Danske Bank has released its financial results for the first nine months of 2016, which have revealed that in Northern Ireland the Bank’s profit before impairment has increased by 8% year-on-year, primarily due to income growth. Profit before impairments for the 9 months to the end of September 2016 came in at £75m.
The company’s strong revenue performance includes growth in both customer lending and deposit volumes, as well higher cards related income. However, the financial report indicated that reduced Bank of England Base Rate will have a negative impact on the Bank’s results going forward.
Danske Bank reported a net credit in loan impairments of £23m, down from £38m in the same period last year – indicative of a continuing recovery in property values and in the trading results of the Bank’s business customers.
The financial report indicated that Danske Bank continues to have a strong capacity to support new lending, as demonstrated by a loan to deposit ratio of 75% at 30th September 2016.
Commenting on the results, Danske Bank UK CEO, Kevin Kingston, said:
“We have continued to make good progress in quarter three, resulting in a £75 million operating profit for the first nine months of 2016.
“As the volume of new economic data grows, the EU referendum result appears, so far, not to have had a major effect on the Northern Ireland economy. UK consumer spending, business activity, house prices and wage growth have all beaten forecasts. UK unemployment reached an 11-year low and, locally, our exporting customers have been helped by the weaker value of sterling.”
That said, Kevin Kingston acknowledged that the longer-term impact of Brexit remains unclear at this stage: “the longer-term effects once the formal withdrawal negotiations begin and the exit itself takes place, remain to be seen. Our Quarterly Sectoral Forecast report published last month suggests that Northern Ireland’s economy will grow by 1 per cent this year and 0.5 per cent in 2017. This has been revised down from the previous report, in which growth of 1.6 per cent had been expected for this year and 1.9 per cent in 2017.
“More challenging from the Bank’s perspective is that we are now operating in a lower interest rate environment than we had anticipated. Whilst interest rates had generally been expected to start rising during 2016, post the EU referendum it seems clear that we will now be operating in an environment of historically low interest rates for a prolonged period.
“Mortgage lending has remained healthy and we expect that to continue. There was a 63 per cent increase in mortgage approvals to customers in quarter three 2016 compared to the same period last year, and an uplift of 96 per cent year-on-year.
“For small business customers we have provided a unique offering of £500 cash back for switchers and start-ups. Since this incentive was introduced in April we have seen an average of 40 new small business relationships established every week. To further build on this momentum, from October 2016 new Business Centre customers who meet certain criteria, will be able to benefit from Danske Bank also covering their arrangement fees, legal fees and valuation fees. Small and medium sized businesses are a key customer segment for the Bank and we are delighted that year-on-year new lending volumes in this area are up 27 per cent.
“On the corporate banking side, uncertainty around Brexit remains a factor. While we are not seeing business projects being cancelled as a result of the referendum vote, equally we are not seeing new projects being brought to us at the same rate as in the first half of the year.”
