Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2012 Earnings Presentation
47 slides from Danske Bank A/S's earnings presentation, Aug 7, 2012
Slide 1: Conference Call: Financial results for H1 2012
CONFERENCE CALL Financial results for H1 2012 Eivind Kolding CEO & Chairman of the Executive Board Henrik Ramlau-Hansen CFO & Member of the Executive Board 7 August 2012
Slide 2: Agenda
Financial results for H1 2012 Agenda Key points Financial results Capital, funding and liquidity Strategy process Outlook for 2012 Q&A session Appendix: Trends in focus areas & business units 2
Slide 3: Highlights
Financial results for H1 2012 Highlights Income statement & key figures (DKK m) Key points H1 H1 2012 H1 2011 Index Q2 2012 Q1 2012 Index • Best half year result since 2008 Net interest income 12,390 11,339 109 6,218 6,172 101 • Improvement driven both by a solid Net fee income 4,013 4,142 97 2,026
Slide 4: Net interest income: Resilient, but strong underlying drivers
Financial results for H1 2012 Net interest income: Resilient, but strong underlying drivers – both positive and negative Quarterly net interest income (DKK m) Net interest income drivers Positive • Increased lending rates +7% 6,218 Negative 6,182 6,172 • Low and declining central bank rates • Increa
Slide 5: Net fee income: Stable despite low activity
Financial results for H1 2012 Net fee income: Stable despite low activity Quarterly net fee income (DKK m) Fee income drivers Portfolio fees • Activity levels remain subdued Activity fees • Small decline in activity based fees 2,218 • Increase in portfolio based fees 2,049 2,026 1,987 1,938 1,499 1,
Slide 6: Trading: Strong H1 2012, but outlook is uncertain
Financial results for H1 2012 Trading: Strong H1 2012, but outlook is uncertain Quarterly trading income (DKK m) Trading income drivers • Solid trading income mainly from bond 3,222 and derivatives trading • Q2 gain on unlisted shares DKK 283 m and DKK 396 m on pension plans Prospera Ranking 2,445 2
Slide 7: Insurance: Result boosted by risk allowance and new discount curve
Financial results for H1 2012 Insurance: Result boosted by booking of risk allowance, helped by strong investment result and new discount curve Quarterly insurance income (DKK m) Key points • Risk allowance for 3 out of 4 groups 976 • New discount curve reduces liabilities with DKK 1.3 bn and improv
Slide 8: Expenses: Elevated by restructuring cost, but cost programme on track
Financial results for H1 2012 Expenses: Elevated by restructuring cost, but cost programme on track Total expenses (DKK bn) No. of staff, end of period (‘000) Adjustments (bonus, severance, dep. guarantee, asset write down) 24 Adjusted expenses 6,850 22 6,678 6,632 21 6,459 20 5,499 18 2007 Q2 12 20
Slide 9: Impairments: Declining trend due to personal customers and SMEs
Financial results for H1 2012 Impairments: Declining trend in recent quarters due to personal customers and SME’s Impairments by customer segment (DKK bn) Impairment drivers Financials • Decline in impairments of DKK 800 SMEs m in Q2 4.8 Large corp. • Drop in impairments in Denmark Personal and Nort
Slide 10: Impairments: Lower impairments in Denmark and Northern Ireland
Financial results for H1 2012 Impairments: Lower impairments in Denmark and Northern Ireland Impairments (DKK m) Loan loss ratio (bp, annualised) Q112 Q212 Q112 1,330 Q212 Denmark Denmark 40 54 960 110 Finland 151 Finland 39 29 210 Sweden 61 Sweden 13 44 114 Norway 7 Norway 2 33 646 Northern Ireland
Slide 11: Capital: Earnings and capital efficiency increases tier 1 and core tier 1
Financial results for H1 2012 Capital: Earnings and capital efficiency increases tier 1 and core tier 1 Capital ratios, under CRD/Basel II (%) Capital drivers Total capital • RWA of DKK 893 bn Tier 1 (including state hybrid) • Government hybrid contributes Core tier 1 with 2.7 %-point of the Tier 1
Slide 12: Funding, deposits and rating
Financial results for H1 2012 Funding, deposits and rating: Declining wholesale deposits after rating downgrade, but funding plan completed Deposits, end of period (DKK bn) Long term funding (DKK bn) Markets 73 CIB 61 BA, other 51 792 789 795 774 97 736 102 97 86 59 69 68 69 72 57 2010 2011 2012* Da
Slide 13: Liquidity: Strong liquidity buffer despite deposit outflow
Financial results for H1 2012 Liquidity: Strong liquidity buffer despite deposit outflow 12-month liquidity*, end of period (DKK bn) Key points Q2 2011 Q4 2011 Q2 2012 • 12- month liquidity of more than DKK 125 bn 300 • 12-month liquidity curve remains positive for more than 2½ years • Eligible liqu
Slide 14: Strategy process: On track, to be completed in Q3
Financial results for H1 2012 Strategy process: On track, to be completed in Q3 and reported in Q4 Corporate strategy Vision/Mission Corporate Story Corporates & Institutions Business Banking Personal Banking strategy strategy strategy Short-term measures 14
Slide 15: Outlook for 2012: Low result, but high uncertainty
Financial results for H1 2012 Outlook for 2012: Low result, but high uncertainty due to economic and financial instability Macro Sluggish economic recovery and low interest rate environment NII Re-pricing continues, declining central bank rates create headwinds Expenses Cost cutting on track with FT
Slide 16: Q&A session
Financial results for H1 2012 Q&A session Press 1 to ask a question Press “#” to cancel Press “Ask a question” in your webcast player www.danskebank.com/ir 16
Slide 17: Appendix
Financial results for H1 2012 Appendix Tax 18 NII and margin developments 19 Expenses 22 Credit 23 Capital and funding 33 Business units 35 17
Slide 18: Adjusted tax rate close to 26%
Financial results for H1 2012 Adjusted tax rate close to 26%, but actual tax rate remains high owing to Ireland Actual and adjusted tax rates (DKK m) Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011 Pre-tax profit 2,510 1,581 615 10 2,081 Pre-tax loss, BA Ireland 1,616 1,371 1,524 1,490 1,780 Permanent non-t
Slide 19: Net interest income: Margin improvement visible in most markets
Financial results for H1 2012 Net interest income: Margin improvement visible in most markets Quarterly change in net interest income (DKK m) Net interest margins, NII/loan stock (%) Q2 11 1.3 Q2 12 Q1 12 6,172 Denmark 1.3 1.4 Lending volume 46 Finland 1.4 1.3 Funding 60 Sweden 1.4 1.2 Equity 28 Nor
Slide 20: Higher lending margins are beginning to feed through
Financial results for H1 2012 Higher lending margins are beginning to feed through Quarterly lending margins (%) Quarterly deposit margins (%) 1.10 0.79 Q3 11 1.17 0.60 Q4 11 Denmark* 1.31 0.29 1.34 0.33 Q1 12 0.47 0.66 Q2 12 0.68 0.36 Finland 0.77 0.16 0.66 0.38 1.06 0.83 1.17 0.75 Sweden 1.32 0.57
Slide 21: Net interest income: Trend in Realkredit Danmark
Financial results for H1 2012 Net interest income: Trend in Realkredit Danmark Net interest income at Realkredit Danmark, excluding lending margins (DKK m) 2010 2011 2012 193 170 155 132 128 107 100 102 96 54 Q1 Q2 Q3 Q4 21
Slide 22: Expenses: On track with cost programme
Financial results for H1 2012 Expenses: On track with cost programme Expenses (DKK m) Quarterly change in expenses (DKK m) H1 12 H1 11 Index Q2 12 Q1 12 Index Expenses 13,482 14,029 96 6,632 6,850 97 Q1 12 6,850 Perf. based compensation 457 372 123 172 285 60 Severance payments etc. 363 173 210 303
Slide 23: Impairment dynamics
Financial results for H1 2012 Impairment dynamics Individual loan impairment charges, ex Baltics (DKK bn) Change in allowance account (DKK m) New Increased Reversals Allowance, end-2007 4,900 5.4 3.8 2.3 3.1 3.5 Gross 104,082 impairments 1.8 Reversals 25,507 3.6 Write-offs 29,467 -1.8 Allowance 54,0
Slide 24: Loan quality
Financial results for H1 2012 Loan quality Impairment-tested loans (%) Coverage, individual allowance /impairment-tested loans (%) Q1 12 Q1 12 Q2 12 Q2 12 Denmark 5.7 Denmark 31 5.8 31 3.8 31 Finland Finland 3.8 31 2.2 32 Sweden Sweden 2.0 34 3.2 33 Norway Norway 3.2 33 17.8 62 N. Ireland N. Ireland
Slide 25: Retail Banking Denmark, including Realkredit Danmark
Financial results for H1 2012 Retail Banking Denmark, including Realkredit Danmark Impairments at Retail Banking Denmark, Q2 2012 (DKK m) Loans by LTV and rating, Realkredit Danmark, end-Q2 2012 (%) Individual Collective Total Rating 1-3 4-7 8-11 Total Public LTV ratio guarantee Bank Personal custom
Slide 26: Denmark: House prices still declining but affordability improving
Financial results for H1 2012 Denmark: House prices still declining but affordability keeps improving Danish house price by region (%) Affordability index, quarterly data from1985 - 2011 Fixed rate Mixed rate Average Region Prices Change Change in Preview* peaked since peak Q1 12 Q2 12 140 Copenhage
Slide 27: Limited exposure to agriculture and shipping
Financial results for H1 2012 Limited exposure to agriculture and shipping Agriculture: breakdown of loan portfolio, Q2 2012 (%) Shipping: breakdown of loan portfolio, Q2 2012 (%) Other Other Car carriers 14 Agriculture Ro-Ro 9 10 Chemical tanker Mixed 25 Product tanker 2 7 operations 6 6 Container
Slide 28: Macro trends
Financial results for H1 2012 Macro trends Bankruptcies (index 1996 = 100) Business confidence indicator (index 1996 = 100) Denmark Finland Norway Sweden Sweden Finland Denmark 400 160 140 300 120 200 100 100 80 60 1996 2000 2004 2008 2012 1996 2000 2004 2008 2012 Rating upgrades*, corporates, 12-mo
Slide 29: Denmark and Northern Ireland: Loan exposure
Financial results for H1 2012 Dividend Denmark and Northern Ireland: Loan exposure Individual impairments Value of collateral Residential mortgage exposure Commercial property exposure Denmark (DKK bn) Northern Ireland (DKK bn) Denmark (DKK bn) Northern Ireland (DKK bn) 517.4 16.1 121.1 10.3 9.9 0.5
Slide 30: Ireland: Breakdown of loan portfolio
Financial results for H1 2012 Dividend Ireland: Breakdown of loan portfolio Individual impairments Value of collateral Personal mortgages (DKK bn) Other (DKK bn) Total (DKK bn) Arrears*, private customers (%) 91-180 days Market 26.8 180+ days 16.1 10.2 10.7 3.6 1.8 0.5 0.1 1.8 0.7 0.4 1.9 1.1 3.4 0.
Slide 31: Non-core Ireland
Financial results for H1 2012 Dividend Non-core Ireland Individual impairments Value of collateral CRE (DKK bn) Personal mortgages (DKK bn) Other* (DKK bn) Total (DKK bn) 19.4 38.1 16.1 1.7 9.0 9.7 24.4 3.1 9.7 6.4 1.9 0.1 1.3 13.8 1.0 3.1 4.7 7.5 0.8 2.0 Gross Impaired Gross Impaired Gross Impaired
Slide 32: Solid funding structure and liquidity position
Financial results for H1 2012 Solid funding structure and liquidity position Loan portfolio and long-term funding, Q2 2012 (DKK bn) Maturing funding (DKK bn) Hybrid T1 1,754 69 1,704 Subordinated T2 115 Senior debt Senior Covered bonds Bank loans 598 51 736 Deposits 46 45 34 Bank mortgages 381 153 C
Slide 33: Well-diversified funding position
Financial results for H1 2012 Well-diversified funding position Funding position (%) Funding sources (%) Q4 11 Q2 12 40 Equity Central banks 5 30 Subordinated debt 7 Deposits 3 29 20 Repos 12 10 0 Banks 7 Short-term bonds Due to credit inst. Mortgage finance Shareholders’ eq. Long-term bonds (match
Slide 34: Retail Banking Denmark: Visible increase in net interest income
Financial results for H1 2012 Retail Banking Denmark: Visible increase in net interest income but higher impairments lower the result Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 6,270 5,918 106 Net fee income 1,590 1,6
Slide 35: Retail Banking Finland
Financial results for H1 2012 Retail Banking Finland: Strong net interest income, but low result due to loan losses Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 1,122 1,002 112 Net fee income 532 501 106 Other income 19
Slide 36: Retail Banking Sweden
Financial results for H1 2012 Retail Banking Sweden: High return held up by 20 % increase in net interest income Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 1,384 1,158 120 Net fee income 265 304 87 Other income 96 112
Slide 37: Retail Banking Norway
Financial results for H1 2012 Retail Banking Norway: Solid increase in total income more than double pre-tax profit Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 973 760 128 Net fee income 146 130 112 Other income 367 36
Slide 38: Banking Activities Northern Ireland
Financial results for H1 2012 Banking Activities Northern Ireland: Moving in the right direction with higher income and lower costs and impairments Income statement (DKK m) Trend in lending volume*, average (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 604 548 110 -2% Net fee i
Slide 39: Banking Activities Ireland
Financial results for H1 2012 Banking Activities Ireland: Higher expenses due to restructuring of the continuing business Income statement (DKK m) Trend in lending volume, end of period (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 207 456 45 Net fee income 39 31 126 Other inco
Slide 40: Non-core Ireland: Marked by high impairments
Financial results for H1 2012 Non-core Ireland: Marked by high impairments Income statement (DKK m) Trend in lending volume, end-of-period (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 210 - - Net fee income -1 - - Other income 2 - - Total income 211 - - 27 27 Expenses 106 - -
Slide 41: Banking Activities Baltics
Financial results for H1 2012 Banking Activities Baltics: Higher income and increased write back of impairments increases pre-tax profit by 50 % Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2012 H1 2011 Index Retail Corporate Net interest income 244 240 102 Net fee income 74
Slide 42: CIB: Solid NII development and continued margin improvement
Financial results for H1 2012 CIB: Solid NII development and continued margin improvement, but higher loan losses from shipping and construction Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2012 H1 2011 Index Net interest income 1,059 952 111 Net fee income 384 437 88 103 10
Slide 43: Danske Markets & Treasury
Financial results for H1 2012 Danske Markets & Treasury: Solid Q2 from derivates and bond trading, one off gains increase income in Treasury Income statement (DKK m) Trading income split, Q2 2012 H1 2012 H1 2011 Index FX & money market Danske Markets 4,916 3,659 134 Repos & derivatives 4 Group Treas
Slide 44: Danske Capital: Lower fee income due to changed asset mix
Financial results for H1 2012 Danske Capital: Lower fee income due to changed asset mix, margins remain flattish Income statement (DKK m) AuM – customer breakdown (DKK bn) H1 2012 H1 2011 Index Private equity Institutional Retail* Life insurance Net interest income 60 55 109 Net fee income 783 830 9
Slide 45: Danica Pension: Strong investment result
Financial results for H1 2012 Danica Pension: Strong investment result and partially booked risk allowance Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q2 2012 (%) H1 12 H1 11 Index Equities Bonds Credit bonds Property Premiums (bn) 12.6 14.2 89 Danica Traditionel (insu
Slide 46: Danica Pension's profit model
Financial results for H1 2012 Danica Pension’s profit model Profit model Condition/ sensitivity H1 2012 DKK m Danica Traditionel. Mainly risk Can be booked only if investment Risk allowance 656 1 allowance 69 bp of technical return is high enough and if no use of Other -41 provisions (DKK 173 bn) bo
Slide 47: Disclaimer
Financial results for H1 2012 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,