COPENHAGEN: Danske Bank beat quarterly profit forecasts helped by smaller loan losses at its Irish unit, raising hopes that the worst may be over after years of struggling with its exposure to Ireland's property market crash.
The Danish bank said on Tuesday it would continue to see high impairments and low earnings this year, but was on the right track.
"These are our best results for a half year since the financial crisis hit in 2008," Chief Executive Eivind Kolding said in a statement.
Kolding, who took the helm in February, has promised a new strategy later this year to draw a line under the fallout from the 2008 financial crisis and cut costs to help revive the bank's earnings.
The Danish bank has written down 69 billion crowns ($11.5 billion) on its loan portfolio since 2008, of which almost one third is from its National Irish Bank operations in the Republic of Ireland.
Impairments at NIB, which have weighed heavily on results for several quarters, fell to 1.46 billion crowns in the second quarter from 1.85 billion a year earlier and were unchanged from the first three months of this year.
Kolding took action in May to reverse rising loan losses in Ireland, announcing the bank would hive off $6 billion of bad loans at the unit as part of a reorganisation.
Danske shares were 5.1 percent higher at 94.6 crowns at 1012 GMT on Tuesday, against a lower Nordic banking sector index and a 0.2 percent rise in the Copenhagen stock exchange's benchmark index.
The bank's total loan impairments rose to 3.11 billion crowns in the second quarter from 2.75 billion a year earlier, below an average 3.34 billion estimate in a Reuters poll of analysts.
The impairments were related mainly to the commercial property in Ireland and Northern Ireland, personal customers in Ireland and Denmark, and the shipping industry, Danske said.
The Danish bank owns Northern Bank in Northern Ireland.
Second-quarter pretax profit rose to 2.51 billion crowns from 2.08 billion in the same quarter last year, beating all forecasts in the Reuters poll where the average estimate was 1.34 billion crowns.
The result was helped by a 7 percent rise in net interest income to 6.22 billion crowns, in line with forecasts.
"Strong income, lower writedowns and good cost control have resulted in a remarkably improved bottom line for the second quarter," said Sydbank analyst Bjorn Schwarz.
"This shows that Danske Bank is well on its way to realise its goal for significantly better profitability, which will take effect from 2013," he added.
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