Posted on Wednesday 17 October 2012 by Ulster Business

Danske Bank

Ole Andersen, Gerry Mallon and Thomas Borgen pictured at Danske Bank’s Belfast headquarters.

There will be a new name on Northern Ireland's high streets by the end of the year when Northern Bank is rebranded as Danske Bank, the name of its parent company.

While there will no doubt be some sadness at the passing of a brand which dates back to 1809, in every other way it will be business as usual for the lender.

In fact, Copenhagen-headquartered Danske Bank is expecting more than business as usual, following a reorganisation of the way its banking group is structured that's designed to make it more efficient and effective.

The reorganisation shifts the focus from a geographical structure to one based around the three core units of Danske: Personal Banking, Business Banking and Corporates & Institutions.

Danske believes this will push decision making closer to its customers, making business operations simpler, faster and more agile.

The new business units will be in charge of customer relations, credit granting, business development, communications and marketing for their individual units.

However, Ole Andersen, Chairman of Danske's Board of Directors, emphasises that this is not a centralising exercise.

"Yes, we are organising the business according to homogeneous customer groups but don't forget we still have strong local management teams in place leading the way," he told Ulster Business on a visit to Belfast.

"In terms of the credit function, there will not be many changes for Northern Ireland because they already have a credit department here."

The rebrand which has accompanied the reorganisation was driven by recognition that customers' needs are determined by whether they are personal customers, SMEs or large international groups. Pooling resources under one name should speed up development and marketing of new products across the organisation.

"We have a bank in Finland called Sampo Bank, Fokus Bank in Norway, National Irish Bank in the Republic, Northern Bank here. We came to the conclusion that there were many advantages of actually moving from a multi-brand business to a single brand," the chairman explained.

"Many people are used to the existing brand names and feel quite attached to these brand names, so there are some emotions involved. But weighing up the pros and cons we came to the conclusion it was the right move for us."

Mr Andersen, who took up his current role in December 2011, has a reputation as a heavy-weight among Danish corporate managers and board chairmen. With a background in private equity, he is also chairman of audio equipment maker Bang & Olufsen, facilities management giant ISS and natural ingredients producer Chr. Hansen.

The focus of his first visit to Belfast was to meet Northern Bank's management and staff, and to learn more about the business.

"I must say I am very impressed by what I have seen and what I have heard. There seems to be a strong and dedicated, and energised team who are committed to continuing the long track record that we have here," he said.


Danske Bank could be forgiven for viewing Ireland as its problem child.

It has transferred all of National Irish Bank's impaired loans relating to commercial and investment property – some 56% of its loan portfolio with a value of DKK 35bn (£3.8bn) – into a separate entity that will be wound down. In addition the Dublin based corporate banking wing has been expanded and now reports directly into the Group's Corporates & Institutions unit.

The continuing parts of National Irish Bank and Northern Bank have been integrated into a new organisation, to be run on an all-island basis by Northern Bank CEO Gerry Mallon.

In August, Danske Bank's CEO Eivind Kolding told the Wall Street Journal he hopes the bank's operations in Ireland will be profitable within around two years. It's a target Mr Andersen is happy to stick to.

"Danske Bank acquired Northern Bank and National Irish Bank in 2005 and the crash hit us in 2007. There's no doubt that the whole Irish operation has been a burden to Danske Bank," he admitted.

"Time has passed, we're still not out of the woods, but we have acted as a responsible owner and we are very confident that we'll manage to get out of this and get back to an acceptable profitability level. Yes, the Irish venture has of course been costly for Danske Bank, but we are where we are, we have a very strong franchise here and we try to look forward to get the best out of it."

Although Danske Bank's results for the first half of 2012 showed impairments of £763m for the half – up from the £677m for the corresponding six months of 2011 – charges declined for the second consecutive quarter. Pre-tax profit before impairment charges was up 9% to £1.2bn in the first half of 2012.

Northern Bank's operating profit of £34.8m for the half year represented a 60% increase on first half 2011, with improvements in both operating income and costs dented only by £100m of charges for bad loans.

Thomas Borgen, Chairman of Northern Bank's Board of Directors, head of Corporates & Institutions, and a member of Danske's Executive Board, believes that outside of property the prospects in Northern Ireland, and also the Republic, are good.

"If you look at the underlying business it has been a tremendous run in terms of getting clients in the shop. We service them well, there are high satisfaction levels. The problem is when you have legacy loans on your book and the property prices are falling, it will hurt you. But it is more important for us to work on what we can impact," he said.

Danske expects loan impairment charges of DKK 5-7bn (£524m – £759m) from the Republic up to and including 2014.

"Impairment claims will still be high for 2012," added Mr Andersen. "Nobody can foresee what's going to happen on the macro-economics, but we do expect impairments to fall, hopefully in 2013, but we can't say that for definite."


Northern Bank CEO Gerry Mallon thinks the bank will be in a more competitive position in the future because it is getting the pain of those devalued assets out of the way now.

"We're taking what we see to be the sensible approach in terms of recognising impairments as early and as comprehensively as we can," said Mr Mallon.

"We're also looking at what the new normality looks like in the banking industry. The economics of retail banking have completely changed – we have a low interest rate, low-growth environment and we need to adjust our cost base to make the business sustainable in the long term. I think we're proceeding with greater pace than a lot of others in the market," he added.

Danske has also continued to invest in its business, with new products such as mobile banking. The roll out of mobile banking follows success in Scandinavia, where many people rarely visit bank branches any more.

"It is interesting for us to observe trends in Nordic markets because the adoption of technology is maybe three to five years ahead of us. So we can see the trends and we feel like we're preparing ourselves to reach the same kinds of tipping points for the adoption of those channels," commented Mr Mallon.

The CEO sees lots of scope for growth in the Northern Ireland market and says the bank has identified the segments it will target.

"In the corporate market I think we have a number one position. In private banking we have a strong proposition, which we've revised, bringing in a breadth of wealth and investment products which we haven't had in the past, so there's potential for income growth there. More broadly in our personal customer base, while we have a very high market share in current accounts we have a relatively low market share in other products such as mortgages. So there's a lot of potential to deepen our relationships with customers. We have the appetite, the capital resources and liquidity to do that," he said.


After being placed on negative outlook, Danske Bank saw its rating lowered by two rating agencies – Moody's and Standard & Poor's – in the second quarter of 2012 over concerns about the cost of bad loans in Ireland.

The group's considerable liquidity buffers have countered the increased cost of borrowing caused by the downgrades, but Mr Andersen says it is the bank's ambition to "correct" those ratings.

"Danske Bank has had a very good result in the European stress tests. We are one of the strongest banks in Europe when it comes to capital reserves, but we are still looking into our capital structure. We still have a state hybrid loan which we are going to repay in 2014. Certainly it is a priority to maintain a strong balance sheet and minimise our funding costs," he added.

Thomas Borgen further elaborates that deleveraging is one of several key challenges facing the banking industry.

"We need to get trust and credibility back into the sector. There's nothing we as Danske can fix ourselves, but we are part of it," he explained.

"Secondly, is the regulation, which has an impact for the consumer, for shareholders and for employees. Thirdly, it is the changing behaviour of the consumer and being able to adapt fast enough. We are moving fast here in Northern Bank, but in many ways consumers are moving faster than the banks, so we need to keep constantly innovating products," he added.

"Lastly, the macro-economic situation is still hard. Ireland has had a tough time. But I'm very happy to see that the Republic has maybe stabilised. It was very important the Irish government were able to go to the bond market at the beginning of last month. I am also pleased that Danske Bank was the lead on that bond issue, we did the majority of those placements. So that's one of the areas where we see we can bring a lot of value to the whole society. It was a major breakthrough after two years of no issues."

Mr Borgen says Danske is also focused on taking complexity out of the business and going back to basics to get closer to its customers.

"We are in a period of optimisation, making sure we are really keeping clients happy and serving them well. We will also be copying some of the success Gerry has had here in Northern Ireland in acquiring clients – his team is the role model for corporate clients," he said.

"I think the sector perhaps got too complicated. Some banks were developing products they may not have even understood themselves. So there was a need to take a step back and ask, what is the core value proposition, what do clients want? That is what we have done."


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