Preliminary announcement of financial statements 2019

Summary

• Earnings per share DKK 29.0 (2018: DKK 28.2)
• Profit before tax DKK 3,079m, corresponding to a return on equity of 9.1% (2018: DKK 3,140m and 9.5%)
• Profit after tax DKK 2,440m, corresponding to a return on equity of 7.1% (2018: DKK 2,500m and 7.6%)
• Core income: DKK 8,060m (2018: DKK 7,999m)
• Core profit: DKK 3,132m (2018: DKK 2,635m)
• Capital ratio of 21.5% and Common Equity Tier 1 ratio of 17.4% (2018: 20.0% and 16.4%)
• The current share buy-back programme is raised by DKK 500m and extended until 31 July 2020
• It is the intention of the Supervisory Board that, at the Annual General Meeting in March 2020, a motion be made for the cancellation of 3,651,372 shares
• A DKK 250,000 limit for zero interest on the balance of personal clients’ NemKonto is set from 1 May 2020
• Profit after tax is expected to be in the range of DKK 1.8 bn-2.2 bn for 2020.

Comments by management

Profit for the year

“In 2019, Jyske Bank generated a profit per  share of DKK 29.0 and a profit after tax of DKK 2,440m, compared to DKK 28.2 per share and DKK 2,500m, respectively, in 2018. Due to buybacks of own shares in recent years and expectations that this line will continue in the coming years, earnings per share will be a relevant measure for shareholders’ return.

The year 2019 was characterised by continuing progress in the Danish economy and a favourable trend in the financial markets. The financial situation of the clients was generally at a satisfactory level, and the falling interest rates supported high refinancing activity. The robust financial situation of the clients was reflected in reversal of impairment charges despite the higher management's estimates in consequence of the sector-wide information letter from the Danish Financial Supervisory Authority. On the other hand, the pressure on net interest income increased, particularly due to the lower interest rates and customers’ high propensity to save.

Negative interest rates

After 1 December 2019, almost half of Jyske Bank’s deposits are still not subject to negative interest rates.  Over the past five years, the negative interest rate environment, which has been prevalent almost without interruption since 2012, has contributed to the decline in Jyske Bank's net interest income of DKK 650m despite the increase in lending (excl. repo) by about DKK 100 bn over the same period.

As it is expected that the negative interest-rate environment will continue for several years, Jyske Bank finds it necessary - as from 1 May 2020 - to set a DKK 250,000 limit for zero interest on the balance of personal clients’ NemKonto. For deposit accounts for children, the limit for zero interest will be DKK 100,000.

So far, our experience rendering advice to clients who are affected by negative interest rates has been positive.  The advice offers the clients one or more ways to avoid being affected by the negative interest rates. This is expected still to be the case even when the exemption limit for zero interest is lowered.

Business activity

Over the year, the extension of negative deposit rates and a positive development in the financial markets resulted in increasing demand for investment products. In combination with the very high refinancing activity, this secured a high level of activity in 2019.  Mortgage loans grew moderately, while bank loans and advances faced challenges in the form of a low demand for investments and lending.

It is Jyske Bank’s aim that its power consumption, inclusive of the bank’s share of JN Data’s and Bankdata's power consumption, should be carbon neutral through its own production of renewable energy as from 2021, rather than through the current carbon compensation obtained through purchases of green power certificates. In this connection, the Group wishes to acquire a land-based wind turbine that produces about 16 GWh per year.

Jyske Bank has changed its terms of business so that, as of the beginning of 2020, the bank can require all corporate clients to use an auditor approved by the bank. The experience gained throughout 2019 proves a positive effect on the efforts to prevent money laundering.

Capital structure, etc.

Given the capital ratio of 21.5%, Jyske Bank already at the end of 2019 met the capital level target intended for 2022. Due to the raising of Tier 2 capital in the amount of about DKK 1.5 bn in January 2020, the capital structure offers scope for an increase by DKK 500m and an extension until 31 July 2020 of the current share buy-back programme.

Considering the current market conditions, it is the aim of the bank to deliver a profit after tax in the range of DKK 1.8bn-2.2 bn for 2020,” ends Anders Dam.

Outlook

Jyske Bank anticipates that economic growth in Denmark will continue at a moderate level in 2020.

It is the aim of the bank still to generate moderate growth in the balance of loans of Jyske Realkredit. At the end of 2019, the balance of loans amounted to DKK 338 bn. It is expected that in 2020, growth will to a higher degree stem from financing of commercial properties rather than from owner-occupied properties.

It is expected that core income will be realised at a lower level in 2020.

Jyske Bank has a continuous focus on costs and achieved a practically flat underlying cost development in 2019. It is still the ambition to keep underlying costs under control in 2020.

It is expected that loan impairment charges and provisions for guarantees will be at a low level in 2020.

In 2020, Jyske Bank will continue the gradual replacement of its old senior debt with new non-preferred senior debt to be used to meet the Group’s minimum requirement for own funds and eligible liabilities as of 2021. Jyske Bank expects to issue non-preferred senior debt in the order of EUR 750m in 2020.

Jyske Bank has an objective of a capital ratio of 20%-22% and a CET1 ratio of 15%-17% for the next 2-3 years.

Considering the current market conditions, it is the aim of the Group to deliver a profit after tax in the range of DKK 1.8bn-2.2bn for 2020.

Jyske Bank’s return on equity depends in particular on the interest-rate level and the level of economic activity.

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