Huge wealth management division formed

Bank creates wealth management division around two thirds the size of country’s economy

Huge wealth management division formed
Danske Bank A/S has created an ambitious 1.35 trillion kroner ($207 billion) wealth management unit that will target growth in the rich Scandinavian financial markets, according to a Bloomberg report.

The wealth management unit, which is almost twice as big as Denmark’s largest pension fund and about two-thirds the size of the country’s economy, existed in its current form since April 1; and is a combination of several divisions, including the bank’s pension business.

“We have very high ambitions long-term for it,” said Thomas Borgen, Danske’s chief executive officer, in a phone interview with Bloomberg. Borgen didn’t divulge which particular area the unit will invest, but expressed commitment to wealth management as an important strategic area for Danske. 

The unit endured a rocky start during the first two months of the quarter, with pre-tax profit down by 25 per cent from a year earlier as income fell 15 per cent; but Borgen said the broader outlook for investing client’s money looks promising.

“The market was very complicated particularly the first couple of months, which has a natural impact on the unit and also taking into account the first quarter of last year was extremely good,” Borgen told Bloomberg, “But long term we are very comfortable with the wealth unit.”

Danske’s best pre-tax profit came from wealth management, as a percentage of allocated capital, at 25.6 per cent. The bank’s worst performing unit by metric, at 10.7 per cent, are corporates and institutions. The result is an indicator of wealth management’s light capital appeal, the report said. With Danske’s expansion of its wealth business, the bank gains an alternative revenue stream as lending income dries up.