Delayed Quote.27.50%
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Analyst Recommendations on DANSKE BANK A/S
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Sales 2021 42 137 M 6 413 M 6 413 M
Net income 2021 11 540 M 1 756 M 1 756 M
Net Debt 2021 - - -
P/E ratio 2021 8,36x
Yield 2021 6,31%
Capitalization 95 633 M 14 528 M 14 555 M
Capi. / Sales 2021 2,27x
Capi. / Sales 2022 2,26x
Nbr of Employees 22 027
Free-Float 77,6%
Duration : Period :
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Mean consensus HOLD
Number of Analysts 20
Last Close Price 112,10 DKK
Average target price 124,47 DKK
Spread / Average Target 11,0%
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Carsten Rasch Egeriis Chief Executive Officer
Stephan Engels Chief Financial Officer
Karsten Dybvad Dalsjö Chairman
Fredrik Lindstrom Group Chief Information Officer
Frans Woelders Group Chief Operating Officer
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