Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — 9M 2018 Earnings Presentation
35 slides from Danske Bank A/S's earnings presentation, Nov 1, 2018
Slide 1: Financial results – first nine months 2018
Financial results – first nine months 2018 Jesper Nielsen Interim Chief Executive Officer Christian Baltzer Chief Financial Officer 1 November 2018
Slide 2: Agenda
Financial results – first nine months 2018 Agenda Executive summary and recap of Estonia case 2 Group and business unit update 6 Selected topics 9 Outlook for full-year 2018 12 Q&A 13 Appendix 14 1
Slide 3: Executive summary: Mixed results for 9M 2018
Financial results – first nine months 2018 Executive summary: Mixed results for 9M 2018 Financial results, 9M 2018 Lending growth of 2% y/y, driven by growth of 1% y/y at Banking Denmark and 4% y/y • Net profit of DKK 11.6 bn, down 24% from 9M at Banking Nordic 2017 due to donation and lower trading
Slide 4: Recap of the Estonia case (1/2)
Financial results – first nine months 2018 Recap of the Estonia case (1/2) Non-resident portfolio in Estonia closed down in 2015 15,000 customers and 9.5 million payments being investigated Total payment flow around EUR 200 billion Of the 15,000 customers, 6,200 have been identified as the Portfolio
Slide 5: Recap of the Estonia case (2/2)
Financial results – first nine months 2018 Recap of the Estonia case (2/2) External reactions Internal reactions • Investigations by Danish, Estonian • Full cooperation with all authorities and US authorities • Estimated gross income of DKK 1.5 bn will be donated to an independent foundation support
Slide 6: The building blocks of Financial Crime Compliance (FCC)
Financial results – first nine months 2018 The building blocks of Financial Crime Compliance (FCC) Since 2014, Danske Bank has made substantial investments to improve our set-up, capabilities and competencies to combat financial crime. However, as financial crime continues to evolve, we will continu
Slide 7: Net profit: DKK 11.6 bn, down 24% from 9M 2017 due to donation and lower trading income
Financial results – first nine months 2018 Net profit: DKK 11.6 bn, down 24% from 9M 2017 due to donation and lower trading income Income statement and key figures (DKK millions) Key points, 9M 2018 vs 9M 2017 9M 2018 9M 2017 Index Q3 2018 Q2 2018 Index • Return on equity of 10.1% Net interest incom
Slide 8: Banking units: Continued growth, driven by Banking Nordic and stable Banking DK
Financial results – first nine months 2018 Banking units: Continued growth, driven primarily by good momentum at Banking Nordic and stable growth at Banking DK Pre-tax return on allocated capital (%) Financial highlights, 9M 2018 vs 9M 2017 9M 2018 9M 2017 Banking Denmark • Total income unchanged 21
Slide 9: C&I and Wealth Management: Difficult market conditions affected trading income
Financial results – first nine months 2018 C&I and Wealth Management: Difficult market conditions affected trading income; WM fees benefit from SEB Pension DK Corporates & Institutions: Financial highlights, 9M18 vs 9M17 Wealth Management: Financial highlights, 9M18 vs 9M17 • Fee income down 1% owin
Slide 10: Expenses: Up 2% y/y excluding donation
Financial results – first nine months 2018 Expenses: Up 2% y/y excluding donation due to regulatory compliance costs and the SEB Pension Danmark acquisition Change in expenses (DKK millions) Total expenses (DKK millions) Severance pay 122 Deposit scheme guarantee/bank packages Bonuses 118 1,500 178
Slide 11: Impairments: Q3 driven by agriculture in Denmark and oil in Norway
Financial results – first nine months 2018 Impairments: Q3 driven by increased impairments against agriculture segment in Denmark and oil segment in Norway Group impairments,* 2012 to 9M 2018 (DKK billions/bp) Impairment drivers, Q3 2018 vs Q2 2018 Impairments Loan loss ratio* (rhs) • Net reversals
Slide 12: Capital: Strong capital base; CET1 ratio of 16.4%
Financial results – first nine months 2018 Capital: Strong capital base; CET1 ratio of 16.4% vs minimum requirement of 13.9%; 2018 share buy-back programme cancelled Capital ratios, under Basel III/CRR (%) Capital highlights, Q3 2018 Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • Pillar II add-on furthe
Slide 13: 2018 outlook updated since Q2: net profit DKK 16-17 bn
Financial results – first nine months 2018 2018 outlook updated since Q2: We expect net profit to be in the range of DKK 16-17 bn Net interest Updated since Q2: We expect net interest income to be slightly lower than in 2017, as income volume growth is offset by margin pressure Net fee income is exp
Slide 14: Q&A session
Financial results – first nine months 2018 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.da
Slide 15: Appendix
Financial results – first nine months 2018 Appendix Business units 15 Income, expenses and credit quality 20 Macro and portfolio reviews 25 Funding, liquidity and ratings 29 Tax 32 Contact details 33 14
Slide 16: Banking DK: PBT down 16% in Q3
Financial results – first nine months 2018 Banking DK: PBT down 16% in Q3 due to lower reversals driven by impairments related to the agriculture segment Income statement and key figures (DKK millions) Lending volume by segment (DKK billions) Q3 2018 Q2 2018 Index Retail RD Retail non-RD Net interes
Slide 17: Banking Nordic: Profit before tax up 16% in Q3
Financial results – first nine months 2018 Banking Nordic: Profit before tax up 16% in Q3; growth in Sweden, Norway and Finland Income statement and key figures (DKK millions) Lending volume by segment and country* (Q2 2017 = Index 100) Q3 2018 Q2 2018 Index Finland retail Sweden commercial Net inte
Slide 18: Corporates & Institutions: Profit before tax down 28% q/q
Financial results – first nine months 2018 Corporates & Institutions: Profit before tax down 28% q/q due to oil-related impairment charges Income statement and key figures (DKK millions) Income breakdown (DKK millions) Q3 2018 Q2 2018 Index FI&C Capital Markets General Banking Net interest income 99
Slide 19: Wealth Management: Profit before tax up 20% q/q
Financial results – first nine months 2018 Wealth Management: Profit before tax up 20% q/q as acquisition of SEB Pension Danmark increases fee income Income statement and key figures (DKK millions) Key points, Q3 2018 vs Q2 2018 Q3 2018 Q2 2018 Index • Assets under management up 1%. Net interest inc
Slide 20: Non-core: Deleveraging progressed according to plan
Financial results – first nine months 2018 Non-core: Deleveraging progressed according to plan; REA of DKK 12 bn at Q3 2018 Non-core loan portfolio, Q3 2018 (DKK billions) Non-core REA (DKK billions) Allowance account Non-core conduits etc. Non-performing credit exposure Non-core Banking Performing
Slide 21: Net interest income: Volume growth offset by margin pressure and FX
Financial results – first nine months 2018 Net interest income: Volume growth offset by margin pressure and FX effect; up 1% y/y adjusted for FX effect Change in net interest income (DKK millions) Comments • NII Other includes and is impacted by: 149 33 • differences at the Internal Bank 262 between
Slide 22: Trading income: At a low level owing to challenging conditions
Financial results – first nine months 2018 Trading income: At a low level owing to challenging conditions in rates markets Trading income by business unit* (DKK millions) Key points, Q3 2018 vs Q2 2018 Other incl. Treasury Wealth Management Banking Nordic • Trading income was up 16% from a low North
Slide 23: Expenses: Up 1% q/q excluding DKK 1.5 bn donation
Financial results – first nine months 2018 Expenses: Up 1% q/q excluding DKK 1.5 bn donation of income related to the Estonia case Total expenses (DKK millions) Change in expenses (DKK millions) Severance payments Donation Deposit guarantee scheme/resolution funds Other costs Q2 2018 5,788 Bonuses +
Slide 24: Credit quality: Positive trend continues; NPLs decreased 11% y/y
Financial results – first nine months 2018 Credit quality: Positive trend in credit quality continues; NPLs decreased 11% y/y Breakdown of core allowance account under IFRS 9 (DKK billions) Core allowance account by business unit (DKK billions) Stage 1 Banking DK Corporates & Institutions Northern I
Slide 25: Credit exposure: Limited agriculture and directly oil-related exposure
Financial results – first nine months 2018 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (2.9% of Group exposure) Oil-related exposure (0.7% of Group exposure) • Pork prices reached a very low level while milk prices increased • Net exposure decreased to
Slide 26: Nordic macroeconomics
Financial results – first nine months 2018 Nordic macroeconomics Denmark Sweden Norway Finland EU Real GDP, constant prices (index 2005 = 100) Inflation (%) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Interest rates, leading (%) Unemployment (%) 2006 2008 2010 2012 2014 201
Slide 27: Nordic housing markets
Financial results – first nine months 2018 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Apartment prices (index 2005 = 100) Apartment prices/nom.
Slide 28: Realkredit Danmark and the Danish housing market: Portfolio overview
Financial results – first nine months 2018 Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, Q3 2018 Stock of retail loans (DKK 449 bn), Realkredit Danmark, Q3 18 (%) • Approx. 364,000 loans (residential and commercial) Fixed rate (10yrs-30yrs)
Slide 29: Realkredit Danmark: 58% of new retail loans are fixed rate
Financial results – first nine months 2018 Realkredit Danmark: 58% of new retail loans are fixed rate; compliant with all regulatory requirements Key points Supervisory diamond for Danish mortgage credit institutions • 58% of new retail loans in Q3 were fixed-rate loans, and 33% were 5- to 10-year v
Slide 30: Funding and liquidity: long-term funding issued in 9M 2018; LCR 135%
Financial results – first nine months 2018 Funding and liquidity: DKK 59 bn of long-term funding issued in 9M 2018; LCR compliant at 135% Changes in funding,* 2018 (DKK billions and bp) Long-term funding excl. RD (DKK billions)** Cov. bonds Senior Non-preferred Senior Funding plan Completed 38bp 85
Slide 31: Funding structure and sources: Danish mortgage system is fully pass-through
Financial results – first nine months 2018 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q3 2018 (DKK billions) Funding sources (%) Q2 2018 2,014 Q3 2018 Senior & 133 51 51 NPS debt 1,758 Bank loans 601 909 Deposits Bank mortgages 3
Slide 32: Three distinct rating methodologies
Financial results – first nine months 2018 Three distinct rating methodologies Rating methodology Anchor Additional Issuer + 1 + 2 + 3 + 4 = SACP1 = Support + ALAC + = SACP1 factors rating A bbb+ +1 +1 -1 0 a- 0 +1 0 Negative 1=Business Position, 2=Capital & Earnings, 3=Risk Position, 4=Funding & Li
Slide 33: Tax
Financial results – first nine months 2018 Tax Actual and adjusted tax rates (DKK millions) Tax drivers, Q3 2018 Q32018 Q22018 Q12018 Q42017 Q32017 • The adjusted tax rate of 22.4% is higher Profit before tax 3,589 5,487 5,802 6,729 6,236 than the Danish rate of 22% due to Permanent non-taxable diff
Slide 34: Contacts
Financial results – first nine months 2018 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 13 92 34 Heidi Birgitte Nielsen Mobile:
Slide 35: Disclaimer
Financial results – first nine months 2018 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 Un