Danish banks boost profit forecasts on mortgage boom, low rates (updated)

Vestjysk Bank A/S

08/10/2019 16:06

(Adds detail, quotes)
    By Nikolaj Skydsgaard
    COPENHAGEN, Oct 8 (Reuters) - Danish lenders Vestjyske Bank
 VJBA.CO  and Spar Nord  SPNO.CO  raised their profit guidance
on Tuesday, saying they expect a boost from high activity in the
country's mortgage business, which has been fuelled by negative
interest rates.
    The two banks followed similar hikes to profit outlooks on
Monday by rivals Skjern Bank  SKJE.CO  and Kreditbanken
 KRE.CO , as well as last week by the country's fourth-biggest
bank, Ringkjoebing Landbobank  RILBA.CO .
    Earnings at banks across Europe have been hit by negative
rates set by central banks. In Denmark, lower borrowing costs
have cushioned the blow for some banks and spurred a record
number of Danes to try to improve their mortgage loans.
    Spar Nord said it raised its full-year guidance because of
strong activity in its mortgage business and "positive value
adjustments on bonds due to the persistent decline in interest
rates."  urn:newsml:reuters.com:*:nFWN26S0SX 
    At the end of July, Danish homeowners took advantage of
ultra-low interest rates to pay down mortgages worth 137 billion
Danish crowns, the biggest refinancing wave yet.  urn:newsml:reuters.com:*:nL8N24R30X
    On Monday, lender Kreditbanken also revised its full-year
guidance upward, citing strong activity in the housing market,
as well as fewer impairments than expected. 
    Its chief executive, Lars Frank Jensen, said interest rates
had a "clear advantage" for banks' earnings in the short term
due to higher fee incomes and yields on rising bond prices.
    "It will clearly be net-negative for banks in the long
term," Jensen told Reuters. 
    Denmark's central bank governor said last month that large
banks continue to see "high earnings" despite negative interest
rates.
    According to the central bank, Danish lenders lost 1 billion
Danish crowns ($146.86 million) on their deposits in the central
bank in 2018, but generated earnings of about 40 billion crowns
in the same period.
    Separately, the Danish banking lobby Finance Denmark said in
a statement on Tuesday that banks' earnings were declining
despite extraordinary income from refinanced mortgages. 
    "Among the driving factors are low interest rates," it said.
    Last week, Spar Nord became the third bank in Denmark this
year to start charging wealthy clients on large deposits in a
bid to transfer some of the costs of negative rates to private
clients.  urn:newsml:reuters.com:*:nL5N26O2A7
    
($1 = 6.8090 Danish crowns)

 (Reporting by Nikolaj Skydsgaard; Editing by Jacob
Gronholt-Pedersen, Bernadette Baum and Dan Grebler)
 ((Nikolaj.Skydsgaard@thomsonreuters.com;))