Danske Bank (DANSKE) A/S’s hybrid core capital note advanced to a 16-month high in Copenhagen after Jyske Bank A/S said the paper offered better returns than similar bonds issued by Nykredit A/S.
Danske Bank’s perpetual, euro-denominated 4.878 percent note rose to 93.058, its highest since June 2011, outperforming Nykredit’s perpetual, euro-denominated 9 percent bond.
Danske’s note “will not only give a higher yearly return but will do so for a longer period of time,” Christian Hede, an analyst at Silkeborg, Denmark-based Jyske Bank, said by phone. Hede cut recommendations on Nykredit’s 9 percent bond to sell from buy and Nykredit’s 4.901 percent note to hold from buy.
Record low yields on government and covered bonds have prompted a hunt for riskier assets offering higher returns. That’s helped turn around demand for hybrid debt, which had seen an outflow of foreign interest earlier this year, Hede said. At the same time, a slowdown in writedowns probably will boost profits starting next year, particularly at Danske, he said.
“People are more certain that Danske Bank will be able to make money in coming years,” Hede said. “The whole situation with Eivind Kolding being the new chief executive officer and coming up with a new strategy plan in October will also help the price.”
Danske Bank is due to report third-quarter earnings on Oct. 30.
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