Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Debt Investor Presentation (November 2021)
59 slides from Danske Bank A/S's debt investor presentation, November 2021
Slide 1: Debt investor update – first nine months 2021
Debt investor update – first nine months 2021
Slide 2: Agenda
Debt investor update – first nine months 2021 Agenda 01. Overview and Strategy 2 02. Financial update 9 03. Capital and funding 17 04. Covered bond universe and ratings 27 05. Appendix 22
Slide 3: We are a Nordic universal bank with strong regional roots
Debt investor update – first nine months 2021 We are a Nordic universal bank with strong regional roots Norway (AAA) Finland (AA+) Challenger position 3rd largest Market share: 6% Market share: 9% Share of Group lending: 10% Share of Group lending: 7% GDP growth 2021E: 3.8% GDP growth 2021E: 3.3% Un
Slide 4: Sustainability is an integrated element of our corporate strategy and targets
Debt investor update – first nine months 2021 Sustainability is an integrated element of our corporate strategy and our corporate targets What we want to accomplish by 2023 How we measure success The seven focus areas Sustainable "On average among the top 2 in customer 1 Sustainable ≤2.0 average CSA
Slide 5: Progress is positive across sustainability focus areas – results Q3 2021
Debt investor update – 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-
Slide 6: Strong foundation and significant investments further strengthened our position
Debt investor update – 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 t
Slide 7: Financial Crime Plan: Solid progress and prudently redeployed resources
Debt investor update – 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
Slide 8: Enhanced business model to deliver on cost/income ratio ambition towards 2023
Debt investor update – 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 i
Slide 9: Line of sight to an RoE of 9-10% through-the-cycle
Debt investor update – 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 ~
Slide 10: Steady progress in most areas supported by strong macro and credit quality
Debt investor update – 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 a
Slide 11: Total income up 4% y/y driven by strong fee income
Debt investor update – 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
Slide 12: Net profit outlook reaffirmed: more than DKK 12 billion in 2021
Debt investor update – 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 underlyi
Slide 13: NII: Stabilisation despite margin pressure
Debt investor update – 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
Slide 14: Fee: Increase in fee income driven by capital markets
Debt investor update – 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 3,19
Slide 15: Trading: Slightly lower trading income than in exceptional 2020
Debt investor update – 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.
Slide 16: Expenses: Downwards trajectory according to plan
Debt investor update – 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
Slide 17: Impairments: Strong credit quality, net reversals for the quarter
Debt investor update – 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 rat io by business unit (annualised, %) 3.40 Credit quality deterioration: oil & gas P
Slide 18: Capital: Strong capital base; CET1 ratio of 18.1%
Debt investor update – first nine months 2021 Capital: Strong capital base; CET1 capital ratio of 18.1% (buffer of 5.0%) Capital ratios, under Basel III/CRR (%) Est imated capital buffer structure (%) Tier 2 Countercyclical capital buffer 23.4 Hybrid T1/AT1 23.0 23.2 Capital conservation buffer 22.7
Slide 19: Strong CET1 capital build-up since 2008
Debt investor update – first nine months 2021 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) well in excess of DKK 100 bn Common Equity Tier 1, 2008 – 9M-21 (DKK bn) +DKK 71 bn 144 148 126 130 134 133 133 127 133 119 107 77 79 85 2008 2009 2010 2011 2012 2013 2014 2015
Slide 20: Fully compliant with MREL requirement
Debt investor update – first nine months 2021 Fully compliant with MREL requirement; expect to cover MREL need with both preferred and non-preferred senior MREL resources and requirements; Q1 2021; % of Group REA Overview of MREL MREL resources and requirements; Q3 2021; % of Group REA, DKK bn The G
Slide 21: Funding structure and sources: Danish mortgage system is pass-through
Debt investor update – first nine months 2021 Funding structure and sources: Danish mortgage system is fully pass-through Loan port folio 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
Slide 22: Funding programmes and currencies
Debt investor update – first nine months 2021 Funding programmes and currencies Covered bonds by currency, end-Q3 2021 Largest funding programmes, end-Q3 2021 Utilisation 0% EMTN Programme 44% EUR 24% Limit – EUR 35bn 30% SEK NOK Global Covered Bond 75% CHF Limit – EUR 30bn 47% ECP Programme 4% Tota
Slide 23: Funding and liquidity: LCR compliant at 161%
Debt investor update – 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 8bp 67 69 43bp 36 26 28 25 24 104b
Slide 24: Danske Bank covered bond universe, a transparent pool structure
Debt investor update – first nine months 2021 Danske Bank covered bond universe, a transparent pool structure1 Danske Bank A/S C-pool S&P AAA Fitch AAA + Residential mortgages from • Denmark, D-pool • Norway, I-pool • Sweden, Danske Hypotek AB Danske Bank A/S I-pool Finland • Finland, Danske Mortgag
Slide 25: Danske Bank's credit ratings
Danske Bank’s credit ratings Long-term instrument ratings No rat ing changes on Danske Bank Group Fitch Moody’s Scope S&P The credit ratings of Danske Bank Group are unchanged compared to the AAA Aaa AAA AAA ratings published in the Investor presentation for Q2 2021. AA+ Aa1 AA+ AA+ Fitch, Moody’s a
Slide 26: Danske Bank's ESG ratings
Danske Bank’s ESG ratings We have chosen to focus on five providers based on their importance to our investors Q3 2021 Q2 2021 Q1 2021 End 2020 End 2019 End 2018 Range 1 B 277 companies, out of the 9,600+ analysed, B B B C C D- to A+ (A+ highest rating) made the climate change A List in 2020 C Prime
Slide 27: Three distinct methods for rating banks
Danske Bank’s rating Three distinct methods for rating banks Rating methodology Extra- Anchor Additional + 1 + 2 + 3 + 4 = SACP = ordinary + ALAC + = Issuer rating SACP1 factors support A bbb+ +1 +1 -1 0 a- 0 +2 -1 (Stable) 1=Business Position, 2=Capital & Earnings, 3=Risk Position, 4=Funding & Liqu
Slide 28: Appendix
Debt investor update – first nine months 2021 Appendix 01. Sustainability 28 02. Update on 2023 ambitions 36 02. Business units 43 03. Credit quality 50 04. Macro and portfolio reivew 55 06. Contact details 57
Slide 29: Danske Bank has been working with sustainability for many years
Debt investor update – first nine months 2021 Danske Bank has been working with sustainability for many years 2006 2007 2008 2009 First CSR report Joined the UN First Responsible Investment Policy Began offsetting our published Global Compact Moneyville launched to support carbon emissions financial
Slide 30: Our 2023 Sustainability Strategy
Debt investor update – first nine months 2021 Our 2023 Sustainability Strategy defines the key dimensions for our efforts to create lasting value for our customers, employees, society and investors Danske Bank’s 2023 Sustainability Strategy 29
Slide 31: Danske Bank works actively to integrate ESG considerations
Debt investor update – first nine months 2021 Danske Bank works actively to integrate ESG considerations across key activities Data & analytics Advisory Risk Management Products &solutions Reporting & transparency Pricing 30
Slide 32: Aspires to Nordic leadership in sustainable finance
Debt investor update – first nine months 2021 Danske Bank aspires to Nordic leadership in sustainable finance – our sustainable finance framework guides our approach Group ambition for Be a leading bank in the Nordics on sustainable finance Sustainable finance Sustainable financing: Sustainable inve
Slide 33: Committed to reducing the absolute emissions of our portfolios
Debt investor update – first nine months 2021 Danske Bank is firmly committed to reducing the absolute emissions of our portfolios • Portfolio target to be published during • First sector-by-sector interim targets • First sector-by-sector interim targets 2022 to be published by YE 2021 published Dan
Slide 34: Further highlights from Q3 include…
Debt investor update – first nine months 2021 Further highlights from Q3 include… Leading bookrunner • #1 Nordic bookrunner for green, social and sustainable bonds1) • #1 Nordic mandated lead arranger of sustainability-linked loans1) Further expanded product suite • No-threshold green loan for SME c
Slide 35: Overview of ESG integration in lending operations
Debt investor update – first nine months 2021 Deep dive: Overview of ESG integration in Danske Bank’s lending operations Multiple types of approaches are implemented to consider ESG factors both at company and portfolio levels 1. Position statements 2. Single-name ESG analysis 3. Portfolio-level ESG
Slide 36: Support for international agreements, goals and standards on sustainability
Debt investor update – first nine months 2021 Danske Bank actively supports a range of international agreements, goals and standards relating to sustainability1) The Paris Pledge Sector Net Zero Task force on Climate-related Partnership for Carbon Banking for Impact commitments Financial Disclosures
Slide 37: Line of sight to delivering an RoE of 9-10%
Debt investor update – 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
Slide 38: Progressing towards our full profitability potential
Debt investor update – 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
Slide 39: Corporate and retail commercial priorities
Debt investor update – 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 Sustain
Slide 40: Business customers and building the future retail bank
Debt investor update – 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
Slide 41: Leverage market-leading position for large corporates and institutions
Debt investor update – 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 i
Slide 42: Technology & Services drives efficiency across the value chain
Debt investor update – 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 t ime-
Slide 43: Assumptions behind 2023 ambition
Debt investor update – 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 increa
Slide 44: Strong footprint within retail lending
Debt investor update – first nine months 2021 Strong footprint within retail lending Lending by segment 1 Q3-21 (%) Credit exposure by industry Q3-21 (%) Personal Customers DK Personal Customers 38 Personal Customer Nordic Public Institutions 12 Business Customers Commercial Property 12 Asset Financ
Slide 45: Personal & Business Customers
Debt investor update – 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 Lendin
Slide 46: Realkredit Danmark portfolio overview
Debt investor update – 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
Slide 47: Large Corporates & Institutions
Debt investor update – 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
Slide 48: Danica Pension
Debt investor update – 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 3
Slide 49: Northern Bank
Debt investor update – 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 Q3-2
Slide 50: Non-core
Debt investor update – 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 Re
Slide 51: Credit quality: Low level of actual credit deterioration
Debt investor update – 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
Slide 52: Oil-related exposure: Limited downside risks
Debt investor update – 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
Slide 53: Credit exposure: Limited agriculture and oil-related exposure
Debt investor update – 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
Slide 54: Credit exposure: transportation, hotels, restaurants and leisure
Debt investor update – first nine months 2021 Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure Transportat ion 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 sin
Slide 55: Credit exposure: retailing and commercial real estate
Debt investor update – 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 expos
Slide 56: Nordic macroeconomics
Debt investor update – first nine months 2021 Nordic macroeconomics Denmark Sweden Norway Finland EU Real GDP, constant prices (index 2005 = 100) Inflat ion (%) 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
Slide 57: Nordic housing markets
Debt investor update – first nine months 2021 Nordic housing markets Denmark Sweden Norway Finland Propert y 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 56
Slide 58: Contacts
Debt investor update – first nine months 2021 Contacts Kimberly Bauner Mobile +46 73 700 19 39 Claus Ingar Jensen Mobile +45 25 42 43 70 Head of Group Treasury tagg@danskebank.dk Head of IR clauj@danskebank.dk Bent Callisen Direct +45 45 12 84 08 Nicolai Brun Tvernø Mobile +45 31 33 35 47 Head of Gr
Slide 59: Disclaimer
Debt investor update – 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 solici tation of an offer to buy or acquire securities of Danske Bank A/S in any jurisdiction, including th
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