Copenhagen: Denmark's banks face larger writedowns this year than those endured in 2011 as rules enforced since April take a bigger toll on lenders than the industry predicted.
"We anticipate that loan losses won't decline in 2012," Per Tornqvist, an analyst at Standard & Poor's based in Stockholm, said in an interview. "There's no doubt that the provisions need to be done, and the sooner the better, in terms of working it out of the economy."
S&P estimates total loan losses at Danish banks swelled to 155 billion crowns (Dh99.8 billion) in the four years through 2011, with another 30 billion crowns (Dh19.29 billion) in writedowns yet to be taken. Danske Bank, the country's largest lender, accounted for almost half the industry's bad loans, according to S&P.
New standards
Denmark's Financial Supervisory Authority told banks in February to comply with stricter writedown standards, a requirement it said would have limited impact on loan losses as it estimated most banks already followed the revised rules.
Since then, Jyske Bank and Sydbank, the country's second- and third-largest listed lenders, respectively, raised their forecasts for impairments this year, citing the new regulatory standards. Danske reports its first-quarter results tomorrow.
"All of us have been quite surprised by the magnitude of the writedowns, given what the FSA said in February," Thomas Hovard, head of credit research at Danske Bank in Copenhagen, said in an interview. "Most people had expected that loan losses would come down in 2012."
"Elevated risks in agricultural lending are contributing to downward pressure on the credit profiles of Danish lenders and covered bonds," Moody's said, as part of its review of 114 European lenders, including eight Danish banks.
