Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — 9M 2014 Earnings Presentation
49 slides from Danske Bank A/S's earnings presentation, Oct 30, 2014
Slide 1: Financial results – first nine months 2014
Financial results – first nine months 2014 Thomas F. Borgen Chief Executive Officer Henrik Ramlau-Hansen Chief Financial Officer 30 October 2014
Slide 2: Agenda
Financial results for 9M 2014 Q1 2013 Agenda Executive summary and financial results 3 Business unit update 5 Selected topics 7 Status of selected market initiatives 12 Business review: C&I 13 Outlook for full-year 2014 17 Q&A 18 Appendix 19 2
Slide 3: Executive summary – first nine months 2014
Financial results for 9M 2014 Q1 2013 Executive summary – first nine months 2014 Key message With ROE of 8.9%, we continue to make progress towards our financial targets Net profit Net profit of DKK 10.1 bn – up 95% vs 9M 2013 Income Total income of DKK 32.6 bn – up 13% vs 9M 2013 Expenses Expenses
Slide 4: Net profit: DKK 10.1 bn, almost double the level in 9M 2013
Financial results for 9M 2014 Q1 2013 Net profit: DKK 10.1 bn, almost double the level in 9M 2013 Income statement & key figures (DKK m) Key points, 9M 14 vs 9M 13 9M 9M Q3 Q2 • Return on equity improved from Index Index 4.9% to 8.9% 2014 2013 2014 2014 Net interest income 17,227 16,437 105 5,976 5,
Slide 5: The three banking units: Improvement at all units, particularly at Personal Banking
Financial results for 9M 2014 Q1 2013 The three banking units: Improvement at all units, particularly at Personal Banking Pre-tax return on allocated capital (%) Financial highlights, 9M 2014 vs 9M 2013 9M 2013 9M 2014 Personal Banking • Slightly higher total income due to fee and trading income • E
Slide 6: Danske Capital and Danica Pension: Solid performance continues
Financial results for 9M 2014 Q1 2013 Danske Capital and Danica Pension: Solid performance continues Danske Capital: Financial highlights, 9M 2014 vs 9M 2013 Danica Pension: Financial highlights, 9M 2014 vs 9M 2013 • Total income up 13% on an increase in assets under • Premiums up 2% management and
Slide 7: Expenses: Positive effect of cost-saving initiatives in all cost lines
Financial results for 9M 2014 Q1 2013 Expenses: Positive effect of cost-saving initiatives in all cost lines Total Group expenses (DKK m) Change in expenses (DKK m) Consultants etc. Bonuses Severance payments Write-down on Sampo name YTD 2013 17,207 Deposit scheme guarantee / bank packages Other cos
Slide 8: Impairments: Loan loss ratio of 14 bp for core activities and 17 bp for the entire Group
Financial results for 9M 2014 Q1 2013 Impairments: Loan loss ratio of 14 bp for core activities and 17 bp for the entire Group Impairments, 2008 to Q3 14 (DKK bn/bp) Impairments (DKK m) Impairments Loan loss ratio* (rhs) 9M 14 9M 13 Index Q314 Q214 Index Personal Banking 895 1,434 62 342 216 158 10
Slide 9: AQR and stress test: Substantial capital buffer of DKK 57bn in the adverse scenario
Financial results for 9M 2014 Q1 2013 AQR and stress test: Substantial capital buffer of DKK 57bn in the adverse scenario Key points Adjusted CET1 capital ratio as of 1 January 2014 (%) • Danske Bank passed the EBA stress test with total capital AQR adjustment CET1 ratio post-AQR that is more than d
Slide 10: Capital: Very solid capital base, with CET1 ratio of 15%
Financial results for 9M 2014 Q1 2013 Capital: Very solid capital base, with CET1 ratio of 15% Capital ratios, under Basel III/CRR (%) Capital drivers Tier 2 • In Q3 2014, RWA declined DKK 19 bn to DKK 868 bn, Hybrid tier 1 / Additional tier 1 mainly because we removed the temporary add-on of 3 Comm
Slide 11: Non-core: Winding-up of Irish assets proceeding as planned
Financial results for 9M 2014 Q1 2013 Non-core: Winding-up of Irish assets proceeding as planned Key points New Non-core loan portfolio,* Q3 2014 (DKK bn) • The loss before tax was reduced from DKK 1.4 bn in the Allowance account 48 first nine months of 2013 to DKK 1.0 billion Impaired credit exposu
Slide 12: Status of selected market initiatives
Financial results for 9M 2014 Q1 2013 Status of selected market initiatives MobilePay Danske Business One, Plus and Pro Danske OneTrader More than 1.6 million active users Customer inflow at Business 300 businesses have used the Banking DK has risen 23% since platform since the launch in May 68% of
Slide 13: Business review: Setting the agenda for the new Corporates & Institutions
Financial results for 9M 2014 Q1 2013 Business review: Setting the agenda for the new Corporates & Institutions Customer attention New organisational set-up focused on customers, with a strong return-optimisation mindset Increasing client-driven income from transaction banking, debt capital markets,
Slide 14: C&I has a solid starting point...
Financial results for 9M 2014 Q1 2013 C&I has a solid starting point... Competitive advantages of the Nordic markets Overview of latest Prospera rankings, 2014 YTD 2013-2014 2012-2013 Two local floating currencies 27 1 16 Denmark and Sweden have two of the largest bond markets in the world, with ric
Slide 15: ... but market and regulatory challenges put pressure on profitability
Financial results for 9M 2014 Q1 2013 ... but market and regulatory challenges put pressure on profitability Market and regulatory changes affect C&I Return on allocated capital (pre-tax) Profit before tax (DKK bn) Return on allocated capital (%) Allocated capital (DKK bn) 37.9 Liquidity Coverage Ra
Slide 16: The new C&I target: Return on allocated capital of 15%
Financial results for 9M 2014 Q1 2013 The new C&I target: Return on allocated capital of 15% Ranges for key figures The new C&I A large wholesale bank with a competitive edge in the Nordic markets, which offer many business opportunities DKK DKK 9bn Income 11bn – Strong platforms in corporate and
Slide 17: Outlook for 2014: Net profit guidance raised to DKK 11.5-13.5 bn
Financial results for 9M 2014 Q1 2013 Outlook for 2014: Net profit guidance raised to DKK 11.5-13.5 bn Macro Economic growth remains slow and fragile, with low interest rates Total income Income above the 2013 level, with improvements in most income lines Expenses below DKK 23 bn in 2014 (DKK 23.8 b
Slide 18: Q&A session
Financial results for 9M 2014 Q1 2013 Q&A session Press * then 1 to ask a question Press “#” to cancel Press “Ask a question” in your webcast player www.danskebank.com/ir 18
Slide 19: Appendix
Financial results for 9M 2014 Q1 2013 Appendix Business units 20 Special topics: NII, trading income and expenses 25 Impairments 28 Macro, credit quality and portfolio reviews 30 Funding, liquidity and ratings 35 Financial targets 38 Danica’s profit model and tax 39 C&I review 41 Contact details 48
Slide 20: Personal Banking: Positive trend in income and expenses continues
Financial results for 9M 2014 Q1 2013 Personal Banking: Positive trend in income and expenses continues; impairments up owing to collective charges Income statement & key figures (DKK m) Key points, Q3 14 vs Q2 14 Q3 2014 Q2 2014 Index Net interest income 2,761 2,728 101 • Profit before tax up 4% to
Slide 21: Business Banking: Stable trends in income and expenses
Financial results for 9M 2014 Q1 2013 Business Banking: Stable trends in income and expenses; impairments up owing to collective charges Income statement & key figures (DKK m) Key points, Q3 14 vs Q2 14 Q3 2014 Q2 2014 Index Net interest income 2,309 2,283 101 • Profit before tax down 6% to DKK 1,45
Slide 22: Corporates & Institutions: Strong improvement in net profit
Financial results for 9M 2014 Q1 2013 Corporates & Institutions: Strong improvement in net profit from client-driven income and lower impairments Income statement & key figures (DKK m) Key points, Q3 14 vs Q2 14 Q3 2014 Q2 2014 Index Net interest income 713 689 103 • Profit before tax up 69%, mainly
Slide 23: Danske Capital: Positive trend in income continues
Financial results for 9M 2014 Q1 2013 Danske Capital: Positive trend in income continues from higher margins owing to change in product mix Income statement (DKK m) Key points, Q3 14 vs Q2 14 Q3 2014 Q2 2014 Index • Total income up 5% on higher margins Net interest income -1 1 - Net fee income 554 5
Slide 24: Danica Pension: Net income up 12%
Financial results for 9M 2014 Q1 2013 Danica Pension: Net income up 12%; full risk allowance booked for all four interest rate groups Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q3 14 (%) Q3 2014 Q2 2014 Index Equities Credit bonds Alternative investments Premiums 5,98
Slide 25: Net interest income: Improvement because of higher lending margins
Financial results for 9M 2014 Q1 2013 Net interest income: Improvement because of higher lending margins Quarterly net interest income (DKK m) Quarterly changes in net interest income (DKK m) +7% 5,976 Q2 14 5,900 5,900 5,640 5,561 Lending effect 103 5,351 Deposit effect 33 Q313 Q413 Q114 Q214 Q314
Slide 26: Trading income: Client-driven income affected by low seasonal activity in Q3
Financial results for 9M 2014 Q1 2013 Trading income: Client-driven income affected by low seasonal activity in Q3; rebound in income from Market Making Trading income by business unit (DKK m) Key points Other incl. Treasury C&I Business Personal • Adjusted for income from sale of 2,195 Nets of DKK
Slide 27: Expenses: Reduced 1% as decline in staff costs in Q3 is partly offset
Financial results for 9M 2014 Q1 2013 Expenses: Reduced 1% as decline in staff costs in Q3 is partly offset by write-down on premises Total expenses (DKK m) Quarterly change in expenses, (DKK m) Consultants etc. Bonuses Severance payments Other costs Q2 2014 5,589 Deposit guarantee scheme /bank pack
Slide 28: Impairments: Stable impairments in core activities
Financial results for 9M 2014 Q1 2013 Impairments: Stable impairments in core activities Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal • Personal Banking: Up from low Q2 level partly from collective charges 1.2 1.1 • Business Banking: Increased impairments o
Slide 29: Group impairments: Stable impairment level; DKK 44.5 bn in the allowance account
Financial results for 9M 2014 Q1 2013 Group impairments: Stable impairment level; DKK 44.5 bn in the allowance account Individual loan impairment charges,* ex Baltics (DKK bn) Change in allowance account* (DKK m) New Increased Reversals Allowance, end-2007 4,900 0.8 1.2 1.1 0.8 0.9 1.7 Gross impairm
Slide 30: Macro: Trends in the Nordics
Financial results for 9M 2014 Q1 2013 Macro: Trends in the Nordics Bankruptcies (index 1996 = 100) Rating upgrades,* 12-month moving average (%) Denmark Finland Norway Sweden Business Banking C&I (incl. Financials) 500 100 400 Upgrades > downgrades 300 50 200 100 Downgrades > upgrades 0 1996 1999 20
Slide 31: Denmark: Housing remains affordable as prices stabilise
Financial results for 9M 2014 Q1 2013 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Affordability index, quarterly data from1989-2014 Change in Fixed rate Mixed rate Average Region Prices Change q/q Preview* 160 peaked since peak Q2 2014 Q3 14 140 Copenhag
Slide 32: Realkredit Danmark: Portfolio overview
Financial results for 9M 2014 Q1 2013 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q3 14 Loans by LTV ratio and rating, RD, end-Q3 14 (DKK bn) • Approx. 383,000 loans (residential and commercial) Pub. • 2,306 loans in 3- and 6-month arrears LTV ratio (%) 1-3 4-7 8-
Slide 33: Realkredit Danmark: Preference for longer-term variable rate loans
Financial results for 9M 2014 Q1 2013 Realkredit Danmark: Preference for longer-term variable rate loans driven by flat yields and fee structure Key points Expected development in RD portfolio* (%) • Trend away from short-term Flexlån® continued in Q3 Interest-only Amortising 2014 • Shift into FlexK
Slide 34: Impaired exposure: Limited agriculture and shipping exposure
Financial results for 9M 2014 Q1 2013 Impaired exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio,* Q3 14 (%) Shipping, breakdown of loan portfolio,* Q3 14 (%) Other Car carrier Other RO-RO Chemical tanker Horticulture 12 Product tanker 7 5 2 8 Mixed operati
Slide 35: Funding and liquidity: Successful capital issues and high issuance activity
Financial results for 9M 2014 Q1 2013 Funding and liquidity: Successful capital issues and high issuance activity in the first nine months of 2014 Changes in funding , 2014 (DKK bn and bp*) Long-term funding ex RD (DKK bn) Cov.bonds Senior Tier 2 Tier 1 Funding plan Completed 132bp 589bp 589bp 136bp
Slide 36: Funding: Structure and sources
Financial results for 9M 2014 Q1 2013 Funding: Structure and sources Loan portfolio and long-term funding, Q3 14 (DKK bn) Funding sources (%) Q2 2014 Q3 2014 1,785 89 Senior debt 43 1,582 Bank loans 519 761 Deposits 23 Bank mortgages 316 188 Covered bonds 11 9 6 5 1 2 RD mortgages 747 747 Issued RD
Slide 37: Three distinct methods of rating banks
Financial results for 9M 2014 Q1 2013 Three distinct methods of rating banks Rating methodology Danske Bank’s rating Anchor Extraord. Add. Issuer + 1 + 2 + 3 + 4 = SACP = + = SACP* Support factors Rating bbb+ +1 0 0 0 a- +2 -1 A (Negative) 1=Business Position 2=Capital & Earnings 3=Risk Position 4=F
Slide 38: Financial targets: Further progress towards 9% ROE in 2015
Financial results for 9M 2014 Q1 2013 Financial targets: Further progress towards 9% ROE in 2015 Status at Target Year to be achieved Comments 30 September 2014 9% 2015 Initiatives progressing Return on equity 8.9% Above 12% Long-term as planned S&P/Moody’s/Fitch Improve ratings by at In progress, u
Slide 39: Danica Pension's profit model
Financial results for 9M 2014 Q1 2013 Danica Pension’s profit model Profit model Condition/ sensitivity Q1-Q3 2014 DKK m Danica Traditionel. Mainly risk Can be booked only if investment return Risk allowance 1,027 1 allowance 75 bp p.a. of technical is high enough and if no use of bonus Other -80 pr
Slide 40: Tax
Financial results for 9M 2014 Q1 2013 Tax Actual and adjusted tax rates (DKK m) Tax drivers Q3 14 Q2 14 Q1 14 Q4 13 Q3 13 • Actual tax rate increased from Q2 14 to Q3 14 owing to booking of Profit before tax 4,503 5,000 3,630 2,862 2,304 tax-free income from the sale of Pre-tax loss, Ireland core an
Slide 41: Business review: Setting the agenda for the new Corporates & Institutions
Financial results for 9M 2014 Q1 2013 Business review: Setting the agenda for the new Corporates & Institutions Customer attention New organisational set-up focused on customers, with a strong return-optimisation mindset Increasing client-driven income from transaction banking, debt capital markets,
Slide 42: C&I has a solid starting point...
Financial results for 9M 2014 Q1 2013 C&I has a solid starting point... Competitive advantages of the Nordic markets Overview of latest Prospera rankings, 2014 YTD 2013-2014 2012-2013 Two local floating currencies 27 1 16 Denmark and Sweden have two of the largest bond markets in the world, with ric
Slide 43: ... but market and regulatory challenges put pressure on profitability
Financial results for 9M 2014 Q1 2013 ... but market and regulatory challenges put pressure on profitability Market and regulatory changes affect C&I Return on allocated capital (pre-tax) Profit before tax (DKK bn) Return on allocated capital (%) Allocated capital (DKK bn) 37.9 Liquidity Coverage Ra
Slide 44: The new C&I target: Return on allocated capital of 15%
Financial results for 9M 2014 Q1 2013 The new C&I target: Return on allocated capital of 15% Ranges for key figures The new C&I A large wholesale bank with a competitive edge in the Nordic markets, which offer many business opportunities DKK DKK 9bn Income 11bn – Strong platforms in corporate and
Slide 45: Adapting our business: Making the C&I income stream more balanced
Financial results for 9M 2014 Q1 2013 Adapting our business: Making the C&I income stream more balanced by increasing the relative weight of Capital Markets Capital Markets Capital Markets services are essential in a Nordic universal bank Capital-light fee income FICC Growth potential FICC s
Slide 46: Adapting our business: Increase customer attention and client-driven income
Financial results for 9M 2014 Q1 2013 Adapting our business: Increase customer attention and client-driven income Income from client-driven activities Client-driven income initiatives (2012–14 annualised; DKK bn) Client-driven focus areas Tying C&I’s product offering together – from individual Oth
Slide 47: Creating a sustainable FICC area by adjusting the business model
Financial results for 9M 2014 Q1 2013 Creating a sustainable FICC area by adjusting the business model while maintaining capacity to service customers A sustainable FICC business • A large player with a competitive edge in the Nordic markets, which Initiatives implemented offer plentiful business •
Slide 48: Contacts
Financial results for 9M 2014 Q1 2013 Contacts Henrik Ramlau-Hansen Direct: +45 45 14 06 66 Chief Financial Officer Mobile: +45 22 20 73 10 hram@danskebank.com Claus Ingar Jensen Direct: +45 45 12 84 83 Head of IR Mobile: +45 25 42 43 70 clauj@danskebank.dk Robin Hjelgaard Løfgren Direct: +45 45 14
Slide 49: Disclaimer
Financial results for 9M 2014 Q1 2013 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