Here’s why the Danske Bank share price fell after earnings

Danske Bank’s share price tumbled hard on Friday in Copenhagen even after the company published encouraging financial results. The stock plunged to DKK 193, much lower than the year-to-date high of DKK 211.50. 

Danske Bank, the sixth biggest Danish company, published strong financial results as it continued benefiting from higher interest rates. 

The company’s net interest income rose to over DKK 9.14 billion (£1.1 billion) during the quarter, up from DKK 8.02 billion. This happened as Denmark’s Central Bank has left interest rates at 3.75%, lower than the ECB’s 4.25%.

Denmark’s interest rates have remained lower because of Novo Nordisk, the biggest company in Europe that has benefited from its weight loss and diabetes drugs. Novo paid over $2 billion in taxes last year.

Danske Bank’s total income rose to DKK 13.95 billion while its net profit rose gradually to DKK 5.6 billion. It expects that its net profit will rise to between 20 and 22 billion kroner this year.

Therefore, the stock crashed because analysts expect that the company’s good times have ended since the central bank will start cutting rates this year.

Still. Danske Bank’s stock performance is encouraging for a company that was facing existential challenges a few years ago amid a heightened money laundering scandal. In the aftermath, the company paid a $2 billion to US regulators in 2023.

Danske has now restarted paying payouts and repurchasing its shares. It hopes to continue paying dividends in the range of 40% and 60% of its net profit. It has also started a 5.5 billion kroner share repurchase program.

Looking ahead, Danske Bank faces challenges growing its net interest income as rates are expected to start going down soon. The most recent data shows that the country’s Consumer Price Index (CPI) stood at 0.9% in March.

Danske Bank chart by TradingView

The daily chart shows that the Danske Bank’s stock price has plunged hard in the past few days. It has crossed the key support at DKK 200, the neckline of the double-top pattern. It has also crashed below the 50-day moving average. 

Meanwhile, the Relative Strength Index (RSI), a popular oscillator, has moved from the overbought point of 76 to 34. The RSI is a technical indicator that measures the speed and change of price movements.

Therefore, the short-term outlook for the stock is bearish, with the next point to watch being at DKK 190, the 23.6% Fibonacci Retracement level. A drop below that level will point to more downside, with the next point to watch being the 38.2% retracement point at DKK 177.

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