Danske Bank Plc Group's Interim Report January - June 2016
21.7.2016
Satisfactory result amid increasing uncertainty
The first half-year of 2016 was characterized by difficult market conditions with a continuation of negative interest rates and low growth. In addition, the UK's potential exit from the EU increased uncertainty in the financial markets and about the economic outlook in Finland. Danske Bank's diversified business model and efforts to become an even more customer-focused and efficient bank mean that, despite the challenges, we delivered a satisfactory result for the period.
Total income for Danske Bank's operations in Finland* was 3% lower compared with the same period of the previous year and amounted to EUR 316.9 million (EUR 326.2 million). Low interest rates continued to depress net interest income. Net fee income was also slightly lower compared with previous year's level. Net trading income, which has been impacted by significant volatility related to credit default swap spreads and Brexit among other things, increased by 7%. Total costs continued to decrease and were down by almost 3%. Profit before taxes totaled EUR 130.8 million (135.9).
Customer activity was good in several units. Mortgage lending developed positively, and around half of mortgage customers chose one of the new flexible mortgage solutions and 33 % of customers took the benefit of managing their interest risk with an interest rate collar. Loan portfolio among small and medium-sized companies grew by 8%, continuing to outpace the market. In the C&I business, Danske Bank arranged bonds for several major Finnish corporates as well as for central and local government entities.
"Our loan portfolio continued to grow especially among the corporate customers. Net interest income decreased further despite the balance sheet growth, because the interest rates paid on customers' deposits are adjusted to reflect the low interest environment with a delay," says Risto Tornivaara, CEO of Danske Bank Plc.
Over 320.000 Finns have downloaded the popular MobilePay application, and its business version was launched in the spring with both point-of-sale and appSwitch solutions. During the second half of the year Danske Bank intends to launch a MobilePay solution for small businesses that will offer them completely new possibilities to operate in the world of mobile payment.
"MobilePay's business version has raised a lot of interest among Finnish companies, and it looks like 2016 will be the year for the breakthrough of mobile payment in this market. Finland needs growth stories and innovations, which will help businesses succeed in the global competition and create wellbeing for future generations. Finland has high-level expertise in digitalization and mobile solutions, in particular, but there is also still plenty of unused potential in Finnish companies." says Risto Tornivaara.
*Includes Danske Bank Plc Group and the Helsinki Branch of Danske Bank A/S.
Financial Highlights of Danske Bank's operations in Finland
In addition to Danske Bank Plc, Danske Bank's operations in Finland include the Helsinki branch of Danske Bank A/S.
| EUR millions | H1 2016 | H1 2015 | Change | 2015 |
| Net interest income | 161,3 | 165,9 | -2,7% | 332,7 |
| Net fee income | 132,5 | 137,9 | -3,9% | 268,7 |
| Net trading income | 17,9 | 16,7 | 6,8% | 19,3 |
| Other income | 5,2 | 5,6 | -7,6% | 11,6 |
| Total income | 316,9 | 326,2 | -2,8% | 632,2 |
| Operating expenses | 183,5 | 188,9 | -2,9% | 376,1 |
| Profit before loan impairment charges | 133,4 | 137,3 | -2,8% | 256,1 |
| Loan impairment charges | 2,6 | 1,4 | 83,1% | 12,8 |
| Profit before tax | 130,8 | 135,9 | -3,7% | 243,2 |
| C/I -ratio, % | 57,9% | 57,9% | 0,0% | 59,5% |
| Loans | 21 552,0 | 20 826,7 | 3,5% | 20 882,8 |
| Deposits | 19 035,1 | 20 251,7 | -6,0% | 19 830,6 |
Danske Bank Plc Group's Financial Highlights
| EUR millions | H1 2016 | H1 2015 | Change | 2015 |
| Net interest income | 145,8 | 150,6 | -3,2% | 304,4 |
| Net fee income | 116,4 | 116,8 | -0,3% | 234,5 |
| Net trading income | 16,8 | 14,8 | 13,5% | 14,3 |
| Other income | 10,1 | 10,7 | -5,5% | 21,6 |
| Total income | 289,1 | 293,0 | -1,3% | 574,7 |
| Operating expenses | 170,8 | 176,9 | -3,5% | 352,5 |
| Profit before loan impairment charges | 118,3 | 116,0 | 2,0% | 222,2 |
| Loan impairment charges | 2,6 | 3,1 | -16,1% | 12,6 |
| Profit before tax | 115,7 | 113,0 | 2,5% | 209,5 |
| C/I -ratio, % | 59,1% | 60,5% | -1,4% | 61,4% |
| ROE, % | 7,5% | 6,3% | 1,2% | 6,6% |
| Total capital ratio, % * | 19,5% | 15,5% | 4,0% | 18,4% |
| Common equity tier 1 capital ratio, (Tier 1), % * | 18,6% | 14,8% | 3,8% | 17,5% |
| FTE at the end of period | 1 736 | 1 923 | -9,7% | 1 730 |
| Loans | 20 309,2 | 19 694,3 | 3,1% | 19 818,8 |
| Deposits | 17 065,2 | 20 190,2 | -15,5% | 18 115,3 |
| Total equity | 2 550,3 | 2 427,7 | 5,0% | 2 515,4 |
| Total balance sheet | 30 174,6 | 31 647,4 | -4,7% | 30 312,9 |
Figures in this press release have not been audited. *Profit after taxes for January-June is not included in Tier 1 distributable capital in solvency calculations at the end of June 2016.
Danske Bank Plc publishes only one interim report during 2016. The entire report for January -June 2016 is attached to this release as a PDF file. The Group's financial statement for January-December 2016 will be released on 2 February 2017.
Outlook for 2016
Growth in the Finnish economy is expected to be quite modest yet during the second half of 2016 and the interest environment is expected to remain at a low level. We expect our lending to personal and corporate customers to grow in 2016.
Expenses are expected to be around the same level as the previous year, mostly due to growth in costs associated with regulation. Overall, we expect that our net profit for 2016 will be slightly higher than in 2015 as loan impairment charges are expected to remain at a low level.
For further information:
Risto Tornivaara, CEO of Danske Bank Plc. For an interview with Risto Tornivaara, please contact Tomi Koljonen/Communications, tel. +358 50 422 0911.
Danske Bank is Finland's third largest bank, which serves around a million Finnish personal, business and institutional customers. Danske Bank Plc is a part of the Nordic Danske Bank Group.
Danske Bank is a Nordic universal bank with strong regional roots and bridges to the rest of the world. We serve more than 3.5 million personal, business and institutional customers, and in addition to banking services, we offer life insurance and pension, mortgage credit, wealth management, real estate and leasing services and products. Our vision is to be recognised as the most trusted financial partner. We are driven by a desire to make important financial decisions and daily banking easy, and our aim is to create long-term value for our customers and investors and the societies we are a part of. Danske Bank is headquartered in Copenhagen and is listed on Nasdaq Copenhagen. www.danskebank.com
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