Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — FY2009 Earnings Presentation
47 slides from Danske Bank A/S's earnings presentation, Feb 4, 2010
Slide 1: Financial results for 2009
ANNUAL REPORT 2009 Financial results for 2009 Peter Straarup CEO & Chairman of the Executive Board Tonny Thierry Andersen CFO & Member of the Executive Board February 4, 2010
Slide 2: Agenda
AGENDA Agenda Slide • Key messages 3 • Macroeconomics 4 • Highlights 5 • Business trends 6 • Outlook 19 • Q&A session 20 • Appendix: Trends in focus areas & business units 21 2
Slide 3: Improved result despite challenging conditions; continued decline in loan impairment charges
Improved result despite challenging conditions; continued decline in loan impairment charges Quarterly total income DKK m • Net profit 65% Y/Y to DKK 1.7bn in 2009 18,000 Other income Net trading income • Impairment charges still high, but declining 15,000 Net fee income steadily, with better visib
Slide 4: Indications of macroeconomic stabilisation, but turnaround is still fragile
Indications of macroeconomic stabilisation, but turnaround is still fragile % GDP development % Unemployment 5 - 2009 seems to be the trough Norway 20 - Rising trend going forward Euroland Baltics Denmark Finland Sweden 0 16 Ireland Baltics Ireland -5 12 Sweden Finland Euroland -10 8 Denmark -15 4 N
Slide 5: Record-high income, but net profit hurt by high impairment charges
Record-high income, but net profit hurt by high impairment charges DKK m 2008 2009 Index Q3 2009 Q4 2009 Index Net interest income 27,005 27,524 102 6,625 6,765 102 Net fee income 8,110 7,678 95 1,918 2,077 108 Net trading income 6,076 18,244 300 3,886 1,961 50 Other income 3,585 3,083 86 703 872 12
Slide 6: Slightly increasing and robust net interest income from banking activities
Slightly increasing and robust net interest income from banking activities Annual net interest income Quarterly net interest income DKK m DKK m Y/Y 2%* 30,000 Y/Y 6%* 7,500 Q/Q 2% * * * * 20,000 6,500 10,000 5,500 0 4,500 2007 2008 2009 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 * Adjuste
Slide 7: Stable net fee income, up in Q4 on performance fees at Danske Capital
Stable net fee income, up in Q4 on performance fees at Danske Capital DKK m Annual fee income DKK m Quarterly fee income 10,000 2,500 2,000 7,500 1,500 5,000 1,000 2,500 500 0 0 2007 2008 2009 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Activity based fees Y/Y 6% Activity based fees Y/Y 8% Q
Slide 8: Net trading income at more than double the normal level, but declining as expected
Net trading income at more than double the normal level, but declining as expected Breakdown of net trading income VIX Volatility Index 90 DKK m Q1 2009 Q2 2009 Q3 2009 Q4 2009 2009 Trading Activities 7,534 4,410 3,194 1,791 16,929 75 Group Treasury -589 297 567 -152 123 60 Institutional Banking (no
Slide 9: Insurance income up on higher investment result, risk allowance and shadow account
Insurance income up on higher investment result, risk allowance and 50% of shadow account Net income from insurance business Unit linked -insurance business DKK bn DKK m DKK m 2008 2009 Index 60 Premiums Insurance result 200 Premiums (DKK bn) 21.9 20.4 93 Assets under management Share of techn
Slide 10: Tangible results of intensified cost focus; momentum sustained into 2010
Tangible results of intensified cost focus; momentum sustained into 2010 Expenses and number of employees Trend in number of employees and branches FTEs Branches DKKm 2008 2009 Index 25,000 850 Expenses 28,726 28,907 101 Integration expenses 774 291 38 24,000 Branches Amortisation of intangibles 589
Slide 11: Loan impairment charges declining, but from a very high level
Loan impairment charges declining, but from a very high level Annual loan impairment charges Quarterly loan impairment charges DKK bn DKK bn bp 30,000 10,000 200 135 bp Total loan imp. 7,500 charges in bp 150 20,000 57 bp 5,000 100 10,000 2,500 50 3 bp 0 0 0 2007 2008 2009 Q3 08 Q4 08 Q1 09 Q2 09
Slide 12: Increasing number of upgrades in H2 2009, but real economy still recovering
Increasing number of upgrades in H2 2009, but the real economy is still in a recovery phase % Upgrades / total rating changes on the corporate book 80 Downturn Upturn Downturn 60 More upgrades Internal rating changes than downgrades More downgrades than upgrades 40 Moody’s 20 ratings drift, Western
Slide 13: Loan impairment charges still dominated by corporates; stable coverage ratio
Loan impairment charges still dominated by corporates; stable coverage ratio Impairments by customer segment Gross exp. subject to individual imp. test & cov. ratio - SMEs account for most of the Group’s impairments - Coverage ratio incl. collateral nearly 90% Exposure Coverage 100% DKK bn ratio, %
Slide 14: Good trend in loan impairment charges on the Nordic markets
Good trend in loan impairment charges on the Nordic markets DKK m DKK m 15,000 2,800 Accumulated impairments161 bp* Accumulated impairments 134 bp* Denmark Collective 1,612 Finland Collective 244 12,500 59% of Group’s lending 2,000 9% of Group’s lending Individual Individual 10,000 Quarterly P/L –
Slide 15: High loan impairment charges in Ireland, the Baltics and Danske Markets
High loan impairment charges in Ireland, the Baltics and Danske Markets DKK m DKK m 2,400 8,000 Accumulated impairments 914 bp* Northern Ireland Accumulated impairments 389 bp* Ireland 2,000 Collective 633 3% of Group’s lending Collective 322 6,000 4% of Group’s lending 1,600 Individual Individual 1
Slide 16: Significant funding completed in 2009; very low funding need in 2010
Significant funding completed in 2009; very low funding need in 2010 New funding 2008 and 2009 12-month liquidity* Moody’s Financial Strength DKK bn DKK bn 80 450 60 300 End-Q4 2009 40 150 End-Q4 2008 End-Q3 2009 20 0 0 -150 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 12 months 1 week 1 month 2 weeks 3
Slide 17: Capital position strengthened further in 2009
Capital position strengthened further in 2009 Capital ratios – CRD/Basel II Trend in RWA (DKKm) % 20 16 99 32 26 12 33 960 8 834 4 0 Credit quality parameters Q4 08 Q4 09 Change in counterparty Q4 2008 Q4 2009 Market and lending New Solvency ratio risk Total tier 1 ratio Tier 1 ratio incl. convertib
Slide 18: Narrowing loan-to-deposit gap and improving leverage ratios
Narrowing loan-to-deposit gap and improving leverage ratios Loan-to-deposit gap (DKK bn) and ratio (%) Leverage ratios DKK bn % % 500 130 8 6.4 400 5.9 125 6 300 4.5 4.2 4.2 120 4 3.0 3.2 3.1 200 2.8 115 2 100 0 110 0 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Unadjusted According to US GAAP* Adjusted** Lo
Slide 19: Outlook for 2010
Outlook for 2010 • Some economic improvement, but 2010 will be another challenging year • Robust income from banking activities • Lower trading and insurance income; level dependent on market developments • Total expenses to decline in 2010; continued focus on cost management, but also investments i
Slide 20: www.danskebank.com/ir
www.danskebank.com/ir 20
Slide 21: Appendix
APPENDIX Appendix 21
Slide 22: 2% quarterly increase due to one-off items
2% quarterly increase due to one-off items Quarterly trend in net interest income DKK m 7,000 2% 236 87 6,500 80 86 17 6,000 NII interest rate sensitivity: 6,765 6,625 - /+ 25bp in ST rates = - /+ DKK 450m 5,500 5,000 Q3 2009 Interest on Deposit Lending Interest on VAT Other Q4 2009 equity margin*
Slide 23: Improving lending margins in all markets, but pressure beginning to emerge
Improving lending margins in all markets, but pressure beginning to emerge Quarterly lending margins Q3 2008 – Q4 2009 % 2.5 (loan stock) 2.0 1.5 1.0 0.5 0.0 Sweden Note: Danske Bank DK includes Realkredit Denmark lending. 23
Slide 24: Narrowing deposit margins because of lower short-term rates
Narrowing deposit margins because of lower short-term rates Quarterly deposit margins Q3 2008 – Q4 2009 % 2.0 (deposit stock) 1.5 1.0 0.5 0.0 -0.5 Sweden 24
Slide 25: Favourable market conditions for Danske Markets, but levelling off as expected
Favourable market conditions for Danske Markets, but levelling off as expected EUR/SEK 12M volatility Bid/offer spreads, 8Y Danish govts % - High FX volatility boosts activity ticks - Government bonds have become profitable 20 100 15 75 10 50 5 25 0 0 Jun-08 Dec-08 Jun-09 Dec-09 Dec-07 Jun-08 Dec-08
Slide 26: 13% reduction of balance sheet, driven particularly by Danske Markets
13 % reduction of balance sheet, driven particularly by Danske Markets Trend in total assets DKK bn end of period 4,000 Change in 2009 3,000 Other assets +11% Trading & inv. - 26% 2,000 portfolio Banks & repos - 23% 1,000 Lending - 6% 0 Total - 13% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 26
Slide 27: Credit exposure down 9% in 2009
Credit exposure down 9% in 2009 Credit exposure from lending activity, end-Q4 2009 (DKK 2,301bn, including DKK 1,816bn in lending and repos) Central and local governments Subsidised 6% housing companies 5% Banks 7% Personal customers 37% Commercial property 11% Construction, engineering and building
Slide 28: Credit exposure to commercial property and construction
Credit exposure to commercial property and construction Portion Construction Commercial from and building Sector in DKK bn property developers materials total Denmark 108.9 1.2 12.2 121.1 Finland 17.2 0.7 5.3 22.5 Sweden 48.7 0.2 4.6 53.4 Norway 34.4 2.8 1.9 36.3 Northern Ireland 10.1 3.5 4.4 14.5 I
Slide 29: Danish agriculture sector pressured by lower property and output prices
Danish agriculture sector pressured by lower property and output prices Exposure to agriculture DKK bn Realkredit Danmark 45 Banking Activities Denmark 11 Other Other business areas 15 6% Mixed Agriculture 71 operations 8% Agriculture LTV, Realkredit Danmark % Agriculture 2008 46 25% 2009 64 Chemica
Slide 30: Well-diversified shipping exposure
Well-diversified shipping exposure Multipurpose Seismic 1% 1% Other Shipping exposure DKK bn FPSO/FSO 3% Shipping 44 4% Container Land trans., aviation & insfrastructure 24 feeder Offshore supply 2% 20% Transportation and shipping 68 Offshore rig 8% DKK bn Shipping Ro-ro Gross exposure subject to in
Slide 31: Gross exposure subject to individual impairment test reflects difficult conditions
Gross exp. subject to individual imp. test; reflects difficult economic conditions in certain markets bp Gross exposure subject to individual imp. test in basis points of total loans 2,500 2,400 2,000 1,903 1,595 1,500 1,000 894 517 500 351 389 278 146 0 Denmark Finland Sweden Norway Northern Irelan
Slide 32: Signs of housing market stabilising
Signs of housing market stabilising Housing supply vs. number of transactions in Months Denmark 20 Region Prices peaked Price fall Change in since peak (%) Q409 (%) 15 Supply / sold houses Copenhagen Q3 2006 27.8 3.1 Zealand Q3 2007 22.1 0.2 10 South Denmark Q1 2008 6.8 -0.7 Central Jutland Q4 2007
Slide 33: Mortgages in Denmark; low average LTV ratio, arrears picking up
Mortgages in Denmark; Low average LTV ratio, arrears picking up, but still at a low level Breakdown of loans by LTV and rating category Danish mortgages Mortgage finance (residential & commercial) • 37 repossessed properties and 4,547 arrears out of End-Q4 416,245 loans at end-Q4 LTV/rating 1-3 4-7
Slide 34: Safe and highly rated bond portfolio
Safe and highly rated bond portfolio Bond portfolio Rating distribution (DKK 423bn) AAA 27% AA+ 2% Credit bonds Certificates AA 19% 4% 4% AA- 3% Quasi- government A+ 1% Danish 2% A 31% mortgage bonds A- 2% 42% BBB+ 7% Swedish covered bonds BBB 1% 18% BBB- 5% BB+ 0% BB 0% BB- 1% … 0% Other covered NA
Slide 35: Well-diversified funding position
Well-diversified funding position Equity 4% Central banks 6% Repos 5% Deposits 32% Banks, net • 54% deposits and fully match- 4% funded Danish mortgage bonds S-T bonds (net) 7% • Long-term bonds DKK 279bn • Issued covered bonds DKK 118bn L-T bonds • Funding market has eased during 12% H2 2009 Subord
Slide 36: Banking Activities Denmark; positive result when adjusted for bank package I
Banking Activities Denmark; Positive result when adjusted for payments to bank package I Profit before loan impairment charges 15% Trend in lending volume - Improved NII & underlying costs down 2% (average) DKK m 2008 2009 Index DKK bn Retail: Y/Y 0% Corporate: Y/Y 8% Net interest income 15,555 1
Slide 37: Banking Activities Finland; synergies fully achieved
Banking Activities Finland; Synergies fully achieved, but pressure on net interest income Profit before loan impairment charges 55% Trend in lending volume - Boosted by lower expenses and achieved synergies (average) DKK m 2008 2009 Index Retail: Y/Y 0% Corporate: Y/Y 15% DKK bn Net interest inc
Slide 38: Banking Activities Sweden; stable result despite lower lending volumes
Banking Activities Sweden; Stable result despite lower lending volumes Trend in lending volume Profit before loan impairment charges 10% (average, % -ch. in local currency) - Affected by 9% depreciation of SEK against DKK DKK m 2008 2009 Index DKK bn Retail: Y/Y 8% Corporate: Y/Y 14% Q/Q 3% Q
Slide 39: Banking Activities Norway - Earnings held up by strong income growth
Banking Activities Norway - Earnings held up by strong income growth Profit before loan impairment charges 72% Trend in lending volume (average % -ch. in local currency) - Very strong income growth despite 5% NOK depreciation vs. DKK DKK bn Retail: Y/Y 4% Corporate: Y/Y 14% DKK m 2008 2009 Ind
Slide 40: Banking Activities Northern Ireland; hurt by lower short-term rate
Banking Activities Northern Ireland; Hurt by lower short-term rate, partly offset by lower costs Profit before loan impairment charges 12% Trend in lending volume (average, % -ch. in local currency) -Decreasing NII, lower activity and tight cost control DKK m 2008 2009 Index Retail: Y/Y 4% Corpo
Slide 41: Banking Activities Ireland; declining activity and high impairment charges
Banking Activities Ireland; Declining activity and high commercial property related imp. charges Profit before loan impairment charges DKK 2.7bn Trend in lending volume - Income under pressure, partly offset by lower operating costs (average) DKK m 2008 2009 Index DKK bn Retail: Y/Y 4% Corporate
Slide 42: Banking Activities Baltics; declining activity and high impairment charges
Banking Activities Baltics; Declining activity and high impairment charges Profit before loan impairment charges DKK 1.4bn Trend in lending volume - Lower income , tight cost control and high loan imp. charges (average) DKK m 2008 2009 Index DKK bn Retail: Y/Y 8% Corporate: Y/Y 20% Net interes
Slide 43: Danske Markets – Low activity in Q4, exceptionally high income for the year
Danske Markets – Low activity in Q4, however exceptionally high income for the whole year Profit before tax at record level Quarterly breakdown of income - Driven by lower ST rates, high volatility and customer activity DKK m 2008 2009 Index DKK m Q1 2009 Q2 2009 Q3 2009 Q4 2009 Total income 3,763 1
Slide 44: Danske Capital – Income up owing to performance related fees
Danske Capital – Income up owing to performance related fees Profit before loan impairment charges 8% DKK bn AuM – Customer breakdown - Due to higher exp. owing mainly to severance pay and one-offs 600 DKK m 2008 2009 Index Private equity Total income 1,697 1,728 102 hereof performance fees 38 161
Slide 45: Danica Pension - Higher investment return and positive unit-link result
Danica Pension - Higher investment return and positive unit-link result Net income from insurance business Investment returns, YTD DKK m 2008 2009 Index Customers’ funds Premiums (DKK bn) 21.9 20.4 93 % Investment return Investments & liabilities Share of technical provisions 1,088 1,087 100 8.0 7.1
Slide 46: Danica's profit model
Danica’s profit model Profit model Condition / sensitivity 2009 DKK m • Risk allowance 64 bp of • No usage of bonus potential of • Positive technical basis of DKK 1 technical prov. (DKK170bn) paid-up policies and sufficient 5.7bn and restored bonus 1,087 investment income potential + • Return on inv
Slide 47: Disclaimer
Disclaimer 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 or an inducement to enter into investment activity. No part of this presentat