COPENHAGEN: Denmark's biggest lender, Danske Bank, reported much better-than-expected first-quarter results on Friday, outperforming its Nordic rivals as it weathered negative interest rates by snatching market share and cutting costs.
The results sent the bank's shares up more than 4 percent as it easily beat analysts' forecasts for both net profit and trading income, even though turmoil in financial markets helped trading income fall by nearly half from last year.
Danske's relative resilience in the face of negative interest rates, low oil prices and widespread market turmoil stands in contrast to most banks in Europe. While the STOXX Euro 600 Bank Index is down around 15 percent this year, Danske Bank shares have shed just 1.3 percent.
Denmark and Sweden have introduced negative interest rates to spur their economies and inflation, making it more difficult for banks to make a profit. Danske Bank's first-quarter net profit of 4.9 billion Danish crowns ($749 million), however, was virtually flat compared to last year and well above analysts' forecasts for 4.3 billion crowns.
That contrasted with Swedish banks Nordea and SEB which both reported weaker-than-expected first-quarter operating profits on Wednesday.
"Danske Bank stands as the clear winner," said Nykredit Markets' chief analyst Ricky Steen Rasmussen.
The bank's share price jumped 4.3 percent, one of the top five gainers on Europe's Stoxx 600 index. Danske's market value is now on a par with several of the region's big lenders including Deutsche Bank and Standard Chartered, and above Italy's largest lender UniCredit.
The Danish bank said lending growth of 2 percent from a year earlier and lower funding costs enabled it to offset pressure on margins in the first quarter, but did not elaborate.
It increased lending in Denmark, Finland and Norway and said it had cut costs.
"We've worked hard towards becoming simpler and taking away bureaucracy," Chief Executive Thomas Borgen told Reuters in a phone interview. He also warned of the risks of negative interest rates. "Negative rates can always create asset bubbles", he said, adding that the housing market in some areas such as Stockholm "looks slightly inflated."
As volatile financial markets early this year hit banks, Danske's trading income slumped 47 percent in the first quarter to 1.6 billion crowns, but beat forecasts for 1.4 billion crowns.
The bank's results were also bolstered by the sale of its historic head office buildings in the centre of Copenhagen to Britain's Standard Life for 1.4 billion Danish crowns ($214 million).
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