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Preliminary announcement of financial statements 2020
Core income: DKK 7,982m (2018: DKK 8,060m)
Core expenses: DKK 4,848m (2019: DKK 5,029m)
Loan impairment charges: DKK 968m incl. DKK 1 bn increase of management’s estimate (2019: DKK -101m)
Core profit: DKK 2,166m (2019: DKK 3,132m)
Pre-tax profit: DKK 2,110m, corresponding to a return on equity of 5.9% (2019: DKK 3,079m and 9.1%)
Net profit: DKK 1,609m, corresponding to a return on equity of 4.4% (2019: DKK 2,440m and 7.1%)
Earnings per share: DKK 19.8 (2019: DKK 29.0)
Capital ratio of 22.9% and Common Equity Tier 1 ratio of 17.9% (2019: 21.5% and 17.4%)
For 2021, Jyske Bank estimates a pre-tax profit in the range of DKK 2.5 bn - 3.0 bn, corresponding to a net profit of DKK 1.9 bn - 2.3 bn. Inclusive of the current share repurchase programme, earnings per share are expected to be DKK 25-31 against DKK 19.8 for 2020.
Summary
“A challenging first quarter of 2020 was followed by three quarters resulting in a pre-tax profit of DKK 3.1 bn and a net profit of DKK 2.4 bn, corresponding to earnings per share of DKK 31.2. The client activity is at a solid level, and the underlying business has developed in a stable fashion supported by significant cost reductions and a continuing good credit quality. Also, the organisation has been most adaptive and flexible during a turbulent year characterised by restrictions. Jyske Bank has a satisfactory balance of impairment charges as well as a most solid capital and liquidity position, which has, so far, enabled the bank to launch a share repurchase programme in the amount of DKK 750m,” states Anders Dam, CEO and Managing Director.
In 2020, the economic development was affected by the COVID-19 pandemic. After the extensive lockdown of the Danish economy in the spring, most economic activities were resumed, but towards the end of the year, the number of COVID-19 cases increased again and the visibility as to the effect on the economy in 2021 is somewhat limited.
So far, the Danish economy has performed relatively well through the pandemic; the number of bankruptcies is low, consumer spending and unemployment are developing in a stable manner, and activity levels in the housing market are high. At the same time, our clients’ capital and liquidity situation is generally good and supported by various support packages.
The further development of the Danish economy will be affected by the development in COVID-19 cases and the rolling out of vaccines in and outside Denmark as well as the phasing out of support packages. To this must be added any derived economic effects from Great Britain’s exit from the EU.
In addition to the economic consequences, the COVID-19 pandemic has also resulted in adjustments of e.g. work habits and client behaviour. This has resulted in a stronger trend towards digital client interaction and an increased use of electronic payments.
From high growth to business optimisation
Following several years with high lending growth, focus on the continued enforcement of the credit policy has increased. Meanwhile, Jyske Bank intensified in 2020 business optimisation through various income-enhancing and cost-saving measures.
These measures included, among other things, changes to the terms and conditions of client’ deposit rates, which now to a higher degree reflect the negative interest rate environment.
Also, Jyske Bank's focus on costs has intensified. Core expenses fell by 4% in 2020, and further reductions are expected in 2021.
Over the period from mid-2020 to mid-2021, Jyske Bank will reduce the number of branches by about 20% in consequence of changed client behaviour and increasing digitization. The adjustment strengthens the professionalism and coherence in the remaining branches to the benefit of both clients, employees and shareholders.
In combination with major organisational changes in business areas such as Personal Clients and Business Concepts, the measures launched have contributed positively to the optimisation of Jyske Bank’s business in 2020.
Net profit of DKK 1,609m in 2020
The net profit for the year of DKK 1,609m corresponds to a return on equity by 4.4% against DKK 2,440m and 7.1%, respectively, for 2019. Earnings per share fell to DKK 19.8 from DKK 29.0. The lower profit can be attributed to an increased management's estimate for impairment charges in the amount of DKK 1.1 bn relating to the COVID-19 pandemic. Earnings per share came to DKK 31.2 in the last nine months of 2020.
For the fourth quarter of 2020, net profit came to DKK 831m, corresponding to a return on equity of 9.6% p.a. against DKK 966m and 11.5% for the fourth quarter of 2019. Earnings per share fell to DKK 10.9 from DKK 12.2. An intensified cost focus offset in part the effects from lower remortgaging activity and lower interest income from investment of excess liquidity. Reduced deposit rates compensated for the decline in bank loans.
Jyske Bank’s loans and advances (excl. repo loans) were at the same level at the end of 2020 as the previous year. Hence, increasing mortgage loans to corporate clients were offset by lower bank loans due to limited demand for credit following the outbreak of COVID-19 as well as the launch of support packages from the Danish government. Bank deposits were also unchanged compared to the end of 2019.
Core income fell by 1% relative to 2019. Remortgaging activity fell from a record-high level, and the COVID-19 pandemic adversely affected income from money transfers and card payments as well as bank loans. These elements more than offset the positive effects from higher value adjustments and reduced deposit rates.
Adjusted for one-off items in 2019 and 2020, core expenses fell by 6%. The decrease can be attributed to an 7% reduction in the number of full-time employees, an intensified cost focus as well as the effect from the outbreak of COVID-19 on travel expenses, etc.
Credit quality is assessed to be at a historically good level, and at the end of 2020 the proportion of non-performing loans was at the lowest level ever. To this must be added the balance of management's estimates of DKK 1.6 bn after DKK 1.1 bn were reserved for potential impairment charges in consequence of the outbreak of COVID-19.
At the end of 2020, Jyske Bank's capital ratio and common equity tier 1 capital ratio were calculated at historically high levels of 22.9% and 17.9%, respectively, with excess capital of DKK 13.1 bn as well as a liquidity buffer (LCR) of DKK 111 bn. It is assessed that the capital and liquidity buffers can withstand even very severe stress scenarios.
On 28 January 2021, Jyske Bank initiated a new share repurchase programme of up to DKK 750m, running until 30 September 2021 at the latest.
Outlook
It is expected that in 2021 the bank’s business volumes will be affected by rising bank loans and falling deposits. To some extent, this is expected due to the corporate clients’ payment of deferred VAT and taxes as well as pent-up consumer and investment demand. Similarly, for mortgage loans an increase is expected in line with the market growth in 2021.
It is expected that core income will decline in 2021.
For 2021, endeavours will be made to reduce core expenses compared to 2020.
It is expected that loan impairment charges will be at a very low level. The estimate is associated with uncertainty relating to the effects of the COVID-19 pandemic.
For 2021, Jyske Bank estimates a pre-tax profit in the range of DKK 2.5 bn - 3.0 bn, corresponding to a net profit of DKK 1.9 bn - 2.3 bn. Inclusive of the current share repurchase programme, earnings per share are expected to be DKK 25-31 against DKK 19.8 for 2020.
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