Loan losses at Danske Bank’s Irish arm picked up pace in the second quarter of the year, as impairment charges rose.
The Irish division reported a pretax loss of €17.4 million for the three month period, up from an €8.8 million loss in the first quarter of the year. Loan impairment charges were €15.4 million for the second quarter, compared with €5.5 million at the end of March.
But total income rose to €15.7 million, from 14.6 million in the previous quarter, and the company trimmed costs slightly, reducing preprovision losses to €2 million.
Danske Bank’s country head Terry Browne said the bank was seeing the benefit of its recent reorganisation.
“While significantly lower year on year, we are still guiding €750 million in impairments by the end of 2014,” Danske Bank’s country head Terry Browne
“Total income increased on the previous quarter with non-interest income now accounting for 40 per cent of the bank’s income as compared with 34 per cent in 2012,” he said.
“The personal banking division continues to bed down its new operating model while maintaining the focus on credit management with mortgage arrears remaining relatively low at 4.25 per cent versus an industry average of 12.3 per cent. While significantly lower year on year, we are still guiding €750 million in impairments by the end of 2014.”
The combined loan book at Danske Bank Ireland has fallen to €2.9 billion, while customer deposits rose 8 per cent in the quarter to €3.4 billion.
On a group basis, Danske Bank cut its profit outlook for the year after financial market turmoil hurt trading income.
Danske now sees net income from 6.5 billion kroner ($1.16 billion) to 9 billion kroner, compared with a previous range of 7.5 billion kroner to 10 billion kroner.
Net interest income slipped 3.7 per cent to 5.5 billion kroner, while net income rose 46 per cent to 2.18 billion kroner, beating a 1.68 billion-krone estimate, after the bank reported a 45 per cent drop in loan losses to 924 million kroner. Trading income dropped 26 per cent to 2.15 billion kroner.
Danske, which has navigated its way through burst property bubbles in Ireland and Denmark, said loan losses declined to their lowest level since the second quarter of 2008 as the economies of its main markets improved.
Denmark is showing signs of emerging from its housing slump as property prices start to rise, while the economies of Norway and Sweden, where Danske also operates, are growing at a faster rate than the rest of Europe.
“The result is a considerable improvement compared with the same period in 2012 and an important step towards our 2015 objectives,” chief executive Eivind Kolding said in the statement. “The difficult macroeconomic environment with low interest rate levels combined with the volatility in the financial markets in June, however, have led us to revise our guidance for full-year 2013.”
Additional reporting: Bloomberg
