Danske Bank outlines DKr5bn share buyback

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Danske Bank unveiled plans for its first share buyback in more than a decade and a higher than expected dividend after Denmark’s biggest lender posted mixed results.

Danske announced on Tuesday it would buy back up to DKr5bn ($764m) of shares this year while paying out DKr5.50 per share in dividends, slightly ahead of analysts’ expectations.

But some analysts were disappointed by slightly lower than expected fourth-quarter results and what they saw as relatively weak forecasts for this year.

Danske has struggled more than the other big Nordic banks to put the global financial crisis behind it as its exposure in its home country and Ireland has weighed it down. Denmark was hit hardest of the four big Nordic countries by the crisis and is still one of the only European countries in which banks have been allowed to fail in recent years.

Denmark’s biggest bank changed its chief executive in 2013 and reinstated its dividend last year in an attempt to boost its standing with investors, who have tended to favour the four big Swedish banks — all of which came through the financial crisis in stronger shape.

Net profit in the fourth quarter before goodwill impairment charges fell from DKr3.3bn a year earlier to DKr2.8bn. Including goodwill writedowns of DKr9.1bn due to Danske’s business in Finland, Northern Ireland and Estonia — already announced in December — the bank made a net loss of DKr6.3bn in the quarter compared with a profit of DKr3.3bn a year earlier.

For the full year it made a net profit of DKr3.8bn and one of DKr12.9bn excluding the goodwill impairments. Danske said it expected to make a net profit of more than DKr14bn this year, but that is below consensus analyst forecasts of DKr15.4bn.

“2015 guidance [is] disappointing: the new financial targets lack ambition and critically there is no big cost ambition. The dividend is small appeasement,” wrote Nick Anderson, analyst at Berenberg, the German investment bank.

Danske also raised its return on equity targets slightly from 9 to 9.5 per cent for this year and from 12 to 12.5 per cent by 2018. It also tweaked its dividend policy from aiming to pay out about 40 per cent of net profits — it paid out 43 per cent of last year’s before goodwill — to 40-50 per cent in the future.

But that still lags behind Swedish banks with Nordea, the Nordic region’s biggest bank, paying out 70 per cent of its net profits and Swedbank aiming for as much as three-quarters.

Danske’s shares slipped 0.8 per cent to DKr170.90 in afternoon trading on Tuesday, having risen more than 38 per cent over the past 12 months.

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