Danske Bank A/s · OMXCOP:DANSKE
Danske Bank A/s — 9M 2009 Earnings Presentation
44 slides from Danske Bank A/s's earnings presentation, Nov 3, 2009
Slide 1: Financial results for the first nine months of 2009
Financial results for the first nine months of 2009 November 3, 2009 Conference call 2.30pm CET Dial-in numbers UK: +44 208 817 9301 DK: +45 70 26 50 40 Webcast available at www.danskebank.com/ir
Slide 2: Agenda
AGENDA Agenda Slide • Key messages 3 • Macroeconomics 4 • Highlights 5 • Business trends 6 • Outlook 18 • Q&A session 19 • Appendix: Trends in focus areas & business units 20 2
Slide 3: Key messages
KEY MESSAGES Key messages - Acceptable result in light of macroeconomic challenges DKK m Quarterly total income 18,000 Other income • Still challenging macroeconomic Net trading income 15,000 Net fee income environment, but indications of more stable Net interest income conditions ahead 12,000 • Net
Slide 4: The macroeconomic environment
MACRO ECONOMICS The macroeconomic environment - Cautious outlook despite signs of stabilisation in sight GDP development Unemployment % - 2009 seems to be the trough Norway % - Rising trend going forward 5 Euroland 20 Denmark Baltics Finland Sweden 0 16 Ireland Ireland -5 Baltics 12 Sweden Euroland
Slide 5: Performance highlights
HIGHLIGHTS Performance highlights - High total income, but net profit low due to impairment charges Income statement and key figures DKK m 9M 2008 9M 2009 Index Q2 2009 Q3 2009 Index Net interest income 19,640 20,759 106 6,907 6,625 96 Net fee income 6,166 5,601 91 1,920 1,918 100 Net trading income
Slide 6: Net interest income
BUSINESS TRENDS Net interest income - Wider lending margins could not offset negative effects NII 6% Y/Y DKK m Quarterly net interest income • 9% Y/Y adjusted for the net cost of Y/Y 4%* 7,500 Q/Q 1%* government hybrid capital * • Improved lending margins * • NII under pressure from 6,500 •
Slide 7: Net interest income, Q3 2009 vs. Q2 2009
BUSINESS TRENDS Net interest income, Q3 2009 vs. Q2 2009 - 4% decrease due to cost of hybrid capital and lower interest rates DKK m Quarterly trend in net interest income 8.000 4% 7.000 74 190 73 100 213 220 6.000 6.907 NII interest rate sensitivity: 6.625 - /+ 25bp in ST rates = - /+ DKK 450m 5.0
Slide 8: Net fee income
BUSINESS TRENDS Net fee income - Downward trend has stopped DKK bn Quarterly net fee income 2,500 Net fee income 9% Y/Y • Activity-based fees down because of lower 2,000 investment fees and lower lending activity • Portfolio-based fees down owing to lower 1,500 asset management fees at Danske Capi
Slide 9: Net trading income
BUSINESS TRENDS Net trading income - Exceptionally high income is the positive side of the crisis Net trading income DKK 16.3bn in 9M 2009 Breakdown of net trading income • Very strong Q1 2009, but gradually declining DKK m Q1 2009 Q2 2009 Q3 2009 because not all drivers are sustainable Trading Acti
Slide 10: Expenses
BUSINESS TRENDS Expenses - Underlying cost base down slightly Expenses 16% Y/Y Expense trend and number of employees • Increase due to DKKm 9M 2008 9M 2009 Index Expenses 18,762 21,723 116 • state guarantee fee Integration expenses 633 245 39 • goodwill impairment Amortisation of intangibles 463 3
Slide 11: Intensified focus on cost management
BUSINESS TRENDS Intensified focus on cost management - Most apparent in decreasing FTEs Trend in number of employees 25,000 Number of employees 6% Y/Y • Reduction of 1,408 FTEs from the peak 24,000 level in Q2 2008 23,000 • Scrutinising external spending • Streamlining the organisation and 22,000
Slide 12: Loan impairment charges
BUSINESS TRENDS Loan impairment charges - Impairment charges still high, but gradually declining from Q4 08 level DKK m Quarterly loan impairment charges Impairment charges DKK 6.2bn in Q3 2009 10,000 173 bp • Impairment charges still declining, although level remains extraordinarily high owing to t
Slide 13: Loan impairment charges and coverage ratio
BUSINESS TRENDS Loan impairment charges and coverage ratio - SMEs still predominate in impairment charges Impairments by customer segment Gross NPL and coverage ratios - SMEs account for most of the Group’s impairments Gross NPL - Coverage ratio incl. collateral above 90% Coverage (DKK bn) ratio (%)
Slide 14: Loan imp. charges – geographical breakdown (1)
BUSINESS TRENDS Loan imp. charges – geographical breakdown (1) - Q3 impairments in Denmark related to shipping, property and farming DKK m DKK m 12,500 Accumulated impairments 117 bp* 3,500 Accumulated impairments186 bp* Denmark Collective 1,479 3,000 Finland 250 10,000 Collective 59% of Group’s len
Slide 15: Loan imp. charges - geographical breakdown (2)
BUSINESS TRENDS Loan imp. charges - geographical breakdown (2) - Ireland and the Baltics account for a large portion of total impairments DKK m DKK m 2,000 7,000 Accumulated impairments 346 bp* Accumulated impairments 749 bp* Northern Ireland 323 6,000 Ireland 1,600 Collective Collective 623 3% of G
Slide 16: Liquidity and new funding
BUSINESS TRENDS Liquidity and new funding - Strong improvement as access to int’l capital markets has eased New funding in Q2 & Q3 / 2009 12-month liquidity* By maturity Moody’s Financial Strength DKK bn DKK bn 30 Q3 2009 450 Q2 2009 20 300 End-Q3 2009 End-Q2 2009 150 End-Q4 2008 10 0 -150 1 week 2
Slide 17: Capital management
BUSINESS TRENDS Capital management - Improving capital ratios Capital ratios – CRD/Basel II Trend in RWA (DKKm) - Strong improvement due to new hybrid capital and reduced assets - Decline in lending drives the reduction % Q4 08 Q1 09 Q2 09 Q3 09 14 Core (tier 1) ratio ex hybrid 8.1 7.9 8.2 8.5 27 14
Slide 18: Outlook
OUTLOOK Outlook - Difficult market conditions will continue ! Challenging macroeconomic climate, with signs of stabilisation ! Loan impairment charges to remain high ! Stable activity level in Q4 2009 ! Q4 2009 combined NII and fees in line with Q3 ! Trading income to recede towards normal level ! I
Slide 19: Q&A session
Q&A SESSION Q&A session Press 1 to ask a question Press “Ask a question” in Press “#” to cancel your webcast player www.danskebank.com/ir www.danskebank.com/ir 19
Slide 20: Appendix
APPENDIX EEE Appendix Danske 20
Slide 21: Lending margins
TRENDS IN FOCUS AREAS Lending margins - Improving trend in all markets % Quarterly lending margins Q3 2008 – Q3 2009 2.5 2.0 1.5 1.0 0.5 0.0 Sweden Note: Danske Bank DK includes Realkredit Denmark lending. 21
Slide 22: Deposit margins
TRENDS IN FOCUS AREAS Deposit margins - Narrowing because of lower short-term rates % Quarterly deposit margins Q3 2008 – Q3 2009 2.0 1.5 1.0 0.5 0.0 -0.5 Sweden 22
Slide 23: Net trading income (2)
TRENDS IN FOCUS AREAS Net trading income (2) - Favourable market conditions % EUR/SEK 12M volatility ticks Bid/offer spreads, 8Y Danish govts - High FX volatility boosts activity - Government bonds have become profitable 20 100 15 75 10 50 5 25 0 0 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Mar-07 Se
Slide 24: Balance sheet trend
TRENDS IN FOCUS AREAS Balance d sheet trend - DKK 246bn asset reduction in 9M 2009 Trend in total assets end of period DKK bn 4,000 Change in 9M 2009 3,000 Other assets +7% Trading & inv. - 21% 2,000 portfolio Banks & repos +8% 1,000 Lending - 5% 0 Total - 7% Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 0
Slide 25: Total credit exposure
TRENDS IN FOCUS AREAS Total credit exposure - Down 2% since year-end Credit exposure from lending activity, end-Q3 2009 (DKK 2,459bn, including DKK 1,881bn in lending and repos) Central and local governments 8% Subsidised housing companies 5% Personal customers Banks 34% 8% Commercial property 10% C
Slide 26: Credit exposure – selected industries (1)
TRENDS IN FOCUS AREAS Credit exposure – selected industries (1) Commercial property and construction Portion Construction Commercial from and building Sector in Agriculture DKK bn property developers materials total Denmark 106.1 1.3 13.4 119.5 DKK bn Finland 17.0 0.8 5.6 22.6 Agriculture 75 Sweden
Slide 27: Credit exposure – selected industries (2)
TRENDS IN FOCUS AREAS Credit exposure – selected industries (2) Transportation and shipping Shipping by sector (%) DKK bn DKKbn Exposure Container Shipping 45 feeder Container Other 2% 1% 4% trans., aviation &insfrastructure Land transp.,aviation, insfrastructure 26 Offshore Transportation and shipp
Slide 28: Gross non-perf. loans – geographical breakdown
TRENDS IN FOCUS AREAS Gross non-perf. loans – geographical breakdown - Trend reflects worsened economic situation bp Gross non-performing loans in basis points of total loans 2,400 2,131 2,000 1,600 1,309 1,200 972 809 800 421 450 400 317 308 167 0 Denmark Finland Sweden Norway Northern Ireland Balt
Slide 29: Denmark: Housing market remains soft
TRENDS IN FOCUS AREAS Denmark: Housing market remains soft - Prices down, but low unemployment and low LTV ratio reduce risk Fall in the Danish house prices from the peak level (%) Region Prices peaked Price fall at Q3 2009 Est. further fall to Q4 2010 Copenhagen Q3 2006 31.5 5.5 Zealand Q3 2007 22.
Slide 30: Credit exposure: Mortgages in Denmark
TRENDS IN FOCUS AREAS Credit exposure: Mortgages in Denmark - Low avg. LTV ratio; arrears limited, but picking up Danish mortgages Breakdown of loans by LTV and rating category Mortgage finance (residential & commercial) • 26 repossessed properties and 4,057 arrears out of End-Q3 417,290 loans at en
Slide 31: Bond portfolio
TRENDS IN FOCUS AREAS Bond portfolio - Safe and highly rated portfolio Bond portfolio (DKK 423bn) Credit bonds 5% Certificates 4% Quasi- government 1% Danish mortgage bonds Swedish 37% covered bonds 20% Other covered bonds 8% Governments & municipals 25% 31
Slide 32: Funding – end-Q3 2009
TRENDS IN FOCUS AREAS Funding – end-Q3 2009 - Well-diversified funding position Equity Central banks 4% 6% Repos Deposits 5% 30% • Well-diversified funding structure Banks, net 5% • 52% deposits and fully match-funded Danish mortgage bonds (net) S-T bonds 10% • Long-term bonds DKK 287bn • DKK 72bn i
Slide 33: Banking Activities Denmark
TRENDS IN BUSINESS UNITS Banking Activities Denmark - High impairment charges and state guarantee fee led to negative result Profit before loan impairment charges 16% DKK bn Trend in lending volume - Improved NII & flat underlying costs, but state guarantee fee weighs (average) DKK m 9M 2008 9M 200
Slide 34: Banking Activities Finland
TRENDS IN BUSINESS UNITS Banking Activities Activities Finland Finland - Adverse macroeconomic situation Profit before loan impairment charges DKK 655m Trend in lending volume DKK bn (average) - Boosted by improving total income and achieved synergies 100 Retail: Y/Y 1% Corporate: Y/Y 2% DKK m
Slide 35: Banking Activities Sweden
TRENDS IN BUSINESS UNITS Banking Activities Sweden - Higher lending margins and improving quarterly trend in impairments Trend in lending volume Profit before loan impairment charges in line with last year DKK bn (average, % -ch. in local currency) - Affected by 11% depreciation of SEK against DKK R
Slide 36: Banking Activities Norway
TRENDS IN BUSINESS UNITS Banking Activities Norway - Earnings held up by strong income growth and flat expenses Profit before loan impairment charges 49% DKK bn Trend in lending volume (average % -ch. in local currency) - Very strong income growth despite 9% NOK depreciation vs. DKK 125 Retail: Y/
Slide 37: Banking Activities Northern Ireland
TRENDS IN BUSINESS UNITS Banking Activities Northern Ireland - Hurt by lower short-term rate, GBP depreciation & higher impairments Profit before loan impairment charges 22% DKK bn Trend in lending volume (average, % -ch. in local currency) -Decreasing NII, lower activity and tight cost control 60
Slide 38: Banking Activities Ireland
TRENDS IN BUSINESS UNITS Banking Activities Ireland - Commercial property market remains frozen Profit before loan impairment charges 6% DKK bn Trend in lending volume - Deposit margin erosion offset by higher lending margins and lower costs Retail: Y/Y 2% (average) Corporate: Y/Y 2% DKK m 9M
Slide 39: Banking Activities Baltics
TRENDS IN BUSINESS UNITS Banking Activities Baltics - Tough macroeconomic environment Profit before loan impairment charges DKK 1.4bn DKK bn Trend in lending volume - Lower income , tight cost control and high loan imp. charges (average) DKK m 9M 2008 9M 2009 Index 20 Retail: Y/Y 4% Corporate: Y
Slide 40: Danske Markets
TRENDS IN BUSINESS UNITS Danske Markets - Exceptionally high income, but gradually falling to normal level Profit before tax at record level Quarterly breakdown of income - Driven by lower ST rates, high volatility and customer activity DKK m 9M 2008 9M 2009 Index DKK m Q1 2009 Q2 2009 Q3 2009 Total
Slide 41: Danske Capital
TRENDS IN BUSINESS UNITS Danske Capital - Income down due to declining assets under management Profit before tax 27% DKK bn AuM – Customer breakdown - Due to lower asset management and investment fees 600 Private equity DKK m 9M 2008 9M 2009 Index Institutional Total income 1,328 1,236 93 400 Expe
Slide 42: Danica Pension
TRENDS IN BUSINESS UNITS Danica Pension - Higher investment return and unit-link result Net income from insurance business Investment returns, YTD DKK m 9M 2008 9M 2009 Index Customers’ funds % Premiums (DKK bn) 16.3 14.3 88 Investment return Investments & liabilities 8.0 Share of technical provisio
Slide 43: Danica's profit model
TRENDS IN BUSINESS UNITS Danica’s profit model – Risk allowance not included – decision postponed to Q4 Profit model Condition / sensitivity 9M 2009 DKK m • No usage of bonus potential • Bonus potential restored, but 809 • Risk allowance 64 bp of 1 technical prov. (DKK169bn) of paid-up policies, ris
Slide 44: Disclaimer
DISCLAIMER Disclaimer 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 or an inducement to enter into investment activity. No part of thi