February 2, 2017
Danske Bank reports net profit of DKK 19.9 billion (EUR 2,671 million). Return on shareholders' equity of 13.1%
Danske Bank has announced its financial results for 2016.
"The year 2016 was another year of solid progress for Danske Bank. In a challenging envi-ronment, we delivered satisfactory financial results while at the same time strengthening our market position. With a return on equity of 13.1%, we delivered on our long-term target,” says Thomas F. Borgen, Chief Executive Officer.
"The results reflect our diversified business model and our efforts to become a more customer-centric, simple and efficient bank. We kept a high innovation pace and launched a number of new advisory products and easy-to-use solutions. We also saw a continued improvement in customer satisfaction and managed to attract new customers and grow our volume, while maintaining high credit quality and reducing costs.
We are satisfied with the progress and remain committed to continuing the execution of our strategy and to realising the full potential of Danske Bank on our journey to become recognised as the most trusted financial partner."
The annual report is available at danskebank.com
. Highlights are shown below:
2016 vs 2015
Despite higher activity levels, operating expenses were reduced 3% to DKK 22.6 billion (EUR 3,046 million). The main reasons for the decline were our ongoing efforts to in-crease efficiency, a lower net contribution to the Danish Resolution Fund and the Guaran-tee Fund, and lower depreciation on intangible assets. The cost/income ratio before good-will impairment charges improved from 50.9% to 47.2%.
Loan impairment charges showed a net reversal of DKK 3 million (EUR 0.4 million) and remained low, primarily because of strengthened credit quality and stable macroeconomic conditions.
At the end of December 2016, total lending was up 5% from the level at the end of 2015. The reasons for the increase include higher customer inflow and lending growth in Norway and Sweden.
- Danske Bank Group’s net profit for 2016 was DKK 19.9 billion (EUR 2,671 million). This represents a 12% increase from 2015, when net profit before goodwill impairments was DKK 17.7 billion (EUR 2,375 million). The result was driven by higher income resulting from, among other things, a larger business volume, decreasing costs and very low impairments. The result was also positively impacted by a number of special items.
- With a return on shareholders’ equity of 13.1% in 2016, against 11.6% before goodwill impairments in 2015, we have delivered on our longer-term ambition of at least 12.5% ahead of plan.
- Total income was up 5% and amounted to DKK 48.0 billion (EUR 6,451 million), against DKK 45.6 billion (EUR 6,112 million) in 2015, driven by higher net interest income, net trading income and other income.
- Net interest income totalled DKK 22.0 billion (EUR 2,963 million) and was 3% higher than in 2015. Good volume growth offset the pressure on margins that followed from the low interest rates and intense competition in all markets.
- Remortgaging activity normalised compared with the high level in especially the first half of 2015, and the turbulence in the financial markets resulted in lower customer activity within investment products. As a result, net fee income was down 6% to DKK 14.2 billion (EUR 1,908 million).
- Net trading income rose 26% to DKK 8.6 billion (EUR 1,158 million), partly because of good customer activity particularly in the second half of the year.
- Net trading in-come also benefited from the sale of VISA Europe and Danmarks Skibskredit A/S.
•Other income amounted to DKK 3.1 billion (EUR 422 million), up DKK 34%, owing mainly to the sale of domicile properties and positive value adjustment of shares in as-sociated companies.
Higher customer satisfaction
Customer satisfaction generally improved across the Group during the year, bringing us in line with our ambitions in most areas. Customer satisfaction remains a key priority.
Considerations about branchification in Finland
As part of our efforts to simplify the organisation and improve efficiency, we are looking into the possibilities of merging our activities in Finland into a single branch. In doing so, we would achieve a uniform organisational structure across the Nordic markets. The change would be primarily of a technical nature and would not change the way in which we serve our custom-ers. We have initiated a dialogue with the authorities, and during 2017, we expect to take ini-tiatives that may lead to branchification.
Capital position, dividends and share buy-back programme
Danske Bank has a strong capital position. At 31 December 2016, the common equity tier 1 capital ratio and the total capital ratio were 16.3% and 21.8%, respectively, against 16.1% and 21.0% at 31 December 2015.
The Board of Directors is therefore proposing a dividend of DKK 9.0 (EUR 1.2) per share, or 45% of net profit for the year.
In addition, the Board of Directors has decided to initiate a share buy-back programme of DKK 10 billion (EUR 1,345 million) in 2017. The purpose of the share buy-back programme is to adjust the share capital to better reflect Danske Bank’s capital targets. The share buy-back programme is described in more detail in company announcement No. 8 of today's date. Outlook for 2017 We expect net profit for 2017 to be in the range of DKK 17-19 billion (EUR 2,287-2,556 mil-lion). We maintain our longer-term ambition for a return on shareholders’ equity of at least 12.5%. Danske Bank