Jyske Bank: Charting a Course for Profitability Amidst Lower Interest Rates

Jyske Bank, Denmark's third-largest bank by assets, has unveiled its strategic plan and long-term financial targets, positioning itself for a future marked by lower interest rates. The bank aims to achieve a return on tangible equity (ROTE) of 10% by 2028, supported by a cost/income ratio below 50% and a common equity tier 1 (CET1) capital ratio within the 15%-17% range.

The bank's strategy focuses on capital-light income and structural cost measures, enabling it to mitigate the impact of lower interest rates. By shifting towards fee-based income and reducing operational costs, Jyske Bank aims to maintain profitability even as interest margins narrow. The bank also plans to invest in new technology and enhance efficiency, further bolstering its competitive position.

Jyske Bank's acquisition of Handelsbanken Denmark's activities is a significant step towards achieving its strategic goals. The transaction, expected to be completed in the fourth quarter of 2022, will add approximately 70 billion Danish kroner in assets, 113,000 customers, and 66 billion kroner in loans to Jyske Bank's portfolio. This acquisition is projected to lift the bank's annual pretax profit by approximately 1 billion Danish kroner in 2025 and onwards, a 25% rise from 2021 levels.

To achieve its targeted ROTE, Jyske Bank will implement cost-cutting measures and efficiency improvements. These include streamlining operations, reducing administrative expenses, and optimizing its branch network. The bank also plans to leverage technology to enhance customer experience and drive operational efficiency.

In conclusion, Jyske Bank's strategic plan and long-term financial targets demonstrate its commitment to navigating the challenges posed by lower interest rates. By focusing on capital-light income, structural cost measures, and technological innovation, the bank is well-positioned to deliver sustainable profitability and value to its shareholders.