Release Date: July 18, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Danske Bank AS (DNKEY, Financial) reported a net profit of DKK11.2 billion, achieving a return on shareholders' equity of 13%, which aligns with their financial targets for 2026.
- The bank experienced a 5% increase in lending, particularly driven by corporate customers, contributing to an improved market share for corporate lending across all Nordic countries.
- Deposits grew by 3% in the first half of 2025, with significant contributions from large corporate and retail business sectors.
- The bank's strategic focus on expanding its cash management business and investing in technology aligns with its FORWARD 28 strategy, supporting long-term growth.
- Credit quality remained strong, with loan impairment charges well below the cycle, maintaining a positive outlook for the full year.
Negative Points
- Net profit was down 2% year-on-year, primarily due to lower net income from the insurance business and higher loan impairment charges.
- Fee income was softer than expected, impacted by reduced investment activity and lower refinancing activity in the mortgage sector.
- Operating expenses remained stable, but there was a slight increase in costs related to financial crime prevention.
- The macroeconomic environment, despite being generally favorable, still posed challenges with geopolitical uncertainties affecting consumer and business sentiment.
- The bank's net interest income (NII) faced pressure from rate cuts, although partially mitigated by increased volumes and structural hedging.
Q & A Highlights
Q: The fee income was relatively soft this quarter. How should we think about the fee income for the coming quarters? Do you see scope for recovery in asset management activity or advisory in the second half of the year?
A: Carsten Rasch Egeriis, CEO: The fee income was softer than expected, mainly due to investment side challenges in April and lower lending fees from refinancing activities. However, AUMs ended at a record high, and we see good momentum on the investment side. We expect more activity in capital markets in the second half, with a solid pipeline, especially in advisory and capital market fees.
Q: Can you remind us of your latest thoughts on capital allocation, particularly regarding dividends, buybacks, or M&A?
A: Carsten Rasch Egeriis, CEO: We continue to generate healthy capital with a strong CET1 ratio of 18.7%. Our focus remains on distributing in-year earnings, and we will update our capital distribution strategy in Q1 next year. Our priority is to grow our business, and we will consider potential capital distribution if growth does not meet expectations.
Q: On your guidance, the numbers are the same, but it seems there's a shift towards higher NII and lower fees. Is that fair?
A: Carsten Rasch Egeriis, CEO: Yes, we adjusted the guidance wording due to weaker Q2 fees. Despite this, we remain positive about our strategy and fee opportunities. We continue to feel good about the NII trajectory, expecting it to be above DKK35 billion, supported by strong volume growth and structural hedges.
Q: Can you explain the increase in NII sensitivity for downward rate movements?
A: Cecile Hillary, CFO: The sensitivity increase to minus DKK650 million for a 25 basis points decrease is due to approaching the zero bound, reducing our ability to pass rate changes to deposits. Additionally, minor changes in sensitivity for rate increases and adjustments in our deposit bond hedge contribute to this.
Q: What are your views on the competitive dynamics in Denmark, especially with the CRR3 output floors not applying to Danish subsidiaries?
A: Carsten Rasch Egeriis, CEO: We have already front-loaded the CRR3 impact, and I don't foresee changes in competitive dynamics. Historically, Denmark's early adoption created some unlevel playing fields, but we've navigated through it. We continue to monitor regulatory developments, especially concerning European competitiveness and simplification.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
