Sunday 8 December 2019

Most Danish banks still not issuing bonds after crisis

Danske Bank HQ in Copenhagen
Danske Bank HQ in Copenhagen

Frances Schwartzkopff

More than half a decade 
after Denmark's financial crisis left most of its banks shut out of debt funding markets, 
the lenders still aren't issuing bonds.

Jan Kondrup, director of Denmark's Association of Local Banks, says most of the group's 70 members are meeting their capital requirements through equity. For liquidity, aside from deposit funding, they're relying on a partnership with Nykredit unit Totalkredit.

"All the banks have a challenge with customers saving and repaying their debt," Mr Kondrup said. "A few need to work with their capital structures."

Denmark has lost more than 60 small and medium-sized banks since 2008.

Three years ago, the country became the first in the European Union to force losses onto senior creditors, a development that sent shock waves through funding markets.

The situation for Denmark's community banks is in stark contrast to the success of the country's biggest lenders 
such as Danske Bank in tapping bond markets. Danske and Nykredit, Denmark's biggest mortgage bank, both issued contingent convertible debt this year to meet capital requirements.


The yield on Danske's 5.75pc Additional Tier 1 note eased to 5.27pc at the end of last week, compared with a high of 5.58pc a few days after it was issued in March.

Nykredit's 4pc Tier 2 CoCo yielded 3.62pc last week, little changed since its issuance in June.

Totalbanken, a community lender with a market capitalisation of about 100m kroner, sold a 9.4698pc subordinated note due 2024 in June.

At Danske, a subordinated note due 2026 and sold in May carries a coupon of 2.75pc, according to data compiled by Bloomberg.

The community banks going to market now "would get better terms than two, three years ago, because of the work they've done," Mr Kondrup said.

Members of the Association of Local Banks are showing some signs of improvement. The lenders delivered a profit in the first quarter, compared with a loss a year earlier.

"We expect to see even more progress" for the second quarter, Mr Kondrup said. "Writedowns are falling, costs have stabilised and the top line has stabilised."

Denmark has lost almost twice the number of credit institutions as the European 
average. Fifteen percent have closed or been taken over, 
compared with 8.7pc for the EU, according to the European Central Bank. (Bloomberg)

Irish Independent

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