Morningstar | Danske Bank First-Half Results Hit by Weakness in Trading; FVE Maintained
Narrow-moat Danske posted net income of DKK 8.8 billion for the first half of 2018, excluding any financial effects from the Estonian money-laundering scandal. This indicates a 15% year-over-year decline, which trends below our full-year estimate. We cut our earnings estimates for 2018, mainly to reflect the weakness in the trading activity and a self-imposed penalty amounting to DKK 1.5 billion for the Estonian issue. While it is currently unclear whether there will be any regulatory sanctions for the Estonian money laundering, we believe that the additional DKK 5 billion capital requirement imposed by the Danish regulator could be a proxy for the size of a potential fine. In our 2019 estimates, we account for a potential DKK 5 billion fine. The impact on our fair value estimate is negligible, and we retain our fair value estimate of DKK 278. We caution that there is downside risk to earnings and our fair value estimate, should the regulatory sanctions exceed the DKK 6.5 billion that we have currently pencilled in. Our narrow moat and stable trend ratings are unchanged.At the revenue level, results were mixed. Net interest income was up 4% compared with the first half of last year, benefiting from loan growth mainly in Sweden and Norway. First-half net trading income came in at DKK 2.5 billion, a decrease of 40% on the year-ago period, trading below our expectations. The main culprits were the corporates and institutions (FICC and Capital Markets) and wealth management divisions, adversely affected by adverse financial market conditions and lower results in the health and accident business, respectively. Fee income in the first half of 2018 was 3% lower than last year, mainly affected by lower customer activity in the wealth management division. Operational expenses were slightly lower than in first-half 2017, owing to lower activity-based expenses.
Management reduced its guidance for net income (excluding any fines) to be towards the the lower end of the DKK 18 billion-DKK 20 billion guided previously, in line with our reduced expectations.
Danske Bank is a diversified financial services firm. Through its subsidiaries, Co.'s activities include the provision of banking, mortgage finance, insurance, real estate brokerage, asset masnagement and trading in fixed income products, foreign exchange and equities. Co. operates international retail bank operations in 15 countries, with an emphasis in the Nordic region. Co. divides its operations into five segments: Banking Activities, Danske Markets, Danske Capital, Danica Pension and Other Activities. As of Dec 31 2011, Co. had total assets of DKK3,424,403,000,000 and total deposits of DKK848,994,000,000.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.