Danske Bank posts strong Q4 results with 11% profit growth and credit quality

Investing.com -- Danske Bank (CSE:DANSKE) on Friday reported solid financial results for the fourth quarter of 2024, supported by strong growth in core banking income, disciplined cost management, and credit quality. 

The Danish multinational bank posted an 8% year-over-year increase in total income, reaching DKK 56.4 billion, with improvements across net interest income (NII) and fee-based earnings.

Net interest income rose to DKK 36.7 billion, reflecting a 5% increase from the previous year. The growth was driven by resilient treasury effects and balance sheet optimizations, which helped mitigate the impact of central bank rate cuts. 

Lending margins improved due to lower funding costs, although deposit margins were affected by the declining interest rate environment.

Fee income saw an uplift, rising 16% year-over-year to DKK 14.9 billion. This was largely driven by strong customer activity and a record-high contribution from performance fees in Asset Management, which surged by 143% compared to the previous year. 

Investment-related fee income was a key contributor, as assets under management grew to DKK 880 billion.

Trading income remained stable, increasing by 2% year-over-year to DKK 2.7 billion, though seasonal factors led to a quarter-over-quarter decline. 

The insurance business posted a modest decline in net income, impacted by higher provisions related to long-term health and accident liabilities.

Operating expenses increased slightly to DKK 25.7 billion, up 1% from the prior year. However, the bank’s cost-to-income ratio improved to 46% from 49% in 2023, reflecting enhanced efficiency and cost control measures.

The decrease in financial crime prevention costs and reduced legacy remediation expenses contributed to the bank’s ability to manage inflationary pressures.

Credit quality remained strong, enabling a net reversal of impairment charges amounting to DKK 543 million for the year. 

This reflected a well-provisioned portfolio and a continued review of the post-model adjustment buffer. The strong credit environment was also evident in the stable loan performance of Realkredit Danmark, the bank’s mortgage lending arm.

Danske Bank reported a net profit of DKK 23.6 billion for 2024, up 11% year-over-year, lifting its return on equity to 13.4%. The bank maintained a strong capital position, with a Common Equity Tier 1 ratio of 17.8%, providing a solid foundation for capital distribution plans.

Based on an expected decrease in market rates, the bank expects total income to decline slightly in 2025 due to lower NII. 

However, fee income is expected to remain strong, supporting overall profitability. In addition to operating expenses being capped at 26 billion DKK, loan impairment charges are expected to be around 1 billion DKK, reflecting continued strong credit quality.