Danske Bank Additional Tier 1 Capital Investor Presentation - PowerPoint PPT Presentation

Danske Bank Additional Tier 1 Capital Investor Presentation February 2015

Financial results for Q1 2013 Agenda Executive summary 3 Overview 6 Financial results 9 Capital, liquidity & funding 14 New issue 19 Q & A 27 2

Financial results for Q1 2013 Executive summary: Danske Bank in brief Macro-economic Operates principally in AAA rated Northern European countries: the largest Danish commercial operating bank with a strong footprint across the Nordic space environment Diversified Diversified business position by line of business and country business model Profit Net profit before goodwill impairments of DKK 12.9 bn, corresponding to ROE of 8.5% Significant improvement in impairments. Loan loss ratio for 2014 of 15 bp for core activities Impairments and 20 bp for the entire Group Capital Danske Bank Group CET1 ratio of 15.1% and total capital ratio of 19.3% as of YE2014 Funding and Robust funding model with LCR of 129% as of YE2014 liquidity The Board of Directors is proposing a dividend of DKK 5.5 per share and has decided to initiate a Dividend share buy-back programme of DKK 5 bn in 2015 Solid rating Moody’s A3 (stable) / S&P A (negative) / Fitch A (stable) position 3

Financial results for Q1 2013 Executive summary: Additional Tier 1 Notes Nature of EUR RegS benchmark transaction transaction Structure Perpetual, non-call [7] with temporary write-down conditions Trigger The notes will carry 7 % transitional CET1 trigger at both the Bank and Group level Distance to trigger Significant 12.1% distance to trigger at the Bank level and 8.1% at the Group level Distance to MDA Significant distance to MDA restriction restriction Expected rating of BB+ / BB+ the notes (S/F) Continued normalisation of capital structure to be efficient under CRD IV. 7.0% trigger allows for recognition in relation to Pillar II requirements. Rationale Adjust capital structure to optimise efficiency in relation to rating agencies. Supports total capital ratio in light of announced dividend and share buyback. 4

Financial results for Q1 2013 Agenda Executive summary 3 Overview 6 Financial results 9 Capital, liquidity & funding 14 New issue 19 Q & A 27 5

Financial results for Q1 2013 Overview: Danske Bank has a strong Nordic franchise Facts Danske Bank market share** 3.7 million customers 329 branches* 15 countries 18,478 full-time employees Finland Business units Sweden 10% Personal Banking 5% Estonia Norway Business Banking Corporates & Institutions 7% 5% Latvia Danica Pension Northern Danske Capital Ireland 2% Denmark Lithuania 19% 27% Non-core 6% Non-core (Ireland & Conduits) Personal banking activities in the Baltics * Excluding agricultural centres in Denmark. 6 **Market share by lending Q4 2014

Financial results for Q1 2013 Nordic footprint across sectors Lending in Personal and Business Banking , Q4 2014 (%) Credit exposure by industry, Q4 2014 (%) 37 Personal customers Denmark 57 Commercial property 12 9 Other 6 Non-profit & Associations 9 Finland 5 Investment funds 4 Public institutions 11 Sweden 4 Other financials 4 Banks 8 4 Norway Industrial Services etc Agriculture 3 Consumer 3 3 N. Ireland 2 Insurance 2 Other commercial 1 Baltics 2 Energy & Utilities 2 Shipping Constr. & building products 2 Total lending of Total credit exposure C&I 11 DKK 1,564 bn of DKK 2,268 bn 1 Credit Institutes 7

Financial results for Q1 2013 Agenda Executive summary 3 Overview 6 Financial results 9 Capital, liquidity & funding 14 New issue 19 Q & A 27 8

Financial results for Q1 2013 Net profit: DKK 12.9 bn,* up 82% from 2013 Income statement & key figures (DKK m) Key points, 2014 vs 2013 • Return on equity improved from 2014 2013 Index Q4 2014 Q3 2014 Index 5.0% to 8.5% before goodwill Net interest income 23,107 22,077 105 5,880 5,976 98 impairments Net fee income 10,491 9,468 111 2,966 2,640 112 • Total income up 10%, with gains in Net trading income 6,562 5,799 113 977 1,525 64 all income lines Other income 1,344 1,308 103 366 304 120 • Insurance income improved owing Net income from insurance business 2,362 1,088 217 1,032 488 211 Total income 43,866 39,740 110 11,221 10,933 103 to booking of full risk allowance and Expenses 22,641 23,794 95 6,090 5,530 110 part of the shadow account Goodwill impairment charges 9,099 - - 9,099 - - • Expenses down 5% Profit before loan impairment charges 12,126 15,947 76 -3,968 5,403 - • Impairments down 32% Loan impairment charges 2,788 4,111 68 853 668 128 Profit before tax, core 9,338 11,836 79 -4,821 4,735 - Key points, Q4 14 vs Q3 14 Profit before tax, Non-core -1,503 -1,777 - -477 -232 - Profit before tax 7,835 10,059 78 -5,298 4,503 - • NII decreased slightly, owing Tax 3,989 2,944 135 987 1,231 80 primarily to currency effects Net profit 3,846 7,115 54 -6,285 3,272 - • Fee income up 12% from higher Net profit before goodwill impairments 12,945 7,115 182 2,814 3,272 86 activity and performance fees at Danske Capital Return on avg. shareholders' equity (%) 2.4 5.0 -16.9 8.5 • Insurance income includes booking ROE before goodwill impairments (%) 8.5 5.0 7.1 8.5 of DKK 0.6 billion from the shadow Cost/income ratio* 51.6 59.9 54.3 50.6 account Common equity tier 1 capital ratio (%) 15.1 14.7 15.1 15.0 EPS 3.6 7.1 -6.4 3.2 • Expenses up 10% owing mainly to 1,564 1,537 102 1,564 1,582 99 Lending (DKK bn) restructuring charges and 763 776 98 763 761 100 Deposits (DKK bn) seasonality * Before goodwill impairment charges. 9

Financial results for Q1 2013 Expenses: Reduced by 5% in 2014 as a result of continued cost-efficiency measures Total Group expenses ex goodwill charge (DKK m) Change in expenses ex goodwill (DKK m) Consultants etc. Bonuses Severance payments Write-down on Sampo name 2013 23,794 Deposit scheme guarantee / bank packages Other costs 23,958 23,794 Staff costs 197 659 780 470 22,641 694 629 Severance 542 104 931 590 payments 901 873 464 762 826 Office expenses 281 Property, 105 rent etc. 20,835 20,627 19,810 Consultants etc. 239 Other costs 227 2014 22,641 2012 2013 2014 10

Financial results for Q1 2013 Impairments: Loan loss ratio for 2014 of 15 bp for core activities and 20 bp for the entire Group Group impairments, 2008 to 2014 (DKK bn/bp) Impairments (DKK m) Impairments Loan loss ratio* (rhs) 2014 2013 Index Q414 Q314 Index Personal Banking 1,412 1,887 75 517 342 151 10 180 173 Business Banking 1,007 1,751 58 161 342 47 C&I 372 473 79 177 -15 - 9 Other activities -2 - - -2 - - 150 Total core 2,788 4,111 68 853 668 128 8 Non-core 930 1,309 71 413 137 - Group 3,718 5,420 69 1,266 805 157 7 120 6 99 5 90 Loan loss ratio, annualised (bp) 4 2014 2013 Index Q414 Q314 Index Personal Banking 17 22 77 25 17 147 60 3 Business Banking 17 27 63 11 22 50 C&I 7 9 78 13 -1 - 33 2 Total core 15 21 71 18 14 129 27 30 Non-core 218 251 87 388 143 271 1 11 Group 20 27 74 27 17 159 0 0 Q408 Q409 Q410 Q411 Q412 Q413 Q414 * The loan loss ratio is defined as annualised impairment charges as a percentage of loans and guarantees. 11

Financial results for Q1 2013 Bridge to above 12.5% ROE in 2018 with unchanged macro, CET1 ratio of around 14% and capital management actions Change in ROE (%, after tax) Comments (Q4 presentation for assumptions) ROE target of above 12.5% in 2018 at the latest • Interest rates as per end 2014 ROE 2015E* 9.5% • Low growth and low credit demand Costs Costs 0.5-1% • Efficiencies to mitigate cost inflation (2%) and increasing payroll tax, one-off saving from Sampo-related amortisation charge ending in 2017 Funding & ratings 0.5-1% Funding & ratings • Assumes maturing funding refinanced at current prices. Further, assumes improved credit rating Volume effect 0.5-1% Volume growth • 2% loan growth and 2% non-NII growth Income initiatives 0.5% Income initiatives • Danske Capital and Danica income growth • Pricing optimisation Loan losses 0.5-1% & other Loan losses & other • Lower loan losses, including Non-core exit Capital effect 0.5% Capital • Higher nominal equity in 2018 net of effect of capital management ROE 2018E Above 12.5% * Based on our external 2015 ROE target of 9% adjusted for the goodwill write-down of DKK 9.1 bn. 12

Financial results for Q1 2013 Agenda Executive summary 3 Overview 6 Financial results 9 Capital, liquidity & funding 14 New issue 19 Q & A 27 13