Danske unveils $1.7b buy-back plan

Denmark’s biggest bank tops Bloomberg’s index of European financial stocks

Denmark’s biggest bank unveiled another share buy-back programme and said it’s generating enough extra cash to target higher dividends for its owners.

Danske Bank plans to buy back 10 billion crowns ($1.7 billion) in shares, the Copenhagen-based lender said yesterday. The bank said because its “capital position is very strong,” it’s now targeting a dividend payout ratio of 40-60 per cent, compared with 40-50 per cent previously. Danske, which has already bought back a total of 23 billion crowns of its stock since 2015, is proposing a dividend of 10 crowns per share for 2017, or 45 per cent of net profit. Danske’s shares opened more than 3 per cent higher in Copenhagen, putting it at the top of Bloomberg’s index of European financial stocks.

Danske delivered a result for 2017 that was in the high end of its target range, with net profit reaching 20.9 billion kroner. Back in November, the bank said it expected to land somewhere between 19-21 billion kroner. For this year, Danske is targeting a range of 18-20 billion kroner.

“Investors will ask themselves if it once again is a cautious guidance that allows for several future upgrades or whether it’s the best bet for 2018,” Per Hansen, an economist at Nordnet, said in a client note. “If it’s the latter, investors will be disappointed.”

The bank, which has spent the past several years focusing on cost cuts, also said it will move headquarters from its current central-Copenhagen location to offices close to the city’s main train station. The relocation is due to take place in 2023.

Chief Executive Officer Thomas Borgen said the bank had a “positive development across our business units, which in many areas led to good increases in the number of customers and lending.” Borgen also said Danske is continuously investing more in digitisation.

Danske, the Nordic region’s second largest bank, has weathered the world’s longest stretch of negative interest rates and low loan demand by focusing on fee-generating and capital-light activities such as wealth management and corporate advisory services. Buoyed by the shift and an improving economy, the bank twice last year raised its outlook for 2017. Sensex (IN)