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Copenhagen bourse puts Totalbanken on watch list
March 14, 2012 / 12:52 PM / 6 years ago

Copenhagen bourse puts Totalbanken on watch list

* Totalbanken put on bourse’s observation list

* Bourse says uncertain if bank can remain a going concern

* Shares drop 18.3 percent in positive wider market

COPENHAGEN, March 14 (Reuters) - The Copenhagen stock exchange put small Danish bank Totalbanken on its watch list on Wednesday, after the lender’s auditors questioned whether the bank could survive as a going concern.

If Totalbanken were to fall into state hands, it would become the tenth Danish bank to do so since the financial crisis began towards the end of 2008.

Totalbanken reported on Monday a 115.3 million Danish crown ($20.33 million) pretax loss in 2011, hit by 155.7 million crowns in loan losses.

Many Danish banks have had to take heavy writedowns after excessive lending to property buyers in the boom years and are struggling to meet stricter capital requirements and high funding costs.

“Totalbanken A/S has been transferred to the observation list as the bank’s auditors in the financial statement for 2011 draw attention to the significant uncertainty as to the bank’s ability to remain a going concern,” the Copenhagen stock exchange said in a statement.

Putting a company’s shares on the observation list is a warning to investors of problems at a company.

Concern has lingered that more small lenders in Denmark’s highly fragmented banking sector could fail, after tiny local bank Fjordbank Mors became the latest to fall into the state’s arms last June.

All but a handful of Denmark’s biggest banks last year saw their access to international funding markets freeze up for months and a number of small banks have merged recently.

Totalbanken was not immediately available for comment.

Its shares plunged 18.3 percent by 1112 GMT, underperforming a 0.4 percent rise in the Copenhagen stock exchange’s benchmark index.

STATE TO THE RESCUE

About two weeks ago, the Danish government announced a fresh set of measures that will include allowing lenders to shift bad property loans to the state to strengthen their finances.

The move was also seen rescuing unlisted corporate bank FIH Erhvervsbank which has already made use of the new scheme and transferred 17 billion crowns ($3.0 billion) worth of property loans to a new entity controlled by the state company that manages troubled banks, Finansiel Stabilitet.

FIH Erhvervsbank, owned by pension insurance companies, is the sixth-biggest bank in Denmark and a lender to Danish enterprises.

The initiative was the fifth launched by the state to lend a helping hand to the country’s banks in one form or another since the start of the financial crisis.

Ratings agency Moody’s said on Monday that Denmark’s new support package for its banks is “credit positive” and would help avoid cuts in the value of assets held by senior creditors and depositors.

The latest initiative was also seen reducing the risk of an earlier support scheme, known as Banking Package III, being used to impose haircuts on holders of senior unsecured debt and depositors, Moody’s said.

Other initiatives, or bank packages, have included making it more attractive for sound banks to take over struggling peers.

“There are so many options Totalbanken can take advantage of that this will not become a sector problem,” said Alm Brand analyst Stig Nymann.

“It will not have any consequences for the other banks,” Nymann said.

At the end of last year, Denmark’s central bank threw a lifeline to the country’s liquidity-squeezed banks by offering a new six-month loan based on its main lending rate and expanding the scope of collateral that it accepts from banks.

At the end of this month, the central bank will offer a three-year facility to banks, and they are expected to borrow between 150 billion Danish crowns and 200 billion, according to a note from Nordea. ($1 = 5.6716 Danish crowns) (Reporting by Mette Fraende; Editing by Jon Loades-Carter)

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