Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — Investor Day (June 2023)
73 slides from Danske Bank A/s's investor day presentation, Jun 7, 2023
Slide 1: Focused Nordic leader with strong profitability
Focused Nordic leader with strong profitability Investor update Copenhagen, June 7, 2023
Slide 2: Agenda for the day
08:00 – 08:30 Welcome and registration 08:30 – 09:00 CEO presentation Carsten Egeriis 09:00 – 09:25 Financial performance Stephan Engels Agenda 09:25 – 09:40 Q&A 09:40 – 09:45 Short break for the day 09:45 – 10:45 Strategic priorities by business units Berit Behring (LC&I), Johanna Norberg (BC), Chr
Slide 3: Who we are – Our recent journey
Who we are – Our recent journey Carsten Egeriis, Chief Executive Officer 3
Slide 4: Nordic leader with a unique position
Who we are Nordic leader with a unique position Corporate market share2 A strong foundation Retail market share2 Top 2 corporate, institutional and Share of group lending3 business bank in the Nordics1 Sweden 8% 3% 15% Leading and scalable retail bank in Denmark and Finland Norway Finland Positioned
Slide 5: Nordics – an attractive, stable and innovative region for banking
Who we are Nordics – an attractive, stable and innovative region for banking 1 Attractive macro environment 2 Digital leaders Digital Economy and GDP growth (index: 2013=100)1 Society Index2 (EU) 125 Nordics 1. Finland 5. Ireland 120 115 Euro area 2. Denmark 6. Malta 110 3. Netherlands 7. Spain 105
Slide 6: Positioned in the most attractive segments with a strong product offering
Who we are Positioned in the most attractive segments with a strong product offering Most attractive customer segments Strong product offering and partnerships Large Corporates & Institutions • Core relationship with 59% of Nordic Tier 1 Institutions and 40% of Nordic Large Corporates1 FX and TxB6 •
Slide 7: Attractive business with a sound financial and risk profile
Who we are Attractive business with a sound financial and risk profile Diverse income mix Diverse segment mix Diverse country mix % of total income % of total income % of total income Other1 Other2 Personal Non-Nordic3 9% Customers Finland 6% 15% Denmark 11% 33% LC&I 32% Norway 13% 55% 53% Net fee 3
Slide 8: We have made fundamental changes to become a stronger more resilient bank
Our recent journey We have made fundamental changes to become a stronger more resilient bank Strengthened control environment Business de-risked & re-focused Strengthened organisation Resolution of Estonia matter with Exit of high-risk countries and More customer-focused business US and Danish autho
Slide 9: Accelerated commercial momentum over the past 18-24 months
Our recent journey Accelerated commercial momentum over the past 18-24 months Nordic large corporate lending (index: 2020 = 100) Strengthening leading position Large 126 • Steady long-term growth in lending, capturing market share Corporates 106 100 • Relative capital consumption decreased & Institu
Slide 10: We are significantly exceeding our original targets for 2023
Our recent journey We are significantly exceeding our original targets for 2023 Cost to Income1 2023 targets from previous strategy • Fundamental changes 72% to become a stronger 68% more resilient bank 54% 47% Guidance for 2023 • Accelerated underlying Q2 ‘22 Q3 ‘22 Q4 ‘22 Q1 ‘23 commercial momentu
Slide 11: Strategic priorities – Our plan towards 2026
Strategic priorities Our plan towards 2026 11
Slide 12: Business plan for growth and profitability
Strategic priorities Business plan for growth and profitability Our targets for 2026 13% Growth in Disciplined capital Strong capital Return on Equity focus segments return & cost generation & low risk Leading wholesale Capital allocation towards Strong capital generation >16% CET1 and business bank
Slide 13: Portfolio optimisation and capital allocation to support most profitable opportunities
Strategic priorities Portfolio optimisation and capital allocation to support most profitable opportunities Clear strategic focus in each business area Focused, profitable growth LC&I Fortify leading position in Nordics PC Denmark Focused, profitable growth PC Finland BC mid corp. BC mid corp. Grow
Slide 14: Investing in strategic focus areas
Strategic priorities Investing in 4 strategic focus areas 1. Advisory Further reinforce our advisory and proactive engagement with differentiated expertise for our customers Advisory 2. Digital Continue to strengthen our digital platforms, self- Simple, service, customer journeys and 3rd party integ
Slide 15: 1. Advisory
Strategic priorities 1. Advisory Our starting point What we will do Unique breadth and depth of Improve service model for each segment local expertise across all − New segmentation model in each business unit customer segments − 360-degree view of customers Leading Capital Markets Become even more p
Slide 16: 2. Digital
Strategic priorities 2. Digital Our starting point What we will do Award-winning customer Further strengthen customer experiences and digital setup channels – #1 Mobile Bank in − Continue to reinforce user experience across our digital platforms Denmark and District platform − Invest significantly i
Slide 17: 3. Sustainability
Strategic priorities 3. Sustainability Our starting point What we will do Industry leading Climate Action Large Corporates & Institutions Personal Customers Plan with biodiversity as next Advisory, transition finance and Housing, investments, pensions, priority theme project finance mobility and dai
Slide 18: 4. Simple, Efficient, Secure
Strategic priorities 4. Simple, Efficient, Secure Our starting point What we will do Our ‘One IT’ platform gives us a Increase yearly digital and tech investments by DKK 1 bn strong starting point – highly − Further strengthen focus on customer experiences, data and AI available, secure and scalable
Slide 19: A focused Nordic leader with strong profitability
Strategic priorities A focused Nordic leader with strong profitability Our targets for 2026 13% Growth in Disciplined capital Strong capital Return on Equity focus segments return & cost generation & low risk Leading wholesale Capital allocation towards Strong capital generation >16% CET1 and busine
Slide 20: Financial performance
Financial performance Stephan Engels, Chief Financial Officer 20
Slide 21: Proven ability to grow with commercial momentum picking up
Financial performance Proven ability to grow with commercial momentum picking up Grown income across segments Stabilised cost Strong capital and low loan losses Large +5% Core Common +12% Corporates OPEX1 -2% Equity 12.83 24.8 24.4 149 & Institutions 12.25 (DKK bn) Tier 1 (DKK bn) 133 +15% Business
Slide 22: Significantly ahead of our targets for 2023
Financial performance Significantly ahead of our targets for 2023 Cost to income1 Surpassing our original targets for 2023 of 61% 8.5-9% RoE and C/I of mid-50s 47% Normalisation of interest rates, with more favourable exposure in Denmark and Finland 2019 Cost NII Non-NII 2023 FY Q1 Streamlined the b
Slide 23: Accelerating our commercial momentum and profitability
Financial performance Accelerating our commercial momentum and profitability Focused ambitious growth Disciplined capital return and cost Capital distribution and low risk • Increase returns by targeting • Capital allocation towards most • Dividend policy of 40-60% of the most attractive segments pr
Slide 24: Main assumptions behind our 2026 plans
Financial performance Main assumptions behind our 2026 plans Interest rates, 3 month (%) Wage inflation (%) 4 15 3 10 2 1 5 ~3% Lending growth p.a. 2022 23 24 25 2026 2022 23 24 25 2026 Real GDP growth (%) Unemployment (%) 4 10 <1% 2 Deposit growth p.a. 5 -2 2022 23 24 25 2026 2022 23 24 25 2026 Den
Slide 25: Capital distribution
~45% Cost to income Our 2026 financial targets >16% 13% CET1 Return on Equity Capital distribution • Dividend potential from 2023 to 2026 of above DKK 50 bn (~40% of current market cap) • Accelerated dividend by H1 result targeting the higher end of the 40-60% policy range1 • Ambition for further di
Slide 26: Cost discipline enables increased investments and drive profit
Financial performance Cost discipline enables increased investments and drive profit Return on Equity, 2022-2026 <1% • Normalisation of FCRP <1% 13% and Compliance cost >2.5% 10-11% <1% >1% >1.5% • Increased digital and non- digital investments to drive productivity 6.5%1 • Income to increase from b
Slide 27: Improving profitability across all segments
Financial performance Improving profitability across all segments Return on Allocated Capital, 2022-2026 Large Corporates & Institutions* Business Customers Personal Customers >2pp >5pp >16pp >31% 29% 24% >23% 26% >20% 16% 16% 13% ~29% ~18% ~21% 2022 Q1 ’23 2026T 2022 Q1 ’23 2026T 2022 Q1 ’23 2026T
Slide 28: All segments contribute to income growth
Financial performance All segments contribute to income growth Income development, 2022-2026 (DKK bn) >56 51-53 42 2022 2023E NII Fee income Trading and Other income 2026T Insurance income Share of 2026 contribution PC – Growing in segments with Share of 2026 contribution PC – Increasing share of wa
Slide 29: Cost discipline allows further targeted investment levels
Financial performance Cost discipline allows further targeted investment levels Cost development, 2022-2026 (DKK bn) Stabilising FCRP and Compliance cost following completion of remediation programmes Continuing simplification and 26.5 digitalisation on back of cost ~26 reductions over past 18-24 mo
Slide 30: Increased level of digital and tech investments towards 2026 by DKK 1 bn p.a.
Financial performance Increased level of digital and tech investments towards 2026 by DKK 1 bn p.a. Investments per year, 2023 and 2026 (DKK) Additional investments Reinvested savings Funding baseline Increased funding envelope for +1 bn digital and tech investments next ~4 bn years by DKK 1 bn p.a.
Slide 31: Cost Income ratio improving to ~45%
Financial performance Cost Income ratio improving to ~45% Cost to Income development, 2022-2026 Cost efficiencies 63%1 offsetting inflation and cost of growth Income improvements from both NII and non- NII offsetting headwind from falling rates Targeted investments ~48% will underpin commercial mome
Slide 32: Expected impairment charges of ~8 bps through the cycle
Financial performance Expected impairment charges of ~8 bps through the cycle Loan impairment charges Allowance account (DKK bn) LLP (bps) Loan impairment charges (DKK bn) Stage 1-2 of which PMA Stage 3 22 22 20 19 34 6 6 ~8 bps through 4 3 7 the cycle 8 3 4 7 4 13 13 12 8 7 2019 20 21 2022 2 0 2 2
Slide 33: Strong capital position and ability to distribute
Financial performance Strong capital position and ability to distribute CET1 capital generation and usage (% of Risk Exposure Amount) CET1 requirement Buffer to requirement CET1 capital ratio expected to approach target through capital distribution and REA inflation from growth ~6% ~10% ~1.5% Pruden
Slide 34: Capital distribution
~45% Cost to income Our 2026 financial targets >16% 13% CET1 Return on Equity Capital distribution • Dividend potential from 2023 to 2026 of above DKK 50 bn (~40% of current market cap) • Accelerated dividend by H1 result targeting the higher end of the 40-60% policy range1 • Ambition for further di
Slide 35: Q&A
Q&A 35
Slide 36: 5 minutes break
5 minutes break 36
Slide 37: Large Corporates & Institutions
Large Corporates & Institutions The leading wholesale bank in the Nordics Berit Behring, Head of LC&I 37
Slide 38: We have a strong foundation to build upon
Strategic priorities – Large Corporates & Institutions We have a strong foundation to build upon From 2017 To 2022 Customer-first mindset Nordic Grand Total Prospera #1 #1 Preferred daily banking offering Daily banking net fee income1, DKK 2.9 bn 3.8 bn Strongholds Core relationships with Nordic Tie
Slide 39: We will focus on three growth and profitability levers
Strategic priorities – Large Corporates & Institutions We will focus on three growth and profitability levers 1 Continue corporate growth journey outside Denmark Growth targets 2023E 2026T Income RoAC Grow number of Large Corporate customers in line with new segmentation Large corporates Continue to
Slide 40: Continue corporate growth journey outside Denmark
Strategic priorities – Large Corporates & Institutions 1 Continue corporate growth journey outside Denmark Proven track record in Nordics Platform for growth 2026 targets Grown Large Corporate customers Grow number of corporate with 20% in Sweden since 2021 customers, notably in Sweden +40 Customer
Slide 41: Strengthen and leverage One Corporate Bank platform
Strategic priorities – Large Corporates & Institutions 2 Strengthen and leverage One Corporate Bank platform One Corporate Bank today Digital focus areas 2026 targets Only true Nordic platform – with both scale and depth across customer segments Improve Increase Enhance Winning in daily banking effi
Slide 42: Deepen relationships with Nordic institutions
Strategic priorities – Large Corporates & Institutions 3 Deepen relationships with Nordic institutions Leading Nordic institutional franchise Selected growth investments 2026 targets Core client share of Nordic Tier-1 institutions 1 (%) Capture new growth opportunities from financial sponsors, asset
Slide 43: Large Corporates & Institutions: return on allocated capital
Return on Allocated Capital <50% Cost to Income +2pp 29% ~18% 16% 2022 Q1 ‘23 Cost Income Other1 2026T Cost and Income Other Income growth from new customers, higher Increased capital due to higher regulatory Large Corporates share of ancillary business and deeper relationships with Nordic instituti
Slide 44: Business Customers
Business Customers The corporate banking partner for tomorrow's opportunities Johanna Norberg, Head of Business Customers 44
Slide 45: A strong presence in the most attractive customer segments
Strategic priorities – Business Customers A strong presence in the most attractive customer segments Small corporates Mid corporates Mid corporates Basic needs Medium needs Advanced needs Market size1 Service model Scalable digitally-led model and Digital daily banking combined Proactive advisory an
Slide 46: We have a strong foundation to build upon
Strategic priorities – Business Customers We have a strong foundation to build upon From 2020 To 2022 Nordics FX ranking1 #1 Leading product suite & global expertise Nordics DCM issuer ranking1 #3 #1 Accelerated sustainability agenda Green loan volume, DKK 12 bn 36 bn (+73% p.a.) Strongholds Leading
Slide 47: We will focus on three main growth and profitability levers
Strategic priorities – Business Customers We will focus on three main growth and profitability levers 1 Win prioritised segments and scale digital engagement model Targets 2023E 2026T Income RoAC Win new mid corporates with advanced needs and corporates with international needs Scale small corporate
Slide 48: Win prioritised segments and scale digital engagement model
Strategic priorities – Business Customers 1 Win prioritised segments and scale digital engagement model Segment Ambition Value levers Markets 2026 targets Relative income contribution Mid corporates Mid corporates with advanced Nordic market leader for customers with advanced needs Pan-Nordic DKK +0
Slide 49: Strengthen and leverage One Corporate Bank platform
Strategic priorities – Business Customers 2 Strengthen and leverage One Corporate Bank platform Non-digital focus areas Digital focus areas 2026 targets Harvest BC and LC&I synergies in product development Improve Increase Enhance cross-sell +5% efficiency integration Annual growth in daily Utilise
Slide 50: Differentiate through leading advisory and ESG capabilities
Strategic priorities – Business Customers 3 Differentiate through leading advisory and ESG capabilities Foundation to build upon Future focus 2026 targets Improve • Leading advisory capabilities • Implement next-level segmentation model and satisfied customers customer • Enhance advisory and 1:1 com
Slide 51: Business Customers: return on allocated capital
Return on Allocated Capital <40% Cost to Income +5pp 24% ~21% 16% 2022 Q1 ‘23 Cost Income Other1 2026T Cost Income Business Optimised advisor efficiency enabled by digitalisa- tion, re-invested to cater for above market growth Targeted customer acquisition in most income generating segments Customer
Slide 52: Personal Customers
Personal Customers A focused and personalised bank built on a common platform Christian Bornfeld, Head of Personal Customers 52
Slide 53: Pan-Nordic presence with a solid position in the most attractive segments
Strategic priorities – Personal Customers Pan-Nordic presence with a solid position in the most attractive segments Lending market share1 Share of Top 1-3 market position Deposit market share1 income Leading full-service Retail and Private Bank 8% with strong subsidiaries and partners 11% Establishe
Slide 54: We have a strong foundation to build upon
Strategic priorities – Personal Customers We have a strong foundation to build upon From 2019 To 2022 Improved quality of advice Satisfaction on advisory meetings1 8.7 9.1 ‘Digitally savvy’ customer base Digital customers in Nordics ~90% ~90% Strongholds Broad offering through product units Income f
Slide 55: We are sharpening our focus across markets, building on our strengths
Strategic priorities – Personal Customers We are sharpening our focus across markets, building on our strengths Strategy Rationale Focus Cement position as the bank of choice for Broad customer base skewed Narrow Broad majority of customer segments in society towards more advanced needs and preferen
Slide 56: New need-based segmentation to guide customer focus
Strategic priorities – Personal Customers New need-based segmentation to guide customer focus and targeted value propositions New need-based customer segmentation New ways of engaging Key life-events Children moving out 1. The convenience of digital is a must for almost everyone Wealthy families Car
Slide 57: Proactive & adaptable engagement model with broad personalised offering
Strategic priorities – Personal Customers Proactive & adaptable engagement model joined with a broad yet personalised offering Proactive engagement model Broad & configurable offerings Example life events (per year1) Modular base offerings with targeted add-ons Proactivity based on financial ~2mn ~3
Slide 58: Clear cross-country synergies from building on the same platform
Strategic priorities – Personal Customers Clear cross-country synergies from building on the same platform Building on the same shared platform Country-specific investment plans 2023-’24 ‘26 ’27 Digital and tech investments • Accelerate digitisation of offering Distinct segment focus • Expand usage
Slide 59: We will focus on three selected growth and profitability levers
Strategic priorities – Personal Customers We will focus on three selected growth and profitability levers 30% 1 Make relationships more efficient Targets 2023E 2026T Income RoAC Proactive engagement model with digital self-service and continuous digital advice Increase number of meetings, and meetin
Slide 60: Personal Customers: return on allocated capital
Return on Allocated Capital <50% Cost to Income +16pp 29% 26% 13% 2022 Q1 ‘23 Cost Income Other1 2026T Cost Income Personal Make relationships more efficient with new engagement and digital self-service model Significant uplift from normalised interest rates, notably in Denmark and Finland Up- and r
Slide 61: Digital and technology
Digital and technology Driving business outcomes Frans Woelders, Chief Operating Officer 61
Slide 62: Our unique digital and technology platform is a competitive advantage
Digital and technology Our unique digital and technology platform is a competitive advantage Strong digital customer engagement #1 Online banking for Cash 1 Management (District) Award-winning Mobile Banking Serving customers at scale One 55% Accounts opened digitally >1bn Card transactions handled
Slide 63: Driving down tech run costs while investing in digital and increasing productivity
Digital and technology Driving down tech run costs while investing in digital and increasing productivity Reducing technology run cost Increasing investments Increasing productivity Annual technology run cost, excl. one-offs Annual funding for development Avg. number of change releases for applicati
Slide 64: Examples of how we are delivering results
Digital and technology Examples of how we are delivering results Reducing technology run cost Increasing investments Increasing productivity Finance applications Enhanced self-service and Implemented Agile@Scale moved to cloud digital offerings in District to respond better & faster Capacity availab
Slide 65: Driving competitive digital value propositions for our customers
Digital and technology Driving competitive digital value propositions for our customers Digital 2026 Leading digital solutions in Mobile Banking and District Digital One integrated, cloud-based channel for Mobile Banking, District and Leading digital engagement eBanking solutions Digitally-enhanced
Slide 66: Investing in data and AI capabilities to drive better advice
Digital and technology Investing in data and AI capabilities to drive better advise for our customers Data and AI capabilities 2026 Provide targeted data-driven insights to advisors and customers Proactive, Data-driven advisory Enhance analytics-driven customer engagement with 360-degree view target
Slide 67: Accelerating deployment of latest technologies
Digital and technology Accelerating deployment of latest technologies Technology 2026 targets Largely API-enabled our platform Public cloud Move applications to public cloud and SaaS while reducing legacy 30% Infuse platform with latest technologies and AI Of applications moved to public cloud Conti
Slide 68: Accelerating our investments to deliver on our business ambitions
Digital and technology Accelerating our investments to deliver on our business ambitions Key focus areas Increasing investment levels (DKK per year) Digital Available for strategic change Customer Integrated ~4 bn engagement platform customer channels +1 bn Customer journey One Corporate ~3 bn digit
Slide 69: Digital and technology: driving business outcomes
Our unique single platform is a competitive advantage We are accelerating our digital and technology investments Digital and Our strategy drives business growth and technology profitability Driving business outcomes 69
Slide 70: Concluding remarks
Concluding remarks 70
Slide 71: A focused Nordic leader with strong profitability
Strategic priorities A focused Nordic leader with strong profitability Our targets for 2026 13% Growth in Disciplined capital Strong capital Return on Equity focus segments return & cost generation & low risk Leading LC&I and Capital allocation towards Strong capital generation >16% CET1 business ba
Slide 72: Q&A
Q&A 72
Slide 73: Disclaimer
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, or an inducement to enter into