Danske Makes a Good Start Into the Year; Fair Value Estimate Maintained

We maintain our DKK 170 per share fair value estimate for Danske after it reported decent first-quarter results. Comparing performance with the last quarter of 2020, which we believe paints a clearer picture, Danske did well. Total income increased 2% to DKK 10.6 billion carried by higher trading income and income from its insurance business. Net interest income was flat as deposit repricing tailwinds were offset by product mix effects and margin effects in the large corporates segment. More importantly, however, operating expenses have declined materially after the group has been investing and spending heavily over the last couple of years to restructure its business and clean its closet. Operating expenses came in at DKK 6.3 billion and are expected to fall below DKK 24.5 billion for the full year versus DKK 28.1 billion in 2020. Loan loss impairments of DKK 497 or 10 basis points were a positive as well compared with last quarter, but we would highlight that Danske’s current guidance of below DKK 3.5 billion implies higher impairments for the remainder of the year. Net income for the quarter came in at DKK 3.1 billion, which corresponds to a decent 7.5% return on equity.