Company Announcement for the First Quarter 2022
Company Announcement for the First Quarter 2022
Kamilla Hammerich Skytte, CEO, comments on the financial results:
“We saw a positive development in the loan portfolio, which grew from DKK 793 billion in the first quarter of 2021 to DKK 809 billion in the first quarter of 2022. We also saw strong activity on the back of the significant increase in interest rates. In the first quarter of 2022, we saw a significant remortgaging activity and we helped more than 2,500 customers who wanted to remortgage to a higher coupon. Corona-related losses remained at a low level in the first quarter. However, we reaffirm our existing estimate of loan impairment charges due to the uncertainty caused by the war in Ukraine, rising energy prices and significantly higher interest rate levels. It is our assessment that the Danish economy and most homeowners are well prepared for a period of increased uncertainty.”
Mortgage Market
The war in Ukraine and geopolitical tensions have brought increased economic and financial uncertainty. For now, the Danish economy remains in good form, operating very near or perhaps even above capacity. Unlike before the financial crisis, Danish home-owners are not living beyond their means.
The surge in inflation has surprised central banks forcing them to act. This has helped push Danish mortgage rates up, and 30-year fixed-rate repayment mortgages went from 1.5% at the beginning of the year to 3% at the end of the first quarter 2022. Rates for three- and five-year FlexLån mortgages have also jumped now that multiple rate hikes are expected in the euro area in the coming years. All in all, the yield curve steepened sharply in the first quarter, prompting many homeowners to look to variable-rate loans. This has meant that, for the first time for several years, fixed-rate mortgages are losing market share to variable-rate products, and we expect this trend to continue. Rising rates for fixed-rate loans have also given many homeowners the opportunity to remortgage to a higher or variable rate, so that they can reduce their outstanding debt.
Generally speaking, housing market indicators through to March 2022 showed a market still in pretty good shape. It is however probably only a matter of time before increased inflation, with adhering erosion of real wages, and higher interest rates feed through to the housing market, and we expect the housing market to slow further during 2022.
First Quarter 2022
The Realkredit Danmark Group recorded a net profit of DKK 961 million in the first quarter of 2022, against DKK 1,008 million in the same period of 2021. The profit was affected by lower income relating to lending activity, higher costs for ongoing compliance and digitalisation and lower loan impairment charges. Administration margin income fell DKK 16 million, due to lower average loan-to value (LTV) for the customers.
Loan impairment charges amounted to an expense of DKK 31 million in the first quarter of 2022, against DKK 115 million in the same period of 2021. Charges related to the corona crisis were limited in the first quarter of 2022. The total allowance account at 31 March 2022 amounted to DKK 2,965 million, against DKK 2,971 million at 31 December 2021. The level is maintained due to the financial uncertainty mentioned.
Gross lending amounted to DKK 47 billion, against DKK 46 billion in the first quarter of 2021. Mortgage lending at fair value fell DKK 31 billion to DKK 779 billion. The decrease is attributable to lower bond prices due to rising interest rate levels. The development in mortgage lending at fair value is composed of an increase in the nominal outstanding bond debt of DKK 2 billion and a decrease of DKK 33 billion in the market value adjustment in the first quarter of 2022.
In the first quarter of 2022, Realkredit Danmark maintained its focus on green bond initiatives. Customer responses are still very positive, and at 31 March 2022, total lending amounted to DKK 18.0 billion.
In Denmark, total lending of green loans funded by RD Cibor6®Green amounted to DKK 14.5 billion. In Sweden, demand for green financing options has also been strong. As a result, Realkredit Danmark has extended its product range in the Swedish commercial property market, opening for RD Stibor3® Green in mid-2020. At 31 March 2022, total lending amounted to DKK 3.5 billion. In the future, Realkredit Danmark will also offer green covered bonds in Norway.
Realkredit Danmark expects net profit for 2022 to be somewhat lower than net profit for 2021.
Contact: Kamilla Hammerich Skytte, CEO, tel. +45 45 13 20 82.
| Financial highlights – Realkredit Danmark Group | ||||||||||||||||||
| INCOME STATEMENT | Q1 | Q1 | Index | Q1 | Q4 | Q3 | Q2 | Q1 | Full year | |||||||||
| (DKK millions) | 2022 | 2021 | 22/21 | 2022 | 2021 | 2021 | 2021 | 2021 | 2021 | |||||||||
| Administration margin | 1,458 | 1,474 | 99 | 1,458 | 1,461 | 1,460 | 1,462 | 1,474 | 5,857 | |||||||||
| Net interest income | 6 | 40 | 15 | 6 | 3 | 1 | 2 | 40 | 46 | |||||||||
| Net fee income | 57 | 53 | 108 | 57 | -46 | -86 | -48 | 53 | -127 | |||||||||
| Income from investment portfolios | -27 | 11 | – | -27 | 7 | -1 | 38 | 11 | 55 | |||||||||
| Other income | 25 | 36 | 69 | 25 | 25 | 35 | 40 | 36 | 136 | |||||||||
| Total income | 1,519 | 1,614 | 94 | 1,519 | 1,450 | 1,409 | 1,494 | 1,614 | 5,967 | |||||||||
| Expenses | 256 | 207 | 124 | 256 | 307 | 241 | 240 | 207 | 995 | |||||||||
| Profit before loan impairment charges | 1,263 | 1,407 | 90 | 1,263 | 1,143 | 1,168 | 1,254 | 1,407 | 4,972 | |||||||||
| Loan impairment charges | 31 | 115 | 27 | 31 | 11 | 94 | 49 | 115 | 269 | |||||||||
| Profit before tax | 1,232 | 1,292 | 95 | 1,232 | 1,132 | 1,074 | 1,205 | 1,292 | 4,703 | |||||||||
| Tax | 271 | 284 | 95 | 271 | 249 | 236 | 265 | 284 | 1,034 | |||||||||
| Net profit for the period | 961 | 1,008 | 95 | 961 | 883 | 838 | 940 | 1,008 | 3,669 | |||||||||
| BALANCE SHEET (END OF PERIOD) | ||||||||||||||||||
| (DKK millions) | ||||||||||||||||||
| Due from credit | ||||||||||||||||||
| institutions etc. | 18,688 | 29,978 | 62 | 18,688 | 18,643 | 21,270 | 19,351 | 29,978 | 18,643 | |||||||||
| Mortgage loans | 779,211 | 805,001 | 97 | 779,211 | 810,139 | 803,643 | 803,233 | 805,001 | 810,139 | |||||||||
| Bonds and shares | 45,523 | 45,588 | 100 | 45,523 | 46,435 | 42,840 | 43,607 | 45,588 | 46,435 | |||||||||
| Other assets | 3,322 | 3,435 | 97 | 3,322 | 1,782 | 2,062 | 2,531 | 3,435 | 1,782 | |||||||||
| Total assets | 846,744 | 884,002 | 96 | 846,744 | 876,999 | 869,815 | 868,722 | 884,002 | 876,999 | |||||||||
| Due to credit institutions etc. | 2,000 | 2,000 | 100 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | 2,000 | |||||||||
| Issued mortgage bonds | 792,508 | 830,468 | 95 | 792,508 | 820,950 | 815,427 | 816,135 | 830,468 | 820,950 | |||||||||
| Other liabilities | 5,403 | 4,737 | 114 | 5,403 | 4,577 | 3,809 | 2,857 | 4,737 | 4,577 | |||||||||
| Shareholders’ equity | 46,833 | 46,797 | 100 | 46,833 | 49,472 | 48,579 | 47,730 | 46,797 | 49,472 | |||||||||
| Total liabilities and equity | 846,744 | 884,002 | 96 | 846,744 | 876,999 | 869,815 | 868,722 | 884,002 | 876,999 | |||||||||
| RATIOS AND KEY FIGURES | ||||||||||||||||||
| Net profit for the period as % p.a. | ||||||||||||||||||
| of average shareholders’ equity | 8.0 | 8.4 | 8.0 | 7.2 | 7.0 | 8.0 | 8.4 | 7.4 | ||||||||||
| Impairment charges as % p.a. of mortgage lending | 0.02 | 0.06 | 0.02 | 0.01 | 0.05 | 0.02 | 0.06 | 0.03 | ||||||||||
| Cost/income ratio (%) | 16.9 | 12.8 | 16.9 | 21.2 | 17.1 | 16.1 | 12.8 | 16.7 | ||||||||||
| Total capital ratio (%) | 27.9 | 27.4 | 27.9 | 25.3 | 27.3 | 28.2 | 27.4 | 25.3 | ||||||||||
| Tier 1 capital ratio (%) | 27.6 | 26.9 | 27.6 | 24.9 | 26.9 | 27.7 | 26.9 | 24.9 | ||||||||||
| Full-time-equivalent staff (end of period) | 228 | 224 | 228 | 217 | 216 | 224 | 224 | 217 | ||||||||||
The company announcement for the first quarter of 2022 has not been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, and additional Danish disclosure requirements for interim reports of issuers of listed bonds.
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