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 &
Investor presentation March 2017
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Executive summary Overview of Danske Bank Financial results Capital and regulation Funding, liquidity & rating Transaction 2 3 5 10 14 16 Terms & Conditions 17
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Nature of transaction USD Reg. S benchmark 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. Distance to trigger Significant 11.9% distance to trigger at the Bank level and 8.0% at the Group level (pro forma Q4 2016). Distance to MDA restriction Significant distance to MDA restriction and ADI in excess of DKK 100 bn. Expected ratings of the notes (S&P/F) BBB - / BB+. Rationale Continued process to achieve efficient capital structure under CRD IV. Support of the Group’s ratings. Conversion format allows for currency diversification.
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1 .Excluding agricultural centres in Denmark * Total lending before loan impairment charges. Lending by country excludes Corporates & Institutions and Wealth Management, however
most of these are Nordic clients.
Danske Bank lending breakdown* For divestment Non-core (Ireland & Conduits) Personal banking activities in Estonia Facts 3.4 million customers 272 branches1 15 countries 19,303 full-time employees Business Units (% of total lending) Personal Banking (43%) Business Banking (39%) Corporates & Institutions (12%) Wealth Management (4%) Northern Ireland (3%)
Northern Ireland
Denmark Norway Sweden Finland
Baltics
3%
51% 10% 12% 8%
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Lending by business unit*; %; Q4 2016 Credit exposure by industry; %; Q4 2016 1 1 1 2 2 2 2 2 2 2 2 2 2 3 4 4 6 12 13 35 Consumer staples Other commercials Other financials Agriculture Banks Consumer discretionary Industrial Services etc. Credit Institutes Transportation IT & telecom Health care
Shipping Investment funds Materials Insurance Energy & Utilities Non-profit & Associations Commercial property Public Institutions Personal customers
Total lending of DKK 1,712bn Total credit exposure
4% 3% 12% 39% 43% Business Banking Wealth Management Northern Ireland C&I Personal Banking
* Total lending before loan impairment charges
5 * Before goodwill impairments in 2014 and 2015 **Expenses in 2014 and 2015 have been restated to reflect the organizational changes
Total income; DKK bn Total expenses**; DKK bn Group loan loss ratio; bps RoE after tax*; % 2016 13.1 2015 11.6 2014 8.6 2016 22.6 2015 23.2 2014 24.0
20 2016 2015 2014 2016 48.0 2015 45.6 2014 45.3
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Low economic growth – full year of negative interest rates Costs below 2015 level; loan loss ratio of zero driven by improved credit quality Volume growth and stronger client activity benefited NII and trading income Customer satisfaction improved further, bringing us to a satisfactory position in most markets
ratio of 16.3%
DKK 10 bn share buy-back programme
range of DKK 17-19 bn** 19.9 17.7 ROE (%) 13.1 11.6 Net profit (DKK bn) 2016 2015*
Financial results, 2016
* Before goodwill impairment charges in 2015. ** From the 2016 Annual Report.
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Key points, 2016 vs 2015
Income statement and key figures (DKK m)
higher NII, trading income and other income
properties, VISA Europe and Danmarks Skibskredit
ratio of 47.2%
Key points, Q4 2016 vs Q3 2016
Denmark & higher lending volumes
performance fees of DKK 483 m and shadow account of DKK 279 m
seasonality and severance pay
related collective charges
REA of DKK 815 bn
2016 2015 Index Q4 2016 Q3 2016 Index Net interest income 22,028 21,402 103 5,790 5,492 105 Net fee income 14,183 15,018 94 4,032 3,414 118 Net trading income 8,607 6,848 126 2,323 2,549 91 Other income 3,140 2,343 134 757 589 128 Total income 47,959 45,611 105 12,902 12,044 107 Expenses 22,642 23,237 97 6,056 5,471 111 Goodwill impairment charges
25,317 17,773 142 6,847 6,573 104 Loan impairment charges
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264
25,320 17,716 143 7,007 6,309 111 Profit before tax, Non-core 37 46 80 32
25,357 17,762 143 7,039 6,267 112 Tax 5,500 4,639 119 1,449 1,362 106 Net profit 19,858 13,123 151 5,590 4,905 114 Net profit before goodwill impairments 19,858 17,724 112 5,590 4,905 114 Return on avg. shareholders' equity (%) 13.1 11.6 14.5 12.9 Cost/income ratio (%)* 47.2 50.9 46.9 45.4 Common equity tier 1 capital ratio (%) 16.3 16.1 16.3 15.8 EPS (DKK) 20.2 12.8 158 5.8 5.0 116 Lending (DKK bn) 1,689 1,609 105 1,689 1,675 101 Deposits and RD funding (DKK bn) 1,631 1,568 104 1,631 1,644 99
859 817 105 859 872 99 Risk exposure amount (DKK bn) 815 834 98 815 814 100
* Before goodwill impairment charges in 2015.
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864 867 944 436 403 720 893 590 572 274 390 23,237 20,502 2014 23,972 21,362 2016 22,642 21,034 2015
* 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.
Total expenses ex goodwill charge, 2012-2016(DKK m) Total expenses ex goodwill charge (DKK m)
Other costs Bonuses Amortisation of customer relations*** Deposit guarantee & resolution funds Severance payments 320 298 502 203 347 Rent 104 Net of guarantee fund IT 85 Severance pay Staff costs 2015 23,237 2016 22,642 Other costs 10 Depr. intangibles Consul- tants*
Change in expenses (DKK m)
2016 22,642 2015 23,237 21,827 1,410 2014 23,972 22,641 1,331 2013 23,794 2012 24,642 Reported Restated**
9 * Incl. Non-core **The loan loss ratio is defined as annualised quarterly impairment charges as a percentage of loans and guarantees.
Group impairments,* 2012 to 2016 (DKK bn/bp) Impairment drivers, Q4 2016 vs Q3 2016 Loan loss ratio,** annualised (bp) Impairments (DKK m)
except for C&I resulted in a net reversal of DKK 0.2 bn
prices increased & customers refinanced to amortising loans
commercial property customers. Lower new impairments to the agriculture sector due to improved output prices
Management and Northern Ireland
DKK 450 m towards oil-related exposure
18 12 6
70 60 50 40 30 20 10
5.4 2012 12.5 2016
2015
2014 3.7 2013 Loan loss ratio* (rhs) Impairments 2016 2015 Q4 2016 Q3 2016 Personal Banking
390
Business Banking
191
C&I 1,071 65 282 468 Wealth Management
Northern Ireland
Other activities 9 1 3 5 Total core
57
264 Non-core
Group
247 2016 2015 Q4 2016 Q3 2016 Personal Banking
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Business Banking
3
C&I 27 1 27 42 Wealth Management
Northern Ireland
Other activities 24 1 137 78 Total core
5 Non-core
Group
5
10 10
Capital ratios, under Basel III/CRR (%) Estimated capital buffer structure, %
2016 reported 21.8 16.3 21.0 16.1 2.4 18.7 15.0 1.7 Regulatory requirement** 16.6 16.2 1.7 2.0 10.5 1.5 2016 pro forma* 2.8 2.7 2015 reported 2.0 2016 fully loaded 19.9 2.5 CET1 Pillar II component (total 2.7%) Hybrid T1/AT1 Tier 2
* Pro forma fully loaded, adjusted for share buy-back of DKK 10 bn to take effect in Q1 2017. ** Pro forma fully phased-in reg. requirement in 2019. *** Assuming REA equal to Q4 2016, CET1 target of min. 14% (target range 14%-15%) and that reg. requirements are met by relevant capital instruments. Under current Danish rules, Pillar II does not count towards automatic MDA .
18 16 14 12 10 8 6 4 2 1.2 0.4 14.0 7.0 16.3 10.5 9.3 4.5 0.6 1.8 2019E 4.5 3.0 2.5 1.3 2018E 4.5 2.4 1.9 0.5 0.5 8.0 0.5 2016A 6.7 4.5 2017E Countercyclical capital buffer CET1 trigger point 7% CET1 (Q4 2016) 16.3% CET1 target (minimum 14%) CET1 min req. Systemic risk buffer Capital conservation buffer
7.0 6.0 4.7 3.5
Sliding scale of restrictions MDA buffer***
2.7 2.0 12.0
11 11 * On June 30 2016, Danske Bank Group stopped consolidating Danmarks Skibskredit A/S and LR Realkredit A/S for the purpose of regulatory capital. This lead to a drop in CET1 of DKK 3 bn and a simultaneous drop in REA of DKK 16.2 bn.** Before goodwill impairment charges *** Based on year-end communicated distributions
ratio has doubled from 8.1% to 16.3% from 2008 until today
DKK 48.5 bn back to the shareholders while maintaining a strong CET1 ratio
provide a prudent cushion to its CBR to mitigate against the risk of distribution restrictions under CRD IV
133 134 130 126 119 107 85 79 77 2012 2011 2010 2009 2008 +DKK 56 bn 2016* 2015 2014 2013
REA, CET1, profit and distribution (DKK bn, %) Common Equity Tier 1, 2008 – 2016; DKK billion Key points
2008 2009 2010 2011 2012 2013 2014 2015 2016 REA 960 834 844 906 819 852 865 834 815 CET1 ratio 8.1% 9.5% 10.1% 11.8% 14.5% 14.7% 15.1% 16.1% 16.3% Net profit** 1.0 1.7 3.7 1.7 4.7 7.1 13.0 17.7 19.9 Distributed to shareholders 5.9 2.0 10.5*** 17.1*** 18.9*** Total assets 3,544 3,098 3,214 3,424 3,485 3,227 3.453 3,293 3,484
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Source: Company Interim Reports (Q4 16) / Danske Bank Source: EBA 2016 EU-wide stress test results (July)
EBA Stress Tests: Impact of Adverse Scenario (2018 Adverse vs 2018 Baseline) CET1 ratios vs regulatory requirements (in percent of REA)
12.0 4.2 16.2 16.3
Danske
14.7 1.3 16.0 16.0 17.4 1.0 18.4 18.4 11.8 5.2 17.0 17.1 11.8 2.4 14.2 14.1 12.0 1.6 13.6 13.6 10.3 1.2 11.5 11.6
DNB Nordea ABN Amro ING Groep Lloyds** BNP
20% 15% 10% 5% 0%
BNP 6%-p
Lloyds 9%-p
ING Groep 8%-p
ABN AMRO 21%-p
SEB 20%-p
Nordea 12%-p
DNB
Danske 3%-p
Impact on RWAs Impact on CET1 ratio
18.8 18.8 18.1 0.7
SEB
Excess capital Q416 fully loaded Q416 reported Regulatory requirement*
* Pro-forma 2019 CET1 requirements with fully loaded combined buffer. ** Assuming systemic risk buffer of 2.5%.
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Own funds and senior unsecured* (% of REA) MREL requirements in Denmark (preliminary)
proposal to harmonise the TLAC standard and MREL.
the end of 2017.
Volume:
arrangements with the industry. Details are yet to be disclosed.
EBA guidelines (not accounting for the proposed changes to the BRRD), i.e.,
Type of instrument:
requirements for MREL and the FSA has said that it wishes to conform with any emerging European standard. With appropriate transitional arrangements, our relatively short senior maturity profile leaves ample flexibility to refinance into a new eligible instrument. Senior maturity profile* (DKK bn) Q4 2016 19.9 4.5 37.4 13.0 Own funds Senior <1Y Senior >1Y
34 2024 2021 2 8 2023 2017 2022 2019 37 24 2026 16 2020 21 2018 2025
* Includes structured notes.
14 14 * Spread over 3M EURIBOR.
158 137 136 124 125 100 Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015
26 35 37 34 16 21
2020: DKK 65 bn
57bp 27bp
2019: DKK 55 bn
34bp 57bp
2018: DKK 71 bn
40bp 41bp
Senior
70 64 39 85 2017E 70-90 2016 2015 2014 2013 Completed Funding plan
17 30 19 37 33
New 2016: DKK 85 bn
48bp 26bp 63
Redeemed 2016 DKK: 63 bn
96bp 93bp
Redemptions 2017: DKK 66 bn
82bp 50bp
Senior
Maturing funding,* 2018–2020 (DKK bn and bp) Changes in funding,* 2016 (DKK bn and bp) Long-term funding ex RD (DKK bn) Liquidity coverage ratio (%)
15 15
Moody’s (Pos) S&P (Stable) Fitch (Stable) Aaa AAA AAA Aa1 AA+ AA+ Aa2 AA AA Aa3 AA- AA- A1 A+ A+ A2 A A A3 A- A- Baa1 BBB+ BBB+ Baa2 BBB BBB Baa3 BBB- BBB- Ba1 BB+ BB+ Ba2 BB BB … … … Ca D D
Senior unsecured Tier 2 Additional Tier 1
Investment grade Speculative grade S&P Global upgrades SACP rating
Alone Credit Profile) rating from ‘a-’ to ‘a’ as a result of Danske Bank’s improved capitalisation. Moody’s upgrades Danske Bank’s deposit rating – outlook changes to positive
long-term deposit rating to A1 from A2 and affirmed all
positive from stable on Danske Bank’s ratings.
improvements in financial metrics to date and the expectation of a continuation of the positive trend. Rating affirmed by Fitch
with a stable outlook. The asset quality and profitability score were raised from ‘a-’ to ‘a’. Danske Bank’s long-term instrument ratings and outlook*
* Outlook refers to the senior unsecured ratings of Danske Bank A/S. Capital centre T of RD is rated AA+ by Fitch, capital centre S is rated AAA.
Covered bonds Danske Bank A/S Covered bonds Danske Bank Plc Covered bonds RD
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CRR/CRD IV efficiency A strong CET1 ratio is supplemented by Additional Tier 1 capital. This serves to adjust the Group’s capital structure to be more in line with our capital targets and in a manner that is efficient under CRR/CRD IV. Grandfathered “Hybrid Tier 1 capital” of DKK 12 bn. will lose regulatory efficiency in 2017. Rating Strengthens the capital as measured by rating agencies by enhancing the Group’s loss-absorbing capital, supporting the Group’s overall rating ambitions. Leverage ratio and Pillar II Full recognition for the leverage ratio and beneficial in relation to Pillar II requirements. Support for senior creditors Increases protection to senior creditors. Diversifying into new currencies Conversion instrument has been chosen to allow for diversifying our Additional Tier 1 into other currencies. Only convertible instruments allow hedging of the exchange rate risk without inducing P&L volatility.
17 17 *Subject to the Conditions to Redemption Note: The terms are outlined in their entirety in the full terms and conditions of the Notes which will be set out in the final Offering Memorandum. In case of any discrepancy, the final Offering Memorandum prevails.
Issuer
Note Ratings (S&P/F)
Description and Status
Notes (the “Notes”)
to rank junior to the Notes
Optional Redemption* and Substitution and Variation
Optional Redemptions in case of two ”Special Events”:
regulatory capital) Substitution and Variation:
Notes so that they become or remain “Qualifying Capital Notes” Interest and Interest Cancellation
[seventh] anniversary) reset to a new (7) year fixed rate
CRD IV restrictions
18 18
Loss Absorption following a Trigger Event
the Group (a “Trigger Event”)
Holder's only right under the Notes against the Issuer for any failure to deliver the shares will be a claim to have such shares delivered (no right or claim for compensation for any loss) Conversion Price
expected to be set 30-35% below corresponding share price at issuance), adjusted from time to time as outlined in the full terms and conditions of the Notes Conversion Shares Offer
any shares not sold in the shares offer) to the Holders
Governing Law
redemption and enforcement events which will be under Danish Law Denominations/ Listing/Clearing/
Note: The terms are outlined in their entirety in the full terms and conditions of the Notes which will be set out in the final Offering Memorandum. In case of any discrepancy, the final Offering Memorandum prevails.
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Business units Special topics Macro and portfolio reviews Funding, ROE bridge and outlook Contact details 21 23 27 31 35
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Pre-tax return on allocated capital (%) Financial highlights, 2016 vs 2015 Income statement (DKK m)
Personal Banking
Business Banking
Northern Ireland
Northern Ireland 14.5 Business 16.1 Personal 21.8 2016 2016 2015 Index 2016 2015 Index 2016 2015 Index Net interest income 7,660 7,909 97 8,427 8,309 101 1,458 1,620 90 Net fee income 3,306 3,494 95 1,629 1,864 87 471 487 97 Net trading income 562 517 109 568 606 94 126 118 107 Other income 613 609 101 588 581 101 18 14 128 Total income 12,141 12,529 97 11,212 11,360 99 2,072 2,239 93 Expenses 7,654 8,444 91 4,791 4,704 102 1,243 1,369 91 Goodwill impairment charges
4,486 930
5,360 120 829 720 115 Loan impairment charges
390
191
4,963 540
5,169 129 1,063 1,281 83 Profit before tax excl. goodwill 4,963 3,695 134 6,657 6,465 103 1,063 1,431 74 Lending (DKK bn) 742 721 103 662 630 105 46 52 87 Deposits and RD funding (DKK bn) 666 649 103 554 528 105
267 256 104 230 226 102 59 64 93 Northern Ireland Personal Business
22 22
C&I: Financial highlights, 2016 vs 2015 Wealth Management: Financial highlights, 2016 vs 2015 Wealth Management: Income statement (DKK m)
pressure
includes negative CVA of DKK -0.6 bn in Q2 owing to model improvement
Resolution Fund and regulatory measures
DKK 1 bn against facilities in the oil sector C&I: Income statement (DKK m)
from net sales, net premiums and performance
institutional and retail clients. Net premiums of DKK 34 bn at Danica Pension
booking of DKK 279 m
business unit in 2016
* 2016 reflects new capital allocation framework.
2016 2015 Index Net interest income 3,061 2,660 115 Net fee income 2,221 2,408 92 Net trading income 5,263 4,799 110 Other income 16 7 227 Total income 10,561 9,873 107 Expenses 4,648 4,412 105 Profit before loan impairment charges 5,913 5,461 108 Loan impairment charges 1,071 65
4,842 5,396 90 Pre-tax return on allocated capital (%)* 12.7 14.8 Lending (DKK bn) 197 172 115 Deposits (DKK bn) 233 214 109 2016 2015 Index Net interest income 675 620 109 Net fee income 6,732 6,977 96 Net trading income 591 316 187 Other income 574 564 102 Total income 8,572 8,477 101 Expenses 3,887 3,702 105 Profit before loan impairment charges 4,685 4,775 98 Loan impairment charges
4,823 4,804 100 Pre-tax return on allocated capital (%)* 34.3 30.9 Lending (DKK bn) 72 68 106 Deposits (DKK bn) 63 53 119 Assets under management (DKK bn) 1,420 1,369 104
23 23
Change in net interest income (DKK m)
696 801 580 253 317 87 Days effect 22,028 Other FX effect Deposit margin Deposit volume Lending margin Lending volume 2015 21,402 2016
24 24
* Ex Baltics. Note: Non-performing loans are loans in rating categories 10 and 11 against which individual impairments have been made.
Individual loan impairment charges* (DKK bn) Gross non-performing loans (DKK bn) Allowance account by business unit (DKK bn)
Q4 2016
0.5 0.7 Q3 2016 0.1 Q2 2016 0.2 Q1 2016
Q4 2015
Reversal Increased New 5,6 13,3 2,8 0,5 1,3 Q4 2016 23.5 Q3 2016 25.1 Q2 2016 25.3 Q1 2016 26.3 Q4 2015 27.5
Personal Banking Business Banking Corporates & Institutions Wealth Management Northern Ireland
8,8 13,1 18,5 Q4 2016 40.4 Q3 2016 42.7 Q2 2016 42.6 Q1 2016 43.4 Q4 2015 47.8 Individual allowance account Net exposure not in default Net exposure in default
25 25
Agriculture exposure (2.5 % of Group net exposure) Oil-related exposure (0.9 % of Group net exposure) Agriculture by segment, Q4 2016 (DKK m)
specialist teams for customer relationship and credit management in C&I
DKK 450 m against direct oil exposure; total collective charges now stand at DKK 1.1 bn
stand at DKK 0.2 bn Oil-related exposure, Q4 2016 (DKK m)
2016, as pig prices remained stable while milk prices increased from a very low level
covering 1.4% of gross credit exposure
accumulated impairment charges.
Gross credit exposure
impairment charges Net credit exposure C&I 23,136 268 22,868 Oil majors 5,479
Oil service 8,721 27 8,694 Offshore 8,936 241 8,695 Business Banking 913 14 899 Oil majors 2
Oil service 803 14 789 Offshore 108
Others 4 4 Total before collective impairments 24,054 282 23,772 Collective impairment charges 1,128 Total gross exposure 25,182
Gross credit exposure Portion from RD Acc. Individual impairment charges Net credit exposure NPL coverage ratio Business Banking 55,448 43,090 2,928 52,520 95% Growing of crops, cereals, etc. 18,240 15,001 356 17,884 98% Dairy 9,027 6,969 1,014 8,013 91% Pig breeding 12,991 10,421 1,345 11,646 98% Mixed operations etc. 15,190 10,698 213 14,977 89% Northern Ireland 4,845
4,780 89% C&I 5,177 2,411
100% Others 216 14 1 216
65,686 45,514 2,994 62,692 94% Collective impairment charges 920 250 Total gross exposure 66,606
* The oil-related net credit exposure of DKK 24 bn is part of the energy & utilities industry (DKK 15 bn) and shipping (DKK 9 bn) industry.
26 26
Non-core loan portfolio, Q4 2016 (DKK bn) Non-core REA (DKK bn) 28 31 35 37 27
14 6 20 2 3 2 3 Total 26 Conduits etc. 7 1 Commercial portfolio 1 Personal customers 19 Performing credit exposure Non-performing credit exposure Allowance account 20 12 10 10 8 5 6 5 5 5 Q4 2016 13
Q3 2016 14 Q2 2016 15 Q1 2016 18 Q4 2015 26 Non-core Banking Non-core conduits, etc.
27 27
Interest rates, leading (%)
135 120 105 90 2016 2014 2012 2010 2008 2006 Finland Norway Sweden Denmark 6 4 2
2016 2014 2012 2010 2008 2006 6 5 4 3 2 1
2016 2014 2012 2010 2008 2006 10 8 6 4 2 2016 2014 2012 2010 2008 2006
Real GDP, constant prices (index 2005 = 100) Inflation (%) Unemployment (%)
28 28
Apartment prices (index 2005 = 100)
Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) Apartment prices/nom. GDP (index 2005 = 100)
2006 2014 2016 85 90 95 100 105 110 115 120 125 130 2008 2010 2012 210 180 150 120 90 2016 2014 2012 2010 2006 2008 2016 120 160 200 240 280 320 2014 2012 2010 2008 2006 Denmark Sweden Norway Finland 100 120 140 160 180 200 2006 2008 2010 2012 2014 2016
29 29
38% 30% 21% 10%
Fixed rate: Repayment Variable rate (6m-10yrs): Interest-only Fixed rate: Interest only Variable rate (6m-10yrs): Repayment
111 106 86 68 5 yrs+ 3-4 yrs 1-2 yrs Fixed rate
2000 2012 2016 2 4 6 8 250 500 2008 2004 10Y swap rate Unemployment
* In addition, we charge a fee of 30 bp of the bond price for refinancing of 1- and 2-year floaters and a fee of 20 bp for floaters of 3 or more years.
With amortisation Interest-only Unemployment and foreclosures (%/No.) Portfolio facts, Realkredit Danmark, end-Q4 2016 Stock of retail loans, Realkredit Danmark, end-Q4 2016 (%) Mortgage margins, 80% LTV, owner-occupied (bp)
DKK 3 bn with public guarantee
LTV ratio at origination (legal requirement)
+ refinancing fee*
143 138 118 101 5 yrs+ 1-2 yrs Fixed rate 3-4 yrs Adjustable rate*
30 30
73 76 76 74 78 80 90 99 107 109 111 130 161 160 169 68 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
Q3 Q2 Q1 Q4 Q4 Q3 Q2 Q1 Loan portfolio, FlexLån F1 and F2 (DKK bn) Key points Supervisory diamond for Danish mortgage institutions
loans and 28% were 5- to 10-year variable rate loans
increased to 40% from 36% in Q3
2013 2014 2015 2016
Refinancing need:
quarterly and max. 25% annually Concentration risk: Sum of 20 largest exposures/CET1 < 1 Interest risk: (L TV ratio > 75% of legal limit and interest rate fixed < 2 years) < 25% of portfolio Growth: Max.15% annually in certain segments Interest-only loans:
L TV ratio > 75% of legal limit
* Nominal value.
31 31
Issued RD bonds RD mortgages Covered bonds Bank mortgages Deposits Bank loans Senior debt Funding 1,929 771 154 859 144 Loans 1,689 771 338 580
10 2 13 9 55
5 9 Equity Subord. debt Covered bonds Senior unsecured Deposits Repos, net CD & CP Deposits credit inst. Q4 2016 Q3 2016
Short-term funding Long-term funding Loan portfolio and long-term funding, Q4 2016 (DKK bn) Funding sources (%)
32 32
Largest funding programmes, end-2016 Senior debt by currency, end-2016 Covered bonds by currency, end-2016
50% 81% 19% 42% 83% 24% 2%
4% 11% 11% 68% 3% 4% SEK CHF NOK DKK EUR GBP
Total DKK 154 bn
1% 2% 2% 1% 3% 11% 23% 58% HKD JPY GBP AUD NOK SEK USD EUR
Total DKK 144 bn Utilisation
EMTN Programme Limit: EUR 35 bn Global Covered Bond Limit: EUR 30 bn US Commercial Paper Limit: USD 4 bn US MTN (144A) Limit: USD 10 bn French Commercial Paper Limit: EUR 10 bn UK Certificate of Deposit Limit: USD 15 bn ECP Programme Limit: EUR 13 bn
33 33
0.2% ROE 2018E 11.6% Above 12.5% Capital effect 0.5% Loan losses & other 0.5% Income initiatives 0.5% Volume effect 0.5-1% Funding & ratings 0.5% Costs 0.5-1% Adjustments** ROE 2015*
* Excluding goodwill impairment charges. ** Adjustments for equity effect of goodwill impairment charges, remortgaging fees, payroll tax refund, one-off gain on property sales, resolution fund payment and tax.
Overall status of ROE bridge to 2018
Costs
Funding & ratings
Volume effect
partly offset by margin pressure Income initiatives
Management, partly mititgated by higher income in C&I Loan losses
Capital effect
regulatory uncertainty
Status at year-end 2016 ROE 2015-18E, after tax (%)
34
Financial results for Q1 2013
Claus Ingar Jensen Head of IR Direct: +45 45 12 84 83 Mobile: +45 25 42 43 70 E-mail: clauj@danskebank.dk John Bäckman Chief IR Officer Direct: +45 45 14 07 92 Mobile: +45 30 51 46 85 E-mail: jbc@danskebank.dk Robin Hjelgaard Løfgren Senior IR Officer Direct: +45 45 14 06 04 Mobile: +45 24 75 15 40 E-mail: rlf@danskebank.dk Louisa Grue Baruch IR Officer Direct: +45 45 13 92 34 Mobile: +45 21 56 19 35 E-mail: lobar@danskebank.dk
Christoffer Møllenbach Head of Group Treasury Direct: +45 45 14 63 60 Mobile: +45 21 55 10 52 E-mail: chm@danskebank.dk Bent Callisen First Vice President, Group Treasury Direct: +45 45 12 84 08 Mobile: +45 30 10 23 05 E-mail: call@danskebank.dk Nicolaj Verdelin Chief Funding Manager, Group Treasury Direct: +45 45 12 85 14 Mobile: +45 23 72 99 14 E-mail: nver@danskebank.dk Thomas Halkjær Jørgensen Chief Portfolio Manager, Group Treasury Direct: +45 45 12 83 94 Mobile: +45 25 42 53 03 E-mail: thjr@danskebank.dk Robert Wagner Senior Vice President, Group Capital Direct: +45 45 14 54 25 Mobile: +45 21 84 81 48 E-mail: rwag@danskebank.dk
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THIS DOCUMENT AND ITS CONTENTS ARE CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH THE PROPOSED OFFER OF SECURITIES REFERRED TO HEREIN AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO ANY OTHER PERSON IN ANY MANNER OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE. FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF APPLICABLE SECURITIES LAWS. IF THE DOCUMENT HAS BEEN RECEIVED IN ERROR, THEN IT MUST BE RETURNED IMMEDIATELY. NOTHING IN THIS PRESENTATION IS, NOR SHALL BE RELIED ON AS, A PROMISE OR REPRESENTATION AS TO THE FUTURE. By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following instructions and
“Notes”) of Danske Bank A/S (the “Issuer”) in any jurisdiction in which such offer or solicitation is unlawful. References herein to the “Group” are to the Issuer, together with its consolidated subsidiaries. This presentation is not for distribution, directly or indirectly, in or into Australia, South Africa, Canada, the United States or Japan or any other state or jurisdiction in which it would be unlawful to do so. This presentation does not constitute or form a part of any offer or solicitation to purchase or subscribe for any Notes or other securities in the United States. The Notes have not been, and will not be, registered under the United States Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. There will be no public offer
This presentation does not constitute or form part of, and should not be construed as, an offer or invitation to sell securities, or the solicitation of an offer to subscribe for or purchase securities, and nothing contained herein shall form the basis of or be relied on in connection with any contract or commitment whatsoever. This presentation is accompanied by a preliminary Offering Memorandum (the “Offering Memorandum”). The Offering Memorandum is subject to completion and amendment and is furnished on a confidential basis only for the use of the intended recipient. The Offering Memorandum shall not constitute an offer to sell or the solicitation of an offer to buy any securities. The Offering Memorandum is not a prospectus and prospective investors should not subscribe for any Notes except on the basis of information contained in the final form of the Offering Memorandum (including the information incorporated by reference therein) to be prepared in connection with the offering of the Notes. Copies of the Offering Memorandum are, subject to applicable securities laws, available to investors from the managers appointed by the Issuer in respect of the proposed offer of the Notes (the “Joint- Lead Managers”). The Offering Memorandum includes descriptions of certain risks related to an investment in the Notes and it is recommended that prospective investors read and carefully assess those risks. The summary terms and conditions contained in this presentation are indicative of the terms and conditions of the proposed Notes. Prospective investors are required to make their own independent investigations and appraisals of the business and financial condition of the Issuer, the Group and the nature of the Notes before taking any investment decision with respect to the Notes. Investors should make their investment decision solely on the basis of the Offering Memorandum in final form and not rely on these summary terms and conditions as being a complete and accurate representation of the full terms and conditions of the Notes. Prospective investors should, either individually or through their advisers, have sufficient investment expertise to understand the risks involved in any purchase or sale of any financial instrument discussed herein.
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This presentation is being made only to and is directed only at: (a) persons who are outside the United Kingdom; (b) persons who have professional experience in matters relating to investments who fall within Article 19(5) of the U.K. Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) to high net worth entities and other persons falling within Article 49(2)(a) to (d) of the Order; or (d) other persons to whom it may otherwise lawfully be communicated in accordance with the Order (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Restriction on marketing and sales to Retail Investors The Notes are complex financial instruments and are not a suitable or appropriate investment for all investors. In some jurisdictions, regulatory authorities have adopted or published laws, regulations or guidance with respect to the offer or sale of securities such as the Notes to retail investors. In particular, in June 2015, the United Kingdom Financial Conduct Authority (the “FCA”) published the Product Intervention (Contingent Convertible Instruments and Mutual Society Shares) Instrument 2015 which took effect on 1 October 2015 (the “PI Instrument”). Under the rules set out in the PI Instrument (as amended or replaced from time to time, the “PI Rules”), certain contingent write-down or convertible securities (including any beneficial interests therein), such as the Notes must not be sold to retail clients in the European Economic Area (the “EEA”) and there must not be any communication or approval of an invitation or inducement to participate in, acquire or underwrite such securities (or the beneficial interest in such securities) where that invitation or inducement is addressed to or disseminated in such a way that it is likely to be received by a retail client in the EEA (in each case, within the meaning of the PI Rules), other than in accordance with the limited exemptions set out in the PI Rules. Potential investors should inform themselves of and comply with any applicable laws, regulations or regulatory guidance with respect to any resale of the Notes, including the PI Rules, as the case may be. By purchasing, or making or accepting an offer to purchase any Notes from the Issuer and/or any of the Joint-Lead Managers, you represent, warrant, agree with and undertake to the Issuer and each of the Joint-Lead Managers that: (1) you are not a retail client in the EEA (as defined in the PI Rules); (2) whether or not you are subject to the PI Rules, you will not: (a) sell or offer the Notes (or any beneficial interests therein) to retail clients in the EEA; or (b) communicate (including the distribution of the Offering Memorandum) or approve an invitation or inducement to participate in, acquire or underwrite the Notes (or any beneficial interests therein) where that invitation or inducement is addressed to or disseminated in such a way that it is likely to be received by a retail client in the EEA (in each case within the meaning of the PI Rules), in any such case other than (i) in relation to any sale of or offer to sell Notes (or any beneficial interests therein) to a retail client in or resident in the United Kingdom, in circumstances that do not and will not give rise to a contravention of the PI Rules by any person and/or (ii) in relation to any sale of or offer to sell Notes (or any beneficial interests therein) to a retail client in any EEA member state
the risks of an investment in the Notes (or any beneficial interests therein) and are able to bear the potential losses involved in an investment in the Notes (or such beneficial interests therein) and (b) you have at all times acted in relation to such sale or offer in compliance with the Markets in Financial Instruments Directive (2004/39/EC) ("MiFID") to the extent it applies to you or, to the extent MiFID does not apply to you, in a manner which would be in compliance with MiFID if it were to apply to you; and
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(3) you will at all times comply with all applicable local laws, regulations and regulatory guidance (whether inside or outside the EEA) relating to the promotion, offering, distribution and/or sale of the Notes (or any beneficial interests therein), including (without limitation) any such laws, regulations and regulatory guidance relating to determining the appropriateness and/or suitability of an investment in the Notes by investors in any relevant jurisdiction. Where acting as agent on behalf of a disclosed or undisclosed client when purchasing, or making or accepting an offer to purchase, any Notes from the Issuer and/or the Joint-Lead Managers, the foregoing representations, warranties, agreements and undertakings will be given by and be binding upon both the agent and its underlying client. This presentation and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. The distribution of this presentation and/or any other documents related to the proposed offering of the Notes into any jurisdiction may be restricted by law. Persons into whose possession this presentation comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. The information in this presentation has been provided by the Issuer or obtained from publicly available sources. This presentation speaks as at the date hereof and has not been independently verified. None of the Issuer, any Group member, their respective advisers or any other party is under any duty to update or inform any recipient of any changes to information in this presentation, provide any recipient with access to any additional information or to correct any inaccuracies in any such information which may become apparent. No representation or warranty (express or implied) is given by the Issuer, any member of the Group or any of their respective affiliates, agents, directors, partners and employees or any other party that the information in this presentation is correct or complete, and to the fullest extent permitted by applicable law none of them accepts any liability whatsoever for any loss or damage howsoever arising from any use of this presentation or otherwise arising in connection therewith. This presentation has been issued by and is the sole responsibility of the Issuer. None of the Joint-Lead Managers or their respective affiliates, agents, directors, partners and employees accepts any responsibility whatsoever for, or any liability for any loss howsoever arising, directly or indirectly, from this presentation or its contents, or makes any representation or warranty, express or implied, as to the contents of this presentation or for any other statement made or purported to be made by it, or on its behalf, including (without limitation) information regarding the Issuer, the Group or the Notes and no reliance should be placed on such information. To the fullest extent permitted by applicable law, each of the Joint-Lead Managers accordingly disclaims any and all responsibility and/or liability, whether arising in tort, contract or otherwise, which it might otherwise have in respect of this presentation or any such statement. This presentation is published solely for information purposes and does not constitute investment advice. Recipients should consult with their own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that they deem it necessary, and make their own investment, hedging and trading decisions (including decisions regarding the suitability of the Notes) based upon their own judgement as so advised, and not upon any information herein.
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This presentation includes certain “forward-looking statements”. Statements that are not historical facts, including statements about the beliefs and expectations of the Issuer, the Group and their respective directors or management, are forward-looking statements. Words such as “believes”, “anticipates”, “estimates”, “expects”, “intends”, “plans”, “aims”, “potential”, “will”, “would”, “could”, “considered”, “likely”, “estimate” and variations of these words and similar future or conditional expressions, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur, many of which are beyond the control of the Issuer or the Group and all of which are based on current beliefs and expectations about future events. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Issuer or the Group, the performance of any assets or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In addition, even if the Issuer’s
statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. Such forward-looking statements are not guarantees of future performance and are based on numerous assumptions regarding the present and future business strategy of the Issuer and the environment in which the Issuer and the Group will operate in the future. These forward-looking statements speak only as at the date of this presentation and the Issuer and the Group expressly disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statements contained in this presentation. Any projections, valuations and statistical analyses are provided to assist the recipient in the evaluation of matters described herein. They may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results and to the extent they are based on historical information, they should not be relied upon as an accurate prediction of future performance. Market data and certain economics and industry data and forecasts used, and statements made herein regarding the Issuer's position in the industry, were estimated or derived based upon assumptions the Issuer deems reasonable and from the Issuer's
publications such as newspapers.