Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2009 Earnings Presentation
44 slides from Danske Bank A/S's earnings presentation, May 5, 2009
Slide 1: Financial results for Q1 2009: Record-high income in a recessionary economy
Financial results for Q1 2009: Record-high income in a recessionary economy May 5, 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
Slide 2: Agenda
AGENDA Agenda Slide Key messages 3 Macroeconomics 4 Highlights 5 Business trends 6 Hybrid capital 18 Outlook 19 Q&A session 20 Appendix: Trends in focus areas & business units 21 2
Slide 3: Key messages
KEY MESSAGES Key messages - All-time high income level, but also high impairment charges DKr m Worst economic downturn since the Great 9,000 Depression Trading and Insurance income 7,000 Net profit better than expected Profit before loan and goodwill 5,000 impairment charges ex trading, Extrao
Slide 4: The macroeconomic environment
MACRO ECONOMICS The macroeconomic environment - Worst economic crisis in more than 60 years Macroeconomic key figures % GDP forecasts for 2009 2009 estimates 3.50 - Denmark relatively resilient GDP growth Budget balance Gross publ. debt Unempl. rate 1.75 % % of GDP % of GDP % -2.4 -2.3 40.4 3.3 0.00
Slide 5: Performance highlights
HIGHLIGHTS Performance highlights - Net profit better than expected, despite high level of impairments Net profit 40% Y/Y to DKr 1.6bn Income statement and key figures DKr m Q1 2008 Q4 2008 Q1 2009 Net interest income up 16% Y/Y, driven Net interest income 6,236 7,365 7,227 by wider lending margin
Slide 6: Net interest income
BUSINESS TRENDS Net interest income - Widening lending spreads, but also lower short-term rates Net interest income 16% Y/Y DKr m Quarterly net interest income Y/Y 16% 7,500 Q/Q 2% Robust trend in banking activities Stable lending volumes Improved lending margins 6,500 NII under pressure fro
Slide 7: Net interest income, Q1 2009 vs. Q4 2008
BUSINESS TRENDS Net interest income, Q1 2009 vs. Q4 2008 - Only 2% decrease despite significant pressure from low interest rate environment DKr m 8,000 Quarterly trend in net interest income 2% 160 117 63 230 7,000 534 250 450 580 7,365 7,227 6,000 NII interest rate sensitivity: +/- 25bp of ST rates
Slide 8: Net fee income
BUSINESS TRENDS Net fee income - Lower investment activity and subdued lending activity Net fee income 20% DKr bn Net fee income 2.5 Y/Y 20% Activity-based fees down 24% due to lower investment fees and lower lending activity 2.0 Portfolio-based fees down 18% owing to lower 1.5 Portfolio asset m
Slide 9: Net trading income
BUSINESS TRENDS Net trading income - Exceptionally high income Net trading income 450% Y/Y Trading income Main factors behind the high income: DKr m Q1 2008 Q4 2008 Q1 2009 High corporate hedging activity due to volatile FX and fixed Trading activities 1,745 2,634 7,534 income markets Group Trea
Slide 10: Expenses
BUSINESS TRENDS Expenses - Underlying costs as expected cost management intensified Expenses 9% DKr bn Expenses & C/I ratio % Increase due mainly to state guarantee fee and 8.0 65 severance payments 60 Flat underlying cost base, as expected 6.0 55 50 Intensified focus on cost management 45
Slide 11: Loan impairment charges
BUSINESS TRENDS Loan impairment charges - Still extraordinarily high, reflecting tough macro environment and falling asset prices Impairment charges DKr 8bn DKr m Loan imp. charges by business unit bp 3,500 (Q1 2009) 1,000 An extraordinarily high level because of the <= Loan imp. charges Loan imp.
Slide 12: Breakdown of loan impairment charges
BUSINESS TRENDS Breakdown of loan impairment charges - Danske Markets and Ireland take disproportionate shares Impairment charges DKr m Collective impairments in Q1 2009 1,200 by business unit SMEs account for most of the Groups impairments 66% 1,000 For Banking Activities Denmark, impairments
Slide 13: Loan imp. charges geographical breakdown
BUSINESS TRENDS Loan imp. charges geographical breakdown - High charges reflect lower asset prices and sharp economic downturn Annualised loan impairment charges as % of total loans Group Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 -0.07% 0.05% 0.29% 0.92% 0.91% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 0.10% 0.11% 0.33% 1
Slide 14: Non-performing loans and loan imp. charges
BUSINESS TRENDS Non-performing loans and loan imp. charges DKr bn Quarterly change DKr bn Accumulated imp. charges, end of period 16 50 - Rise in impairment charges 14 Non-performing loans Impairment charges 40 Non-performing loans 12 10 30 8 20 6 4 Individual imp. 10 charges 2 Collective imp. charg
Slide 15: Total credit exposure
BUSINESS TRENDS Total credit exposure - Relatively favourable diversification Credit exposure, end-Q1 2009 (DKr 2,448bn, including DKr 1,954bn in loans) Central and local Subsidised governments housing 6% companies 5% Personal Banks 8% Largest changes in Q1 customers 34% Total credit exposure: -3% C
Slide 16: Liquidity and new funding
BUSINESS TRENDS Liquidity and new funding - Strong improvement in the above 3 months funding 12-month liquidity* New funding in Q1 2009 Moodys Financial Strength by maturity DKr bn DKr bn 300 30 200 End-Q1 2009 25 100 End-Q4 2008 20 15 0 10 -100 5 1 month 1 week 2 months 3 months 4 months 5 months
Slide 17: Capital management
BUSINESS TRENDS Capital management - Solid capital ratios based on conservative methodology Ratios are high, well above regulatory Capital ratios CRD/Basel II requirements % Q4 2008 Q1 2009 Q1 2009 * Ratios will be strengthened further through new Core (tier 1) ratio ex hybrid 8.1 7.9 7.9 hybr
Slide 18: Hybrid capital infusion
HYBRID CAPITAL Hybrid capital infusion - Facts Quick facts Repayment conditions Amount: 0-5Y No repayment option (0-3Y for RD) Danske Bank A/S: DKr 24bn 5Y (end) Price 100 (conversion option for 5 years) (min. T1 of 12% or similar capital) Realkredit Danmark A/S: DKr 2bn 5-6Y Price 105 (no
Slide 19: Outlook for 2009
OUTLOOK Outlook for 2009 - Difficult market conditions leading to high loan impairments ! Tough macroeconomics ! Loan impairment charges to remain high ! Robust banking activities ! Widening of lending margins ! Focus on existing customer base ! Intensified cost management efforts ! Strong risk, liq
Slide 20: Q&A session
Q&A SESSION Q&A session Press 1 to ask a question Press Ask a question in Press # to cancel your webcast player www.danskebank.com/ir www.danskebank.com/ir 20
Slide 21: Appendix
APPENDIX Appendix 21
Slide 22: Net interest income (3)
TRENDS IN FOCUS AREAS Net interest income (3) - Lending margins improving in all markets Lending margins % 3.0 Q1 2009 Q4 2008 2.5 Q3 2008 2.0 1.5 1.0 0.5 0.0 * Sweden * Ex Realkredit Denmark lending. 22
Slide 23: Net interest income (4)
TRENDS IN FOCUS AREAS Net interest income (4) - Deposit margins coming down Deposit margins % 2.0 Q1 2009 Q4 2008 Q3 2008 1.5 1.0 0.5 0.0 Sweden 23
Slide 24: Balance sheet trend
BUSINESS TRENDS Balance d sheet trend - DKr 200bn asset reduction, but stable lending book DKr bn Total assets end of period 4,000 Change in 3,500 Q1 2009 3,000 Other assets +3% 2,500 Trading & inv. -14% 2,000 portfolio 1,500 Banks & repos -13% 1,000 Lending -1% 500 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 T
Slide 25: Credit exposure (2)
TRENDS IN FOCUS AREAS Credit exposure (2) - Commercial property and construction Portion Construction Commercial from and building Sector in DKr bn property developers materials total Denmark* 98.1 1.5 14.0 112.1 Finland 14.0 0.9 6.3 20.3 Sweden 48.5 0.5 5.3 53.8 Norway 32.9 2.8 2.0 34.9 Northern Ir
Slide 26: Non-perf. loans geographical breakdown
TRENDS IN FOCUS AREAS Non-perf. loans geographical breakdown - Significant worsening of economic situation Non-performing loans as % of total loans (Rating categories 10 and 11) Group Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 1.71% 1.29% 1,09% 1.27% 1.65% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 0.63% 0.60% 1.04% 1.83%
Slide 27: Denmark: Housing market remains soft
TRENDS IN FOCUS AREAS Denmark: Housing market remains soft - Prices down, but low unemployment and low LTV ratio reduce risk Updated: Q1 2009 Property prices Index = 1996 Houses Flats Ireland 400 UK + 5.6% - 1.8% 300 Norway +3.6% - 5.8% Square metre 200 price Q/Q Sweden Finland Square metre 100 De
Slide 28: Credit exposure: Mortgages in Denmark
TRENDS IN FOCUS AREAS Credit exposure: Mortgages in Denmark - Low avg. LTV ratio; arrears limited, but picking up Danish mortgages Breakdown of loans by LTV and rating category Mortgage finance (residential & commercial) 27 repossessed properties and 2,751 arrears out End-Q1 of 420,704 loans at en
Slide 29: Bond portfolio
BUSINESS TRENDS Bond portfolio - Widening spreads continue to hurt, but credit quality still high Bond portfolio (DKr 401bn) European covered bonds (5-yr bullets) Swap spreads (December 30, 2008 April 28, 2009) Credit bonds (bp) - Danish mortgage bonds show strong resilience 6% 250 Certificates 6%
Slide 30: Funding end-Q1 2009
BUSINESS TRENDS Funding end-Q1 2009 - Well-diversified funding position Equity Central banks 4% 6% Repos 7% Well-diversified funding structure Deposits Banks, net 30% 51% deposits and fully match-funded 7% Danish mortgage bonds (net) Short-term bonds DKr 268bn S-T bonds 10% DKr 78bn in cov
Slide 31: Money market spreads
TRENDS IN FOCUS AREAS Money market spreads - 3M interbank against OIS, coming down from high levels bp bp 300 300 250 250 200 200 150 150 100 100 50 50 0 0 06-02-07 06-04-07 06-06-07 06-08-07 06-10-07 06-12-07 06-02-08 06-04-08 06-06-08 06-08-08 06-10-08 06-12-08 06-02-09 06-04-09 31-12-08 31-01-09
Slide 32: Hybrid capital infusion (2)
HYBRID CAPITAL Hybrid capital infusion (2) Formula Existing hybrid + govt hybrid Tier 1 ex hybrid + existing hybrid* + govt hybrid** Illustration with FY 2008 figures for Danske Bank A/S DKr 15bn + DKr 24bn = 33% DKr 78bn + DKr 15bn* + DKr 24bn** * Must be within 15% of total tier 1 capital. ** Tota
Slide 33: Banking Activities Denmark
TRENDS IN BUSINESS UNITS Banking Activities Denmark - Very strong NII, but high impairment charges & state guarantee fee offset profit Profit before loan impairment charges 4% DKr bn Trend in lending volume - Improving NII, but high loan imp. charges and state guarantee fee (average) DKr m Q1 2008 Q
Slide 34: Banking Activities Finland
TRENDS IN BUSINESS UNITS Banking Activities Finland - Profit before loan impairment charges doubles Profit before loan impairment charges 115% DKr bn Trend in lending volume - Reflects improving total income and achieved synergies (average) DKr m Q1 2008 Q1 2009 Index Retail: Y/Y 1% Corporate: Y/Y 1
Slide 35: Banking Activities Sweden
TRENDS IN BUSINESS UNITS Banking Activities Sweden - Hurt by falling exchange rate and high loan impairment charges Profit before loan impairment charges 10% DKr bn Trend in lending volume (average) - Reflects 15% depreciation of SKr against DKr Retail: Y/Y 15% Corporate: Y/Y 28% DKr m Q1 2008 Q1 20
Slide 36: Banking Activities Norway
TRENDS IN BUSINESS UNITS Banking Activities Norway - Strong income growth, but loan impairments also rise Profit before loan impairment charges 79% DKr bn Trend in lending volume (average) - Very strong income growth partly offset by declining NKr Retail: Y/Y 6% Corporate: Y/Y 33% DKr m Q1 2008 Q1 2
Slide 37: Banking Activities Northern Ireland
TRENDS IN BUSINESS UNITS Banking Activities Northern Ireland - Hurt by lower short-term rate, falling GBP & higher impairments Profit before loan impairment charges 44% DKr bn Trend in lending volume Retail: Y/Y 13% (average) Corporate: Y/Y 7%* - Reflects deposit margin erosion and 15% depreciation
Slide 38: Banking Activities Ireland
TRENDS IN BUSINESS UNITS Banking Activities Ireland - Weak macroeconomic environment, but higher underlying profit Profit before loan impairment charges 90% DKr bn Trend in lending volume - Strong rise in lending margins, but high imp. charges spoil profit Retail: Y/Y 13% (average) Corporate: Y/Y 15
Slide 39: Banking Activities Baltics
TRENDS IN BUSINESS UNITS Banking Activities Baltics - High loan imp. charges due to difficult macroeconomic environment Profit before loan impairment charges 31% DKr bn Trend in lending volume - Falling expenses help, but high loan imp. charges weigh heavily (average) Retail: Y/Y 13% Corporate: Y/Y
Slide 40: Danske Markets
TRENDS IN BUSINESS UNITS Danske Markets - Unusually high income due to favourable market conditions Profit before tax at record level Market position in the Nordics - Driven by lower ST rates, high volatility and customer activity - Within top three in all main product areas DKr m Q1 2008 Q1 2009 In
Slide 41: Danske Capital
TRENDS IN BUSINESS UNITS Danske Capital - Income down due to declining assets under management Profit before tax 40% DKr bn AuM Customer breakdown - Due to lower asset management and investment fees 600 DKr m Q1 2008 Q1 2009 Index Private equity Total income 470 388 83 400 Institutional Expenses 2
Slide 42: Danica Pension
TRENDS IN BUSINESS UNITS Danica Pension - Higher investment return and lower ST rate lift result Net income from insurance business Investment returns, YTD % customers funds DKr m Q1 2008 Q1 2009 Index Premiums (DKr bn) 5.6 5.2 93 3.0 Investment return Investments & liabilities Share of technical p
Slide 43: Danicas profit model
TRENDS IN BUSINESS UNITS Danicas profit model Risk allowance postponed due to negative investment returns Profit model Condition / sensitivity Q1 2009 DKr m Total inv. return > average guarantee 272 1 Risk allowance 64 bp of Total inv. return: -1.2% -272 of 3.2% (2008) and bonus potential o
Slide 44: Disclaimer
DISCLAIMER 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 of thi