The chief executive of Denmark's biggest lender, Danske Bank has said its Irish loan losses have likely peaked.
In an interview, Peter Straarup described the banking bailout in Ireland as "scary" but said he believed the measures taken by the Government would eventually help lead the country back to economic health.
“Obviously, it is scary that the banking sector has cost the Irish government and taxpayers so much and the big question is, of course, what happens now - will the property market fall even more?" he said. “If it does, it will obviously result in more impairment charges in addition to what has already taken place. We do think, though, and still think, that impairment charges peaked in Ireland in the second quarter.”
Danske, which acquired Northern Bank and National Irish Bank in 2005, suffered the largest loan losses of any Nordic bank last year because of the economic crisis in its home market and in Ireland.
The lender’s Danish consumer business has been unprofitable since the fourth quarter of 2008 because of impairment charges and costs related to the Danish state guarantee programme for banks, and in Ireland since early 2008 after the property market slumped.
Mr Starrup warned today that austerity measures expected to be unveiled in December's budget could led to a delay in economic recovery in Ireland.
“If the Irish Government tightens more, which could become necessary, then it would obviously also hit other sectors than the property sector, which could mean the economy would take some time longer to recover,” he.
“I don’t have any doubt, though, that the Irish economy will recover one day, and I think the government and the country is putting the right medicine into the medicine cabinet,” he added.
Danske Bank, the Nordic region’s second-largest bank by market value before the global financial crisis began, has slipped in size and now ranks fourth after Nordea Bank, Norway’s DnB NOR and Sweden’s Svenska Handelsbanken.
Danske shares have gained 11 per cent this year, compared with a 4 per cent decline in the Bloomberg Europe Banks and Financial Services Index, which includes 54 European banks and insurers.
Danske is closing branches in Ireland, Sweden, Norway and Denmark as part of a plan to consolidate its network, make smaller corporate customers use its telephone bank instead and lower costs, Mr Straarup said.
The bank is cutting its branch network in Ireland by 50 per cent and as much as 20 per cent in Sweden and Norway, he said.
Danske has 320 branches in Denmark, 49 Swedish outlets, 45 Norwegian branches and 44 Irish outlets.
Bloomberg