(Reuters) – Negative interest rates have proved an unexpected boon for some Danish banks, as a jump in fees from homeowners refinancing their mortgages has more than offset the hit to interest income, according to results from three lenders on Wednesday.
No.2 bank Jyske, No.3 Sydbank and regional bank Spar Nord were the first lenders to report results since the central bank slashed interest rates four times to defend a currency pegged to the euro.
The main certificate of deposit rate has been at -0.75 percent since February.
Banks had warned negative interest rates would hit them hard, as they might have to stop offering some mortgages and would have to pay to park money with the central bank.
However, Jyske Bank said its net fee and commission income jumped 46 percent to 617 million Danish crowns ($ 91 million) in the first quarter, helping to lift pretax profit 20 percent to 502 million crowns.
“We saw a high level of refinancing activity in our mortgage unit BRFkredit,” Chief Executive Anders Dam told Reuters.
Sydbank, meantime, doubled its income from remortgaging, while Spar Nord said remortgaging had never been stronger, with its fee income rising 52 percent and net profit up 53 percent to 533 million crowns, the best quarterly result in its history.
“Particularly the housing area experienced an extremely high activity level,” it said in a statement. “The mortgage credit area represented the most significant source of the advance.”
Denmark’s No.1 lender by market capitalisation, Danske Bank , will report first-quarter results on Thursday and its net fee income is expected to have risen 18 percent, according to a Reuters poll of analysts.
Danske said in February the record low deposit rate would have a negative impact on its business of between 700 million and 900 million Danish crowns.
But it has also said it would continue to offer mortgages — even at negative rates — because the income from fees would outstrip the interest it would need to pay to customers.