Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — 9M 2008 Earnings Presentation
42 slides from Danske Bank A/s's earnings presentation, Oct 28, 2008
Slide 1: First nine months of 2008: Riding through the storm
First nine months of 2008: Riding through the storm 28 October 2008
Slide 2: Agenda
AGENDA Agenda Slide Key messages 3 Highlights 4 Business trends 5 Outlook 23 Q&A session 24 Appendix: Trends in focus areas & business units 25 2
Slide 3: Key messages
KEY MESSAGES Key messages - Result marked by financial turmoil, but retail banking resilient DKr m Net interest income 7,000 Net profit shows effect of financial turmoil, especially in Q3 6,000 Profit before loan impairment charges in banking activities stable; NII continues to 5,000 improve F
Slide 4: Performance highlights
HIGHLIGHTS Performance highlights - Reasonable top line; encouraging trend in NII Net profit 39% to DKr 6.9bn Income statement and key figures Net interest income up 9% DKr m 9M 2007 9M 2008 Index Net interest income 18,071 19,640 109 Total income declined 8%, slightly below Net fee income 6,836
Slide 5: Net interest income up 9%
BUSINESS TRENDS Net interest income up 9% - Clear improvement in lending margins Net interest income 9% DKr m Net interest income Y/Y 8% 7.000 63% of total income Q/Q 1% Q3/Q2 growth of 1% Lending book repriced, significantly in Denmark 6.000 and gradually in other countries More rate hikes
Slide 6: Net fee income
BUSINESS TRENDS Net fee income - Low investment activity and reimbursements in Finland Net fee income 10% DKr bn Net fee income Y/Y 10% Investment fees lower due to equity market unrest and lower activity 8.0 Portfolio-based fees more stable 6.0 Portfolio Down 8% at BA Denmark 4.0 fees Lower
Slide 7: Net trading income
BUSINESS TRENDS Net trading income - Customer activity still high, but mtm losses on bond portfolio Total trading income DKr m 9M 2007 9M 2008 Q2 2008 Q3 2008 Index Trading activities 3,350 4,727 1,580 1,402 89 Proprietary trading result includes Proprietary trading 253 -1,545 -532 -600 - DKr 200m
Slide 8: Bond portfolio
BUSINESS TRENDS Bond portfolio - Hit by widening spreads, but high credit quality Bond portfolio, DKr 446bn European covered bonds (5-yr bullets) Swap spreads (bp) (1 January 24 October 2008) Certificates, 7% 150 Credit bonds, 4% DK spreads widened Quasi- markedly in government, 2% 125 September D
Slide 9: Danicas profit model
BUSINESS TRENDS Danicas profit model Risk allowance postponed due to negative investment returns Profit model Condition / sensitivity 9M 2008 DKr m 822 1 Risk allowance 64 bp of Total inv. return > average Total inv. return: -3.2% -822 technical prov. (DKr171bn) guarantee of 3.2% (2007) =>
Slide 10: Expenses
BUSINESS TRENDS Expenses - Lower than expected and cost management intensified Expenses 1% Total integration expenses declining DKr bn Expenses & C/I ratio % Increasing synergies achieved in Finland 20 65 Expenses in BA Finland down 31% Q/Q 60 Cost/income ratio: 60.5%, against 54.7%, due 1
Slide 11: Loan impairment charges
BUSINESS TRENDS Loan impairment charges - Now above expected average for a business cycle Credit book resilient and diversified bp Loan impairment charges 40 Credit losses increases due to Collective impairment charges Commercial properties 30 Individual impairment charges Lehman Brothers 20
Slide 12: Loan impairment charges - geographical
BUSINESS TRENDS Loan impairment charges - geographical - Increasing charges reflecting lower asset prices and economic slowdown Annualised loan impairment charges as % of total loans Group Q4 07 Q1 08 Q2 08 Q3 08 Q4 07 Q1 08 Q2 08 Q3 08 0.40% -0.07% 0.05% 0.29% 0.08% 0.10% 0.11% 0.33% Sweden Q4 07 Q
Slide 13: Non-performing loans - Geographical
BUSINESS TRENDS Non-performing loans - Geographical - Uptick from a very low level Non-performing loans as % of total loans (Rating categories 9 and 10) Group Q4 07 Q1 08 Q2 08 Q3 08 Q4 07 Q1 08 Q2 08 Q3 08 1.36% 1.71% 1.29% 1,09% 0.56% 0.63% 0.60% 1.04% Sweden Note: Q3 08: 0.66% excluding Lehman Br
Slide 14: Total credit exposure
BUSINESS TRENDS Total credit exposure - Diversified loan book with low exposure to commercial property Credit exposure end Q3 2008 Lending to commercial (DKr 2,725bn, % of which loans 2,041bn) property and construction Subsidised Central and local housing governments companies etc. 2% 5% Construc- P
Slide 15: Denmark: Housing market turning soft
BUSINESS TRENDS Denmark: Housing market turning soft - Low unemployment rate & strong LTV position key drivers in assessing risk Updated: Q3 2008 Property prices Index = 1996 Houses Flats 500 Ireland -2.8% - 2.3% 400 United Kingdom 300 Norway -0,1% - 3.6% Square metre price Q/Q 200 Sweden 100 Denm
Slide 16: Credit exposure: Mortgages in Denmark
BUSINESS TRENDS Credit exposure: Mortgages in Denmark - Low LTV and very limited arrears Danish mortgages Breakdown of loans by LTV and rating category 11 repossessed properties and 1401 arrears out Mortgage finance (residential & commercial) End Q3 of 430,000 loans at End Q3. LTV/rating 1-3 4-6 7
Slide 17: Backup liquidity facilities for conduits
BUSINESS TRENDS Backup liquidity facilities for conduits - Lines reduced by DKr 3.5bn in Q3, and by 72% since Q3 07 End Q3 2008 SIVs ABCPs Total Number 2 6 8 Bank-managed 0 - 0 Amount (DKr bn) 0.8 11.1 11.9 Bank-managed (DKr bn) 0.0 - - Lines drawn (DKr bn) 0.8 8.2 9.0 DKr bn 50 40 -72% 30 Other lin
Slide 18: Liquidity
BUSINESS TRENDS Liquidity - Strong position throughout Q3 2008 12-month liquidity* DKr bn Moodys Financial Strength 300 End-Q3 2008 200 100 End-Q4 2007 0 -100 1w 2w 3w 1 2 3 4 5 6 9 12 mth mth mth mth mth mth mth mth * Main assumptions: No access to capital markets; no refinancing of debt to credit
Slide 19: Funding – end Q3
BUSINESS TRENDS Funding end Q3 - Strong funding position Strong and well diversified funding Banks, net * structure 11% S-T Bonds 61% deposits and fully matched 9% Deposits Danish mortgage bonds 33% Short-term bonds less than DKr L-T Bonds 13% 200bn Subordinated DKr 60bn covered bond a n
Slide 20: Danish state guarantee
BUSINESS TRENDS Danish state guarantee - In force for two years - approved by Parliament on Oct. 10, 2008 What Two-year state guarantee for liabilities in Denmark, incl. deposits, interbank liabilities and senior debt Financial sector issues DKr 10bn loss guarantee and pays an annual commission
Slide 21: Capital management
BUSINESS TRENDS Capital management - Capital ratios well above targets and incl. conservative methodology Capital ratios CRD/Basel II as % of RWA 9M 2008 1 Jan '08 Core capital ex hybrid 8.9 7.7 Core capital 10.0 8.7 Solvency 13.9 12.6 No dividend payment for 2008 or 2009 Condition for state gua
Slide 22: Update on Sampo Bank
BUSINESS TRENDS Update on Sampo Bank Improving, and running at the expected service level; synergies intact The IT systems at Sampo Bank Finland are now at a DKr bn Lending and deposits (end of quarter) satisfactory level 100 Major new initiatives taken to improve the service level Q2 2008 D
Slide 23: Outlook for full-year 2008
OUTLOOK Outlook for full-year 2008 - Guidance lowered due to macro outlook and financial crisis Assumptions and underlying conditions DKr m Profit before loan impairment charges Danish GDP growth of 0.5% in 2008 vs. 1.7% in 2007 Ex. trading and insurance income Funding costs will increase 13.000 Out
Slide 24: Q&A session
Q&A SESSION www.danskebank.com/ir www.danskebank.com/ir 24
Slide 25: Appendix
APPENDIX Appendix 25
Slide 26: Macroeconomic trends
TRENDS IN FOCUS AREAS Macroeconomic trends - Danish economy among the healthiest, but growing slowly % GDP growth DKr bn Balances 5 4 100 Government budget balance Denmark Weighted average 80 Current account 3 for DB Group markets 60 2 40 1 20 0 0 01 02 03 04 05 06 07 08 09 -20 01 02 03 04 05 06 07
Slide 27: Asset backing for liquidity portfolio
TRENDS IN FOCUS AREAS Asset backing for liquidity portfolio - High credit rating; resilient against further housing depreciation Underlying asset breakdown Total exposure: DKr 11.9bn Specific US subprime exposure Other, 6% ABCP backup line Collateralised by diversified pool of 16 Corporate, 14%
Slide 28: Net interest income
Net interest income(2) - Large share of recurring income and improving lending margins NII, loans and margin trend Break down of income Q1-Q3 2008 - NII accounts for 63% 4 140 Insurance & Other, 4% NII growth => Net trading, 13% 3 130 <= NII/RWA 2 120 Fee, 20% 1 Loan growth => 110 NII, 63% 0 100 200
Slide 29: Money market spreads
Money market spreads - 3M interbank against OIS, widening in September bp bp 250 250 200 200 150 150 100 100 50 50 0 0 30/06/2008 30/07/2008 30/08/2008 30/09/2008 06/02/2007 06/04/2007 06/06/2007 06/08/2007 06/10/2007 06/12/2007 06/02/2008 06/04/2008 06/06/2008 06/08/2008 06/10/2008 Libor Euribor Ci
Slide 30: Net fee income before financial crisis
1,500 1,750 2,000 2,250 2,500 DKr m Q2 2007 Before financial crisis Financing, activ. Net fee income Investment, activ. Service, activ Financing, port. -19% Investment, port. Service, port. Q3 2008 - Decline since Q2 2007, mainly from lower investment fees 30
Slide 31: Stress test scenarios
Stress test scenarios - Loan impairment charges % Impairment charge ratio (model) 0,7 0,6 Assumptions (worst year) Mild Severe Year 1 Year 2 Year 3 0,5 recession recession GDP growth 1.4% -2.1% Unemployment rate 6.4% 9.9% 0,4 Property prices, growth 0.7% -14.2% Property prices 3 year growth is +2% u
Slide 32: Banking Activities Denmark
TRENDS IN BUSINESS UNITS Banking Activities Denmark - Very strong NII, but increasing loan impairment charges Profit before tax DKr bn Trend in lending volume - Down 10% owing to higher loan impairment charges (average) DKr m 9M 2007 9M 2008 Index Retail: Y/Y 4% Corporate: Y/Y 11% Net interest incom
Slide 33: Banking Activities Finland
TRENDS IN BUSINESS UNITS Banking Activities Finland - Planned and temporary integration expenses take their toll Profit before tax DKr bn Trend in lending volume - Down 54% due to higher planned integration expenses (average) DKr m 9M 2007 9M 2008 Index Retail: Y/Y 6% Corporate: Y/Y 5% Net interest
Slide 34: Banking Activities Sweden
TRENDS IN BUSINESS UNITS Banking Activities Sweden - Still good growth and acceptable return Profit before tax DKr bn Trend in lending volume - Up 9% on rising income; returns remain at a competitive level (average) despite higher funding costs Retail: Y/Y 15% Corporate: Y/Y 27% DKr m 9M 2007 9M 200
Slide 35: Banking Activities Norway
TRENDS IN BUSINESS UNITS Banking Activities Norway - Solid growth continues Profit before tax DKr bn Trend in lending volume - Up 17% on increasing margin and growth in corporate lending (average) DKr m 9M 2007 9M 2008 Index Retail: Y/Y 9% Corporate: Y/Y 43% Net interest income 1,236 1,507 122 Q/Q 1
Slide 36: Banking Activities Northern Ireland
TRENDS IN BUSINESS UNITS Banking Activities Northern Ireland - Increasing return as integration expenses fall off Profit before tax DKr bn Trend in lending volume - Up DKr 130m on lower total integration costs Retail: Y/Y 7%* (average) Corporate: Y/Y 13%* DKr m 9M 2007 9M 2008 Index 50 Q/Q 3%* Q/Q 3
Slide 37: Banking Activities Ireland
TRENDS IN BUSINESS UNITS Banking Activities Ireland - High growth, but loan impairment charges increase Profit before tax Trend in lending volume - Down due to higher loan impairment charges Retail: Y/Y 19% (average) Corporate: Y/Y 19% DKr m 9M 2007 9M 2008 Index 50 Q/Q 4% Q/Q 5% Net interest income
Slide 38: Banking Activities Baltics
TRENDS IN BUSINESS UNITS Banking Activities Baltics - Lending growth is slowing down Profit before tax DKr bn Trend in lending volume - Up 201% on income and volume growth (average) DKr m 9M 2007 9M 2008 Index Retail: Y/Y 23% Corporate: Y/Y 25% Net interest income 368 465 126 20 Q/Q 5% Q/Q 5% Net fe
Slide 39: Danske Markets
TRENDS IN BUSINESS UNITS Danske Markets - Customer activity still high, but widening spreads hurt Profit before tax Breakdown of income - Down due to financial turmoil but customer activity is high - Down 52% due to mark-to-market losses DKr m 9M 2007 9M 2008 Index DKr m 9M 2007 9M 2008 Index Total
Slide 40: Danske Capital
TRENDS IN BUSINESS UNITS Danske Capital - Affected by the falling equity markets Profit before tax DKr bn AuM - Customer breakdown - Down 19% because of higher expenses and falling income 800 DKr m 9M 2007 9M 2008 Index Private equity 600 Total income 1,439 1,328 92 Institutional Expenses 659 683 10
Slide 41: Danica Pension
TRENDS IN BUSINESS UNITS Danica Pension - Falling equity markets continue to hurt Net income from insurance business % Investment returns, YTD DKr m 9M 2007 9M 2008 Index Customers funds Premiums (DKr bn) 13.4 16.3 121 Investment return Investments & liabilities 4 Share of technical provisions 783
Slide 42: Disclaimer
DISCLAIMER Disclaimer 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 or an inducement to enter into investment activity. No part of thi