Danske Bank Will Buy Back Own Stock After Decade-Long Hiatus

by Frances Schwartzkopff

(Bloomberg) -- Denmark’s biggest bank said it will return cash to investors by buying back shares for the first time since before the financial crisis.
Danske Bank A/S, based in Copenhagen, said it will buy back own stock for 5 billion kroner ($760 million), the first such program since 2004. The bank also proposed a 5.5-krone dividend a share compared with 2 kroner last year, and raised its payout ratio target to as much as 50 percent of net income compared with 40 percent previously.
The share buy-back plan was “unexpected,” Sydbank A/S said in a note to clients. Danske rose as much as 2.8 percent in Copenhagen trading and the shares advanced 1.3 percent to 174.40 kroner at 9:41 a.m.

“Although we still have some way to go to meet our ambitions and realize the full potential of Danske Bank, the progress confirms that we are on track to
deliver on our targets,” Thomas F. Borgen, Danske Bank’s chief executive officer, said in the statement.
Danske has struggled to keep pace with its Swedish competitors, which last week announced they were raising dividends after building up excess capital. Nordea Bank AB, Scandinavia’s biggest lender, has seen its shares surge 19 percent this year after paying out 70 percent of its 2014 profit to owners. Danske stock is up 2.9 percent over the same period.

Negative Rates

Banks in Denmark are struggling to generate income as the central bank delves deeper into negative rates to defend the krone’s peg to the euro. Nordea CEO Christian Clausen said last week he was considering charging retail clients to deposit money in his bank to help cover the cost of paying the central bank.
Danske reported a fourth-quarter net loss attributable to shareholders of 6.37 billion kroner after writing down 9 billion kroner in goodwill in December. That compares with a profit of 1.92 billion kroner a year earlier. Net income before goodwill impairment charges was 2.81 billion kroner.
Net income in 2015 will exceed 14 billion kroner, the bank said. Danske raised its 2015 target for return on equity to 9.5 percent, from 9 percent, and its long-term target to above 12.5 percent from 12 percent. The bank reported an increase in last year’s ROE, to 8.5 percent before impairments, compared with 5 percent in 2013.
To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net