Sparekassen Lolland under observation

NASDAQ OMX Copenhagen transferred Sparekassen Lolland A/S (CPH: SPALOL) to the observation list yesterday as worries regarding the Danish banking sector persist. This is due to the opinion of the company’s auditors in the annual report, stating that there is significant uncertainty regarding the company’s ability to remain going concern.

Inspections by the Danish Financial Supervisory Authority Finanstilsynet (DFSA) led to 273.1 million DKK in write-downs in the 2011 accounts. This pushed the annual results to minus 156.8 million after taxes. The solvency ratio (11.2% vs. requirement of 10.7%) remains sufficient according to  DFSA but with very little buffer.

CEO Ulrich Jespersen agreed with the DFSA and said that the company has not managed its risk in lending well enough. According to him the situation is being remedied in cooperation with DFSA.  He noted that the core business of the bank is solid, something with which the financial authority agreed with, and expectations for 2012 are for just over 100 million in earnings before write-downs.

The Board of Directors said that the company intends to actively seek for opportunities to partake in industry consolidation. As a part of a short term plan, the company has sold its portfolio holdings, which should add another percent into the liquidity buffers. There has been extensive coverage in the local papers this morning and the stock has been sliding heavily. Currently it is around 10% in the minus, having been down 15% earlier on.