Danske Misses Consensus Due to Market Volatility; Maintain Fair Value Estimate

Narrow-moat Danske Bank reported second-quarter profits before tax of DKK 2,164 million, substantially missing consensus estimates of DKK 3,600 million collected by the bank prior to the release. Losses in trading income as well as income from the insurance business were the culprits. Danske was caught out by higher levels of volatility and lower liquidity in fixed income markets hitting its trading operation. The declining market environment also drove negative value adjustments in Danske’s insurance business, which could not be offset by a DKK 415 million gain on the sale of Danica Norway. We maintain our DKK 170 per-share fair value estimate despite this performance. Outside the very volatile line items, which have caused the substantial miss relative to expectations this quarter, results looked decent. We anticipate the trading and insurance businesses to recover for the rest of the year.