Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — Debt Investor Presentation (March 2011)
41 slides from Danske Bank A/s's debt investor presentation, March 2011
Slide 1: Danske Bank
Danske Ba nk (Air Danske Bank Marts 2011
Slide 2: Disclaimer
Disclaimer This presentation has been prepared solely for use at this presentation. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation does not constitute or form part of and should no
Slide 3: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 3
Slide 4: Danske Bank is a strong Nordic franchise
Danske Bank is a strong Nordic franchise Lending divided by Banking Activity Q4 2010 5.0 million customers BAL; 1% Others; 5% IR; 4% NIR; 3% NO; 9% Finland 2.4 million active Internet customers Market position: Leader SE; 11% DK; 58% Branches: 121 FIN; 9% Market share: 12% 670 branches in 15 countri
Slide 5: Credit exposure increased by 3% Y/Y
Credit exposure increased by 3% Y/Y Credit exposure from lending activity, end-Q4 2010 (DKK 2,364 bn, including DKK 1,848 bn in lending and repos) Central and local governments 7% Subsidised housing companies 5% Banks 8% Personal customers 37% Commercial property 10% Construction, engineering and bu
Slide 6: Danske Bank is rated by the three major international rating agencies
Danske Bank is rated by the three major international rating agencies Negative outlook Negative outlook Stable outlook Short term Long term Short term Long term Short term Long term P-1 Aaa A-1+ AAA F1+ AAA P-2 Aa1 A-1 AA+ F1 AA+ P-3 Aa2 A-2 AA F2 AA Aa3 A-3 AA- F3 AA- A1 B A+ B A+ A2 C A C A A3 D A
Slide 7: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 7
Slide 8: Economic recovery is improving, but is still uneven
Economic recovery is improving, but is still uneven % GDP, 2009-12E Public finances 8 (Growth Y/Y) Gross public Budget bal. Sovereign rating 4 debt % of GDP % of GDP & outlook (S&P) 2010 2011 0 Denmark 44.3 -4.8 AAA/Stable Norway Sweden 42.2 -1.4 AAA/Stable -4 Euroland Norway 33.1 13.0 AAA/Stable De
Slide 9: Signs of housing market stabilising
Signs of housing market stabilising Danish house prices by regions Correlation between house prices Price and consumption in Denmark DKK bn Region Prices Change since Change in * Preview per sq m 16,000 200 peaked peak (%) Q310 (%) Q410 (%) Copenhagen Q3 2006 -24.9 1.4 Zealand Q3 2007 -21.6 0.4 12,0
Slide 10: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 10
Slide 11: Earnings recovery continues as impairments decline
Earnings recovery continues as impairments decline Profit before tax (Q4 2010) • Net profit of DKK 3.7 bn in 2010 DKK m 2,000 • Cost management continues to deliver results • Declining impairment charges 1,000 • No dividend payment for Q4 2010 0 • Negotiations with Danish government to prepay hybrid
Slide 12: Declining expenses and impairments more than offset lower income
Declining expenses and impairments more than offset lower income DKK m 2009 2010 Index Q3 2010 Q4 2010 Index Net interest income 27,524 23,843 87 5,840 6,069 104 Net fee income 7,678 8,510 111 2,069 2,325 112 Net trading income 18,244 7,921 43 1,930 795 41 Other income 3,083 3,857 125 703 1,013 144
Slide 13: Net interest income fell in 2010, but rose in Q4
Net interest income fell in 2010, but rose in Q4 Annual net interest income Quarterly net interest income DKK m DKK m Y/Y 13 % Y/Y 10 % 7,500 30,000 Q/Q 4 % * * * * * 6,500 * 20,000 * * * 5,500 10,000 0 4,500 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 2008 2009 2010 S-T interest rat
Slide 14: Net fee income up on strong performance at Danske Capital
Net fee income up on strong performance at Danske Capital Annual net fee income Quarterly net fee income DKK m DKK m 10,000 2,500 2,000 7,500 1,500 5,000 1,000 2,500 500 0 0 2008 2009 2010 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Activity-based fees Y/Y 8 % Activity-based fees Y/Y 2 % Q/Q 10 % Portfolio-
Slide 15: Net trading income at normal level despite low activity and difficult markets in Q4
Net trading income at normal level despite low activity and difficult markets in Q4 Breakdown of net trading income DKK m 2008 2009 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Trading activities 7,361 16,929 5,812 1,791 2,013 1,665 1,420 714 Group Treasury* -3,996 123 715 -152 119 692 99 -195 Insti
Slide 16: Impairment charges cut in half in 2010 and under DKK 3 bn in Q4
Impairment charges cut in half in 2010 and under DKK 3 bn in Q4 Loan impairment charges Quarterly loan impairment charges DKK m DKK m bp 30,000 10,000 200 25,000 7,500 150 20,000 Total loan impairment charges in basis points 5,000 100 15,000 10,000 2,500 50 5,000 0 0 0 Total impairment charges 2008
Slide 17: SMEs dominate impairment charges in 2010
SMEs dominate impairment charges in 2010 Impairments by customer segment Net exposures in rating categories 10 and 11 - Charges on personal loans are increasing - Exposure in cat. 11 increased due to partial write-offs in cat. 10 DKK m DKK bn 7,000 40 Rating category 11 30 5,000 20 Rating category 1
Slide 18: Nordic impairments: Stable, except that Denmark is still struggling
Nordic impairments: Stable, except that Denmark is still struggling DKK m *Acc. imp. DKK 19,293 m DKK m *Acc. imp. DKK 2,664 m 5,000 Denmark, 58% of Group’s lending - Individual 172 bp 1,050 Finland, 9% of Group’s lending - Individual 156 bp - Collective 22 bp 216 bp - Collective 12 bp 4,000 850 650
Slide 19: Other impairments: Northern Ireland and Ireland remain the most problematic
Other impairments: Northern Ireland and Ireland remain the most problematic DKK m DKK m *Acc. imp. DKK 3,078 m 2,400 *Acc. imp. DKK 9,564 m 750 Northern Ireland, 3% of Group’s lending - Individual 537 bp Ireland, 4% of Group’s lending - Individual 1,244 bp - Collective 53 bp - Collective 116 bp 4-qu
Slide 20: Tier 1 ratio improved in 2010; rights issue planned for H1 2011
Tier 1 ratio improved in 2010; rights issue planned for H1 2011, possible prepayment of hybrid capital Capital ratios: CRD/Basel II % 20 • Negotiations with the Danish government to prepay the 24 bn of 16 17.7% hybrid capital in May 2012 14.8% 12.9% 12 • Rights issue of DKK 20 bn planned for 10.7% f
Slide 21: Outlook for 2011: Recovery continues
Outlook for 2011: Recovery continues Macroeconomic recovery continues, but stable short-term rates and volumes keep NII under pressure Banking activities remain robust, but still difficult conditions in some markets Focus on costs will continue, and costs are expected to decline, partly because of t
Slide 22: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 22
Slide 23: Limited funding needed in 2011, partly frontloaded in 2010
Limited funding needed in 2011, partly frontloaded in 2010 New funding, 2008-11 Funding sources - Estimated funding needed in 2011: DKK 70 bn % - Shift towards long-term funding sources DKK bn 19 bn already raised 200 40 Q4 2010 Q4 2008 150 30 100 20 50 10 0 0 Repo Credit inst. (ex CB) Central banks
Slide 24: Well-diversified funding position
Well-diversified funding position Equity, 4% Central banks, 4% Deposits, 33% Repos, 6% • 57% deposits and fully match-funded Danish mortgage bonds (net) Banks, net, 5% • Long-term bonds: DKK 184 bn S-T bonds, 7% • Issued covered bonds: DKK 120 bn • Termination of state guarantee at end- September ha
Slide 25: Funding in 2010: Completed with long duration and without guarantees
Funding in 2010: Completed with long duration and without guarantees • In 2010 Danske Bank issued bonds for DKK Issues by type and currency 51 bn covering more than the estimated long-term funding needed (DKK 30 bn) Issue type Currency DKK bn Covered bonds EUR 26 • 59% of the issuance was covered bo
Slide 26: Strong loan-to-deposits ratio and liquidity position
Strong loan-to-deposits ratio and liquidity position Loan-to-deposit gap (DKK bn) and ratio (%) 12-month liquidity* Moody’s Financial Strength DKK bn % DKK bn 400 125 450 300 120 300 End-Q4 2009 200 115 150 End-Q4 2010 100 110 0 End-Q4 2008 0 105 -150 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 2 months
Slide 27: The two retail pools
The two retail pools Pool D Cover Pool D - Characteristics Pool notional DKK 32.9 billions (EUR 4.38 billions equivalent) Number of loans 54.245 Substitution collateral DKK 1.0 billions RETAIL Property type 100% owner-occupied WA LTV 60% WA seasoning 3.8 years WA remaining term 25.9 years Rate type
Slide 28: The combined pool
The combined pool COMBINED Cover Pool C - Characteristics Pool notional SEK 27.8 bn (€ 3.2 bn equivalent) Number of Loans 4,550 Number of Borrowers 2,823 Total Value of Properties SEK 65.4 bn (€ 7.4 bn equivalent) Property Type Number of Properties 4,071 Average Loan Size SEK 6.1 Mill. Agriculture,
Slide 29: www.danskebank.com/ir
www.danskebank.com/ir 29
Slide 30: Danske Bank's funding team
Danske Bank’s funding team Steen Blaafalk Tel.: + 45 45 14 63 60 Senior Executive Vice President E-mail: steen.blaafalk@danskebank.dk Peter Holm Tel.: + 45 45 12 84 85 Claus Jensen Tel.: +45 45 12 84 83 Senior Vice President E-mail: holm@danskebank.dk Chief Funding Manager E-mail: clauj@danskebank.d
Slide 31: Appendix
Appendix
Slide 32: Lending margins under pressure as competition grows
Lending margins under pressure as competition grows Quarterly lending margins Q2 2009 – Q4 2010 % (loan stock) 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 0.00 Denmark* Finland Sweden Norway Northern Ireland Ireland Baltics * Including Realkredit Danmark. 34353532
Slide 33: Deposit margins are benefiting from increasing short-term rates
Deposit margins are benefiting from increasing short-term rates Quarterly deposit margins Q2 2009 – Q4 2010 % (deposit stock) 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 0.00 -0.25 Denmark Finland Sweden Norway Northern Ireland Ireland Baltics 33
Slide 34: Credit exposure to commercial property and construction segments
Credit exposure to commercial property and construction segments Commercial Portion from Construction and Sector in DKK bn property developers building materials total Denmark 110.0 0.9 12.4 122.5 Finland 15.6 0.5 7.1 22.7 Sweden 58.8 0.2 4.9 63.8 Norway 32.8 2.1 2.4 35.2 Northern Ireland 9.4 3.0 4.
Slide 35: Gross exposure subject to individual impairment test
Gross exposure subject to individual impairment test Gross exposure, rating categories 10 and 11, in basis points of total loans bp 3,500 3,183 3,000 2,500 2,000 1,861 1,500 1,213 1,222 1,000 600 453 525 500 276 175 0 Denmark Finland Sweden Norway Northern Ireland Baltics Other Act. Group Ireland Q3
Slide 36: Quarterly trend in gross exposure subject to individual impairment test
Quarterly trend in gross exposure subject to individual impairment test Gross exposure, rating categories 10 and 11, subject to individual impairment test DKK bn 120 102.0 102.4 103.1 In bp of gross lending 100 95.5 Other 1,348 bp 6.5 8.7 0.4 88.1 7.3 4.4 Baltics 1,861 bp 77.8 10.4 80 22.4 Ireland 3
Slide 37: Danish agriculture sector pressured by lower property and output prices
Danish agriculture sector pressured by lower property and output prices Other 14% Agriculture 24% Exposure to agriculture DKK bn Mixed operations Realkredit Danmark 45 6% Banking Activities Denmark 11 Other business units 13 Agriculture 69 Grocery trade Agriculture LTV, Realkredit Danmark % 14% Q4 2
Slide 38: Consensus 2011
Consensus 2011 2011 (DKK millions) Low Average High Contributors: Net interest income 23,929 24,600 26,029 •ABG Net fee income 8,344 8,597 9,086 •Alm. Brand Markets Net trading income 7,138 7,996 8,932 •Arctic Securities Other income 2,862 3,284 3,848 •Autonomous •Bank of America/Merrill Lynch Net i
Slide 39: Danske Bank Group Covered Bond Universe
Danske Bank Group Covered Bond Universe Legislation and history behind three business lines • Covered Bond issuer since 2007 • Sampo Housing Loan Bank (SHLB) • Covered Bond issuer since 1851 • Based on Danish legislation • Specialized Mortgage Bank • Based on Danish legislation • Loans from the Grou
Slide 40: Covered Bonds is a valuable funding tool
Covered Bonds is a valuable funding tool DKK bn Eligible loans in the D, I & C pool 120.000 D pool 100.000 I pool C pool 80.000 60.000 40.000 20.000 0 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 40
Slide 41: Danske Bank's Investor Relations website for debt investors
www.danskebank.com/ir Danske Bank’s Investor Relations website has a sub-section dedicated to debt investors The section contains detailed information about Danske Bank’s: Funding strategy Ratings Debt issues Covered Bonds Securitisation 41
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