Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — FY2013 Earnings Presentation
42 slides from Danske Bank A/S's earnings presentation, Feb 6, 2014
Slide 1: Financial results for 2013
Financial results for 2013 Thomas F. Borgen Chief Executive Officer 6 February 2014
Slide 2: Agenda
Financial results for 2013 Q1 2013 Agenda Executive summary 2013 and financial results 3 Business unit update 4 5 Selected topics 7 Capital, liquidity and funding 10 Update on strategy, execution and ROE target 13 Outlook for 2014 16 Q&A session 17 Appendix 18 2
Slide 3: Executive summary 2013
Financial results for 2013 Q1 2013 Executive summary 2013 Net profit & ROE DKK 7.1bn, a 51% increase from 2012; ROE improved from 3.6% to 5.0% Income Total income was down owing primarily to lower income from trading and insurance activities Expenses Expenses down 1% despite restructuring costs Impa
Slide 4: Net profit: DKK 7.1 bn, up 51% from 2012
Financial results for 2013 Q1 2013 Net profit: DKK 7.1 bn, up 51% from 2012 Income statement & key figures (DKK m) Key points, 2013 vs 2012 2013 2012 Index Q4 2013 Q3 2013 Index • NII fell 2% owing to lower lending Net interest income 22,245 22,778 98 5,683 5,606 101 volumes and lower short-term rat
Slide 5: Three main business units: Improvement at Personal and Business; lower income at C&I
Financial results for 2013 Q1 2013 Three main business units: Improvement from 2012 at Personal and Business; lower income at C&I Profit before tax (DKK m) Financial highlights 2013 2012 2013 -43% Personal Banking +55% • Lower NII from declining volumes was offset by higher fees • Trading income dow
Slide 6: Danske Capital & Danica Pension: Solid improvement at Danske Capital
Financial results for 2013 Q1 2013 Danske Capital & Danica Pension: Solid improvement at Danske Capital, but difficult conditions for Danica Pension Danske Capital: Financial highlights 2013 Danica Pension: Financial highlights 2013 • Total income increased 13% from higher assets under • Premiums we
Slide 7: Ireland: Non-core deleveraging develops according to plan
Financial results for 2013 Q1 2013 Ireland: Non-core deleveraging develops according to plan Key points New Non-core: Pro forma loan portfolio,* Q4 2013 (DKK bn) • Profit before tax for 2013 of a negative DKK 1.4 bn, loss Conduits etc. 55.6 reduced 71% from DKK 4,801 bn in 2012 Other • Restructuring
Slide 8: Expenses: Large increase Q/Q from one-offs and seasonality
Financial results for 2013 Q1 2013 Expenses: Large increase Q/Q from one-offs and seasonality; 2013 actions will reduce costs in 2014 Total expenses (DKK m) Quarterly change in expenses (DKK m) Adjustments* Adjusted expenses 6,591 6,880 Q3 13 5,545 5,905 6,013 5,545 Severance/ restructuring 348 incl
Slide 9: Impairments: Loan loss ratio of 18 bp for core activities
Financial results for 2013 Q1 2013 Impairments: Loan loss ratio of 18 bp for core activities and 23 bp for entire Group Impairments, 2008 to Q4 13 (DKK bn/bp) Impairments (DKK m) Impairments Loan loss ratio* (rhs) Q413 Q313 Index 2013 2012 Index Personal Banking 393 445 88 1,935 2,749 70 10 173 180
Slide 10: Capital: Strong capital ratios from retained earnings and capital issues
Financial results for 2013 Q1 2013 Capital: Strong capital ratios from retained earnings and capital issues in Q4 2013 Capital ratios, under CRD/Basel II (%) Capital drivers Tier 2 • State hybrid represents 2.8 %-points of tier 1 and total Hybrid tier 1 (incl. state hybrid) capital ratio and is expe
Slide 11: Funding and liquidity: Outlook for lower funding costs
Financial results for 2013 Q1 2013 Funding and liquidity: Outlook for lower funding costs owing to lower volume and prices; strong liquidity position Changes in funding 2013 & 2014 (DKK bn and bp) Lending and funding sources ex. RD, (DKK bn) Cov.bonds Senior Tier 2 Tier 1 Lending, ex repo Deposits M
Slide 12: Realkredit Danmark: New price structure drives portfolio changes
Financial results for 2013 Q1 2013 Realkredit Danmark: New price structure drives portfolio changes towards longer term funding Key points New price structure for personal customers, Q1 2014 (bp) • New price structure gives incentive to amortise and choose longer interest reset periods on FlexLån® F
Slide 13: Our Vision and Mission stand firm, and we are accelerating execution
Financial results for 2013 Q1 2013 Our Vision and Mission stand firm, and we are accelerating the execution of our strategy Vision Mission “Recognised as the most trusted financial partner” “Setting new standards in financial services” Customer Financial Advisory Digitalisation Openness & satisfacti
Slide 14: Our achievements in 2013 serve as a strong platform
Financial results for 2013 Q1 2013 Our achievements in 2013 serve as a strong platform Developments in 2013 More than 1 m downloads of MobilePay since launch in Denmark in May 2013; launched in Finland in Q4 Customer Programme: 1.2 m customers registered in Denmark Private Banking was named Be
Slide 15: ROE target: 9% in 2015
Financial results for 2013 Q1 2013 ROE target: 9% in 2015 on income and cost-saving initiatives, income normalisation and lower Non-core loss ROE drivers from 2013 to 2015 (%) ROE drivers Current income drivers • Continued optimisation of pricing structures for lending, 2013 5.0 deposits and other p
Slide 16: Outlook for 2014: Net profit of DKK 9 to 12 bn
Financial results for 2013 Q1 2013 Outlook for 2014: Net profit of DKK 9 to 12 bn Macro Economic growth remains fragile, with low interest rates NII Lower funding costs are likely to more than compensate for weak demand for loans Total income Total income expected to be above the level in 2013 (DKK
Slide 17: Q&A session
Financial results for 2013 Q1 2013 Q&A session Press * then 1 to ask a question Press “#” to cancel Press “Ask a question” in your webcast player www.danskebank.com/ir 17
Slide 18: Appendix
Financial results for 2013 Q1 2013 Appendix Business units 19 Special topics: Trading and expenses 24 Impairments 26 Macro, credit quality and portfolio dives, including Non-core 28 SIFI regulations, funding and ratings 36 Financial targets 39 Deep dives: Danica’s profit model and tax 44 40 18
Slide 19: Personal Banking: Increasing profit; positive impairment trend continues
Financial results for 2013 Q1 2013 Personal Banking: Increasing profit; positive impairment trend continues Income statement & key figures (DKK m) Financial highlights for Q4 2013 Q4 2013 Q3 2013 Index • Profit before tax up 4%, and pre-tax ROE up 0.3 of a Net interest income 2,778 2,817 99 percenta
Slide 20: Business Banking: Increasing income and stable impairments
Financial results for 2013 Q1 2013 Business Banking: Increasing income and stable impairments Income statement & key figures (DKK m) Financial highlights for Q4 2013 Q4 2013 Q3 2013 Index • Profit before tax down 6%, and pre-tax ROE down 0.6 of a Net interest income 2,259 2,252 100 percentage point
Slide 21: Corporates & Institutions: Improvement on all income lines
Financial results for 2013 Q1 2013 Corporates & Institutions: Improvement on all income lines Income statement & key figures (DKK m) Financial highlights for Q4 2013 Q4 2013 Q3 2013 Index • Profit before tax up 104%, and pre-tax ROE at 12.2% Net interest income 663 582 114 Net fee income 346 308 112
Slide 22: Danske Capital: Profit up 84%, with a positive trend in AuM
Financial results for 2013 Q1 2013 Danske Capital: Profit up 84%, with a positive trend in AuM Income statement (DKK m) Financial highlights for Q4 2013 and FY 2013 Q4 2013 Q3 2013 Index • Total income increased 66% owing to performance fees Net interest income -9 -12 - of DKK 302 m in Q4 Net fee in
Slide 23: Danica Pension: Improved income because of more normal market conditions
Financial results for 2013 Q1 2013 Danica Pension: Improved income because of more normal market conditions Income statement (DKK m) Financial highlights for Q4 2013 and FY 2013 Q4 2013 Q3 2013 Index • Net income from insurance increased in Q4 owing to a Premiums 6,816 5,967 114 higher investment re
Slide 24: Trading income: Rebound in Q4 after a difficult Q3
Financial results for 2013 Q1 2013 Trading income: Rebound in Q4 after a difficult Q3 Trading income by business unit (DKK m) Key points Other incl. Treasury C&I Business Personal • More normalised trading income in 2,154 Q4 2013 after the subdued Q3 1,775 1,463 1,830 • Loss of DKK 0.4 bn at Treasur
Slide 25: Expenses: Adjusted expenses up slightly in 2013
Financial results for 2013 Q1 2013 Expenses: Adjusted expenses up slightly in 2013, while branch and FTE reductions continue Expenses (DKK m) FTEs, end of period (000s) 2013 2012 Index Q4 2013 Q3 2013 Index Expenses 24,343 24,642 99 6,880 5,545 124 23.6 Guarantee Fund and bank tax 954 700 136 231 20
Slide 26: Impairments: Stable from Q3 to Q4
Financial results for 2013 Q1 2013 Impairments: Stable from Q3 to Q4 Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal • Impairments at Personal Banking and Business Banking were stable 2.7 • Drop of DKK 100 m at C&I - back to the very low level of Q2 • Impairme
Slide 27: Group impairments: Quarterly individual charges have stabilised
Financial results for 2013 Q1 2013 Group impairments: Quarterly individual charges have stabilised with DKK 46.9 bn in the allowance account Individual loan impairment charges*, ex Baltics (DKK bn) Change in allowance account* (DKK m) New Increased Reversals Allowance, end-2007 4,900 2.7 2.1 1.4 1.2
Slide 28: Macro: Trends in the Nordics
Financial results for 2013 Q1 2013 Macro: Trends in the Nordics Bankruptcies (index 1996 = 100) Rating upgrades,* 12-month moving average (%) Denmark Finland Norway Sweden Business Banking C&I (incl. Financials) 500 100 400 Upgrades > downgrades 300 50 200 100 Downgrades > upgrades 0 2000 2005 2010
Slide 29: Denmark: Housing remains affordable as prices stabilise
Financial results for 2013 Q1 2013 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Affordability index, quarterly data from1988–2012 Region Prices Change Change in q/q Preview* Fixed rate Mixed rate Average peaked since peak Q3 2013 Q4 13 140 Copenhagen Q3 2
Slide 30: Realkredit Danmark: Portfolio overview
Financial results for 2013 Q1 2013 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q4 13 Loans broken down by LTV ratio and rating, RD, end-04 13 (%) • Approx. 385,000 loans (residential and commercial) Rating 1-3 4-7 8-11 Total Public • 2,524 loans in 3- and 6-month
Slide 31: Personal Banking Denmark: Limited exposure to high LTV ratio loans
Financial results for 2013 Q1 2013 Personal Banking Denmark: Limited exposure to high LTV ratio loans that start to amortise before end-2018 Exposure to households with an IO mortgage (DKK bn) Breakdown of loans with high LTV ratio (DKK bn) Danske Prioritet (SDO mortgage) Exposure with LTV ratio abo
Slide 32: Impaired exposure: Limited agriculture and shipping exposure
Financial results for 2013 Q1 2013 Impaired exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio, Q4 13 (%) Shipping, breakdown of loan portfolio, Q4 13 (%) Car carrier Other Other 6 Chemical tanker 15 15 8 26 Cereals etc. RO-RO Mixed operations 2 6 Product ta
Slide 33: Ireland: Termination of Personal Banking and Business Banking
Financial results for 2013 Q1 2013 Ireland: Termination of Personal Banking and Business Banking Core: Breakdown of loan portfolio, Q4 2013* (DKK bn) Key points • Discontinuation of Personal Banking and Business Banking on 1 January 2014 • Existing customers are moved to the Non-core unit for servic
Slide 34: Ireland: House price trends and arrears
Financial results for 2013 Q1 2013 Ireland: House price trends and arrears Irish house price indices (index 100 = January 2005) Fall from peak (%) CSO index,* houses Residential real estate Internal price index for houses in Dublin Internal price index for houses outside Dublin Dublin 55 140 Non-Dub
Slide 35: Non-core Ireland: Breakdown of loan portfolio
Financial results for 2013 Q1 2013 Non-core Ireland: Breakdown of loan portfolio Individual impairments Value of collateral CRE (DKK bn) Personal mortgages (DKK bn) Other* (DKK bn) Total (DKK bn) 10.4 7.4 6.2 24.0 8.9 4.7 16.7 5.8 2.9 3.2 10.1 1.4 3.1 1.8 6.6 1.8 Gross Impaired Gross Impaired Gross
Slide 36: SIFI: Key elements of political agreement in October 2013
Financial results for 2013 Q1 2013 SIFI: Key elements of political agreement in October 2013 Key elements Danske Bank’s total SIFI requirements, 2019 (% of RWA) Capital requirements CT1 SIFI requirement of 1% to 3% Total minimum requirement for SIFI banks of 11.5% to13.5% in 2019 CRD IV SIFI I
Slide 37: Funding: Structure and sources
Financial results for 2013 Q1 2013 Funding: Structure and sources Loan portfolio and long-term funding, Q4 13 (DKK bn) Funding sources (%) Q4 2012 Q4 2013 1,785 102 Senior debt 46 1,553 Bank loans 489 788 Deposits 18 Bank mortgages 333 164 Covered bonds 11 7 8 6 3 1 RD mortgages 731 731 Issued RD bo
Slide 38: Three different methods of rating banks
Financial results for 2013 Q1 2013 Three different methods of rating banks Rating methodology Danske Bank’s rating Anchor Extraord. Add. Issuer + 1 + 2 + 3 + 4 = SACP = + = SACP* Support factors Rating BBB+ +1 0 -1 0 BBB+ +2 -1 A- (Stable) 1=Business Position 2=Capital & Earnings 3=Risk Position 4=F
Slide 39: Financial targets: Dividend payments of 28% for 2013
Financial results for 2013 Q1 2013 Financial targets: Dividend payments of 28% for 2013, positive outlook from Moody’s and progress towards 9% ROE in 2015 Year to be Status at 31 Target Previous ambition Comments achieved December 2013 9% Above 12% 2015 In progress after initiating Return on equity
Slide 40: Danica Pension's profit model
Financial results for 2013 Q1 2013 Danica Pension’s profit model Profit model Condition/ sensitivity 2013 DKK m Danica Traditionel. Mainly risk Can be booked only if investment Risk allowance 1,261 allowance 70 bp p.a. of return is high enough and if no use of Other -123 1 technical provisions (DKK
Slide 41: Tax: 29% tax rate for 2013 and 24% adjusted for Ireland
Financial results for 2013 Q1 2013 Tax: 29% tax rate for 2013 and 24% adjusted for Ireland Actual and adjusted tax rates (DKK m) Tax drivers 2013 Q4 13 Q3 13 Q2 13 Q1 13 • Tax on the profit for 2013 amounted to DKK 2.9 bn, or 29% Profit before tax 10,059 2,862 2,304 2,677 2,216 of the pre-tax profit
Slide 42: Disclaimer
Financial results for 2013 Q1 2013 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 Sta