Danske Bank (DANSKE) Q2 2016 earnings summary

Executive summary

• H1 net profit was DKK 9.363bn versus DKK 9.419bn; ROE was 12.4% versus 12.5%, broadly flat year over year.

• Core pretax profit was DKK 12.0bn; lending grew 4% year over year and credit quality remained strong.

• Customer satisfaction and inflows improved in key markets, supported by digitalisation, new products and simpler customer experiences.

Financial highlights

• Total income was DKK 23.012bn, down from DKK 23.839bn; NII was DKK 10.7bn, fee income fell 10% and trading income fell 15% to DKK 3.7bn.

• Expenses fell 3% to DKK 11.115bn; the cost/income ratio was 48.3% versus 47.9%.

• Core loan impairment charges were net reversals of DKK 107m versus charges of DKK 283m in H1 2015; group impairments were net reversals of DKK 188m.

• Profit before tax was DKK 12.051bn versus DKK 12.176bn; EPS was DKK 9.4 versus DKK 9.2.

• Lending reached DKK 1,664bn, up 4% year over year; deposits and RD funding totalled DKK 1,611bn, up 2%.

Outlook and guidance

• FY 2016 net profit was expected to be in line with 2015 net profit before goodwill impairments.

• NII outlook improved, supported by less margin pressure, lending growth and lower funding costs; H2 funding-cost benefit was estimated at DKK 150m.

• FY fee income was expected below 2015 amid weak activity and market uncertainty; expenses were expected to decline and impairments to remain low.

• The ROE ambition remained at least 12.5% by 2018; CET1 and total capital targets were 14–15% and ~19%, respectively.