- Earnings per share excluding one-off expenses related to the acquisition of Handelsbanken Denmark: DKK 33.1 (DKK 31.5).
- Core profit before depreciation and amortization increased by 31% to DKK 2,859 million (DKK 2,176 million).
- Equity ratio: 23.6% (22.6%), of which the common equity tier 1 ratio was 18.6% (18.0%).
- The purchase of Svenska Handelsbanken’s Danish activities has been approved by the Danish Competition and Consumer Authority and is proceeding according to plan. The transaction is expected to be completed before the end of the year.
- According to the agreement, Jyske Bank will make a cash payment for the assets and liabilities of Handelsbanken Denmark and a goodwill payment of DKK 3.0 billion on the acquisition date.
- Synergies are expected to be at least DKK 0.3bn pa pre-tax and will be fully realized over the course of 2024 Restructuring and integration costs are expected to total c. 0.5 billion DKK before tax, of which approx. 0.1 billion DKK in 2022 and approx. 0.3 DKK in 2023.
- Due to the capitalization, it is expected that the transaction will not require the issuance of shares or AT1 capital.
“Jyske Bank’s earnings per share increased in the first nine months of 2022, defying a strong negative turn from DKK 0.8bn to -0.5bn in value adjustments and income from the investment portfolio. Core earnings before impairment and impairment increased 31%. The sharp fluctuations in the financial markets reflect the increasing uncertainty about macroeconomic developments due to accelerating inflation, which was further fueled by the war in Ukraine.
The inflationary pressure has led to historically rapid interest rate increases and thus to the end of the negative interest phase. A period of stagflation in the form of negative growth and persistent inflation is likely to come, although the depth and duration of the economic slowdown is still unknown. We focus on helping our customers in times of uncertainty. In addition, Jyske Bank will help reduce dependency on energy supplies from Russia by reducing its own energy consumption by 15%.
Denmark’s economic situation is good and Jyske Bank’s business continues to grow, supported by increasing business volume and a good level of activity. Added to this are the effects of strict cost controls and continued solid credit quality. The acquisition of Svenska Handelsbanken’s activities in Denmark has been approved by the competition authorities and we very much look forward to welcoming customers and employees in the coming monthsexplains Anders Dam, CEO and Managing Director.
The Danish economy was still characterized by rising employment in the first nine months of 2022, but the high economic growth after the end of the restrictions due to the COVID-19 pandemic in 2021 weakened. Capacity pressures in global supply chains contributed to an imbalance between supply and demand, leading to accelerated inflation. Inflation has hit a 40-year high, leading to historically high interest rate hikes at the expense of household purchasing power and a new low in consumer confidence. This has increased the likelihood of an economic slowdown and lower home prices. However, the Danish economy is well positioned to weather a period of slower growth and Jyske Bank is focused on helping its customers deal with their financial woes.
On June 20, 2022, Jyske Bank entered into an agreement to purchase the activities of Svenska Handelsbanken in Denmark, which has around 600 employees and 43 branches and is headquartered in Copenhagen. The Danish operations were established in 1992 and have since grown organically, complemented by acquisitions of Midtbank and local banks. Based on the status at the end of 2021, the transaction involves more than 130,000 customers, bank loans and advances of DKK 66 billion and deposits of DKK 36 billion. According to the agreement, Jyske Bank will make a cash payment for assets and liabilities on the takeover date in addition to a goodwill payment of DKK 3.0 billion. The takeover will strengthen Jyske Bank’s market position and increase its business volume by around a fifth. The larger scale will also support the ability to develop and offer attractive products and services to current and future customers of Jyske Bank. The takeover also offers the possibility of realizing economies of scale on the basis of a common IT platform. The transaction is expected to close before the end of 2022, following approval by the Danish Competition and Consumer Protection Agency in October.
Jyske Bank is well positioned for both organic growth and the integration of Svenska Handelsbanken’s operations in Denmark. Over the past ten years, Jyske Bank has optimized its business through significant revenue and cost initiatives, new strategic cooperation agreements and organizational adjustments. Several acquisitions were integrated, including the merger with BRFkredit in 2014, which was the most important.
The corporate customer area recorded a significant increase in business volume in the first nine months of 2022. The private customer area implemented further branch mergers and introduced a new customer program on April 1, 2022. The purpose of this program is to ensure that Jyske Bank can continue to offer its private customers accessible, personal and competent advice and good and fast service in a profitable way. These characteristics also apply to Jyske Bank’s private banking activities, and for the seventh year in a row Jyske Bank has been voted the best bank for private banking clients in Denmark according to Voxmeter.
In the first nine months of 2022, the expansion of easy and digital access to Jyske Bank’s services continued, including in the form of self-service ordering of additional loans and a Jyske Forsikring (insurance) overview in Jyske Mobilbank. Extensive training activities for consultants in the area of sustainability as well as the inclusion of ESG preferences in the investment advice offered were also started during this period. In addition, Jyske Bank has joined the Green Building Council Denmark, which strives to promote sustainability in construction among all stakeholders. Jyske Bank had intermediate targets approved by the Net Zero Asset Managers initiative as part of the commitment to have customers’ investment portfolios net of CO2 neutral by 2050. In addition, Jyske Bank has installed solar panels at its headquarters, which will help reduce net electricity consumption in the future.
Earnings per share of DKK 31.9 in Q1-Q3 2022
Earnings per share increased to DKK 31.9 from DKK 31.5, including one-off charges of DKK 78 million related to the acquisition of Handelsbanken Denmark. The profit for the period of DKK 2,194m represented a return on equity of 7.9% pa versus DKK 2,391m or 8.8% pa for the first nine months of 2021. The still solid profit defied a turnaround of DKK 1.3bn Valuation allowances and investment portfolio returns. Thus, the profit reflects a good underlying development with increasing business volume, high activity and good credit quality.
Overall, Jyske Bank’s business volume showed progress in the first nine months of 2022. Loans and receivables from banking transactions recorded one of the highest growth rates reported so far, namely 22% compared to the first nine months of 2021. The progress can be attributed to corporate customers. Leasing and auto finance were up 8% despite tight supply chains in the auto industry. Nominal mortgage lending rose 1% on increased lending to corporate customers, while mortgage lending to retail customers declined, partly as customers with fixed-rate loans took the opportunity to reduce their outstanding debt. Bank deposits increased by 22% due to corporate customers.
Adjusted for a negative development in loan loss provisions, core income rose 13% across the board. Net interest income was supported by increasing bank loans and receivables from corporate customers as well as rising interest rates. Net commission income rose, among other things, due to a high level of lending and debt restructuring activity and a new customer program for private customers. Other income was positively impacted by higher dividends, among other things, and continued favorable sales conditions in the used car market led to higher operating lease income (net).
Core costs increased by 1% compared to Q1-Q3 2021. In addition, one-off expenses of DKK 78 million related to the takeover of the activities of Svenska Handelsbanken in Denmark were recorded. Underlying cost inflation was reduced by lower Bankdata expenses.
Loan write-downs amounted to income of DKK 447 million compared to income of DKK 73 million in the first nine months of 2021. Credit quality remains solid with a low proportion of non-performing loans. Due to macroeconomic uncertainty, Jyske Bank maintains management’s estimates for impairments totaling DKK 1,640 million. This level is roughly unchanged compared to the previous quarters.
At the end of the first nine months of 2022, Jyske Bank’s Common Equity Tier 1 ratio was calculated at a historically high level of 18.6%, which corresponds to an excess capital adequacy of DKK 13.8 billion compared to the regulatory requirements.
For 2022, Jyske Bank expects earnings per share at the upper end of the range of 44-50 DKK and net profit at the upper end of the range of 3.0 billion – 3.4 billion DKK. The ranges include one-off expenses expected to be DKK 0.1 billion, which corresponds to earnings per share of just over DKK 1.
For 2022, business volume is expected to be impacted by increasing bank lending as well as rising nominal mortgage loans to corporate customers.
Core income may fall in 2022 due to significantly lower allowances than 2021.
Excluding one-off costs, core costs are expected to remain roughly flat in 2022 compared to 2021.
Loan loss provisions and provisions for guarantees are expected to generate income in 2022.
Anders Dam, Managing Director and CEO, Tel. +45 89 89 20 01
Birger Krøgh Nielsen, CFO, phone +45 89 89 64 44
Jyske Bank interim financial report Q3 2022
Company announcement Q3 2022_20221101