FINANCIALS: Danske: Conf Call Bullish, Capital Levels Maintained.

Danske Bank (DANBNK : Baa1/BBB+/A+) conf call gave a relatively bullish outlook. We feel capital levels are going to be maintained through 2025, even with the equity return moves today and, perhaps, more importantly, the tone of the macro outlook is clearly more positive. Spreads have already tightened meaningfully, so we struggle to see this going much further.

• Capital return story is driving the equity; Danske has been the subject of much regulatory action recently so the Norway divestment and capital return, alongside the dividend policy clarity, is helpful to those investors. From a credit standpoint, mgmt is clear that CET1 will not drop in the near-term but it will gradually head towards 16% CET1 (from 18.5% now) over the coming years.
• Net interest income story also helpful. Even though margins are now rolling over, as rates are, the performance and outlook for 2H24 appears a little better than previously expected.
• Macro outlook definitely improved: this is the overriding factor, to our minds. The macro model adjustments in loan losses point to improving trends and mgmt noted even areas such as Danish housing are showing signs of improvement now.