April 03, 2009

Danske Bank A/S (DANSKE.KO), Denmark's largest bank, aims to avoid state ownership and would tap shareholder funds before converting the government loan it is seeking into common equity, its chief financial officer told Dow Jones Newswires.Danske this week applied for a 26 billion Danish kroner ($4.7 billion) subordinated hybrid loan under the government's capital-injection scheme to reinforce its balance sheet as its core markets at home and abroad head into recession.Nevertheless, it also asked the state to give it the right to convert the loan into equity capital should its hybrid core capital come to exceed 35% of total core capital.

That option could hypothetically give the government a large Danske stake. The state has already bailed out several smaller banks hit by plummeting housing markets."It should be seen as an extra line of defense," CFO Tonny Thierry Andersen said."The state would be the backstop, so to speak, but it is not in our plans for the state to become a shareholder," Andersen said. "I think we agree with the government that the state's primary role is not to run banks. And it's not a forced convertibility; it's an option we have, and we can always ask our shareholders whether they want to do an equity issuance for existing shareholders first so they don't get diluted."