Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — H1 2023 Earnings Presentation
58 slides from Danske Bank A/s's earnings presentation, July 2023
Slide 1: Investor Presentation First half 2023
Investor Presentation First half 2023
Slide 2: Agenda
Investor Presentation – First half 2023 Agenda 01. Danske Bank – brief overview 2–8 02. Financial highlights – First half 2023 9 – 14 03. Business & Product Units 15 – 18 04. ESG, Sustainability, Financial Crime Prevention 19 – 32 05. Credit Quality & Impairments 33 – 39 06. Capital 40 – 43 07. Fund
Slide 3: We are a focused Nordic bank with strong regional roots
Investor Presentation – First half 2023 We are a focused Nordic bank with strong regional roots Finland (AA+) 3.3m 2,000+ 20,000+ 3rd largest personal and business customers large corporate and institutional employees in Market share: 10% customers 10 countries Share of Group lending: 8% GDP growth
Slide 4: Highlights first half 2023 – improved profitability and upward revision of net profit outlook
Investor Presentation – First half 2023 Highlights first half 2023 – improved profitability and upward revision of net profit outlook for 2023 ✓ Solid financial performance driven by strong NII uplift and despite FX headwinds compared to the first half of 2022 ✓ Significant improvement in trading in
Slide 5: Forward '28: A focused Nordic leader with strong profitability
Forward ’28: A focused Nordic leader with strong profitability; Execution already underway with divestment of PC NO, strategic IT partnership, and dividend distribution Significant milestones already met to create a strong starting point for executing on Forward ’28 strategy Financial targets 2026 a
Slide 6: Danske Bank's fortress balance sheet underpins our resilient business model
Investor Presentation – First half 2023 Danske Bank’s fortress balance sheet underpins our resilient business model which includes a well-balanced ALM strategy and a very strong liquidity position ➢ Danske Bank has a sound funding structure and remains very well capitalised with a CET1 capital buffe
Slide 7: Traction towards our sustainability targets remains positive
Investor Presentation – First half 2023 Traction towards our sustainability targets remains positive Sustainable finance Sustainable operations Impact initiatives Responsible Sustainable Governance & Employee Environmental Entrepreneur- Financial investing financing integrity well-being & footprint
Slide 8: Our Path to Financial Crime Transformation
Investor Presentation – First half 2023 Our Path to Financial Crime Transformation 2022 2023 We continue to recruit new We incorporate all core employees with financial We take a number of specific We develop a set of clearly scenarios into our enhanced crime expertise, and by the and extraordinary
Slide 9: Revised net profit outlook for 2023
Investor Presentation – First half 2023 Revised net profit outlook* for 2023; We now expect net profit to be in the range of DKK 18.5-20.5 bn Net interest income to continue to grow on the basis of the announced central bank rate hikes and our commercial momentum. Fee income to be below the level in
Slide 10: Financial highlights – first half 2023
Investor Presentation – First half 2023 Financial highlights – first half 2023
Slide 11: Total income up 34% Y/Y supported by NII and repricing initiatives
Investor Presentation – First half 2023 Total income up 34% Y/Y supported by NII and repricing initiatives; recovery in trading /insurance despite valuation effects; strong credit quality underpin low impairments Key points H123 vs H122 Income statement and key figures (DKK m) H123 H122 Index Q223 Q
Slide 12: NII: Continued positive margin development
Investor Presentation – First half 2023 NII: Continued positive margin development; deposit volumes remain stable at an elevated level Highlights Net interest income H123 vs H122 (DKKm) Deposit margin development (bps) ➢ Net interest income continued the positive trend, -1,218 16,540 2.5 2.50 -615 a
Slide 13: Fees: Lower fee income driven by lower housing market activity and lower AuM
Investor Presentation – First half 2023 Fees: Lower fee income driven by lower housing market activity and lower AuM, while activity-driven fees remained stable Highlights Net fee income (DKK m) Activity-driven fees (transfer, accounts etc.) 6,537 51 ➢ Y/Y: Stable income from good corporate customer
Slide 14: Trading income: Recovery on the back of new fixed income strategy
Investor Presentation – First half 2023 Trading income: Recovery on the back of new fixed income strategy in LC&I, constructive market conditions and higher customer activity Highlights Net trading income (DKK m) 2,772 LC&I 287 ➢ Y/Y: Recovery driven by more benign market conditions and higher custo
Slide 15: Expenses: Steady cost focus and FX tailwinds mitigate inflation headwinds
Investor Presentation – First half 2023 Expenses: Steady cost focus and FX tailwinds mitigate inflation headwinds and support cost-income ratio of 49% Highlights Expenses (DKK m) ➢ Lower staff costs following structural cost reductions helped mitigate 7 inflation pressure 12,793 267 -331 ➢ FTE incre
Slide 16: Business & Product Units
Bank Business & Product Units
Slide 17: Business units: Solid progress, high customer activity, enhanced profitability
Investor Presentation – First half 2023 Business units: Solid progress, high customer activity, enhanced profitability, and strong lending uplift Y/Y for corporates Personal Customers Business Customers LC&I ✓ Strong operational performance driven by deposit ✓ Improved profitability driven by improv
Slide 18: Business units: Danica and Northern Ireland
Investor Presentation – First half 2023 Business units: Danica impacted by high insurance claims; strong income and profitability performance in Northern Ireland driven by primarily higher income ✓ Strong performance across all business lines. This is mainly driven by NII, which is up Profit before
Slide 19: Realkredit Danmark portfolio overview: Continued strong credit quality
Investor Presentation – First half 2023 Realkredit Danmark portfolio overview: Continued strong credit quality Highlights Retail loans, Realkredit Danmark, Q2 23 (%) Fixed rate (10 yrs-30 yrs) Interest-only ( ) = Q1 23 Portfolio facts, Realkredit Danmark, Q2 23 Variable rate (6m-10 yrs) Repayment •
Slide 20: Sustainability
Investor Presentation – First half 2023 Sustainability
Slide 21: Sustainability is a core strategic priority in our new Forward '28 strategy
Investor Presentation – First half 2023 Sustainability is a core strategic priority in our new Forward ’28 strategy Our starting point What we will do Large Corporates & Institutions Personal Customers ✓ Industry leading Climate Action Plan • Advisory, transition finance and project • Housing, inves
Slide 22: Sustainability integrated in Better Bank strategy since 2019
Investor Presentation – First half 2023 …and sustainability has been an integrated element of our Better Bank strategy since 2019 and our corporate targets Sustainability has been integral to Danske Bank’s 2023 sustainability strategy aims to drive Selected highlights our Better Bank 2023 plan to pr
Slide 23: Climate Action Plan aligned with Paris Agreement launched in January 2023
Investor Presentation – First half 2023 Climate Action Plan aligned with Paris Agreement launched in January 2023 Carbon footprint of 41.1 mtCO2e across the Group, with 99.9% related to financed emissions Increased and expanded 2030 targets based on SBTi guidance to align with Paris Agreement goal o
Slide 24: Our Climate Action Plan sets a clear direction across business activities
Investor Presentation – First half 2023 Our Climate Action Plan sets a clear direction for our efforts across business activities and customer segments, with increased and expanded 2030 targets We are committed to achieving net zero Why and supporting our customers in their green transition Lending
Slide 25: Suite of intermediate 2030 emission reduction targets
Investor Presentation – First half 2023 Targets submitted for SBTi, validation pending Based on methodologies supported by the SBTi, we have developed a comprehensive Targets not submitted for SBTi validation suite of intermediate 2030 emission reduction targets covering our four impact areas Overvi
Slide 26: Recent highlights on sustainability agenda
Investor Presentation – First half 2023 Recent highlights on sustainability agenda contributing to strong performance Support for Danish national sustainable heating Top 10 in Global Green Bonds league table campaign • Danske Bank ranks number 9 in Bloomberg’s Global • Danske Bank is supporting a na
Slide 27: Danske Bank aspires to Nordic leadership in sustainable finance
Investor Presentation – First half 2023 On sustainable finance, Danske Bank aspires to Nordic leadership – our sustainable finance framework has been developed to drive and integrate that ambition Group ambition for Be a leading bank in the Nordics on sustainable finance and the leading bank in Denm
Slide 28: Deep dive: ESG integration in lending operations
Investor Presentation – First half 2023 Deep dive: Overview of ESG integration in Danske Bank’s lending operations 1. Position statements 2. Single-name ESG analysis 3. Portfolio-level ESG analysis ➢ Our position statements are a key tool for aligning ➢ ESG analysis is conducted for all large corpor
Slide 29: International agreements, goals, partnerships and standards supported
Investor Presentation – First half 2023 Danske Bank supports a range of international agreements, goals, partnerships and standards relating to sustainability – some of these are listed below Principles for Responsible Net-Zero Banking Alliance Net-Zero Asset Managers Net-Zero Asset Owner Principles
Slide 30: Completion of our Financial Crime Transformation by the end of 2023
Investor Presentation – First half 2023 Completion of our Financial Crime Transformation by the end of 2023 Establishing a robust compliance function Key remaining work for 2023 In the recent years, the Bank has made significant Technical development and implementation investments to ensure that a r
Slide 31: Regulatory Engagements
Investor Presentation – First half 2023 Regulatory Engagements • We engage in ongoing dialogue with our regulators through regular meetings with the Financial Supervisory Authorities (“FSAs”) and Ongoing Supervisory College to ensure aligned expectations and transparency between our regulators and t
Slide 32: Committee Governance for Compliance Risks
Investor Presentation – First half 2023 Committee Governance for Compliance Risks Financial Crime Remediation Steering Compliance Risk Committee Conduct and Compliance Committee Post-Resolut ion Committee Committee ➢ Provides governance structure and ➢ Second Line Committee responsible ➢ Board level
Slide 33: The Resolutions with the Danish and U.S. Authorities
Investor Presentation – First half 2023 The Resolutions with the Danish and U.S. Authorities In December 2022, Danske Bank reached the final resolutions with the U.S. Department of Justice (DOJ), the U.S. Securities and Exchange Commission (SEC) and the Danish Special Crime Unit (SCU) following the
Slide 34: Credit quality & Impairments
Investor Presentation – First half 2023 Credit quality & Impairments
Slide 35: Impairments: Continued strong credit quality
Investor Presentation – First half 2023 Impairments: Continued strong credit quality along with recoveries and better macro environment resulted in net reversals in Q2; prudent PMAs mitigate tail risks Highlights Impairment charges by category (DKK bn) 4.3 ➢ Credit quality remains strong with limite
Slide 36: Strong footprint within retail lending
Investor Presentation – First half 2023 Strong footprint within retail lending Lending by segment 1 Q2 23 (%) Credit exposure by industry Q2 23 (%, rounded) Personal Customers DK Personal customers 34 Personal Customer Nordic Commercial property 11 of which residential (5%) Public institutions 11 Pr
Slide 37: Overall strong credit quality in portfolios exposed to macro cyclicality
Investor Presentation – First half 2023 Overall strong credit quality in portfolios exposed to macro cyclicality CRE: Well diversified and prudently managed growth Agriculture: Well-provisioned agriculture book Housing: Low leverage and strong household finances DKK 290 bn in gross exposure and ECL
Slide 38: Commercial property; prudently managed and cash-flow based underwriting
Investor Presentation – First half 2023 Commercial property; prudently managed and cash-flow based underwriting standards; sound credit quality and adequate buffers in place to mitigate tail risks Highlights Lending to CRE segment by major peer banks (index)* CRE share of total port folio by major p
Slide 39: Fossil fuels (coal, oil and gas) exposure
Investor Presentation – First half 2023 Fossil fuels (coal, oil and gas) exposure Key points Q223 • The current exposure to fossil fuels includes customers involved in production, refining, and distribution (including shippin g) of oil and gas as well as utilities producing heat or power with coal.
Slide 40: Credit quality: Low level of actual credit deterioration
Investor Presentation – First half 2023 Credit quality: Low level of actual credit deterioration Stage 2 and 3 as % of net exposure Allowance account by business unit (DKK bn) 11 Stage 2 net exposure (% of Total, lhs) 4 PC BC LC&I N.I. Other (Non-core) 10 Stage 3 net exposure (% of Total, rhs) 23.3
Slide 41: Capital
Investor Presentation – First half 2023 Capital
Slide 42: Capital: Prudent CET1 ratio at 18.1%
Investor Presentation – First half 2023 Capital: Prudent CET1 ratio at 18.1%; comfortable buffer to current regulatory requirements Capital ratios, under Basel III/CRR (%) Current capital buffer structure (%) Tier 2 Hybrid T1/AT1 Pillar II component (total 2.9%) CET1 Countercyclical capital buffer 2
Slide 43: Strong CET1 capital build-up since 2008
Investor Presentation – First half 2023 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) well in excess of DKK 100 bn Common Equity Tier 1, 2008 – 2023 (DKK bn) +72bn 152 149 149 144 126 130 134 133 133 127 133 119 107 77 79 85 2008 2009 2010 2011 2012 2013 2014 2015 2016
Slide 44: Fully compliant with MREL and subordination requirement
Investor Presentation – First half 2023 Fully compliant with MREL and subordination requirement; expect to cover MREL need with both preferred and non-preferred senior MREL and subordination requirement* and eligible funds Q223 Comments DKK bn (% of Group REA) +37 PS > 1y NPS > 1y CET1, AT1, T2 • Th
Slide 45: Funding & Liquidity
Investor Presentation – First half 2023 Funding & Liquidity
Slide 46: Funding structure and sources: Danish mortgage system is fully pass-through
Investor Presentation – First half 2023 Funding structure and sources: Danish mortgage system is fully pass-through Loan port folio and long-term funding, Q2 23 (DKK bn) Funding sources* (%) 2,234 Senior & Q1-23 60% 149 59% NPS bonds Q2-23 1,753 1,093 Deposits Bank loans 626 Bank mortgages 399 12% 1
Slide 47: Funding programmes and currencies
Investor Presentation – First half 2023 Funding programmes and currencies Covered bonds by currency, end-Q223 Largest funding programmes, end-Q223 Utilisation EMTN Programme 43% 24% Limit – EUR 35bn EUR 30% SEK NOK Global Covered Bond 74% Limit – EUR 30bn 46% ECP Programme Total DKK 156 bn 5% Limit
Slide 48: Funding and liquidity: LCR compliant at 148%
Investor Presentation – First half 2023 Funding and liquidity: LCR compliant at 148% Changes in funding,* 2023 (DKK bn and bp) Long-term funding excl. RD (DKK bn)*** Cov. bonds Senior Non-Preferred Senior Completed Funding plan 13bp 100 54bp 80-100 69bp 106bp 79 75 61 71bp 170bp 31 63bp 26bp 29 24 2
Slide 49: Danske Bank covered bond universe
Investor Presentation – First half 2023 Danske Bank covered bond universe, a transparent pool structure 1 Danske Bank A/S C-pool S&P AAA Fitch AAA Residential mortgages • Denmark, D-pool • Norway, I-pool • Sweden, Danske Hypotek AB Danske Bank A/S I-pool Finland • Finland, Danske Mortgage Bank Plc S
Slide 50: Credit & ESG Ratings
Investor Presentation – First half 2023 Credit & ESG Ratings
Slide 51: Danske Bank's credit ratings
Investor Presentation – First half 2023 Danske Bank’s credit ratings Long-term instrument ratings Moody’s revised its outlook on Danske Bank in July 2023 Fitch Moody’s Scope S&P • On 10 July 2023, Moody’s revised its outlook to Positive from Stable on AAA Aaa AAA AAA Danske Bank A/S, while affirming
Slide 52: Danske Bank's ESG ratings – slight change in Q2 2023
Investor Presentation – First half 2023 Danske Bank’s ESG ratings – slight change in Q2 2023 We have chosen to focus on five providers based on their importance to our investors Q223 Q123 End 2022 End 2021 End 2020 Range CDP1 B 283 companies, out of the 18,700 analysed, made the climate B B B B A to
Slide 53: Three distinct methods for rating banks
Investor Presentation – First half 2023 Three distinct methods for rating banks Danske Bank’s rating Rating methodology Potential Extraordinary Anchor + 1 + 2 + 3 + 4 = CRA1 = SACP2 + external + ALAC = Issuer rating SACP1 adjustment support A+ bbb+ +1 +1 -1 0 0 a- 0 +2 (Stable) 1=Business Position,
Slide 54: Tax & Material one-offs
| Danske| Bank Tax & Material one-offs
Slide 55: Tax
Investor Presentation – First half 2023 Tax Actual and adjusted tax rates (DKK m) Tax drivers, Q2 2023 ➢ The actual tax rate of 27.6% (excluding prior-year's Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 adjustments) is higher than the Danish rate of 25.2% - due to the tax effect from tax exempt income/ex
Slide 56: Material extraordinary items in 2023
Investor Presentation – First half 2023 Material extraordinary items in 2023 One-off items Effect P&L line affected (DKK m) Q1-23 None Transaction costs and prudent valution related to Personal Customers Norway -693 Other income Gain from sale of shares taken over in connection with a loan 327 Tradi
Slide 57: Contacts
Investor Presentation – First half 2023 Contacts Investor Relations Group Treasury and Funding Kasper Refslund Kirkegaard Claus Ingar Jensen Mobile +45 25 42 43 70 Mobile: +45 23 82 94 88 Head of Group Treasury kaki@danskebank.dk Head of IR clauj@danskebank.dk Bent Callisen Nicolai Brun Tvernø Mobil
Slide 58: Disclaimer
Investor Presentation – First half 2023 Disclaimer Important Notice This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solici tation of an offer to buy or acquire securities of Danske Bank A/S in any jurisdiction, including the Unit