Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2017 Earnings Presentation
34 slides from Danske Bank A/S's earnings presentation, Jul 20, 2017
Slide 1: Financial results – first half 2017
Financial results – first half 2017 Thomas F. Borgen Chief Executive Officer Jacob Aarup-Andersen Chief Financial Officer 20 July 2017
Slide 2: Agenda
Financial results – first half 2017 Agenda Executive summary 2 Business unit update 4 Selected topics 6 Outlook for full-year 2017 9 Q&A 10 Appendix 11 1
Slide 3: Executive summary: A satisfactory first half of 2017
Financial results – first half 2017 Executive summary: A satisfactory first half of 2017 Financial results, H1 2017 The Nordic economies saw positive trends in • Net profit of DKK 10.3 bn, up 10% from H1 the first half of 2017 2016, which included property sales • ROE of 13.5% • Strong capital posit
Slide 4: Net profit: DKK 10.3 bn, up 10% from H1 2016
Financial results – first half 2017 Net profit: DKK 10.3 bn, up 10% from H1 2016* Income statement and key figures (DKK millions) Key points, H1 2017 vs H1 2016 H1 2017 H1 2016 Index Q2 2017 Q1 2017 Index • Return on equity of 13.5% Net interest income 11,431 10,747 106 5,692 5,739 99 • Total income
Slide 5: Banking units: Nordic banking units continue to benefit from growth and strong credit quality
Financial results – first half 2017 Banking units: Nordic banking units continue to benefit from growth and strong credit quality Pre-tax return on allocated capital (%) Financial highlights, H1 2017 vs H1 2016 H1 2017 H1 2016 Personal Banking • Total income up, driven by all income lines 21.7 21.9
Slide 6: C&I and Wealth Management: Positive development in all major income lines
Financial results – first half 2017 C&I and Wealth Management: Positive development in all major income lines due to stronger customer activity C&I: Financial highlights, H1 2017 vs H1 2016 Wealth Management: Financial highlights, H1 2017 vs H1 2016 • Total income up 27% compared to a challenging en
Slide 7: Expenses: Up 3% from a low level
Financial results – first half 2017 Expenses: Up 3% from a low level, driven by IT-related regulatory compliance and digitalisation. Underlying costs were stable Change in expenses (DKK millions) Total expenses ex goodwill charge (DKK millions) Severance payments 28 61 Deposit guarantee and resoluti
Slide 8: Impairments: Loan loss ratio of -5 bp in core activities in H1 2017
Financial results – first half 2017 Impairments: Loan loss ratio of -5 bp in core activities in H1 2017 Group impairments,* 2012 to H1 2017 (DKK billions/bp) Impairment drivers, Q2 2017 vs Q1 2017 Impairments Loan loss ratio* (rhs) • Net reversals continued, supported by benign macroeconomic 18 70 c
Slide 9: Capital: Strong capital base; CET1 capital ratio of 16.2%
Financial results – first half 2017 Capital: Strong capital base; CET1 capital ratio of 16.2%, mainly due to lower REA Capital ratios, under Basel III/CRR (%) Capital highlights, Q2 2017 Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • REA down as portfolio changes lower credit risk. Counterparty 21.1 ris
Slide 10: Upgraded outlook for full-year 2017
Financial results – first half 2017 Upgraded outlook for full-year 2017: We now expect net profit in the range of DKK 18-20 bn* Net interest We expect net interest income to be higher than in 2016, as we will benefit from volume income growth and lower funding costs Net fee income Revised: Net fee i
Slide 11: Q&A session
Financial results – first half 2017 Q&A session Press * then 1 to ask a question Press * then 2 to cancel Press “Ask a question” in your webcast player Want easy access to all relevant Danske Bank material? Download the Danske Bank MyInvestor app on your iPhone, iPad or Android device! www.danskeban
Slide 12: Appendix
Financial results – first half 2017 Appendix Business units 12 Special topics 17 Macro and portfolio reviews 23 Funding, liquidity, ROE bridge and ratings 27 Tax 31 Contact details 32 11
Slide 13: Personal Banking: Profit before tax up 7%
Financial results – first half 2017 Personal Banking: Profit before tax up 7%; growth in Sweden and Norway continues Income statement and key figures (DKK millions) Lending volume by country* (Q1 2016 = Index 100) Q2 2017 Q1 2017 Index Denmark Finland Sweden Norway Net interest income 1,963 1,963 10
Slide 14: Business Banking: Profit before tax down 4%
Financial results – first half 2017 Business Banking: Profit before tax down 4% on lower mortgage refinancing activity and higher regulatory costs Income statement and key figures (DKK millions) Lending volume by country* (Q1 2016 = Index 100) Q2 2017 Q1 2017 Index Denmark Finland Sweden Norway Net
Slide 15: Corporates & Institutions: PBT decreased after strong Q1 2017
Financial results – first half 2017 Corporates & Institutions: PBT decreased after strong customer activity in Q1 2017 Income statement and key figures (DKK millions) Income breakdown (DKK millions) Q2 2017 Q1 2017 Index FICC Capital Markets General Banking Net interest income 785 758 104 Net fee in
Slide 16: Wealth Management: AUM and total income up 2%
Financial results – first half 2017 Wealth Management: AUM and total income up 2%; expenses flat since Q1 2017 Income statement and key figures (DKK millions) Key points, Q2 2017 vs Q1 2017 Q2 2017 Q1 2017 Index • Assets under management up 2% on performance, net sales Net interest income 174 182 96
Slide 17: Non-core: Deleveraging progressed according to plan
Financial results – first half 2017 Non-core: Deleveraging progressed according to plan; REA of DKK 11 bn at Q2 2017 Non-core loan portfolio, Q2 2017 (DKK billions) Non-core REA (DKK billions) Allowance account Non-core conduits, etc. Non-performing credit exposure Non-core Banking Performing credit
Slide 18: Net interest income: Up 7% adjusted for FX
Financial results – first half 2017 Net interest income: Up 7% adjusted for FX Change in net interest income (DKK millions) 11,431 72 204 346 461 63 356 10,747 H1 2016 Lending Lending Deposit Deposit FX effect Other* H1 2017 volume margin volume margin * Other includes income from the Group’s liquid
Slide 19: Contents of the new fee lines
Financial results – first half 2017 Contents of the new fee lines Contents of the individual lines in the new Group fee breakdown Brokerage from bonds, shares, RD Danske Invest Investment Portfolio Management fees Custody fees Subscription fees Pension & Fees from Life and Pension (Danica) within We
Slide 20: Trading income: Down because of exceptionally strong Q1 customer activity
Financial results – first half 2017 Trading income: Down because of exceptionally strong customer activity in Q1 Trading income by business unit (DKK millions) Key points, Q2 2017 vs Q1 2017 Other incl. Treasury Wealth Management Business • Trading income down 33% Northern Ireland C&I Personal • In
Slide 21: Expenses: Up 1% on regulatory compliance
Financial results – first half 2017 Expenses: Up 1% on regulatory compliance; underlying costs stable Total expenses ex goodwill charge (DKK millions) Change in expenses ex goodwill (DKK millions) Severance payments Bonuses Deposit guarantee scheme/resolution fund Other costs Q1 2017 5,724 6,056 IT
Slide 22: Credit quality: NPLs decreased 16% y/y
Financial results – first half 2017 Credit quality: Positive trend in credit quality continues; NPLs decreased 16% y/y Individual loan impairment charges* (DKK billions) Gross non-performing loans (DKK billions) New Increased Reversal Individual allowance account Net exposure in default Net exposure
Slide 23: Credit exposure: Limited agriculture and oil-related exposure
Financial results – first half 2017 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (2.3 % of Group net exposure) Oil-related exposure (0.8 % of Group net exposure) • The pressure on the Danish agricultural industry continued to • Net exposure decreased to
Slide 24: Nordic macroeconomics
Financial results – first half 2017 Nordic macroeconomics Denmark Sweden Norway Finland Real GDP, constant prices (index 2005 = 100) Inflation (%) 6 135 4 120 2 105 0 2005 2007 2009 2011 2013 2015 2017 90 -2 2005 2007 2009 2011 2013 2015 2017 Interest rates, leading (%) Unemployment (%) 6 10 5 8 4 6
Slide 25: Nordic housing markets
Financial results – first half 2017 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 240 140 130 200 120 160 110 100 120 90 2005 2007 2009 2011 2013 2015 2017 2005 2007 2009 2011 2013 2015 2017 Apartment prices (index 20
Slide 26: Realkredit Danmark and the Danish housing market: Portfolio overview
Financial results – first half 2017 Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, Q2 2017 Stock of retail loans (DKK 436 bn), Realkredit Danmark, Q2 17 (%) • Approx. 370,000 loans (residential and commercial) Fixed rate (10yrs-30yrs) Intere
Slide 27: Realkredit Danmark: 51% of new retail loans are fixed rate
Financial results – first half 2017 Realkredit Danmark: 51% of new retail loans are fixed rate loans; compliant with all regulatory requirements Key points Supervisory diamond for Danish mortgage institutions • 51% of new retail loans in Q2 were fixed-rate loans and 32% were 5- to 10-year variable r
Slide 28: Funding and liquidity: LCR compliant at 163%
Financial results – first half 2017 Funding and liquidity: DKK 40 bn of long-term funding issued in H1 2017**; LCR compliant at 163% Changes in funding,* H1 2017 (DKK billions and bp) Long-term funding excl. RD (DKK billions)** Covered bonds Senior Funding plan Completed 81bp 85 70-90 70 64 112bp 14
Slide 29: Funding structure and sources
Financial results – first half 2017 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q2 2017 (DKK billions) Funding sources (%) Q1 2017 2,018 Q2 2017 54 55 139 Senior debt 1,707 Bank loans 589 914 Deposits Bank mortgages 341 188 Covere
Slide 30: ROE of 13.1% in 2016; longer-term ambition maintained
Financial results – first half 2017 ROE of 13.1% in 2016; longer-term ambition maintained with unchanged assumptions ROE 2015-18E, after tax (%) Status at year-end 2016 Overall status of ROE bridge to 2018 • On track ROE 2015* 11.6% • Underlying assumptions are unchanged Adjustments** 0.2% Costs • I
Slide 31: Three distinct methods for rating banks
Financial results – first half 2017 Danske Bank’s rating Three distinct methods for rating banks Rating methodology Anchor Extraord. Add. Issuer + 1 + 2 + 3 + 4 = SACP = + ALAC + = SACP1 support factors rating bbb+ +1 +1 0 0 a 0 0 0 A (Stable) 1=Business Position, 2=Capital & Earnings, 3=Risk Positi
Slide 32: Tax
Financial results – first half 2017 Tax Actual and adjusted tax rates (DKK millions) Tax drivers, Q2 2017 Q22017 Q12017 Q42016 Q32016 Q22016 • The actual tax rate 22.5 % is higher than Profit before tax 6,183 7,140 7,039 6,267 5,780 the Danish rate of 22% - due to higher Ireland core and non-core 0
Slide 33: Contacts
Financial results – first half 2017 Contacts Direct: +45 45 12 84 83 Claus Ingar Jensen Mobile: +45 25 42 43 70 Head of IR clauj@danskebank.dk Direct: +45 45 14 07 92 John Bäckman Mobile: +45 30 51 46 85 Chief IR Officer jbc@danskebank.dk Direct: +45 45 14 06 04 Robin Hjelgaard Løfgren Mobile: +45 2
Slide 34: Disclaimer
Financial results – first half 2017 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 St