Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — Debt Investor Presentation (February 2021)
47 slides from Danske Bank A/s's debt investor presentation, February 2021
Slide 1: Debt investor update Q4 2020
Debt investor update Q4 2020
Slide 2: Agenda
Debt investor update – Q4 2020 Agenda 01. Group financial update 2 02. Capital and funding 11 03. Covered bond universe and ratings 17 04. Appendix 20 1
Slide 3: We are a Nordic universal bank with strong regional roots
Debt investor update – Q4 2020 We are a Nordic universal bank with strong regional roots Norway (AAA) Finland (AA+) Challenger position 3rd largest Market share: 7% Market share: 10% Share of Group lending: 11% Share of Group lending: 8% GDP growth 2020E: -3.3% GDP growth 2020E: -3.3% Unemployment 2
Slide 4: Executive summary – Good business momentum and strong focus on Better Bank agenda
Debt investor update – Q4 2020 Executive summary – Good business momentum and strong focus on executing on the Better Bank agenda 4.6 bn 42.4 bn 28.1 bn Net profit Stable total income Expenses incl. provision for part adjusted for one-offs of transformation costs for ‘21 7 bn 9–11 bn CET1 18.3% Impa
Slide 5: Multiple deliveries for all four key stakeholder groups
Debt investor update – Q4 2020 Multiple deliveries for all four key stakeholder groups during the first year of the Better Bank transformation Customers Employees • Continued to proactively support our customer during • Managed to have almost all employees work remotely the corona crisis, leading to
Slide 6: The Better Ways of Working delivery plan
Debt investor update – Q4 2020 The Better Ways of Working delivery plan is staged towards our ambitions with a strong foundation built in 2020 Full agile organisation New agile governance Ready to accelerate launched, affecting setup in place and clear digitalisation focus 4,500 employees with objec
Slide 7: 2020 status on the 2023 Group sustainability targets
Debt investor update – Q4 2020 2020 status on the 2023 Group sustainability targets 2020 status on sustainability targets for our strategic focus areas (2023 targets in parentheses) Sustainable finance Governance and integrity DKK 102 billion in sustainable financing (100 bn) 95% of employees traine
Slide 8: Net profit in line with expectations; stable income and transformation costs
Debt investor update – Q4 2020 Net profit in line with expectations; stable income and impact from transformation costs as well as corona-related impairments Income statement and key figures (DKK m) Key points, 2020 vs 2019 2020 2019 Index Q4 2020 Q3 2020 Index • NII flat as volume growth was offset
Slide 9: NII: Up 1% y/y adjusted for FX effects
Debt investor update – Q4 2020 NII: Up 1% y/y adjusted for FX effects due to higher volumes and deposit margins; stable q/q excl. one-off correction Key points Change in net interest income, y/y (DKK m) Y/Y • NII stable (up 1% adjusted for FX) driven by volume 263 325 growth and higher deposit margi
Slide 10: NII (cont’d): Lending up 4% in local currency at Banking Nordic
Debt investor update – Q4 2020 NII (cont’d): Lending up 4% in local currency at Banking Nordic; Banking DK saw lower credit demand and margin pressure Key points Lending volumes and development* (DKK bn) • Banking Nordic lending up 3% y/y (up 4% in local currency) 2019 2020 with local currency lendi
Slide 11: Fee income: Stable vs 2019
Debt investor update – Q4 2020 Fee income: Stable vs 2019 as higher investment fees compensate a for lower activity-related and remortgaging fees 2019 0% Key points Net fee income development, y/y (DKK m) 2020 Y/Y +10% 15,201 15,137 • Higher investment fees, due partly to strong perfor- +2% mance fe
Slide 12: Trading income: Up 7% y/y, driven by C&I
Debt investor update – Q4 2020 Trading income: Up 7% y/y, driven by C&I, excluding one-offs; Q4 saw relatively high activity levels Key points Group net trading income (DKK m) Y/Y • Trading income down 11%, but up 7% excluding one-offs in 2019 and 2020, despite the turbulence in the financial -11% -
Slide 13: Expenses: Significant impact from transformation and AML/Estonia
Debt investor update – Q4 2020 Expenses: Significant impact from transformation and AML/Estonia in 2020; continued execution on cost programme Key points Change in expenses, y/y (DKK m) Y/Y • Transformation costs of DKK 1.7 bn including sizeable 902 1,132 severance costs and a provision for part of
Slide 14: Impairments: Macro-driven model releases countered by post-model adjustments
Debt investor update – Q4 2020 Impairments: Macro-driven model releases countered by post- model adjustments; further oil-related charges Key points, Q4 2020 Impairment charges by business unit, 2020 (DKK m) • Impairments were driven by further charges against single names, +907 Banking DK mainly le
Slide 15: Capital: Strong capital base; CET1 capital ratio of 18.3%
Debt investor update – Q4 2020 Capital: Strong capital base; CET1 capital ratio of 18.3% Capital ratios; under Basel III/CRR; % Capital highlights, Q4 2020 Tier 2 Pillar II component (total 4.6%) • CET1 ratio up 0.2%-points q/q due mainly to earnings as well as Hybrid T1/AT1 CET1 lower deductions fo
Slide 16: Strong CET1 capital build-up since 2008
Debt investor update – Q4 2020 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) well in excess of DKK 100 bn Common Equity Tier 1, 2008 – 2020; DKK bn +DKK 67 bn 144 130 134 133 133 133 126 127 119 107 79 85 77 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20181 2019
Slide 17: Fully compliant with new MREL requirement
Debt investor update – Q4 2020 Fully compliant with new MREL requirement; expect to cover MREL need with both preferred and non-preferred senior Overview of MREL MREL resources and requirements; Q4 2020; % of REA Senior <1Y Own funds The Group has to meet both an MREL requirement and a separate debt
Slide 18: Funding structure and sources: Danish mortgage system is fully pass-through
Debt investor update – Q4 2020 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q4 2020 (DKK bn) Funding sources (%) Q3 2020 Q4 2020 2,350 63 63 168 Senior & NPS bonds 1,838 1,193 Deposits Bank loans 628 Bank mortgages 391 170 Covered
Slide 19: Funding programmes and currencies
Debt investor update – Q4 2020 Funding programmes and currencies Covered bonds by currency, end-Q4 2020 Largest funding programmes, end-Q4 2020 EUR SEK NOK CHF Utilisation EMTN Programme 43% 1% Limit – EUR 35bn 18% Global Covered Bond 75% 42% Limit – EUR 30bn 39% ECP Programme 9% Limit – EUR 13bn To
Slide 20: Funding and liquidity: long-term funding issued in 2020; LCR 154%
Debt investor update – Q4 2020 Funding and liquidity: DKK 79 bn of long-term funding and capital instruments issued in 2020; LCR compliant at 154% Changes in funding,* 2020-2021 (DKK bn and bp) Long-term funding excl. RD (DKK bn)** Cov. bonds Senior Non-Preferred Senior Funding plan Completed 31bp 2
Slide 21: Danske Bank covered bond universe, a transparent pool structure
Debt investor update – Q4 2020 Danske Bank covered bond universe, a transparent pool structure1 Residential mortgages from • Denmark, D-pool • Norway, I-pool + • Sweden, Danske Hypotek AB C-pool (AAA/AAA) • Finland, Danske Mortgage Bank Plc Commercial mortgages from Finland • Sweden and Norway, C-po
Slide 22: Danske Bank’s credit ratings
Debt investor update – Q4 2020 Danske Bank’s credit ratings No rating actions on Danske Bank in Q4 2020 Long-term instrument ratings Moody’s affirmed its rating and Stable outlook on Danske Bank on 18 December 2020 Fitch Moody’s Scope S&P Moody’s cite asset quality and capitalisation as strengths AA
Slide 23: Danske Bank’s ESG ratings
Debt investor update – Q4 2020 Danske Bank’s ESG ratings Danske Bank has chosen to focus on five providers, based on their importance to our investors 31 Dec 2020 31 Dec 2019 31 Dec 2018 Range 1 B 271 companies, out of the 9526 analysed, C C D- to A+ (A+ highest rating) made the climate change A Lis
Slide 24: Agenda
Debt investor update – Q4 2020 Agenda 01. Business units 21 02. Special topics 29 03. Macroeconomics 35 04. Outlook and one-off items 39 05. Contacts 41 23
Slide 25: Strong footprint within retail lending
Debt investor update – Q4 2020 Strong footprint within retail lending Lending by business unit1; %; Q4 2020 Credit exposure by industry; %; Q4 2020 Personal Customers 38 Banking DK Wealth Management Commercial Property 12 Banking Nordic Northern Ireland Public Institutions 11 C&I Other Co-ops & Non-
Slide 26: Lending growth: Banking Nordic up 4% in local currency; Banking DK down 1%
Debt investor update – Q4 2020 Lending growth: Growth of 4% in local currency at Banking Nordic; down 1% at Banking DK due to low demand Comments Banking Nordic: lending volume by segment and country* Banking DK • 84% of lending at Banking DK is at mortgage credit subsidiary Finland retail Sweden co
Slide 27: Banking DK: Lower activity due to corona crisis
Debt investor update – Q4 2020 Banking DK: Lower activity due to corona crisis affects income and lending; impairments up, driven by post-model adjustments Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 8,927 9,111 98 2,157 2,289 94
Slide 28: Realkredit Danmark portfolio overview
Debt investor update – Q4 2020 Realkredit Danmark portfolio overview: 73% of new retail lending in Q4 was fixed-rate vs 46% of stock Portfolio facts, Realkredit Danmark, Q4 2020 Retail loans, Realkredit Danmark, Q4 2020 (%) • Approx. 340,000 loans (residential and commercial) Fixed rate (10 yrs-30 y
Slide 29: Banking Nordic: Lending growth in all markets in local currency
Debt investor update – Q4 2020 Banking Nordic: Lending growth in all markets in local currency; impairments driven largely by corona crisis and single names Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 8,105 7,839 103 2,003 2,055 9
Slide 30: Corporates & Institutions: Customer-driven franchise drives income
Debt investor update – Q4 2020 Corporates & Institutions: Customer-driven franchise drives strong increase in income; impairment charges from legacy oil exposure Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 4,029 3,656 110 1,019 1,
Slide 31: Wealth Management: Fee income up 7% in volatile markets
Debt investor update – Q4 2020 Wealth Management: Fee income up 7% in volatile markets, driven mainly by strong performance fees and AuM Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income -285 -248 - -72 -70 - • Fees up 7% driven by stro
Slide 32: Northern Ireland: Corona crisis heavily affected activity levels
Debt investor update – Q4 2020 Northern Ireland: The corona crisis heavily affected activity levels and financial results Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 1,359 1,524 89 324 332 98 • Income down due to lower UK interest
Slide 33: Credit quality: Decreasing NPL trend for the third consecutive quarter
Debt investor update – Q4 2020 Credit quality: Decreasing NPL trend for the third consecutive quarter driven by single-name oil-related exposures Breakdown of core allowance account under IFRS 9 (DKK bn) Core allowance account by business unit (DKK bn) Stage 1 Banking DK Corporates & Institutions Ot
Slide 34: Oil-related exposure: Continued impairments against single names
Debt investor update – Q4 2020 Oil-related exposure: Continued impairments against single-name oil-related exposures in Q4 Key points, 2020 • The offshore segment, in which we see credit deterioration, makes up 38% of the exposure and accounts for 77% of expected credit losses. • Uncertainty continu
Slide 35: Credit exposure: Limited agriculture and directly oil-related exposure
Debt investor update – Q4 2020 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure Oil-related exposure • African Swine Fewer (ASF), which spread to Germany in Q3, • Gross exposure decreased to DKK 17.8 bn from DKK 20.9 bn in continues to cause uncertainty for
Slide 36: Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure
Debt investor update – Q4 2020 Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure Transportation exposure Hotels, restaurant and leisure exposure • Gross exposure* decreased DKK 2.2 bn to DKK 15.6 bn from • Gross exposure increased slightly to DKK 16.1 bn from 15.7
Slide 37: Credit exposure: Limited retailing exposure and stable commercial real estate
Debt investor update – Q4 2020 Credit exposure: Limited exposure to retailing and stable credit quality in commercial real estate Retailing Commercial real estate • Gross exposure increased to DKK 27.1 bn from DKK 26.0 bn in • Gross exposure increased to DKK 331.3 bn from 317.9 bn in Q3 Q3 2020 driv
Slide 38: Non-core: Winding-up is proceeding according to plan
Debt investor update – Q4 2020 Non-core: Winding-up is proceeding according to plan Non-core loan portfolio, Q4 2020 (DKK bn) Non-core REA (DKK bn) Allowance account Non-core conduits etc. Non-performing credit exposure Non-core banking Performing credit exposure 8 7 2 2 5 5 5 2 1 3 3 5 4 1 4 3 1 2
Slide 39: Nordic macroeconomics
Debt investor update – Q4 2020 Denmark Sweden Norway Finland EU Nordic macroeconomics Real GDP, constant prices (index 2005 = 100) Inflation (%) Interest rates, leading (%) Unemployment (%) 38
Slide 40: Nordic macroeconomics
Debt investor update – Q4 2020 Denmark Sweden Norway Finland EU Nordic macroeconomics Current account (surplus+/deficit-); % of GDP Gross public debt; % of GDP Household debt burden; % of disposable income Household interest burden; % of disposable income 39
Slide 41: Nordic housing markets
Debt investor update – Q4 2020 Denmark Sweden Norway Finland Nordic housing markets Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) Apartment prices (index 2005 = 100) Apartment prices/nom. GDP (index 2005 = 100) 40
Slide 42: Resilient property markets and rebound in consumer spending
Debt investor update – Q4 2020 Resilient property markets and rebound in consumer spending; H2 impacted by government support packages C&I lending volume (DKK bn) Consumer spending, Denmark (same weekday 2019 = 100) 230 120 220 110 210 100 200 90 190 80 70 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Feb
Slide 43: 2021 outlook: Net profit expected in the range of DKK 9-11 bn
Debt investor update – Q4 2020 2021 outlook: We expect net profit to be in the range of DKK 9-11 bn We expect total income to be slightly higher than the level in 2020, subject mainly to Total income commercial momentum and broader economic developments Expenses are expected to be no more than DKK 2
Slide 44: Material extraordinary items in 2020
Debt investor update – Q4 2020 Material extraordinary items in 2020 One-off items in 2020 (DKK m) Impact Item P&L line affected (DKKm) Correction of income from bonds held in liquidity portfolio (NII effect) -106 Net interest income Correction of income from bonds held in liquidity portfolio (tradin
Slide 45: Adjusted financial highlights 2020
Debt investor update – Q4 2020 Adjusted financial highlights 2020 Group financial highlights, 2020 (DKK m) Comments Changed Financial Adjusted • As a result of the re-designing of our presentation of highlights 2020 Danica Pension highlights 2020 organisation whereby Wealth Net interest income 21,87
Slide 46: Contacts
Debt investor update – Q4 2020 Contacts Kimberly Bauner Claus Ingar Jensen Head of Group Treasury Head of IR Mobile: +46 73 700 19 39 Mobile: +45 25 42 43 70 E-mail: tagg@danskebank.dk E-mail: clauj@danskebank.dk Bent Callisen Robin Hjelgaard Løfgren Head of Group Funding, Group Treasury Chief IR Of
Slide 47: Disclaimer
Debt investor update – Q4 2020 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,
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