Danske Bank hires 2,700 to cope with digital age

Bloomberg

Danske Bank A/S hired 2,700 people last year as part of a strategy it says will help it cope with the digital age. In an industry relying increasingly on robots, adding headcount isn’t a given.
Danske Chief Financial Officer Jacob Aarup-Andersen says management is building up its technology department, adding staff to areas such as the “customer experience.” Net figures show Danske had 465 more full-time workers in 2017 than the year before.
“We’ll continue to invest in the digital arena and therefore you will see us continue to invest in digital capabilities,” Aarup-Andersen said in an interview. “Therefore I wouldn’t expect us to suddenly see a major slowdown in our IT hirings. It is a big area for us. It is also an area where there is a lot of competition for workforce, so we do see a lot of churn. It’s just the way it is.” Danske isn’t planning any “dramatic changes” to its headcount, he said.

RECORD RESULTS
The bank is hiring after making more money than ever before in 2017. It plans to spend billions on yet another share buyback program and is raising its dividend target. And all that in a country that boasts the world record
in negative interest rates (which are supposed to be bad for banks).
After more than half a decade of life below zero, Danske has been transformed into a profit machine, with almost 90 percent of analysts who rate the stock now advising clients to hold on to their shares or buy even more.
Aarup-Andersen says negative rates have provided “a very strong backdrop on the credit-quality side.” Low borrowing costs have also saved Danske lots of money when it comes to funding its operations, he said. But on the cost side, Danske has lost money because of its decision not to pass negative rates on to retail depositors. So are negative rates good or bad for banks?
“We do think negatives rates are negative in the longer term for the economy,” Aarup-Andersen said. “We also believe it obviously gives us a P&L impact, but it also has the benefit of making it easier for our customers to deliver on their promises.”

BEST RESULT EVER
Danske delivered its best full-year result ever. Net profit reached 20.9 billion kroner ($3.5 billion), which was the high end of the bank’s target range for the year. Back in November, Danske said it expected to land somewhere
between 19-21 billion kroner.
For this year, it’s targeting a range of 18-20 billion kroner.
One of the reasons the forecast for 2018 is lower than the bank’s profit in 2017 is the interest rate outlook, Aarup-Andersen said. “When we look into 2018 it’s fair to say that interest rates is one of the big unknowns in terms of the speed of change that we’ll see,” he said in an interview with Bloomberg Television’s Francine Lacqua. “We’re obviously confident in our outlook. We think that’s a fair reflection going into the year,” he said.
The bank is planning to buy back 10 billion kroner in shares. Because its “capital position is very strong,” Danske says it’s now targeting a dividend payout ratio of 40-60 percent, compared with 40-50 percent previously.
After buying back a total of 23 billion kroner of its stock since 2015, the bank is also proposing a dividend of 10 kroner per share for 2017, or 45 percent of net profit.
The news helped Danske’s shares open more than 3 percent higher in Copenhagen, putting it at the top of Bloomberg’s index of European financial stocks. By mid-morning, it was trading up about 1.5 percent.