Governor Ulrik Nødgaard: The banks may risk losses on loans to export companies

Both company and bank earnings increased through 2024, and there has not been a significant increase in the share of non-performing loans. However, export-sensitive industries, such as manufacturing, transportation and agriculture, will be affected by the global uncertainty associated with the ongoing trade conflict. This is especially true for manufacturing companies, where a significant part of exports goes to the United States, the Governor pointed out in his speech.

”With continued high core earnings and good cushioning in the form of capitalisation, the banks have a good starting point for dealing with the economic consequences of the trade conflict", said Ulrik Nødgaard.

The banks have significant exposures to the export-sensitive industries. Of the three industries mentioned above, it is especially the manufacturing enterprises that have substantial loans from the large banks, while the agricultural enterprises dominate with the medium-sized banks, see the chart below. However, the direct credit risk on bank lending is limited by the fact that a large part of Danish exports of goods to the US are produced in the US. At the same time, Danish agricultural companies export to a greater extent to the European market and are thus less dependent on the American market.

Ulrik Nødgaard also emphasised that a major shock to Danish exports and a general global slow-down could have an impact on the Danish economy as a whole and give rise to losses on credit institutions' lending.