Danske Bank is losing Danish customers to its biggest Swedish rivals, which already are beating Denmark’s largest lender on equity returns and credit ratings.
Danske lost 135,000 clients in its home country in the past 16 months as customer satisfaction at the Copenhagen-based lender fell to the lowest in at least six years, according to data from Denmark’s CEM Institute -Voxmeter.
Nordea Bank and Svenska Handelsbanken, both based in Stockholm, as well as smaller Danish rivals took those customers, according to the researcher. Danske is losing customers at a time when the lender is still fighting to emerge from burst property bubbles in two main markets.
The bank is unwinding its retail business in Ireland nine years after expanding into that country, while losses at home are finally shrinking after a 2008 housing bust.
The Danish business also is struggling to grow in an economy hobbled by the world’s highest private debt burden.
"Large corporate customers are moving to Swedish banks, mid-sized corporates are moving to other Danish banks, and retail customers are leaving for smaller Danish banks," as well as for Copenhagen-based Nykredit, Andreas Hakansson, a Stockholm-based banking analyst at Exane BNP Paribas, said by phone.
Danske’s rivals are also offering more aggressive pricing on the retail side, he said.
After introducing a new fee system that provoked a backlash in media and among politicians and customers, Danske said in October it had lost 94,000 customers in the first nine months of 2013.
The lender, which in September replaced chief executive officer Eivind Kolding with Thomas Borgen, then pledged to improve its image and increase customer attention to win back clients.
Still, in Voxmeter’s customer satisfaction survey published in December, Danske’s score slumped to 4,783 points out of a possible 11,000 - its lowest since the survey began in 2008 and the lowest level of all eight banks included in the report.
“Loan growth in Denmark is negative, so if you lose market share on top of that, you have a problem,” Mr Hakansson said.
Danske is "losing clients on the corporate side to banks like SEB and Nordea because they can offer more competitive pricing since they have cheaper funding. That goes back to Danske's credit rating."
Danske carries a long-term credit rating of Baa1 at Moody's Investors Service, which is four steps lower than the Aa3 ratings held by Handelsbanken and Nordea. SEB and Swedbank, also based in Stockholm, are graded A1, three steps higher than Danske.
At the same time, investors in Danske got less than a third of the average return on equity delivered by the four Swedish banks in the third quarter.
Danske said it’s not losing corporate clients and that it’s winning new customers “in the mid-sized and larger segment,” according to an e-mailed reply to questions.
“With regards to the retail market in Denmark, it’s well known that we have seen an unsatisfactory development in the number of customers, however over the last months we have taken a number of initiatives to strengthen our market position,” Danske said.
“We are confident that we are heading in the right direction and we have retained our market share in volumes.”