"The captain is new, but the course is clear," said Danske Bank A/S's new CEO Carsten Egeriis, as he presented the bank's first-quarter results just nine days into the job.
Egeriis replaced Chris Vogelzang, who resigned after being named a suspect in connection with a money-laundering investigation in the Netherlands.
"I've of course been part of setting the strategy as part of the executive leadership team the last four years and been an integral part of the work. And we will continue to execute on the strategy we have," Egeriis said during an earnings call April 28.
Egeriis was previously Danske's chief risk officer and reiterated the bank's target to bring return on equity to between 9% and 10% in 2023. Danske will continue to have "full focus" on maintaining its commercial momentum and cost trajectory while getting compliance under control, he said.
No profit guidance update
Denmark's largest lender by assets posted a net profit of 3.14 billion kroner for the quarter, which beat the consensus estimate of 2.82 billion kronor, based on bank-provided forecasts from 11 analysts. The bank recorded a loss of 1.29 billion kroner in the same period last year.
Yet Danske maintained its outlook for 2021 and said it still expects net profit in the range of between 9 billion kroner and 11 billion kroner. This surprised several equity analysts, Danish newspaper Børsen reported. Other large Danish banks such as Nykredit Realkredit A/S and Jyske Bank A/S have recently made upward adjustments to their full-year expectations, and some analysts had expected a similar move from Danske.
Danske in particular took a prudent approach to updating its loan loss guidance for the year. Despite seeing impairment charges dropping to 443 million kroner in the first quarter, from 4.34 billion kroner a year ago, the bank maintained its guidance on loan impairments of up to 3.5 billion kroner in 2021.
Egeriis said Danske continues to see a limited credit deterioration in its loan portfolio but that the bank "remains cautious" given the uncertain macroeconomic environment "and particularly also in light of what will happen once the government support stops." The bank expects to see an increase in bankruptcies and credit deterioration once liquidity support from governments and central banks ends, he said.
"So we would like to see a more sustainable trend … before we update on overall credit losses for the year," Egeriis said.
Negative interest rates
Apart from lower loan loss provisions, Danske's results were driven by a 17% rise in total income along with a continued decline in operating expenses as a result of its cost-cutting program, the bank said in its quarterly report.
Danske said it has seen a positive impact from retail deposit repricing in Denmark, with the bank having introduced negative interest rates on private customer deposits over 250,000 kroner at the beginning of the year. Egeriis said the move has not prompted any significant customer outflows, adding that "on the contrary, we've actually seen an increase in deposits."
The Danish bank has announced it will further lower the threshold for negative interest rates for deposits to 100,000 kroner from July 1, while also increasing the charge on business customers, which the bank expects will have an annualized impact on income of about 500 million kroner.
Egeriis hinted that more repricing may come. "We do believe that there is further opportunity on the large corporates and institutions side to optimize our deposit pricing. And that is, for certain, one of the things that have our focus."
As of April 27, US$1 was equivalent to 6.16 Danish kroner.