Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — H1 2022 Earnings Presentation
56 slides from Danske Bank A/s's earnings presentation, Sep 7, 2022
Slide 1: Investor Presentation First half 2022
Investor Presentation First half 2022
Slide 2: Agenda
Investor Presentation – First half 2022 Agenda 01. Danske Bank – brief overview 2–7 02. Financial highlights – first half 2022 8 – 14 03. Business & Product Units 15 – 19 04. ESG, Sustainability, Financial Crime Prevention 20 – 28 05. Credit Quality & Impairments 29 – 37 06. Capital 38 – 41 07. Fund
Slide 3: We are a Nordic universal bank with strong regional roots
Investor Presentation – First half 2022 We are a Nordic universal bank with strong regional roots Finland (AA+) 3.3 m 2,100+ 21,000+ 3rd largest personal and business customers large corporate and institutional employees in Market share: 10% customers 10 countries Share of Group lending: 8% GDP grow
Slide 4: Taking stock as we approach the final phase of the Better Bank plan
Investor Presentation – First half 2022 Taking stock as we are approaching the final phase of the Better Bank plan; good traction towards our 2023 ambitions and 8.5 - 9% ROE target 2019: Inception Today More robust and efficient organisation Invested in strengthening the control environment: Curre
Slide 5: Traction towards targets remains positive across our sustainability indicators
Investor Presentation – First half 2022 Traction towards targets remains positive across our sustainability indicators Sustainable finance Sustainable operations Impact initiatives Responsible Sustainable Governance & Employee Environmental Entrepreneur- Financial investing financing integrity well-
Slide 6: Our Path to Financial Crime Transformation
Investor Presentation – First half 2022 Our Path to Financial Crime Transformation 2020 2021 2022 2023 A comprehensive We automate our Group-wide Financial We continue our Policies and We refresh due transaction monitoring Crime Plan is launched ongoing dialogue instructions are diligence data of to
Slide 7: Nordic macroeconomic data
Investor Presentation – First half 2022 Nordic macroeconomic data EU-27 Denmark Sweden Norway Finland Real GDP, constant prices (index 2005 = 100) Inflation (%) Property prices (index 2005 = 100) Consumer spending (%-change from same period 2019) Unemployment (%) Apartment prices (index 2005 = 100)
Slide 8: Net profit outlook for 2022
Investor Presentation – First half 2022 Net profit outlook for 2022*: We expect net profit to be in the range of DKK 10-12 bn, driven by volume growth and continued solid credit quality We continue to expect income from core banking activities to be higher in 2022, as higher net interest income driv
Slide 9: Financial highlights – first half 2022
Financial highlights – first half 2022
Slide 10: H1 highlights – business momentum continues, despite turbulent conditions
Investor Presentation – First half 2022 H1 highlights – business momentum continues, despite turbulent conditions for rates business. Credit quality remains strong with limited impairments and healthy provisions Highlights Profit development H1-22 vs H1-21 (DKK m) • Despite the uncertain operating e
Slide 11: Financial results – first half 2022
Financial results – first half 2022 Income from core banking activities up 2% y-o-y driven by improved NII trend; trading and insurance income significantly impacted by rates; credit quality remain robust Key points, H122 vs H121 Income statement and key figures (DKK m) • Net interest income uplift
Slide 12: NII: Positive volumes and improving credit demand
Investor Presentation – First half 2022 NII: Positive volumes and improving credit demand coupled with full effect from repricing initiatives continue to support the improving NII trend Highlights Net interest income, Q222 / Q1 22 (DKK m) -55 • Net interest income continued the positive trend, suppo
Slide 13: Fee: Fee performance remains strong in core banking activities
Investor Presentation – First half 2022 Fee: Fee performance remain strong in core banking activities, mitigating impact from lower AuM and financial markets headwinds Highlights Net fee income, YTD and QoQ Capital markets 6,537 6,595 • Y-o-Y: Excl. landmark ECM deal, income is largely in line Capit
Slide 14: Trading: Continued support to customers through extraordinary conditions
Investor Presentation – First half 2022 Trading: Continued support to customers through extraordinary fixed income market conditions; trading income negative in Q2, driven by losses in Rates & Credit at LC&I Highlights Net trading income (DKK m) LC&I Group Functions North. Ireland BC PC xVA LC&I ex.
Slide 15: Expenses: Underlying progress on efficiency despite high remediation costs
Investor Presentation – First half 2022 Expenses: Underlying progress on efficiency despite continually high remediation costs Highlights Expenses, H1-22 vs H1-21 (DKK m) • Progress on structural cost take-out despite ramp-up of 12,770 12,793 AML/compliance and remediation work, as well as SE bank t
Slide 16: Business & Product Units
Bank Business & Product Units
Slide 17: Business unit progress (1/2): Personal Customers
Investor Presentation – First half 2022 Business unit progress: Continued progress on our journey towards 2023 ambitions (1/2) Key financial metrics Key commercial highlights YoY QoQ Lending* • PC DK: Momentum in terms of regaining our fair share of the market for bank loans and customer flow contin
Slide 18: Business unit progress (2/2): LC&I and Danica
Investor Presentation – First half 2022 Business unit progress: Continued progress on our journey towards 2023 ambitions (2/2) Key financial metrics (index) Business highlights Income breakdown (DKKbn) Lending General Banking • Significant lending growth as we supported customers with credit since a
Slide 19: Business unit progress: Northern Ireland
Investor Presentation – First half 2022 Business Unit Progress: Continued progress on our journey towards 2023 ambitions (3/3) Key financial metric (index) Business highlights H1 22/ H1 21 Q2-22/Q1-22 Lending 127 151 • Strong performance in core banking lines supported by UK rate hikes and strong 10
Slide 20: Realkredit Danmark portfolio overview
Investor Presentation – First half 2022 Realkredit Danmark portfolio overview: Continued strong credit quality with decreasing LTVs and continued improving trend for higher margin products Highlights Retail loans, Realkredit Danmark, Q2 22 (%) Fixed rate (10 yrs-30 yrs) Interest-only ( ) = Q1-22 Por
Slide 21: Sustainability
Bank Sustainability
Slide 22: Sustainability is an integrated element of our corporate strategy
Sustainability is an integrated element of our corporate strategy and our corporate targets Sustainability critical in Better Danske Bank’s 2023 sustainability strategy aim to drive Selected highlights Bank plan to improve bank for all change by utilising the power of finance stakeholders by 2023 Cu
Slide 23: Continued progress on sustainable finance in Q2
Investor Presentation – First half 2022 Continued progress on sustainable finance in Q2 – highlights from the first half year Enhanced sustainable investment offerings New attractive energy renovation loan • Continued strengthening of offerings, translating into • Updated home loan for energy improv
Slide 24: Danske Bank aspires to Nordic leadership in sustainable finance
Investor Presentation – First half 2022 On sustainable finance, Danske Bank aspires to Nordic leadership – our sustainable finance framework has been developed to drive and integrate that ambition Group ambition for Be a leading bank in the Nordics on sustainable finance and the leading bank in Denm
Slide 25: Deep dive: ESG integration in lending operations
Deep dive: Overview of ESG integration in Danske Bank’s lending operations Multiple types of approaches are implemented to consider ESG factors both at company and portfolio levels 1. Position statements 2. Single-name ESG analysis 3. Portfolio-level ESG analysis Our position statements are a key
Slide 26: International agreements, partnerships and standards supported
Danske Bank supports a range of international agreements, goals, partnerships and standards relating to sustainability – some of these are listed below Principles for Responsible Net-Zero Banking Alliance Net-Zero Asset Managers Net-Zero Asset Owner Principles for Responsible Banking A worldwide ini
Slide 27: Financial crime prevention – increase in full-time employees
Investor Presentation – First half 2022 Financial Crime prevention - increase in number of full-time employees Group headcount ~3,600 Full-time employees dedicated to the financial crime prevention agenda* 2015 2016 2017 2018 2019 2020 2021 2022 7 Second Line headcount Employees working in Financial
Slide 28: Committee governance for Compliance Risks
Investor Presentation – First half 2022 Committee governance for Compliance Risks Financial Crime Remediation Steering Compliance Risk Conduct and Compliance Committee Committee Committee • Provides governance structure and • Second Line Committee responsible for • Board level committee that oversee
Slide 29: Regulatory Engagements
Investor Presentation – First half 2022 Regulatory Engagements • We engage in ongoing dialogue with our regulators through regular meetings with the Financial Supervisory Authority (FSA) and Supervisory College to ensure aligned expectations and transparency between our regulators and the Bank Ongoi
Slide 30: Credit quality & Impairments
Credit quality & Impairments
Slide 31: Impairments: Continued strong credit quality and prudent buffers
Investor Presentation – First half 2022 Impairments: Continually strong credit quality and prudent buffers in place; modest macro-charges albeit updated outlook Highlights Impairment charges by category* (DKK bn) 4.3 Credit quality deterioration: oil & gas Post-model adjustments • Credit quality rem
Slide 32: Overall strong credit quality in portfolios exposed to macro developments
Investor Presentation – First half 2022 Overall strong credit quality in portfolios exposed to current macro developments CRE: Generally low exposure to property development Retail customers: Strong household finances and Agriculture: Well-provisioned agriculture book activities mortgage back-book m
Slide 33: Strong footprint within retail lending
Investor Presentation – First half 2022 Strong footprint within retail lending Lending by segment 1 Q2 22 (%) Credit exposure by industry Q2 22 (%) Personal Customers DK Personal customers 37.1 Personal Customer Nordic Commercial property 11.4 Business Customers Public institutions 10.1 Asset Financ
Slide 34: Credit quality: Low level of actual credit deterioration
Investor Presentation – First half 2022 Credit quality: Low level of actual credit deterioration Stage 2 and 3 as % of net exposure Allowance account by business unit (DKK bn) 11 Stage 2 net exposure (% of Total, lhs) 4 PC BC LC&I N.I. Other (Non-core) 10 8.7 Stage 3 net exposure (% of Total, rhs) 2
Slide 35: Fossil fuels (coal and oil) exposure
Investor Presentation – First half 2022 Fossil fuels (coal and oil) exposure Key points, Q2 22 • This page shows the current exposure to fossil fuels and includes customers involved in production, refining, and distribution (including shipping) of oil as well as utilities producing heat or power wit
Slide 36: Credit exposure: Limited exposure to agriculture and oil
Investor Presentation – First half 2022 Credit exposure: Limited and well-impaired exposure to agriculture and oil Agriculture exposure Oil-related exposure • African Swine Fewer (ASF), which spread to Germany in Q3 2020, Covid-19, Chinese imports, and the RU/UA war is causing uncertainty for the in
Slide 37: Credit exposure: Transportation and construction and building materials
Investor Presentation – First half 2022 Credit exposure: Limited exposure to transportation and higher focus on construction and building materials sector Transportation exposure Construction and Building materials • Total gross exposure* slightly decreased by DKK 0.1bn from the previous quarter. •
Slide 38: Credit exposure: Retailing and commercial real estate
Investor Presentation – First half 2022 Credit exposure: Limited exposure to retailing and stable credit quality in commercial real estate Retailing Commercial real estate • Gross exposure decreased DKK 11bn from the preceding quarter, driven mainly by a decrease in the residential segment. • Overal
Slide 39: Capital
Bank Capital
Slide 40: Capital: Strong capital base; CET1 ratio of 17.1%
Investor Presentation – First half 2022 Capital: Strong capital base; CET1 capital ratio of 17.1% (buffer of 4.5%) Capital ratios, under Basel III/CRR (%) Current capital buffer structure (%) 23.0 Tier 2 Hybrid T1/AT1 Pillar II component (total 3.4%) CET1 22.4 Countercyclical capital buffer 21.3 21.
Slide 41: Strong CET1 capital build-up since 2008
Investor Presentation – First half 2022 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) well in excess of DKK 100 bn Common Equity Tier 1, 2008 – 2022 H1 (DKK bn) +DKK 70 bn 144 152 147 126 130 134 133 133 127 133 119 107 77 79 85 2008 2009 2010 2011 2012 2013 2014 2015
Slide 42: Fully compliant with MREL and subordination requirement
Investor Presentation – First half 2022 Fully compliant with MREL and subordination requirement; expect to cover MREL need with both preferred and non-preferred senior MREL and subordination requirement* and eligible funds; Q2 2022; Comments DKK bn (% of Group REA) PS > 1y NPS > 1y CET1, AT1, T2 +21
Slide 43: Funding & Liquidity
Bank Funding & Liquidity
Slide 44: Funding structure and sources
Investor Presentation – First half 2022 Funding structure and sources: Danish mortgage system is fully pass-through Loan port folio and long-term funding, Q2 22 (DKK bn) Funding sources* (%) 59% 2,300 58% Q1-22 167 Senior & Q2-22 NPS bonds 1,819 1,156 Deposits Bank loans 679 13% 13% Bank mortgages 3
Slide 45: Funding programmes and currencies
Investor Presentation – First half 2022 Funding programmes and currencies Covered bonds by currency, end-Q2 2022 Largest funding programmes, end-Q2 2022 Utilisation EMTN Programme 43% 23% 26% EUR Limit – EUR 35bn SEK NOK Global Covered Bond 66% Limit – EUR 30bn 51% ECP Programme Total DKK 143 bn 0%
Slide 46: Funding and liquidity: LCR compliant at 155%
Investor Presentation – First half 2022 Funding and liquidity: LCR compliant at 155% Changes in funding,* 2022 (DKK bn and bp) Long-term funding excl. RD (DKK bn)*** Cov. bonds Senior Non-Preferred Senior Funding plan Completed 30bp 100 156bp 79 70-90 75 69 40bp 189bp 114bp 37 26bp 30 13bp 22 30bp 2
Slide 47: Danske Bank covered bond universe
Investor Presentation – First half 2022 Danske Bank covered bond universe, a transparent pool structure1 Danske Bank A/S C-pool S&P AAA Fitch AAA Residential mortgages • Denmark, D-pool • Norway, I-pool • Sweden, Danske Hypotek AB Danske Bank A/S I-pool Finland • Finland, Danske Mortgage Bank Plc S&
Slide 48: Credit & ESG Ratings
Bank Credit & ESG Ratings
Slide 49: Danske Bank's credit ratings
Investor Presentation – First half 2022 Danske Bank’s credit ratings Long-term instrument ratings Credit rat ings remain unchanged in Q2 2022 Fitch Moody’s Scope S&P Credit ratings remain unchanged in Q2 2022, and include the first round of AAA Aaa AAA AAA fallout from the Russia/Ukraine war. AA+ Aa
Slide 50: Danske Bank's ESG ratings
Investor Presentation – First half 2022 Danske Bank’s ESG ratings We have chosen to focus on five providers based on their importance to our investors Q2 2022 Q1 2022 End 2021 End 2020 End 2019 Range B 200 companies, out of the 13,126 B B B C A to F (A highest rating) analysed, made the climate chan
Slide 51: Three distinct methods for rating banks
Investor Presentation – First half 2022 Three distinct methods for rating banks Danske Bank’s rating Rating methodology Potential Extraordinary Anchor + 1 + 2 + 3 + 4 = CRA = SACP1 + external + ALAC = Issuer rating SACP1 adjustment 2 support A+ bbb+ +1 +1 -1 0 0 a- 0 +2 (Negative) 1=Business Positio
Slide 52: Tax & Material one-offs
| Danske| Bank Tax & Material one-offs
Slide 53: Tax
Investor Presentation – First half 2022 Tax Actual and adjusted tax rates (DKK m) Tax drivers, Q2 2022 • The actual tax rate of 26.1% (excluding prior-year's adjustments) is higher than the Danish rate of 22% - Q222 Q122 Q421 Q321 Q221 due primarily to the tax effect from tax exempt income/expenses
Slide 54: Material extraordinary items in 2022
Investor Presentation – First half 2022 Material extraordinary items in 2022 One-off items Effect P&L line affected (DKK m) Q1 Gain from sale of international private banking activities in Luxembourg 421 Other income (pre-tax) Gain from sale of Danica Norway 415 Net income from insurance (tax exempt
Slide 55: Contacts
Investor Presentation – First half 2022 Contacts Investor Relations Group Treasury and Funding Claus Ingar Jensen Mobile +45 25 42 43 70 Kimberly Bauner Mobile +46 73 700 19 39 Head of IR clauj@danskebank.dk Head of Group Treasury tagg@danskebank.dk Bent Callisen Direct +45 45 12 84 08 Nicolai Brun
Slide 56: Disclaimer
Investor Presentation – First half 2022 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 solici tation of an offer to buy or acquire securities of Danske Bank A/S in any jurisdiction, including the Unit