Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2019 Earnings Presentation
34 slides from Danske Bank A/S's earnings presentation, Jul 18, 2019
Slide 1: Financial results – first half 2019
Financial results – first half 2019 Chris Vogelzang Chief Executive Officer Christian Baltzer Chief Financial Officer 18 July 2019
Slide 2: Agenda
Financial results – first half 2019 Agenda 01. Executive summary and update on AML processes 2 02. Group financials and key lines 5 03. Capital 12 04. Financial outlook for full-year 2019 13 05. Q&A 14 06. Appendix 15 1
Slide 3: Executive summary: Difficult first half; net profit down 24%
Financial results – first half 2019 Executive summary: Difficult first half; net profit down 24% from H1 2018 and 2019 net profit outlook lowered to DKK 13-15 bn DKK 7.0 bn Net profit, down 24% from H1 2018 due to lower Loan growth of 3% y/y, driven by growth of NII, higher expenses and higher loan
Slide 4: Increase in costs – driven largely by upstaffing and accelerated investments in AML activities
Financial results – first half 2019 Increase in costs – driven largely by upstaffing and accelerated investments in AML activities Expected change in Group expenses, y/y (DKK bn, subject to roundings) 25.5-26 0.2-0.3 0.1-0.2 Around 25 0.3-0.5 0.3-0.5 0.2 0.1 0.3 23.5 0.4-0.5 2018 ex AML AML digi- SE
Slide 5: Digitalisation and automation of core AML processes
Financial results – first half 2019 Digitalisation and automation of core AML processes will increase accuracy and reduce labour-intensive tasks going forward Short-term investments: Upstaffing across AML functions in the Group, including strengthened 1st and 2nd lines of defence Long-term investmen
Slide 6: Net profit: DKK 7.0 bn, down 24% from H1 2018
Financial results – first half 2019 Net profit: DKK 7.0 bn, down 24% from H1 2018, including DKK 1.3 bn gain on sale of Danica Pension Sweden Income statement and key figures (DKK m) Key points, H1 2019 vs H1 2018 H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index • Return on equity of 9.0% Net interest in
Slide 7: NII: Down 8% y/y due to margin pressure and higher funding costs
Financial results – first half 2019 NII: Down 8% y/y due to margin pressure, higher funding costs and transfer to Non-core Key points Change in net interest income, y/y (DKK m) Y/Y 11,824 294 • NII down 8%, as lending growth of 3% was offset by 670 lower lending margins, higher funding costs and the
Slide 8: NII (cont’d): Volume growth of 6% y/y at Banking Nordic
Financial results – first half 2019 NII (cont’d): Volume growth of 6% y/y at Banking Nordic; Banking DK grew 1% y/y Key points Lending volume and development* (DKK billions) • Banking Nordic lending up 6% y/y with growth in H1 2018 H1 2019 all markets • Banking DK lending up 1% y/y 876 • NII for Oth
Slide 9: Fee income: Flat y/y
Financial results – first half 2019 Fee income: Flat y/y, as margin pressure and Flexinvest Fri compensation offset benefit of SEB Pension Danmark acquisition H1 2018 0% Key points Net fee income development, y/y (DKK m) H1 2019 Y/Y -15% 7,547 7,570 • Fees unchanged. Fee income benfitted from the +3
Slide 10: Trading income: Down 15% y/y and 36% q/q
Financial results – first half 2019 Trading income: Down 15% y/y and 36% q/q in challenging market conditions Key points Group net trading income (DKK m) Y/Y • Trading income down 15% from H1 2018, reflecting challenging market conditions -15% • C&I affected by negative value adjustments on derivati
Slide 11: Expenses: Up 12% y/y due to upstaffing and investments in compliance and AML
Financial results – first half 2019 Expenses: Up 12% y/y due to upstaffing and investments in compliance and AML, 2019 outlook raised to DKK 25.5-26 bn Key points Change in expenses, y/y (DKK m) Y/Y 428 • Expenses up 12% y/y, due mainly to upstaffing and investments 283 in compliance and AML activit
Slide 12: Impairments: Loan loss ratio of 5 bp in core activities in H1
Financial results – first half 2019 Impairments: Loan loss ratio of 5 bp in core activities in H1, single-name exposures at C&I drive impairments Key points Impairment charges by business unit, H1 2019 (DKK m) Y/Y • Charge of DKK 470 m; core loan loss ratio of 5 bp − Impairments at C&I due to single
Slide 13: Capital: Strong capital base; CET1 capital ratio of 16.6%
Financial results – first half 2019 Capital: Strong capital base; CET1 capital ratio of 16.6% Capital highlights, Q2 2019 Capital ratios, under Basel III/CRR (%) • REA up DKK 4 bn, driven mainly by market risk Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • We are in ongoing dialogue with the FSA and exp
Slide 14: 2019 outlook updated: net profit DKK 13-15 bn
Financial results – first half 2019 2019 outlook updated since Q1*: We now expect net profit in the range of DKK 13-15 bn and expenses of DKK 25.5-26 bn Net interest We expect net interest income to be lower than the level in 2018, as volume growth will be income more than offset by higher funding c
Slide 15: Q&A session
Financial results – first half 2019 Q&A session Press 01 to ask a question Press 02 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.danskebank.com/ir 14
Slide 16: Appendix
Financial results – first half 2019 Appendix 01. Business units 16 02. Credit quality 23 03. Macro and portfolio reviews 24 04. Funding, liquidity and ratings 28 05. Tax 31 06. Contact details 32 15
Slide 17: Banking DK: Lending growth of 1% y/y; higher expenses and impairments
Financial results – first half 2019 Banking DK: Lending growth of 1% y/y; higher expenses and impairments Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 4,305 4,458 97 2,125 2,181 97 • Total income down 5% Net fee income 1,486
Slide 18: Banking Nordic: Lending growth of 6% y/y
Financial results – first half 2019 Banking Nordic: Lending growth of 6% y/y but higher interest rates in Sweden and Norway squeezed margins Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 3,774 3,953 95 1,873 1,900 99 • NII dow
Slide 19: Lending growth: Banking DK and Banking Nordic
Financial results – first half 2019 Lending growth: Growth of 1% y/y at Banking DK and 6% at Banking Nordic Comments Banking Nordic: lending volume by segment and country* Banking DK • 83% of lending at Banking DK is at mortgage subsidiary Finland retail Sweden commercial Realkredit Danmark (RD) Fin
Slide 20: Corporates & Institutions: Challenging market conditions and higher impairment charges
Financial results – first half 2019 Corporates & Institutions: Challenging market conditions and higher impairment charges Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 1,787 1,983 90 857 930 92 • NII down 4% adjusted for the
Slide 21: Wealth Management: Gain from sale of Danica Pension Sweden
Financial results – first half 2019 Wealth Management: Gain of DKK 1.3 bn from the sale of Danica Pension Sweden; AuM flat adjusted for the sale Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 335 366 92 160 175 91 • AuM down 4%
Slide 22: Northern Ireland: Lending and NII up y/y
Financial results – first half 2019 Northern Ireland: Lending and NII up y/y despite continued Brexit uncertainty Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 765 736 104 379 386 98 • Lending and NII up despite continued Net
Slide 23: Non-core: Portfolio includes all Baltic and Russian exposures
Financial results – first half 2019 Non-core: Portfolio now includes all Baltic and Russian exposures, intended sale of retail portfolio in Estonia announced in June Non-core loan portfolio, Q2 2019 (DKK bn) Non-core REA* (DKK bn) Allowance account Non-core conduits etc. Non-performing credit exposu
Slide 24: Credit quality: NPLs decreased 2% y/y
Financial results – first half 2019 Credit quality: NPLs decreased 2% y/y Breakdown of core allowance account under IFRS 9 (DKK bn) Core allowance account by business unit (DKK bn) Stage 1 Banking DK Corporates & Institutions Northern Ireland 21.0 20.8 20.4 20.4 Stage 2 19.8 Banking Nordic Wealth Ma
Slide 25: Credit exposure: Limited agriculture and directly oil-related exposure
Financial results – first half 2019 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (3.0% of Group exposure) Oil-related exposure (0.7% of Group exposure) • Pork prices rose significantly in Q2 2019, while milk prices • Net exposure was unchanged at DKK 17
Slide 26: Nordic macroeconomics
Financial results – first half 2019 Denmark Sweden Norway Finland EU Nordic macroeconomics 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 27: Nordic housing markets
Financial results – first half 2019 Denmark Sweden Norway Finland Nordic housing markets 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 28: Realkredit Danmark: Portfolio overview
Financial results – first half 2019 Realkredit Danmark: Portfolio overview 76% of new retail lending in Q2 was fixed-rate vs 42% of stock Portfolio facts, Realkredit Danmark, Q2 2019 Retail loans, Realkredit Danmark, Q2 2019 (%) • Approx. 356,000 loans (residential and commercial) Fixed rate (10 yrs
Slide 29: Funding and liquidity: DKK 60 bn of long-term funding issued in H1 2019
Financial results – first half 2019 Funding and liquidity: DKK 60 bn of long-term funding and capital instruments issued in H1 2019; LCR compliant at 129% Changes in funding,* 2018-2019 (DKK bn and bp) Long-term funding excl. RD (DKK bn)** Cov. bonds Senior Non-preferred senior Funding plan Complete
Slide 30: Funding structure and sources
Financial results – first half 2019 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q2 2019 (DKK bn) Funding sources (%) Q1 2019 Q2 2019 2,085 52 52 150 Senior & NPS bonds 1,809 Bank loans 627 932 Deposits Bank mortgages 375 196 Cover
Slide 31: Three distinct methods for rating banks
Financial results – first half 2019 Danske Bank’s rating Three distinct methods for rating banks Rating methodology Extra- Anchor Additional Issuer + 1 + 2 + 3 + 4 = SACP = ordinary + ALAC + = SACP1 factors rating support bbb+ +1 +1 -1 0 a- 0 +1 0 A (Negative) 1=Business Position, 2=Capital & Earnin
Slide 32: Tax
Financial results – first half 2019 Tax Actual and adjusted tax rates (DKK billions) Tax drivers, Q2 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 • The actual tax rate of 15.2% is lower than Profit before tax 4,757 4,012 4,444 3,589 5,487 the Danish rate of 22% due primarily to Permanent non-taxable
Slide 33: Contacts
Financial results – first half 2019 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 —
Slide 34: Disclaimer
Financial results – first half 2019 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