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

Danske Bank Additional Tier 1 Capital Investor presentation March 2017

Agenda Executive summary 2 Overview of Danske Bank 3 Financial results 5 Capital and regulation 10 Funding, liquidity & rating 14 Transaction 16 Terms & Conditions 17 1

Executive summary: Additional Tier 1 Notes Nature of USD Reg. S benchmark transaction. transaction Structure Perpetual, non-call [7]-year with an equity conversion provision for loss absorption. Trigger The notes will carry a 7% transitional CET1 trigger at both the Bank and Group levels. Significant 11.9% distance to trigger at the Bank level and 8.0% at the Group level (pro forma Q4 Distance to trigger 2016). Distance to MDA Significant distance to MDA restriction and ADI in excess of DKK 100 bn. restriction Expected ratings of BBB - / BB+. the notes (S&P/F) Continued process to achieve efficient capital structure under CRD IV. Rationale Support of the Group’s ratings. Conversion format allows for currency diversification. 2

Overview: Danske Bank has a strong Nordic franchise Danske Bank lending breakdown* Facts 3.4 million customers 272 branches 1 15 countries 19,303 full-time employees Finland Business Units (% of total lending) 8% Norway Sweden Personal Banking (43%) 10% 12% Business Banking (39%) Corporates & Institutions (12%) Denmark Wealth Management (4%) Baltics Northern Ireland 51% Northern Ireland (3%) 3% For divestment Non-core (Ireland & Conduits) Personal banking activities in Estonia 1 . Excluding agricultural centres in Denmark * Total lending before loan impairment charges. Lending by country excludes Corporates & Institutions and Wealth Management, however 3 most of these are Nordic clients.

Strong footprint within retail lending Lending by business unit*; %; Q4 2016 Credit exposure by industry; %; Q4 2016 Personal Banking Wealth Management Personal customers 35 13 Business Banking Northern Ireland Public Institutions 12 Commercial property C&I 6 Non-profit & Associations 4 Industrial Services etc. 4% 3% 4 Consumer discretionary 3 Banks 12% Agriculture 2 2 Other financials 2 Other commercials 43% 2 Consumer staples 2 Energy & Utilities 2 Insurance Materials 2 2 Investment funds 39% 2 Shipping 2 Constr. & building products 1 Health care 1 IT & telecom Total lending of DKK Total credit exposure 1 Transportation 1,712bn of DKK 2,534bn Credit Institutes 0 * Total lending before loan impairment charges 4

Steadily improving financial results Total expenses**; DKK bn Total income; DKK bn Group loan loss ratio; bps RoE after tax*; % 20 13.1 48.0 24.0 23.2 45.6 45.3 22.6 11.6 8.6 0 -1 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 * Before goodwill impairments in 2014 and 2015 **Expenses in 2014 and 2015 have been restated to reflect the organizational changes 5

Executive summary: A satisfactory financial result for 2016 Financial results, 2016 Low economic growth – full year of negative • Net profit of DKK 19.9 bn, up 12% from 2015* interest rates • ROE of 13.1% • Strong capital position, with a CET1 capital ratio of 16.3% Volume growth and stronger client activity • Dividend of DKK 9.0 proposed and further benefited NII and trading income DKK 10 bn share buy-back programme • Net profit for 2017 is expected to be in the range of DKK 17-19 bn** Costs below 2015 level; loan loss ratio of zero driven by improved credit quality 19.9 17.7 13.1 11.6 Customer satisfaction improved further, bringing us to a satisfactory position in most Net profit (DKK bn) ROE (%) markets 2015* 2016 * Before goodwill impairment charges in 2015. ** From the 2016 Annual Report. 6

Net profit: DKK 19.9 bn, up 12% from 2015* Income statement and key figures (DKK m) Key points, 2016 vs 2015 • Return on equity of 13.1% 2016 2015 Index Q4 2016 Q3 2016 Index • Net interest income 22,028 21,402 103 5,790 5,492 105 Total income up 5%, reflecting higher NII, trading income and other Net fee income 14,183 15,018 94 4,032 3,414 118 income Net trading income 8,607 6,848 126 2,323 2,549 91 Other income 3,140 2,343 134 757 589 128 • Income benefited from divesting properties, VISA Europe and Total income 47,959 45,611 105 12,902 12,044 107 Danmarks Skibskredit Expenses 22,642 23,237 97 6,056 5,471 111 Goodwill impairment charges - 4,601 - - - - • Expenses down 3%; cost/income Profit before loan impairment charges 25,317 17,773 142 6,847 6,573 104 ratio of 47.2% Loan impairment charges -3 57 - -160 264 - • Lending volume up 5% Profit before tax, core 25,320 17,716 143 7,007 6,309 111 Profit before tax, Non-core 37 46 80 32 -42 - Key points, Q4 2016 vs Q3 2016 Profit before tax 25,357 17,762 143 7,039 6,267 112 • NII up 5% driven by repricing in Tax 5,500 4,639 119 1,449 1,362 106 Denmark & higher lending volumes Net profit 19,858 13,123 151 5,590 4,905 114 • Fee income up 18% owing to Net profit before goodwill impairments 19,858 17,724 112 5,590 4,905 114 performance fees of DKK 483 m Return on avg. shareholders' equity (%) 13.1 11.6 14.5 12.9 and shadow account of DKK 279 m Cost/income ratio (%)* 47.2 50.9 46.9 45.4 • Expenses up 11% due to Common equity tier 1 capital ratio (%) 16.3 16.1 16.3 15.8 seasonality and severance pay EPS (DKK) 20.2 12.8 158 5.8 5.0 116 • Net reversal despite further oil- 1,689 1,609 105 1,689 1,675 101 Lending (DKK bn) related collective charges 1,631 1,568 104 1,631 1,644 99 Deposits and RD funding (DKK bn) • CET1 capital ratio at 16.3% and 859 817 105 859 872 99 - of which deposits (DKK bn) REA of DKK 815 bn Risk exposure amount (DKK bn) 815 834 98 815 814 100 * Before goodwill impairment charges in 2015. 7

Expenses: Down 3% vs. 2015 level despite upward pressure from regulatory costs Change in expenses (DKK m) Total expenses ex goodwill charge (DKK m) Severance payments 298 320 Deposit guarantee & resolution funds 85 Amortisation of customer relations*** 502 203 Bonuses 347 104 Other costs 10 23,237 22,642 23,972 590 23,237 2015 Staff Severance IT Net of Rent Consul- Depr. Other 2016 720 572 costs pay guarantee tants* intangibles costs 22,642 fund 274 436 893 390 864 Total expenses ex goodwill charge, 2012-2016(DKK m) 403 944 Restated** Reported 867 24,642 23,972 23,794 23,237 1,331 22,642 21,362 21,034 1,410 22,641 20,502 21,827 2014 2015 2016 2012 2013 2014 2015 2016 * Consulting costs were owing mainly to increased regulatory requirements. ** Expenses for 2014 and 2015 are restated to reflect the new Wealth Management unit. *** 2015 charge represents 11 months of amortisation because of a write-down in December 2015. 8

Impairments: Loan loss ratio of zero bp in core activities in 2016 Group impairments,* 2012 to 2016 (DKK bn/bp) Impairment drivers, Q4 2016 vs Q3 2016 • Improved credit quality and reversals at all business units Impairments Loan loss ratio* (rhs) 18 70 except for C&I resulted in a net reversal of DKK 0.2 bn 60 • At Personal Banking, credit quality improved as property 12.5 prices increased & customers refinanced to amortising loans 12 50 • Net reversals at Business Banking largely driven by 40 commercial property customers. Lower new impairments to 5.4 6 30 3.7 the agriculture sector due to improved output prices 20 • Increased collateral values drove net reversals in Wealth 0 10 Management and Northern Ireland -0.1 -0.2 0 • Higher impairments at C&I due to a collective charge of DKK -6 -10 DKK 450 m towards oil-related exposure 2012 2013 2014 2015 2016 Impairments (DKK m) Loan loss ratio,** annualised (bp) 2016 2015 Q4 2016 Q3 2016 2016 2015 Q4 2016 Q3 2016 Personal Banking -7 6 -10 -6 Personal Banking -477 390 -188 -110 Business Banking -235 191 -181 -31 Business Banking -4 3 -11 -2 C&I 27 1 27 42 C&I 1,071 65 282 468 Wealth Management -20 -4 -30 -4 Wealth Management -137 -29 -55 -8 Northern Ireland -47 -121 -20 -54 Northern Ireland -234 -561 -22 -60 Other activities 24 1 137 78 Other activities 9 1 3 5 Total core 0 0 -3 5 Total core -3 57 -160 264 Non-core -69 -38 -136 -33 Non-core -165 -118 -67 -17 Group -1 0 -5 5 Group -168 -61 -227 247 * Incl. Non-core **The loan loss ratio is defined as annualised quarterly impairment charges as a percentage of loans and guarantees. 9