The Group is raising its expectations for full-year profit before credit loss expenses from the guidance in the interim report for the first half of 2006. The trends in prices on the financial markets in the fourth quarter of the year may, however, considerably affect the result.
In 2006, Europe is likely to continue to see moderate economic growth and slightly increasing interest rates. The Group expects growth in its principal markets to be higher than average European growth.
IncomeNet interest income and net fee income from banking activities are expected to rise from the level recorded in 2005 as a result of double-digit growth in property financing and corporate lending. In addition, the Group will recognise income from its banking activities in Northern Ireland and the Republic of Ireland for the full year, as opposed to the 10-month period in 2005.
Net trading income will depend heavily on the trends in prices in the financial markets, and is likely to be lower than in 2005, which benefited from one-off income of about DKr 1.6bn from the sale of property; unlisted shares, including HandelsFinans; and the loan portfolios of the New York and London branches.
Net income from insurance business is expected to be lower than in 2005, which included a risk allowance also for previous years. The Group expects to book its risk allowance for 2006. However, the booking will depend on the trend in prices on the financial markets in the fourth quarter of the year.
Despite considerable one-off income in 2005, the Group expects total income in 2006 to be 3%-5% higher than the year before.
ExpensesCosts are expected to rise by about 5%. The main reasons are the accounting periods of Northern Bank and National Irish Bank, which will cover two months more than in 2005, and accelerated integration costs. Excluding these factors, expenses are expected to rise around 2%.
Credit loss expensesOn the basis of favourable economic trends and satisfactory loan portfolio quality, the Group expects to record modest credit loss expenses throughout the rest of 2006.
TaxConsequently, the pre-tax profit for 2006 is expected to match the level recorded in 2005. However, the result will continue to depend on the level of activity, economic trends and the trends in prices in the financial markets, among other factors.
The Group expects its tax rate to be 28%.
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Last updated/revised on October 31, 2006