Q3 2026 Danske Bank AS Pre-Close Earnings Call
Speaker #1: This meeting is being recorded and transcribed.
Speaker #3: Good afternoon, and welcome to the Danske Bank Q3 2026 pre-close call. My name is Claus Inger Jensen, and I'm Head of Investor Relations. In addition, Olav Jørgensen—
Claus Ingar Jensen: Good afternoon, and welcome to the Danske Bank Q3 2026 pre-close call. My name is Claus Ingar Jensen, and I am Head of Investor Relations. In addition, Olav Jørgensen.
Claus Ingar Jensen: Good afternoon, and welcome to the Danske Bank Q3 2026 pre-close call. My name is Claus Ingar Jensen, and I am Head of Investor Relations. In addition, Olav Jørgensen.
Speaker #1: You are not allowed to unmute. To raise your hand, press star.
Operator: You are not allowed to unmute. To raise your hand, press star 5.
Operator: You are not allowed to unmute. To raise your hand, press star five.
Speaker #2: 5.
Speaker #3: This call is being recorded for compliance reasons, and the script used for this call will be published on the Investor Relations website after the call.
Claus Ingar Jensen: This call is being recorded for compliance reasons, and the script used for this call will be published on the Investor Relations website after the call. Given that we conduct this call via Teams, please be aware that if you want to ask questions, you must log on via the Teams app or your browser. If you participate via a telephone line, the IR team will be available for questions after the call. In today's call, I will highlight relevant public data and macroeconomic trends in our markets. I will go through the major P&L lines and comment on capital at the end. Afterwards, we will open for a Q&A session. For the sake of good order, I would also like to highlight the following. I will only answer questions related to already disclosed information as well as publicly available information, unless otherwise noted.
Claus Ingar Jensen: This call is being recorded for compliance reasons, and the script used for this call will be published on the Investor Relations website after the call. Given that we conduct this call via Teams, please be aware that if you want to ask questions, you must log on via the Teams app or your browser. If you participate via a telephone line, the IR team will be available for questions after the call. In today's call, I will highlight relevant public data and macroeconomic trends in our markets. I will go through the major P&L lines and comment on capital at the end. Afterwards, we will open for a Q&A session. For the sake of good order, I would also like to highlight the following. I will only answer questions related to already disclosed information as well as publicly available information, unless otherwise noted.
Speaker #3: Given that we are conducting this call via Teams, please be aware that if you want to ask questions, you must log on via the Teams app or your browser.
Speaker #3: If you participate via a telephone line, the IR team will be available for questions after the call. In today's call, I will highlight relevant public data and macroeconomic trends in our markets.
Speaker #3: I will go through the major P&L lines and comment on capital at the end. Afterwards, we will open for a Q&A session. For the sake of good order, I would also like to highlight the following: I will only answer questions related to already disclosed information, as well as publicly available information, unless otherwise noted.
Speaker #3: In connection with this, I wish to highlight that developments in specific indices may not always have the same effect on our performance. Firstly, I would like to give a brief comment on the most recent macroeconomic development in our markets, based on the Nordic Outlook published in early September by our macro research team.
Claus Ingar Jensen: In connection with this, I wish to highlight that developments in specific indices may not always have the same effect on our performance. Firstly, I would like to give a brief comment on the most recent macroeconomic development in our markets based on the Nordic Outlook published in early September by our macro research team. The economies have proved resilient with solid labor markets despite high uncertainty as higher energy prices have led to inflationary pressure. In our house view from Danske Bank Macro Research, we expect the ECB and the Danish Central Bank to hike by a total of 100 basis points in 2026, including the hikes in June and September that have already been done, then two additional hikes of 25 basis points in October and December.
Claus Ingar Jensen: In connection with this, I wish to highlight that developments in specific indices may not always have the same effect on our performance. Firstly, I would like to give a brief comment on the most recent macroeconomic development in our markets based on the Nordic Outlook published in early September by our macro research team. The economies have proved resilient with solid labor markets despite high uncertainty as higher energy prices have led to inflationary pressure. In our house view from Danske Bank Macro Research, we expect the ECB and the Danish Central Bank to hike by a total of 100 basis points in 2026, including the hikes in June and September that have already been done, then two additional hikes of 25 basis points in October and December.
Speaker #3: The economies have proved resilient, with solid labor markets despite high uncertainty, and as higher energy prices have led to inflationary pressure. In our house view from Danske Bank macro research, we expect the ECB and the Danish Central Bank to hike by a total of 100 basis points in 2026, including the hikes in June and September that have already been done, and then two additional hikes of 25 basis points in October and December.
Speaker #3: Focusing on the Danish economy, the solid economic development is expected to continue with around 4% GDP growth in 2026, with continued strong support from the pharmaceutical sector.
Claus Ingar Jensen: Focusing on the Danish economy, the solid economic development is expected to continue with around 4% GDP growth in 2026, with continued strong support from the pharmaceutical sector. Employment levels and growing disposable incomes is supporting household finances. However, consumer sentiment continues to be low. Housing market activity continues to be solid, although there are signs that the activity and house prices in the Copenhagen area are slowing. Now let's have a look at net interest income. The hikes from ECB in June and September were included as part of our full year NII guidance of slightly above DKK 38 billion. The hike that occurred in September is not expected to have an impact on our Q3 number. Keep in mind that the contribution to deposit margins in Q3 from the June hike will be partly countered by effects from our deposit hedge given the higher short-term rates.
Claus Ingar Jensen: Focusing on the Danish economy, the solid economic development is expected to continue with around 4% GDP growth in 2026, with continued strong support from the pharmaceutical sector. Employment levels and growing disposable incomes is supporting household finances. However, consumer sentiment continues to be low. Housing market activity continues to be solid, although there are signs that the activity and house prices in the Copenhagen area are slowing. Now let's have a look at net interest income. The hikes from ECB in June and September were included as part of our full year NII guidance of slightly above DKK 38 billion. The hike that occurred in September is not expected to have an impact on our Q3 number. Keep in mind that the contribution to deposit margins in Q3 from the June hike will be partly countered by effects from our deposit hedge given the higher short-term rates.
Speaker #3: Employment levels and growing disposable incomes are supporting household finances; however, consumer sentiment continues to be low. Housing market activity remains solid, although there are signs that activity and house prices in the Copenhagen area are slowing.
Speaker #3: Now, let's have a look at net interest income. The hikes from the ECB in June and September were included as part of our full-year NII guidance of slightly above €38 billion.
Speaker #3: And the hike that occurred in September is not expected to have an impact on our Q3 numbers. Keep in mind that the contribution to deposit margins in Q3 from the June hike will be partly countered by effects from our deposit hedge, given the higher short-term rates.
Speaker #3: As a reminder, the deposit hedge was increased gradually during last year, such that our bond and derivatives portfolio account for around DKK 190 billion, in addition to our loan hedge.
Claus Ingar Jensen: As a reminder, the deposit hedge was increased gradually during last year, such that our bond and derivatives portfolio account for around DKK 190 billion in addition to our loan hedge. The effects I just highlighted are included in our overall sensitivity guidance. While the majority of our sensitivity is related to euro and Danish krone, we don't see policy rate tailwinds for NOK and SEK in the third quarter. Keep that in mind when applying our overall group sensitivity, which we reiterated at our Q2 release and is estimated as a positive effect of around DKK 450 million per 25 basis points hike. However, note that there are typically price lags in the few months after a rate hike. In addition, we estimate a year 2 and year 3 up and down effect of DKK 300 million and DKK 100 million respectively.
Claus Ingar Jensen: As a reminder, the deposit hedge was increased gradually during last year, such that our bond and derivatives portfolio account for around DKK 190 billion in addition to our loan hedge. The effects I just highlighted are included in our overall sensitivity guidance. While the majority of our sensitivity is related to euro and Danish krone, we don't see policy rate tailwinds for NOK and SEK in the third quarter. Keep that in mind when applying our overall group sensitivity, which we reiterated at our Q2 release and is estimated as a positive effect of around DKK 450 million per 25 basis points hike. However, note that there are typically price lags in the few months after a rate hike. In addition, we estimate a year two and year three up and down effect of DKK 300 million and DKK 100 million respectively.
Speaker #3: The effects I just highlighted are included in our overall sensitivity guidance. While the majority of our sensitivity is related to euro and Danish kroner, we don't see policy rate tailwinds for NOK and SEK in the third quarter.
Speaker #3: Keep that in mind when applying our overall group sensitivity, which we reiterated at our Q2 release and is estimated as a positive effect of around €450 million per 25 basis points hike.
Speaker #3: However, note that there are typically price lags in the few months after a rate hike. In addition, we estimate a year two and year three up and down effect of DKK 300 million and DKK 100 million, respectively.
Speaker #3: Regarding recent volume development, we refer to public sector statistics released on the 25th of September. The sector data showed solid Danish volume trends continuing. Please keep in mind that sector development is not an indication of how our volumes necessarily have developed, with retail lending growth typically more muted when we look at our lending book growth overall.
Claus Ingar Jensen: Regarding recent volume development, we refer to public sector statistics released on 25 September. The sector data showed solid Danish volume trends continuing. Please keep in mind that sector development is not an indication of how our volumes necessarily have developed, with the retail lending growth typically more muted when we look at our lending group growth overall. When it comes to deposits, we are starting to see a gradual shift to higher saving rate products where we pass through more of the rate hikes to customers. All else equal, this churn will have an impact on deposit margins. Please note that the third quarter has one more interest day compared to the second quarter. The day effect is estimated to be around DKK 75 million. As always, please be mindful of currency fluctuations in the markets where we operate.
Claus Ingar Jensen: Regarding recent volume development, we refer to public sector statistics released on 25 September. The sector data showed solid Danish volume trends continuing. Please keep in mind that sector development is not an indication of how our volumes necessarily have developed, with the retail lending growth typically more muted when we look at our lending group growth overall. When it comes to deposits, we are starting to see a gradual shift to higher saving rate products where we pass through more of the rate hikes to customers. All else equal, this churn will have an impact on deposit margins. Please note that the third quarter has one more interest day compared to the second quarter. The day effect is estimated to be around DKK 75 million. As always, please be mindful of currency fluctuations in the markets where we operate.
Speaker #3: When it comes to deposits, we are starting to see a gradual shift to higher saving rate products, where we pass through more of the rate hikes to customers.
Speaker #3: All else equal, this churn will have an impact on deposit margins. Please note that the third quarter has one more interest day compared to the second quarter; the day effect is estimated to be around DKK 75 million.
Speaker #3: As always, please be mindful of currency fluctuations in the markets where we operate. During the third quarter, and as of last Friday, SEK has depreciated by around 2% against the Danish krone, whereas NOK has appreciated more than 3.5%.
Claus Ingar Jensen: During Q3, and as of last Friday, SEK has depreciated by around 2% against the Danish krone, whereas NOK has appreciated more than 3.5%. Pound sterling has been roughly flat. Looking at funding costs, we note that the 3-month CIBOR has increased by almost 25 basis points, NIBOR with almost 10 basis points, while STIBOR has been roughly flat, all based on quarterly averages. This will all else equal, add some pressure to lending margins until facilities are fully reset. With respect to our wholesale funding costs, we expect an increase relative to Q2 with the transactions we have executed in Q3. We have now issued a total of 85 billion so far during 2026, well in line with our full-year funding plan of 90 to 110 billion of debt issuance across instruments.
Claus Ingar Jensen: During Q3, and as of last Friday, SEK has depreciated by around 2% against the Danish krone, whereas NOK has appreciated more than 3.5%. Pound sterling has been roughly flat. Looking at funding costs, we note that the 3-month CIBOR has increased by almost 25 basis points, NIBOR with almost 10 basis points, while STIBOR has been roughly flat, all based on quarterly averages. This will all else equal, add some pressure to lending margins until facilities are fully reset. With respect to our wholesale funding costs, we expect an increase relative to Q2 with the transactions we have executed in Q3. We have now issued a total of 85 billion so far during 2026, well in line with our full-year funding plan of 90 to 110 billion of debt issuance across instruments.
Speaker #3: Pound Sterling has been roughly flat. Looking at funding costs, we note that the three-month KIBOR has increased by almost 25 basis points, NIBOR by almost 10 basis points, while STIBOR has been roughly flat, all based on quarterly averages.
Speaker #3: This will, all else equal, add some pressure to lending margins until facilities are fully reset. And with respect to our wholesale funding costs, we expect an increase relative to Q2, with the transactions we have executed in the third quarter.
Speaker #3: We have now issued a total of 85 billion so far during 2026, well in line with our full-year funding plan of 90 to 110 billion of debt issuance across instruments.
Speaker #3: This includes a multi-tranche Scandic currency AT1 in the middle of August, equivalent to DKK 5 billion. Please visit danskebank.com, the debt section, for further details on terms and pricing for our issuance.
Claus Ingar Jensen: This includes a multi-tranche Scandi currency AT1 in the middle of August, equivalent to DKK 5 billion. Please visit danskebank.com, the debt section, for further details on terms and pricing for our issuance. Turning to fee income. In respect to fee income, we will start by noting that the development is, as always, subject to conditions in the financial markets, refinancing activity, and the general activity level among our customers. Furthermore, please be mindful that Q3 always has an impact from seasonally lower activity during the summer. Forward activity is generally solid and recent PMI statistics also encouraging, and consumer spending is also improving slightly despite the bearish consumer sentiment, according to recent data from Statistics Denmark. Both factors are continuing to underpin our everyday banking fees.
Claus Ingar Jensen: This includes a multi-tranche Scandi currency AT1 in the middle of August, equivalent to DKK 5 billion. Please visit danskebank.com, the debt section, for further details on terms and pricing for our issuance. Turning to fee income. In respect to fee income, we will start by noting that the development is, as always, subject to conditions in the financial markets, refinancing activity, and the general activity level among our customers. Furthermore, please be mindful that Q3 always has an impact from seasonally lower activity during the summer. Forward activity is generally solid and recent PMI statistics also encouraging, and consumer spending is also improving slightly despite the bearish consumer sentiment, according to recent data from Statistics Denmark. Both factors are continuing to underpin our everyday banking fees.
Speaker #3: And then, turning to fee income: with respect to fee income, we will start by noting that the development is, as always, subject to conditions in the financial markets.
Speaker #3: Refinancing activity and the general activity level among our customers. Furthermore, please be mindful that Q3 always has an impact from seasonally lower activity during the summer.
Speaker #3: Corporate activity is generally solid, and recent PMI statistics are also encouraging. Consumer spending is improving slightly despite bearish consumer sentiment, according to recent data from Statistics Denmark.
Speaker #3: Both factors continue to underpin our everyday banking fees. With respect to investment fees, we note that this line is naturally impacted by developments in assets under management, as well as the investment activity among our customers.
Claus Ingar Jensen: With respect to investment fees, we note that this line is naturally impacted by the development in assets under management, as well as the investment activity among our customers. In respect of fees generated from financing, we note that most Realkredit Danmark refinancing auctions for adjustable rate mortgages does not take place in Q3. Therefore, we expect income from refinancing fees in Q3 to be immaterial and lower relative to Q2. Finally, concerning fee income from capital markets activity, we note that primary market activity has seen some impact from the recent volatility. ECM activity has been subdued and similar to activity fees. This will all else equal be affected by lower seasonal activity. Now turning our focus to trading income.
Claus Ingar Jensen: With respect to investment fees, we note that this line is naturally impacted by the development in assets under management, as well as the investment activity among our customers. In respect of fees generated from financing, we note that most Realkredit Danmark refinancing auctions for adjustable rate mortgages does not take place in Q3. Therefore, we expect income from refinancing fees in Q3 to be immaterial and lower relative to Q2. Finally, concerning fee income from capital markets activity, we note that primary market activity has seen some impact from the recent volatility. ECM activity has been subdued and similar to activity fees. This will all else equal be affected by lower seasonal activity. Now turning our focus to trading income.
Speaker #3: With respect to fees generated from refinancing or financing, we note that most Realkredit Danmark refinancing auctions for adjustable-rate mortgages do not take place in the third quarter.
Speaker #3: Therefore, we expect income from refinancing fees in Q3 to be immaterial and lower relative to Q2. Finally, concerning fee income from capital markets activity, we note that primary market activity has seen some impact from the recent volatility, ECM activity has been subdued, and, similar to activity fees, this will, all else equal, be affected by lower seasonal activity.
Speaker #3: Now turning our focus to trading income, please note that customer-driven trading income, primarily in LCNI, is impacted by a continued reduced level of customer activity and market sentiment, which has been cautious, as well as seasonally slower summer activity.
Claus Ingar Jensen: Please note that customer-driven trading income, primarily in LC&I, is impacted by a continued reduced level of customer activity and the market sentiment, which has been cautious and seasonally slower summer activity. Danica's results are always subject to developments in the financial markets and in the health and accident business. We have no specific comments to other income, and while we reiterate our outlook on cost for full-year expenses of up to 26 to 26.5 billion in 2026, we expect the Q3 cost level to be in line with Q2, reflecting commercial activity and investment spend. We have no specific comments to credit quality in Q3. As such, we reiterate full-year loan impairment guidance of around 1 billion. We have any comments in respect to tax, and we have no one-offs relevant for Q3. Capital.
Claus Ingar Jensen: Please note that customer-driven trading income, primarily in LC&I, is impacted by a continued reduced level of customer activity and the market sentiment, which has been cautious and seasonally slower summer activity. Danica's results are always subject to developments in the financial markets and in the health and accident business. We have no specific comments to other income, and while we reiterate our outlook on cost for full-year expenses of up to 26 to 26.5 billion in 2026, we expect the Q3 cost level to be in line with Q2, reflecting commercial activity and investment spend. We have no specific comments to credit quality in Q3. As such, we reiterate full-year loan impairment guidance of around 1 billion. We have any comments in respect to tax, and we have no one-offs relevant for Q3. Capital.
Speaker #3: Danske's results are always subject to developments in the financial markets and in the health and accident business. We have no specific comments regarding other income.
Speaker #3: And while we reiterate our outlook on costs for full-year expenses of up to DKK 26 to DKK 26.5 billion in 2026, we expect the Q3 cost level to be in line with Q2, reflecting commercial activity and investment spend.
Speaker #3: We have no specific comments on credit quality in the third quarter. As such, we reiterate full-year loan impairment guidance of around DKK 1 billion. We have no comments in respect to tax, and we have no one-offs relevant for the third quarter.
Speaker #3: And then, capital in respect to RHIA—we expect credit risk RHIA to reflect the trend in lending volumes. We also note that market risk RHIA remains subject to the volatility which we have seen in the financial markets, including changing interest rate expectations.
Claus Ingar Jensen: In respect to REA, we expect credit risk REA to reflect the trend in lending volumes. We also note that market risk REA remains subject to the volatility which we have seen in the financial markets, including changing interest rate expectations. Also, please note that the anticipated Pillar 2 relief related to resolved legacy case has been formally reviewed as part as the supervisory review and evaluation process. As previously guided, this will reduce our CET1 requirements by around 40 basis points and will be reflected in the Q3 numbers. This concludes our initial comments. Before we move to the Q&A session, I would like to highlight that we begin our silent period on Thursday, 8 October. We will shortly start to collect consensus estimates with a contribution deadline on Thursday, 8 October.
Claus Ingar Jensen: In respect to REA, we expect credit risk REA to reflect the trend in lending volumes. We also note that market risk REA remains subject to the volatility which we have seen in the financial markets, including changing interest rate expectations. Also, please note that the anticipated Pillar 2 relief related to resolved legacy case has been formally reviewed as part as the supervisory review and evaluation process. As previously guided, this will reduce our CET1 requirements by around 40 basis points and will be reflected in the Q3 numbers. This concludes our initial comments. Before we move to the Q&A session, I would like to highlight that we begin our silent period on Thursday, 8 October. We will shortly start to collect consensus estimates with a contribution deadline on Thursday, 8 October.
Speaker #3: Also, please note that the anticipated Pillar Two relief related to the resolved legacy case has been formally reviewed as part of the supervisory review and evaluation process.
Speaker #3: As previously guided, this will reduce our CET1 requirements by around 40 basis points and will be reflected in the third-quarter numbers. This concludes our initial comments before we move to the Q&A session.
Speaker #3: I would like to highlight that we begin our silent period on Thursday, 8 October. We will shortly start to collect consensus estimates, with the contribution deadline also on Thursday, 8 October.
Speaker #3: Please note that we will publish our Q3 interim report on 29 October at 7:30 a.m. CET, and the Q3 conference call for investors and analysts will take place at 8:30 a.m.
Claus Ingar Jensen: Please note that we publish our Q3 interim report on 29 October at 7:30 AM CET, and that the Q3 conference call for investors and analysts will take place at 8:30 AM. We are now ready for the Q&A session. If you wish to ask questions, please use the raise your hand function. I can see that we have a question from Andreas. Please go ahead, Andreas.
Claus Ingar Jensen: Please note that we publish our Q3 interim report on 29 October at 7:30 AM CET, and that the Q3 conference call for investors and analysts will take place at 8:30 AM. We are now ready for the Q&A session. If you wish to ask questions, please use the raise your hand function. I can see that we have a question from Andreas. Please go ahead, Andreas.
Speaker #3: We are now ready for the Q&A session. If you wish to ask questions, please use the "raise your hand" function. I can see that we have a question from Andreas.
Speaker #3: Please go ahead.
Speaker #2: I thought sorry, I missed the first couple of minutes, but just on the NII, I was a bit interested in hearing that one of your peers talked about an impact of negative impact of NI in the upcoming quarter from repricing of Danish mortgages.
[Analyst]: Hi, Claus.
[Analyst 1]: Hi, Claus.
Claus Ingar Jensen: Hi, Andreas.
Claus Ingar Jensen: Hi, Andreas.
[Analyst]: Yeah. Claus. Sorry, I missed the first couple of minutes, but just on the NII.
[Analyst 1]: Yeah. Claus. Sorry, I missed the first couple of minutes, but just on the NII.
Claus Ingar Jensen: Yeah
Claus Ingar Jensen: Yeah
[Analyst]: I was a bit interested in hearing that one of your peers talked about a negative impact of NII in the upcoming quarter from repricing of Danish mortgages.
[Analyst 1]: I was a bit interested in hearing that one of your peers talked about a negative impact of NII in the upcoming quarter from repricing of Danish mortgages.
Speaker #2: And today, I was looking at some news in Denmark where you have this new campaign—you call it 'Top Rente'—which seems like you are hiking deposit rates a fair bit across various durations.
Claus Ingar Jensen: Yeah.
Claus Ingar Jensen: Yeah.
[Analyst]: Today I was looking at some news in Denmark where you have this new campaign, you call it Toprente, which seems like you are hiking deposit rates a fair bit in varying durations. Could you tell us a little on what we should expect on both an asset and liability side from these movements that we have seen in media?
[Analyst 1]: Today I was looking at some news in Denmark where you have this new campaign, you call it Toprente, which seems like you are hiking deposit rates a fair bit in varying durations. Could you tell us a little on what we should expect on both an asset and liability side from these movements that we have seen in media?
Speaker #2: Could you tell us a little bit about what we should expect on both the asset and liability side from these movements that we've seen in the media?
Speaker #3: I think, when it comes to pricing of the traditional mortgage loans, the big players in Denmark have adopted a different pricing policy, at least for now.
Claus Ingar Jensen: I think when it comes to pricing of the traditional mortgage loans, the big players in Denmark have adopted a different pricing policy, at least for now. I know that there are some banks who have been repricing their back book, and some banks, including us, have repriced the front book for certain products and for certain customer segments. So that explained why I did not have the same comment as the bank you are referring to. Secondly, on deposit pricing, as I also mentioned during the call, we have seen a shift starting towards products with high interest rates, term deposits and other saving products. This is an area where we have also done some repricing. If you go back a couple of quarters, the maximum interest rate you could get on the so-called Danske Toprente, which is our prime term deposit loan, was 1.85%. Now it is 2.35%.
Claus Ingar Jensen: I think when it comes to pricing of the traditional mortgage loans, the big players in Denmark have adopted a different pricing policy, at least for now. I know that there are some banks who have been repricing their back book, and some banks, including us, have repriced the front book for certain products and for certain customer segments. So that explained why I did not have the same comment as the bank you are referring to. Secondly, on deposit pricing, as I also mentioned during the call, we have seen a shift starting towards products with high interest rates, term deposits and other saving products. This is an area where we have also done some repricing. If you go back a couple of quarters, the maximum interest rate you could get on the so-called Danske Toprente, which is our prime term deposit loan, was 1.85%. Now it is 2.35%.
Speaker #3: I know that some banks have been repricing their back book, and some banks, including us, have repriced the front book for certain products and for certain customer segments.
Speaker #3: So that explains why I didn't have the same comment as the bank you are referring to. Secondly, on deposit pricing, as I also mentioned during the call, we have seen a shift starting towards products with higher interest rates—term deposits and other savings products.
Speaker #3: And this is an area where we have also done some repricing. I mean, if you go back a couple of quarters, the maximum interest rate you could get on the so-called Danske Top Rente, which is our prime term deposit loan, was 1.85%.
Speaker #3: Now it's 2.35. So that's an area where we have passed through some or all of the rate increases we have seen so far. But there are no rate hikes on other products.
Claus Ingar Jensen: That is an area where we have passed through some or all of the rate increases we have seen so far. But there are no rate hikes on other products. We have a product called Danske Indlån, which is a kind of hybrid saving product, where we have maintained the interest rates. But there are also products within private banking segment where there is an automatic reset when interest rates are going up. These customers have, of course, also benefited from higher rates. I think that is the short answer, Andreas.
Claus Ingar Jensen: That is an area where we have passed through some or all of the rate increases we have seen so far. But there are no rate hikes on other products. We have a product called Danske Indlån, which is a kind of hybrid saving product, where we have maintained the interest rates. But there are also products within private banking segment where there is an automatic reset when interest rates are going up. These customers have, of course, also benefited from higher rates. I think that is the short answer, Andreas.
Speaker #3: We have a we have a product called Danske InLoan, which is a kind of hybrid saving product where we have maintained the interest rates but there are also products within private banking segment where we have where there is an automatic reset when interest rates are going up and this customers have of course also benefited from higher rates.
Speaker #3: I think that's the short answer, Andreas.
Speaker #2: Yeah, thanks. And just to follow up on the first question, then—you said that you repriced your front book. Could you tell us how much lower the front book margin would be compared to the back book, and how quickly would that reprice?
[Analyst]: Yeah. Thanks. Just follow up on the first question then. You said that you repriced your front book, and could you tell us how much lower would the front book margin be compared to the back book, and how quickly would that reprice?
[Analyst 1]: Yeah. Thanks. Just follow up on the first question then. You said that you repriced your front book, and could you tell us how much lower would the front book margin be compared to the back book, and how quickly would that reprice?
Speaker #3: Well, I think that we have repriced the front book of specific products, and that has happened gradually over the first half of the year.
Claus Ingar Jensen: Well, I think that we have repriced the front book of specific products, and that has happened gradually over the first half of the year. So we are probably now in a situation where there is not that much of a difference between front book pricing for the different mortgage banks in Denmark. But I am not able to provide you with any indication on how that will migrate into the back book over time.
Claus Ingar Jensen: Well, I think that we have repriced the front book of specific products, and that has happened gradually over the first half of the year. So we are probably now in a situation where there is not that much of a difference between front book pricing for the different mortgage banks in Denmark. But I am not able to provide you with any indication on how that will migrate into the back book over time.
Speaker #3: So, we are probably now in a situation where there isn't that much of a difference between front-book pricing for the different mortgage banks in Denmark.
Speaker #3: But I'm not able to provide you with any indication of how that will migrate into the back book over time.
Claus Ingar Jensen: Well, I think that we have repriced the front book of specific products, and that has happened gradually over the first half of the year. So we are probably now in a situation where there is not that much of a difference between front book pricing for the different mortgage banks in Denmark. But I am not able to provide you with any indication on how that will migrate into the back book over time.
Speaker #2: Okay, thank you.
[Analyst]: Okay. Thank you.
[Analyst 1]: Okay. Thank you.
Speaker #3: Then I think we have a question from Sofia. Please go ahead, Sofia.
Claus Ingar Jensen: Then I think we have a question from Sophia. Please go ahead, Sophia.
Claus Ingar Jensen: Then I think we have a question from Sophia. Please go ahead, Sophia.
Speaker #1: Yeah, no, thanks a lot for taking my question. So, just going back on the shift in the savings products, is there—could you give us any magnitude? How do you think about what share of your deposits could potentially move to risk products?
[Analyst]: Yeah. Thanks a lot for taking my question. Just going back on the shift in the savings products.
[Analyst 2]: Yeah. Thanks a lot for taking my question. Just going back on the shift in the savings products.
Claus Ingar Jensen: Yeah
Claus Ingar Jensen: Yeah
[Analyst]: Could you give us any magnitude? How do you think about what share of your deposits potentially moved to this product?
[Analyst 2]: Could you give us any magnitude? How do you think about what share of your deposits potentially moved to this product?
Speaker #3: I'm not able to give you any third-quarter numbers, as you probably can imagine. But if you look at the fact book, we have a table there called 175, where you will see term deposits for our personal customers' business unit.
Claus Ingar Jensen: I am not able to give you any Q3 numbers, as you probably can imagine. But if you look at the fact book, we have a table there called 175, where you will see term deposits for our personal customers business unit. And there you will see that already from the Q1 into the Q2 it went up by around DKK 3 billion, and I would expect that to go up even further in the Q3. That is the total of term deposits we have. So it also includes what we have in Sweden and in Finland. However, the vast majority will be the product that I referred to before.
Claus Ingar Jensen: I am not able to give you any Q3 numbers, as you probably can imagine. But if you look at the fact book, we have a table there called 175, where you will see term deposits for our personal customers business unit. And there you will see that already from the Q1 into the Q2 it went up by around DKK 3 billion, and I would expect that to go up even further in the Q3. That is the total of term deposits we have. So it also includes what we have in Sweden and in Finland. However, the vast majority will be the product that I referred to before.
Speaker #3: And there, you will see that already from the first quarter into the second quarter, it went up by around $3 billion, and I would expect that to go up even further in the third quarter.
Speaker #3: That is the total of term deposits we have. So it also includes what we have in Sweden and in Finland. However, the vast majority will be the product that I referred to before.
Speaker #1: Okay, okay, that's very clear. And then you mentioned that the refinancing mortgage fees are going to be materialized this quarter. Could you just remind us—yeah, not material.
[Analyst]: Okay. That is very clear. You mentioned that the refinancing mortgage fees are going to be material this quarter. Could you just remind us
[Analyst 2]: Okay. That is very clear. You mentioned that the refinancing mortgage fees are going to be material this quarter. Could you just remind us
Claus Ingar Jensen: Not material.
Claus Ingar Jensen: Not material.
[Analyst]: Yeah, not material.
[Analyst 2]: Yeah, not material.
Speaker #1: Could you just remind us how much the refinancing fees were in the second quarter?
Claus Ingar Jensen: Yeah.
Claus Ingar Jensen: Yeah.
[Analyst]: Could you just remind us how much the refinancing fees were in Q2?
[Analyst 2]: Could you just remind us how much the refinancing fees were in Q2?
Speaker #3: I think the refinancing fee in the second quarter was close to $100 million.
Claus Ingar Jensen: I think the refinancing fee in Q2 were close to DKK 100 million.
Claus Ingar Jensen: I think the refinancing fee in Q2 were close to DKK 100 million.
Speaker #1: Okay, and then my last question: we've seen some noise around the pig farmers and the agricultural sector in Denmark. How should we think about the potential asset quality, or is it a non-issue? Any color you can add here?
[Analyst]: Okay. My last question. We have seen some noise around the pig farmers and agricultural sector in Denmark. How should we think about the potential asset quality, or is it a non-issue? Any color you can add here.
[Analyst 2]: Okay. My last question. We have seen some noise around the pig farmers and agricultural sector in Denmark. How should we think about the potential asset quality, or is it a non-issue? Any color you can add here.
Speaker #3: Well, whether it’s going to be a non-issue—well, of course, I can't say—but as you know, because you have followed Danske Bank for a while, Sofia, there has always been a little bit of volatility in the agricultural exposure for many reasons.
Claus Ingar Jensen: Well, whether it is going to be a non-issue, of course, I cannot say, but as you know, because you have followed Danske Bank for a while, Sophie, there has always been a little bit of volatility for the agricultural exposure for many reasons. Higher, lower, I would say volatility on input and output prices, diseases, tariffs, which we now experience from China, the ban of exporting products to Russia, just to mention a few. I think the current issue in Denmark is a combination of two things. First of all, that the lower output prices, and the second one being that with the new government, there will be new rules implemented for pig breeding. That has caused a lot of protests in Denmark and could, of course, also over time be an issue for earnings among the pig producers in Denmark.
Claus Ingar Jensen: Well, whether it is going to be a non-issue, of course, I cannot say, but as you know, because you have followed Danske Bank for a while, Sophie, there has always been a little bit of volatility for the agricultural exposure for many reasons. Higher, lower, I would say volatility on input and output prices, diseases, tariffs, which we now experience from China, the ban of exporting products to Russia, just to mention a few. I think the current issue in Denmark is a combination of two things. First of all, that the lower output prices, and the second one being that with the new government, there will be new rules implemented for pig breeding. That has caused a lot of protests in Denmark and could, of course, also over time be an issue for earnings among the pig producers in Denmark.
Speaker #3: Higher, lower—I would say volatility on input and output prices; diseases; tariffs, which we now experience from China; the ban on exporting products to Russia, just to mention a few.
Speaker #3: I think the current issue in Denmark is a combination of two things. First of all, the lower output prices, and the second one being that, with the new government, there will be new rules implemented for pig breeding, and that has caused a lot of protests in Denmark.
Speaker #3: And could, of course, also over time be an issue for earnings among the pig producers in Denmark. I think that is what the issue is about.
Claus Ingar Jensen: I think that is what the issue is about. We have a very well-provisioned book in agriculture. We have 2.2% of our credit exposure to agriculture. 14% of that is to pig breeding. The other part is for different types of agricultural production. We have PMAs of DKK 800 million against agriculture. This is not something that keeps us awake at night, but of course, we monitor the development. Please also remember that the exposure we have in Danske Bank is to a large extent collateralized exposure from Realkredit Danmark lending to the, I would say, the bricks and mortar among the farmers.
Claus Ingar Jensen: I think that is what the issue is about. We have a very well-provisioned book in agriculture. We have 2.2% of our credit exposure to agriculture. 14% of that is to pig breeding. The other part is for different types of agricultural production. We have PMAs of DKK 800 million against agriculture. This is not something that keeps us awake at night, but of course, we monitor the development. Please also remember that the exposure we have in Danske Bank is to a large extent collateralized exposure from Realkredit Danmark lending to the, I would say, the bricks and mortar among the farmers.
Speaker #3: We have a very well-provisioned book in agriculture. We have 2.2% of our credit exposure to agriculture; 14% of that is to pig breeding. The other part is for different types of agricultural production.
Speaker #3: We have PMAs of 800 million against agriculture. So this is not something that keeps us awake at night, but of course we keep monitoring the development.
Speaker #3: And please also remember that the exposure we have in Danske Bank is, to a large extent, collateralized exposure from real credit Denmark lending to, I would say, the bricks and mortar among the farmers.
Speaker #1: Okay, that's very clear. Thank you.
[Analyst]: Okay. That's very clear. Thank you.
[Analyst 2]: Okay. That's very clear. Thank you.
Speaker #3: And then, Ricardo, please go ahead.
Claus Ingar Jensen: Riccardo, please go ahead.
Claus Ingar Jensen: Riccardo, please go ahead.
Speaker #2: Yes, thanks. Thanks, Claus. Just a quick one. If I understand it correctly, on asset quality at some point you stated that you have not much to add and you continue to have this $1 billion guidance for the full year.
[Analyst]: Yeah. Thanks, Claus. Just a quick one. If I understand correctly, on asset quality, at some point you stated that you have not much to add, and you continue to have this DKK 1 billion guidance for the full year. What do you have in mind when you say this kind of statement? Do you have in mind the first half of what we have seen or the Q2 in terms of asset, in terms of provisions? On PMAs, how should we think about them? They remain fairly stable. It's still a fairly large amount. Asset quality over the past several quarters has been fairly strong. So how should we think about all these things? Thanks.
[Analyst 3]: Yeah. Thanks, Claus. Just a quick one. If I understand correctly, on asset quality, at some point you stated that you have not much to add, and you continue to have this DKK 1 billion guidance for the full year. What do you have in mind when you say this kind of statement? Do you have in mind the first half of what we have seen or the Q2 in terms of asset, in terms of provisions? On PMAs, how should we think about them? They remain fairly stable. It's still a fairly large amount. Asset quality over the past several quarters has been fairly strong. So how should we think about all these things? Thanks.
Speaker #2: Are you kind of referring to what you have in mind when you make this kind of statement? Do you have in mind the first half of what we have seen, or the second quarter, in terms of assets or in terms of provisions?
Speaker #2: And on PMIs, how should we think about them? They remain fairly stable. It's still a fairly large amount. I mean, asset quality over the past several quarters has been fairly strong.
Speaker #2: So, how should we think about all these things? Thanks.
Speaker #3: Well, I think the comment I made was, of course, related to the third quarter, where we haven't seen any—or don't expect to see any—deterioration in credit quality.
Claus Ingar Jensen: Well, I think the comment I made were, of course, related to the Q1, where we haven't seen any, or don't expect to see any deterioration in the credit quality. But we still keep our full year guidance of around DKK 1 billion. In respect to the PMAs, of course, we assess the PMAs on a quarterly basis. If you go back in time, you will see that there has been some reclassification where we have moved PMAs from one type of exposure to another. We have also reduced our PMAs that are coming from a level which is much higher than what you can see right now. But I would say overall, the market is characterized by very strong credit quality, and that is something we have repeated for a couple of quarters, and that is why we don't have anything more to add for the Q3.
Claus Ingar Jensen: Well, I think the comment I made were, of course, related to the Q1, where we haven't seen any, or don't expect to see any deterioration in the credit quality. But we still keep our full year guidance of around DKK 1 billion. In respect to the PMAs, of course, we assess the PMAs on a quarterly basis. If you go back in time, you will see that there has been some reclassification where we have moved PMAs from one type of exposure to another. We have also reduced our PMAs that are coming from a level which is much higher than what you can see right now. But I would say overall, the market is characterized by very strong credit quality, and that is something we have repeated for a couple of quarters, and that is why we don't have anything more to add for the Q3.
Speaker #3: And we are, and we still keep our full-year guidance of around DKK 1 billion. And in respect to the PMAs, of course, we assess the PMAs on a quarterly basis.
Speaker #3: If you go back in time, you will see that there has been some reclassification, where we have moved PMAs from one type of exposure to another.
Speaker #3: We have also reduced our PMAs that are coming from a level which is much higher than what you can see right now. But I would say overall in the market it is characterized by very strong credit quality and that is something we have repeated for a couple of quarters.
Speaker #3: And that is why we don't have anything more to add for the third quarter.
Speaker #2: Finance. Okay, thanks.
[Analyst]: Fair enough. Okay, thanks.
[Analyst 3]: Fair enough. Okay, thanks.
Speaker #3: Okay, thank you so much for your questions. If there are no further questions, I would like to thank you for your participation.
Claus Ingar Jensen: Okay, thank you so much for your questions. If there are no further questions, I would thank you for your participation and wish you-
Claus Ingar Jensen: Okay, thank you so much for your questions. If there are no further questions, I would thank you for your participation and wish you-
Speaker #2: Sorry, Claus, I have one question.
[Analyst]: Sorry, Claus, I have one question.
[Analyst 1]: Sorry, Claus, I have one question.
Speaker #3: Okay.
Claus Ingar Jensen: Okay.
Claus Ingar Jensen: Okay.
Speaker #2: Yeah.
[Analyst]: Yeah.
[Analyst 1]: Yeah.
Speaker #3: I'm ready.
Claus Ingar Jensen: I am ready.
Claus Ingar Jensen: I am ready.
Speaker #2: So, yeah, just one question regarding your structural hedge. We've seen three-year swap rates increasing lately, and I was just wondering how we should see the contribution from your structural hedge to your net interest income in the coming quarters.
[Analyst]: So just one question regarding your structural hedge. We have seen three-year swap rates increasing lately, and I was just wondering how we should see the contribution from your structural hedge to your net interest income in the coming quarters.
[Analyst 1]: So just one question regarding your structural hedge. We have seen three-year swap rates increasing lately, and I was just wondering how we should see the contribution from your structural hedge to your net interest income in the coming quarters.
Speaker #3: Well, I think in general, it's working as it should. It's a hedge. Over time, we will see a continued or higher positive contribution from lending margins in general terms. Of course, the magnitude depends very much on pass-through and so on.
Claus Ingar Jensen: Well, I think in general it is working as it should. It is a hedge. We will over time see a continued or higher positive contribution from lending margins. In general terms, of course, the magnitude depends very much on pass-through and so on, whereas the impact or the effect in the hedge goes the other way. So in that way, it actually works quite fine, meaning that over time, the contribution from the hedge will go down if interest rates continues to go up.
Claus Ingar Jensen: Well, I think in general it is working as it should. It is a hedge. We will over time see a continued or higher positive contribution from lending margins. In general terms, of course, the magnitude depends very much on pass-through and so on, whereas the impact or the effect in the hedge goes the other way. So in that way, it actually works quite fine, meaning that over time, the contribution from the hedge will go down if interest rates continues to go up.
Speaker #3: Whereas the impact or the effects in the hedge go the other way. So, in that way, it actually works quite fine. Meaning that, over time, the contribution from the hedge will go down if interest rates continue to go up.
Speaker #2: All right.
[Analyst]: All right.
[Analyst 1]: All right.
Speaker #3: I think that's the dynamics we see, and that is very much as expected.
Claus Ingar Jensen: I think that is the dynamics we see, and that is very much as expected.
Claus Ingar Jensen: I think that is the dynamics we see, and that is very much as expected.
Speaker #2: Okay, thank you.
[Analyst]: Okay. Thank you.
[Analyst 1]: Okay. Thank you.
Claus Ingar Jensen: You are welcome. Okay. If that was the last question, thank you so much for your participation, and have a very nice afternoon. Goodbye.
Claus Ingar Jensen: You are welcome. Okay. If that was the last question, thank you so much for your participation, and have a very nice afternoon. Goodbye.
