Danske Bank Additional Tier 1 Capital
Investor Roadshow
March 2014
Agenda
Overview
3
Financial results
5
9
Capital, liquidity & funding
12
New issue
17
Appendix
25
16
23
24
25
2
Overview: Danske Bank has a strong Nordic franchise
3.8 million customers
Finland
Market position:
Leader
Branches:
45
Market share:
10%
2.2 million active internet customers
354 branches and presence in 15 countries*
19,122 full-time employees
Norway
Northern Ireland
Market position:
Branches:
Market share:
Leader
53
20%
Market position:
Branches:
Market share:
Challenger
32
4%
Ireland
Market share:
4%
Market position:
Branches:
Market share:
Market position:
Branches:
Market share:
Denmark
Leader
159
27%
Sweden
Challenger
39
5%
Estonia
Market position: Challenger
Branches:
13
Market share:
7%
Market position:
Branches:
Market share:
Latvia
Challenger
1
2%
Lithuania
Market position:
Branches:
Market share:
Challenger
12
6%
*. Excluding agricultural centres in
Denmark.
Numbers as of end 2013. Market share by lending.
3
Overview
3
Financial results
5
9
Capital, liquidity & funding
12
New issue
17
Appendix
25
16
23
24
25
4
Executive summary 2013
Net profit & ROE
DKK 7.1bn, a 51% increase from 2012; ROE improved from 3.6% to 5.0%
Income
Total income was down owing primarily to lower income from trading and insurance activities
Expenses
Expenses down 1% despite restructuring costs
Impairments
Impairments down 45%; improvement at all business units
Non-core
Significant improvement in pre-tax loss owing to lower impairments
Capital
Strong capital: Danske Bank Group CET1 ratio of 14.7% and total capital ratio of 21.4%
Dividend
The Board of Directors is proposing a dividend of DKK 2 per share, or 28% of the net profit
Outlook
Net profit in 2014 of DKK 9-12 bn
5
Net profit: DKK 7.1 bn, up 51% from 2012
Income statement & key figures (DKK m)
2013
Net interest income
Key points, 2013 vs 2012
2012 Index Q4 2013 Q3 2013 Index
22,245
22,778
98
5,683
5,606
101
Net fee income
9,525
8,866
107
2,777
2,278
122
Net trading income
5,818
10,562
55
1,471
418
352
Other income
1,328
1,285
103
374
301
124
Net income from insurance business
1,088
2,171
50
614
479
128
40,004
45,662
88
10,919
9,082
120
24,343
24,642
99
6,880
5,545
124
15,661
21,020
75
4,039
3,537
114
4,187
7,680
55
845
959
88
11,474
13,340
86
3,194
2,578
124
-1,415
-4,801
-
-332
-274
-
10,059
8,539
118
2,862
2,304
124
2,944
3,814
77
939
768
122
7,115
4,725
151
1,923
1,536
125
Total income
Expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Profit before tax
Tax
Profit
Return on avg. shareholders' equity (%)
5.0
3.6
5.3
4.3
Cost/income ratio
60.9
54.0
63.0
61.1
Core tier 1 capital ratio (%)
14.7
14.5
14.7
14.2
7.1
1,553
788
5.0
1,641
784
1.9
1,553
788
1.5
1,579
EPS
Lending (DKK bn)
Deposits (DKK bn)
786
• NII fell 2% owing to lower lending
volumes and lower short-term rates
• Trading income declined 45% owing
to extraordinary conditions in 2012
and a relatively weak 2013
• Expenses down 1% despite high
restructuring costs in Q4 2013
• Impairments and losses from
Non-core dropped substantially
Key points, Q4 13 vs Q3 13
• NII up 1% as higher lending margins
offset pressure on deposit margins
and lending volumes
• Fee income up 22% from higher
fees at all business units, including
performance fees at Danske Capital
• Trading more normalised
• Expenses up 24% owing mainly to
restructuring charges and
seasonality
6
Impairments: Loan loss ratio of 18 bp for core activities and
23 bp for entire Group
Impairments, 2008 to Q4 13 (DKK bn/bp)
Impairments
10
Impairments (DKK m)
Loan loss ratio* (rhs)
Q413
180
173
8
445
88
1,935
2,749
70
Business Banking
415
390
106
1,779
3,825
47
38
124
31
473
1,160
41
-
-
-
-
-54
-
Total core
845
959
88
4,187
7,680
55
Non-core
255
212
120
1,233
4,849
25
1,100
1,171
94
5,420
12,529
43
Q313 Index
2013
Group
7
120
6
99
90
5
Loan loss ratio, annualised (bp)
Q413
4
60
3
2
1
2012 Index
393
Other activities
150
2013
Personal Banking
C&I
9
Q313 Index
23
30
19
21
90
22
31
71
Business Banking
27
25
108
28
58
48
3
8
38
9
21
43
18
20
90
22
39
56
353
279
127
392
1217
32
23
24
96
28
63
44
Total core
Non-core
11
0
0
Q2
08
Personal Banking
C&I
33
Q2
09
Q2
10
Q2
11
Q2
12
2012 Index
Group
Q2
13
* Loan loss ratio defined as annualised impairment charges as a percentage of loans and guarantees.
7
Our Vision and Mission stand firm, and we are accelerating the
execution of our strategy
Vision
Mission
“Recognised as the most trusted financial partner”
“Setting new standards in financial services”
Customer
satisfaction
Financial
results
Advisory
services
Digitalisation
Openness &
Transparency
Strategy
Customer
attention
Simplicity
Efficiency
Business review initiated
8
Our achievements in 2013 serve as a strong platform
Developments in 2013



More than 1 m downloads of MobilePay since launch in Denmark in May 2013; launched in Finland in Q4
Customer Programme: 1.2 m customers registered in Denmark
Private Banking was named Best Private Banking Bank in Denmark by the Financial Times
PERSONAL BANKING



New units for large businesses and large real estate customers
Leading market solution for tablet and mobile banking for businesses on the go
Customer satisfaction on target in three of the five markets
BUSINESS BANKING


CORPORATES
& INSTITUTIONS



Ranked 1st in Prospera’s “Corporate Banking 2013 Nordics” and “Institutional Banking 2013 Nordics”
Strong growth in income from Equities and improved Prospera rankings
Growth in high-yield bond underwriting
Significant increase in customer satisfaction – from 4th to 2nd place
Launch of online Pension Check, which received an Investment & Pensions Europe 2013 award
DANICA PENSION


Named by Morningstar “Best in equities in Denmark” for 5th year running and “Best equity fund in Norway”
Strong growth in managed accounts sold to personal and Private Banking customers across the Nordics
DANSKE CAPITAL
9
ROE target: 9% in 2015 on income and cost-saving initiatives,
income normalisation and lower Non-core loss
ROE drivers from 2013 to 2015 (%)
ROE drivers
Current income drivers
2013
• Continued optimisation of pricing structures for lending,
deposits and other products
5.0
• Extension of the duration of the Group’s bond portfolio
Income
(new initiatives)
• Lower funding costs from planned repayment of state
hybrid, low funding need, and refinancing at lower costs
• Income initiatives at C&I, including guaranteed products,
equities and Debt Capital Markets products
Income
(normalisation)
• Normalisation of market making and insurance results
Current cost drivers
Costs
• FTEs reduced by 709 in Q4 2013
• Internal efficiency measures on track
Non-core loss
Non-core loss
• Loss at Non-core is expected to be marginal in 2015
Capital
Capital
• Higher RWA from implementation of IRB orders
increases average equity
2015E
9.0
10
Overview
3
Financial results
5
9
Capital, liquidity & funding
12
New issue
17
Appendix
16
25
23
24
25
11
Funding and liquidity: Outlook for lower funding costs owing to
lower volume and prices; strong liquidity position
Changes in funding 2013 & 2014 (DKK bn and bp)
Cov.bonds
Senior
Tier 2
Lending and funding sources ex. RD, (DKK bn)
Tier 1
Lending, ex repo
133bp
587bp
37bp
30bp*
18
1,000
900
29
10
Redeemed 2013:
DKK 58 bn
-56
28
400
15 14
56bp
5
New 2013:
DKK 39 bn
108bp
2
Redemptions 2014:
DKK 65 bn
Long-term funding ex RD (DKK bn)
Funding plan
96
7
46bp
14
Market funding
60bp 266bp
287bp
26
Deposits
300
200
Dec
2012
Mar
2013
Jun
2013
Sep
2013
Dec
2013
Liquidity Coverage Ratio** (%)
Completed
150
95
73
125
39
20-40
126
132
132
127
110***
100
2011
2012
2013
2014
Q1 13
Q2 13
Q3 13
Q4 13
* Spread over 3M EURIBOR. **LCR is calculated in accordance with Danish FSA’s specifications and includes holdings of covered bonds and Danish mortgage bonds, including own issued
bonds. . ***Minimum requirement of the Danish FSA.
12
Capital: Strong capital ratios from retained earnings and
capital issues in Q4 2013
Group capital ratios, under CRD/Basel II (%)
Tier 2
• State hybrid represents 2.8 percentage-points of tier 1 and total
capital ratio and is expected to be repaid in Q2 2014
Hybrid tier 1 (incl. state hybrid)
CET1
21.3
21.4
2.4
2.4
4.4
2.8
1.5
Capital drivers
• A number of new tier 2 issues, totalling DKK 13.9 bn, were issued
in Q4 to replace the USD 1 bn tier 2 RAC issue and to prepare for
the planned repayment of the state hybrid capital
State
hybrid
• RWA decreased DKK 16 bn because of lower credit risk and lower
operational risk
• CRD IV leverage ratio: 4.6% according to the transitional rules and
3.3% fully phased-in
CRD IV effect on CET1 ratio (%)
14.7
0.7
14.5
Q413
13.9
1.1
14.7
CET1
Q413
Q412
0.1
RWA
effect
12.8
20%
Pro forma
80%
Pro forma
deduction
CET 1
deduction CRD IV
for Danica 1 Jan 2014 for Danica Q413
etc.
etc.
13
Capital: Strong build-up since 2009
Capital base, 2009-2013 (DKK bn)
Key points
CET1 capital
AT1 capital
Tier 2 capital
182
20
4
127
24
155
37
47
17
3
36
• Danske Bank is focusing on an
ongoing optimisation of the current
capital instruments in relation to
CRD IV’s grandfathering of
non-compliant CRD IV instruments
• A strengthening of the capital base
has primarily been focusing on the
CET1
• In addition to the CET1 increase,
Danske Bank issued tier 2 capital
for DKK 13.9 bn in Q4 2013
38
39
11
RWA and Group capital ratios (DKK bn, %)
126
79
78
Q1 2009
AT1 capital Other capital
increases
and
decreases
Q2 2009
2009
2011
2013
834.2
906
852.3
CET1 ratio
9.5
11.8
14.7
Tier 1 ratio
14.1
16.0
19.0
Total
capital ratio
17.8
17.9
21.4
RWA
Decrease in Growth in
subordinated CET1 capital
debt
Q4 2013
14
Financial targets: Dividend payments of 28% for 2013, positive
outlook from Moody’s and progress towards 9% ROE in 2015
Target
Previous ambition
Year to be Status at 31
achieved December 2013
9%
Above 12%
2015
Above 12%
Above 12% in 2015 Long-term
Return on equity
5.0%
Improve ratings by at
least one notch
Unchanged
Core tier 1 ratio
Total capital ratio
Minimum 13%
Minimum 17%
Unchanged
Nominal costs
Cost/income ratio
Below DKK 23 bn
Below 50%
Below DKK 24 bn
Below 46%
Ratings
Dividend payments
About 40% of net profit Unchanged
2015
S&P/Moody’s/Fitch
A-/Baa1/A
Comments
In progress after initiating
additional cost savings
and other initiatives
In progress
Stable/Positive/Stable
Positive outlook from
Moody's in December
End-2013
14.7%
21.4%
Met at end-2012
Met at end-2012
2015
DKK 24.3 bn
60.9%
On track
On track
2015
28% payout for 2013
On track


15
Overview
3
Financial results
5
9
Capital, liquidity & funding
12
New issue
17
Appendix
25
16
23
24
25
16
New issue: Transaction Rationale
Capital Optimisation under CRD IV
- Strong CET1 position to be supplemented with Additional Tier 1 capital
- Normalisation of capital structure to be efficient under CRD IV
- 7.0% trigger allows for recognition in relation to Pillar 2 requirements
Supporting Senior Creditors
- Support for senior creditors and depositors by enhancing total capital in context of Bank
Recovery & Resolution Directive
- Incremental capital to support Danske Bank’s credit ratings
Timing Considerations (Political agreement in place and new law proposed to Parliament)
- Finalisation and implementation of CRD IV
- Clarity over regulatory framework for AT1: instrument criteria and associated capital
recognition
- Evolution and stability of market demand for new CRD IV capital instruments
- Clarification regarding Danish tax treatment of CRD IV AT1 instruments
17
Comparison with other Additional Tier 1 precedents
Size / Coupon
•
EUR [ ] bn [ ]%
•
•
USD 1.5bn 9.000%
EUR 1.5bn 7.000%
•
•
USD 1.25bn 8.250%
USD 1.75bn 7.875%
•
•
USD 2bn 8.250%
EUR1bn 8.000%
•
USD 1.75bn
7.875%
Issue Date
•
[ ] March 2014
•
•
30 Apr 2013
11 Feb 2014
•
•
29 Aug 2013
11 Dec 2013
•
•
13 Nov 2013
3 Dec 2013
•
15 Jan 2014
Format
•
Perp-nc-6
•
•
Perp-nc-5
Perp-nc-5
•
•
Perp-nc-5
Perp-nc-10
•
•
Perp-nc-5
Perp-nc-7
•
Perp-nc-10
First Call
•
2020
•
•
2018
2019
•
•
2018
2023
•
•
2018
2020
•
2024
Trigger Metric*
Transitional CET1
Transitional CET1
Transitional CET1
Fully-loaded CET1
Transitional CET1
Principal Loss
Absorption
Mechanism
Temporary Write-down
Share Conversion
Temporary Write-down
Share Conversion
Temporary Write-down
PONV
Risk Factor
Lapsing contractual/Risk
Factor
Risk Factor
Risk Factor
Risk Factor
Instrument
Ratings (M/S/F)
- / (BB+ )/ [BB+] (Exp.)
- / - / BB-
Ba3 / BB+ / BB
- / B+ / BB+
- / BB+ / BB+
Capital Buffer at
issue**
Implied
buffer to Trigger
Trigger
11.9%
7.7%
7.000%
7.000%
Group
Bank
Basel II End 2013
5.975%
7.575%
6.475%
5.125%
5.125%
5.125%
Group
Bank
Consolidated
Basel II End 2013
Basel 2.5 Sept. 2013
2.600%
4.900%
4.275%
7.000%
7.000%
Consolidated
Group
Basel III fully loaded
Sep 2013
(incl. Rights Issue)
Basel 2.5 Sept 2013
5.125%
Bank
Source: Transaction documentation, Bloomberg, IFR. The information above relating to capital ratios of other financial institutions represents the Issuer’s understanding of the respective institution's capital position
when the relevant transaction was marketed, and has been extracted from offering documentation and marketing presentations for the respective transactions. The Issuer takes no responsibility for the accuracy of any
such information. * Transitional CET1 means Basel 3 CET 1 phased-in capital definition in the European Union. Fully-loaded CET1 means that all measures used shall be calculated on a fully loaded basis. ** Buffer to
18
trigger relates to the latest AT1 transaction.
Mandatory distribution restrictions
Key points
• Mandatory restrictions to discretionary distributions* will apply to all European banks under CRD IV.
The Maximum Distributable Amount (“MDA”) is calculated in relation to the combined capital buffer
requirement (“CBR”)
• CBR is defined as the capital conservation buffer extended by the systemic risk buffer and
countercyclical capital buffer
• Danske Bank’s CBR of 5.8% is currently expected to consist of a 2.5% capital conservation buffer, a
0.3% countercyclical capital buffer reflecting the exposures in Norway and Sweden and a 3.0%
systematic risk buffer
• The analysis on this presentation assumes that the upcoming DK legislation will follow CRD IV, i.e.
Pillar II requirement is not relevant for MDA purposes
Danske Bank intends to manage its CET1 capital ratio to provide a prudent
cushion to its CBR to mitigate against the risk of mandatory distribution
restrictions under CRD IV
*Dividends on ordinary shares, coupon payments on AT1 instruments and discretionary variable compensation
19
Mitigating mandatory distribution restrictions
Estimated capital buffer structure, (%)
Key points
Countercyclical capital buffer
(0.3% from 2016)
CET1 (End 2013) 14.7%
CET1 capital target min.13%
Capital conservation buffer
CET1 trigger point 7%
• Significant headroom to the MDA
restriction point is anticipated,
assuming that the min.13% CET1
ratio target is maintained*
• Between now and 2017, the
effective floor for mandatory
restrictions on interest payments
will be the 7% CET1 trigger,
stepping up to 10.3% by 2019
when the CRD IV transitional rules
are fully phased-in
Systemic risk buffer
CET1 min req.
Sliding scale of restrictions
15
10.3
10
Estimated MDA buffers* (DKK bn)
9.1
7.9
5
10.3
4.0
5.1
0.6
6.6
1.3
0.6
1.2
1.8
2.5
2.5
3.0
3.0
1.9
2.4
51
4.5
4.5
4.5
4.5
2014E
2015E
2016E
2017E
2018E
2019E
2020E
44
33
23
23
2020E
4.5
51
2019E
4.0
4.5
51
0
2018E
2017E
2016E
2015E
2014E
*Assuming CET1 target of min.13% and that AT1 and T2 requirements are covered by relevant capital instruments .
20
New issue: Terms and Conditions 1/3
Issuer
Danske Bank A/S
Issuer’s Senior Ratings (M/S/F)
Baa1 (Pos) / A- (Stable) / A (Stable)
Instrument Rating (S/F)
[BB+*] / [BB+] (expected)
Description
EUR [ ] Perpetual Non-cumulative Resettable Additional Tier 1 Capital Notes
(the “Notes”)
Perpetual
Maturity
Optional Redemption
[] April [2020] (“First Call Date”) at the Outstanding Principal Amount or on
any interest payment date thereafter subject to regulatory approval
Interest
[ ]% p.a. payable semi-annually in arrear up to the First Call Date
Thereafter reset to a new fixed rate, payable semi-annually in arrear, based
on the underlying swap rate plus the margin, in 2020 and every sixth
anniversary thereafter
Interest Cancellation
Any payment of interest in respect of the Notes shall be payable only out of
the Issuer’s Distributable Items and (i) may be cancelled, at any time, in
whole or in part, at the option of the Issuer in its sole discretion, or (ii) will be
mandatorily cancelled to the extent so required by the Relevant Rules,
including the applicable criteria for Additional Tier 1 Capital instruments
Note: The summary terms are outlined in their entirety in the full terms and conditions of the Notes
* S&P is currently in the process of completing a RfC on rating methodology on Bank Hybrid Capital instruments as described in “Risk Factors” in the Prospectus
21
New issue: Terms and Conditions 2/3
Status/Subordination
The Notes are eligible to constitute Additional Tier 1 under CRD IV. Subject to any Loss
Absorption Following a Trigger Event and Reinstatement of the Notes as detailed below,
the Notes will constitute direct, unsecured and subordinated debt obligations of the
Issuer, and will rank
(i) pari passu without any preference among themselves, (ii) pari passu with any other
Tier 1 Capital of the Issuer (including the Existing Hybrid Tier 1 Capital Notes) and
obligations or capital instruments that rank or are expressed to rank equally with the
Notes, (iii) senior to all classes of Issuer’s share capital and obligations ranking or
expressed to rank junior to the Notes and (iv) junior to all other obligations of the Issuer
Special Event
Redemption
The Issuer may redeem the Notes at the Outstanding Principal Amount at any time in
case of a Tax Event (future additional amounts or loss of deductibility) or a Capital Event
(exclusion from or reclassification to a lower form of regulatory capital) (each a “Special
Event”) subject to regulatory approval
Substitution and
Variation
If a Special Event has occurred, the Issuer may substitute all (but not some only) of the
Notes or vary the terms of all (but not some only) of the Notes, without any requirement
for the consent or approval of the Holders, so that they become or remain Qualifying
Capital Notes
Qualifying Capital Notes must (i) comply with the then current Additional Tier 1 Capital
requirements and provide the same amount of regulatory recognition as the Notes, (ii)
carry the same rate of interest, (iii) have the same Original and Outstanding Principal
Amounts, (iv) rank pari passu with the Notes, (v) not immediately be subject to a Special
Event Redemption, (vi) have terms that are not materially less favourable to an investor
and (vii) maintain listing
Note: The summary terms are outlined in their entirety in the full terms and conditions of the Notes
22
New issue: Terms and Conditions 3/3
Loss Absorption
following a Trigger
Event and
Reinstatement
If at any time the Common Equity Tier 1 (“CET1”) Capital Ratio of the Issuer and/or the
Group has fallen below 7.000 %, the Outstanding Principal Amounts shall be reduced (in
whole or in part)
The amount of the write down shall be the lower of (i) the amount that would cure the Trigger
Event taking into account first the CET1 generated by any instruments with a higher CET1
trigger than the Notes and second any CET1 generated pro rata by all Parity Trigger Loss
Absorbing Instruments (if any), in each case to the extent permitted by the Relevant Rules,
and (ii) the amount that would reduce the Outstanding Principal Amounts to EUR 0.01
Following any such reduction of the Outstanding Principal Amounts, the Issuer may, at its
discretion, reinstate some or all of the principal amount of the Notes subject to compliance
with the Relevant Rules
Reinstatement under current rules would be on a pro-rata basis with all other Parity Trigger
Loss Absorbing Instruments with triggers at the same level and that feature similar
reinstatement provisions
PONV
The Notes may be subject to statutory provisions as applicable from time to time that could
lead to write down and/or conversion to ordinary shares of the Issuer of the Outstanding
Principal Amounts of the Notes, as further described in the “Risk Factors” in the Prospectus
Governing Law
English Law, except subordination, interest cancellation, loss absorption and reinstatement,
Special Event redemption and Enforcement Events which will be under Danish Law
Denominations/
Listing
Neg. Pledge/
Cross Def.
EUR 100k+1k/Irish Stock Exchange
None
Note: The summary terms are outlined in their entirety in the full terms and conditions of the Notes
23
Overview
3
Financial results
5
9
Capital, liquidity & funding
13
New issue
17
Appendix
25
16
23
24
25
24
Appendix
Business units
26
Special topics: Trading and expenses
31
Impairments
33
Macro, credit quality and portfolio dives, including Non-core
35
SIFI regulations, funding and ratings
44
Deep dives: Danica’s profit model and tax
47
Contact list
44
49
25
Personal Banking: Increasing profit; positive impairment trend
continues
Income statement & key figures (DKK m)
Financial highlights for Q4 2013
Net interest income
Net fee income
Net trading income
Other income
Total income
Expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Q4 2013
2,778
1,164
231
183
4,356
3,149
1,207
392
815
Q3 2013
2,817
1,045
131
154
4,147
2,919
1,228
445
783
Lending
Deposits
FTE
ROE (pre-tax)
823,953
348,948
6,934
9.8
836,679
358,748
7,400
9.5
Index
99
111
176
119
105
108
98
88
104
98
97
94
• Profit before tax up 4%, and pre-tax ROE up 0.3 of a
percentage point to 9.8%
• Total income up 5% on higher trading income from
refinancing fees on RD loans
• Recent pricing initiatives partially mitigated the drop in
volumes stemming from lower demand and price
competition
• Expenses up 8% from severance payments and higher
IT expenses for development of online solutions
• Impairment charges remained low, declining 12% from
the Q3 2013 level to DKK 0.4 bn
Loan impairment charges (DKK bn)
• Loan loss ratio dropped from 21 bp in Q3 to 19 bp in Q4
• More than 1.2 million customers have registered for the
new customer programme in Denmark
692
Q412
589
Q113
509
Q213
• The MobilePay app released in Q2 2013 in Denmark
has become a “new standard” for easy money transfer
with more than 1 million downloads
445
392
Q313
Q413
• MobilePay was launched in Finland in Q4 2013
26
Business Banking: Increasing income and stable impairments
Income statement & key figures (DKK m)
Financial highlights for Q4 2013
Net interest income
Net fee income
Net trading income
Other income
Total income
Expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Q4 2013
2,259
510
274
120
3,163
1,552
1,611
415
1,196
Q3 2013
2,252
466
129
112
2,959
1,290
1,669
390
1,279
Index
100
109
212
107
107
120
97
106
94
Lending
Deposits
FTE
ROE (pre-tax)
614,118
265,347
3,769
10.9
620,943
261,727
3,734
11.5
99
101
101
Loan impairment charges (DKK bn)
• Profit before tax down 6%, and pre-tax ROE down 0.6 of a
percentage point to 10.9%
• Total income increased 7% from Q3 because of
refinancing income in December and the positive effect
of income initiatives
• NII remained stable despite continued pressure on
lending volumes
• Impairments remained at the Q3 level of DKK 0.4 bn,
with a loan loss ratio of 27 bp
• Expenses rose 20% from the low level in Q3 owing
mainly to severance payments and the booking of holiday
payments
• Credit decisions were moved closer to the frontline;
faster, more convenient loan application process
• Strong interest in new mobile banking products
794
579
Q412
Q113
395
390
415
Q213
Q313
Q413
27
Corporates & Institutions: Improvement on all income lines
Income statement & key figures (DKK m)
Financial highlights for Q4 2013
Net interest income
Net fee income
Net trading income
Other income
Total income
Expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Q4 2013
663
346
1,342
7
2,358
1,372
986
38
948
Q3 2013
582
308
671
3
1,564
976
588
124
464
Index
114
112
200
233
151
141
168
31
204
Lending
Deposits
FTE
ROE (pre-tax)
154,406
173,655
1,565
12.2
160,735
168,249
1,594
6.1
96
103
98
Loan impairment charges (DKK bn)
• Profit before tax up 104%, and pre-tax ROE at 12.2%
• Total income increased 51% from Q3 to Q4 on higher
income from all lines
• NII rose 14%, primarily because of higher margins
• Sales and Research income rose as improved market
visibility led to higher client-driven activity; Market Making
income also improved as investors were more active
• Expenses increased 41%, primarily from bonuses,
severance payments and seasonality
Income breakdown (%)
Market Making
Sales and Research
Capital Markets
General Banking
2,382
2,057
291
36
Q412
1,564
124
38
20
Q113
Q213
2,358
2,131
Q313
Q413
Q412
Q113
Q213
Q313
Q413
28
Danske Capital: Profit up 84%, with a positive trend in AuM
Income statement (DKK m)
Financial highlights for Q4 2013 and FY 2013
Net interest income
Net fee income
- portion from performance fees
Other income
Total income
Expenses
Profit bef. loan imp. charges
Loan impairment charges
Profit before tax
Q4 2013
-9
773
302
7
771
322
449
449
Q3 2013
-12
472
4
464
220
244
244
Index
164
175
166
146
184
184
Assets under management (bn)
727
712
102
15
1.7%
10
5
Net inflow as % of AuM (rhs)
2.7%
20
19.2
11.4
• From 2012 to 2013, total income rose 13%, excluding
perfomance fees total income rose 21%
• Assets under management rose from DKK 687 bn at
end-2012 to DKK 727 bn at end-2013
• Net inflow increased DKK 28 bn in 2013 evenly divided
between the Nordic countries
• Successful expansion of the hedge fund product range
with AuM of DKK 11 bn at the end of 2013, an increase
of 43% from 2012
Net inflow in AuM (DKK bn)
Net inflow
• Total income increased 66% owing to performance fees
of DKK 302 m in Q4
3
2
1.3%
8.9
-0.4%
-3.0
0
0.4%
1
2.9
0
-5
• Strengthened market position in alternative
investments e.g. advisory agreements with Danish
pension fund. AuM of 18 bn at the end of 2013
• Roll-out of managed account products in most of the
Nordic countries in close cooperation with Personal
Banking. AuM of 17 bn at the end of 2013
-1
Q412
Q113
Q213
Q313
Q413
29
Danica Pension: Improved income because of more normal
market conditions
Income statement (DKK m)
Financial highlights for Q4 2013 and FY 2013
Premiums
Danica Traditionel (insurance result)
Unit-linked (insurance result)
Health and accident (ins. result)
Result from insurance business
Investment result
Financing result
Special allotments
Net income bef. postponed risk allow.
Change in shadow account
Net income
Q4 2013
6,816
241
157
-38
360
170
-43
-45
442
172
614
Q3 2013
5,967
289
152
-43
398
110
-46
-18
444
35
479
Index
114
83
103
90
155
100
128
Possibility of booking risk allowance in 2014 (%)
% change in equities
• It was possible to book risk allowance for three of four
interest rate groups, although only partly for one of them
• In Denmark, total premiums rose 6% to DKK 4.7 bn; in all
markets, they rose 14% to DKK 6.8 bn
• At the end of Q4, the shadow account balance was DKK
1.2 bn
Investment allocation for Danica Traditionel, end-Q4 13 (%)
Equities
100%
50%
• Net income from insurance increased in Q4 owing to a
higher investment result and booking from the shadow
account
Full risk allowance
Partial risk allowance
0%
-50%
-100%
-2.00%
-1.00%
0.00%
1.00%
Percentage point change in interest rates
Credit bonds
Property
14
12
10
12
50
56
66
69
21
21
11
12
12
New schemes
Low
Medium
15
No risk allowance
Bonds
2.00%
7
12
High
30
Trading income: Rebound in Q4 after a difficult Q3
Trading income by business unit (DKK m)
Other incl. Treasury
1,830
C&I
Business
1,775
Key points
• More normalised trading income in
Q4 2013 after the subdued Q3
Personal
2,154
1,463
418
Q412
Q113
Q213
Q313
Q413
Trading income from C&I (DKK m)
• Loss of DKK 0.4 bn at Treasury from
redemption of tier 2, continuation of
high LCR and some unallocated
funding costs
• Personal Banking and Business
Banking benefitted from DKK 245 m
in refinancing fees, down from DKK
313 m in Q4 2012
Trading income split, Q4 2013 (%)
Market Making
Repos &
derivatives
Customer-driven
1,581
14
1,342
1,300
1,285
671
FX &
money 25
market
52
9
Q412
Q113
Q213
Q313
Q413
Equities
Bonds & DCM
31
Expenses: Adjusted expenses up slightly in 2013, while branch
and FTE reductions continue
Expenses (DKK m)
FTEs, end of period (000s)
Expenses
Guarantee Fund and bank tax
Revaluation of domicile prop
Perf. based compensation
Severance payments etc
Rebranding
Write-down, name rights
Adjusted expenses
2013
24,343
954
58
762
756
-7
21,820
2012
24,642
700
244
903
586
177
464
21,568
Index Q4 2013 Q3 2013
99
6,880
5,545
136
231
208
24
43
84
260
118
129
398
147
1
101
5,948
5,071
Index
124
111
221
271
117
23.6
22.1
21.5 21.3
-5%
20.1
19.1
Branches, end of period
-56%
804
2008
734
2009
670
2010
645
2011
491
2012
354
2013
Q408 Q409 Q410 Q411 Q412 Q413
32
Impairments: Stable from Q3 to Q4
Impairments by business unit (DKK bn)
Non-core
C&I
Business
Impairment drivers
Personal
• Impairments at Personal Banking
and Business Banking were stable
2.7
• Drop of DKK 100 m at C&I - back to
the very low level of Q2
• Impairments in Non-core largely
unchanged at DKK 0.3 bn
2.0
• Positive trend for impaired loans
continued, with declining volume of
defaults
Impaired loans (DKK bn)
1.1
1.2
0.2
0.1
Q412
Q113
Q213
1.1
Defaulted
0.3
0.0
31.8
31.6
30.8
11.6
11.4
10.6
20.3
20.1
20.1
Q2 13
Q3 13
Q4 13
0.4
0.4
0.4
0.4
Q313
Q413
Note: Impaired loans are loans in rating categories 10 and 11 on which individual impairments have been made.
Performing
33
Group impairments: Quarterly individual charges have
stabilised with DKK 46.9 bn in the allowance account
Individual loan impairment charges*, ex Baltics (DKK bn)
New
Increased
Change in allowance account* (DKK m)
Reversals
Allowance, end-2007
2.7
4,900
2.1
1.4
1.1
1.2
Gross impairments
127,127
1.8
Reversals
35,929
1.6
Write-offs
49,198
-2.2
Allowance, end-Q4 13
Q412
Q113
* Includes Non-core activities.
Q213
Q313
46,900
Q413
34
Macro: Trends in the Nordics
Bankruptcies (index 1996 = 100)
Denmark
Finland
Norway
Rating upgrades,* 12-month moving average (%)
Business Banking
Sweden
500
C&I (incl. Financials)
100
400
Upgrades > downgrades
300
50
200
Downgrades > upgrades
100
2000
2005
2010
2015
Property prices, Nordic countries (index 2003 = 100)
Denmark
Finland
Norway
0
2009
2010
2011
2012
2013
House prices/nom. GDP, Nordic countries (index 2005 = 100)
Sweden
Denmark
220
Finland
Norway
Sweden
130
120
180
110
140
100
90
100
2004
2006
2008
2010
2012
2014
* The relation between upgrades and total rating changes. Ratings since Q4 11 reflect recalibration.
2006
2008
2010
2012
35
Denmark: Housing remains affordable as prices stabilise
Danish house prices by region (%)
Region
Affordability index, quarterly data from1988–2012
Change Change in q/q
Prices
peaked since peak
Q3 2013
Q4 13
140
120
Copenhagen
Q3 2006
-21.8
0.7
1.7
Zealand
Q2 2007
-28.1
-0.5
10.9
South Denmark
Q2 2008
-18.6
-0.6
-5.2
Central Jutland
Q2 2008
-14.5
-1.7
1.1
Northern Jutland
Q1 2008
-10.3
-4.0
-12.2
Nationwide
Q3 2007
-17.3
-0.6
1.0
Danish housing market (000s)
No. housing units for sale
Fixed rate
Preview*
Mixed rate
Average
Above average = expensive
100
80
60
40
1988
Below average = cheap
1992
1996
2000
2004
2008
2012
Unemployment and foreclosures (%)
House price per m2 (rhs)
80
10Y swap rate
14
Unemployment
No. of forced sales (rhs)
2,000
15
70
1,500
10
60
12
50
1,000
5
500
40
30
10
2007
2008
2009
2010
2012
0
1988
0
1996
2004
2012
* Leading indicator based on monthly statistics from “home” (Danske Bank’s real estate agency) that cover about one-third of the market.
Sources: Danske Research, Statistics Denmark, Assoc. of Danish Mortgage Banks, “home”, Adam, Danish central bank, SKAT (tax authority )and own calculations.
36
Realkredit Danmark: Portfolio overview
Portfolio facts, Realkredit Danmark, end-Q4 13
•
•
•
•
•
Loans broken down by LTV ratio and rating, RD, end-04 13 (%)
Rating
Approx. 385,000 loans (residential and commercial)
2,524 loans in 3- and 6-month arrears
122 repossessed properties
DKK 12 bn of loans with LTV > 100%, including DKK 2bn
with public guarantee
Average LTV ratio of 71%
1-3
4-7
8-11
Total
Public
guarantee
0-20
48
185
21
254
3
20-40
32
156
19
207
3
40-60
21
115
15
151
3
60-80
10
64
10
85
4
80-100
4
18
4
25
2
>100
3
7
2
12
2
117
545
72
734
16
LTV ratio
LTV ratio at origination (legal requirement)
• Residential: max. 80%
• Commercial: max. 60%
Total (DKK bn)
1-month arrears, Realkredit Danmark (% of stock)
Trend in mortgage margins, 80% LTV, owner-occupied, (bp)
All products
0.8
Fixed rate
Adjustable rate
118
0.6
0.6%
68
52
0.4
Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413
+ refinancing fee*
86
2011 Jan13: with amortisation
* 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 .
+ refinancing fee*
101
Jan 13: interest-only
37
Personal Banking Denmark: Limited exposure to high LTV ratio
loans that start to amortise before end-2018
Exposure to households with an IO mortgage (DKK bn)
Breakdown of loans with high LTV ratio (DKK bn)
Danske Prioritet (SDO mortgage)
Exposure with LTV ratio above 100%
RD mortgage (fixed or variable rate)
Exposure with LTV ratio of 80-100%
IO mortgages that start to
amortise before end-2018
48
70 90
High LTV ratio**
Secured bank lending
56
Rating categories 1-8
Rating category 9
174
Total credit exposure
5.6
11.1
16.7
14.6
0.7
Category 11
(default)
Portion with acceptable
LTV ratio*
Rating categories 10-11
157
1.3
28%
72%
Category 10
Reset in
Portion with high LTV ratio**
16.7
2014 -18
2.3
0.7
2014
Impairments against
households with IO
mortgages
Collective
1.6
19%
81%
2015
* Definition of acceptable LTV ratio: 80% or below for RD mortgages and Danske Prioritet, and 100% or below for secured bank lending.
** Definition of high LTV ratio: above 80% for RD mortgages and Danske Prioritet, or above 100% for secured bank lending.
Individual
38
Impaired exposure: Limited agriculture and shipping exposure
Agriculture, breakdown of loan portfolio, Q4 13 (%)
Shipping, breakdown of loan portfolio, Q4 13 (%)
Other
Other
15
Mixed operations
26
RO-RO
Cereals etc.
6
Product tanker 6
Chemicals and feeds 13
20
6
Crude tanker
7 5 7
Offshore rig
Cruise/Ferry
Gas tanker
Dry bulk
Shipping, exposure and allowance, Q4 13 (DKK bn)
Gross
exposure
Allowance
Coverage
Personal Banking
0.5
0.1
16.3%
Business Banking
58.3
3.1
7.3
Total exposure, ex. Non-core
Portion from RD
Corporates & Institutions
19 Container
8
Cattle breeding
Agriculture, exposure and allowance, Q4 13 (DKK bn)
Business unit
2
Offshore supply 10
20
Pig breeding
15
Car carrier
Chemical tanker
6
8
Gross
exposure
Allowance
Coverage
Personal Banking
0.1
0.0
0.0%
5.3%
Business Banking
1.7
0.4
21.0%
0.0
0.0%
Corporates & Institutions
36.3
1.6
4.3%
66.1
3.1
4.8%
Total exposure
38.1
1.9
5.1%
45.5
0.3
0.7%
Gross impaired loans: DKK 3.6 bn (5.4%)
Business unit
Gross impaired loans: DKK 4.2 bn (11.0%)
39
Ireland: Non-core deleveraging develops according to plan
Key points
New Non-core: Pro forma loan portfolio,* Q4 2013 (DKK bn)
Profit before tax for 2013 of a negative DKK 1.4 bn, loss
reduced 71% from DKK 4,801 bn in 2012
Conduits etc.
•
Restructuring of core amounted to DKK 141 m in Q4
CRE
•
Guidance for 2014 impairments is maintained at up to
DKK 2 bn for core and Non-core Ireland after DKK 95 m
in impairments in Q4 2013
Personal mortgages
•
•
Sales are progressing well, with an increasing number of
properties on the market or under offer
•
In Q4 2013, the pro forma Non-core portfolio amounted
to DKK 55.6 bn, down from DKK 58.5 bn in Q3
Property pipeline and sales (No. of properties)
Q113
Q213
Q313
55.6
Other
6.2
10.4
7.4
13.2
Non-core
Ireland
Non-core
Conduits etc.
4.3
14.2
Core Ireland**
Total
RWA (DKK bn)
Q413
59
Core Ireland and Conduits etc.
Non-core Ireland
1,423
32
886
707
675
789
434
106
On the market
168
Offer or contract
293
40
95
35
31
28
27
Q412
Q113
Q213
Q313
Q413
95
Sold
* Gross credit exposure. ** Personal Banking and Business Banking Ireland.
37
40
Ireland: Termination of Personal Banking and Business
Banking
Core: Breakdown of loan portfolio, Q4 2013* (DKK bn)
Key points
•
Discontinuation of Personal Banking and Business
Banking on 1 January 2014
•
Existing customers are moved to the Non-core unit for
servicing and termination
•
Risk of additional impairments of up to DKK 500 m
towards end-2014, resulting in estimated total
impairments in 2014 of up to DKK 2 bn
18.5
14.2
4.3
Personal mortgages
Other
Total
Non-core: Breakdown of loan portfolio, Q4 2013* (DKK bn)
Realised impairments and guidance, core & Non-core (DKK bn)
24.0
10.4
CRE
* Gross credit exposure.
7.4
6.2
Personal
mortgages
Other
<2
0.1
Total
Realised Q4 13
Guidance for 2014
41
Ireland: House price trends and arrears
Irish house price indices (index 100 = January 2005)
Fall from peak (%)
CSO index,* houses
Residential real estate
Internal price index for houses in Dublin
Dublin
Internal price index for houses outside Dublin
140
55
Non-Dublin
120
62
Commercial real estate
Ireland, total
66
100
Arrears** (%)
91-180 days
80
12.9
180+ days
Market
60
5.1
40
20
2005
2006
2007
2008
2009
2010
2011
2012
2013
Q310
* The general Irish house price index. ** Number of arrears, personal customers, excluding buy-to-let financing. Based on Q2 2013.
Q311
Q312
Q313
42
Non-core Ireland: Breakdown of loan portfolio
Personal mortgages (DKK bn) Other* (DKK bn)
CRE (DKK bn)
10.4
7.4
Individual impairments
Value of collateral
Total (DKK bn)
6.2
24.0
8.9
4.7
16.7
5.8
2.9
3.2
10.1
1.4
3.1
Gross
exposure
Impaired
loans
Collective imp. (DKK bn)
Impaired
1.8
1.8
0.1
85%
Gross
exposure
Impaired
loans
Collective imp. (DKK bn)
Impaired
0.1
43%
Gross
exposure
6.6
Impaired
loans
Collective imp. (DKK bn)
Impaired
0.2
75%
Gross
exposure
Impaired
loans
Collective imp. (DKK bn)
0.3
Impaired
70%
Note: Value of collateral is capped by size of loan and reflects a haircut of at least 20%. Impaired loans are loans in rating categories 10 and 11 on which individual
impairments have been made. * Consists primarily of consumer-related industries.
43
SIFI: Key elements of political agreement in October 2013
Key elements
Capital requirements
 CT1 SIFI requirement of 1% to 3%
 Total minimum requirement for SIFI banks of 11.5%
to13.5% in 2019
 In periods of high loan growth, possibility of
countercyclical capital buffer up to 2.5% in 2019
Liquidity and funding requirements
 LCR requirements will be announced when the final EU
rules are in place, including rules on the treatment of
Danish covered bonds as level 1 assets
Danske Bank’s total SIFI requirements, 2019 (% of RWA)
CT1
CRD IV
7.0
SIFI
3.0*
AT1/T2
CRD IV
3.5
Legislative process and implementation
 H1 2014: The Danish parliament will pass a bill with the
final SIFI rules
 1 January 2015: Expected implementation of new rules
Total capital
* Phased in at 0.6% per annum 2015-19.
13.5
44
Funding: Structure and sources
Loan portfolio and long-term funding, Q4 13 (DKK bn)
Funding sources (%)
Q4 2012
1,785
102
Senior debt
788
Deposits
Q4 2013
46
1,553
Bank mortgages
333
18
164
Covered bonds
11
8
7
6
3
Short-term funding
Covered
bonds
Funding
Senior
unsecured
Loans
Issued RD bonds
Deposits
731
Repos
731
CD & CP
RD mortgages
Deposits
credit inst.
1
Equity
489
Subord.
debt
Bank loans
Long-term funding
45
Three different methods of rating banks
Rating methodology
Danske Bank’s rating
Anchor
SACP*
BBB+
+
1
+1
+
2
+
3
0
+
-1
4
=
0
SACP
=
Extraord.
+
Support
Add.
factors
+2
BBB+
=
Issuer
Rating
A(Stable)
-1
1=Business Position 2=Capital & Earnings 3=Risk Position 4=Funding & Liquidity
Bank
Financial
Strength
Rating
Baseline
Credit
Assessment (BCA)
C-
Baa2
+
Individual Rating/Viability Rating
Parental and
Cooperative
Support
0 notches
=
Adjusted
BCA
Baa2
+
Systemic
Support
=
1 notch
* Stand-Alone Credit Profile.
Baa1
(Positive)
a
Issuer Default Rating (IDR)
IDR is the higher of the Viability Rating
and the Support Floor
Support Rating/Support Rating Floor
Issuer
Rating
A
(Stable)
A-
46
Danica Pension’s profit model
Profit model
Condition/ sensitivity
2013
Danica Traditionel. Mainly risk
allowance 70 bp p.a. of
technical provisions (DKK 158
bn)
Can be booked only if investment
return is high enough and if no use of
bonus potential of paid-up policies
Risk allowance
Other
Unit-linked business. Longterm: approximately 0.4% of
AuM
Prices and volume
Solid income base, but also
price competition
538
Health and accident business
Combined ratio
Price competition
-167
Return on investment portfolio
at shareholders’ risk
Equity markets, interest rates
Investment return: 1.9%
349
4
+
Financing result
S-T interest rate (equity – allocated
capital)
Low short-term interest rate
-174
1
+
2
+
3
+
5
+
6
+
Special allotments, depending
on profit and business volume
Shadow account
7
=

Net income
DKK m
1,261
-123
-158
Transferred to shadow
account from two interest
groups, although only partly
from one
-438
1,088
47
Tax: 29% tax rate for 2013 and 24% adjusted for Ireland
Actual and adjusted tax rates (DKK m)
Tax drivers
2013
Q4 13
Q3 13
Q2 13
Q1 13
10,059
2,862
2,304
2,677
2,216
1,307
206
103
372
626
-258
-366
248
-292
151
11,108
2,702
2,655
2,757
2,993
2,944
939
768
493
744
-244
-296
-120
181
-9
Adjusted tax
2,700
642
648
674
736
Adjusted tax rate
24.3%
23.8%
24.4%
24.4%
24.6%
Actual tax rate
29.3%
32.8%
33.3%
18.4%
33.6%
Profit before tax
Pre-tax loss, Ireland core and non-core
Permanent non-taxable difference
Adjusted pre-tax profit, Group
Tax according to P&L
Taxes from previous years
• Tax on the profit for 2013
amounted to DKK 2.9 bn, or 29%
of the pre-tax profit
• The tax charge was high relative to
the profit, mainly because DKK
244 m was expensed as a result of
a decrease in the deferred tax
asset owing to lower corporation
tax rates in the UK
• Adjusted for this charge, the tax
rate for the year was 24.3%
48
Contact list
Henrik Ramlau-Hansen
Chief Financial Officer, Member of the Executive Board
Tel.: +45 45 14 06 66
Mobile: +45 22 20 73 10
E-mail: [email protected]
Christoffer Møllenbach
Head of Treasury
Tel.: +45 45 14 63 60
Mobile: +45 21 55 10 52
E-mail: [email protected]
Peter Holm
Senior Vice President
Tel.: +45 45 12 84 85
Mobile: +45 20 98 50 45
E-mail: [email protected]
Elisabeth Toftmann Klintholm
Chief IR Officer
Tel.: +45 45 14 06 04
Mobile: +45 25 55 63 37
E-mail: [email protected]
Bent Callisen
First Vice President
Tel.: +45 45 12 84 08
Mobile: + 45 30 10 23 05
E-mail: [email protected]
Claus Jensen
Chief IR Officer
Tel.: +45 45 12 84 83
Mobile: +45 25 42 43 70
E-mail: [email protected]
49
Disclaimer
Important Notice
•
This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the
solicitation of an offer to buy or acquire securities of Danske Bank A/S (“Danske Bank”) in any jurisdiction, including the
United States, or an inducement to enter into investment activity. No part of this presentation, nor the fact of its
distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment
decision whatsoever. The securities referred to herein have not been, and will not be, registered under the Securities
Act of 1933, as amended (“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
•
This presentation contains forward-looking statements that reflect management’s current views with respect to certain
future events and potential financial performance. Although Danske Bank believes that the expectations reflected in
such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have
been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a
result of various factors many of which are beyond Danske Bank’s control
•
This presentation does not imply that Danske Bank has undertaken to revise these forward-looking statements, beyond
what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will
lead to changes compared to the date when these statements were provided
50