FINANCIALS: Danske Results: Risk Of New Capital Policy

Danske Bank (DANBNK : Baa1/BBB+/A+) results are due 19-Jul. It recently upgraded guidance. Spreads have performed well since last time, asset quality metrics were strong then, but the risk now is a new capital policy may be announced with these results.

• Last results (3-May) looked pretty solid to us, but the equity was very weak on the day, as net interest income missed expectations. Trading profits and cost saves offset this, however, and, from a credit standpoint, lower loan losses and non-performers were more informative.
• Since then Spar Nord has upgraded financial guidance (19-Jun) on better NII and Danske followed suit (on 26-Jun). Grenke (GLJGR: BBB) 2Q24 new business figures also referenced a good performance in Denmark. Expectations are reported that the firm is going to update the market on capital policy.
• Danske’s spreads have come in 15bp since those results (€IG banks broadly flat) but the equity has underperformed a few percentage points. A bumper buyback announcement could derail that bullish spread move, we fear.
• Estimates haven’t moved much since that guidance upgrade, revenues are 1% better for this year (nothing for next) and earnings about 2-3% better across the coming two years.

Results are due 0630 (London time) with a conf call at 0830 at: https://edge.media-server.com/mmc/p/pimqpznh