Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2011 Earnings Presentation
52 slides from Danske Bank A/S's earnings presentation, Aug 9, 2011
Slide 1: Roadshow: Financial results for H1 2011
Roadshow Financial results for H1 2011 Peter Straarup CEO & Chairman of the Executive Board Henrik Ramlau-Hansen CFO & Member of the Executive Board 9 August 2011
Slide 2: Agenda
Financial results for Q2 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 improved because of higher NII and strong trading income
Financial results for Q2 2011 Earnings improved because of higher NII and strong trading income but were limited by one-off expenses Net profit of DKK 1.9 billion in H1 2011 and DKK 1.2 billion in Q2 2011 in line with expectations Net interest income improved in Q2, mainly because of higher deposit
Slide 4: NII improved in Q2 and trading income remained strong
Financial results for Q2 2011 NII improved in Q2 and trading income remained strong Income statement & key figures (DKK m) H1 2010 H1 2011 Index Q1 2011 Q2 2011 Index Net interest income 11,934 11,339 95 5,554 5,785 104 Net fee income 4,208 4,142 98 2,093 2,049 98 Net trading income 5,101 5,420 106
Slide 5: Net interest income up 4% Q/Q on increased deposit margins and one-offs
Financial results for Q2 2011 Net interest income up 4% Q/Q on increased deposit margins and one-offs Quarterly net interest income (DKK m) Quarterly change in net interest income (DKK m) Cost of gov. hybrid NII Q1 11 5,554 +4% RD 48 Deposit margin 145 Lending margin 71 Volume 10 5,927 5,840 6,069 5
Slide 6: Net fee income: Lower activity partly offset by increase in portfolio fees
Financial results for Q2 2011 Net fee income: Lower activity partly offset by increase in portfolio fees 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 performance fees -5% 2,396 800 2,155 2,095 2,
Slide 7: Value at risk and PIIGS exposure remains limited
Financial results for Q2 2011 Value at risk and PIIGS exposure remains limited, trading income driven by derivatives activities in Q2 Breakdown of net trading income (DKK m) Danske Markets income split (%) H1 2010 H1 2011 Index Q1 2011 Q2 2011 Index Bonds & DCM Forex & money market Danske Markets 3,
Slide 8: Net insurance income: Risk allowance from three out of four groups
Financial results for Q2 2011 Net insurance income: Risk allowance from three out of four groups Net income from insurance business (DKK m) Traditionel customers’ funds (%) H1 10 H1 11 Index Q1 11 Q2 11 Index Investment return Investments & liabilities Premiums (bn) 12 14 117 7 7 99 Traditional (ins
Slide 9: Continued focus on expenses
Financial results for Q2 2011 Continued focus on expenses Expenses (DKK m) Quarterly trend in expenses (DKK m) Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q1 11 7,351 Expenses 6,423 6,836 6,294 6,457 7,351 6,678 Integration expenses 46 46 47 45 45 45 Dep. guarantee 555 Amortisation of intangibles 127 126 12
Slide 10: Impairment charges are improving, albeit slowly
Financial results for Q2 2011 Impairment charges are improving, albeit slowly Quarterly loan impairment charges (DKK m) Individual impairments – Group ex Baltics (DKK m) Total impairments Collective impairment charges New Increased Reversals 4,000 6,000 3,000 3,000 2,000 1,000 0 0 71 bp 64 bp 62 bp
Slide 11: Impairment charges driven by SMEs and large corporates in Q2 2011
Financial results for Q2 2011 Impairment charges driven by SMEs and large corporates in Q2 2011 Impairments by customer segment (DKK bn) Net exposures in rating categories 10 and 11 (DKK bn) SMEs Large corporates Personal Financials Rating category 10 Rating category 11 4 40 2.8 3 35 2.1 2 30 1 1.0
Slide 12: Nordic impairments: Denmark is moving sideways
Financial results for Q2 2011 Nordic impairments: Denmark is moving sideways Denmark, 56% of Group’s lending (DKK m) Finland, 9% of Group’s lending (DKK m) 2,254 Allowance* 16,660 m Allowance* 1,890 m Individual 147 bp Individual 117 bp 1,498 Collective 28 bp Collective 12 bp 1,162 84 790 742 26 29
Slide 13: Denmark is dominated by collective impairments against home loans and agriculture
Financial results for Q2 2011 Denmark is dominated by collective impairments against home loans and agriculture Impairments at Retail Denmark, Q2 2011 (DKK m) Debt level and land prices (index 1996=100) Individual Collective Total Price of land Average debt per farm 800 Bank Personal customers 255 4
Slide 14: Other impairments: Northern Ireland and Ireland are still dragging on
Financial results for Q2 2011 Other impairments: Northern Ireland and Ireland are still dragging on Northern Ireland, 3% of Group’s lending (DKK m) Ireland, 4% of Group’s lending (DKK m) Allowance* 3,856 m Allowance* 12,555 m Individual 730 bp Individual 1,731 bp Collective 59 bp Collective 118 bp 1
Slide 15: 2011 funding almost completed, with approximately DKK 10 bn left
Financial results for Q2 2011 2011 funding almost completed, with approximately DKK 10 bn left Funding need (DKK bn) Issued funding, types and duration (DKK bn) Estimated funding needed Pre-funded Issued funding Covered bonds Senior 5-10 11 years 182 10 2-5 20 19 years 11 5-17 years 63 51 2-6 1 year
Slide 16: Strong capital position strengthened further by the share offering
Financial results for Q2 2011 Strong capital position has been strengthened further by the share offering Capital ratios: CRD/Basel II (%) Risk-weighted assets (DKK bn) Total capital Tier 1 Core tier 1 Q1 2011 855 18.8 17.4 Market risk 1 16.6 14.6 Change in lending 8 Solvency need Exposure 3 12.3
Slide 17: Danske Bank passed the European stress test
Banca March 23.5 Irish Life & P OTP Sydbank 13.6 Caisse d’Epargne Nordic peers Danske Bank 13.0 Jyske Bank 12.8 PKO Bank Pohjola Bank 11.6 Financial results for Q2 2011 Rabobank NL SEB 10.5 LB Berlin Dexia Valletta KBC Note: Not all 90 participating banks are shown in the chart. Allied Irish Hypo Re
Slide 18: Realkredit Danmark: Higher OC requirement from Moody's
Financial results for Q2 2011 Realkredit Danmark: Higher OC requirement from Moody’s sharp contrast to DKK 24.8 bn solvency Capitalisation, overcollateralisation (OC) and stress test, end-Q2 2011 (DKK bn) 147.0 +50.0 97.0 +34.1 33 years 62.9 17.0 49.9 45.9 29.0 24.8 4.4 0.4 Solvency Capital base + s
Slide 19: Economic recovery is still modest
Financial results for Q2 2011 Economic recovery is still modest GDP growth, Y/Y (%) Public finances (% of GDP) DK NO SE FI IR BAL Eurozone Gross public debt Budget balance Sovereign rating 8 2010 2011 & outlook (S&P) Denmark 43.7 -4.0 AAA/Stable Sweden 39.7 0.0 AAA/Stable 4 Norway 31.0 13.0 AAA/Stab
Slide 20: Outlook for 2011
Financial results for Q2 2011 Outlook for 2011: Tailwinds will increase net interest income; impairments will remain high but will be lower than in 2010 Macroeconomic recovery continues; rising short-term rates and share offering will favour NII Central bank hikes and increasing margins in Denmark w
Slide 21: www.danskebank.com/ir
Financial results for Q2 2011 www.danskebank.com/ir 21
Slide 22: Appendix
Financial results for Q2 2011 Appendix Tax 23 NII and margin developments 24-26 Credit 27-35 Realkredit Danmark 36-37 Liquidity and funding 38-39 Business areas 40-51 22
Slide 23: Adjusted tax rate close to normal
Financial results for Q2 2011 Adjusted tax rate close to normal, but actual rate fluctuates owing to Ireland and one-offs Explanation of tax rate (DKK m) Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Pre-tax profit 1,741 1,870 1,448 1,499 2,081 Pre-tax loss, BA Ireland 1,553 942 1,119 1,204 1,780 Permanen
Slide 24: Net interest income development
Financial results for Q2 2011 Net interest income development Net interest income (DKK m) Net interest income in Realkredit Danmark (DKK m) 2009 2010 2011 H1 10 11,934 635 RD 72 Deposit margin 595 Lending margin 569 355 Volume 277 One-offs 143 270 247 Equity 217 170 Allocated funding 235 128 132 100
Slide 25: Net interest margins by business unit
Financial results for Q2 2011 Net interest margins by business unit Denmark Norway Finland N. Ireland Baltics CIB Sweden Ireland Group Net interest margins, NII/loan stock (%) 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 2009 figures are not comparable wi
Slide 26: Deposit and lending margins
Financial results for Q2 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 (%) 1.19 0.41 Q310 1.17 0.47 Q410 Denmark* 1.13 0.63 1.11 0.71 Q111 0.75 0.24 Q211 0.72 0.29 Finland
Slide 27: Impairments
Financial results for Q2 2011 Impairments Impairments distributed by segment (%) Impairments, reversals and write-offs (DKK m) SMEs CRE Personal Financials Large corp. Allowance end-2007 4,900 69 Gross impairments 81,968 37 30 29 Reversals 20,643 16 17 8 Write-offs 21,626 4 4 Allowance end-Q2 2011 4
Slide 28: Commercial property exposure
Financial results for Q2 2011 Commercial property exposure Unsecured Value of collateral Collective impairments Individual impairments Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) 115.1 NPL 11 % 20.9 NPL 75 % 10.4 NPL 36 % 2.7 NPL 42 % 1.5 4.9 35.0 15.6 2.6 2.0 8.3 6.
Slide 29: Credit exposure to commercial property and construction segments
Financial results for Q2 2011 Credit exposure to commercial property and construction segments Credit exposure broken down by business unit, Q2 2011 (DKK bn) Commercial Developer subsegment Construction and Sector property of commercial property building materials in total Denmark 114.0 0.7 6.1 120.
Slide 30: Residential mortgage exposure
Financial results for Q2 2011 Residential mortgage exposure Unsecured Value of collateral Collective impairments Individual impairments Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) NPL 1 % NPL 5 % NPL 1 % NPL 15 % 506.0 25.1 14.2 12.1 1.0 2.0 90.0 4.6 10.4 20.3 12.3 4
Slide 31: House prices
Financial results for Q2 2011 House prices Danish house prices by region (%) House prices and consumption – Denmark (DKK) House price per sq m Consumption, bn (rha) Region Prices Change Change in Preview* peaked since peak Q4 10 H1 11 16,000 200 Copenhagen Q3 2006 -19.4 1.3 Zealand Q2 2007 -24.1 -3.
Slide 32: Danish agricultural sector
Financial results for Q2 2011 Danish agricultural sector Breakdown of loan portfolio (%) Agricultural exposure and allowance (DKK bn) Business unit Exposure Allowance Coverage Realkredit Danmark 44.7 0.1 0.1% Retail Banking Denmark 9.7 2.0 17.1% Other Other business units 14.6 0.3 2.0% 13 Total expo
Slide 33: Upgrades/rating changes ratio in the Nordic countries
Financial results for Q2 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 > upgrades 0 2009
Slide 34: Gross exposure subject to individual impairment test
Financial results for Q2 2011 Gross exposure subject to individual impairment test Gross exposure in rating categories 10 and 11 (bp) Q3 10 Q4 10 Q1 11 Q2 11 4,000 3,861 3,000 2,000 1,924 1,364 1,000 776 593 454 403 362 287 165 0 Denmark Finland Sweden Norway Northern Ireland Baltics CIB Other Act.
Slide 35: Economic climate in Denmark is still lagging the other Nordics
Financial results for Q2 2011 Economic climate in Denmark is still lagging the other Nordics Business confidence indicator (index 1996=100) Bankruptcies (index 1996=100) Denmark Sweden Finland 140 500 400 120 300 100 200 80 100 60 0 1996 2000 2004 2008 2012 1996 2004 2011 Note: Indexes are seasonall
Slide 36: Mortgage bonds at Realkredit Danmark
Financial results for Q2 2011 Mortgage bonds at Realkredit Danmark Facts, end-Q2 2011 Breakdown of loans by LTV and rating, end-Q2 2011 (%) • 164 repossessed properties and 3,262 arrears out of LTV/rating 1-3 4-7 8-11 Total 405,521 loans ( 0.8%) 0-20 8.1 23.4 4.3 35.8 • 1% of loans with LTV > 80 % a
Slide 37: No change in spread on RD mortgage bonds
Financial results for Q2 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 04/01/2012 RD 4.0 A 10/01/2041 NDA 2.0 04/01/2012 NDA 4.0 A 10/01/2041 NYK 4.0 04/01/2012 NYK 4.0 A 10/01/
Slide 38: Liquid, highly rated bond portfolio
Financial results for Q2 2011 Liquid, highly rated bond portfolio Bond portfolio of DKK 459 bn (%) 12-month liquidity,* end of period (DKK bn) Q4 2008 Q4 2010 Q2 2011 300 Credit bonds Commercial paper Other Quasi-government covered 2 2 4 bonds Swedish 5 200 covered bonds Danish 12 mortgage 41 bonds
Slide 39: Well-diversified funding position
Financial results for Q2 2011 Well-diversified funding position Funding position (%) Funding sources (%) Q4 08 Q2 11 40 Central banks Subordinated debt Equity 3 30 4 5 Banks, net 5 Deposits 20 33 S-T bonds 5 10 Covered bonds 5 0 Short-term bonds Due to credit inst. Mortgage finance Shareholders’ eq.
Slide 40: Retail Banking Denmark
Financial results for Q2 2011 Retail Banking Denmark: Drop in expenses more than compensates for 7 % decline in NII Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate 0% Net interest income 6,393 5,918 93 Net fee income 1,703 1,631 96 0% Other income 478
Slide 41: Retail Banking Finland
Financial results for Q2 2011 Retail Banking Finland: 3 % increase in total income more than offset by increasing expenses Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 1,006 1,002 100 +3% Net fee income 495 501 101 +6% Other inc
Slide 42: Retail Banking Sweden
Financial results for Q2 2011 Retail Banking Sweden: 20 % increase in NII driven by higher deposit margins Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 968 1,158 120 +9% Net fee income 299 304 102 +16% Other income 84 112 133 96
Slide 43: Retail Banking Norway
Financial results for Q2 2011 Retail Banking Norway: Profit before tax fell by half owing to high impairments in Q1 2011 and squeezed mortgage margins Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate -3% Net interest income 856 760 89 Net fee income 15
Slide 44: Banking Activities Northern Ireland
Financial results for Q2 2011 Banking Activities Northern Ireland: Rise in loan impairment charges Income statement (DKK m) Trend in lending volume* (DKK bn) H1 2010 H1 2011 Index Retail Corporate -10% Net interest income 602 548 91 Net fee income 150 151 101 -5% Other income 54 72 133 29 30 28 28 2
Slide 45: Banking Activities Ireland
Financial results for Q2 2011 Banking Activities Ireland: Negative result driven by large loan impairment charges Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 548 456 83 -10% Net fee income 55 31 56 -6% Other income 25 23 92 45
Slide 46: Banking Activities Baltics
Financial results for Q2 2011 Banking Activities Baltics: Reversal of impairments compensates for declining profit Income statement (DKK m) Trend in lending volume (DKK bn) H1 2010 H1 2011 Index Retail Corporate Net interest income 249 240 96 -17% Net fee income 76 71 93 -8% Other income 56 48 86 To
Slide 47: Corporate & Institutional Banking
Financial results for Q2 2011 Corporate & Institutional Banking: Pressure on lending margins is easing and profit trend is positive Income statement (DKK m) Trend in lending volume, average (DKK bn) H1 2010 H1 2011 Index -8% Net interest income 921 952 103 111 107 103 101 102 Net fee income 528 437
Slide 48: Danske Markets
Financial results for Q2 2011 Danske Markets: Strong first half of the year driven by high customer activity Income statement (DKK m) Market position in the Nordics (rank) H1 2010 H1 2011 Index Product area Denmark Sweden Norway Finland Fixed income 2 1 3 3* Total income 4,570 4,576 100 Forex 2 4 4
Slide 49: Danske Capital
Financial results for Q2 2011 Danske Capital: Rise in income and reversed impairments outweigh higher expenses Income statement (DKK m) AuM – customer breakdown (DKK bn) H1 2010 H1 2011 Index Private equity Institutional Retail* Life insurance Net interest income 69 55 80 590 602 598 603 558 12 12 N
Slide 50: Danica Pension: Risk allowance
Financial results for Q2 2011 Danica Pension: Risk allowance for three out of four groups, but increasing interest rates puts “high” group in shadow account Income statement (DKK m) Investment allocation for Danica Traditional, end-Q2 2011(%) H1 2010 H1 2011 Index Equities Bonds Credit bonds Propert
Slide 51: Danica Pension's profit model
Financial results for Q2 2011 Danica Pension’s profit model Profit model Condition/ sensitivity H1 2011 DKK m 1 Danica Traditional. Mainly risk No usage of bonus potential of Mainly risk allowance 547 allowance 69 bp of technical paid-up policies and sufficient + prov. (DKK 171 bn) investment income
Slide 52: Disclaimer
Financial results for Q2 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 the United States,