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Danske Bank Splits Off Irish Loans to Cut Losses

Reuters with CNBC
Thursday, 10 May 2012 | 5:23 AM ET

Denmark's Danske Bank on Thursday reported higher first-quarter profits despite increased loan impairments and said it would hive off 35 billion crowns ($6.09 billion) in loans at its National Irish Bank and wind them up.

Announcing a restructuring of its Irish activities to try to curb loan losses, the bank warned 2012 earnings would remain low overall and said the continuing part of the National Irish Bank would be fully integrated into Danske Bank's new organization under the Danske bank name.

"The Irish economy shows no prospect of material improvement over the next couple of years," the bank said in the statement.

“We are pleased with the results. Our impairments are down compared with the fourth quarter of 2011, so it’s a small step forward for Danske Bank,” Henrik Ramlau- Hansen, the bank’s CFO told CNBC’s “Squawk Box Europe.”

The Bank confirmed that the high impairments in its Irish operation were likely to continue hitting the bank for the next “two to three years.”

This Result Is a Small Step Forward for Danske Bank: CFO
Henrik Ramlau-Hansen, CFO of Dankse Bank, told CNBC, "We still have too high impairments compared with what we would like to have but our impairments are actually quite down compared with our Q4 results, so we actually think that this result is a small step forward for Dankse bank."

“The Irish operation is not just an accounting restructure,” he said. “We want to carve out the commercial property, then we can create a non-core part of the bank and concentrate on servicing customers.”

“We’re moving in the right direction, but there are challenges even in Denmark and the high impairments will continue for 2012 but we see signs here and there,” he said.

In the new organization, the bank will market all its banking operations under the Danske Bank brand name, it said.

From April 1, 2012 to end-2014, the group expects to recognize impairments in Ireland of 5-7 billion crowns, with the level of impairments expected to reach a normalised level in 2015, it said.

First-quarter pretax profits rose to 1.58 billion crowns from 1.50 billion in the same quarter last year, above an average 1.32 billion forecast in a Reuters poll.

Loan impairments rose to 3.92 million, exceeding an average 3.46 billion in the poll.

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