Jyske Bank Annual Report 2017

Summary

  • Pre-tax profit: DKK 4,002m (2016: DKK 3,906m), corresponding to a return on equity of 12.4%
    (2016:12.7%)
  • Post-tax profit: DKK 3,143m (2016: DKK 3,116m), corresponding to a return on equity of 9.7%
    (2016: 10.1%)
  • Core income: DKK 8,361m (2016: DKK 8,361m)
  • Core expenses: DKK 5,374m (2016: DKK 5,108m)
    Less one-off expenses of DKK 237m, core expenses rose by 0.6%
  • Reversal of impairment charges: DKK 453m (2016: DKK 149m)
  • Capital ratio of 19.8% and Common Equity Tier 1 capital ratio of 16.4% (2016: 18.3% and 16.5%)
  • The Supervisory Board will, at the Annual General Meeting in March 2018, make a motion for the distribution of ordinary dividend of DKK 5.85 per share for the financial year 2017 compared to DKK 5.25 per share for the financial year 2016.


Where are we going?

Read more at jb2018.dk/en


Comments by Management

In connection with the publication of Jyske Bank's Annual Report 2017, Anders Dam, Jyske Bank’s CEO and Managing Director states:

Profit for the year
"Jyske Bank generated a pre-tax profit of DKK 4,002m, corresponding to an annual return on equity of 12.4%. This profit was achieved thanks to increasing business volumes in all segments. The post-tax profit amounted to DKK 3,143m, corresponding to a return on equity of 9.7%, which is satisfactory and in line with the target of a return on equity in the range of 8-12%.

Market areas
With respect to mortgage lending to personal clients, we have over the past almost four years increased our market share. In 2017, total mortgage loans increased by 30bn, and since the merger with BRFkredit, mortgage loans have increased by DKK 100bn. This is evidence of the Group's strong market position with respect to products and prices. The target of Jyske Bank being able to add new home loans in the amount of DKK 100bn to the Group will be reached at the end of February 2018. Loans for commercial property have increased by DKK 19.3bn, and the target of growth of DKK 20bn over five years is expected to be met in the first half of 2018 - about a year before originally expected.

As of mid-2018, only the Jyske brand will be used in the area of home financing as, at this time, Jyske Realkredit will be launched as the name of the mortgage activities. Provided that economic growth in Denmark remains stable, it is the ambition of the Group that the portfolio of home loans will grow by DKK 20bn- 25bn and commercial property loans by DKK 15bn-20bn over the coming three years. The aim is to achieve a total loan balance of DKK 350bn for Jyske Realkredit.

In addition to growth in the mortgage activities, progress was also recorded in respect of the business volume for leasing activities. In respect of capital market activities, an inflow of clients as well as business volume was recorded. Also, the business volume of private banking clients is improving, and it is expected that these trends will continue in 2018.

The organisation
In 2017, the Group united and strengthened the client-oriented functions through the establishment of three new client units, Personal Clients, Corporate Clients and Private Banking. Due to the increased integration between banking and mortgage activities, corporate clients are to a higher degree experiencing the advantages from the Group being able to offer both banking and mortgage products.

Thanks to the establishment of an even stronger development organisation across the Group, the first visible results will be seen in mid-2018, externally in the form of a simpler product range and internally in the form of improved processing of loans.

The organisational changes implemented and the technological development support the Group's on-going focus on the cost level. Hence, the target is that five years after the merger with BRFkredit the number of employees will, all other things being equal, be back at about the level at the end of 2013. At today's date, the number of full-time employees is about 3,900 less the employees for whom costs were covered externally. At this point in time, notices have been received from and retirement agreements have been reached for a total of about 50 employees to take effect until mid-2019.

Client satisfaction
The employees of the Jyske Bank Group strive continuously to meet the ambition of making a positive difference for the clients, and the Voxmeter study in 2017 showed that Jyske Bank has the most satisfied private banking clients in Denmark, and the report from Aalund showed that Jyske Bank has the most satisfied corporate clients in Denmark. For two consecutive years, we were named "Best in Test" by the Danish Consumer Council, and again in 2017 we ranked ahead of other national financial institutions and received the distinction of 'Anbefalet' (Recommended), particularly in respect of clients with a high level of home equity.

We are the only Danish financial institution that offers our clients mobile payments with 'Apple Pay'. The number of clients wishing to use Apple Pay is increasing steadily. It is expected that various functionalities in the payment and card area will become more widely used and be expanded over the coming years. The possibility of issuing 'Jyske VISA mobil' without issuing a physical card is the most recent example of that development.

Capital structure and dividend
In 2017, the Group made a gradual adjustment of its capital structure. At 19.8% and 16.4%, respectively, both the capital ratio and the Common Equity Tier 1 capital ratio are above the long-term targets of 17.5% and 14%, respectively. It is expected that Basel IV will result in an increased capital requirement, corresponding to a change of 3 percentage points in the capital ratio, i.e. about 1 percentage point below the level announced previously. It is the ambition of the Jyske Bank Group to meet these requirements at the beginning of the phase-in period starting in 2022. In the short term, SP's risk-adjusted capital ratio (Risk Adjusted Capital) is a governing factor. For the long term, the Jyske Bank Group aims for a RAC ratio at the level of 10.5%. At the end of 2017, the RAC ratio was 10.2%.

The Supervisory Board will, at the Annual General Meeting in March 2018, make a motion for the distribution of ordinary dividend of DKK 5.85 per share. The aim is to generate a stable dividend level. Additional dividends and share buy-backs will be measures taken to the extent made possible by the development, particularly in the RAC requirements", ends Anders Dam.