Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — 9M 2021 Earnings Presentation
52 slides from Danske Bank A/S's earnings presentation, October 2021
Slide 1: Financial results – first nine months 2021
Financial results – first nine months 2021 Presentation for Conference Call Carsten Egeriis Stephan Engels Chief Executive Officer Chief Financial Officer
Slide 2: Agenda
Financial results – first nine months 2021 Agenda 01. Summary 2 02. Group income statement – first nine months 3 03. Financial outlook for 2021 4 04. Update on 2023 ambitions 5 – 11 05. Q&A 12 06. BU deep dive on 2023 ambitions 13 – 18 07. First nine months 2021 in detail 19 – 28 08. Appendix 29 – 4
Slide 3: Steady progress in most areas supported by strong macro and credit quality
Financial results – first nine months 2021 Steady progress in most areas supported by strong macro and credit quality Robust capital markets activity, Solid Nordic macroeconomic recovery Deposit repricing initiatives in DK have including strong growth for sustainable supported customer activity acro
Slide 4: Total income up 4% y/y driven by strong fee income and higher income from insurance
Financial results – first nine months 2021 Total income up 4% y/y driven by strong fee income and higher income from insurance business; macro recovery post-corona supports low impairments Income statement and key figures (DKK m) Key points, 9M 2021 vs 9M 2020 9M-21 9M-20 Index Q3-21 Q2-21 Index • N
Slide 5: Net profit outlook reaffirmed: net profit of more than DKK 12 billion in 2021
Financial results – first nine months 2021 Net profit outlook reaffirmed: We maintain our expectation of a net profit of more than DKK 12 billion in 2021 We expect total income in 2021 to be higher (than the level in 2020*), including the gain from Total income the sale of Aiia We expect underlying
Slide 6: Update on our 2023 ambitions
Update on our 2023 ambitions Bank
Slide 7: Line of sight to sustainable RoE of 9-10% through the cycle
Financial results – first nine months 2021 Two years ago, we set up an ambitious plan; today, we confirm that our business model will allow for a sustainable RoE of 9-10% through the cycle and for 8.5-9% in ‘23 With more clarity, an extensive review of assumptions and adjusted plans, we have line of
Slide 8: Strong foundation and investments strengthen our position for long-term value creation
Financial results – first nine months 2021 Our strong foundation and significant investments in the structural setup have further strengthened our position to enable long-term sustainable value creation Structural achievements Recent achievements ✓ Invested additional DKK 2 bn to accelerate our tran
Slide 9: Progressing towards our full profitability potential
Financial results – first nine months 2021 We’re progressing towards our full profitability potential, and despite significant headwinds over the past two years, we will deliver tangible uplift towards 2023 Since 2019 we have had to adjust our plan to a number of factors More extensive compliance sc
Slide 10: Corporate and retail commercial priorities
Financial results – first nine months 2021 Our strong position in the corporate segments makes us well-positioned to execute on our commercial priorities. Key focus on regaining momentum within our retail business Foundation Top commercial priorities Increasing momentum built up over past Sustaining
Slide 11: Enhanced business model to deliver on cost/income ratio ambition
Financial results – first nine months 2021 Our enhanced business model and current trajectory through ‘22 will deliver on our cost/income ratio ambition towards 2023 – in a sustainable way Tangible levers to reach top-line growth ambitions; a significant number of C/I ratio 63% 66% ~60% Mid 50s init
Slide 12: Equity: line of sight to RoE of 9-10% through-the-cycle
Financial results – first nine months 2021 With current trajectory, we have line of sight to an RoE of 9-10% through-the-cycle. In 2023 we will deliver 8.5-9% on the back of a normalised equity level 9-10% With our consistent operational performance and on the back of a more 8.5 – 9% ~0.9 ~-0.3 ~0 n
Slide 13: Danske Bank Q&A session
Financial results – first nine months 2021 Financial results – first nine months 2021 Danske Bank Q&A session Press 01 to ask a question Press 02 to cancel Press “Ask a question” We have the foundation in your webcast player We have invested in our operational setup We are ready to deliver sustainab
Slide 14: BU deep dive on 2023 ambitions
BU deep dive on 2023 ambitions
Slide 15: Business customers, PC DK and the future retail bank across the Nordics
Financial results – first nine months 2021 Capitalising on our strong position in the business customers segment, regaining momentum at PC DK and building the future retail bank across the Nordics Business Customers Be the no. 1 bank for businesses in Nordics Ambitions Grow market share across Nor
Slide 16: Leveraging market-leading position for large corporates and institutions
Financial results – first nine months 2021 We will leverage our market-leading position for large corporates and institutions and capitalise on the growing Nordic capital markets Sustainable Finance & Investments as growth enablers Our ambitions Be a leading Nordic sustainability bond, loan and inve
Slide 17: Financial Crime Plan: solid progress and completion on track
Financial results – first nine months 2021 Financial Crime Plan: Solid progress & prudently redeployed resources to mitigate extended scope. Completion on track towards ’23 followed by steady-state cost, by ‘25 Forward outlook Significant progress made despite changing circumstances Overall, now tha
Slide 18: Technology & Services drives efficiency across the value chain
Financial results – first nine months 2021 Technology & Services drives efficiency across the value chain – strong traction in 2021 towards Group ambitions Digital transformation Turn to new tech Efficiency Launched agile organisation to continuously Transforming our tech stack to decrease time-to-
Slide 19: Assumptions behind 2023 ambition
Financial results – first nine months 2021 Assumptions behind 2023 ambition Financial uplift from 2021 to 2023 – Commentary and underlying assumptions Costs / Operational efficiency Income Cost initiatives to be main driver of significant gross cost efficiency improvements, Top-line to increase
Slide 20: First nine months 2021 in detail
First nine months 2021 in detail
Slide 21: NII: Stabilisation despite margin pressure
Financial results – first nine months 2021 NII: Stabilisation despite margin pressure and impact from lending volumes and mix; Q3 supported by repricing initiatives Net interest income, 9M-21/9M-20 (DKK m) Highlights 16,703 NII came in slightly lower than in the same period last year, as deposit mar
Slide 22: Fee: Increase in fee income driven by capital markets
Financial results – first nine months 2021 Fee: Increase in fee income driven by capital markets performance and higher activity; Q3 showed good traction on investments fees, especially from retail customers Net fee income, 9M-21/9M-20 and Net fee income, Q3-21/Q2-21 (DKK m) Highlights 9,700 3,193 9
Slide 23: Trading: Slightly lower trading income than in exceptional 2020
Financial results – first nine months 2021 Trading: Slightly lower trading income than in exceptional 2020, partly off-set by higher investment activity at P&BC Net trading income, 9M-21/9M-21 and Net trading income, Q3-21/Q2-20 (DKK m) Highlights Group Functions North. Ireland P&BC xVA LC&I ex. xVA
Slide 24: Expenses: Downwards trajectory according to plan
Financial results – first nine months 2021 Expenses: Downwards trajectory according to plan, including lower costs for AML/Estonia and transformation Expenses, 9M-21/9M-20 (DKK m) Highlights 622 502 19,333 Total underlying expenses decreased 6% from the same period last year due 439 primarily to pro
Slide 25: Impairments: Strong credit quality, net reversals for the quarter
Financial results – first nine months 2021 Impairments: Strong credit quality further supported by economic recovery, resulting in net reversals for the quarter Impairment charges by category (DKK bn) Loan loss ratio by business unit (annualised, %) 3.40 Credit quality deterioration: oil & gas Post-
Slide 26: Capital: Strong capital base; CET1 ratio 18.1%
Financial results – first nine months 2021 Capital: Strong capital base; CET1 ratio 18.1%. EBA-related REA increases in Q4 will be mitigated by Pillar II relief Key points Capital ratios (%) Tier 2 AT1 Pillar II CET1 CET1 CET1 capital ratio increased 0.1% points to 18.1% by the end of Q3-21, 23.3 23
Slide 27: P&BC: Lending growth in Norway and Sweden
Financial results – first nine months 2021 P&BC: Lending growth in Norway and Sweden; profitability remains challenged by sustained margin pressure and lack of growth in Personal Customers Denmark Profit development 9M-21 vs 9M-20 (DKK m) Highlights 6,383 In Q3-21, margin improved from Profit before
Slide 28: LC&I: Increase in profitability driven by higher fee income
Financial results – first nine months 2021 LC&I: Increase in profitability driven by higher fee income and lower impairments Profit development 9M-21 vs 9M-20 (DKK m) Highlights 4,900 High customer activity within capital Higher PBT supported by low level of markets advisory and strong single-name c
Slide 29: Danica and Northern Ireland
Financial results – first nine months 2021 Danica: Strong business momentum continued. Northern Ireland: Profit before tax significantly up as a result of loan loss reversals Danica Pension, key figures (DKK m) Northern Ireland, key figures (DKK m) 9M-21 9M-20 % Q3-21 Q2-21 % 9M-21 9M-20 % Q3-21 Q2-
Slide 30: Appendix
Appendix Bank
Slide 31: Appendix
Financial results – first nine months 2021 Appendix 01. Sustainability 31 02. Business units 32 03. Credit quality 37 04. Macro data 42 05. Realkredit Danmark overview 44 06. Funding, liquidity and ratings 45 07. Tax and one-off items 48
Slide 32: Progress is positive across sustainability focus areas
Financial results – first nine months 2021 Progress is positive across sustainability focus areas – results Q3 2021 Sustainable finance Sustainable operations Impact initiatives Sustainable Sustainable Governance & Employee Environmental Entrepreneur- Financial investing financing integrity well-bei
Slide 33: Personal & Business Customers
Financial results – first nine months 2021 Personal & Business Customers Income statement (DKK m) NII bridge (DKK m) 9M-21 9M-20 Index Q3-21 Q2-21 Index 3,988 18 10 26 3,887 75 Net interest income 11,755 12,108 97 3,988 3,887 103 18 2 13 Net fee income 4,805 4,666 103 1,538 1,516 101 Q2-21 Lending L
Slide 34: Large Corporates & Institutions
Financial results – first nine months 2021 Large Corporates & Institutions Income statement (DKK m) NII bridge (DKK m) 9M-21 9M-20 Index Q3-21 Q2-21 Index 1,177 0 8 -38 1,161 Net interest income 3,553 3,767 94 1,161 1,177 99 -29 -4 93 -47 Net fee income 4,720 3,735 126 1,499 1,621 92 Net trading inc
Slide 35: Danica Pension
Financial results – first nine months 2021 Danica Pension Income statement and key figures (DKK m) Assets under management (DKK m) 9M-21 9M-20 Index Q3-21 Q2-21 Index H&A Life insurance Result, life insurance 1,863 1,948 96 550 528 104 Q3-20 424,372 441,037 Result, health and accident -202 -559 36 1
Slide 36: Northern Bank
Financial results – first nine months 2021 Northern Bank Income statement (DKK m) NII bridge (DKK m) 9M-21 9M-20 Index Q3-21 Q2-21 Index 4 5 334 331 2 Net interest income 996 1,035 96 334 331 101 6 5 2 3 Net fee income 201 198 102 72 69 104 Q2-21 Lending Lending Deposit Deposit FX Days Other Q3-21 N
Slide 37: Non-core
Financial results – first nine months 2021 Non-core Non-core loan portfolio, Q3-21 (DKK bn) Non-core, Q3-21 REA (DKK bn) Non-core conduits etc. Non-core banking Allowance account Non-performing credit exposure Performing credit exposure 7 2 5 4 5 2 3 1 3 1 2 2 2 4 4 3 1 1 1 2 0.4 1 1 1 0.0 0.1 Retai
Slide 38: Credit quality: Low level of actual credit deterioration
Financial results – first nine months 2021 Credit quality: Low level of actual credit deterioration Breakdown of core allowance account under IFRS 9 (DKK bn) Allowance account by business unit (DKK bn) P&BC N.I. Stage 1 Stage 2 Stage 3 LC&I Other (Non-core) 24.9 23.6 25.9 24.6 22.6 22.5 22.5 22.5 23
Slide 39: Oil-related exposure: Limited downside risks
Financial results – first nine months 2021 Oil-related exposure: Limited downside risks underpinned by reduced exposure to off- shore segment coupled with solid collateral values Key points, Q3-21 • The offshore segment, in which we have seen credit deterioration, makes up 37% of the exposure and ac
Slide 40: Credit exposure: Limited agriculture and directly oil-related exposure
Financial results – first nine months 2021 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure Oil-related exposure • Total oil-related exposure* decreased by DKK 0.2 bn from the preceding quarter driven • African Swine Fewer (ASF), which spread to Germany in
Slide 41: Credit exposure: transportation, hotels, restaurants and leisure
Financial results – first nine months 2021 Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure Transportation exposure Hotels, restaurant and leisure exposure • Total gross exposure* decreased DKK 0.4 bn to DKK 16.8 bn from the Q2-21 level, driven mainly by a single
Slide 42: Credit exposure: retailing and commercial real estate
Financial results – first nine months 2021 Credit exposure: Limited exposure to retailing and stable credit quality in commercial real estate Retailing Commercial real estate • Gross exposure decreased by DKK 7 bn from preceding quarter. • Overall, credit quality remain stable • Total gross exposure
Slide 43: Nordic macroeconomics
Financial results – first nine months 2021 Nordic macroeconomics Denmark Sweden Norway Finland EU Real GDP, constant prices (index 2005 = 100) Inflation (%) Consumer spending, Denmark (same weekday 2019 = 100) Unemployment (%) 130 120 110 100 90 80 70 0 Jan Apr Jul Oct Jan Apr Jul 2020 2020 2020 202
Slide 44: Nordic housing markets
Financial results – first nine months 2021 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) Apartment prices (index 2005 = 100) Apartment prices/nom. GDP (index 2005 = 100) Source: Danske Bank Macro Research 43
Slide 45: Realkredit Danmark portfolio overview
Financial results – first nine months 2021 Realkredit Danmark portfolio overview: 60% of new retail lending in Q3 was fixed-rate vs 49% of stock Highlights Retail loans, Realkredit Danmark, Q3-21 (%) Fixed rate (10 yrs-30 yrs) Interest-only Portfolio facts, Realkredit Danmark, Q3-21 Variable rate (6
Slide 46: Funding and liquidity: LCR compliant at 161%
Financial results – first nine months 2021 Funding and liquidity: LCR compliant at 161% Changes in funding,* 2021 (DKK bn and bp) Long-term funding excl. RD (DKK bn)** Cov. bonds Senior Non-Preferred Senior Funding plan Completed 31bp 100 41bp 79 60-75 59bp 62bp 67 69 8bp 36 43bp 26 28 25 24 104bp 1
Slide 47: Funding structure and sources
Financial results – first nine months 2021 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q3-21 (DKK bn) Funding sources* (%) 56% 56% 2,292 Q2 2021 165 Senior & Q3 2021 NPS bonds 1,801 595 1,155 Deposits Bank loans Bank mortgages 399
Slide 48: Danske Bank's credit ratings
Financial results – first nine months 2021 Danske Bank’s credit ratings Long-term instrument ratings No rating changes on Danske Bank Group Fitch Moody’s Scope S&P The credit ratings of the Danske Bank Group are unchanged from the ratings AAA Aaa AAA AAA published in the Conference Call presentation
Slide 49: Tax
Financial results – first nine months 2021 Tax Actual and adjusted tax rates (DKK m) Tax drivers, Q3-21 The actual tax rate of 21.6% (excluding prior-year’s Q3-21 Q2-21 Q1-21 Q4-20 Q3-20 adjustments) is slightly lower than the Danish rate of 22% - due primarily to differences in statutory tax rates
Slide 50: Material extraordinary items in the first nine months of 2021
Financial results – first nine months 2021 Material extraordinary items in the first nine months of 2021 Effect One-off items P&L line affected (DKK m) Gain on sale of Visa C shares 227 Trading Provision for home office allowance -122 Expenses Q1 Provision for upcoming changes in the VAT setup follo
Slide 51: Contacts
Financial results – first nine months 2021 Contacts Claus Ingar Jensen Mobile — +45 25 42 43 70 Head of IR clauj@danskebank.dk Nicolai Brun Tvernø Mobile — +45 31 33 35 47 Chief IR Officer nitv@danskebank.dk Olav Jørgensen Mobile — +45 52 15 02 94 Chief IR Officer ojr@danskebank.dk Patrick Laii Skyd
Slide 52: Disclaimer
Financial results – first nine months 2021 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 Un