Outlook 2008

The growth of its banking, market and insurance activities in 2007 placed the Group in a strong position for 2008.

The substantial financial turbulence in the capital markets and the lower real economic growth, however, have affected the income basis more than expected at the presentation of the Annual Report 2007.

Market outlook
Danish GDP growth is likely to fall from 1.9% in 2007 to 1.4% in 2008, while economic growth rates in the Group’s other markets are still likely to exceed the euro-zone average of 1.4%. The Group expects the weighted GDP growth for its markets to reach 2.0%, against the original estimate of 2.5%.

Interest rates in the Group’s principal markets are forecast to continue to fall slightly through 2008.

The turbulence in the capital and liquidity markets is expected to subside gradually in the second half of 2008. Although from an international perspective, the Group has unique access to funding of home mortgages through Realkredit Danmark, current market conditions will lead to increased costs for the Group’s other types of funding.

The financial turbulence and the fall in real economic growth make the income estimates more uncertain than usual.

Income
The Group expects overall net interest income, driven by growth in lending, to climb 6-9%. The pressure on deposit margins is likely to intensify compared with 2007, whereas the pressure on lending margins will ease.

Net fee income is expected to grow 0-5%. The Group originally estimated an increase of 8-13%, assuming normalised financial markets in the first half of 2008. This no longer seems a realistic scenario.

The Group expects net trading income to be slightly lower than in 2007, and this income will continue to depend greatly on trends in the financial markets, including the level of securities prices at the end of the year. Danske Markets expects to expand its market position within customer-driven activities.

Other income is expected to increase 10-15%, owing mainly to income from the sale of real property and a higher level of operating lease activities.
 
Given the current trends in the financial markets, the Group expects to have to postpone the booking of its risk allowance and therefore expects net income from insurance business to be negative. The result will depend especially on the level of securities prices at the end of the year.

Overall, income is expected to be 0-4% higher than in 2007. Still, the current turbulence in the financial markets makes the income estimates more uncertain than they would normally be.

Operating expenses
The Group expects operating expenses to rise by 2-4%. The trend reflects primarily a rise in wages and prices and a planned expansion of Danske Markets and wealth management activities. The Group’s Digital Banking initiatives will also affect expenses.

Credit loss expenses
Because of the economic slowdown and the continued turbulence in the financial markets, credit loss expenses are expected to be somewhat higher in 2008 than in 2007. The Group expects impairment charges to approach the average for a business cycle.

Tax
The Group estimates that its effective tax rate will be 25%, against 23% in 2007 when the Group benefited from a lowering of the tax rate in Denmark.

Net profit
Overall, net profit is expected to be 6-13% lower than in 2007.

Outlook for 2008

	Danske Bank 2007* (DKK millions)	Outlook 2008 (%)
Net interest income	24,391	6 - 9
Net fee income	9,166	0 - 5
Net trading income	7,378	Slightly lower
Other income	3,010	10 - 15
Net income from insurance business	1,118	Negative
Total income	45,063	0 - 4
Total operating expenses	25,070	2 - 4
Net profit	14,870	Down 6 - 13

	Danske Bank 2007* (DKK millions)	Outlook 2008 (%)
Net interest income	24,260	6 - 9
Net fee income	8,788	8 - 13
Net trading income	7,887	Slightly lower
Other income	3,010	5 - 10
Net income from insurance business	1,118	20
Total income	45,063	5 - 9
Total operating expenses	25,070	2 - 5
Net profit	14,870	0 - 7