DNB GROUP AT GOLDMAN SACH ROME 16 JUNE 2015 Rune Bjerke CEO DNB - - PowerPoint PPT Presentation
DNB GROUP AT GOLDMAN SACH ROME 16 JUNE 2015 Rune Bjerke CEO DNB First quarter 2015 Pre-tax operating profit before impairment in NOK billion 9.3 (7.4) Cost/income ratio in per cent 37.0 (41.3) Return on equity in per cent 16.1 (15.4)
DNB GROUP AT GOLDMAN SACH
ROME 16 JUNE 2015
Rune Bjerke CEO DNB
Pre-tax operating profit before impairment in NOK billion
9.3 (7.4)
Cost/income ratio in per cent
37.0 (41.3)
Return on equity in per cent
16.1 (15.4)
Common equity Tier 1 capital ratio in per cent (transitional rules)
12.7 (11.9)
Figures in parentheses refer to 1Q14 2
First quarter 2015
Earnings per share
4.01 (3.37)
Profit figures
Pre-tax operating profit before impairment
NOK million
Pre-tax operating profit before impairment
NOK million
Profit for the period
NOK million
Profit for the period
NOK million
3 5 478 4 553 5 620 4 965 6 533 1Q14 2Q14 3Q14 4Q14 1Q15 5 913 4 529 5 292 4 594 5 211 1Q14 2Q14 3Q14 4Q14 1Q15 7 377 6 722 7 626 6 964 9 273 1Q14 2Q14 3Q14 4Q14 1Q15 7 973 6 689 7 177 6 456 7 462 1Q14 2Q14 3Q14 4Q14 1Q15
Return on equity and cost/income ratio
Return on equity excl. basis swaps 1)
Per cent
Return on equity 1)
Per cent
Cost/income ratio
Per cent
Cost/income ratio excl. basis swaps
Per cent 39.4 43.9 41.8 44.1 42.2 1Q14 2Q14 3Q14 4Q14 1Q15 41.3 43.8 40.4 42.2 37.0 1Q14 2Q14 3Q14 4Q14 1Q15 15.4 12.4 14.8 12.6 16.1 1Q14 2Q14 3Q14 4Q14 1Q15 16.6 12.3 14.0 11.7 12.9 1Q14 2Q14 3Q14 4Q14 1Q15 1) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as liability .
4
Ratio of deposits to net loans and earnings per share
Earnings per share
NOK
Ratio of deposits to net loans
Per cent The ratio of deposits to net loans excl. short-term money market investments
5 3.37 2.80 3.45 3.05 4.01 1Q14 2Q14 3Q14 4Q14 1Q15 67.0 64.4 64.0 65.4 65.2 65.0 64.3 63.9 63.5 64.1 31 March 2014 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015
Customer segments
6
Pre-tax operating profit after impairment
NOK million 2,393 869 2,865 2,514 854 2,909 2,135 845 2,870 1Q15 4Q14 1Q14 Personal customers Large corporates and international customers Small and medium- sized enterprises
Development in loans
NOK billion 1 315 1 344 1 476 1 315 1 327 1 389
31 March 13 30 June 13 30 Sept. 13 31 Dec.13 31 March 14 30 June 14 30 Sept. 14 31 Dec.14 31 March 15
Loans at end of period Loans adjusted for exchange rate movements 7
Development in deposits
– adjusted for short-term money market investments
NOK billion
8
810 874 946
810 861 877
31 March 13 30 June 13 30 Sept. 13 31 Dec.13 31 March 14 30 June 14 30 Sept. 14 31 Dec.14 31 March 15
Deposits adjusted for short-term money market investments Deposits adjusted for short-term money market investments and exchange rate movements
Development in average interest rate spreads
Per cent 2.21 2.32 2.42 2.42 2.42 2.39 2.31 2.32 2.32 (0.30) (0.24) (0.29) (0.30) (0.29) (0.27) (0.17) (0.15) (0.11) 1.20 1.28 1.29 1.30 1.25 1.27 1.25 1.27 1.28
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
Lending spread Deposit spread Combined spread
9
NOK million
10
Development in commissions and fees
1) The first quarter figures in 2014 and 2015 are adjusted for income from public sector activities within life insurance that are in the process of being wound up.
1)
1,807 1,981 1,935 1,956 2 113 2 200 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15
Sale of insurance products Money transfer and banking services Asset management and custodial services Investment banking services Real estate broking Net commissions and fees
+ 4.1% growth
1) 1)
Income statement
11
Full year Amounts in NOK million 1Q15 4Q14 3Q14 2Q14 1Q14 2014 Net interest income 8 587 8 700 8 228 7 867 7 691 32 487 Net commissions and fees 2 212 2 313 2 229 2 242 2 185 8 969 Net gains on financial instruments at fair value 3 400 279 1 817 1 132 2 089 5 317 Net financial and risk result, DNB Livsforsikring 52 185 136 183 105 609 Net insurance result, DNB Skadeforsikring 99 129 121 139 102 491 Other operating income 361 446 256 391 397 1 490 Net other operating income, total 6 124 3 352 4 560 4 087 4 877 16 877 Total income 14 711 12 052 12 788 11 954 12 569 49 363 Operating expenses 5 215 5 045 5 088 5 150 5 168 20 452 Restructuring costs and non-recurring effects 223 42 74 83 24 223 Pre-tax operating profit before impairment 9 273 6 964 7 626 6 722 7 377 28 689 Net gains on fixed and intangible assets 12 42 13 (3) 52 Impairment of loans and guarantees 575 821 183 554 80 1 639 Pre-tax operating profit 8 710 6 184 7 456 6 165 7 297 27 102 Tax expense 2 130 1 236 1 828 1 600 1 799 6 463 Profit from operations held for sale, after taxes (47) 16 (8) (11) (19) (22) Profit for the period 6 533 4 965 5 620 4 553 5 478 20 617 Profit attributable to shareholders 6 519 4 965 5 620 4 553 5 478 20 617
Net gains on financial instruments
4Q14 - 1Q14 - Amounts in NOK million 1Q15 4Q14 1Q14 1Q15 1Q15 Customer revenues in DNB Markets 622 549 459 73 163 Trading in foreign exchange/fixed income/equities in DNB Markets 468 94 590 374 (123) Changes in credit spreads on bonds in DNB Markets 140 (196) 148 336 (8) Adjustments in valuation models with effects on the balance sheet and income statement
291 242 (291) The bank's own equity investments (193) (146) 1 (47) (195) Exchange rate effects, additional Tier 1 capital 170
170 Other mark-to-market adjustments (incl. CVA/DVA) 384 (287) 282 671 102 1 590 (229) 1 772 1 819 (182) Basis swaps 1 810 508 (596) 1 302 2 406 Valuation of the investment in Nets
Net gains on financial instruments at fair value 3 400 279 2 089 3 121 1 311 Change Net gains on financial instruments at fair value, excl. basis swaps
12
Changes in net interest income
NOK million From 1st quarter 2014 to 1st quarter 2015
7 691 8 587 366 264 116 112 90 (54)
1Q14 Exchange rate effects Lending and deposit volumes Long- term funding Lending and deposit spreads Interest rate instruments Other net interest income 1Q15 13
Changes in net interest income
NOK million From 4th quarter 2014 to 1st quarter 2015
14
8 700 8 587 228 89 21 (26) (46) (90) (122) (169)
4Q14 Exchange rate effects Lending and deposit spreads Long- term funding Lending and deposit volumes Equity and non-interest bearing items Interest rate instruments Other net interest income Interest days 1Q15
Changes in net other operating income
NOK million From 1st quarter 2014 to 1st quarter 2015
4 877 6 124 2 406 39 27 (54) (77) (182) (913)
1Q14 Basis swaps Other
income Net commissions and fees Net financial and risk result from DNB Livsforsikring Profit from associated companies Net gains on
instruments Investment in Nets 1Q15 15
Changes in net other operating income
NOK million From 4th quarter 2014 to 1st quarter 2015
16
3 352 6 124 1 819 1 302 (27) (87) (102) (133)
4Q14 Net gains on other financial instruments Basis swaps Other
income Net gains on investment property Net commissions and fees Net financial and risk result from DNB Livsforsikring 1Q15
Changes in operating expenses
17
Change in Amounts in NOK million 1Q15 Change 1Q14 per cent Total adjusted operating expenses 5 215 47 5 168 0.9 Of w hich : Exchange rate effects for units outside Norw ay 83 Currency-adjusted operating expenses 5 132 (36) 5 168 (0.7) Total adjusted operating expenses 5 215 47 5 168 Income-related costs Ordinary depreciation on operational leasing 17 Expenses directly related to operations Fees 33 Pension expenses 21 Properties and premises (61) Other costs 37 Non-recurring effects 223 199 24 Restructuring costs, employees 50 5 46 Other restructuring costs and non-recurring effects 64 87 (22) IT restructuring 108 108 Operating expenses 5 438 246 5 192 4.7
Changes in operating expenses
Change in Amounts in NOK million 1Q15 Change 4Q14 per cent Total adjusted operating expenses 5 215 170 5 045 3.4 Of w hich : Exchange rate effects for units outside Norw ay 43 Currency-adjusted operating expenses 5 172 127 5 045 2.5 Total adjusted operating expenses 5 215 170 5 045 Income-related costs Customer paid marketing, DNB Eiendom 31 Expenses directly related to operations Pension expenses 72 IT expenses 39 Performance-based pay 36 Other costs (8) Non-recurring effects 223 181 42 Restructuring costs, employees 50 (36) 86 Other restructuring costs and non-recurring effects 64 104 (40) Reversal of provisions 73 (73) IT restructuring 108 39 70 Operating expenses 5 438 350 5 088 6.9
18
Impairment of loans and guarantees
19
Full year Amounts in NOK million 1Q15 4Q14 3Q14 2Q14 1Q14 2014 Personal customers (34) (67) 84 53 48 118
(81) (141) 33 (5) (16) (129)
46 74 51 58 64 247 Small and medium-sized enterprises 308 450 165 157 65 838 Large corporates and international customers 256 496 18 292 219 1 024
(15) 333 (3) 97 (56) 370
(39) 166 86 (17) 56 291
242 (21) (116) 152 152 166
12 5 5 (2) 24 31
50 1 39 53 31 124
7 13 8 9 13 42 Total individual impairment 530 879 267 502 332 1 980 Total collective impairment of loans 44 (58) (84) 52 (252) (341) Impairment of loans and guarantees 575 821 183 554 80 1 639 Total impairment in relation to average volumes (annualised) 0.16 0.23 0.05 0.16 0.02 0.12
Net non-performing and net doubtful loans and guarantees 1)
18.4 19.5 19.7 20.7 16.4 16.1 14.9 17.3 13.9 1.55 1.50 1.50 1.38 1.19 1.05 1.01 0.96 0.83
31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 2010 2011 2012 2013 2014 2015
DNB Group As a percentage of net loans
Per cent NOK billion
1) Includes non-performing commitments and commitments subject to individual impairment. Accumulated individual impairment is deducted.
20
Balance sheets
21
31 March 31 Dec. 31 March 31 Dec. Amounts in NOK billion 2015 2014 2015 2014 Deposits with central banks 305 59 302 54 Due from credit institutions 203 373 457 608 Loans to customers 1 476 1 439 743 723 Other assets 806 779 639 613 Total assets 2 790 2 649 2 141 1 998 Due to credit institutions 263 214 333 269 Deposits from customers 963 942 918 903 Short-term debt securities issued 233 207 233 207 Long-term debt securities issued 620 605 168 160 Other liabilities and provisions 536 523 349 332 Additional Tier 1 capital 8 8 Other equity 166 159 131 128 Total liabilities and equity 2 790 2 649 2 141 1 998 Ratio of deposits to net loans (%) 65.2 65.4 123.6 124.8 Adjusted ratio of deposits to net loans (%) 1) 64.1 63.5 121.3 121.0 Total combined assets 3 089 2 936 2 141 1 998 Currency-adjusted loans to customers 1 459 731 Currency-adjusted deposits from customers 950 904
1) Excluding short-term money market deposits
DNB Group DNB Bank ASA
Common equity Tier 1 capital ratio 1)
Leverage ratio
Per cent
Estimate applying average weights used by Swedish banks 2)
Per cent
Transitional rules
Per cent
Future Basel III estimate
Per cent
22
1) Common equity Tier 1 capital includes 50 per cent of interim profits in all quarters, apart from the Leverage ratio figures. Annual figures are exclusive of dividend payments. 2) Average weights used by Swedish banks on corporate loans and loans secured by real estate.
11.8 11.9 12.1 12.6 12.7 12.7
31 Dec. 2013 31 March 2014 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015
5.3 5.1 5.3 5.7 6.0 5.7
31 Dec. 2013 31 March 2014 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015
13.6 14.2 14.4 15.0 15.1 14.6
31 Dec. 2013 31 March 2014 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015
16.3 17.5 17.3 18.0 18.3 18.8
31 Dec. 2013 31 March 2014 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015
Changes in the common equity Tier 1 capital ratio
From 31 March 2014 to 31 March 2015
Per cent
11.9 12.7 1.3 0.4 0.2 0.1 0.1 (0.2) (0.4) (0.7)
31 March 2014 Profit for the period after dividends Exchange rate effect on equity Capital efficiency measures Regulatory changes Risk-weighted volume DNB Livsforsikring Increase in pension commitments Lending growth Exchange rate effect on existing portfolio 31 March 2015 23
Changes in the common equity Tier 1 capital ratio
From 31 December 2014 to 31 March 2015
Per cent
12.7 12.7 0.3 0.1 (0.2) (0.2)
31 Dec. 2014 50% of profit for the period Exchange rate effect on equity Lending growth Exchange rate effect on existing portfolio 31 March 2015 24
The minimum 14% common equity Tier 1 capital target by year-end 2016 remains firm
25
Financial restructuring Realisation of capital gains IRB approvals (does not apply under transitional rules) Capital-efficient products Asset disposal
CET 1 ratio CET 1 RWA
Active portfolio management
The Group’s financial ambitions stay firm Build up of adequate common equity Tier 1 capital through dynamic management of balance sheet items Stable volume-weighted spreads Commissions and fees – underlying growth of 5 per cent Flat nominal costs throughout 2015 (excluding restructuring costs and exchange rate effects)
1) Normalised levels are around 28 bps of net loans to customers, which corresponds to losses of approx. NOK 4 billion.
Impairment expected to stay below normalised levels 1) in 2015 – no noticeable effects from oil and gas thus far
26
Financial ambitions 2016 and 2017
> 12 per cent
as capital level
> 50% dividend
when capital level is reached
Return on equity
27 1) Based on transitional rules
29
30
31 * Fully-loaded Basel III estimate ** As at 31 June 2012
8.6 9.2 9.3 10.6 11.9 12.7 2010 2011 2012 2013 2014 2015 10.6 12.1 14.2 14.6 2012** 2013 2014 2015 4.1 4.3 5.1 5.7 2012** 2013 2014 2015 CET 1 capital ratio, transitional rules
as at 31 March, per cent
CET 1 capital ratio, Basel III*
as at 31 March, per cent
Leverage ratio, Basel III
as at 31 March, per cent
5.50 6.00 6.50 7.00 7.50 8.00 8.50 9.00 1/4/2014 1/7/2014 1/10/2014 1/1/2015 1/4/2015
USD/NOK*
32 *Updated as of 5 June 2015
Currency effects
USD/NOK EUR/NOK
+15%
Factors affecting the CET1 ratio
2016 effect, bps
+31%
USD/NOK EUR/NOK
45 bps
33
Financial restructuring Realisation of capital gains IRB approvals (Do not apply under transitional rules) Capital-efficient products Asset disposal
CET1 ratio CET1 RWA
Active portfolio management
*up to 2016 under transitional rules
34
0% 20% 40% 60% 80% 100%
DNB Nordea SHB SEB Swedbank Danske
Corporate risk weights
RW PD/LGD Floors 0% 10% 20% 30% 40% 50%
DNB Nordea SHB SEB Swedbank Danske
Mortgage risk weights
RW LGD Floor 20% PD Floor 0.2% Pillar 2 requirement
DNB risk weights – transitional rules
???
Future risk weights – Basel 4 ?
???
Current IRB risk weights
35
36
15,000 20,000 25,000 30,000 35,000 2010 2011 2012 2013 2014
Net interest income
NOK million
Expected lending growth of 3-4 per cent Stable development in volume- weighted spreads
Net interest income expectations for 2015
CAGR 8.5%
37 * Personal customers and SMEs, ** Large Corporates and International
Total = NOK 522 billion
Deposits in retail banking* LCI** maturing volumes and spreads public clients
NOK billion, bps
62% 38% Deposits with repricing potential Low-yielding deposits / other 7 15 22
2015 2016 2017 Volume Average spread Total NOK 536 billion May March April Average maturity
38
Sound growth in other quality earnings
Corporate finance
Revenues in NOK million
168 316
Expect underlying growth of 5% in net commissions and fees
35 46 10 27 2012 2013 2014 Q115 CAGR 55% 19 28 20 27 34 36 2012 2013 2014 Q115
Private banking
Assets under management, NOK billion
New pension products
Assets under management, NOK billion Investments Deposits
39
Digital 86% Manual 14%
Savings agreements
Digital, 64% Manual, 36%
Consumer loans
Digital, 50% Manual, 50%
Car loans
Digital 11% Manual 89%
Insurance Sales digital vs. traditional Share of customer traffic
40
Text message banking: 25 % Online banking: 30% Branch
Call Center: 2% Mobile banking: 42%
10,000 20,000 30,000 40,000 50,000 60,000 70,000 2013 2014 2015 41
Key takeaways Number of manual transactions in branches
Modernising the way we do banking
channels
Reduction so far:
67%
Goal:
75%
42
Keeping our best-in-class cost-efficiency position
40 45 50 55 60 65 70 75 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
European banks (top 50)* Nordic peer group DNB
Cost/income DNB vs peer groups
Per cent
C/I ambition for 2017
Combination of top-line growth and cost focus
* Based on total assets Source: SNL Financial
43
44 Source: Statistics Norway/DNB Markets forecasts 1.2 % 2.4 % 3.5 % 4.5 % 4.4 %
0% 1% 2% 3% 4% 5% 6% 7% 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e Mainland GDP growth Unemployment rate
GDP growth and unemployment
Year on year, per cent
DNB Markets Oil Price Assumption: $65/bbl. (avg. price)
Oil price development
USD per barrel Main assumptions and a downside $50/bbl.-scenario by DNB Markets
Oil investments
2013 prices, NOK billion Main assumptions and a downside $50/bbl.-scenario by DNB Markets 112 47
65 80 90 50
1995 1999 2003 2007 2011 2015e 2019e Oil price DNB Markets' forecast $50/bbl-scenario
Source: Statistics Norway/DNB Markets
98 205 155 123 1997 2000 2003 2006 2009 2012 2015e 2018e Oil investments DNB Markets' forecast $50/bbl-scenario
45
46
Scenario: Lower oil price
1.2 2.4 0.6 4.5 4.1 5.2
0% 1% 2% 3% 4% 5% 6% 7% 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e Mainland GDP GDP $50/bbl-scenario Unemployment
GDP growth and unemployment
Year-on-year, per cent Consensus assumptions and a downside $50/bbl.-scenario by DNB Markets
Sources: Consensus Forecast, Norges Bank, Statistics Norway, forecast and scenario by DNB Markets as of May 2015
Fiscal policy Large public wealth gives ample leeway to smooth business cycles
47 Source: Thomson Datastream, DNB Markets
50 100 150 200 250 300 2001 2003 2005 2007 2009 2011 2013 2015e Structural, non-oil deficit 4 per cent return on the fund capital 88
National budget structural, non-oil deficit
2015 prices, NOK billion
Monetary policy Higher interest rates in Norway than in the rest of Europe
1 2 3 4 5 6 7 2008 2010 2012 2014 2016 2018 ECB Sweden Norway
Central bank rates
Per cent
DNB has a well diversified oil-related portfolio
OSV: Offshore Service Vessels, F(P)SO: Floating (Production) Storage Offloading. LNG: Liquid Natural Gas. IG: Investment grade,, All figures as of 31 Mar 2015.
48
22.2 60% Sub-IG or similar 5.4 15% Seismic 1.5 4% Leverage Buy Out (LBO) 7.7 21% Other 0.1 0%
Oilfield Services - NOK 37bn (1.8% of total Group EaD)
NOK bn and per cent of NOK37bn
Exploration & Production IG 24.0 32% Exploration & Prod. Sub-IG 4.6 6% Reserve Based Lending (RBL) 10.1 13% Exploration Financing (EFF) 2.7 4% Midstream incl LNG 22.4 29% Refining & petchem 12.2 16%
Oil & Gas exposure - NOK76 bn (3.7% of total Group EaD)
NOK bn and per cent of NOK 76bn
OSV 22.7 42.7% Rig 17.6 33.0% FPSO/FSO 5.2 9.8% Subsea cons- truction 4.2 7.9% Other 3.5 6.6%
Offshore exposure - NOK57 bn. (2.8% of total Group EaD)
NOK bn and per cent of NOK57bn
Some migration from low to medium risk
49
EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see back up slide for details. DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk.
DNB’s oil-related portfolio split by sub-segment in exposure (EaD) and by risk grade NOK 169bn as of 31 Mar 2015 (and NOK 161bn as of 31 Dec 2014)
NOK billion
54 64 61 14 10 15 0.20 0.20 0.20 0.00 0.00 0.00 17 18 17 29 33 40 1.47 0.31 0.30 0.00 1.17 1.30 19 23 23 8 10 12 0.61 0.30 1.20 0.20 0.30 0.20 20 40 60 80 100 120 Sep-14 Dec-14 Mar-15 Sep-14 Dec-14 Mar-15 Sep-14 Dec-14 Mar-15 Sep-14 Dec-14 Mar-15 Grade 1-4 "Low risk" Grade 5-7 "Medium" Grade 8-10 "High" Grade 11-12 "Doubtful & NPL"
Oilfield Services Offshore Oil & Gas
19 25 26 6 6 10 0.14 0.20 0.20 0.00 0.00 0.00 6 9 8 19 21 25 1.45 0.31 0.00 0.00 1.17 1.30 4 4 4 6 7 8 0.47 0.20 0.80 0.19 0.20 0.20 90 105 101 51 53 67 2.28 0.81 1.70 0.20 1.47 1.50 20 40 60 80 100 120 20 40 60 80 100 120 Sep-14 Dec-14 Mar-15 Sep-14 Dec-14 Mar-15 Sep-14 Dec-14 Mar-15 Sep-14 Dec-14 Mar-15 Grade 1-4 "Low risk" Grade 5-7 "Medium" Grade 8-10 "High" Grade 11-12 "Doubtful & NPL"
Oilfield Services (34% drawn loans) Offshore (59% drawn loans) Oil & Gas (47% drawn loans) Exposure (EaD)
Outstanding loans to oil, offshore and oil service are 49% of EaD
50
DNB’s oil-related portfolio: Drawn loans split by sub-segment and risk grade, total exposure by risk grade (EaD) NOK 83bn and exposure (EaD) NOK 169bn as of 31 Mar 2015
NOK billion
EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see back up slide for details. DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. Doubtful & NPL = Non performing loans, IG = investment grade companies
HERE FOR YOU. EVERY DAY. WHEN IT MATTERS THE MOST.