Danske Bank Group's expectations for the financial result of the 2005 accounting year remain unchanged, compared with the expectations announced in the Annual Report for 2004. Income is likely to be higher than expected at the publication of the Annual Report, but the increase will be offset by the amortisation of intangible fixed assets.
In 2005, Europe is likely to see generally low economic growth and generally low interest and inflation rates.
Income
Net interest and fee income from banking activities and mortgage finance is expected to rise. The increase in income from property financing in the Nordic units, among other activities, is likely to offset the decline in income from wholesale banking activities in England and the US. The newly acquired banks in the Republic of Ireland and Northern Ireland will also add to the income of the Group from the time of consolidation at 1 March 2005.
The accounts for 2004 were influenced by one-off revenue from sales of unlisted shares. As earnings from the Group's investment portfolios form part of trading income, it is unlikely that trading income will fully match the level recorded in 2004. Moreover, income will depend greatly on the trends in the financial markets, including the level of securities prices at the end of the year.
Net income from insurance business is expected to decline, since increased business volume and improved costs and risk results cannot fully compensate for the booking in 2004 of the risk allowance from previous years.
On the whole, the Group expects total income to increase, still depending on the trend of prices in the financial markets.
Expenses
Also in 2005, the Group will continue to focus on tight cost containment. Savings as a result of the outsourcing of decentralised IT activities in 2004 and the decrease in severance payments are expected to offset the general increase in costs and the expenses related to the continued expansion of activities in Norway and Sweden.
The acquisition of the banks in the Republic of Ireland and Northern Ireland will increase costs. The acquisition will entail integration costs and related costs of some DKK 1.5 billion, of which a good one-third will be expensed in 2005. In accordance with the international financial reporting standards, IAS 38, "Intangible Assets", and IFRS 3, "Business Combinations", some DKK 1.5 billion of the total goodwill on acquisition will be recognised with other intangible assets amortised over a period of three years.
Consequently, the Group expects its total costs and its cost/income ratio to increase.
Credit loss expenses
The Group considers the quality of its loan portfolio satisfactory, and the provisioning ratio is therefore expected to remain low.
Pre-tax profit
The pre-tax profit for 2005 is expected to be at a level similar to that of 2004, despite the increase in activity, as the result for 2004 included considerable one-off revenue and the pre-tax profit will be affected by the amortisation of intangible fixed assets of nearly DKK 450 million. Moreover, the pre-tax profit will, as in previous years, depend on the trends in the financial markets, including the level of securities prices at the end of the year.
Tax
The Group expects its tax charge to remain at a level similar to the current corporation tax rate.
Last updated/revised on 3 May 2005