Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — Debt Investor Presentation (2020)
46 slides from Danske Bank A/s's debt investor presentation, 2020
Slide 1: Debt investor update Q1 2020
Debt investor update Q1 2020 Bank
Slide 2: Agenda
Debt investor update – Q1 2020 Agenda 01. Group financial update 2 02. Capital and funding 14 03. Covered bond universe and ratings 20 04. Appendix 24 1
Slide 3: We are a Nordic universal bank with strong regional roots
Debt investor update – Q1 2020 We are a Nordic universal bank with strong regional roots Norway (AAA) Finland (AA+) Challenger position 3rd largest Market share: 6% Market share: 10% Share of Group lending: 10% Share of Group lending: 9% GDP growth 2019: 2.3% GDP growth 2019: 1.0% Unemployment 2019:
Slide 4: Executive summary: Underlying business performing despite coronavirus impact
Debt investor update – Q1 2020 Executive summary: Underlying business performing despite significant negative impact of the coronavirus pandemic Lending down 1% y/y (up 2% in local currency). DKK 1.3 bn net loss in Q1 2020, against net profit of DKK 3.0 Continually strong inflow from partnership agr
Slide 5: How we support our stakeholders during challenging times
Debt investor update – Q1 2020 How we support our stakeholders during challenging times • Initiatives across markets include deferred payment, new or extended overdraft and credit facilities, bridge financing, interest-only loans, suspension of negative interest rates, etc. Customers • We have made
Slide 6: Net loss of DKK 1.3 bn driven by loan impairment charges and lower trading income
Debt investor update – Q1 2020 Net loss of DKK 1.3 bn driven by significant loan impairment charges and significantly lower trading income Income statement and key figures (DKK m) Key points, Q1 2020 vs Q1 2019 Q1 2020 Q1 2019 Index Q4 2019 Index • Trading income down 82% as Net interest income 5,47
Slide 7: NII: Down 1% y/y due to currency effects, margin pressure and funding costs
Debt investor update – Q1 2020 NII: Down 1% y/y due to currency effects, margin pressure and continually high funding costs Key points Change in net interest income, y/y (DKK m) Y/Y • NII down 1% due to currency effects, margin 78 35 109 64 pressure, a shift towards longer-term mortgages as well as
Slide 8: NII (cont'd): Group lending down 1% y/y but up 2% adjusted for currency
Debt investor update – Q1 2020 NII (cont’d): Group lending down 1% y/y but up 2% adjusted for currency effects Key points Lending volumes and development* (DKK bn) • Banking DK lending down 2% y/y, due to negative value Q1 2019 Q1 2020 adjustments on the mortgage book. Underlying lending was flat •
Slide 9: Fee income: Up 3% y/y due to remortgaging activity in Denmark
Debt investor update – Q1 2020 Fee income: Up 3% y/y due to continued remortgaging activity in Denmark in the first part of Q1 2020, lower AuM Q1 2019 +3% Key points Net fee income development, y/y (DKK m) Q1 2020 Y/Y +8% • Fee income up 3% due mainly to continued 3,569 3,673 remortgaging activity i
Slide 10: Trading income: Down 82% y/y as turbulent markets affected rates business
Debt investor update – Q1 2020 Trading income: Down 82% y/y as turbulent financial markets affected rates business, and due to negative value adjustments Key points Group net trading income (DKK m) Y/Y • Trading income down 82% in turbulent financial markets, which affected both our rates business a
Slide 11: Expenses: Up 10% y/y, due mainly to planned upstaffing
Debt investor update – Q1 2020 Expenses: Up 10% y/y, due mainly to planned upstaffing within compliance, AML and consultancy Key points Change in expenses, y/y (DKK m) Y/Y 64 50 • Expenses up 10% y/y, due mainly to higher costs for regulatory 292 compliance, investments to combat financial crime and
Slide 12: Impairments: Extraordinary charge due to macroeconomic model changes and oil prices
Debt investor update – Q1 2020 Impairments: Extraordinary charge due to changes in macroeconomic model assumptions and decline in oil prices Key points, Q1 2020 Impairment charges by business unit, Q1 2020 (DKK m) • Charge of DKK 4.3 bn; core loan loss ratio of 90 bp − Changes in macroeconomic model
Slide 13: Impairments: Limited exposure to industries sensitive to the pandemic
Debt investor update – Q1 2020 Impairments: Limited exposure to industries sensitive to economic effects of the coronavirus pandemic Key points, Q1 2020 • Limited exposure (less than 4%) to industries highly affected by the coronavirus pandemic • Overall exposure to highly affected industries has re
Slide 14: Impairments: Overview of updated IFRS 9 model scenarios
Debt investor update – Q1 2020 Impairments: Overview of updated IFRS 9 model scenarios Downside scenario (25% weighting) Base case scenario (65% weighting) Upside scenario (10% weighting) Builds on prolonged recovery with Largely similar to the downside Largely similar to the base case continued dec
Slide 15: Capital: Strong capital base; CET1 capital ratio of 17.6%
Debt investor update – Q1 2020 Capital: Strong capital base; CET1 capital ratio of 17.6% - cancellation of 2019 dividend provided 0.9 %-points uplift Capital ratios; under Basel III/CRR; % Capital highlights, Q1 2020 Tier 2 Pillar II component (total 4.5%) • CET1 ratio increased 0.3%-points, driven
Slide 16: Strong CET1 capital build-up since 2008
Debt investor update – Q1 2020 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) in excess of DKK 100bn Common Equity Tier 1, 2008 – 2019; DKKbn +DKK 50bn 130 134 133 133 133 126 127 119 107 79 85 77 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20181 2019 REA, CET1, p
Slide 17: Update on MREL Requirement
Debt investor update – Q1 2020 Update on MREL Requirement Overview of MREL MREL resources and requirements, Q1 2020 (% of REA) The Group has to meet both an MREL requirement and a Senior <1Y Own funds separate debt buffer requirement for Realkredit Danmark (RD). Senior >1Y MREL requirement based on
Slide 18: Funding structure and sources: Danish mortgage system is fully pass-through
Debt investor update – Q1 2020 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q1 2020 (DKK bn) Funding sources (%) Q4 2019 Q1 2020 2,127 63 Senior & 60 163 NPS bonds 1,782 Bank loans 630 995 Deposits Bank mortgages 357 15 15 174 Cove
Slide 19: Funding programmes and currencies
Debt investor update – Q1 2020 Funding programmes and currencies Covered bonds by currency, end-Q1 2020 Largest funding programmes, end-Q1 2020 EUR SEK NOK CHF Utilisation EMTN Programme 42% 1% Limit – EUR 35bn 16% Global Covered Bond 78% Limit – EUR 30bn 53% 30% ECP Programme 2% Limit – EUR 13bn To
Slide 20: Funding and liquidity: LCR compliant at 154%
Debt investor update – Q1 2020 Funding and liquidity: DKK 26 bn of long-term funding and capital instruments issued in Q1 2020; LCR compliant at 154% Changes in funding,* 2020 (DKK bn and bp) Long-term funding excl. RD (DKK bn)** Cov. bonds Senior Non-preferred senior Funding plan Completed 27bp 100
Slide 21: Danske Bank covered bond universe, a transparent pool structure
Debt investor update – Q1 2020 Danske Bank covered bond universe, a transparent pool structure1 Residential mortgages from • Denmark, D-pool • Norway, I-pool + • Sweden, Danske Hypotek AB C-pool (AAA/AAA) • Finland, Danske Mortgage Bank Plc Commercial mortgages from Finland • Sweden and Norway, C-po
Slide 22: Danske Bank's credit ratings
Debt investor update – Q1 2020 Danske Bank’s credit ratings Fitch takes rating action on Danske Bank in Q1 2020 Long-term instrument ratings Fitch places Danske Bank on Rating Watch Negative On 31 March 2020, Fitch placed all the long-term ratings of Fitch Moody’s Scope S&P Danske Bank on Rating Wat
Slide 23: Danske Bank's ESG ratings
Debt investor update – Q1 2020 Danske Bank’s ESG ratings Danske Bank has chosen to focus on six providers, based on their importance to our investors 31 Mar 2020 31 Dec 2019 31 Dec 2018 Range 1 C C C D- to A+ (A+ highest rating) neutral (CCC) positive (B) positive (B) D to AAA (AAA highest rating) C
Slide 24: Danske Bank's 2023 targets for the seven focus areas
Debt investor update – Q1 2020 Danske Bank’s 2023 targets for the seven focus areas within Societal Impact & Sustainability 2023 targets Status 2019 DKK 30 bn in green investments by Danica Pension; 1 Sustainable investing DKK 10 bn Sustainable towards DKK 100 bn by 2030 finance Well above DKK 100 b
Slide 25: Agenda
Debt investor update – Q1 2020 Agenda 01. Business units 25 02. Special topics 33 03. Macroeconomics 39 04. One-off items and 2020 focus areas 42 05. Contacts 44 24
Slide 26: Strong footprint within retail lending
Debt investor update – Q1 2020 Strong footprint within retail lending Lending by business unit1; %; Q1 2020 Credit exposure by industry; %; Q1 2020 Personal Customers 39 Banking DK Wealth Management Commercial Property 13 Banking Nordic Northern Ireland Co-ops & Non-Profit 8 C&I Other Public Institu
Slide 27: Lending growth: Growth of 4% in local currency at Banking Nordic
Debt investor update – Q1 2020 Lending growth: Growth of 4% in local currency at Banking Nordic; lending down 2% y/y at Banking DK due to value adj. Comments Banking Nordic: lending volume by segment and country* Banking DK • 84% of lending at Banking DK is at mortgage credit subsidiary Finland reta
Slide 28: Banking DK: Lending excluding value adjustments was flat
Debt investor update – Q1 2020 Banking DK: Lending excluding value adjustments was flat; higher expenses and impairments Income statement and key figures (DKK m) Key points Q1 2020 Q1 2019 Index Q4 2019 Index Y/Y Net interest income 2,203 2,346 94 2,231 99 • NII down 6% due to margin pressure Net fe
Slide 29: Realkredit Danmark: Portfolio overview
Debt investor update – Q1 2020 Realkredit Danmark: Portfolio overview 68% of new retail lending in Q1 was fixed-rate vs 44% of stock Portfolio facts, Realkredit Danmark, Q1 2020 Retail loans, Realkredit Danmark, Q1 2020 (%) • Approx. 347,000 loans (residential and commercial) Fixed rate (10 yrs-30 y
Slide 30: Banking Nordic: Growth in local currency lending
Debt investor update – Q1 2020 Banking Nordic: Growth in local currency lending; significant impairment charges in the commercial portfolio Income statement and key figures (DKK m) Key points Q1 2020 Q1 2019 Index Q4 2019 Index Y/Y Net interest income 1,999 1,959 102 1,992 100 • NII up 2% due to gro
Slide 31: Corporates & Institutions: Significant drop in trading income
Debt investor update – Q1 2020 Corporates & Institutions: Significant drop in trading income and significant impairment charges Income statement and key figures (DKK m) Key points Q1 2020 Q1 2019 Index Q4 2019 Index Y/Y Net interest income 893 930 96 985 91 • Trading income negative, including Net f
Slide 32: Wealth Management: AuM down 12% y/y and q/q
Debt investor update – Q1 2020 Wealth Management: AuM down 12% y/y and q/q in turbulent financial markets Income statement and key figures (DKK m) Key points Q1 2020 Q1 2019 Index Q4 2019 Index Y/Y Net interest income -84 -48 - -75 - • Fees down 10%. AuM down 12%, partly Net fee income 1,222 1,360 9
Slide 33: Northern Ireland: Lending up 1% in local currency
Debt investor update – Q1 2020 Northern Ireland: Lending up 1% in local currency, loan impairments reflect worsening outlook Income statement and key figures (DKK m) Key points Q1 2020 Q1 2019 Index Q4 2019 Index Y/Y Net interest income 375 386 97 391 96 • Impairment charges up as forward- Net fee i
Slide 34: Credit quality: NPLs increased 7% q/q
Debt investor update – Q1 2020 Credit quality: NPLs increased 7% q/q driven by single-name exposures at Corporates & Institutions Breakdown of core allowance account under IFRS 9 (DKK bn) Core allowance account by business unit (DKK bn) Stage 1 Banking DK Corporates & Institutions Other 24.1 Stage 2
Slide 35: Credit exposure: Limited agriculture and directly oil-related exposure
Debt investor update – Q1 2020 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure Oil-related exposure • Pork prices continued their upturn and rose 6% q/q. The • Gross exposure decreased to DKK 23.8 bn from DKK 24.4 bn in monthly average pork price reached D
Slide 36: Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure
Debt investor update – Q1 2020 Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure Transportation exposure Hotels, restaurant and leisure exposure • Gross exposure decreased to DKK 15.1 bn from 16.3 bn in Q4 • Gross exposure decreased to DKK 15.8 bn from 17.2 bn in Q
Slide 37: Credit exposure: Limited exposure to retailing
Debt investor update – Q1 2020 Credit exposure: Limited exposure to retailing Retailing • Gross exposure increased to DKK 27.5 bn from 26.2 bn in Q4 2019. However, the increase is towards customers with strong credit quality and over recent years we have had a selected approach to this segment with
Slide 38: Credit quality: Assumptions behind updated IFRS 9 model scenarios
Debt investor update – Q1 2020 Credit quality: Assumptions behind updated IFRS 9 model scenarios Downside (25%) Base case (65%) Upside (10%) Group averages (%) 2020 2021 2020 2021 2020 2021 GDP -4.2% -1.5% -0.1% 1.6% 1.3% 1.6% Industrial production -6.3% -2.2% -0.3% 2.9% 1.6% 1.9% Unemployment 7.3%
Slide 39: Non-core: Estonia, Latvia and Russia now exited
Debt investor update – Q1 2020 Non-core: Estonia, Latvia and Russia now exited; sale of Lithuanian portfolio expected to finalise in the first half of 2020 Non-core loan portfolio, Q1 2020 (DKK bn) Non-core REA* (DKK bn) Allowance account Non-core conduits etc. Non-performing credit exposure Non-cor
Slide 40: Nordic macroeconomics
Debt investor update – Q1 2020 Denmark Sweden Norway Finland EU Nordic macroeconomics Real GDP, constant prices (index 2005 = 100) Inflation (%) 2005 2006 2007 2008 2009 201020112012 2013 2014 2015 2016 2017 2018 2019 2005 2006 2007 2008 2009 2010 2011 201220132014 2015 2016 2017 2018 2019 Interest
Slide 41: Nordic macroeconomics
Debt investor update – Q1 2020 Denmark Sweden Norway Finland EU Nordic macroeconomics Current account (surplus+/deficit-); % of GDP Gross public debt; % of GDP 2005 2006 2007 2008 2009 201020112012 2013 2014 2015 2016 2017 2018 2019 2005 2006 2007 2008 2009 2010 2011 201220132014 2015 2016 2017 2018
Slide 42: Nordic housing markets
Debt investor update – Q1 2020 Denmark Sweden Norway Finland Nordic housing markets Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 2005 2006 2007 2008 2009 20112012 2010 2013 2014 2015 2017 2016 2019 2018 2005 2006 2007 2008 2009 2010 2011 201220132014 2015 2016 2017 201
Slide 43: Significant net positive extraordinary items in 2019
Debt investor update – Q1 2020 Significant net positive extraordinary items in 2019 One-off items in 2019 (DKK millions) Impact Q Item P&L line affected (DKKm) Change in VA add-on to discount curve at Danica -140 Net trading income Q1 Non-core value adjustment -300 Profit before tax, Non-core Sale o
Slide 44: The four key focus areas for 2020
Debt investor update – Q1 2020 The four key focus areas for 2020 – working towards ambitious deliverables with tangible progress and plans in the first quarter Q1 progress • KYC and ODD refresh on 1.2 m out of 2.8 m customers and digital, automated review 1 Compliance solution built under Control •
Slide 45: Contacts
Debt investor update – Q1 2020 Contacts Christoffer Møllenbach Claus Ingar Jensen Head of Group Treasury Head of IR Direct: +45 45 14 63 60 Direct: +45 45 12 84 83 Mobile: +45 21 55 10 52 Mobile: +45 25 42 43 70 E-mail: chm@danskebank.dk E-mail: clauj@danskebank.dk Bent Callisen John Bäckman Head of
Slide 46: Disclaimer
Debt investor update – Q1 2020 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 States,