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Company Announcement for the First Nine Months of 2022

Company Announcement for the First Nine Months of 2022

Kamilla Hammerich Skytte, CEO, comments on the financial results:

“The result for the first nine months of 2022 is solid in a turbulent period, characterised by stable administration margin income but also by a decline in income from investment portfolios. Markedly higher interest rates, rising inflation driven by high energy prices affected developments in the third quarter, in which, among other things, we saw a decline in housing market activity with a slight impact on prices. The average loan-to-value for customers is down to 46%, which is the lowest level in decades. Generally speaking, our customers are well equipped to handle financial headwinds. Our focus is directed towards helping our customers during this period of increased uncertainty, through bringing clarity to their financing options.

We expect lending activity to continue to decrease in the coming period as a result of the uncertainty in the market. Buyers and sellers are still transitioning to changed market dynamics, with declining house prices being the most likely scenario for the coming quarters.”

Mortgage Market
Growth in the Danish economy has slowed this year, both as a reaction to the surge in activity last year and in the wake of an ever more uncertain economic climate. Historically high inflation has eroded purchasing power among both firms and consumers, and soaring consumer prices have also sparked a sharp rise in interest rates in financial markets. In terms of Danish mortgage rates, September brought a 30-year loan with a fixed rate of 5% and 6% in the beginning of October, up from 1.5% at the beginning of the year. We have not seen as significant a rise in mortgage rates in such a short space of time for many years, and this goes for both short and long rates. Rising interest rates are also helping to put a damper on economic activity.

Unsurprisingly, the housing market has been hit by the erosion of purchasing power and rising interest rates. Activity has dropped off considerably during the year, the supply of housing is growing, sellers are giving bigger discounts, and we have also now begun to see a real fall in selling prices. For now, however, it is worth remembering that homeowners in Realkredit Danmark, with an average loan-to-value at 44%, are in a good position to deal with the substantial headwinds which are now buffeting the housing market and look like continuing to do so for some time.

First Nine Months of 2022
The Realkredit Danmark Group recorded a net profit of DKK 2,617 million in the first nine months of 2022, against DKK 2,786 million in the same period of 2021. The profit was affected by higher income relating to lending activity, lower income from investment portfolios, higher costs and lower loan impairment charges. The impact of the lower average loan-to-value was a decrease in administration margin by DKK 73 million.

Expenses increased DKK 124 million, mainly due to a DKK 48 million provision for Realkredit Danmark’s part of the debt collection legacy remediation and DKK 69 million from termination of Danske Bank’s VAT group. Loan impairment charges decreased by DKK 84 million in spite of charges related to Realkredit Danmark’s share of debt collection write-offs at DKK 174 million in third quarter. The total allowance account at 30 September 2022 amounted to DKK 2,888 million, against DKK 2,971 million at 31 December 2021. The post-model adjustment of DKK 0.7 billion booked in Q1 2020 for COVID-19 related losses has been rolled back and fully repurposed into post-model adjustments related to Global Tension, energy crisis and inflation has been booked to cover the impact from increased economic uncertainty.

The steeply increasing mortgage rates has fuelled remortgaging activity during 2022, and our customers have reduced nominal outstanding debt by DKK 5.4 billion in the first nine months of 2022. Mortgage lending at nominal value decreased by 1% but measured at fair value, the decrease was 13%. The latter attributable to lower bond prices due to the rising interest rate levels. Gross lending amounted to DKK 121 billion, against DKK 110 billion in the first nine months of 2021.

In the first nine months of 2022, Realkredit Danmark maintained its focus on green bond initiatives. Customer responses are still very positive, and at 30 September 2022, total green lending amounted to DKK 21 billion.

Realkredit Danmark expects net profit for 2022 to be somewhat lower than net profit for 2021.

Contact: Kamilla Hammerich Skytte, CEO, tel. +45 45 13 20 82.

Financial highlights – Realkredit Danmark Group

 

 

 

 

 

 

 

 

 

 

INCOME STATEMENT

Q1-Q3

Q1-Q3

Index

Q3

Q2

Q1

Q4

Q3

Full year

(DKK millions)

2022

2021

22/21

2022

2022

2022

2021

2021

2021

Administration margin

4,323

4,396

98

1,423

1,442

1,458

1,461

1,460

5,857

Net interest income

-6

43

-

10

-22

6

3

1

46

Net fee income

-5

-81

6

-33

-29

57

-46

-86

-127

Income from investment portfolios

-25

48

-

-6

8

-27

7

-1

55

Other income

68

111

61

18

25

25

25

35

136

Total income

4,355

4,517

96

1,412

1,424

1,519

1,450

1,409

5,967

Expenses

812

688

118

290

266

256

307

241

995

Profit before loan impairment charges

3,543

3,829

93

1,122

1,158

1,263

1,143

1,168

4,972

Loan impairment charges

174

258

67

201

-58

31

11

94

269

Profit before tax

3,369

3,571

94

921

1,216

1,232

1,132

1,074

4,703

Tax

752

785

96

203

278

271

249

236

1,034

Net profit for the period

2,617

2,786

94

718

938

961

883

838

3,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET (END OF PERIOD)

 

 

 

 

 

 

 

 

 

(DKK millions)

 

 

 

 

 

 

 

 

 

Due from credit

 

 

 

 

 

 

 

 

 

institutions etc.

9,505

21,270

45

9,505

5,515

18,688

18,643

21,270

18,643

Mortgage loans

706,695

803,643

88

706,695

739,996

779,211

810,139

803,643

810,139

Bonds and shares

45,648

42,840

107

45,648

46,179

45,523

46,435

42,840

46,435

Other assets

1,317

2,062

64

1,317

1,873

3,322

1,782

2,062

1,782

Total assets

763,165

869,815

88

763,165

793,563

846,744

876,999

869,815

876,999

Due to credit institutions etc.

2,000

2,000

100

2,000

2,000

2,000

2,000

2,000

2,000

Issued mortgage bonds

707,784

815,427

87

707,784

740,480

792,508

820,950

815,427

820,950

Other liabilities

4,919

3,809

129

4,919

3,330

5,403

4,577

3,809

4,577

Shareholders' equity

48,462

48,579

100

48,462

47,753

46,833

49,472

48,579

49,472

Total liabilities and equity

763,165

869,815

88

763,165

793,563

846,744

876,999

869,815

876,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RATIOS AND KEY FIGURES

 

 

 

 

 

 

 

 

 

Net profit for the period as % p.a.

 

 

 

 

 

 

 

 

 

of average shareholders' equity

7.1

7.6

 

6.0

7.9

8.0

7.2

7.0

7.4

Impairment charges as % p.a.
of mortgage lending

0.03

0.04

 

0.11

-0.03

0.02

0.01

0.05

0.03

Cost/income ratio (%)

18.6

15.2

 

20.5

18.7

16.9

21.2

17.1

16.7

Total capital ratio (%)

31.2

27.3

 

31.2

30.1

27.9

25.3

27.3

25.3

Tier 1 capital ratio (%)

30.8

26.9

 

30.8

29.7

27.6

24.9

26.9

24.9

Mortgage loans, nominal value

803,362

802,448

 

803,362

804,115

809,465

807,621

802,448

807,621

Full-time-equivalent staff (end of period)

228

216

 

228

228

228

217

216

217

The company announcement for the first nine months of 2022 has not been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, and additional Danish disclosure requirements for interim reports of issuers of listed bonds.

Attachment