In an effort to narrow the gap with its more prosperous Nordic counterparts, Danske Bank has announced an upward revision of its long-term earnings target. The bank now aims for an impressive return on equity (ROE) of 13% by 2026, surpassing its previous goal of 8.5% to 9%. Complementing this ambition, Danske Bank also intends to achieve a cost-income ratio of approximately 45%, a significant improvement from its earlier mid-50s percentage objective.
Carsten Egeriis, the CEO of Danske Bank, highlighted the institution’s dedication to restructuring and refining its operations. He expressed that Danske Bank has implemented fundamental changes, including risk reduction, organizational development, and a drive to enhance its commercial momentum.
With a keen focus on combating money laundering and bolstering its digital infrastructure, Danske Bank made substantial investments in recent years. However, these efforts left the bank trailing behind its Nordic competitors in terms of earnings. Rival financial institutions such as Nordea and DNB have long-term ROE targets surpassing 13%, while Swedbank sets its sights even higher at a minimum of 15%.
As part of its revitalized strategy, Danske Bank revealed its plans to divest its retail customer business in Norway, opting to concentrate on catering to large enterprises within the Nordic region. The bank stated that the process of finding a suitable buyer is well underway.
Regulatory data indicates that Danske Bank currently holds a market share of nearly 5%, making it Norway’s third-largest bank after DNB and Nordea.
Furthermore, Danske Bank has committed to doubling its investments in strategic development, specifically targeting digital platforms, expert advisory services, and sustainability initiatives.
The bank’s new financial targets are predicated on an assumption of 3% lending growth and less than 1% deposit growth.
Following a $2 billion settlement related to a significant money-laundering scandal in the United States and Denmark, Danske Bank refrained from paying any dividends for the year 2022. However, the bank has confirmed that it will resume dividend payments upon the release of its first-half 2023 results in July.
(Exchange rate: $1 = 6.9713 Danish crowns)
