Danske Bank Analyst Calls Are Followed by a Sudden Selloff

(Bloomberg) -- As Danske Bank A/S started calling analysts this week to give them an overview of the trends and market developments that affected second-quarter results, its stock price started falling.

The calls, which are routinely done by companies to ensure market expectations don’t stray too far from reality, left one analyst with the impression that the bank’s net interest income may be under pressure. A second analyst said there were also signs of weakness at Danske’s wealth unit. Both declined to be identified by name because the conversations were private.

By the end of Tuesday, Danske was the worst performing financial stock in Europe with its share price down more than 4%. The stock fell about 2% on Wednesday.

Claus Jensen, head of investors relations at Danske Bank in Copenhagen, said by phone on Wednesday that he was contacted by market participants who were wondering what was going on. “I got calls from analysts who were asking, ‘What you have communicated because there are rumors in the market,’ and I also got calls from a couple of investors who were alarmed by market rumors, and were making reference to these calls.”

Danske is struggling to rebuild its image after last year admitting it was at the center of a $230 billion Estonian money-laundering scandal. It has lost more than half its market value since the beginning of 2018 as investors weigh the risk of fines against the bank’s financial performance.

Danske began its analyst calls on Tuesday, ahead of a silent period before the bank reports second-quarter earnings on July 18. One of the analysts to have received a call from Danske said the tone of the conversation had been downbeat.

According to estimates compiled by Bloomberg, Danske’s pretax profit in the second quarter is set to rise about 5% from a year earlier, led by an 11% increase in revenue.

“We stick to a prepared script where we only comment on seasonality, one-offs, trends and indexes. The calls are always attended by at least two IR officers,” Jensen said. He said any details specific to the bank that were provided to analysts would already have been made public.

“It’s very unfortunate that analysts’ own interpretations are being perceived as though Danske Bank is effectively guiding on the second quarter, which is not the case,” Jensen said. “Unfortunately, I can see that things get mixed up, from what happened yesterday.”

Subjects discussed with analysts included the development in interest rates, which affect net interest income, as well as increases in inter-bank rates in Sweden and Norway, and their impact on wholesale funding, Jensen said. He also said that the calls touched on the performances of indexes and what that might mean for assets under management.

Volatile markets mean executives have an incentive to lower expectations before they publish quarterly results, but the calls don’t typically result in large share movements. Investor relations departments are prohibited from revealing any new information to a limited group of people.

The July report will be the first for Chris Vogelzang, Danske’s new chief executive officer. The former ABN Amro banker started work this month, replacing interim CEO Jesper Nielsen who held the position since Thomas Borgen was ousted last year in the wake of the scandal.

Vogelzang has made regaining the trust of customers and investors his primary goal. Jensen, the head of IR, said Danske has for years arranged calls with individual analysts as a service, and that the banks adheres rigidly to a standard procedure and a pre-set presentation, to avoid triggering market reactions.

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Christian Wienberg at cwienberg@bloomberg.net

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