The Danish rarely cross our minds except in breakfast form, but here’s an exception (HT Credit Writedowns).
COPENHAGEN, Feb 23 (Reuters) – Small Danish bank Fionia (FIONIA.CO) said on Monday it ceded control to the Danish state in return for a 1 billion Danish crown ($169 million) capital injection that keeps it solvent.
Fionia is the ninth-largest Danish bank by market value. It has 84,000 private customers and 7,500 business customers.
The bank’s shareholders retain ownership of the bank and can reclaim control once the bank rights itself and pays back the state, Fionia said. Trading in Fionia shares was suspended on the Copenhagen exchange.
That’s effectively another bank failure to add to the two that occurred last year — Roskilde Bank and EBH Bank, which were also taken over by the government.
Denmark has already agreed to inject about €13.4bn in its banks, or 5.9 per cent of its GDP, according to BNP Paribas stats (see below). While that pales in comparison to other European countries the form is interesting. Credit Suisse wrote last month:
We are concerned that these ad-hoc capital injections may not boost lending. Banks are under no obligation to participate and the Tier 1 instruments come with stringent conditions. These include the commitment to increase lending; banks will be required to submit semi-annual reports on lending developments and practices. There will also be controls on executive pay and a ban on dividends in 2008 and 2009. Finally, a bank with a good rating will have to pay an interest rate of at least 9%, which is probably what Danske Bank will pay if it is participating in the scheme. We think this is fairly expensive.
Danske Bank, as Credit Writedowns notes below, is something of a giant. While Denmark has something like 150 banks, the top five retail lenders (Danske, Nordea, Jyske, Sydbank and Spar Nord) hold close to 80 per cent of the market. Anyway, this is Credit Writedown’s take:
Denmark has escaped attention during the recent crisis over Eastern European debt. Most of its banks are relatively small. Yet, it has significant exposure to the Baltics and is home to Danske Bank, an international behemoth, with assets twice the size of the Danish economy.
Indeed, looking at this chart, below right, Danske is fifth in terms of assets against host country’s GDP, with Nordea seventh — two very unnappetising bailout prospects if things were ever to deteriorate.
Related links:
Central bank sees 50 fewer Danish banks in 10 years – Reuters report
Denmark: Fionia Bank collapses – Credit Writedowns
Danish house prices – Jensks.com