Frontpage News 2014 Q1: Decrease in co...

Q1: Decrease in costs helps on the bottom line

15 May 2014

​The Danish banks have reduced costs and thus strengthened the bottom line with a return on equity of approximately 7 percent.

The Danish Bankers Association has collected 1st quarter accounts for a number of the country's banks, which make up approximately 75 percent of the Danish banking sector. The figures indicate a general improvement on the bottom line, which both covers the stabilisation of the economy but also internal efficiency.
Return on equity in the first quarter is 1.8 per cent after tax and has thus increased compared to the level of Q1 2013, which was 1.2 percent. If the Q1 estimate is enumerated to an annual level, this corresponds to approximately 7 percent at present.

"The banking sector has started the year with an improved outcome. First, the write-downs have decreased, but it is also clear that there have been efficiency improvements internally in the banks," Niels Storm Stenbæk, Chief Economist at the Danish Bankers Association, explains.
"The low interest rates and a low demand for loans put pressure on the banks’ primary source of income in the form of net interest income. Consequently, there has been increased focus on the cost side. Additionally, the demand for self-service solutions has increased," says Niels Storm Stenbæk while emphasizing that the banking sector has not yet reached the goal.
Figure 1. Return on equity in the banking sector
Source: The Danish FSA, bank accounts and the Danish Bankers Associa-tion’s own calculations.
Note: After tax. Our sample consists of the following banks: Danske Bank, Jyske Bank, Sydbank, Nykredit Bank, FIH Erhvervsbank and Spar Nord. The sample represents approximately 75 percent of the sector in terms of assets.
Figure 2. The development in bank revenue and expenses
Source: Bank accounts and the Danish Bankers Association’s own calculations.
Note: Index where 2008=100. Same sample as in figure 1.
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