Bloomberg News

Danish Banks Still Poor Bet as Crisis Persists, ATP Fund Says

October 27, 2011

Oct. 27 (Bloomberg) -- Denmark’s lenders, which have cut jobs and raised interest rates to survive a regional banking crisis, remain an unattractive buy as they fail to persuade investors they’ve done enough, said ATP, the biggest investor in Danish shares.

“The prospect of capital issues and the need for more cost cuts prompts us to hold back on the sector,” Lars Rohde, chief executive officer of the Hilleroed, Denmark-based pension fund, said today in a telephone interview.

Danish banking stocks are the worst performing in the Nordic region after the February failure of Amagerbanken A/S triggered the European Union’s first senior creditor losses within a resolution framework and Denmark’s economy slipped into a recession. ATP owns about 3 percent of all Denmark’s listed equity, including a stake of about 2.1 percent in Danske Bank A/S, the country’s biggest.

“There’s always a level at which buying becomes attractive, but banks, both in Denmark and abroad, still face substantial structural challenges,” said Rohde. ATP was unprofitable in the third quarter, mainly due to losses in Danish equities, he said.

ATP, which has 744 billion kroner ($140 billion) of assets, lost a net 2.86 billion kroner in the three months through September. Its Danish share portfolio had a negative return of 24.3 percent in the first nine months of the year. Denmark’s benchmark Copenhagen 20 index lost 23.4 percent in the same period.

Job Cuts

Denmark’s four largest listed banks have announced job cuts since Sept. 22 and said they will increase interest rates to stay profitable. Danske may cut as many as 1,500 jobs through attrition over seven years. Jyske Bank A/S will eliminate 250 jobs through 2012. Sydbank A/S will cut 89 jobs and Spar Nord Bank A/S will remove 50 positions.

Denmark’s economy slipped into a recession in the fourth quarter of last year as a falling housing market has undermined consumer confidence. The economy will grow only 1.4 percent this year, a third of the 4.2 percent expansion rate in neighboring Sweden, the two countries’ central banks estimate.

Danske Bank shares have lost 40 percent this year, the most among the Nordic region’s six largest lenders. Jyske, Sydbank and Spar Nord have all lost more than a third of their stock market value this year.

Jyske and Sydbank both reported third-quarter earnings this week that missed analyst estimates. Spar Nord yesterday cut its full-year profit forecast. Danske is scheduled to report third- quarter earnings on Nov. 1.

Europe’s banks will need to raise 106 billion euros ($147 billion) in fresh capital under tougher rules being introduced in response to the euro area’s sovereign debt crisis, according to the European Banking Authority. Nykredit A/S, which isn’t listed, was the only Danish lender not to meet the EBA’s capital buffer target and needs to raise about 50 million euros.

--Editors: Christian Wienberg, Tasneem Brogger.

To contact the reporter on this story: Peter Levring at plevring1@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net; Andrew Rummer at arummer@bloomberg.net


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