Company announcement for the first quarter 2022
Kamilla Hammerich Skytte, CEO, comments on the financial results:
“We saw a positive expansion of the loan portfolio from DKK 793 billion in the first quarter of 2021 to DKK 809 billion in the first quarter of 2022. We also saw strong activity thanks to the sharp rise in interest rates. In eIn the first quarter of 2022, we experienced significant remortgaging activity and we helped over 2,500 customers who wanted to remortgage with a higher coupon. Corona-related losses remained at a low level in the first quarter. However, we reaffirm our current estimate of loan impairment charges due to the uncertainty caused by the war in Ukraine, rising energy prices and significantly higher interest rate levels. IIn our view, the Danish economy and most owners are well prepared for a period of increased uncertainty.”
The war in Ukraine and geopolitical tensions have increased economic and financial uncertainty. For now, the Danish economy remains in good shape, operating very close to or perhaps even above capacity. Unlike before the financial crisis, Danish homeowners are not living beyond their means.
The surge in inflation surprised central banks, forcing them to act. This has helped push up Danish mortgage rates, and 30-year fixed-rate mortgages have risen from 1.5% at the start of the year to 3% by the end of the first quarter of 2022. FlexLån mortgage rates three- and five-year bonds also jumped now that multiple rate hikes are expected in the euro zone in the coming years. All in all, the yield curve steepened sharply in the first quarter, prompting many homeowners to turn to variable rate loans. This means that, for the first time in several years, fixed rate mortgages are losing market share to variable rate products, and we expect this trend to continue. Rising rates on fixed rate loans have also given many homeowners the option to remortgage at a higher or variable rate to reduce their outstanding debt.
Generally speaking, housing market indicators through March 2022 showed a market still in fairly good shape. It is, however, probably only a matter of time before rising inflation, with the continued erosion of real wages, and rising interest rates trickle down to the housing market, and we we expect the housing market to slow further in 2022.
First quarter 2022
Realkredit Danmark Group recorded a net profit of DKK 961 million in the first quarter of 2022, compared to DKK 1,008 million in the same period of 2021. The profit was affected by lower income related to the activity of loan, higher costs for ongoing compliance and digitization and reduced loan impairment charges. Administration margin income fell by DKK 16 million, due to a lower average loan value (LTV) for clients.
Loan impairment charges amounted to DKK 31 million in the first quarter of 2022 compared to DKK 115 million in the same period of 2021. Charges related to the corona crisis were limited in the first quarter of 2022. The account Total provision as of March 31, 2022 was DKK 2,965 million compared to DKK 2,971 million as of December 31, 2021. The level is maintained due to the mentioned financial uncertainty.
Gross loans amounted to DKK 47 billion, compared to DKK 46 billion in the first quarter of 2021. Mortgages at fair value decreased by DKK 31 billion to DKK 779 billion. The decline is attributable to lower bond prices due to rising interest rates. The evolution of mortgage loans at fair value consists of an increase in the nominal outstanding bond debt of DKK 2 billion and a decrease of DKK 33 billion in the mark-to-market adjustment. first quarter of 2022.
In the first quarter of 2022, Realkredit Danmark continued to focus on green bond initiatives. Customer responses are still very positive and as of March 31, 2022, total loans amounted to DKK 18.0 billion.
In Denmark, total green loans funded by RD Cibor6®Green amount to DKK 14.5 billion. In Sweden, demand for green financing options has also been strong. As a result, Realkredit Danmark has expanded its product range in the Swedish commercial real estate market, opening for RD Stibor3® Green in mid-2020. As of March 31, 2022, total loans amounted to DKK 3.5 billion. In the future, Realkredit Danmark will also offer green covered bonds in Norway.
Realkredit Danmark expects 2022 net profit to be slightly lower than 2021 net profit.
|Financial Highlights – Realkredit Danmark Group|
|INCOME STATEMENT||Q1||Q1||Hint||Q1||Q4||Q3||Q2||Q1||Full year|
|(millions of Danish kroner)||2022||2021||22/21||2022||2021||2021||2021||2021||2021|
|Net interest income||6||40||15||6||3||1||2||40||46|
|Income from investment portfolios||-27||11||–||-27||7||-1||38||11||55|
|Earnings before loan impairment charges||1,263||1,407||90||1,263||1,143||1,168||1,254||1,407||4,972|
|Loan impairment charges||31||115||27||31||11||94||49||115||269|
|Profit before tax||1,232||1,292||95||1,232||1,132||1,074||1,205||1,292||4,703|
|Net income for the period||961||1,008||95||961||883||838||940||1,008||3,669|
|BALANCE SHEET (END OF PERIOD)|
|(millions of Danish kroner)|
|Mortgages||779 211||805,001||97||779 211||810 139||803 643||803 233||805,001||810 139|
|Bonds and stocks||45,523||45,588||100||45,523||46,435||42,840||43,607||45,588||46,435|
|Total assets||846 744||884,002||96||846 744||876 999||869 815||868 722||884,002||876 999|
|Due to credit institutions etc.||2,000||2,000||100||2,000||2,000||2,000||2,000||2,000||2,000|
|Mortgage bonds issued||792 508||830 468||95||792 508||820 950||815 427||816 135||830 468||820 950|
|Total Liabilities and Equity||846 744||884,002||96||846 744||876 999||869 815||868 722||884,002||876 999|
|RATIOS AND KEY FIGURES|
|Net profit for the period in % pa|
|Impairment charges in % pa
|Operating coefficient (%)||16.9||12.8||16.9||21.2||17.1||16.1||12.8||16.7|
|Total capital ratio (%)||27.9||27.4||27.9||25.3||27.3||28.2||27.4||25.3|
|Tier 1 capital ratio (%)||27.6||26.9||27.6||24.9||26.9||27.7||26.9||24.9|
|Full-time equivalent staff (end of period)||228||224||228||217||216||224||224||217|
The company’s announcement for the first quarter of 2022 has not been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, and additional Danish disclosure requirements for issuers’ interim reports listed bonds.
Realkredit Danmark Company Announcement for Q1 2022