Cantillon: What now for Danske Bank in Ireland?

 

Danske Bank’s ruthless firing of group chief executive Eivind Kolding yesterday, saying it wants someone with “stronger qualifications within banking”, sparked the usual flurry of speculation here about the Danish company’s long-term commitment to this market.

A spokesman for the bank in Copenhagen assured Cantillon that the appointment of Thomas Borgen would not result in a change of strategy in Ireland. This was less about a shift in strategy and more about changes to the execution, he added.

Danske’s retrenchment in the Republic over recent years is well-documented. It has closed its branch network and is now very much a niche player here.

It hit the headlines recently with its pursuit of Minister for State for Small Business John Perry over a €2.47 million debt, which was restructured recently.

Danske’s “core” business in Ireland earned just €30.3 million in the first six months of this year, 1 per cent of the Danish bank’s group revenues. It made an operating loss of €5.3 million, which expanded to €26.2 million when impairment charges on loans were booked.

In its outlook statement, Danske reaffirmed its expectation that impairments at the Irish unit – core and non-core – in 2013 and 2014 would amount to about 2.5 billion Danish kroner (€340 million). This reflects bad lending decisions during the property bubble, which are still washing through its accounts.

On a conference call on August 1st to discuss its interim results, Kolding was asked about any “near-term disposals” in Ireland, presumably of loan books, although this wasn’t specified by the questioner.

“Ireland, no, we stick to the strategy that we have, and it’s basically to run down our non-core portfolio. We don’t expect we can do it in a different manner,” Kolding replied. “This is not sensible, so it will be bit by bit. But hopefully when we talk again by the end of ’14, you will see quite a handsome reduction on that.”

Kolding won’t now get that opportunity and it will be interesting to see if Borgen sticks with this view of how it should work through its problems in Ireland when Danske hosts its next analysts’ conference call.

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