Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2018 Earnings Presentation
32 slides from Danske Bank A/S's earnings presentation, Jul 18, 2018
Slide 1: Financial results – first half 2018
Financial results – first half 2018 Thomas F. Borgen Chief Executive Officer Morten Mosegaard Interim Chief Financial Officer 18 July 2018
Slide 2: Agenda
Financial results – first half 2018 Agenda Executive summary 2 Group and business unit update 3 Selected topics 6 Outlook for full-year 2018 9 Q&A 10 Appendix 11 1
Slide 3: Executive summary: Mixed results for H1 2018
Financial results – first half 2018 Executive summary: Mixed results for H1 2018 Stable macroeconomic environment Financial results, H1 2018 supported continued lending growth of 2% • Net profit of DKK 9.1 bn, down 12% from H1 y/y; good business momentum and growth 2017, which saw stronger trading a
Slide 4: Net profit: DKK 9.1 bn, down 12% from H1 2017
Financial results – first half 2018 Net profit: DKK 9.1 bn, down 12% from H1 2017 when trading income was stronger Income statement and key figures (DKK millions) Key points, H1 2018 vs H1 2017 H1 2018 H1 2017 Index Q2 2018 Q1 2018 Index • Return on equity of 11.9% Net interest income 11,824 11,649
Slide 5: Banking units: Continued growth and positive development in credit quality
Financial results – first half 2018 Banking units: Continued growth and positive development in credit quality Pre-tax return on allocated capital (%) Financial highlights, H1 2018 vs H1 2017 H1 2018 H1 2017 Personal Banking • Total income down 4%, Krogsveen in Norway was sold in Q1 21.2 21.7 • Expe
Slide 6: C&I and Wealth Management: Difficult market conditions affected fee and trading income
Financial results – first half 2018 C&I and Wealth Management: Difficult market conditions affected fee and trading income Corporates & Institutions: Financial highlights, H118 vs H117 Wealth Management: Financial highlights, H118 vs H117 • Fee income down 3% owing to a decline in event-driven activ
Slide 7: Expenses: Slightly down y/y due to lower activity-related costs
Financial results – first half 2018 Expenses: Slightly down y/y due to lower activity-related costs; efficiency measures partly offset by regulatory compliance costs Change in expenses (DKK millions) Total expenses (DKK millions) Severance payments 66 62 138 Deposit guarantee and resolution funds 25
Slide 8: Impairments: Net reversals at most business units
Financial results – first half 2018 Impairments: Net reversals at most business units Group impairments,* 2012 to H1 2018 (DKK billions/bp) Impairment drivers, Q2 2018 vs Q1 2018 Impairments Loan loss ratio* (rhs) • Net reversals at all business units, but especially at Business 14 70 Banking 12.5 1
Slide 9: Capital: Strong capital base; CET1 capital ratio of 15.9%
Financial results – first half 2018 Capital: Strong capital base; CET1 capital ratio of 15.9% net of effect of SEB Pension Danmark acquisition Capital ratios, under Basel III/CRR (%) Capital highlights, Q2 2018 Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • CET1 effect from SEB Pension Danmark acquisiti
Slide 10: 2018 outlook updated
Financial results – first half 2018 2018 outlook updated: Based on trading in H1 2018, we currently expect net profit at the lower end of the range of DKK 18-20 bn* Net interest We expect net interest income to be higher than in 2017, as we will benefit mainly from income volume growth Revised: Net
Slide 11: Q&A session
Financial results – first half 2018 Q&A session Press * then 1 to ask a question Press * then 2 to cancel Press “Ask a question” in your webcast player Want easy access to all relevant Danske Bank material? Download the Danske Bank MyInvestor app on your iPhone, iPad or Android device! www.danskeban
Slide 12: Appendix
Financial results – first half 2018 Appendix Business units 12 Special topics 17 Macro and portfolio reviews 22 Funding, liquidity and ratings 26 Tax 29 Contact details 30 11
Slide 13: Personal Banking: PBT down 18% in Q2
Financial results – first half 2018 Personal Banking: PBT down 18% in Q2, regulatory compliance increases costs; growth in Sweden and Norway continues Income statement and key figures (DKK millions) Lending volume by country* (Q1 2017 = Index 100) Q2 2018 Q1 2018 Index Denmark Finland Sweden Norway
Slide 14: Business Banking: Profit before tax down 9% in Q2
Financial results – first half 2018 Business Banking: Profit before tax down 9% in Q2; growth in all Nordic countries excluding FX Income statement and key figures (DKK millions) Lending volume by country* (Q1 2017 = Index 100) Q2 2018 Q1 2018 Index Denmark Finland Sweden Norway Net interest income
Slide 15: Corporates & Institutions: Profit before tax down 20% q/q
Financial results – first half 2018 Corporates & Institutions: Profit before tax down 20% q/q due to significantly lower trading income; expenses down Income statement and key figures (DKK millions) Income breakdown (DKK millions) Q2 2018 Q1 2018 Index FICC Capital Markets General Banking Net intere
Slide 16: Wealth Management: Profit before tax down 13% q/q
Financial results – first half 2018 Wealth Management: Profit before tax down 13% q/q, acquisition of SEB Pension Danmark adds DKK 102 bn to AuM Income statement and key figures (DKK millions) Key points, Q2 2018 vs Q1 2018 Q2 2018 Q1 2018 Index • Assets under management up 9%. Excluding DKK 102 bn
Slide 17: Non-core: Deleveraging ongoing
Financial results – first half 2018 Non-core: Deleveraging ongoing; Transfer of portfolio from BB Baltics in Q2 totalling a net credit exposure of DKK 14.6 billion Non-core loan portfolio, Q2 2018 (DKK billions) Non-core REA (DKK billions) Allowance account Non-core conduits etc. Non-performing cred
Slide 18: Net interest income: Up 3% y/y adjusted for FX effect
Financial results – first half 2018 Net interest income: Up 3% y/y adjusted for FX effect Change in net interest income (DKK millions) Comments • NII Other includes and is impacted by: 102 116 • differences at the Internal Bank between actual and allocated 166 189 funding costs (FTP) 56 • income rel
Slide 19: Trading income: At a low level owing to challenging market conditions
Financial results – first half 2018 Trading income: At a low level owing to challenging market conditions Trading income by business unit* (DKK millions) Key points, Q2 2018 vs Q1 2018 Other incl. Treasury Wealth Management Business Banking • Trading income was down 26% from a Northern Ireland Corpo
Slide 20: Expenses: Up 3% owing to restructuring and regulatory compliance
Financial results – first half 2018 Expenses: Up 3% owing to restructuring, regulatory compliance and the acquisition of SEB Pension Danmark Total expenses (DKK millions) Change in expenses (DKK millions) Severance payments Bonuses Deposit guarantee scheme/resolution funds Other costs Q1 2018 5,612
Slide 21: Credit quality: Positive trend continues; NPLs decreased 12% y/y
Financial results – first half 2018 Credit quality: Positive trend in credit quality continues; NPLs decreased 12% y/y Breakdown of total allowance account under IFRS 9 (DKK billions) Allowance account by business unit (DKK billions) Stage 1 Personal Banking Corporates & Institutions Northern Irelan
Slide 22: Credit exposure: Limited agriculture and oil-related exposure
Financial results – first half 2018 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (2.9% of Group exposure) Oil-related exposure (0.8% of Group exposure) • Pork prices remained at a low level while milk prices declined • Net exposure increased slightly fr
Slide 23: Nordic macroeconomics
Financial results – first half 2018 Nordic macroeconomics Denmark Sweden Norway Finland EU Real GDP, constant prices (index 2005 = 100) Inflation (%) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Interest rates, leading (%) Unemployment (%) 2006 2008 2010 2012 2014 2016 2018
Slide 24: Nordic housing markets
Financial results – first half 2018 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Apartment prices (index 2005 = 100) Apartment prices/nom. GDP (in
Slide 25: Realkredit Danmark and the Danish housing market: Portfolio overview
Financial results – first half 2018 Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, Q2 2018 Stock of retail loans (DKK 448 bn), Realkredit Danmark, Q2 18 (%) • Approx. 365,000 loans (residential and commercial) Fixed rate (10yrs-30yrs) Intere
Slide 26: Realkredit Danmark: 50% of new retail loans are fixed rate
Financial results – first half 2018 Realkredit Danmark: 50% of new retail loans are fixed rate; compliant with all regulatory requirements Key points Supervisory diamond for Danish mortgage credit institutions • 50% of new retail loans in Q2 were fixed-rate loans, and 40% were 5- to 10-year variable
Slide 27: Funding and liquidity: DKK 54 bn of long-term funding issued
Financial results – first half 2018 Funding and liquidity: DKK 54 bn of long-term funding issued in H1 2018; LCR compliant at 142% Changes in funding,* 2018 (DKK billions and bp) Long-term funding excl. RD (DKK billions)** Cov. bonds Senior Non-preferred senior Funding plan Completed 38bp 85 70 67 6
Slide 28: Funding structure and sources: Danish mortgage system is fully pass-through
Financial results – first half 2018 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q2 2018 (DKK billions) Funding sources (%) Q1 2018 2,031 Q2 2018 57 135 Senior debt 51 1,748 Bank loans 599 927 Deposits Bank mortgages 352 172 Covere
Slide 29: Three distinct rating methodologies
Financial results – first half 2018 Three distinct rating methodologies Rating methodology Anchor Additional Issuer + 1 + 2 + 3 + 4 = SACP1 = Support + ALAC + = SACP1 factors rating bbb+ +1 +1 0 0 a 0 +1 -1 A Positive 1=Business Position, 2=Capital & Earnings, 3=Risk Position, 4=Funding & Liquidity
Slide 30: Tax
Financial results – first half 2018 Tax Actual and adjusted tax rates (DKK millions) Tax drivers, Q2 2018 Q22018 Q12018 Q42017 Q32017 Q22017 • The adjusted tax rate of 22.6% is higher Profit before tax 5,487 5,802 6,729 6,236 6,183 than the Danish rate of 22% due to Permanent non-taxable difference
Slide 31: Contacts
Financial results – first half 2018 Contacts Direct: +45 45 12 84 83 Claus Ingar Jensen Mobile: +45 25 42 43 70 Head of IR clauj@danskebank.dk Direct: +45 45 14 07 92 John Bäckman Mobile: +45 30 51 46 85 Chief IR Officer jbc@danskebank.dk Direct: +45 45 13 92 34 Heidi Birgitte Nielsen Mobile: +45 27
Slide 32: Disclaimer
Financial results – first half 2018 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 solicitation of an offer to buy or acquire securities of Danske Bank A/S in any jurisdiction, including the United St