FINANCIALS: Danske Results Not Enough To Drive Further Tightening

Danske Bank (DANBNK : Baa1/BBB+/A+) results show improving macro outlooks and solid credit measures. The post-disposal equity payout is outlined which appears broadly in line with expectations, too, we feel. Danske’s spreads have outperformed €IG banks recently and we don’t see enough here to drive that further.

• Credit view: loan loss charges are a release (c.4bp of loans) from a c.2bp charge in the prior quarter – tiny figures overall. Non-performers are 1.3%, a small improvement on Mar-24.  CET1 is stable at 18.4% (fully loaded).
• Following the Norway business sale, there’s a 4Q24 equity payout, equivalent to 65bp of CET1 (DKK5.5bn) alongside the entirety of FY24 net profit, which will be paid out in early-2025. The CET1 regulatory minimum is 14.5% so Danske will still be meaningfully buffered, it will also revert to 40-60% payout policy again following these actions.
• Net interest income was a small miss against consensus (which was taken badly at 1Q24) but overall revenues beat expectations, as has pre-tax profit. The above payout, relative to expectations is likely to define the direction of the equity this morning, we feel.
• Outlook: macro models within loan impairments have had a small, bullish update put through in the quarter, which is clearly helpful but there’s no incremental upgrade evident, beyond that given on 26-Jun.

Conf call is 0830 (London time) at: https://edge.media-server.com/mmc/p/pimqpznh