Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — 9M 2011 Earnings Presentation
54 slides from Danske Bank A/s's earnings presentation, Nov 1, 2011
Slide 1: Financial results for first nine months 2011
ROADSHOW Financial results for first nine months 2011 1 November 2011
Slide 2: Agenda
Financial results for first nine months of 2011 Agenda Group overview The results in detail Funding and capital Macroeconomics Outlook Q & A session Appendix: Trends in focus areas & business units 2
Slide 3: Earnings reflect stressed capital markets and low growth, but initiatives to improve ROE are gradually paying off
Financial results for first nine months of 2011 Earnings reflect stressed capital markets and low growth, but initiatives to improve ROE are gradually paying off Net profit of DKK 1.5 billion in Q1-Q3 2011 and net loss of DKK 0.4 billion in Q3 2011 are below expectations Results reflect lower tradin
Slide 4: Results low because of capital markets, but NII improvement continued in Q3
Financial results for first nine months of 2011 Results low because of capital markets, but NII improvement continued in Q3 Income statement & key figures (DKK m) 9M 2010 9M 2011 Index Q2 2011 Q3 2011 Index Net interest income 17,774 17,355 98 5,785 6,016 104 Net fee income 6,303 6,080 96 2,049 1,93
Slide 5: Net interest income up 4% Q/Q on increased margins and return on equity
Financial results for first nine months of 2011 Net interest income up 4% Q/Q on increased margins and return on equity Quarterly net interest income (DKK m) Quarterly change in net interest income (DKK m) +4% Q2 11 5,785 6,069 6,016 5,840 5,785 5,554 RD 53 Deposit margin 56 Lending margin 82 Fundin
Slide 6: Net fee income: Holding up well despite lower activity and declining assets under management
Financial results for first nine months of 2011 Net fee income: Holding up well despite lower activity and declining assets under management Quarterly net fee income (DKK m) Quarterly fee income at Danske Capital (DKK m) Portfolio fees Total fee income Activity fees Fee income adjusted for performan
Slide 7: Net trading income hit by difficult markets, low liquidity and higher funding costs
Financial results for first nine months of 2011 Net trading income hit by difficult markets, low liquidity and higher funding costs Breakdown of net trading income (DKK m) Danske Markets’ income split (%) Bonds & DCM Forex & money market 9M 2010 9M 2011 Index Q2 2011 Q3 2011 Index Repo & deriviative
Slide 8: Net insurance income: Low investment return causes loss
Financial results for first nine months of 2011 Net insurance income: Low investment return causes loss Net income from insurance business (DKK m) Danica Traditionel customers’ funds (%) 9M 10 9M 11 Index Q2 11 Q3 11 Index Investment return Premiums (bn) 18 20 113 7 6 82 Investment return incl adj o
Slide 9: Expenses low in third quarter, partly because of seasonality
Financial results for first nine months of 2011 Expenses low in third quarter, partly because of seasonality Expenses (DKK m) Quarterly trend in expenses (DKK m) 9M 10 9M 11 Index Q2 11 Q3 11 Index Expenses 19,553 19,528 100 6,678 5,499 82 Q2 11 6,678 Integration expenses 139 135 97 45 45 100 Amorti
Slide 10: Impairment charges unchanged, still dominated by SME's
Financial results for first nine months of 2011 Impairment charges unchanged, still dominated by SME’s Quarterly loan impairment charges (DKK bn) Impairments by customer segment (DKK bn) Total impairments Collective impairment charges Financials SMEs Large corp. Personal 4 4 2.8 3 2.8 3 2.6 2 2 1 1
Slide 11: Nordic impairments: Charges remain low except in Denmark
Financial results for first nine months of 2011 Nordic impairments: Charges remain low except in Denmark Denmark, 57% of Group’s lending (DKK m) Finland, 9% of Group’s lending (DKK m) Allowance* 17,185 m Allowance* 2,198 m Individual 151 bp Individual 137 bp 1,498 Collective 27 bp Collective 11 bp 1
Slide 12: Denmark: Impairments driven by commercial property, agriculture and personal customers
Financial results for first nine months of 2011 Denmark: Impairments driven by commercial property, agriculture and personal customers Impairments at Retail Denmark, Q3 2011 (DKK m) Debt level and land prices (index 1996=100) Individual Collective Total Price of land Average debt per farm Bank Perso
Slide 13: Other impairments: Still high in Northern Ireland and Ireland because of commercial property
Financial results for first nine months of 2011 Other impairments: Still high in Northern Ireland and Ireland because of commercial property Northern Ireland, 3% of Group’s lending (DKK m) Ireland, 4% of Group’s lending (DKK m) Allowance* 4,702 m Allowance* 14,123 m Individual 836 bp Individual 2,01
Slide 14: Funding: Difficult markets, but first part of 2012 funding plan has been executed
Financial results for first nine months of 2011 Funding : Difficult markets, but first part of 2012 funding plan has been executed Funding plan (DKK bn) Maturing funding (DKK bn) Funding plan Hybrid T1 89 Issued funding (until end of October 2011) Subordinated T2 Senior Covered Bonds 70 45 44 44 73
Slide 15: Strong capital position despite increasing RWA
Financial results for first nine months of 2011 Strong capital position despite increasing RWA Capital ratios: CRD/Basel II (%) Risk-weighted assets (DKK bn) Total capital Tier 1 Core tier 1 Q2 2011 860 ---- Solvency need 18.8 New LDG model 56 18.0 16.6 16.0 New TTC PD’s 22 ---- 10.1 ---- Portfolio
Slide 16: Risk weights unchanged on group level but AIRB re-calibration implies changes
Financial results for first nine months of 2011 Risk weights unchanged on group level but AIRB re-calibration implies changes in both retail and corporate weights Risk weights for portfolios under Advanced IRB (%) Main changes in model Q2 11 Corporate total 30 27 Q3 11 CIB 33 21 Increasing RWA Denma
Slide 17: Economic growth in Europe is declining
Financial results for first nine months of 2011 Economic growth in Europe is declining GDP growth, Y/Y (%) Public finances (% of GDP) DK SE NO FI IE BAL Eurozone Gross public debt Budget balance Sovereign rating 2010 2011 & outlook (S&P) Denmark 43.7 -3.9 AAA/Stable 6 Sweden 39.7 0.0 AAA/Stable Norw
Slide 18: Outlook for 2011: Net interest income will continue to rise, but total income depends on capital markets
Financial results for first nine months of 2011 Outlook for 2011: Net interest income will continue to rise, but total income depends on uncertain capital markets Generally low activity and subdued lending growth Higher net interest income because of higher lending margins already implemented in Dem
Slide 19: Earnings to increase DKK 4.5 billion through higher income and lower operating expenses
Financial results for first nine months of 2011 Earnings to increase DKK 4.5 billion through higher income and lower operating expenses • Several years of low economic growth External • Banking sector must maintain higher capital and liquidity buffers factors • High number of bankruptcies and forecl
Slide 20: www.danskebank.com/ir
Financial results for first nine months of 2011 www.danskebank.com/ir 20
Slide 21: Appendix
Financial results for first nine months of 2011 Appendix Tax 22 NII and margin developments 23-25 Credit 26-35 Realkredit Danmark 36-37 Liquidity and funding 38-40 Business units 41-53 21
Slide 22: Adjusted tax rate close to normal, but actual rate fluctuates
Financial results for first nine months of 2011 Adjusted tax rate close to normal, but actual rate fluctuates owing to Ireland and one-offs Explanation of tax rate (DKK m) Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Pre-tax profit 1,870 1,448 1,499 2,081 10 Pre-tax loss, BA Ireland 942 1,119 1,204 1,780
Slide 23: Net interest income
Financial results for first nine months of 2011 Net interest income Net interest income (DKK m) Net interest income at Realkredit Danmark (DKK m) 2009 2010 2011 635 9M 10 17,774 RD 49 Deposit margin 939 Lending margin 753 355 Volume 361 Equity 387 270 247 Funding costs 225 170 155 One-off items 110
Slide 24: Net interest margin by business unit
Financial results for first nine months of 2011 Net interest margin by business unit Net interest margins, NII/loan stock (%) Denmark Norway Sweden Finland N. Ireland Ireland Baltics CIB Group 2.80 2.40 2.00 1.60 1.20 0.80 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Note: 2009
Slide 25: Deposit margins are benefitting from the increase in leading rates
Financial results for first nine months of 2011 Deposit margins are benefitting from the increase in leading rates, and the pressure on lending margins is easing Quarterly lending margins (%) Quarterly deposit margins (%) 1.17 0.47 Q4 10 1.13 0.63 Q1 11 Denmark* 1.11 0.71 1.10 0.79 Q2 11 0.72 0.29 Q
Slide 26: Impairments
Financial results for first nine months of 2011 Impairments Impairments broken down by segment (%) Change in allowance account (DKK m) SMEs CRE Personal Financials Large corp. Allowance end-2007 4,900 67 Gross impairments 86,812 39 30 31 Reversals 22,368 18 16 16 8 0 Write-offs 22,179 Allowance end
Slide 27: Impairment charges driven by SMEs and large corporates in Q3 2011
Financial results for first nine months of 2011 Impairment charges driven by SMEs and large corporates in Q3 2011 Individual impairments – Group ex Baltics (DKK bn) Net exposure in rating categories 10 and 11 (DKK bn) New Rating category 10 Increased Rating category 11 Reversals 40 6 35 3 30 0 25 -3
Slide 28: Commercial property exposure
Financial results for first nine months of 2011 Dividend Commercial property exposure Individual impairments Value of collateral Collective impairments Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) 118.2 NPL 8 % 20.8 NPL 78% 10.2 NPL 36 % 2.5 NPL 42 % 16.2 2.3 8.7 1.1
Slide 29: Credit exposure to commercial property and construction segments
Financial results for first nine months of 2011 Credit exposure to commercial property and construction segments Credit exposure broken down by business unit, Q3 2011 (DKK bn) Commercial Developer subsegment Construction and Sector in property of commercial property building materials total Retail B
Slide 30: Residential mortgage exposure
Financial results for first nine months of 2011 Residential mortgage exposure Dividend Individual impairments Value of collateral Collective impairments Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) NPL 1 % NPL 5 % NPL 1 % NPL 15 % 515.0 24.5 14.45 12.3 1.3 0.22 2.0 6.
Slide 31: House prices
Financial results for first nine months of 2011 House prices Danish house prices by region (%) House prices and consumption – Denmark (DKK) Change House price per sq m Consumption, bn (rha) Region Prices Change in Preview* peaked since peak Q2 11 Q3 11 16,000 220 Copenhagen Q3 2006 -21.1 -0.6 200 Ze
Slide 32: Danish agricultural sector
Financial results for first nine months of 2011 Danish agricultural sector Breakdown of loan portfolio (%) Agricultural exposure and allowance, Q3 2011 (DKK bn) Business unit Exposure Allowance Coverage Realkredit Danmark 44.9 0.0 0.1% Retail Banking Denmark 9.7 2.1 17.6% Other - of which pig farmer
Slide 33: Upgrades/rating changes ratio above 50 in the Nordic countries but lagging in Denmark
Financial results for first nine months of 2011 Upgrades/rating changes ratio above 50 in the Nordic countries but lagging in Denmark Relation between upgrades and total rating changes, corporates, 12-month rolling average (%) Denmark Norway Sweden Finland CIB 100 Upgrades > downgrades 50 Downgrades
Slide 34: Gross exposure subject to individual impairment test
Financial results for first nine months of 2011 Gross exposure subject to individual impairment test Gross exposure in rating categories 10 and 11 (bp) Q4 10 Q1 11 Q2 11 Q311 4,500 4,083 4,000 3,000 2,000 1,944 1,387 1,000 827 596 473 390 355 152 64 0 Denmark Finland Sweden Norway Northern Ireland B
Slide 35: Economic climate in Denmark is still lagging the other Nordics
Financial results for first nine months of 2011 Economic climate in Denmark is still lagging the other Nordics Bankruptcies (index 1996=100) Business confidence indicator (index 1996=100) Denmark Finland Norway Sweden Denmark Finland Sweden 500 160 400 140 300 120 100 200 80 100 60 1996 2000 2004 20
Slide 36: Mortgage bonds at Realkredit Danmark
Financial results for first nine months of 2011 Mortgage bonds at Realkredit Danmark Facts, end-Q3 2011 Breakdown of loans by LTV and rating, end-Q3 2011 (%) 404,656 loans LTV/rating 1-3 4-7 8-11 Total 3,164 arrears (0.8%) 0-20 8.6 22.5 4.0 35.1 153 repossessed properties DKK 8 bn of loans w
Slide 37: No change in spread on RD mortgage bonds after termination of Moody's
Financial results for first nine months of 2011 No change in spread on RD mortgage bonds after termination of Moody’s 1-year interest reset, yield to maturity (%) 30-year fixed rate, yield to maturity (%) RD 2.0 01/01/2013 RD 4.0 A 10/01/2041 NDA 2.0 01/01/2013 NDA 4.0 A 10/01/2041 NYK 2.0 01/01/201
Slide 38: Liquid, highly rated bond portfolio and 12 month liquidity unchanged
Financial results for first nine months of 2011 Liquid, highly rated bond portfolio and 12 month liquidity unchanged since year-end 2010 Bond portfolio of DKK 474 bn (%) 12-month liquidity,* end of period (DKK bn) Q4 2008 Q4 2010 Q3 2011 300 Credit bonds Commercial paper Other covered Quasi-governme
Slide 39: Well-diversified funding position
Financial results for first nine months of 2011 Well-diversified funding position Funding position (%) Funding sources (%) Q4 08 Q3 11 40 Equity Subordinated debt Central banks 5 30 3 4 Banks, net 7 Deposits 20 33 10 Repos 9 0 S-T bonds 3 Short-term bonds Due to credit inst. Mortgage finance Shareho
Slide 40: Issued funding
Financial results for first nine months of 2011 Issued funding Issued funding, types and duration (DKK bn) Pre-funded Covered bonds Senior 5-10 11 years 20 19 2-5 5-17 years 11 years 3-5 3-15 9 years 6 years 2-6 2-5 1 years years 1 2010 Q1 11 Q2 11 Q3 11 Oct 11 Note: Tier 1 and tier 2 loans are set
Slide 41: Retail Banking Denmark: 18% drop in expenses more than compensates for decline in NII
Financial results for first nine months of 2011 Retail Banking Denmark: 18% drop in expenses more than compensates for decline in NII Income statement (DKK m) Trend in lending volume (DKK bn) 9M 2010 9M 2011 Index Retail Corporate 0% Net interest income 9,536 9,097 95 Net fee income 2,598 2,400 92 -
Slide 42: Retail Banking Finland: Positive trend in lending volume continues
Financial results for first nine months of 2011 Retail Banking Finland: Positive trend in lending volume continues Income statement (DKK m) Trend in lending volume (DKK bn) 9M 2010 9M 2011 Index Retail Corporate Net interest income 1,514 1,531 101 +6% Net fee income 736 741 101 +7% Other income 314
Slide 43: Retail Banking Sweden: 17% increase in profit before tax
Financial results for first nine months of 2011 Retail Banking Sweden: 17% increase in profit before tax because of higher deposit margins Income statement (DKK m) Trend in lending volume (DKK bn) 9M 2010 9M 2011 Index Retail Corporate +6% Net interest income 1,508 1,754 116 Net fee income 439 452 1
Slide 44: Retail Banking Norway: Lending volume remains strong
Financial results for first nine months of 2011 Retail Banking Norway: Lending volume remains strong while low income, increasing costs and impairments reduce profit Income statement (DKK m) Trend in lending volume (DKK bn) 9M 2010 9M 2011 Index Retail Corporate +5% Net interest income 1,282 1,149 9
Slide 45: Banking Activities Northern Ireland: Loan losses rise because of weak market conditions
Financial results for first nine months of 2011 Banking Activities Northern Ireland: Loan losses rise because of weak market conditions Income statement (DKK m) Trend in lending volume* (DKK bn) 9M 2010 9M 2011 Index Retail Corporate -14% Net interest income 899 845 94 Net fee income 232 231 100 -5%
Slide 46: Banking Activities Ireland: Positive margin development, but loan losses dominate P/L
Financial results for first nine months of 2011 Banking Activities Ireland: Positive margin development, but loan losses continue to dominate P/L Income statement (DKK m) Trend in lending volume (DKK bn) 9M 2010 9M 2011 Index Retail Corporate Net interest income 809 686 85 -11% Net fee income 80 48
Slide 47: Banking Activities Baltics: Reversal of impairments more than compensates for declining profit
Financial results for first nine months of 2011 Banking Activities Baltics: Reversal of impairments more than compensates for declining profit Income statement (DKK m) Trend in lending volume (DKK bn) 9M 2010 9M 2011 Index Retail Corporate Net interest income 376 363 97 -18% Net fee income 115 109 9
Slide 48: Corporate & Institutional Banking: Margin increases pay off as NII rise 7%
Financial results for first nine months of 2011 Corporate & Institutional Banking: Margin increases pay off as NII rise 7% Income statement (DKK m) Trend in lending volume, average (DKK bn) 9M 2010 9M 2011 Index -1% Net interest income 1,388 1,483 107 107 103 101 102 105 Net fee income 744 604 81 Ot
Slide 49: Danske Markets: Turmoil in financial markets reduces income in third quarter
Financial results for first nine months of 2011 Danske Markets: Turmoil in financial markets reduces income in third quarter Income statement (DKK m) Market positions in the Nordics (rank) 9M 2010 9M 2011 Index Product area Denmark Sweden Norway Finland Total income 6,116 4,470 73 Fixed income 2 3 2
Slide 50: Danske Capital: 14% increase in income driven by growth in AuM and higher margins
Financial results for first nine months of 2011 Danske Capital: 14% increase in income driven by growth in AuM and higher margins Income statement (DKK m) AuM – customer breakdown (DKK bn) 9M 2010 9M 2011 Index Private equity Institutional Retail* Life insurance Net interest income 94 88 94 Net fee
Slide 51: Danica Pension: Postponed risk allowance and strengthening of reserves
Financial results for first nine months of 2011 Danica Pension: Postponed risk allowance and strengthening of reserves as a result of Q3 financial turmoil Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q3 2011(%) 9M 2010 9M 2011 Index Equities Bonds Credit bonds Property
Slide 52: Danica Pension: Credit bond exposure in Danica Traditionel
Financial results for first nine months of 2011 Danica Pension: Credit bond exposure in Danica Traditionel Credit bond portfolio, maturity (DKK bn) Credit bond exposure, sectors (%) 16 Government Financials 11 23 Industrial 10 8 Others 5 8 24 Telecom Consumers 4 6 3 4 4 Utilities 2 Energy IT Materia
Slide 53: Danica Pension's profit model
Financial results for first nine months of 2011 Danica Pension’s profit model Profit model Condition/ sensitivity 9M 2011 DKK m Danica Traditionel. Mainly risk Can only be booked if investment Risk allowance 884 1 allowance 69 bp of technical return is high enough Other -62 prov. (DKK 170 bn) + Unit
Slide 54: Disclaimer
Financial results for first nine months of 2011 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 t