October 8, 2019 / 1:35 PM / 8 days ago

Danish banks boost profit forecasts on mortgage boom, low rates

COPENHAGEN, Oct 8 (Reuters) - Danish lenders Vestjyske Bank and Spar Nord raised their profit guidance on Tuesday, saying they expect a boost from high activity in the country’s mortgage business which has been fuelled by negative interest rates.

Two other smaller Danish banks, Skjern Bank and Kreditbanken, made similar announcements on Monday.

Banks across Europe have seen their earnings hit by negative rates set by central banks, but in Denmark, lower borrowing costs have cushioned the blow for some banks and spurred a record number of Danes to try to improve their mortgage loans.

“Vestjysk Bank has ascertained an exceptionally high level of activity, primarily in relation to re-mortgaging activities in mortgage lending,” Vestjysk said in a statement on Tuesday.

The bank, Denmark’s eighth largest, upgraded its guidance for full-year profit after tax to an interval of 420-460 million Danish crowns ($113.27 million) from an earlier 360-410 million Danish crowns and said it expected lower impairment losses.

At the end of July, Danish homeowners took advantage of ultra-low interests rates to pay down mortgages worth 137 billion Danish crowns, the biggest refinancing wave yet.

Lender Spar Nord hiked its full-year guidance on Tuesday, crediting its mortgage business and “positive value adjustments on bonds due to the persistent decline in interest rates.”

Last week, Spar Nord became the third bank in Denmark this year to start charging wealthy clients on large deposits in a bid to transfer some of the costs of negative rates to private clients.

The two banks followed similar hikes to profit outlooks on Monday by rivals Skjern Bank and Kreditbanken, as well as last week by the country’s fourth biggest bank, Ringkjoebing Landbobank.

$1 = 6.7981 Danish crowns Reporting by Nikolaj Skydsgaard; Editing by Jacob Gronholt-Pedersen and Bernadette Baum

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