Danske Bank reported a steep fall in full-year profit today impacted by loan impairment charges that it expects to remain high this year as it turned to the government for financial aid.
Denmark's biggest financial group's net profit fell 93 per cent to 1 billion Danish crowns (€135.8 million) compared to 7.5 billion expected on average in a Reuters poll of analysts, as it wrote off in full the remaining goodwill on its National Irish bank division.
The bank said it would lay off 350 staff and would apply for 26 billion crowns in subordinated loan capital from Denmark's latest banking support package. It cancelled bonuses for its executive board and sharply reduced them for other employees.
"We are going through the worst crisis since the Great Depression," said Chief Executive Peter Straarup. "We have incurred losses and made provisions for potential losses of a magnitude we had not anticipated."
But the bank's core business remained robust and its earnings good "as we were able to achieve a 5 per cent increase in income from our banking activities in the most turbulent year ever."
Danske took more than double the loan impairment charges expected even as interest, fee and trading income exceeded analysts' forecasts.
"There is no doubt that they surprise significantly on write-offs and therefore also on the bottom line," said Anne Damgaard, chief analyst at Fionia Bank. "But you can also see that the banking activities in fact have done reasonably well in 2008."
Danske wrote off outstanding goodwill on its National Irish Bank division in full, taking a 2.9 billion crown charge.
"National Irish Bank's performance matched our expectations until last autumn, growing profitably, achieving cost reduction targets and restoring a reputation that had suffered for many years," Mr Straarup said.
"No one anticipated the speed and depth of the recession that has hit Ireland and the assumptions we made in 2005 on likely economic growth are clearly no longer valid."
Danske bought National Irish in 2005 together with Northern Bank in Northern Ireland for about $1.9 billion. The index of Irish financial stocks was down 6.07 percent in early trade after Danske's comments on Ireland.
Danish shipping and oil group A.P. Moller-Maersk, which owns 20 percent of Danske, cut its 2008 net profit forecast to $3.4 billion from its previously announced range of $4 billion to $4.3 billion after the bank's results.
Reuters