February 25, 2020 / 9:02 AM / in a month

UPDATE 2-Customers to pay as Jyske Bank plans for sustained negative rates

* Negative interest limit cut to 250,000 crowns

* Shares down after upbeat morning trade

* Sees 2020 tax after profit of 1.8 bln-2.2 bln crowns (Adds background, economist, analyst comment, CEO quote)

By Nikolaj Skydsgaard

COPENHAGEN, Feb 25 (Reuters) - Denmark’s Jyske Bank said on Tuesday it would apply negative interest to deposits holding around 25 billion crowns ($3.6 billion), as it seeks to recover some of the costs of record low rates.

Jyske Bank, Denmark’s third-largest bank, was the first Danish lender to impose negative rates on large deposits in August last year, affecting roughly 11,000 clients as of Dec. 1.

Other banks have followed suit. Last week, Denmark’s biggest bank, Danske Bank, became the latest to start charging negative rates on large deposits.

Jyske Bank on Tuesday it said it was lowering the deposit amount exempt from negative interest to 250,000 Danish crowns, down from an earlier 750,000 crown limit on clients’ personal accounts.

Around 25 billion crowns in deposits would be eligible for the new interest rates, Jyske said, but declined to specify how many more people would be affected.

Starting May 1, the bank will charge a negative 0.75% interest on amounts above the new limit, it said, saying it expected negative rates to persist for several years.

Chief Executive Anders Dam said the new policy will effectively save the bank an estimated 170 million crowns by reducing some of the costs of depositing funds at the central bank at a negative rate.

DECLINING INTEREST INCOME

Also on Tuesday, Jyske reported a full-year profit of 2.44 billion crowns, slightly down from 2.50 billion last year, but said it expected to deliver profit after tax in the range of 1.8 billion to 2.2 billion crowns in 2020.

Shares in Jyske initially traded higher following the results announcement, but were down 2.47% at 1027 GMT, in line with the rest of the Copenhagen blue chip index.

“The pressure on net interest income increased, particularly due to the lower interest rates and customers’ high propensity to save,” Dam said in a statement.

Dam said negative rates had contributed to a decline of 650 million in Jyske Bank’s net interest income over the last five years.

He said clients had sought financial advice on different ways to invest and avoid paying extra for their deposits.

“The key message is that customers can get out of this if they want to,” he said.

In 2019, net interest income declined 6.4% compared to the year earlier, the bank said, while fee income rose 17% and value adjustments rose by 319 million crowns.

Those increases were mainly because of high remortgaging activity in Denmark last year, prompted by the low rates, and favourable bond price developments.

Sydbank analyst Mikkel Emil Jensen, who said the bank’s results were in line with expectations, foresaw a “new wave” of rate policies in the Danish finance sector spurred by first mover Jyske Bank.

“I would be surprised if more banks do not follow in Jyske’s footsteps and lower the limit,” Jensen said.

Niels Arne Dam, chief economist at financial business association Finance Denmark said banks were bracing for a longer period of negative rates than previously expected.

“The banks are acting on the basis that they will continue to lose money on offering deposit accounts with zero interest rates,” he told Reuters. ($1 = 6.8851 Danish crowns) (Reporting by Nikolaj Skydsgaard, editing by Louise Heavens and Barbara Lewis)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below