TIDMSYDB 
 
   Company Announcement No 44/2019 
 
   30 October 2019 
 
   Sydbank's Interim Report -- Q1-Q3 2019 
 
   Q1-Q3 2019 was characterised by continued solid credit quality and 
historically high remortgaging activity 
 
   Q1-Q3 2019 -- highlights 
 
 
   -- Profit of DKK 658m equals a return on equity of 7.8% p.a. after tax. 
 
   -- Total income of DKK 2,915m is 7% lower than in Q1-Q3 2018. 
 
   -- Impairment charges for loans and advances represent an income of DKK 49m 
      compared with an income of DKK 71m in the same period in 2018. 
 
   -- Total credit intermediation has increased by DKK 2.1bn, equal to 1.5% 
      compared to year-end 2018. 
 
   -- A share buyback of DKK 250m was commenced on 2 May 2019. 
 
   -- Predominantly due to the announced share buyback programme, the Common 
      Equity Tier 1 capital ratio has declined by 1.1 percentage points 
      compared to year-end 2018 and constitutes 16.2% excluding profit for the 
      period. 
 
   -- Remarkable improvement in customer satisfaction -- a number two ranking 
      as regards both corporate and retail clients. 
 
   CEO Karen Frøsig on Sydbank's Q1-Q3 result: 
 
   -          We are pleased that Q3 saw an impressive increase in total 
credit intermediation, that customers' finances improved also in this 
quarter and that we can reverse impairment charges for the tenth 
consecutive quarter. 
 
   Better balance between income and costs 
 
   As a result of the current banking conditions it is decisive to ensure 
efficient operations, including a strong focus on the development and 
implementation of automated processes as well as the profitability of 
products and business units. In addition to compliance and IT security 
the Bank gives high priority to process automation. Process automation 
is one of the important factors to ensure a better balance between 
income and costs in the long term. Striking a better balance between 
income and costs requires a series of measures as regards income as well 
as costs. 
 
   Measures supporting a rise in core income: 
 
 
   -- Change in negative interest rates on deposits 
 
   -- Overall interest rate changes -- deposits 
 
   -- Change in fees on payment cards and other services to market level 
 
   -- Other initiatives. 
 
 
   It is expected that these income measures in isolation will generate an 
increase in annual core income of approx DKK 200m. 
 
   Measures countering a rise in costs (core earnings) in 2020: 
 
 
   -- Reduction in staff due to process automation 
 
   -- Freeing up of time due to simplification of operations, including 
      reduction in time spent on internal activities 
 
   -- Savings triggered by amalgamating functions with an overlap of tasks 
 
   -- Other cost savings. 
 
 
   It is expected that these cost measures will be sufficient to balance 
price and wage increases in 2020. It is anticipated that costs (core 
earnings) in 2020 will be on a par with the level of costs in 2019. 
 
   CEO Karen Frøsig on the cost measures: 
 
   -          At Sydbank we have focused on costs since 2009. In 
recognition of the fact that banking conditions have worsened we are 
adjusting costs further. Our efforts to enhance the efficiency of 
processes are now showing the first significant real improvements. 
Consequently the necessary reduction in staff is made possible. It is 
projected that the main part of the required staff reduction can take 
place via natural wastage. 
 
   Negative interest rates on deposits 
 
   As a consequence of Danmarks Nationalbank's most recent change of the CD 
rate to minus 0.75% Sydbank will lower its interest rate on corporate 
deposits to minus 0.75% and will introduce negative interest rates as 
regards retail clients holding deposits in excess of DKK 750,000. The 
interest rate of minus 0.75% will also apply to retail clients. This is 
a change as regards the announcement in the interim financial statements 
according to which the Bank introduced a negative interest rate of minus 
0.6% as regards retail clients holding deposits in excess of DKK 7.5m. 
 
   CEO Karen Frøsig on the change in deposit rates: 
 
   -          Danmarks Nationalbank's CD rate has been negative more or 
less continuously since 2012 and given the most recent initiatives by 
the ECB and the additional CD rate cut it would seem that the negative 
interest rates will continue for quite some time. Therefore we believe 
it is time to lower our deposit rates in the corporate and retail 
segments so as to adapt our business model to market conditions. It is 
both natural and in accordance with the monetary intentions of the ECB 
and Danmarks Nationalbank that the negative interest rates materialise 
to a greater extent in deposits -- including in the retail segment. 
 
   The strategy -- "A stronger bank" 
 
   At a time when the banking environment in Denmark continues to be 
affected by macroeconomic factors such as negative interest rates, 
pressure on interest margins and a low demand for loans by enterprises, 
the need increases to stick to one's values, show resilience while at 
the same time display the ability to introduce possible adjustments of 
income as well as costs. In such an environment there is a greater need 
to review on an ongoing basis whether the current strategy is the right 
one. In recent months we have revisited the current strategy -- "A 
stronger bank". We are in a strong position -- and note for instance: 
 
 
   -- Sydbank's employee satisfaction is among the best in the sector, which 
      gives strength to continue 
 
   -- Sydbank's strategy of ensuring high accessibility is having the intended 
      effect, generating a high level of customer satisfaction 
 
   -- Sydbank's cautious credit policy has received the highest long-term 
      issuer rating among Danish banks 
 
   -- Sydbank's commitment to streamline operations is beginning to show 
      results where the solutions can reduce the process time -- in selected 
      areas -- by up to 86% 
 
   -- Adapting to market conditions means that today Sydbank has launched 
      measures to achieve a better balance between income and costs 
 
   -- Sydbank's total capital ratio is very high and according to Moody's 
      assessment Sydbank's capital position is in the best category. 
 
 
   Outlook for 2019 
 
 
   -- Limited growth is projected for the Danish economy in 2019. 
 
   -- Total income is expected to be lower than the income generated in 2018. 
 
   -- Costs (core earnings) are projected to rise slightly in 2019. 
 
   -- Impairment charges for 2019 are forecast to be at a low level. 
 
   -- Non-recurring costs are expected to represent around DKK 75m. 
 
   -- Profit after tax is expected to be in the range of DKK 800-1,100m. Profit 
      after tax is expected to be in the lower part of the range. 
 
   Additional information 
 
   Jørn Adam Møller, Deputy Group Chief Executive, tel +45 74 37 
24 00 
 
   Louise Degn-Hansen, Head of Communications, tel +45 61 20 48 04 
 
   Karen Frøsig, CEO, Bjarne Larsen, Deputy Group Chief Executive, and 
Jørn Adam Møller, Deputy Group Chief Executive, will present 
the Interim Report today at 10.00 (CET) at a teleconference. The 
teleconference will be held in Danish and may be attended via 
https://www.sydbank.com/about/investor-relations/annual-report 
 
   Attendees are invited to call +45 35 44 55 77. Please quote the 
following code: 13590410# 
 
   Attachments 
 
 
   -- FM 44 UK 
      https://ml-eu.globenewswire.com/Resource/Download/59c9d616-7ff7-46a1-a94d-694cda472364 
 
 
   -- Interim Report -- Q1-Q3 2019 
      https://ml-eu.globenewswire.com/Resource/Download/6a94ac35-1081-4c07-8924-276fe0c1ba40 
 
 
 
 
 
 
 

(END) Dow Jones Newswires

October 30, 2019 03:25 ET (07:25 GMT)