Updated expectations of result; dialogue regarding a tender offer for Forstædernes Bank A/S

Company announcement 16 - 2008 

15 September 2008


Updated expectations of result; dialogue regarding a tender offer for
Forstædernes Bank A/S 

The Board of Directors of Forstædernes Bank A/S ("the Bank") has been in talks
with a leading financial institution about a possible tender offer for the
Bank. The Bank expects that a tender offer will be presented shortly after the
publication of this announcement. 

The Bank updates its expectations of its results etc. as follows:

As per 31 August 2008, the Bank has calculated its solvency ratio at 11.8 and
the excess cover in relation to the 10% requirement set out in Section 152 of
the Danish Financial Business Act at 105%, equivalent to a liquidity reserve of
approximately DKK 4 bn. 

Since 30 June 2008, the Bank's core earnings have developed as expected.
However, as a consequence of the circumstances described below, the Bank
expects core earnings for all 2008 to amount to DKK 250-300m, equivalent to a
return on equity as per the beginning of the financial year of approximately
12%. In connection with the publication of the Bank's half-year report for
2008, the Bank expected core earnings for all 2008 to be at the level of
approximately DKK 300-350m. 

Furthermore, according to the management's estimates the Bank can only expect a
break-even result for 2009 and 2010 in aggregate. 

The background for the Management's adjusted expectations of 2008 and the
expected break-even result in 2009 and 2010 is as follows: 

The global crisis on the financial markets 
The global financial markets are facing a historic crisis. This has brought
increased focus on the risk of making capital available for financial
institutions, and it has reduced the amount of liquidity available for lending
to clients. 

The Bank is affected by the situation on the international lending market in
general and the international lenders' view of the Danish financial sector in
particular.  To a large extent, the loan financing ("funding") obtained by the
Bank is established through Danish and foreign financial institutions, which
now seek to reduce their exposure to the Danish market. 

The collapse of Roskilde Bank in mid July 2008 and the subsequent unsuccessful
efforts to dispose of this bank to a third party have brought focus on the
Bank. At present, the access to funding from the international lending markets
is characterised by greatly increased prices to the extent that funding is
available at all.  Correspondingly, it is estimated that under the current
market conditions it is in practice not possible to raise hybrid capital and
subordinate loan capital. 

In its activities, the Bank has taken into account a possible economic slowdown
and has planned a number of emergency measures in order to counter potential
write downs of assets and securities held by the Bank. However, the Bank did
not anticipate the current almost complete and unprecedented standstill in the
international funding markets. 

Liquidity position
The lack of international financing affects the Bank's short and long term
funding which expires and must be refinanced. 

According to plan, the Bank must refinance approximately DKK 5-6bn on the
international lending markets in the period until the end of 2010 and in 2011
to 2013 an additional amount of DKK 5-6bn. Viewed separately, the Bank has
sufficient liquidity to refinance the funding which expires until the end of
2009, but the shortage of financing options may well affect the funding that
has to be refinanced subsequently. Under the present market conditions, it is
uncertain whether the Bank in the long term will be able to obtain the
necessary refinancing with its present structure and ownership. Even if it were
possible to obtain such funding, it should be expected that, under the
prevailing market conditions, refinancing will be available on considerably
poorer terms, to the detriment of the Bank's earnings potential and
competitiveness. 

Since 11 July 2008 when Roskilde Bank first made a public announcement
regarding Roskilde Bank's problems, the Bank has experienced a net reduction of
deposits of approximately 8 percent of total deposits as of 30 June 2008,
equivalent to DKK 1.3bn. This development in the deposits does not in itself
give rise to any problems for the Bank, and the Bank still has a reasonable
excess liquidity of approximately DKK 4bn as per 31 August 2008. With the
development on the international lending markets as outlined above, a material
reduction of the total deposits may, however, contribute to a more difficult
position in the future, since a lack of funding and reduced deposits will
mainly have to be financed through the Bank's liquidity reserve and a
coinciding reduction of the loan portfolio. 

Potential write downs
The Bank's earnings and the risk of write downs depend to a considerable extent
on the development on the property and securities markets. 

Decreasing prices for both business and housing property have put considerable
strain on the property markets, and thus the pledges on which the Bank's loan
portfolio is based have been diluted.  When this development is taken together
with the weaker economic development in Denmark, there is also a risk that
certain lenders' earnings and liquidity will be put under pressure. 

The development on the securities markets has also been negative in 2008 as a
whole and in particular during recent months. To the extent that the Bank's
credit commitments have been secured by a pledge on securities, the decreasing
prices entail reduced security and thus, other things being equal, an increased
risk of losses. 

On the basis of the foregoing, the Board of Directors and the Executive Board
have made a renewed assessment of the Bank's risk of write downs. The need for
write downs in 2008 has been taken into account in the adjusted expectations of
the Bank's core earnings for all 2008. It is the assessment of the Board of
Directors and the Executive Board that the risk of write downs will increase
considerably during each of the next two years, should the present
macroeconomic conditions continue or deteriorate. This will negatively affect
the earnings and intensify the requirements to the solvency of the Bank. 

Earnings potential
It is the opinion of the Board of Directors and the Executive Board that the
expected development of the Bank's funding position will lead to a reduced
activity level in the Bank, either through reduced lending or through
non-competitive interest rate margins and consequently reduced earnings
potential. When this is related to expected lower earnings from asset
management due to the global development of asset values and the
above-mentioned potential write downs, it is the management's assessment that
the aggregate result for 2009 and 2010 will be a break-even result. 

Jesper Andreasen
Chairman of the Board of Directors

-------------------------------------------------------------------------------- 
Contact person:
Jesper Andreasen, Chairman of the Board of Directors: Tel. +45 40 58 63 34
Steffen Torvits, Investor Relations and Press Manager: Tel. +45 22 22 20 36


This announcement has been issued both in Danish and English. In case of
inconsistency the Danish-language version shall prevail.