Banks in Denmark brace for Q2 losses

Bloomberg

Banks in Denmark expect the Covid-19 crisis to hit them hard in the second quarter, with anticipated losses bigger than at any time during the financial crisis, according to the central bank.
More lenders anticipate reporting bigger impairments and losses than at any other time in the poll’s history, according to a quarterly survey.
With first-quarter earnings reports imminent, only a handful of lenders in Scandinavia have so far indicated how big losses may be after weeks of lockdowns. In Denmark, Sydbank A/S has reported collective charges of 225 million kroner ($33 million), while Jyske Bank A/S has estimated its potential losses at 1 billion kroner.
“We can see that things will turn for the worse in the near future,” Birger Krogh Nielsen, Jyske’s chief financial officer, said by phone. “We have used the 2008-2009 crisis as a benchmark.”
Danske Bank A/S, Denmark’s largest lender, will probably report a 2.1 billion-krone loss this year on higher provisions, according to Citi analyst Maria Semikhatova. The bank reports first-quarter earnings on April 30.
“Provisioning outlook is key for sector profitability and stock performance,” Semikhatova said in a note to clients this week, in which she downgraded the region’s six big banks to neutral.
Low impairments and in some cases writebacks had helped banks weather negative interest rates, no more so than in Denmark, which has had a sub-zero monetary policy for longer than anywhere else. The central bank first resorted to negative rates in 2012 to defend the currency’s peg to the euro.
After the virus’ outbreak, Denmark’s FSA echoed European orders and reiterated companies should report immediately to the market when they become aware of the need to suspend or downgrade forecasts.
One issue is how much leeway regulators will give banks that show forbearance to customers. Denmark’s supervisor has said it’s ready to order higher impairments at banks that downplay risks.
Nielsen says he’s anticipating that “strong customers who in a very short time period need liquidity and will be able to service the debt afterward” will “presumably remain strong customers without impairments.”