Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — Debt Investor Presentation (August 2011)
58 slides from Danske Bank A/s's debt investor presentation, August 2011
Slide 1: Danske Bank
Danske V1] oe Danske Bank August 2011 ,
Slide 2: Disclaimer
This presentation has been prepared solely for use at this presentation. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation does not constitute or form part of and should not be constr
Slide 3: Overview of Danske Bank; Macro Economy; Financial Performance; Funding & Liquidity
I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 3
Slide 4: Danske Bank is a strong Nordic franchise
Danske Bank is a strong Nordic franchise Lending divided by Banking Activity Q2 2011 Danmark 56% 5.0 million customers Finland Finland 9% Market position: Leader 2.1 million active Internet customers Branches: 120 Market share: 12% Market rank: 3 662 branches in 15 countries* Loan growth (Y/Y): 6% O
Slide 5: Credit exposure
Credit exposure Credit exposure from lending activity, end-H1 2011 - DKK 2,272 bn Central and local Subsidised housing governments, 5% companies, 5% Banks, 6% Personal customers, 38% Diversified financials, 9% Other financials, 3% Energy and utilities, 2% Consumer, 9% Other industrials, Commercial 7
Slide 6: Danske Bank and Covered Bond rated by three major agencies
Danske Bank and it’s Covered Bond Viechle is rated by the three major international rating agencies Negative outlook Negative outlook Negative outlook Short term Long term Short term Long term Short term Long term P-1 Aaa A-1+ AAA F1+ AAA P-2 Aa1 A-1 AA+ F1 AA+ P-3 Aa2 A-2 AA F2 AA Aa3 A-3 AA- F3 AA
Slide 7: Agenda
I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 7
Slide 8: Economic recovery is still modest
Economic recovery is still modest GDP growth, Y/Y (%) Public finances (% of GDP) DK NO SE FI IR BAL Eurozone Gross public debt Budget balance Sovereign rating 8 2010 2011 & outlook (S&P) Denmark 43.7 -4.0 AAA/Stable Sweden 39.7 0.0 AAA/Stable 4 Norway 31.0 13.0 AAA/Stable Finland 48.4 -1.4 AAA/Stabl
Slide 9: House prices
House prices Danish house prices by region (%) House prices and consumption – Denmark (DKK) House price per sq m Consumption, bn (rha) Region Prices Change Change in Preview* peaked since peak Q4 10 H1 11 16,000 200 Copenhagen Q3 2006 -19.4 1.3 Zealand Q2 2007 -24.1 -3.9 12,000 180 South Denmark Q2
Slide 10: Agenda
I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 10
Slide 11: Earnings improved on higher NII and strong trading income
Earnings improved because of higher NII and strong trading income but were limited by one-off expenses Net profit of DKK 1.9 billion in H1 2011 and DKK 1.2 billion in Q2 2011 in line with expectations Net interest income improved in Q2, mainly because of higher deposit margins Trading income remaine
Slide 12: NII improved in Q2 and trading income remained strong
NII improved in Q2 and trading income remained strong Income statement & key figures (DKK m) H1 2010 H1 2011 Index Q1 2011 Q2 2011 Index Net interest income 11,934 11,339 95 5,554 5,785 104 Net fee income 4,208 4,142 98 2,093 2,049 98 Net trading income 5,101 5,420 106 2,975 2,445 82 Other income 2,
Slide 13: Net interest income up 4% Q/Q
Net interest income up 4% Q/Q on increased deposit margins and one-offs Quarterly net interest income (DKK m) Quarterly change in net interest income (DKK m) Cost of gov. hybrid NII Q1 11 5,554 +4% RD 48 Deposit margin 145 Lending margin 71 Volume 10 5,927 5,840 6,069 5,785 5,554 One-offs 64 No. of
Slide 14: Value at risk and PIIGS exposure remains limited
Value at risk and PIIGS exposure remains limited, trading income driven by derivatives activities in Q2 Breakdown of net trading income (DKK m) Danske Markets income split (%) H1 2010 H1 2011 Index Q1 2011 Q2 2011 Index Bonds & DCM Forex & money market Danske Markets 3,759 3,659 97 2,270 1,389 61 Re
Slide 15: Continued focus on expenses
Continued focus on expenses Expenses (DKK m) Quarterly trend in expenses (DKK m) Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q1 11 7,351 Expenses 6,423 6,836 6,294 6,457 7,351 6,678 Integration expenses 46 46 47 45 45 45 Dep. guarantee 555 Amortisation of intangibles 127 126 127 127 127 127 Severance paymen
Slide 16: Impairment charges are improving, albeit slowly
Impairment charges are improving, albeit slowly Quarterly loan impairment charges (DKK m) Individual impairments – Group ex Baltics (DKK m) Total impairments Collective impairment charges New Increased Reversals 4,000 6,000 3,000 3,000 2,000 1,000 0 0 71 bp 64 bp 62 bp 59 bp 56 bp -1,000 -3,000 Q2 1
Slide 17: Impairment charges driven by SMEs and large corporates
Impairment charges driven by SMEs and large corporates in Q2 2011 Impairments by customer segment (DKK bn) Net exposures in rating categories 10 and 11 (DKK bn) SMEs Large corporates Personal Financials Rating category 10 Rating category 11 4 40 2.8 3 35 2.1 2 30 1 1.0 25 0.1 0 -0.4 -1 20 Q210 Q310
Slide 18: Nordic impairments: Denmark is moving sideways
Nordic impairments: Denmark is moving sideways Denmark, 56% of Group’s lending (DKK m) Finland, 9% of Group’s lending (DKK m) 2,254 Allowance* 16,660 m Allowance* 1,890 m Individual 147 bp Individual 117 bp 1,498 Collective 28 bp Collective 12 bp 1,162 84 790 742 26 29 15 -34 Q2 10 Q3 10 Q4 10 Q1 11
Slide 19: Northern Ireland and Ireland still dragging on
Other impairments: Northern Ireland and Ireland are still dragging on Northern Ireland, 3% of Group’s lending (DKK m) Ireland, 4% of Group’s lending (DKK m) Allowance* 3,856 m Allowance* 12,555 m Individual 730 bp Individual 1,731 bp Collective 59 bp Collective 118 bp 1,850 606 1,647 464 1,213 1,283
Slide 20: Strong capital position strengthened by share offering
Strong capital position has been strengthened further by the share offering Capital ratios: CRD/Basel II (%) Risk-weighted assets (DKK bn) Total capital Tier 1 Core tier 1 Q1 2011 855 18.8 17.4 Market risk 1 16.6 14.6 Change in lending 8 Solvency need Exposure 3 12.3 10.0 Other 1 Q2 2011 860 Q1 11
Slide 21: Danske Bank passed the European stress test
Banca March 23.5 Irish Life & P OTP Sydbank 13.6 Caisse d’Epargne Nordic peers Danske Bank 13.0 Jyske Bank 12.8 PKO Bank Pohjola Bank 11.6 Rabobank NL SEB 10.5 LB Berlin Dexia Valletta KBC Note: Not all 90 participating banks are shown in the chart. Allied Irish Hypo Real Estate Core tier 1 ratio, a
Slide 22: Outlook for 2011
Financial results for Q2 2011 Outlook for 2011: Tailwinds will increase net interest income; impairments will remain high but will be lower than in 2010 Macroeconomic recovery continues; rising short-term rates and share offering will favour NII Central bank hikes and increasing margins in Denmark w
Slide 23: Agenda
I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity 23
Slide 24: 2011 funding almost completed
2011 funding almost completed, with approximately DKK 10 bn left Funding need (DKK bn) Issued funding, types and duration (DKK bn) Estimated funding needed Pre-funded Issued funding Covered bonds Senior 5-10 11 years 182 10 2-5 20 19 years 11 5-17 years 63 51 2-6 1 years 2009 2010 2011 2010 Q1 11 Q2
Slide 25: Liquid, highly rated bond portfolio
Liquid, highly rated bond portfolio Liquid Bond portfolio of DKK 459 bn (%) 12-month liquidity,* end of period (DKK bn) Q4 2008 Q4 2010 Q2 2011 300 Credit bonds Commercial paper Other Quasi-government covered 2 2 4 bonds Swedish 5 200 covered bonds Danish 12 mortgage 41 bonds 100 0 34 Governments &
Slide 26: Well-diversified funding position
Well-diversified funding position Funding position (%) Funding sources (%) Q4 08 Q2 11 40 Central banks Subordinated debt Equity 3 30 4 5 Banks, net 5 Deposits 20 33 S-T bonds 5 10 Covered bonds 5 0 Short-term bonds Due to credit inst. Mortgage finance Shareholders’ eq. Long-term bonds 7 L-T bonds (
Slide 27: Danske Bank Group Covered Bond Universe
Danske Bank Group Covered Bond Universe Legislation and history behind three business lines • Covered Bond issuer since 1851 • Covered Bond issuer since 2007 • Sampo Housing Loan Bank (SHLB) • Based on Danish legislation • Based on Danish legislation • Specialized Mortgage Bank • Specialized Mortgag
Slide 28: The three cover pools and Sampo
The three cover pools and Sampo RETAIL RETAIL COMBINED RETAIL Characteristics Cover Pool D Cover Pool I Cover Pool C SHLB Pool notional DKK 35.8bn DKK 100bn DKK 9.7 bn DKK 25.5bn (€ 4.8bn eqv) (€13.4bn eqv) (€ 1.3bn eqv) (€ 3.4bn eqv) Number of Loans 59,090 120,267 3,652 71,905 Substitution collater
Slide 29: Danske Bank's funding team
Danske Bank’s funding team Steen Blaafalk Tel.: + 45 45 14 63 60 Senior Executive Vice President E-mail: steen.blaafalk@danskebank.dk Peter Holm Tel.: + 45 45 12 84 85 Claus Jensen Tel.: +45 45 12 84 83 Senior Vice President E-mail: holm@danskebank.dk Chief Funding Manager E-mail: clauj@danskebank.d
Slide 30: www.danskebank.com/ir
www.danskebank.com/ir 30
Slide 31: Appendix
Appendix Tax 32 NII and margin developments 33-35 Credit 36-44 Realkredit Danmark 45-47 Business areas 48-58 31
Slide 32: Adjusted tax rate close to normal
Adjusted tax rate close to normal, but actual rate fluctuates owing to Ireland and one-offs Explanation of tax rate (DKK m) Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Pre-tax profit 1,741 1,870 1,448 1,499 2,081 Pre-tax loss, BA Ireland 1,553 942 1,119 1,204 1,780 Permanent nontaxable difference* -649
Slide 33: Net interest income development
Financial results for Q2 2011 Net interest income development Net interest income (DKK m) Net interest income in Realkredit Danmark (DKK m) 2009 2010 2011 H1 10 11,934 635 RD 72 Deposit margin 595 Lending margin 569 355 Volume 277 One-offs 143 270 247 Equity 217 170 Allocated funding 235 128 132 100
Slide 34: Net interest margins by business unit
Net interest margins by business unit Denmark Norway Finland N. Ireland Baltics CIB Sweden Ireland Group Net interest margins, NII/loan stock (%) 2.80 2.40 2.00 1.60 1.20 0.80 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 34 2009 figures are not comparable with figures for Q1 2010 and
Slide 35: Deposit margins benefitting from increase in leading rates
Deposit margins are benefitting from the increase in leading rates, and the pressure on lending margins is easing Quarterly lending margins (%) Quarterly deposit margins (%) 1.19 0.41 Q310 1.17 0.47 Q410 Denmark* 1.13 0.63 1.11 0.71 Q111 0.75 0.24 Q211 0.72 0.29 Finland 0.59 0.49 0.53 0.73 1.11 0.55
Slide 36: Denmark dominated by collective impairments
Denmark is dominated by collective impairments against home loans and agriculture Impairments at Retail Denmark, Q2 2011 (DKK m) Debt level and land prices (index 1996=100) Individual Collective Total Price of land Average debt per farm 800 Bank Personal customers 255 493 748 Agriculture 146 300 446
Slide 37: Impairments
Impairments Impairments distributed by segment (%) Impairments, reversals and write-offs (DKK m) SMEs CRE Personal Financials Large corp. Allowance end-2007 4,900 69 Gross impairments 81,968 37 30 29 Reversals 20,643 16 17 8 Write-offs 21,626 4 4 Allowance end-Q2 2011 44,599 -14 2008 - Q1 2011 Q2 20
Slide 38: Commercial property exposure
Commercial property exposure Unsecured Value of collateral Collective impairments Individual impairments Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) 115.1 NPL 11 % 20.9 NPL 75 % 10.4 NPL 36 % 2.7 NPL 42 % 1.5 4.9 35.0 15.6 2.6 2.0 8.3 6.7 5.4 1.1 3.8 77.1 0.1 0.4 1.7
Slide 39: Credit exposure to commercial property and construction
Credit exposure to commercial property and construction segments Credit exposure broken down by business unit, Q2 2011 (DKK bn) Commercial Developer subsegment Construction and Sector property of commercial property building materials in total Denmark 114.0 0.7 6.1 120.1 Finland 13.0 0.5 3.0 16.0 Sw
Slide 40: Residential mortgage exposure
Residential mortgage exposure Unsecured Value of collateral Collective impairments Individual impairments Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) NPL 1 % NPL 5 % NPL 1 % NPL 15 % 506.0 25.1 14.2 12.1 1.0 2.0 90.0 4.6 10.4 20.3 12.3 414.1 1.8 0.6 1.2 6.3 0.2 0.2 1
Slide 41: Danish agricultural sector
Danish agricultural sector Breakdown of loan portfolio (%) Agricultural exposure and allowance (DKK bn) Business unit Exposure Allowance Coverage Realkredit Danmark 44.7 0.1 0.1% Retail Banking Denmark 9.7 2.0 17.1% Other Other business units 14.6 0.3 2.0% 13 Total exposure 69.0 2.3 3.3% Agriculture
Slide 42: Upgrades/rating changes ratio
Upgrades/rating changes ratio above 50 in the Nordic countries but lagging in Denmark Relation between upgrades and total rating changes, corporates, 12-month rolling average (%) Denmark Norway Sweden Finland CIB 100 Upgrades > downgrades 50 Downgrades > upgrades 0 2009 2010 2011 42
Slide 43: Gross exposure subject to individual impairment test
Gross exposure subject to individual impairment test Gross exposure in rating categories 10 and 11 (bp) Q3 10 Q4 10 Q1 11 Q2 11 4,000 3,861 3,000 2,000 1,924 1,364 1,000 776 593 454 403 362 287 165 0 Denmark Finland Sweden Norway Northern Ireland Baltics CIB Other Act. Group Ireland 43
Slide 44: Economic climate in Denmark still lagging other Nordics
Economic climate in Denmark is still lagging the other Nordics Business confidence indicator (index 1996=100) Bankruptcies (index 1996=100) Denmark Sweden Finland 140 500 400 120 300 100 200 80 100 60 0 1996 2000 2004 2008 2012 1996 2004 2011 Note: Indexes are seasonally adjusted. 44 Source: EcoWin.
Slide 45: Mortgage bonds at Realkredit Danmark
Mortgage bonds at Realkredit Danmark Facts, end-Q2 2011 Breakdown of loans by LTV and rating, end-Q2 2011 (%) • 164 repossessed properties and 3,262 arrears out of LTV/rating 1-3 4-7 8-11 Total 405,521 loans ( 0.8%) 0-20 8.1 23.4 4.3 35.8 • 1% of loans with LTV > 80 % and low rating 20-40 5.4 19.7 3
Slide 46: Realkredit Danmark: Higher OC requirement from Moody's
Realkredit Danmark: Higher OC requirement from Moody’s sharp contrast to DKK 24.8 bn solvency Capitalisation, overcollateralisation (OC) and stress test, end-Q2 2011 (DKK bn) 147.0 +50.0 97.0 +34.1 33 years 62.9 17.0 49.9 45.9 29.0 24.8 4.4 0.4 Solvency Capital base + senior S&P Moody’s Moody’s Mood
Slide 47: Retail Banking Denmark
Retail Banking Denmark: Drop in expenses more than compensates for 7 % decline in NII Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate 0% Net interest income 6,393 5,918 93 Net fee income 1,703 1,631 96 0% Other income 478 591 124 Total income 8,574 8,
Slide 48: Retail Banking Finland
Retail Banking Finland: 3 % increase in total income more than offset by increasing expenses Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 1,006 1,002 100 +3% Net fee income 495 501 101 +6% Other income 211 263 125 Total income 1
Slide 49: Retail Banking Sweden
Retail Banking Sweden: 20 % increase in NII driven by higher deposit margins Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 968 1,158 120 +9% Net fee income 299 304 102 +16% Other income 84 112 133 96 98 101 101 Total income 1,351
Slide 50: Retail Banking Norway
Retail Banking Norway: Profit before tax fell by half owing to high impairments in Q1 2011 and squeezed mortgage margins Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate -3% Net interest income 856 760 89 Net fee income 155 130 84 +9% Other income 330
Slide 51: Banking Activities Northern Ireland
Banking Activities Northern Ireland: Rise in loan impairment charges Income statement (DKK m) Trend in lending volume* (DKK bn) H1 2010 H1 2011 Index Retail Corporate -10% Net interest income 602 548 91 Net fee income 150 151 101 -5% Other income 54 72 133 29 30 28 28 Total income 806 771 96 26 Expe
Slide 52: Banking Activities Ireland
Banking Activities Ireland: Negative result driven by large loan impairment charges Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 548 456 83 -10% Net fee income 55 31 56 -6% Other income 25 23 92 45 44 43 Total income 628 510 81
Slide 53: Banking Activities Baltics
Banking Activities Baltics: Reversal of impairments compensates for declining profit Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 249 240 96 -17% Net fee income 76 71 93 -8% Other income 56 48 86 Total income 381 359 94 14 14 13
Slide 54: Corporate & Institutional Banking
Corporate & Institutional Banking: Pressure on lending margins is easing and profit trend is positive Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2010 H1 2011 Index -8% Net interest income 921 952 103 111 107 103 101 102 Net fee income 528 437 83 Other income 37 56 151 Tota
Slide 55: Danske Markets: Strong first half
Danske Markets: Strong first half of the year driven by high customer activity Income statement (DKK m) Market position in the Nordics (rank) H1 2010 H1 2011 Index Product area Denmark Sweden Norway Finland Fixed income 2 1 3 3* Total income 4,570 4,576 100 Forex 2 4 4 2* Expenses 1,341 1,424 106 De
Slide 56: Net insurance income: Risk allowance
Net insurance income: Risk allowance from three out of four groups Net income from insurance business (DKK m) Traditionel customers’ funds (%) H1 10 H1 11 Index Q1 11 Q2 11 Index Investment return Investments & liabilities Premiums (bn) 12 14 117 7 7 99 Traditional (insurance result) 555 547 99 264
Slide 57: Danske Capital: Rise in income
Financial results for Q2 2011 Danske Capital: Rise in income and reversed impairments outweigh higher expenses Income statement (DKK m) AuM – customer breakdown (DKK bn) H1 2010 H1 2011 Index Private equity Institutional Retail* Life insurance Net interest income 69 55 80 590 602 598 603 558 12 12 N
Slide 58: Net insurance income: Risk allowance
Net insurance income: Risk allowance from three out of four groups Net income from insurance business (DKK m) Traditionel customers’ funds (%) H1 10 H1 11 Index Q1 11 Q2 11 Index Investment return Investments & liabilities Premiums (bn) 12 14 117 7 7 99 Traditional (insurance result) 555 547 99 264
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