Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Debt Investor Presentation (June 2010)
55 slides from Danske Bank A/S's debt investor presentation, June 2010
Slide 1: US Debt Investor Presentation
US Debt Investor Presentation Peter Rostrup-Nielsen, CRO Cato Baldvinsson, Head of Treasury June 2010
Slide 2: Disclaimer
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 no
Slide 3: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation 3
Slide 4: Danske Bank is a strong Nordic franchise
Danske Bank is a strong Nordic franchise Lending divided by Banking Activity Q1 2010 5.0million customers NIR; 3 IR; 4 BAL; 1 Others; 3 NO; 9 2.3 million active Internet customers Market position: Leader SE; 10 Branches: 121 DK; 59 Market share: 13% 720 branches in 14 countries* FIN; 9 Market rank:
Slide 5: Our ratings have been under pressure
Our ratings have been under pressure - as for many other players Stable Negative 5
Slide 6: Rating downgrade from Standard & Poors
Rating downgrade from Standard & Poors - from December 2009 What Standard & Poors said Strengths: • ‘We consider Danske Bank‟s · Strong leader in most segments of the Danish capitalization to be only modest.‟ financial market. • „….The composition and quality of the · Significant retail-banking fran
Slide 7: Current Status on 'S&P weaknesses'
Current Status on ’S&P weaknesses’ - much has changed already Weaknesses: Status: · Severely impaired asset • Baltics have improved, quality in domestic, Irish and Ireland is stabilizing, Baltic operations. Denmark improving · Very low domestic margins • Repricing ongoing, but low and high losses. d
Slide 8: Upgrades/downgrades ratio improving significantly, but Denmark lags
Upgrades/downgrades ratio improving significantly, but Denmark lags % Upgrades / total internal rating changes on the corporate book 80 Downturn Upturn Downturn 60 Upgrades > downgrades Downgrades > upgrades 40 Outside Denmark Denmark 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 2010 Source:
Slide 9: Loan impairment charges trending down
Loan impairment charges trending down - with more momentum after downgrade Quarterly loan impairment charges bp DKK m 10,000 200 Total loan imp. charges in basis points 7,500 150 5,000 100 2,500 50 0 0 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Collective impairment charges Individual impairment ch
Slide 10: Nordic impairments: Charges still high in Denmark
Nordic impairments: Charges still high in Denmark - but improved in the rest of the markets. DKK m DKK m 5,000 1,250 *Acc. imp. DKK 16,662m *Acc. imp. DKK 2,580m Denmark - individual 144bp Finland - individual 150 bp 4,000 1,000 216 bp 59% of Group‟s lending - collective 22bp 9% of Group‟s lending -
Slide 11: Other impairments generally improving
Other impairments generally improving - most notably in Northern Ireland and Baltics DKK m DKK m 750 2,100 *Acc. imp. DKK 2,141m *Acc. imp. DKK 8,093m Northern Ireland - individual 365 bp Ireland - individual 966 bp 3% of Group‟s lending - collective 63 bp 4% of Group‟s lending - collective 105 bp 7
Slide 12: Impairments – Nordic Peers: Danske is closing the gap
Impairments – Nordic Peers: Danske is closing the gap 400 350 300 250 200 150 100 50 0 -50 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 DB Nordea HB SEB Swedbank DnB NOR Jyske Sydbank 12
Slide 13: Nordic countries: The gaps between Danske and peers are narrowing
APPENDIX Nordic countries: The gaps between Danske and peers are narrowing quarter by quarter bp 297 423 250 200 150 100 50 0 SEB SEB DB SEB DB HB DB SEB HB DB HB Nordea Nordea Nordea Nordea HB Swedbank DnB NOR -50 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Avg 13
Slide 14: Danske Bank's exposure to PIGS - Executive summary
Danske Bank’s exposure to PIGS - Executive summary • Denmark‟s lending to PIGS is significant smaller than EU average • Danske Bank has a very small exposure to PIGS sovereign debt – Only DKK 22m Greek gov‟t bond exposure – 0.65% of total credit exposure – 3.57% of bond portfolio • Danske Bank‟s PIG
Slide 15: Danske Bank's exposure to PIGS is insignificant relative to total lending
Danske Bank’s exposure to PIGS is insignificant relative to total lending Bond positions Credit Exposure DKK m Government Covered Bonds Other Portugal 218 14 558 124 Italy 666 2,894 0 216 Greece 55 22 0 0 Spain 1,713 992 6,608 1,094 Total 2,652 3,923 7,166 1,434 Total 2,652 12,523 Collateral for the
Slide 16: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation 16
Slide 17: Indications of macroeconomic improvement, but turnaround is still fragile
Indications of macroeconomic improvement, but turnaround is still fragile % GDP development Public finances 8 2010 estimates 4 Gross publ. debt Budget bal. Sovereign % of GDP % of GDP rating (S&P) 0 Norway Denmark 42.0 -5.6 AAA Euroland Sweden 43.1 -2.8 AAA -4 Denmark Norway 26.0 12.0 AAA Sweden Fin
Slide 18: Signs of housing market stabilising
Signs of housing market stabilising Correlation between house prices Danish house price development by regions Price and consumption in Denmark per sqm. DKK bn 16,000 200 Region Prices peaked Price fall Change in since peak (%) Q110 (%) <= House prices Copenhagen Q3 2006 -28.3 1.5 12,000 180 Zealand
Slide 19: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation 19
Slide 20: Acceptable net profit, with economic recovery marginally visible
Acceptable net profit, with economic recovery marginally visible Quarterly total income and DKK m underlying expenses* 18,000 Total income • Net profit 50% Y/Y and 90% Q/Q to DKK Underlying expenses 15,000 0.8bn in Q1 2010 12,000 • Encouraging and tangible results on continuous cost management 9,0
Slide 21: Income declined to a more normal level; lower expenses and impairment charges
Income declined to a more normal level; lower expenses and impairment charges led to net profit DKK m Q1 2009 Q1 2010 Index Q4 2009 Q1 2010 Index Net interest income 7,227 6,007 83 6,765 6,007 89 Net fee income 1,763 2,048 116 2,077 2,048 99 Net trading income 7,479 2,379 32 1,961 2,379 121 Other in
Slide 22: Seasonality lowered net interest income, but underlying trend is steady
Seasonality lowered net interest income, but underlying trend is steady Quarterly net interest income Quarterly trend in net interest income DKK m DKK m Y/Y 12%* 7,500 7,000 Q/Q 11% * * 63 * 147 6,500 42 6,500 490 * 142 6,000 6,765 5,500 5,500 6,007 4,500 5,000 Other *** RD** Q1 08 Q2 08 Q3 08 Q
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 Q1 2009 – Q1 2010 % (loan stock) 2.5 2.0 1.5 1.0 0.5 0.0 Denmark * Finland Sweden Norway Northern Ireland Ireland Baltics * Incl. Realkredit Danmark 23
Slide 24: Narrowing deposit margins because of lower short-term rates and stiff competition
Narrowing deposit margins because of lower short-term rates and stiff competition Quarterly deposit margins Q1 2009 – Q1 2010 % (deposit stock) 1.2 0.8 0.4 0.0 Denmark Finland Sweden Norway Northern Ireland Ireland Baltics 24
Slide 25: Net trading income returning to normal as market volatility subsides
Net trading income returning to normal as market volatility subsides Breakdown of net trading income VIX Volatility Index DKK m Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 90 Trading Activities 7,534 4,410 3,194 1,791 2,013 75 Group Treasury -589 297 567 -152 119 60 Institutional Banking (non-Nordic) 86
Slide 26: Loan impairment charges still dominated by SMEs
Loan impairment charges still dominated by SMEs 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, % 120 Coverage ratio incl. coll
Slide 27: Strong capital position maintained
Strong capital position maintained Capital ratios – CRD/Basel II Trend in RWA (DKKm) % 20 17.9% 9 16 1 4 14.2% 12 12.4% 10.3% 9.6% 8 834 838 4 0 Credit quality Change in counterparty Q4 08 Q4 09 Q1 10 Q4 2009 Q1 2010 lending* Market and Solvency ratio risk Total tier 1 ratio Tier 1 ratio incl. conve
Slide 28: Capital and ratios
Capital and ratios - decreasing RWA and steady capital lead to increasing ratios Pct. 20,0 18,0 16,0 14,0 12,0 10,0 8,0 6,0 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Core capital ratio (ex. hybrid capital) Core capital ratio Solvency ratio DKr bn Decreasing RWA Stable capital *) DKr bn 1.000 950 160 900 140 8
Slide 29: Outlook for 2010
Outlook for 2010 • Macroeconomic improvement, but upswing remains fragile • Robust income from banking activities • Lower trading and insurance income, dependent on market developments • Total expenses to decline in 2010; continued focus on cost management, but also investments in product and IT dev
Slide 30: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation 30
Slide 31: Well-diversified funding structure
Well-diversified funding structure Total funding Q1 2010 DKK 2,435bn Equity; 4% Central banks; 5% Repos; 6% Deposits; 32% Banks, net; 5% Certificates; 8% L-T bonds; 9% Match funded DK . Subordinated debt; mortgage bonds; 3% 24% Covered bonds; 4% 31
Slide 32: Low funding need in 2010 and extended duration
Low funding need in 2010 and extended duration New funding 2008-11 Funding sources - Low estimated funding need going forward - Move towards long-term funding sources DKK bn 40 200 180 30 Q1 2010 160 Q4 2008 140 120 20 100 80 60 10 40 20 0 Issued bonds Credit inst. (ex. CB) Covered bonds Shareholder
Slide 33: Danske Bank has very low funding need in 2010-11
Danske Bank has very low funding need in 2010-11 EUR bn Debt maturities E2010-11 40 E2011 30 E2010 Can be fully 20 funded through unutilised covered bond pool assets 10 0 Maturities as % of 8.9% 19.4% 12.7% 10.4% 9.1% 1.6% funded balance sheet E2010+11 Source: BoA/Merrill Lynch, European banks, May
Slide 34: Strong loan-to-deposits ratio and liquidity position
Strong loan-to-deposits ratio and liquidity position Loan-to-deposit gap (DKK bn) and ratio (%) 12-month liquidity* Moody’s Financial Strength DKK bn % DKK bn 500 130 450 400 125 300 End-Q1 2010 300 120 150 End-Q4 2009 200 End-Q4 2008 115 0 100 0 110 -150 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 1
Slide 35: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation 35
Slide 36: Key points on Basel III / CRD IV
Key points on Basel III / CRD IV • Basel III will take ROE out of the banking sector • Potentially huge negative macroeconomic effect if fully implemented • Long-term liquidity rules and leverage ratio are expected to be watered down • Renewed focus on corporate governance • Danske Bank is in a rela
Slide 37: Preliminary assessment of Basel III effect shows all Nordic banks above 8%
Preliminary assessment of Basel III effect shows that all Nordic banks are above 8% core tier 1 Core tier 1 effect 14 12 2.9 10 8 6 11.5 10.4 9.9 9.7 8.6 8.2 4 2 0 Swedbank SHB SEB Nordea Danske DnB NOR New core tier 1 State hybrid Insurance deduction Minorities Other Note: Calculation made by Morga
Slide 38: Liquidity rules (NSFR) seem unrealistic, but Danske Bank has a strong position
Liquidity rules (NSFR) seem unrealistic and very punitive, but Danske Bank has a strong position European banks may NSFR need EUR 1.5 trillion % to get to 100% NSFR! 120 107 106 102 100 93 93 91 90 90 87 87 87 80 83 79 78 80 72 69 60 40 20 0 Santander Nordea Swedbank Lloyds DnB NOR Deutsche RBS Dexi
Slide 39: Leverage ratio: Preliminary assessment of Basel III proposal
Leverage ratio: Preliminary assessment of Basel III proposal Leverage ratio US Canada Europe Greece Spain Austria Nordics DB Italy UK Ireland Benelux France Swiss Germany 0 0,5 1 1,5 2 2,5 3 3,5 4 Definition: Equity tier 1 capital divided by total assets minus intangibles, DTAs, minority stakes and
Slide 40: www.danskebank.com/ir
www.danskebank.com/ir 40
Slide 41: Appendix
Appendix
Slide 42: Balance sheet reduction driven by lower lending and Danske Markets
Balance sheet reduction driven by lower lending and Danske Markets Trend in total assets DKK bn end of period 4,000 Change Y/Y 3,000 Other assets +10% Trading & inv. -10% 2,000 portfolio Banks & repos +5% 1,000 Lending - 6% 0 Total - 4% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 42
Slide 43: Credit exposure down 4% Y/Y
Credit exposure down 4% Y/Y Credit exposure from lending activity, end-Q1 2010 (DKK 2,344bn, including DKK 1,845bn in lending and repos) Central and local governments Subsidised 6% housing companies 5% Banks Personal 8% customers 36% Commercial property 10% Construction, engineering and building pro
Slide 44: 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 109.4 1.1 12.9 122.3 Finland 16.1 0.7 5.3 21.4 Sweden 51.2 0.2 5.1 56.3 Norway 33.8 2.6 2.1 35.9 Northern Ireland 10.2 3.5 4.5 14.7 I
Slide 45: Danish agriculture sector pressured by lower property and output prices
Danish agriculture sector pressured by lower property and output prices Other 11% Mixed operations Agriculture 7% 23% Exposure to agriculture DKK bn Realkredit Danmark 45 Banking Activities Denmark 12 Other business areas 14 Chemicals and Agriculture 71 feeds 15% Agriculture LTV, Realkredit Danmark
Slide 46: Well-diversified shipping exposure
Well-diversified shipping exposure Multipurpose Seismic 1% 1% Other FPSO/FSO 2% 4% Container Offshore supply feeder 13% 3% Offshore rig 9% Crude tanker Ro-ro 13% Shipping exposure DKK bn 4% Shipping 47 Gas tanker Land trans., aviation & insfrastructure 23 6% Transportation and shipping 70 Dry bulk C
Slide 47: Danske Bank Covered Bond Universe
Danske Bank Covered Bond Universe Legislation and history behind two business lines Covered Bond issuer since 2007 Specialized regulated mortgage bank Based on a new legislation Provides traditional mortgage loans Loans from the Group’s banking Dates back to 1851 activities in Northern E
Slide 48: Covered Bonds is a valuable funding tool
Covered Bonds is a valuable funding tool DKK bn Eligible loans in the D & I pool 80.000 D pool I pool 60.000 40.000 20.000 0 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 48
Slide 49: The two retail pools
The two retail pools Pool D Pool notional DKK 31,9bn (€ 4.3bn equivalent) Number of Loans 52,337 Substitution collateral DKK 516m Residential/commercial 100 % owner occupied residential properties RETAIL WA LTV 58% WA Seasoning 3.3 years WA Remaining Term 26.5 years Rate type Floating Geographical l
Slide 50: New pool (Pool C). No issues yet
New pool (Pool C). No issues yet Pool notional DKK 28.3bn (€ 3.8 bn equivalent) Number of Loans 6,370 COMMERCIAL WA LTV 67% WA Seasoning 3 years WA Remaining Term 23.6 years Rate type Floating rate Geographical location 100% SE Cut-off date 01-02-2010 Industry Secondary Home Other Primary Home Owner
Slide 51: Danish State Guarantee Schemes - Overview
Danish State Guarantee Schemes - Overview Bank Package I (October 2008) Bank Package II (February 2009) • Unconditionally, irrevocable guarantee by the Kingdom of Denmark • Ensures timely payment • AAA ratings, 0% risk weighting and ECB eligibility for €-issues • Covers both existing and new unsecur
Slide 52: Re-capitalisation instrument – Overview
Re-capitalisation instrument – Overview “Act on State-Funded Capital Injections” (Feb 3. 2009) Danske Bank’s solution (May 24. 2009) • Package size DKK 100bn • Danske Bank Group DKK 26bn Mortgage institutions 25bn Realkredit Danmark 2bn Banks 75bn Danske Bank A/S 24bn • Repayment condition • Hybrid,
Slide 53: Issues related to the two packages
Issues related to the two packages - DKK 26bn in hybrid and DKK 35bn in senior unsecured Hybrid capital ISIN code Currency Amount (m) Date issued Maturity Call DK0030170444 DKK 23,992 11.05.2009 Perpetual 12.04.2014 ← Danske Bank DK0030171848 DKK 2,034 11.05.2009 Perpetual 12.05.2012 ← Mortgage Fina
Slide 54: Consensus 2010
Consensus 2010 2010 (DKr m) Low Average High Contributors: Net interest income 24,469 26,139 28,016 Net fee income 7,752 8,079 8,536 • ABG • Carnegie Net trading income 7,378 8,672 10,548 • Citi Other income 2,758 3,041 3,507 • Credit Suisse Net income from insurance business 1,137 2,076 2,946 • Dan
Slide 55: www.danskebank.com/ir
www.danskebank.com/ir Danske Bank‟s Investor Relations website has a sub-section dedicated to debt investors The section contains detailed information about Danske Bank‟s: Funding strategy Ratings Debt issues Covered Bonds Securitisation 55