House prices may have dropped in the Nordics after a period of runaway growth, but Danske Bank A/S CFO Jacob Aarup-Andersen is confident that the lender will still be able to grow its mortgage portfolio across the region in 2018.
A cooling-off of the housing markets in Norway and Sweden in particular is "quite a healthy situation," and Danske Bank expects to continue to grow mortgage lending in those countries, he said in an interview.
"Given our relatively small share of these markets, we can afford to be quite selective in how we build the book," he said. "We'll continue to grow in these two countries even if the market is subdued."
Danske Bank's total credit exposures to home loans increased to 723 billion Danish kroner in 2017 from 706 billion kroner a year earlier.
House prices in Sweden fell by 2% in December 2017, the fourth consecutive month of decline, according to the Nasdaq OMX Valueguard-KTH Housing Index (HOX). House prices in the country had risen steeply throughout 2016 and during the first half of 2017, prompting concerns that the market was overheated and heading for a sharp correction.
Danske Bank's exposure to Danish home loans increased to 465 billion kroner at the end of 2017 from 459 billion a year earlier. The Danish central bank had warned in 2016 that the country was heading toward a housing bubble due to the rapid increase in prices, particularly in Copenhagen.
Aarup-Andersen said he expects growth in the Danish mortgage portfolio in the coming year, but at a slower pace than in Norway and Sweden.
'Very pleased with Northern Ireland'
Commenting on analyst speculation in January that Danske Bank might look to sell off its Northern Irish business in 2018, the CFO said there was "no change" in the bank's strategy for the division.
"They delivered another great year in 2017, despite headwinds from Brexit," he said. "We are very pleased with Northern Ireland, and we will leave it at that."
The Northern Irish business returned a profit of 1.25 billion kroner in 2017, up from 1.06 billion kroner a year earlier.
At a group level, Danske Bank reported a fourth-quarter 2017 net profit of 5.65 billion kroner, up from 4.93 billion kroner in the third quarter of 2017. Net profit for the full year rose year over year in 2017 to 20.90 billion kroner from 19.86 billion kroner.
Commenting on the second European Payment Services Directive — a piece of legislation that came into force in January and requires banks to allow third parties such as fintech companies to access, with consent, bank customers' data — Aarup-Andersen said he saw it as a "business opportunity" for the bank rather than a threat.
Danske Bank will partner with fintech companies in the future to provide certain new digital products and services, according to the CFO.
"It's a balancing act," he said. "If we have skills in-house, we will develop products ourselves. If we don't, we will work with a fintech partner."
As of Feb. 1, US$1 was equivalent to 5.97 Danish kroner.
