COPENHAGEN, Denmark, Oct. 29, 2002 (PRIMEZONE) -- Danske Bank Group (Other OTC:DNSKF) recorded a net profit of DKr6,414m for the first nine months of 2002 against DKr6,984m for the same period of 2001. The decline is attributable mainly to a low tax expense in the third quarter of 2001.
The Group's core earnings in the first nine months of 2002 increased slightly, in line with the outlook presented in the Interim Report. Core income for the first nine months of 2002, compared with the first nine months of 2001, fell by 4% to DKr20,331m. Income continues to be adversely affected by low volume in the capital markets and moderate activity in the core markets of the Group. The decline in income was offset by falling costs and marginally lower provisions.
The Group's total net interest income was unchanged from the level of the first nine months of 2001. The significant fall in Danish money market rates had an adverse impact on net interest income. Banking Activities, International, and the trade-related activities of Danske Markets recorded rising net interest income. The rise in net interest income at Danske Markets should be seen against the background of a considerable fall in trading income.
Despite the substantial fall in the level of activity in the core markets of the Group, earnings from fees and commissions were reduced by a mere 2% compared with 2001 to DKr4,566m. Fee income rose slightly in the third quarter of 2002 relative to the third quarter of 2001.
Other core income rose in the third quarter of 2002 following receipt of gains from the sale of real property and reversal of a reservation made in connection with lawsuits.
The Group's core insurance earnings fell by DKr17m to DKr940m. Danica's pre-tax result improved from a negative DKr75m at the end of June to a profit of DKr310m at the end of September. The rise stems from considerably improved earnings from investment portfolios in Danica as a result of a conversion of the investment assets allocated to Danica's shareholders' equity.
On October 29, 2002, Danica received a financial strength rating and a counterparty credit rating from Standard & Poor's, the international rating agency. Both ratings are A.
The trend in the Group's operating costs and depreciation is progressing as planned. Costs declined by DKr977m to DKr11,229m in the first nine months, corresponding to a fall of 8%. In the same period, the cost/core income ratio fell to 55.2% from 57.4% for the same period of 2001. In the third quarter of 2002, the ratio was 54.6%.
The Group's core earnings before provisions were DKr3,096m for the third quarter of 2002.
In the first nine months of 2002, provisions for bad and doubtful debts fell by DKr49m to DKr1,005m. Accordingly, provisions for bad and doubtful debts remained at a low level compared with total loans, advances and guarantees and amounted to 13bp per annum of total loans, advances and guarantees.
Core earnings rose by DKr87m to DKr8,097m, or 1%.
Against the background of continued cost reductions and expectations of a relatively low provisioning ratio, core earnings for the whole of 2002 are still expected to develop in a positive direction. The trend in core earnings will, however, remain only slightly positive compared with 2001.
Earnings from investment portfolios amounted to DKr707m, against DKr665m for the first nine months of 2001. In the third quarter of 2002, earnings from investment portfolios of the banking business were negative by DKr50m. Earnings from Danica's investment portfolios showed a profit of DKr55m after deduction of postponed risk allowance in the life insurance business because of insufficient investment return.
The Group's tax, including tax on loan loss reserves, is calculated at DKr2,390m for the first nine months of 2002, corresponding to a tax rate of 27%.
The fall in the Group's net profit to DKr6,414m from DKr6,984m for the first nine months of 2001 is attributable to the tax expense in the third quarter of 2001 being exceptionally low as a result of the taking to income of the tax value of DKr700m of prior-year losses incurred by Fokus Bank. In addition, a higher core capital ratio in 2002 reduced the return on equity from 16.8% for the first nine months of 2001 to 14.2% for the first nine months of 2002.
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