Danske Bank reports solid first-quarter profit

(Sharecast News) - Danske Bank reported a solid first-quarter profit and raised its longer-term profitability ambitions on Thursday, as lending growth, higher fee income and strong credit quality helped offset weaker trading income caused by market volatility.

Denmark's largest lender said net profit was DKK 5.7bn (�660m) in the first quarter of 2026, down 1% from DKK 5.8bn a year earlier and broadly in line with analyst expectations cited by Bloomberg.

Total income was broadly stable at DKK 14.0bn, while net interest income rose 4% to DKK 9.3bn, ahead of the Bloomberg consensus of DKK 9.21bn, supported by higher lending volumes and interest rate risk management.

Net fee income increased 7% to DKK 3.9bn, helped by higher investment fee income and stronger customer activity.

Net trading income fell, however, as financial market volatility weighed on the quarter.

Operating expenses rose 2% to DKK 6.4bn, reflecting digital investments under the bank's Forward '28 strategy and higher staff costs from wage inflation.

Loan impairment charges amounted to a net reversal of DKK 26m, compared with impairment charges of DKK 50m a year earlier, underlining the bank's resilient credit quality despite geopolitical uncertainty.

Return on equity was 13.1%, down from 13.4% a year earlier, while the cost-income ratio stood at 45.8%.

The common equity tier one capital ratio was 17.7%, compared with 18.4% a year earlier.

"We delivered a solid financial performance in the first quarter of 2026, demonstrating the strength of our underlying business despite challenging market conditions," said chief financial officer Cecile Hillary.

"Against this backdrop, Danske Bank is well positioned to support customers and be a trusted financial partner, given our well-diversified credit portfolio and strong balance sheet."

Danske maintained its full-year 2026 guidance for net profit of DKK 22bn to DKK 24bn, which it said would imply a return on equity above its 2026 ambition of 13%.

The bank said the outlook remained subject to economic conditions.

It also unveiled new targets for 2028, lifting its return on equity ambition to more than 14.5% and targeting a cost-income ratio of no more than 43%, compared with about 45% previously.

It said it would increase annual investment in core technology, AI-enabled platforms and advisory capabilities by about 13% to DKK 4.5bn to support productivity and growth.

"Our updated targets reflect our ambition to combine growth with high productivity and a more efficient capital structure, which enables us to reinvest in the areas that matter most to our customers," chief executive Carsten Egeriis said in a separate statement cited by Bloomberg.

Danske also announced an extraordinary dividend of DKK 5bn, equivalent to DKK 6.14 per share, and said it saw payout potential of more than DKK 55bn through 2028, with scope for additional distributions and share buybacks depending on earnings, capital and market conditions.

The bank said Nordic macroeconomic conditions remained resilient, particularly in Denmark, where it expected GDP growth of 3% in 2026, inflation below 2% and high employment.

However, it warned that rising geopolitical uncertainty had increased market volatility and pushed up energy prices since its March forecast.

"It is likely that higher energy prices will hit growth in what otherwise looked likely to be a pretty solid year for the economy," said Las Olsen, head of macro research.

"The magnitude will depend on how the situation develops, but currently, it looks more like a setback than a crisis, not least in the Nordic economies."

Personal Customers increased profit before tax by 12% to DKK 2.51bn, driven by higher deposit income, higher fee income and loan impairment reversals.

Business Customers reported a 7% decline in profit before tax to DKK 2.62bn, mainly because impairment reversals were lower than a year earlier, though the underlying business continued to show stable volume growth and strong fee income.

Large Corporates and Institutions recorded a 5% fall in profit before tax to DKK 2.23bn, as lower trading income offset higher net interest and fee income.

Danica's net income fell 19% to DKK 162m because of weaker financial markets, while Northern Ireland profit before tax was unchanged at DKK 602m, with higher income offset by a loan impairment charge.

At 1545 CEST (1445 BST), shares in Danske Bank were down 1.46% in Copenhagen at DKK 324.60.

Reporting by Josh White for Sharecast.com.