By Anna Molin
STOCKHOLM—Danish banking stocks fell Monday after Amagerbanken A/S announced it no longer meets solvency requirements and will therefore be taken over and unwound by Danish state administrators, likely forcing Danish banks to pony up cash for the country's deposit-guarantee scheme.
Amagerbanken, the 11th small Danish bank to fall into state hands since the financial crisis hit in 2008, said late Sunday that fourth-quarter write-downs had wiped out its equity, compelling assets and some liabilities to be transferred to and closed down by Finansiel Stabilitet A/S, the state company set up to manage failed banks.
As a result of the collapse, Danish banks will have to contribute a proportion of their market share in funds to Denmark's deposit guarantee scheme for secured deposits, they said. The amount needed to make up the shortfall for Amagerbanken wasn't immediately clear.
Danish banks, which lent billions in funds to property developers during the boom years, were hit hard by the financial crisis as real estate values plunged and economic growth swooned.
In response to the crisis, Danish authorities set up several bank-rescue packages and created a new deposit-guarantee scheme to make the sector pay for bailing out depositors of failed banks. The scheme guarantees up to 750,000 Danish kroner ($137,000) in deposits per customer.
Amagerbanken said of its more than 100,000 customers, about 700 wouldn't be covered by the deposit scheme and would have their claims registered in the bankruptcy estate of the wound-up bank.
Jyske Bank A/S Monday said it had a net outstanding amount of 3.1 million kroner to Amagerbanken as part of ordinary trading activities, but that it had no credit or bond exposure. Pan-Nordic bank Nordea Bank AB and Danske Bank A/S both said they had "insignificant exposure," while Svenska Handelsbanken /zigman2/quotes/210490790/delayed SE:SHB.B -1.55% AB, Swedbank /zigman2/quotes/203208387/delayed SE:SWED.A -0.31% AB and Spar Nord Bank A/S said they have no exposure to Amagerbanken. Spar Nord Bank added that its share of the deposit guarantee fund is 3.1%.
"We have an insignificant direct exposure of less than 10 million kroner, but of course we will pay our proportional share for the deposit guarantee scheme," Danske Bank spokesman Anders Klinkby Madsen said. Danske contributes about one-third of the fund.
Shares in Danish banks fell Monday against a broader rise in the Copenhagen market, with smaller banks taking the worst hit. Shares in Vestjysk Bank A/S were down 5.3%, while Spar Nord Bank was down 1.7%. Danske was down 0.8% while Jyske was 0.1% lower.
Trading in Amagerbanken shares and bonds were suspended Monday and will be delisted from the Copenhagen exchange. On Friday, Amagerbanken closed at 3.45 kroner.
Finansiel Stabilitet said it will pay a preliminary sum of 15.2 billion kroner for the assets, covering about 59% of unsecured senior liabilities. A newly created subsidiary called Amagerbanken Of 2011 has received enough liquidity to fulfill capital requirements and keep operations going for the customers, it said.
"For bondholders, this implies a maximum 41% haircut on outstanding senior debt, whereas all subordinated debt must be considered worthless," Danske Bank said in a note Monday. It said Danish banks could face some short-term headwinds due to Amagerbanken's failure, but that its troubles were well-known and should be seen as a bank-specific issue rather than a sector issue.
Amagerbanken said late Sunday it had decided to book write-downs of 3.14 billion kroner in the fourth quarter, including 381 million kroner announced in November, following a review comprising 80% of its total commitments and 95% of its corporate commitments. The write-downs will result in a negative equity of 654 million kroner as of Jan. 1, 2011, down from about 2.44 billion kroner on Sept. 30, 2010, it said.
Central bank Governor Nils Bernstein said in a statement Sunday that the collapse of Amagerbanken didn't change his view on the stability of Denmark's financial system.
"The protracted vulnerable situation of Amagerbanken and its termination as a independent bank does not change Danmarks Nationalbank's general assessment of the strength of the financial system," he said in a statement. "The Danish financial sector as a whole is assessed to have sufficient capital and liquidity to meet the outlook for the Danish economy," he added.
Write to Anna Molin at firstname.lastname@example.org