Danske Bank records €2m loss before writedowns

Dankse Bank lost €2 million before impairment charges in the Republic last year as it shut its branch network and shifted its focus to corporates and wealthy individuals.

The Danish-owned bank set aside €750 million in impairment charges for bad loans, mostly in its commercial property book. The writedown was 12 per cent lower than in 2011.

Income at the bank declined by 13 per cent to €122 million over the 2012 calendar year, with the fall attributed to “continued low levels of customer demand”.

A bright spot came in non-interest income, or fees, which were ahead by 22 per cent at €18 million. Danske’s country manager in the Republic, Terry Browne, said he was particularly pleased with the performance on fees, which sits well with the bank’s plan to grow its presence in the corporate market. Last year’s fee income was boosted by the bank’s involvement in bond issuances from both ESB and Bord Gáis.

Danske closed its 27 branches in 2012, discarded the National Irish Bank name and transferred its worst loans into a separate unit to be run down directly from Copenhagen. Its increased focus on the corporate and institutional market is being matched on the consumer side with a focus on wealthy customers who are willing to pay for investment advice.

“2012 marked the beginning of a new era for the bank’s operations in Ireland,” said Mr Browne.

Last year’s €2 million operating loss compared to an operating profit of €45 million before impairment charges in 2011, while the redesign of the business led costs to increase by 29 per cent to €124 million in 2012.

Mr Browne said the bank had experienced customer slippage at a rate of about 4 per cent at the end of last year, but noted that the “potential losses” he had pencilled in as a result of the branch closures did not occur. He said Danske will now look to “embed” the new customer service model in its consumer business, while developing “customer acquisition strategies” towards the end of this year.

The bank’s residential mortgage book is healthier than those of its peers, with 3.8 per cent of loans in arrears of more than 90 days, compared to an industry average of roughly 11 per cent.