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Danske Bank enjoys record profits as costs are reduced amid branch closures

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Danske Bank headquarters in Belfast

Danske Bank headquarters in Belfast

Chief executive Gerry Mallon, who has presided over a ten-fold rise in profits

Chief executive Gerry Mallon, who has presided over a ten-fold rise in profits

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Danske Bank headquarters in Belfast

Danske Bank has posted record pre-tax profits of £117.5m in a year which saw it close an additional seven branches in a cost-cutting bid.

The company's profits rose more than 10-fold in 2014 - down to a reduction in costs and additional cash clawed back from loan impairments.

That includes increased money generated by the sale of assets held against loans and mortgages - including house repossessions.

The bank said the credit in loan impairments reflected "higher than expected repayments generated from the sale of property and other assets held as security against impaired loans."

Chief executive Gerry Mallon said the £117m pre-tax profits were the "highest level of profitability in the history of the bank".

"Improved underlying performance, combined with a substantial fall in impairments as property asset values recovered, has helped deliver strong profitable growth for the full year," he said.

Profits before so-called writebacks - where property held or sold by the bank has increased in value - rose by 35% to £80m.

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But the overall positive financial news for Danske - formerly Northern Bank - comes as the company increased its profits by lowering its overall costs, including reducing its staff numbers.

Employees at the company fell in 2014 - dropping to 1,350 across Northern Ireland, compared to 1,434 in the year to December 2013.

The bank has slashed its branch numbers in half since 2003 - with 46 currently remaining open. Seven were shut in 2014.

"There was more investment in those (digital) channels, and that probably means less customer usage of physical channels," Mr Mallon said.

The number of customers using the web and smartphones to access their accounts saw another marked rise in 2014.

Mr Mallon didn't rule out further branch closures over the course of the year.

"We've been fairly market leading in terms of our branch rationalisation programme, and I think it would be less rapid over the course of the next year, at least.

"We are comfortable where we are at the moment."

The bank said the reduction in overall operating costs was down to "driving efficiencies" within the bank and "reflecting the change in customer behaviour".

The bank's operating income increased by 13% to £224m, due primarily to cost-cutting.

The business loan market remained flat, but there was a small boost in mortgage lending.

Asset finance also had a good year, with customers borrowing money for items such as cars and agricultural equipment.

It saw a bump of around a quarter, year-on-year.

Mr Mallon said it was an area in which the bank had under-performed over the last few years.

The quantity of cash which was deposited in current accounts witnessed a rise in 2014 - among both consumer and business customers.

But business lending remained largely static and the bank said it "had hoped for a greater level" but "didn't see the demand".

"If there is one note of caution, the one area where we had hoped for greater development was in overall business lending - we didn't see the demand growing," Mr Mallon said.

And the bank believes it will be a positive year for business in 2015.


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