Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2009 Earnings Presentation
42 slides from Danske Bank A/S's earnings presentation, Aug 11, 2009
Slide 1: Financial results for H1 2009
Financial results for H1 2009 August 11, 2009 Conference call 2.30pm CET Dial-in numbers UK: +44 208 817 9301 DK: +45 70 26 50 40 Webcast available at www danskebank com/ir www.danskebank.com/ir
Slide 2: Agenda
AGENDA A Agenda d 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: Key messages
KEY MESSAGES K messages Key - Record-high income, gradually declining impairment charges DKr m Q Quarterly l totall iincome 18,000 Other income (incl. insurance) Net trading income 48% higher total income Y/Y led to net profit of 15,000 Net fee income Net interest income DKr 0.7bn in H1 2009 12,00
Slide 4: The macroeconomic environment
MACRO ECONOMICS Th macroeconomic The i environment i t - Very tough first half, but is there a recovery around the corner? Macroeconomic key figures % GDP forecasts for 2009 2009 estimates 6 - Denmark relatively resilient GDP growth Budget balance Gross publ. debt Unempl. rate 0 % % of GDP % of GDP
Slide 5: Performance highlights
HIGHLIGHTS Performance highlights g g - High total income, but loan impairment charges, goodwill impairment and state guarantee fees lower the profit Income statement and key figures DKr m H1 2008 H1 2009 Index Q1 2009 Q2 2009 Index Net interest income 12,901 14,134 110 7,227 6,907 96 Net fee income
Slide 6: Net interest income
BUSINESS TRENDS N t iinterest Net t t iincome - Wider lending margins, but hurt by low interest rates and cost of hybrid capital DKr m Quarterly net interest income Net interest income 10% Y/Y Y/Y 10% Slightly decreasing lending volumes 7,500 Q/Q 4% Improved lending margins NII under pressure
Slide 7: Net interest income, Q2 2009 vs. Q1 2009
BUSINESS TRENDS N t iinterest Net t t iincome, Q2 2009 vs. Q1 2009 - 4% decrease due to cost of hybrid capital and lower interest rates DKr m Quarterly trend in net interest income 8,000 4% 235 79 112 7,000 171 264 383 7,227 6,000 , 6,907 NII interest rate sensitivity: - /+ 25bp in ST rates = - /+ D
Slide 8: Net fee income
BUSINESS TRENDS N t ffee income Net i - Quarterly trend turns upwards DKr bn Quarterly net fee income 2,500 Net fee N f iincome 14% Y/Y Activity-based fees down due to lower 2,000 investment fees and lower lending activity Portfolio-based fees down owingg to lower 1,500 asset management fees at
Slide 9: Net trading income
BUSINESS TRENDS Net trading income - Exceptionally high income is the positive side of the crisis Breakdown of net trading income Net trading income DKr 12.4bn in H1 2009 DKr m Q4 2008 Q1 2009 Q2 2009 Very strong Q1 2009, some effects Trading activities 2,634 7,534 4,410 sustainable Group Treasury
Slide 10: Net trading income (2)
BUSINESS TRENDS Net trading income (2) - Favourable market conditions % EUR/SEK 12M volatility ticks Bid/offer spreads spreads, 8Y Danish govts - High FX volatility boosts activity - Government bonds have become profitable 20 100 15 75 10 50 5 25 0 0 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09
Slide 11: Expenses
BUSINESS TRENDS Expenses - Cost management intensified, underlying cost base flat Expenses 19% Y/Y Expense trend and number of employees Increase due to DKr m H1 2008 H1 2009 Index Expenses 12,933 15,385 119 goodwill impairment Integration expenses 523 181 35 state guarantee fee Amortisation o
Slide 12: Loan impairment charges
BUSINESS TRENDS Loan impairment charges - Impairment charges still high, but gradually declining from Q4 08 level DKr m Quarterly loan impairment charges Impairment p chargesg DKr 6.6bn in Q2 2009 10,000 173 bp Slightly declining impairment charges , although Collective level is still extraordinar
Slide 13: Loan impairment charges and coverage ratio
BUSINESS TRENDS L Loan iimpairment i t charges h and d coverage ratio ti - SME is still dominating the impairments Impairments by customer segment NPLs and coverage ratios - SMEs account for most of the Groups impairments - Improving coverage ratios DKr bn % 100% 80 Coverage g ratio 100 incl. colla
Slide 14: Loan imp. charges geographical breakdown -1
BUSINESS TRENDS L Loan iimp. Ch Charges geographical hi l bbreakdown kd -1 - Improving trend in all Nordic countries except Finland DKr m Accumulated impairments 97 bp* DKr m 10 000 10,000 3 000 3,000 Collective 1,288 Accumulated impairments154 bp* Denmark 2,500 Finland 59% of Groups lending Indi
Slide 15: Loan imp. charges geographical breakdown -2
BUSINESS TRENDS L Loan iimp. Ch Charges - geographical hi l bbreakdown kd -2 - Ireland and the Baltics account for a large portion of total impairments DKr m DKr m 2 000 2,000 5 000 5,000 Accumulated impairments 585 bp* Northern Ireland Accumulated impairments 278 bp* Ireland Collective 653 1,600 4,
Slide 16: Total credit exposure
BUSINESS TRENDS T t l credit Total dit exposure - Down 4% since year-end Credit exposure from lending activity, activity end end-H12009 H12009 (DKr 2,428bn, including DKr 1,898bn in loans) Central and local governments Subsidised S b idi d 8% housing Largest changes in H1 2009 companies 5% Total cre
Slide 17: Liquidity and new funding
BUSINESS TRENDS Li idit and Liquidity d new ffunding di - Strong improvement as access to intl capital markets has eased 12-month liquidity* New funding in Q2 2009 Moodys Financial Strength by maturity DKr bn DKr bn 30 400 300 End-Q2 2009 200 20 100 End-Q1 2009 End-Q4 2008 0 10 -100 1 month 2 mont
Slide 18: Capital management
BUSINESS TRENDS C it l managementt Capital - Improving capital ratios Capital ratios CRD/Basel II Trend in RWA (DKr m) - Strong improvement due to new hybrid capital and reduced assets - Small effect due to the decline in credit quality % Q4 2008 Q1 2009 Q2 2009 11 Core (tier 1) ratio ex hybrid 8.
Slide 19: Outlook for H2 2009
OUTLOOK O tl k ffor H2 2009 Outlook - Difficult market conditions to continue ! Tough macroeconomics ! Loan impairment charges to remain at a high level ! Robust bankingg activities ! Widening of lending margins, but pressure on deposits margin ! Uncertainty about trading income ! Intensified cost m
Slide 20: Q&A session
Q&A SESSION Q&A session i Press 1 to ask a question Press Ask Ask a question question in Press # to cancel your webcast player www.danskebank.com/ir www.danskebank.com/ir / 20
Slide 21: Appendix
APPENDIX EEE Appendix
Slide 22: Lending margins
TRENDS IN FOCUS AREAS L di margins Lending i - Improving in all markets % 2.0 Q2 2009 Q1 2009 Q4 2008 1.5 Q3 2008 1.0 0.5 0.0 S d Sweden Note: Danske Bank (DK) includes Realkredit Denmark lending. 22
Slide 23: Deposit margins
TRENDS IN FOCUS AREAS D Deposit it margins i - Coming down due to lower short-term rates % 2.0 Q2 2009 Q1 2009 Q4 2008 1.5 Q3 2008 1.0 0.5 0.0 S d Sweden 23
Slide 24: Balance sheet trend
BUSINESS TRENDS B Balance d l sheet h t ttrend d - DKr 304bn asset reduction in H1 2009 Total assets end of period DKr bn 4,000 Change in 3,500 H1 2009 3,000 Other assets +2% 2,500 Trading & inv. - 24% 2,000 portfolio 1,500 Banks & repos - 5% 1,000 Lending - 3% 500 0 Total - 9% Q1 08 Q2 08 Q3 08 Q4
Slide 25: Commercial property and construction
TRENDS IN FOCUS AREAS C Commercial i l property t and d construction t ti - Credit exposure, NPL and impairments end-Q2 2009 Portion Construction Commercial from and building Sector in DKr bn property developers materials total Denmark 102.7 1.5 14.2 116.9 Finland 15.6 0.8 6.1 21.7 Sweden 50.5 0.5 4
Slide 26: Gross non-perf. loans geographical breakdown
TRENDS IN FOCUS AREAS G Gross non-perf.f loans l geographical hi l breakdown b kd - Trend reflects worsened economic situation bps Gross non-performing loans as bps of total loans 2,000 1,824 1,600 1 200 1,200 975 850 789 800 340 377 400 239 274 153 0 Denmark Finland Sweden Norway Northern Irela
Slide 27: Denmark: Housing market remains soft
TRENDS IN FOCUS AREAS D Denmark: kH Housing i market k t remains i soft ft - Prices down, but low unemployment and low LTV ratio reduce risk Updated: Q2 2009 Property prices I d = 1996 Index Houses Flats Ireland 400 UK - 1.7% +4.2% Norway 300 +0.3% - 0.7% Square metre 200 price Q/Q Sweden 100 Finl
Slide 28: Credit exposure: Mortgages in Denmark
TRENDS IN FOCUS AREAS C dit exposure: M Credit Mortgages t iin D Denmarkk - Low avg. LTV ratio; arrears limited, but picking up Danish mortgages Breakdown of loans by LTV and rating category 28 repossessed properties and 3,706 arrears out Mortgage finance (residential & commercial) End-Q2 of 419,0
Slide 29: Bond portfolio
BUSINESS TRENDS B d portfolio Bond tf li - Safe and high-rated portfolio Bond portfolio (DKr 381bn) Credit bonds 5% Certificates 5% Quasi Quasi- government 2% Danish mortgage Swedish bonds covered 40% bonds 16% Other covered bonds 9% Governments & municipals 23% 29
Slide 30: Funding end-Q2 2009
BUSINESS TRENDS F di end-Q2 Funding d Q2 2009 - Well-diversified funding position Equity E it Central banks 4% 6% Repos Deposits 6% 30% Well-diversified funding structure Banks, net 52% deposits and fully match-funded 5% Danish mortgage bonds (net) Short-term Short term bonds DKr 240bn S-T b
Slide 31: Banking Activities Denmark
TRENDS IN BUSINESS UNITS B ki A Banking Activities ti iti D Denmarkk - High impairment charges and state guarantee fee led to negative result Profit before loan impairment charges 10% DKr bn Trend in lending g volume - Improved NII, but state guarantee fee weights heavily (average) DKr m H1 2008 H1
Slide 32: Banking Activities Finland
TRENDS IN BUSINESS UNITS B ki A Banking Activities Activities ti iti FiFinland Fi Finland ll dd - Macroeconomic situation worsening Profit before loan impairment charges DKr 684m Trend in lending volume DKr bn (average) - Boosted by improving total income and achieved synergies 100 Retail: Y/Y 4% Co
Slide 33: Banking Activities Sweden
TRENDS IN BUSINESS UNITS B ki A Banking Activities ti iti S Sweden d - Higher lending margins and improving quarterly trend in impairments Trend in lending volume Profit before loan impairment charges 2% DKr bn (average) [Change in SKr) - Reflects 14% depreciation of SKr against DKr Retail: Y/Y 14%
Slide 34: Banking Activities Norway
TRENDS IN BUSINESS UNITS B ki A Banking Activities ti iti N Norway - Earnings held up by strong income growth Profit before loan impairment charges 53% DKr bn Trend in lending g volume (average) [Ch [Changes iin NK NKr]] - Very strong income growth despite NKr depreciation 125 Retail: Y/Y 5% Corpora
Slide 35: Banking Activities Northern Ireland
TRENDS IN BUSINESS UNITS B ki A Banking Activities ti iti N Northern th IIreland l d - Hurt by lower short-term rate, GBP depreciation & higher impairments Profit before loan impairment charges 30% DKr bn Trend in lending g volume [[Change g in £]] (average) - Reflects deposit margin erosion and low
Slide 36: Banking Activities Ireland
TRENDS IN BUSINESS UNITS B ki Activities Banking A ti iti IIreland l d - Weak macroeconomic environment leads to high impairments Profit before loan impairment charges 34% DKr bn Trend in lending g volume Retail: Y/Y 7% (average) Corporate: Y/Y 10% - Driven by higher lending margins and tight cost c
Slide 37: Banking Activities Baltics
TRENDS IN BUSINESS UNITS Banking Activities Baltics - Goodwill impairment of DKr 1.4bn in Lithuania and Latvia Profit before loan impairment charges DKr 1.4bn DKr bn Trend in lending g volume - Lower income and high loan imp. charges, also tight cost control (average) DKr m H1 2008 H1 2009 Index 20
Slide 38: Danske Markets
TRENDS IN BUSINESS UNITS D Danske k MMarkets k t - Exceptionally high income due to favourable market conditions Profit before tax at record level Quarterlyy breakdown of income - Driven by lower ST rates, high volatility and customer activity DKr m H1 2008 H1 2009 Index DKr m Q4 2008 Q1 2009 Q2 200
Slide 39: Danske Capital
TRENDS IN BUSINESS UNITS D Danske k CCapital it l - Income down due to declining assets under management Profit before tax 12% DKr bn AuM Customer breakdown - Due to lower asset management and investment fees 600 DKr m H1 2008 H1 2009 Index Private equity Total income 909 863 95 400 Institutional
Slide 40: Danica Pension
TRENDS IN BUSINESS UNITS D i Pension Danica P i - Higher investment return and lower ST rate lift result Net income from insurance business Investment returns, YTD DKr m H1 2008 H1 2009 Index customers funds % Premiums (DKr bn) 11.2 9.7 87 Investment return Investments & liabilities Share of techni
Slide 41: Danica's profit model
TRENDS IN BUSINESS UNITS Danicas p profit model Risk allowance postponed due to usage of bonus potential of paid- up policies not fully restored Profit model Condition / sensitivity 1H 2009 DKr m No usage of bonus potential Usage of bonus potential 538 Risk allowance 64 bp of 1 technical pr
Slide 42: Disclaimer
DISCLAIMER Di l i 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