Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — FY2018 Earnings Presentation
34 slides from Danske Bank A/S's earnings presentation, Feb 1, 2019
Slide 1: Financial results 2018
Financial results 2018 Jesper Nielsen Interim Chief Executive Officer Christian Baltzer Chief Financial Officer 1 February 2019
Slide 2: Agenda
Financial results 2018 Agenda Executive summary and AML update 2 Group and business unit update 5 Selected topics 8 Financial outlook for full-year 2019 11 Q&A 12 Appendix 13 1
Slide 3: Executive summary: 2018 was a challenging year
Financial results 2018 Executive summary: 2018 was a challenging year Financial results, 2018 Lending growth of 3% y/y, driven by growth of 1% y/y at Banking DK and 5% y/y at • Net profit of DKK 15.0 bn, down 28% from 2017 due Banking Nordic to lower trading income and donation. Excluding the donati
Slide 4: Recap of the Estonia case
Financial results 2018 Recap of the Estonia case On 19 September 2018, findings of the internal investigation was published Our investigation continues and all findings are shared with relevant authorities through regular updates. Timing of completion is uncertain and subject to dialogue with author
Slide 5: Upscaling of AML efforts in 2018 creates cost overhang in 2019; accelerated digitalisation
Financial results 2018 Upscaling of AML efforts in 2018 creates cost overhang in 2019; Accelerated digitalisation efforts over next three years Since 2014, Danske Bank has made substantial investments to improve our set-up, capabilities and competencies for combating financial crime. However, as fin
Slide 6: Net profit: DKK 15.0 bn, down 28% from 2017 due to lower trading income and donation
Financial results 2018 Net profit: DKK 15.0 bn, down 28% from 2017 due to lower trading income and donation Income statement and key figures (DKK millions) Key points, 2018 vs 2017 2018 2017 Index Q4 2018 Q3 2018 Index • Return on equity of 9.8% Net interest income 23,571 23,806 99 5,895 5,852 101 •
Slide 7: Banking units: Continued growth, driven by Banking Nordic and stable Banking DK
Financial results 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, 2018 vs 2017 2018 2017 Banking DK • Total income unchanged 21.6 22.3 • Expenses up 2% owing mainly
Slide 8: C&I and Wealth Management: Difficult market conditions affected trading income
Financial results 2018 C&I and Wealth Management: Difficult market conditions affected trading income; WM fees benefit from SEB Pension DK Corporates & Institutions: Financial highlights, 2018 vs 2017 Wealth Management: Financial highlights, 2018 vs 2017 • NII up 2% despite the transfer of local Bal
Slide 9: Expenses: 2018 impacted by donation, AML & SEB Pension DK
Financial results 2018 Expenses: 2018 impacted by donation, AML & SEB Pension DK; 2019 expected to be driven by AML, SEB, VAT & activity Change in expenses (DKK millions) Expense drivers 72 2018 vs 2017 • Expenses up 10% y/y, due mainly to the 1,500 donation. Excluding the donation, expenses 155 263
Slide 10: Impairments: Q4 net impairment reversal driven by Banking DK and Banking Nordic
Financial results 2018 Impairments: Q4 net impairment reversal driven by Banking DK and Banking Nordic Group impairments,* 2012-2018 (DKK billions/bp) Impairment drivers, Q4 2018 vs Q3 2018 Impairments Loan loss ratio* (rhs) • Net impairment reversal driven by Banking DK and Banking 14 70 Nordic 12.
Slide 11: Capital: Strong capital base; CET1 ratio of 17.0%
Financial results 2018 Capital: Strong capital base; CET1 ratio of 17.0% Capital ratios, under Basel III/CRR (%) Capital highlights, Q4 2018 Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • Credit risk REA increase caused mostly by the move of the 20.9 21.3 Swedish mortgage risk-weight floor from Pillar I
Slide 12: 2019 outlook: We expect net profit in the range of DKK 14-16 bn
Financial results 2018 2019 outlook: We expect net profit in the range of DKK 14-16 bn, excluding potential gain on sale of Danica Pension Sweden We expect net interest income to be at around the level in 2018, as volume growth will be Net interest offset by higher funding costs and margin pressure.
Slide 13: Q&A session
Financial results 2018 Q&A session Press * then 1 to ask a question Press # 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.danskebank.com/ir 12
Slide 14: Appendix
Financial results 2018 Appendix Business units 14 Income, expenses and credit quality 19 Macro and portfolio reviews 24 Funding, liquidity and ratings 28 Tax 31 Contact details 32 13
Slide 15: Banking DK: Profit before tax up 6% in Q4 due to net reversals
Financial results 2018 Banking DK: Profit before tax up 6% in Q4 due to net reversals Income statement and key figures (DKK millions) Lending volume by segment (DKK billions) Q4 2018 Q3 2018 Index Retail RD Retail non-RD Net interest income 2,252 2,245 100 Commercial RD Commercial non-RD Net fee inc
Slide 16: Banking Nordic: Profit before tax down 7% in Q4 as expenses rise
Financial results 2018 Banking Nordic: Profit before tax down 7% in Q4 as expenses rise; growth in commercial Finland and retail Sweden and Norway Income statement and key figures (DKK millions) Lending volume by segment and country* (Q3 2017 = Index 100) Q4 2018 Q3 2018 Index Finland retail Sweden
Slide 17: Corporates & Institutions: Profit before tax down 14% q/q
Financial results 2018 Corporates & Institutions: Profit before tax down 14% q/q due to lower trading income and higher expenses Income statement and key figures (DKK millions) Income breakdown (DKK millions) Q4 2018 Q3 2018 Index FI&C Capital Markets General Banking Net interest income 954 992 96 N
Slide 18: Wealth Management: Profit before tax down 33% q/q
Financial results 2018 Wealth Management: Profit before tax down 33% q/q, due mainly to health and accident business and integration expenses Income statement and key figures (DKK millions) Key points, Q4 2018 vs Q3 2018 Q4 2018 Q3 2018 Index • Assets under management down 6% Net interest income 180
Slide 19: Non-core: Deleveraging progressed according to plan; REA of DKK 12 bn
Financial results 2018 Non-core: Deleveraging progressed according to plan; REA of DKK 12 bn at end-2018 Non-core loan portfolio, Q4 2018 (DKK billions) Non-core REA (DKK billions) Allowance account Non-core conduits etc. Non-performing credit exposure Non-core Banking Performing credit exposure 19
Slide 20: Net interest income: Volume growth offset by margin pressure and FX effect
Financial results 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 75 • differences at the Internal Bank 234 371 between actual and allocated
Slide 21: Trading income: At a low level owing to challenging conditions in rates markets
Financial results 2018 Trading income: At a low level owing to challenging conditions in rates markets, Q4 includes positive one-off from sale of assets Trading income by business unit* (DKK millions) Key points, Q4 2018 vs Q3 2018 Other incl. Treasury Wealth Management Banking Nordic • Trading inco
Slide 22: Expenses: Up 6% q/q excluding DKK 1.5 bn donation
Financial results 2018 Expenses: Up 6% q/q excluding DKK 1.5 bn donation reflecting seasonality and higher integration costs for SEB Pension DK Total expenses (DKK millions) Change in expenses (DKK millions) Donation Bonuses Severance payments Other costs Q3 2018 7,367 Deposit guarantee scheme/resol
Slide 23: Credit quality: Positive trend in credit quality continues; NPLs decreased 10% y/y
Financial results 2018 Credit quality: Positive trend in credit quality continues; NPLs decreased 10% 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 Ireland 21.7 21.0 Ban
Slide 24: Credit exposure: Limited agriculture and directly oil-related exposure
Financial results 2018 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (3.0% of Group exposure) Oil-related exposure (0.8% of Group exposure) • Pork prices remained at a very low level while milk prices weak- • Net exposure increased to DKK 18.7 bn* from D
Slide 25: Nordic macroeconomics
Financial results 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 2016 2018 2006 2008 201
Slide 26: Nordic housing markets
Financial results 2018 Nordic housing markets Denmark Sweden Norway Finland House 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. GDP (index 2005 = 100)
Slide 27: Realkredit Danmark and the Danish housing market: Portfolio overview
Financial results 2018 Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, Q4 18 Stock of retail loans (DKK 449 bn), Realkredit Danmark, Q4 18 (%) • Approx. 362,000 loans (residential and commercial) Fixed rate (10yrs-30yrs) Interest-only (up to
Slide 28: Realkredit Danmark: 47% of new retail loans are fixed-rate
Financial results 2018 Realkredit Danmark: 47% of new retail loans are fixed-rate; compliant with all regulatory requirements Key points Supervisory diamond for Danish mortgage credit institutions • 47% of new retail loans in Q4 were fixed-rate loans, and 40% were 5- to 10-year variable-rate loans •
Slide 29: Funding and liquidity: DKK 69 bn of long-term funding issued in 2018; LCR 121%
Financial results 2018 Funding and liquidity: DKK 69 bn of long-term funding and capital instruments issued in 2018; LCR compliant at 121% Changes in funding,* 2018-2019 (DKK billions and bp) Long-term funding excl. RD (DKK billions)** Cov. bonds Senior Non-preferred senior Funding plan Completed 58
Slide 30: Funding structure and sources: Danish mortgage system is fully pass-through
Financial results 2018 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q4 2018 (DKK billions) Funding sources (%) Q3 2018 1,996 Q4 2018 120 Senior & 51 52 NPS debt 1,769 Bank loans 612 894 Deposits Bank mortgages 358 183 Covered bonds
Slide 31: Three distinct rating methodologies
Financial results 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 & Liquidity Quali- Macro
Slide 32: Tax
Financial results 2018 Tax Actual and adjusted tax rates* (DKK millions) Tax drivers, Q4 2018 FY 2018 Q42018 Q32018 Q22018 Q12018 • The actual tax rate of 23.2% is higher than Profit before tax 19,322 4,444 3,589 5,487 5,802 the Danish rate of 22% due primarily to Permanent non-taxable difference 1,
Slide 33: Contacts
Financial results 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: +45 27 20 41 74 Chi
Slide 34: Disclaimer
Financial results 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 United States, or an i