The Group expects 2010 to be a challenging year for the financial sector, the Danske Bank Group and its customers. Recent macroeconomic indicators offer hope that the business environment will gradually improve, however.
Danish GDP growth in 2010 is estimated at around 1.8%. The Group expects similar growth rates in its other markets except Ireland, which is expected to see zero growth, and the Baltic countries, whose GDPs are likely to contract. Recent figures for house prices in Denmark show a slight rise during the second half of 2009 and the beginning of 2010. The rate of increase is likely to decline in step with the expected rise in interest rates, however. A similarly positive trend is forecast for Norway and Finland. Swedish house prices are forecast to be unchanged, while Ireland and Northern Ireland are likely to see a fall in house prices.
Short-term money market rates are expected to rise about 0.5 of a percentage point in Denmark and by the same amount on average in the Group’s other markets.
Unemployment rose in the Group’s principal markets in 2009, and this trend is expected to continue throughout 2010, although at a slower pace than previously feared. Combined with falling house prices, the rise in unemployment has caused the financial situation of many households to deteriorate. Despite low interest rates, slightly rising property prices and the Danish tax reform, the credit quality of the retail segment is thus forecast to deteriorate further in 2010. Corporate customers are likely to see their creditworthiness improve gradually, although a few sectors, agriculture for example, may continue to occasion rising impairment charges.
The performance of market-related activities – in Danske Markets, Danske Capital and Danica Pension – will depend greatly on trends in the financial markets, including the level of securities prices at the end of the year. The extraordinarily high level of income of 2009 is unlikely to continue into 2010.
The level of expenses is expected to be lower in 2010 than in 2009. The Group will continue to focus on cost control. IT investments in product development and the improvement of processes and customer-facing functionality will remain high in 2010.
Loan impairment charges are likely to remain high in 2010, although not as high as in 2009.
Robust banking activities, tight cost control and a strong focus on risk, liquidity and capital management combined with the massive capital buffer give the Group a solid foundation for its operations.
Last updated on 4 May 2010