Danske Bank warns of dip in credit quality

By Jacob Gronholt-Pedersen

COPENHAGEN (Reuters) -Danske Bank began to see a slight deterioration in customer credit quality towards the end of last year, it said on Friday as it forecast 2024 profit broadly in line with last year.

Nordic banks' results have been buoyed by booming interest rates over the past two years, but central bank policymakers look set to start monetary easing this year.

Danske, Denmark's biggest bank, expects net profit between 20 billion and 22 billion Danish crowns ($2.92 billion to $3.21 billion) this year, it said after reporting a 2023 net profit of 21.3 billion crowns.

Last year's earnings compared with a 4.58 billion crown net loss in 2022, hurt by a large fine related to a U.S. money laundering case.

Danske said 2023 results were helped by low impairments, easing inflationary pressure, resilient labour markets in Nordic countries and improved macroeconomic sentiment towards the end of the year, particularly in Denmark.

However, it said the full effect of higher interest rates has yet to be felt, pointing to the slight deterioration in credit quality in some sectors towards the end of last year.

"The strong credit quality of our portfolio is reflected in low impairment charges. However, the current low level does not change our expectation of increased losses in the near future as impairment charges are subject to an elevated level of uncertainty in 2024," said finance chief Stephan Engels.

Danske proposed a dividend payout of 14.5 crowns per share for 2023, just below analyst expectations of 14.6 crowns.

The bank will also repurchase shares worth 5.5 billion crowns over the coming year, it added.

Nordic rivals SEB and Swedbank both increased shareholder payouts last week after racking up hefty profits thanks to higher interest income.

Danske's fourth-quarter net interest income was slightly lower than a year earlier at 9.13 billion crowns and the 9.3 billion crowns forecast by analysts.

($1 = 6.8540 Danish crowns)

(Reporting by Jacob Gronholt-PedersenEditing by Terje Solsvik and David Goodman)