Strong customer activity and satisfying financial results in 2019 Investor presentation 27 February 2020 Árni Ellefsen, CEO
Disclaimer This presentation contains statements regarding future results, which are subject to risks and uncertainties. Consequently, actual • results may differ significantly from the results indicated or implied in these statements. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy • or completeness of the information contained herein. Accordingly, none of BankNordik, or any of its principal shareholders or subsidiary undertakings or any of such person’s officers or employees or advisers accept any liability whatsoever arising dir ectly or indirectly from the use of this document. Page 2
Retail banking Corporate banking Overview Insurance • Highlights • Financials • Operating income • Insurance • Business volumes • Expenditures • Impairment charges • Capital ratios • Outlook 2020 • Strategy and long-term financial objectives • Appendices Page 3
Highlights in 2019 2019 operating highlights Three initiatives launched in H2 2019 are expected to improve the Group’s operating profit by around DKK 40m on an annual basis: • Introduction of negative interest rates on corporate deposits introduced in September and October 2019 • Introduction of negative interest rates on pension deposits and retail deposits introduced in December 2019 • Organisational adjustments – involving narrowing focus/activities and merging two branches in Denmark • As part of the ongoing efforts to optimise the Group’s capital structure, BankNordik issued additional tier 1 capital in the amount of • DKK 150m with a fixed coupon of 4.5% 2019 financial highlights Operating income up 4% to DKK 658m • Operating costs up 4% to DKK 472m • Profit before impairment charges up by 3% to DKK 185m • Net impairment charges were a reversal of DKK 105m • Operating profit flat at 289m • Non-recurring items was DKK -14m vs. DKK 72m in 2018 • Profit before tax was DKK 260m (DKK 323m) • Bank lending volumes down flat at DKK 9,909m • Mortgage lending volumes up by 6% to DKK 13.0bn (DKK 12.2bn) • CET1 capital ratio of 18.8% and total capital ratio of 22.3% at 31 December 2019 • Page 4
2019 financial results ─ Figures in DKKm 2019 2018 Index Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Net interest income 367 374 95 90 90 91 92 98 Net fee and commission income 189 172 49 47 45 48 42 110 Net insurance income 52 44 14 15 15 9 13 120 Other operating income 49 45 14 13 11 11 9 109 Operating income 658 635 104 171 165 163 158 156 Operating costs -472 -456 -117 -116 -119 -120 -115 104 Profit & loss Sector costs -1 -1 0 0 0 0 0 133 Profit before impairment charges 185 179 103 54 49 43 38 42 Net impairment charges on loans 105 111 25 9 53 19 18 95 Operating profit 289 289 100 79 58 96 57 60 Non-recurring items -14 72 -13 0 0 0 -10 Market value adjustments -16 -38 -6 -8 -10 8 -12 43 Profit before tax 80 260 323 59 50 86 65 38 2019 2018 Index Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Loans and advances 9.9 10.0 9.9 10.0 10.1 10.0 10.0 100 Deposits and other debt 14.4 13.4 14.4 13.5 14.1 14.0 13.4 107 Mortgage credit 13.0 12.2 106 13.0 12.9 12.6 12.5 12.2 Key metrics Operating cost / income, % 72 72 68 70 73 76 73 Total capital ratio, % 22.3 19.8 22.3 21.0 19.6 19.2 19.8 CET1 capital ratio, % 18.8 17.7 18.8 17.5 17.5 17.2 17.7 Page 5
Margin pressure eased by introduction of negative interest rates brackets Comments QoQ changes in net interest income DKKm Net interest income up DKK 4m QoQ due to negative • 96 interest rate brackets introduced on corporate deposits in 94.8 0.4 0.1 September and October 94 4.1 Net interest income down by DKK 7m YoY, mainly due to • 92 margin pressure 90.4 0.0 0.3 0.3 90 Lending volumes down by DKK 74m QoQ and down by • DKK 48m YoY 88 Q3 2019 Lending Lending Deposit Deposit Liquidity Other Q4 2019 volume interest volume interest mgmt. Loans Deposits Loans and deposits YoY changes in net interest income DKKbn DKKm 15 14.4 385 14.1 14.0 13.5 13.4 14 13.2 380 8.6 13 374.1 375 16.4 12 1.8 370 11 5.3 10.1 10.0 10.0 10.0 10.0 3.8 366.7 9.9 0.0 10 365 9 360 8 355 7 2018 Lending Lending Deposit Deposit Liquidity Other 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 volume interest volume interest mgmt. Page 6
Strong demand for mortgage services in 2019 Comments QoQ changes in fee and commission income DKKm Net fee and commission income up by DKK 2m QoQ and 55 • up by DKK 17m YoY 2.2 1.3 49.0 0.2 50 Strong customer activity in 2019, particularly related to • 1.1 47.1 mortgage broking services, drove fee and commission income higher 45 Mortgage-lending volumes up DKK 722m in 2019 in spite • of a decrease for Corporate segment in DK of DKK 189m 40 Q3 2019 Investment Loan, Mortgage Other fee and Q4 2019 and trading guarantee, broking comm. comm. insurance services income comm. Mortgage lending YoY changes in fee and commission income DKKbn DKKm 13 200 189.5 7.1 190 7.4 12 180 5.3 172.2 2.6 170 11 160 150 10 2018 Investment Loan, Mortgage Other fee and 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 and trading guarantee, broking comm. comm. insurance services income comm. Page 7
Developments in business volume Business volumes as measured by the sum of lending, guarantees and AUM DKKbn Bank lending Mortgage lending Guarantees Assets under management 35 30.1 29.4 30 28.3 27.1 4.2 4.4 4.3 3.6 25 3.0 2.8 2.6 2.5 20 13.0 12.2 11.8 11.9 15 10 5 10.0 9.9 9.5 9.1 0 2016 2017 2018 2019 Page 8
Growth in Trygd’s premiums and fewer claims in 2019 Comments Premium and claims DKKm Premium income, net Claims, net Combined ratio of 84% in 2019 compared to 91% in 2018 120 105 Net premium income up by DKK 7m YoY and down by DKK 1m QoQ 90 75 Net claims down by DKK 3m YoY and down by DKK 0.3m 60 QoQ 112.5 105.0 45 Profit before tax of DKK 18m in 2019 relative to DKK 8m in 72.1 69.0 30 2018 and DKK 4m in Q4 2019 relative to DKK 6m in Q3 15 29.1 28.2 2019 17.3 17.0 0 2018 2019 Q3 2019 Q4 2019 Trygd expects to continue attracting new customers and growing premium income in 2020 Profit before tax DKKm 20 15 10 17.7 5 8.2 5.6 4.0 0 2018 2019 Q3 2019 Q4 2019 Page 9
Pressure on operating costs YTD Comments QoQ changes in operating costs DKKm Operating costs up by DKK 16m YoY and up by DKK 0.8m • 120 QoQ 118 YoY increase in staff costs due to non-recurring items, 1.2 • 1.2 116.6 115.8 severance payments as well as general wage increases 0.4 116 2.0 YoY increase in marketing expenditures mainly related to • 114 the Group’s Volapyk-marketing campaign 112 Initiatives launched in December 2019 are expected to • have a positive effect of approx. DKK 20m in 2020 110 Q3 2019 Staff IT Education Other Q4 2019 expenses Average number of employees (FTE) YoY changes in operating costs DKKm 6 420 6 480 6 6 472.1 2.6 0.0 6 6 6 7 7 25 7 7 7.8 26 390 26 7 26 470 24 26 26 26 25 25 5.5 25 25 360 460 456.2 384 380 378 374 364 330 361 360 359 360 357 356 350 450 300 440 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 2019 430 2018 Staff IT Marketing Other 2019 Banking Trygd Skyn expenses Page 10
Reversal of impairment charges continues Comments Net impairment charges DKKm Net impairment charges were a reversal of DKK 105m in 2019 148 85 Well-diversified loan portfolio with no individual sector accounting for more 20 than 5% -12 Strong LTV ratios for housing loans -60 -111 -105 2013 2014 2015 2016 2017 2018 2019 Gross loans by sector 2 LTV for housing loans 1 DKKm 5% 5% 10% 20% < 40% 32% DKK 10.2 bn DKK 3.3bn 5% 63% 3% 46% < 80% > 80% 4% 4% 34% Trade Transport & HoReCa Private sector Manufacturing & mining Real estate Corporate sector Agri. & fishing Other Public sector 1) Lending for housing accounts for DKK 5.7bn of total for retail lending of DKK 6.5bn Page 11 2) Excluding remaining Danish corporate loans of DKK 94m as per 31 December 2019
AT1 issuance strengthens capital position Comments YoY changes in CET1 ratio % CET1 up by 1.1 pp and total capital ratio up by • 2.5 pp, both Y0Y 20 0.6 0.2 0.1 19 AT1 capital in the amount of DKK 150m issued • 1.9 in September 2019 contributes 1.4pp to the 18 Group’s total capital ratio 17 18.8 16 17.7 15 14 2018 Net profit Exp. dividend REA Other 2019 Capital ratio development YoY changes in total capital ratio CET1 ratio Solvency ratio % 22.3 19.8 19.7 23 18.8 0.1 18.3 17.7 17.5 16.8 0.6 22 16.0 0.3 14.8 1.4 13.9 21 1.9 11.8 20 22.3 19 18 19.8 17 16 2014 2015 2016 2017 2018 2019 2018 Net profit Exp. dividend REA AT1 Other 2019 Page 12
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