Jyske Bank expects pre-tax profit growth of 25% with purchase of Handelsbanken Denmark

Jyske Bank A/S is on track to achieve 25% pre-tax profit growth by 2025 with the acquisition of the Danish business of Svenska Handelsbanken AB (publ), said CFO Birger Krøgh Nielsen.

Jyske, Denmark’s third-largest bank by assets, said on June 20 that it had reached a binding agreement with Sweden-based Handelsbanken to buy the latter’s Danish business operations. Jyske’s share price rose more than 16% by mid-afternoon Copenhagen time after the deal was announced.

Assets worth around DKK 70 billion at the end of the first quarter will be transferred as part of the transaction, which is expected to close in the fourth quarter of 2022, Handelsbanken said in a statement. The price will be determined at closing based on the assets and liabilities assumed by Jyske, plus 3 billion crowns of goodwill.

Handelsbanken announced in October that it would divest its operations in Denmark and Finland, as it saw little opportunity to expand its offerings without significant investment.

Jyske expects to have fully migrated the Danish business by the end of 2023, with synergies amounting to DKK 300 million per year fully realized in 2024, CEO Anders Christian Dam said in a call. to analysts on June 20.

The transaction will see Jyske take over more than 113,000 customers, 66 billion crowns in loans and 36 billion crowns in deposits, increasing its own loan volumes by around 15% and its deposits by 30%.

The merger will increase Jyske’s annual pre-tax profit by around 1 billion crowns in 2025 and beyond, a 25% increase from 4 billion crowns in 2021, according to Krøgh Nielsen. The bank expects to make an additional pre-tax profit of 300 million crowns in the transition year 2023, he said.

“From day one, this transaction will have a positive impact on our finances,” said Krøgh Nielsen.

Some major Danish companies are currently excluded from the agreement due to the “special conditions they have in the agreements with Svenska Handelsbanken”, said Krøgh Nielsen. Some of those customers might want to engage with Jyske Bank, which could potentially lead to higher volumes, he added.

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Other Danish banks, including Spar Nord Bank A/S and Nykredit A/S, have also considered bidding for Handelsbanken’s business in Denmark, but have withdrawn their interest in recent weeks, according to the newspaper. Berlingske Tidende.

Analysts have previously suggested that Jyske Bank was not an obvious buyer as it uses a different IT provider from Handelsbanken and would face significant costs to move acquired customers to its own platform. According to the June 20 deal announcement, Handelsbanken will bear all exit costs related to this transfer.

Jyske, meanwhile, expects to incur one-time restructuring and integration costs related to the transaction of approximately DKK 500 million before tax.

Handelsbanken Denmark has 43 branches and about 600 employees, while Jyske has 80 branches and 3,200 employees in the country.

Handelsbanken has yet to find a buyer in Finland, and analysts said selling the unit was a more difficult task, saying the Sweden-based lender may have to sell the business in parts rather than one. one piece.

As of June 17, US$1 was equivalent to 7.11 Danish kroner.