Despite Reporting Profits Denmark’s Third Largest Lender Files for Bankruptcy, This Calls Into Question the Health of Global Banking

“Denmark’s latest regional bank failure shows that even lenders that had reported growing profits can conceal risks big enough to shut them down.

Toender Bank A/S (TNDR), based in southwest Denmark close to the German border, was forced to declare bankruptcy after markets closed on Nov. 2, following an inspection by the Financial Supervisory Authority that revealed bad loans big enough to wipe out the lender’s equity. Sydbank A/S (SYDB), Denmark’s third-largest listed lender, will take over Toender Bank’s 18,000 customers and a balance sheet of 2.3 billion kroner ($396 million). The acquisition won’t include hybrid or supplementary capital.

Denmark’s burst housing bubble has claimed more than a dozen regional lenders since 2008 as continued declines in property values and a struggling farming industry trigger deeper impairments. About 3.2 percent of the nation’s roughly 105 banks are under “intensified supervision due to potential solvency problems,” FSA Director Ulrik Noedgaard said last month. Until last week, Toender Bank had appeared profitable.”

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