Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2019 Earnings Presentation
33 slides from Danske Bank A/S's earnings presentation, Apr 30, 2019
Slide 1: Financial results – first quarter 2019
Financial results – first quarter 2019 Jesper Nielsen Interim Chief Executive Officer Christian Baltzer Chief Financial Officer 30 April 2019
Slide 2: Agenda
Financial results – first quarter 2019 Agenda 01. Executive summary and recap of the Estonia case 2 02. Group financials and key lines 4 03. Capital 11 04. Financial outlook for full-year 2019 12 05. Q&A 13 06. Appendix 14 1
Slide 3: Executive summary: A difficult start to the year; outlook changed
Financial results – first quarter 2019 Executive summary: A difficult start to the year; outlook changed to include expected gain from sale of Danica Pension Sweden* and lower NII DKK 3.0 bn Net profit, down 39% from Q1 2018 due to lower Loan growth of 3% y/y, driven by growth of NII, higher expense
Slide 4: Recap of the Estonia case
Financial results – first quarter 2019 Recap of the Estonia case Our investigation continues and all findings are shared with relevant authorities through regular updates. Timing of completion is uncertain and subject to dialogue with authorities Ongoing investigations by Danish, Estonian, French an
Slide 5: Net profit: DKK 3.0 bn, down 39% from Q1 2018
Financial results – first quarter 2019 Net profit: DKK 3.0 bn, down 39% from Q1 2018 due to lower NII, higher expenses and higher impairments Income statement and key figures (DKK m) Key points, Q1 2019 vs Q1 2018 Q1 2019 Q1 2018 Index Q4 2018 Index • Return on equity of 7.7% Net interest income 5,5
Slide 6: NII: Down 7% y/y due to margin pressure and higher funding costs
Financial results – first quarter 2019 NII: Down 7% y/y due to margin pressure, higher funding costs and transfer to Non-core Key points Change in net interest income, y/y (DKK m) Y/Y 5,946 165 • NII down 7%, as lending growth of 3% was offset by 326 29 193 74 lower lending margins, higher funding c
Slide 7: NII (cont'd): Solid volume growth at Banking Nordic and Northern Ireland
Financial results – first quarter 2019 NII (cont’d): Solid volume growth at Banking Nordic and Northern Ireland. Positive development at Banking DK Key points Lending volume and development* (DKK billions) • Banking Nordic lending up 7% y/y with growth in Q1 2018 Q1 2019 all markets • Banking DK len
Slide 8: Fee income: Up 3% y/y, due primarily to SEB Pension Danmark
Financial results – first quarter 2019 Fee income: Up 3% y/y, due primarily to the SEB Pension Danmark acquisition Key points Net fee income development, y/y (DKK m) Q1 2018 +3% Q1 2019 Y/Y -13% 3,762 3,869 +48% • Fees up 3%, due primarily to the acquisition of SEB Pension Danmark; AuM up 9% 1,406 0
Slide 9: Trading income: Down 9% y/y but up 38% q/q
Financial results – first quarter 2019 Trading income: Down 9% y/y but up 38% q/q due to less challenging market conditions Key points Group net trading income (DKK m) Y/Y • Trading income down 9% from Q1 2018, reflecting higher -9% negative value adjustments on the derivatives portfolio as well +38
Slide 10: Expenses: Up 9% y/y due to investments and SEB Pension Danmark
Financial results – first quarter 2019 Expenses: Up 9% y/y due to investments and SEB Pension Danmark acquisition Key points Change in expenses, y/y (DKK m) Y/Y 124 • Expenses up 9% y/y, due mainly to investments related to 88 regulatory compliance, AML and digitalisation. 30 49 228 248 174 • Costs
Slide 11: Impairments: Loan loss ratio of 8 bp in core activities in Q1
Financial results – first quarter 2019 Impairments: Loan loss ratio of 8 bp in core activities in Q1 Key points Impairment charges by business unit, Q1 2019 (DKK m) Y/Y • Charge of DKK 357 million; core loan loss ratio of 8 bp − Increased impairments against agricultural exposures, Banking DK +206 l
Slide 12: Capital: Strong capital base; CET1 capital ratio of 16.7%
Financial results – first quarter 2019 Capital: Strong capital base; CET1 capital ratio of 16.7% Capital highlights, Q1 2019 Capital ratios, under Basel III/CRR (%) • Credit risk REA increase due to implementation of IFRS 16, Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 exchange rate effects and lending
Slide 13: 2019 outlook updated: net profit DKK 14-16 bn
Financial results – first quarter 2019 2019 outlook updated: We continue to expect net profit in the range of DKK 14-16 bn, however now including the expected gain on the sale of Danica Pension Sweden of approx. DKK 1.3 bn* Net interest Updated: We now expect net interest income to be lower than the
Slide 14: Q&A session
Financial results – first quarter 2019 Q&A session Press 01 to ask a question Press 02 to cancel Press “Ask a question” in your webcast player Want easy access to all relevant Danske Bank material? Download the Danske Bank MyInvestor app on your iPhone, iPad or Android device! www.danskebank.com/ir
Slide 15: Appendix
Financial results – first quarter 2019 Appendix 01. Business units 15 02. Credit quality 22 03. Macro and portfolio reviews 24 04. Funding, liquidity and ratings 27 05. Tax 30 06. Contact details 31 14
Slide 16: Banking DK: Lending growth of 2% y/y; higher impairments
Financial results – first quarter 2019 Banking DK: Lending growth of 2% y/y; higher impairments Income statement and key figures (DKK m) Key points Q1 2019 Q1 2018 Index Q4 2018 Index Y/Y Net interest income 2,181 2,213 99 2,252 97 • Total income down 4% Net fee income 789 886 89 802 98 • Expenses u
Slide 17: Banking Nordic: Lending growth of 7% y/y but margins squeezed
Financial results – first quarter 2019 Banking Nordic: Lending growth of 7% y/y but higher interest rates squeezed margins Income statement and key figures (DKK m) Key points Q1 2019 Q1 2018 Index Q4 2018 Index Y/Y Net interest income 1,900 1,972 96 2,011 94 • NII down 4% as higher interest rates pu
Slide 18: Lending growth: Banking DK 2% y/y, Banking Nordic 7%
Financial results – first quarter 2019 Lending growth: Growth of 2% y/y at Banking DK, solid growth of 7% at Banking Nordic Comments Banking Nordic: lending volume by segment and country* Banking DK • 83% of lending at Banking DK is at mortgage subsidiary Finland retail Sweden commercial Realkredit
Slide 19: Corporates & Institutions: NII and lending down due to Non-core transfer
Financial results – first quarter 2019 Corporates & Institutions: NII and lending down due to portfolio transfer to Non-core; underlying, NII was stable Income statement and key figures (DKK m) Key points Q1 2019 Q1 2018 Index Q4 2018 Index Y/Y Net interest income 930 1,002 93 954 97 • NII flat adju
Slide 20: Wealth Management: AuM up 9% y/y
Financial results – first quarter 2019 Wealth Management: AuM up 9% y/y, owing mainly to the acquisition of SEB Pension Danmark* Income statement and key figures (DKK m) Key points Q1 2019 Q1 2018 Index Q4 2018 Index Y/Y Net interest income 175 179 98 180 97 • AuM up 9%, owing mainly to the Net fee
Slide 21: Northern Ireland: Lending and NII up y/y despite Brexit uncertainty
Financial results – first quarter 2019 Northern Ireland: Lending and NII up y/y despite continued Brexit uncertainty Income statement and key figures (DKK m) Key points Q1 2019 Q1 2018 Index Q4 2018 Index Y/Y Net interest income 386 364 106 383 101 • Lending and NII up despite continued Net fee inco
Slide 22: Non-core: Portfolio now includes all Baltic and Russian exposure
Financial results – first quarter 2019 Non-core: Portfolio now includes all Baltic and Russian exposure Non-core loan portfolio, Q1 2019 (DKK billions) Non-core REA1 (DKK billions) Allowance account Non-core conduits etc. Non-performing credit exposure Non-core Banking Performing credit exposure 21
Slide 23: Credit quality: NPLs decreased 6% y/y
Financial results – first quarter 2019 Credit quality: NPLs decreased 6% y/y, increase in Q1 reflects single name exposure Breakdown of core allowance account under IFRS 9 (DKK bn) Core allowance account by business unit (DKK billions) Stage 1 Banking DK Corporates & Institutions Northern Ireland 21
Slide 24: Credit exposure: Limited agriculture and directly oil-related exposure
Financial results – first quarter 2019 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (3.0% of Group exposure) Oil-related exposure (0.7% of Group exposure) • Pork prices remained at a very low level, while milk prices weak- • Net exposure decreased to DK
Slide 25: Nordic macroeconomics
Financial results – first quarter 2019 Nordic macroeconomics Denmark Sweden Norway Finland EU Real GDP, constant prices (index 2005 = 100) Inflation (%) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Interest rates, leading (%) Unemployment (%) 2006 2008 2010 2012 2014 2016 20
Slide 26: Nordic housing markets
Financial results – first quarter 2019 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Apartment prices (index 2005 = 100) Apartment prices/nom. GDP
Slide 27: Realkredit Danmark: Portfolio overview
Financial results – first quarter 2019 Realkredit Danmark: Portfolio overview 49% of new retail lending in Q1 was fixed-rate vs 42% of stock Portfolio facts, Realkredit Danmark, Q1 2019 Retail loans, Realkredit Danmark, Q1 2019 (%) • Approx. 358,000 loans (residential and commercial) Fixed rate (10
Slide 28: Funding and liquidity: DKK 51 bn of long-term funding issued in Q1 2019
Financial results – first quarter 2019 Funding and liquidity: DKK 51 bn of long-term funding and capital instruments issued in Q1 2019; LCR compliant at 130% Changes in funding,1 2018-2019 (DKK billions and bp) Long-term funding excl. RD (DKK billions)2 Cov. bonds Senior Non-preferred senior Funding
Slide 29: Funding structure and sources: Danish mortgage system fully pass-through
Financial results – first quarter 2019 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q1 2019 (DKK billions) Funding sources (%) Q4 2018 Q1 2019 2,058 52 52 154 Senior & NPS bonds 1,793 Bank loans 616 909 Deposits Bank mortgages 373
Slide 30: Three distinct methods for rating banks
Financial results – first quarter 2019 Danske Bank’s rating Three distinct methods for rating banks Rating methodology Extra- Anchor Additional Issuer + 1 + 2 + 3 + 4 = SACP = ordinary + ALAC + = SACP1 factors rating support bbb+ +1 +1 -1 0 a- 0 +1 0 A (Negative) 1=Business Position, 2=Capital & Ear
Slide 31: Tax
Financial results – first quarter 2019 Tax Actual and adjusted tax rates (DKK billions) Tax drivers, Q1 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 • The actual tax rate of 25.5% is higher than Profit before tax 4,012 4,444 3,589 5,487 5,802 the Danish rate of 22% due primarily to Permanent non-tax
Slide 32: Contacts
Financial results – first quarter 2019 Contacts Direct — +45 45 12 84 83 Claus Ingar Jensen Mobile — +45 25 42 43 70 Head of IR clauj@danskebank.dk Direct — +45 45 14 07 92 John Bäckman Mobile — +45 30 51 46 85 Chief IR Officer jbc@danskebank.dk Direct — +45 45 13 92 34 Heidi Birgitte Nielsen Mobile
Slide 33: Disclaimer
Financial results – first quarter 2019 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