Danske: 2024 Net Profit Guidance Lifted on Lower Loan Losses; Fair Value Estimate Unchanged

Danske published an improved guidance for its 2024 net profit, lifting the target from between DKK 20 billion to DKK 22 billion to between DKK 21 billion to DKK 23 billion. The bank flagged a continually strong credit quality and now expects small reversals of impairment charges for the second quarter of 2024. Previously, the bank guided for about 8 basis points of loan losses, or roughly DKK 1.4 billion, which would have been in line with its targeted through-the-cycle assumptions. Now, Danske believes that credit losses for the full year may not exceed DKK 0.6 billion. The better-than-expected credit quality outlook for this year is a positive development and may signal that although potentially strained, households and corporations will manage to service existing debts after a rapid rise in interest rates for the most part. We would also not be surprised if Danske's Nordic peers would show similar improved outlooks during their second-quarter earnings releases. We maintain our DKK 233 per share fair value estimate and narrow economic moat rating.