Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Debt Investor Presentation (November 2010)
48 slides from Danske Bank A/S's debt investor presentation, November 2010
Slide 1: Danske Bank
(Air Danske Bank November 2010 Danske
Slide 2: Disclaimer
Disclaimer This presentation has been prepared solely for use at this presentation. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations. This presentation does not constitute or form part of and should no
Slide 3: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation & Stress Test 3
Slide 4: Danske Bank is a strong Nordic franchise
Danske Bank is a strong Nordic franchise Lending divided by Banking Activity Q3 2010 5.0 million customers NIR; IR; 3,7% BAL; 1,3% Others; 3,0% 3,5% NO; 9,3% Finland 2.3 million active Internet customers Market position: Leader SE; 11,1% DK; 58,8% Branches: 122 Market share: 12% 690 branches in 14 c
Slide 5: Credit exposure decreased by 5% Y/Y
Credit exposure decreased by 5% Y/Y Credit exposure from lending activity, end-Q3 2010 (DKK 2,330bn, including DKK 1,846bn in lending and repos) Central and local governments 5% Subsidised housing companies 5% Banks 8% Personal customers 37% Commercial property 10% Construction, engineering and buil
Slide 6: Danske and other Nordic banks have low CDS spreads in relation to European peers
Danske and other Nordic banks have low CDS spreads in relation to European peers European banks 5Y senior CDS (bps) Source: UBS, Nordic Banks., July 28, 2010. 6
Slide 7: Danske Bank is rated by the three major international rating agencies
Danske Bank is rated by the three major international rating agencies Stable outlook Negative outlook Stable outlook Short term Long term Short term Long term Short term Long term P-1 Aaa A-1+ AAA F1+ AAA P-2 Aa1 A-1 AA+ F1 AA+ P-3 Aa2 A-2 AA F2 AA Aa3 A-3 AA- F3 AA- A1 B A+ B A+ A2 C A C A A3 D A-
Slide 8: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation & Stress Test 8
Slide 9: The macroeconomic recovery is still modest
The macroeconomic recovery is still modest % GDP, 2009-11E Public finances 8 (Growth Y/Y) 4 Gross public Budget bal. Sovereign rating debt % of GDP % of GDP & outlook (S&P) 0 2010 2011 Norway Denmark 43.0 -4.4 AAA/Stable Euroland Sweden 43.6 -4.1 AAA/Stable -4 Denmark Sweden Norway 26.0 10.0 AAA/Sta
Slide 10: Signs of housing market stabilising
Signs of housing market stabilising Correlation between house prices Danish house price development by regions Price and consumption in Denmark per sqm. DKK bn Region Prices Price fall Change in 16,000 200 peaked since peak (%) Q310 (%) Copenhagen Q3 2006 -24.9 1.4 12,000 180 Zealand Q3 2007 -21.6 0
Slide 11: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation & Stress Test 11
Slide 12: Earnings recovery continues as impairments decline
Earnings recovery continues as impairments decline Profit before taxes (Q3 2010) DKK m 2,000 • Net profit 98% Y/Y to DKK 2.6bn in 9M 2010 1,000 • Q3 result shows strong improvement in Denmark 0 • Cost management continues to deliver Q3 2010 results Q2 2010 -1,000 • Declining impairment charges • C
Slide 13: Declining expenses and impairments more than offset lower income
Declining expenses and impairments more than offset lower income DKK m 9M 2009 9M 2010 Index Q2 2010 Q3 2010 Index Net interest income 20,759 17,774 86 5,927 5,840 99 Net fee income 5,601 6,185 110 2,068 2,069 100 Net trading income 16,283 7,126 44 2,817 1,930 69 Other income 2,211 2,844 129 1,091 7
Slide 14: Stable quarterly net interest income not inflated by one-offs
Stable quarterly net interest income not inflated by one-offs Quarterly net interest income Quarterly change in net interest income DKK m DKK m Y/Y 12% 6,200 7,500 Q/Q 1% 82 * 28 * 65 * 52 9 6,500 5,800 201 * * * 5,927 5,500 5,400 5,840 4,500 5,000 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
Slide 15: Net trading income at normalised level despite low activity
Net trading income at normalised level despite low activity Breakdown of net trading income VIX Volatility DKK m Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 Index 2010 Index Trading activities 4,410 3,194 1,791 2,013 1,665 1,420 90 Group Treasury 297 567 -152 119 * 692 99 75 Institutional banking (no
Slide 16: Impairment charges fell for seventh consecutive quarter, down almost 50% Y/Y
Impairment charges fell for seventh consecutive quarter, down almost 50% Y/Y Quarterly loan imp. charges Loan impairment charges DKK m bp DKK m 10,000 200 25,000 7,500 150 20,000 Total loan imp. charges in basis points 5,000 100 15,000 2,500 50 10,000 0 0 5,000 Total impairment charges Collective
Slide 17: Loan impairment charges still dominated by SMEs, but fewer customers in default
Loan impairment charges still dominated by SMEs, but fewer customers in default Impairments by customer segment Net exposures in rating categories 10 and 11* - SMEs account for most of the Group’s impairments - Declining trend in rating category 11 Exposure DKK m DKK bn 9,000 40 Rating category 11 7
Slide 18: Strong capital position maintained
Strong capital position maintained Capital ratios – CRD/Basel II Trend in RWA (DKK bn) % 20 17 17.4% 10 16 9 14.4% 12.6% 12 10.4% 9.8% 879 8 843 4 0 Credit quality Change in Market risk Q4 08 Q4 09 Q3 10 Q2 2010 Q3 2010 lending Solvency ratio Total tier 1 ratio Core tier 1 ratio incl. convertible hy
Slide 19: Outlook for the rest of 2010 remains cautious
Outlook for the rest of 2010 remains cautious • Macroeconomic improvement, but stable short-term rates and volumes • Income trend in line with first nine months • Focus on costs will continue • Fourth-quarter specifics relative to Q3: • Fee expenses of DKK 75 m for state guarantee on DKK 38 bn fundi
Slide 20: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation & Stress Test 20
Slide 21: Funding need for 2010 completed with duration extended; very limited need in 2011
Funding need for 2010 completed with duration extended; very limited need in 2011 New funding 2008-11 Funding sources - Entire funding need of DKK 30bn for 2010 - Shift towards long-term funding sources DKK bn % already more than covered 200 40 Q3 2010 Q4 2008 150 30 100 20 50 10 0 0 Repo Central ba
Slide 22: Well-diversified funding position
Well-diversified funding position Equity, 4% Central banks, 4% Deposits, 32% • 57% deposits and fully match- Repos, 6% funded Danish mortgage bonds (net) Banks, net, 6% • Long-term bonds DKK 186bn • Issued covered bonds DKK 117bn S-T bonds, 7% • Termination of state guarantee at end-September has no
Slide 23: Frontloaded on funding in 2010; all completed with long duration and without guarantees
Frontloaded on funding in 2010; all completed with long duration and without guarantees • YTD Danske Bank has issued bonds for DKK Issues by type and currency 40 bn, covering more than the estimated long-term funding needed for 2010 Issue type Currency DKK bn (DKK 30 bn) Covered bonds EUR 17 NOK 2 •
Slide 24: Strong loan-to-deposits ratio and liquidity position
Strong loan-to-deposits ratio and liquidity position Loan-to-deposit gap (DKK bn) and ratio (%) 12-month liquidity* Moody’s Financial Strength DKK bn % DKK bn 400 125 450 300 120 300 End-Q4 2009 200 115 150 End-Q3 2010 100 110 0 End-Q4 2008 0 105 -150 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 1 month
Slide 25: Diversification through funding programs
Diversification through funding programs Utilised Q3 2010 Limit Q3 2010 Short-term funding DKK bn 170 85 0 ECP SEK CP UK CD SAMPO FIN CD US CP NOK CP French CP Long-term funding & covered bonds DKK bn DKK bn 450 200 150 300 100 150 50 0 0 SEK MTN FIN MTN SAMPO FIN MTN COVERED BONDS SAMPO EMTN 144A U
Slide 26: Covered Bonds is a valuable funding tool
Covered Bonds is a valuable funding tool DKK bn Eligible loans in the D & I pool 100.000 D pool I pool 80.000 60.000 40.000 20.000 0 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 26
Slide 27: The two retail pools
The two retail pools Macroeconomic outlook 2010 : Denmark Danish economic has benefited from the global recovery and exports have grown substantially in Pool D Pool notional DKK 33,0bn (€ 4.4bn equivalent) the first half of 2010. Exports are expected to Number of Loans 54,319 continue to grow in t
Slide 28: New pool (Pool C). No issues yet
New pool (Pool C). No issues yet Pool notional DKK 21.9bn (€ 2.9 bn equivalent) Number of Loans 4,549 COMMERCIAL WA LTV 60% WA Seasoning 3,25 years WA Remaining Term 21,8 years Rate type Floating rate Geographical location 100% SE Cut-off date 30-09-2010 Industry Residential Agricultural Cooperative
Slide 29: Table of contents
Table of contents I. Overview of Danske Bank II. Macro Economy III. Financial Performance IV. Funding & Liquidity V. Future Regulation & Stress Test 29
Slide 30: The new Basel III proposal is a step in the right direction, but there are still some issues
The new Basel III proposal is a step in the right direction, but there are still some issues • Danske Bank is already aligned with new minimum core tier 1 ratio of 7% • According to our preliminary assessment, Danske Bank’s core tier 1 capital will be reduced by 1 percentage point: • RWA will increa
Slide 31: Danske Bank passed the CEBS stress test with healthy capital buffer
Danske Bank passed the CEBS stress test with healthy capital buffer and ranking in the top quartile Tier 1 ratio Danske Bank in the top quartile in the 14.1% Tier 1 ratio worst adverse scenario in 2011 13.1% 20% Full CRD 12.1% Transitional 11.7% 16% CRD rules 10.8% ** 10.0% * 12% Minimum 6% requirem
Slide 32: www.danskebank.com/ir
www.danskebank.com/ir 32
Slide 33: Danske Bank's funding team
Danske Bank’s funding team Steen Blaafalk Tel.: + 45 45 14 63 60 Senior Executive Vice President E-mail: steen.blaafalk@danskebank.dk Cato Baldvinsson Tel.: + 45 45 12 84 10 Peter Holm Tel.: + 45 45 12 84 85 Senior Vice President E-mail: cbal@danskebank.dk Senior Vice President E-mail: holm@danskeba
Slide 34: Appendix
Appendix
Slide 35: Lending margins under pressure as competition grows
Lending margins under pressure as competition grows Quarterly lending margins Q1 2009 – Q3 2010 % (loan stock) 2.5 2.0 1.5 1.0 0.5 0.0 Denmark * Finland Sweden Norway Northern Ireland Ireland Baltics * Incl. Realkredit Danmark 34353535
Slide 36: In some markets, deposit margins are benefiting from increasing short-term rates
In some markets, deposit margins are benefiting from increasing short-term rates Quarterly deposit margins Q1 2009 – Q3 2010 % (deposit stock) 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 Denmark Finland Sweden Norway Northern Ireland Ireland Baltics 36
Slide 37: Nordic impairments: Strong improvement in Denmark, stable in other Nordics
Nordic impairments: Strong improvement in Denmark, stable in other Nordics DKK m DKK m 5,000 1,250 *Acc. imp. DKK 19,304 m *Acc. imp. DKK 2,674 m Denmark, 59% of Group’s lending - Individual 168 bp Finland, 9% of Group’s lending - individual 156 bp 4,000 1,000 216 bp - collective 24 bp - collective
Slide 38: Other impairments: Northern Ireland and Ireland are the most problematic
Other impairments: Northern Ireland and Ireland are the most problematic DKK m DKK m 750 2,400 *Acc. imp. DKK 2,839 m *Acc. imp. DKK 10,744 m Northern Ireland, 3% of Group’s lending - individual 472 bp Ireland, 4% of Group’s lending - individual 1358 bp - collective 53 bp - collective 119 bp 883 bp
Slide 39: Credit exposure to commercial property and construction segments
Credit exposure to commercial property and construction segments Portion Construction Commercial from and building Sector in DKK bn property developers materials total Denmark 109.5 1.0 12.7 122.1 Finland 15.2 0.6 6.7 21.9 Sweden 57.0 0.2 4.8 61.8 Norway 32.7 2.4 2.4 35.1 Northern Ireland 9.8 3.2 4.
Slide 40: Danish agriculture sector pressured by lower property and output prices
Danish agriculture sector pressured by lower property and output prices Other 6% Mixed operations 7% Agriculture Exposure to agriculture DKK bn 26% Realkredit Danmark 45 Grocery trade Banking Activities Denmark 13 14% Other business units 14 Agriculture 71 Agriculture LTV, Realkredit Danmark % Q4 20
Slide 41: Consensus 2010
Consensus 2010 2010 (DKK millions) Low Average High Contributors: Net interest income 23,703 23,861 24,204 •ABG Net fee income 8,116 8,281 8,448 •Arctic Securities Net trading income 8,800 9,276 9,727 •Autonomous •Bank of America/Merrill Lynch Other income 3,435 3,758 4,307 •Carnegie Net income from
Slide 42: Danish State Guarantee Schemes - Overview
Danish State Guarantee Schemes - Overview Bank Package I (October 2008) Bank Package II (February 2009) • Unconditionally, irrevocable guarantee by the Kingdom of Denmark • Ensures timely payment • AAA ratings, 0% risk weighting and ECB eligibility for €-issues • Covers both existing and new unsecur
Slide 43: Re-capitalisation instrument – Overview
Re-capitalisation instrument – Overview “Act on State-Funded Capital Injections” (Feb 3. 2009) Danske Bank’s solution (May 24. 2009) • Package size DKK 100bn • Danske Bank Group DKK 26bn Mortgage institutions 25bn Realkredit Danmark 2bn Banks 75bn Danske Bank A/S 24bn • Repayment condition • Hybrid,
Slide 44: Issues related to the two packages
Issues related to the two packages - DKK 26bn in hybrid and DKK 35bn in senior unsecured Hybrid capital ISIN code Currency Amount (m) Date issued Maturity Call DK0030170444 DKK 23,992 11.05.2009 Perpetual 12.04.2014 ← Danske Bank DK0030171848 DKK 2,034 11.05.2009 Perpetual 12.05.2012 ← Mortgage Fina
Slide 45: Danske Bank's Investor Relations website has a sub-section dedicated to debt investors
www.danskebank.com/ir Danske Bank’s Investor Relations website has a sub-section dedicated to debt investors The section contains detailed information about Danske Bank’s: Funding strategy Ratings Debt issues Covered Bonds Securitisation 45
Slide 46: Impairments – total impairments
Impairments – total impairments Total impairments bp 400 Q1 2008 – Q3 2010 Danske Bank Nordea 300 HB SEB 200 Swedbank DnB NOR 100 Jyske Nordic peer group 0 average -100 Q1 08 Q3 08 Q1 09 Q2 09 Q4 09 Q2 10 Q2 08 Q4 08 Q3 09 Q1 10 Q3 10 46
Slide 47: Nordic countries: The gaps between Danske and peers are narrowing quarter by quarter
Nordic countries: The gaps between Danske and peers are narrowing quarter by quarter bp 297 423 250 200 150 100 50 0 DB DB DB DB HB HB HB HB SEB SEB SEB SEB Swedbank Nordea Nordea Nordea Nordea DnB NOR -50 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Avg per bank 47
Slide 48: Baltics: Danske in line with peers, and the gap to Nordea is narrowing
Baltics: Danske in line with peers, and the gap to Nordea is narrowing bp 1400 1200 1000 800 600 400 200 0 DB SEB Nordea DnB NOR Swedbank -200 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Avg per bank 48
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