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Update on Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY). The Danish Bank Inspection report, dated  summer 2012; but published February 2nd 2013:


The Finance Inspection directed in compliance with § 152 in Law on Financial Activity of Danske Bank recommends the following:

  • The bank must conform to a short term liquidity requirement using Liquidity Coverage Ratio-Standard (LCR)(according to Finance Inspection LCR specifications) as basis at 100 pct. rising to 110 pct. As of January 1st 2014.
  • The Bank must ensure an appropriate relation between financing with maturity of minimum one month and financing with maturities of a minimum of three months.
  • The Bank must reduce deposit deficit with 75 bio. DKK [approx 15 bio. USD] towards the end of 2013.


As mentioned above the directions were given at a time when the market relations were particularly uncertain. The Finance Inspection thus considered a publication at the time would result in disproportionally great damage to the bank, which is why the directions was not published at the time (in the summer of 2012 issue), according to publication regulations § 3, item 1.

As market relations has since generally improved, and as the bank has complied to the Finance Inspections directions, the conditions for the postponement of the publication no longer apply, which is why the directions are now published.

Danske Bank has the following comment by Danske Banks financial director, Henrik Ramlau-Hansen to the Daily Børsen:


How big a task was it to you to diminish deficit of deposits with 75 bio. DKK?

“Well, we have 900 bio. DKK in deposits and 1700 bio. DKK in loans. So it was a minor task, and it has been dealt with in daily operations. Some of the direction had a time limit as of the end of 2013, but have already done it by now”, he says.


If it really was such a minor problem that could be dealt with on the fly – why has Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) brought itself into a position where they were exposed to directions – a direct order – from the Finance Inspection – unless it was a deliberate flaunting of the Finance Inspection?

The downplaying of the problem is also not in harmony with the ½ a year delay in publication. The publication date postponement is probably more due to the truth coming out anyway with the publication of the annual report, where any auditor would insist on explicitly mentioning the direction or the report would be misleading.

The launch of a publicity campaign before Christmas (called “The New Normal”) with commercials all over the place was singularly poorly received and had to be called off. Next: In January 2013, a fee for having an account under a certain amount was announced – whatever that was – it was not in accordance with the directions of the Finance Inspection, as the fee particularly hurts depositors – minor, true; but under public guarantee.

What was in accordance was the public reaction to the fee: A flood of intense hatred from a busted dam rushed Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY), generally occupying newsprint; but was arrogantly brushed aside as one of a couple of thousand changing banks. The opinion pollster, Voxmeter, declared that they had never seen such disgust – and if it hadn’t been because changing the bank is so long a process and the  company cannot survive rating that poor.

The investor might reflect in another way:

1)      Reducing loans with 15 bio. USD. In a small country, this can only be done by shifting good loans to competitors (significantly the amount of business bonds have not increased), which are rumoured to be Nordea Bank AB (STO:NDA-SEK) and SEB). This must inevitably reduce average credit quality in the remaining portfolio.

2)      The stunt to “reduce cost” – in itself a dubious claim – by offending small depositors and closing down branches perhaps has more to do with a severely strained liquidity as the inspection report more than implies. This impression is backed up by the never admitted (nor denied) fact that at New Year 2011/12, Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) had to ask for an emergency credit of 23 bio. DKK from the CB. The CB demands at the end of the month all outgoing payments being deposited in the CB – before clearing them with incoming payments. Small depositors would strain that, as they are likely to have their wages and pensions paying bills coming due at the end of the month.

3)      The popular hatred – there is no other word for it – will indeed make it politically difficult to cut Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) any slack. There has already been populist claims to introduce transaction tax– especially as the 11 Euro-countries are now getting on with it, none withstanding the usual claims that it will just move banking jobs elsewhere: People just don’t care for the lack of revenue: They just want the bank out!

No doubt about it: The situation is serious and management is apparently just shrugging it off. As annual reports always have some element of estimate and judgement in them, any figure in the annual report is to be regarded with not only suspicion; but downright mistrust. A reservation backed up with the dubious explanations offered publicly to an inconvincible audience. Strangely enough stock quotations remain uninfluenced – what is an investor to trust? The stock market or popular – if not common – sense?

The reduced loan quality is indeed backed up by the fact that according to departing CB CEO, Nils Bernstein, the banks could not dream of lending each other the time of day without collateral – not to mention CB deposits in the 50 bio. USD range. This is in context with a liquidity so appalling that the truth has to be held back as long as possible.

Investors are not the problem, as they have for quite some time given banks a wide berth – while speeding away from banks. The question is: Is the national government able to back up loans – in this bank alone – roughly the size of the GDP?