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Jacob Wolinsky

Founder and CEO of ValueWalk.com (the “Site”) is a web site owned by VALUEWALK LLC, a New Jersey limited liability corporation. I am the former VP of business Development of SumZero, LLC, the world’s largest community I have prior experience in a value based pe firm focused on PIPE transactions in micro-cap companies, and at a value based research firm, which focused on smid caps.

  • Thomas Borgsmidt

    The fate of Danske Bank is intrincinkly tied to the real estate market in Denmark. Not only does the bank own a “Fannie Mae” or real estate financing company with 1/3 market share; but it also finances the remaining 20% of the purchase price in the form om (intended) short term bank loans.

    New figures for Q3 was published today – convieniently delayed two months in comparison to a couple of years back. Not only that, but the sales figures have been revised for the first 6 months of 2011.
    http://dl.dropbox.com/u/33226516/Realestate%20prices%20and%20deals.pdf

    First of all: The so called “recovery” of the housing market is shown to be false. The greates whack is suffered by the region of the capital. where prices now dip sharply. But the general picture is the same all over the country (a rough and ready comparison to US is to compare Denmark with Vermont – in more than one way).
    That the capital region is hardest hit by reality is particularly serious, as here the realestate prices are the highest, have bubbled the most – in short the area most heavily in debt – private debt.
    The problem is that the realestate bonds face the utmost difficulty. The loan/equity ratio of the bond is calculated using public assesment values of the property – made every two years – for property not traded in the last 5 years – newer sales use sales prices.
    The public assesment is an assesment of the fair trade value of the property – if sold in current market.

    As even non-danish readers can se: The high prices of 2006 are now being replaced in the denominater with current prices that have dropped with 20-30% since then.
    This means the loan/value relationship goes through the roof. As 80% of the sales value is financed by a mortgage a drop of 20% will mean that the mortgage loan is now 100% of realisation value. Very little of principal has been paid of – in fact none.
    Investors in Danish real estate bonds have not lost a cent in the 200 year history – that could very well be about to change – at least for the variable interest type of mortgage.

    Secondly: Number of real estate properties sold are now all over the country back at the level of Q4 2008 in Q3 2011 and traditionally Q4 is the worst. The capital region seems to be  compareratively less bad off; but judgement is needed because these figures do not take  into account the various “brilliant” trades the mortgage companies do with somewhat dubious characters to keep repossed properties off the books.

    The more immediate problems for Danske Bank are:
    1. Investors have not been enthused with the high risk exposure in variable interest bonds – combined microscopic interest rates – which has led Danske Bank to buy own bonds. Furthermore other mortgage companies are in a similar predicament.
    So there is a lot of kitchenware accusations as to whom is the most tarnished.
    2. Dubious as the security behind the real estate bonds might be, it is nothing in comparison to the certainty of the last 20% of purchase value financed by the banks.
    Those bankloans are solely secured by defaulters hopes and prayers.
    And with unemployment raising said prayers take on an increasingly shrill pitch.

  • Thomas Borgsmidt

    This morning it was officially confirmed, that Eivind Kolding steps down as chairman of the board to become new CEO of Danske Bank – and he leaves his position in Mærsk Line.

    This will be a rude awakening for Danske Bank Kolding has handles more mergers in the containership division of Mærsk. He is known to have a firm grip on the hachet!

    New chairman of the board is Ole Andersen with a background in capital funds.

    This move indicates:
    1. Ruthless rationalisation in Danske Bank
    2. Probable dismemberment and possible sale off of parts.

    Danske Bank is about to be scrabbed for spare parts.

    Just my take.

  • Thomas Borgsmidt

    Well smearing of Danske Bank is difficult as they are allready rolling in the sewer; but interesting enough the roflmao is posted before the papers had the release from Fitch.

    The problem is not so much the losses abroad in Ireland and the Baltic countries – not to mention the unfortunate incident when Lehmann collapsed.

    No more to the point is the massive direct and indirect exposure to the Danish real estate market:

    1. Not only does Danske Bank own Realkredit Danmark, that has a marketshare of approx. 1/3. The only good thing to be said about RD and DB is, that it is NOT particularly exposed towards agriculture.
    Housing can be mortgaged to 80% of value. The first 5 years the value of the real estate is taken from sales price. That is unnerving. Prices has – already – dropped 20% and now the value of 2006 properties are being displaced with recent public estimates of value.
    This might very well mean that the Special Covered Status of the Realkredit Danmark bonds is untenable.
    Off course this means that the 20% in bank loans are absolutely in the toilet.

    2. On the rent market – and the market for rental housing is not only dead; but mummified.
    There is NO trade.
    There is nothing unusual in banks keeping more than sick loans on the book – that is the way banks work.
    The trouble is that builders have loaned crosswise in several banks – which makes for a lovely gordian knot. Nobody can take losses because then the entire house (no pun intended) comes tumbling down.
    F.I. the Essex Group has a debt – if memory serves – 10 billion DKK, but that is distributed among – i believe it was 20 banks.
    Maybe Danske Bank isn’t particularly exposed here – that may very well be so.
    But the moment ONE of those banks crack and the property has to be sold – it will be into a market with no buyers: This will break an already distressed market.

    3. The exposure in private housing is serious because Danske Bank can’t sell their bonds and have to finance them themselves with 3 month credits – or rather had to, as they can’t raise money even on those short terms.
    One reason they have to use short credits is that the ultimate debtors – the owners of the houses and apartments neither can nor will pay anything in interest – not to mention the principal.

    The claque roflmao uses typical technique: Talk about some minor issue in order to avoid adressing substance.

    Of course Nationalbanken copied ECB – that is necessary to avoid default arbitrage.

    Again: There is no liquidity shortage in Denmark:
    The extremely low interest rate on Danish sovereign bond has a connection to the current panic in Europe – but that is only a part of the explanation. It does not explain the large deposits in Nationalbanken.
    The deposit rate has been reduce in several steps since September from 1.1% to 0.4% at present – this has naturally given a drop in the 2 year sovereign bond from 2/3% to 1/3% over the same period.
    Very nasty when Nationalbanken simultaneously is fighting a pressure to revalue the DKK.

    No thruth be told: There is no shortage of liquidity – it is the major banks (among others Danske Bank) that can’t borrow.
    This means the Nationalbank must give distress loans with “good” loans as collateral – the normal sovereign bonds have been sold off and the abundant real estate bonds are all own issues. The problem is that “good” loans are few and Danske Banks way of classification used for reservation purposes are NOT based on an individual assessment of health.

  • Jacob Wolinsky

    HA perfect timing look what Fitch just announced-http://www.businessweek.com/news/2011-12-14/credit-agricole-danske-bank-reduced-by-fitch-after-review.html. I have no position, but you are the one who sounds quite childish.

  • roflmao

    Wow. Whatever drugs you’re on – I want some!
    You overlooked the simple fact, that the danish Central Bank just copied whatever ECB did on the 3y stuff. No details, because they only had a few hours to do it.
    But don’t let me stop your uneducated childish attempts to smear Danske Bank. I don’t know how they pissed you off, but the level of your panic read between the lines makes fun reading.
    So keep up your entertaining quest of trying to convince the world you know better than rating agencies.

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