Danske Bank Does Not Need To Raise Capital: Analyst
Danske Bank has access to fresh capital if economic conditions worsen, as recent commitments for a loan from the government would provide it with enough of a cushion, an analyst with financial services investment bank KBW told CNBC.com Monday.
Last week, KBW analysts, who did their own stress tests on European banks, wrote in a research note that six European banks would need to raise at least 8 billion euros ($10.8 billion) using a tier 1 equity ratio of at least 4 percent, similar to the one used in the stress tests done in the US.
The six were German Commerzbank, Danish Danske Bank, Sweden's Swedbank, Ireland's Allied Irish and Bank of Ireland and Italy's Banco Popolare.
But Danske Bank has recently received commitments from the government for a loan of 26 billion Danish crowns ($4.8 billion) in the form of hybrid core capital, part of which can be converted into equity, and therefore would be able to raise the capital it would potentially need, Henrik Schmidt, Nordic banks analyst at KBW, said.
"If things turn as bad as under our stress test, they would already have access to that capital," Schimdt told CNBC. "They could convert the hybrid capital that they're getting from the government into common equity."
Last week, Danske Bank reported a much smaller than expected fall in first-quarter pretax profit due to higher trading income, but loan impairment charges soared compared with the same period a year ago.