Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — FY2012 Earnings Presentation
58 slides from Danske Bank A/S's earnings presentation, Feb 7, 2013
Slide 1: Financial results for 2012
CONFERENCE CALL Financial results for 2012 Eivind Kolding CEO & Chairman of the Executive Board Henrik Ramlau-Hansen CFO & Member of the Executive Board 7 February 2013
Slide 2: Agenda
Financial results for 2012 Agenda Key messages 3 Financial results 4 Capital, funding and liquidity 13 Future reporting and financial targets 18 Outlook for 2013 21 Q&A session 22 Appendix: Trends in focus areas & business units 23 2
Slide 3: Key messages on 2012
Financial results for 2012 Key messages on 2012 Income improved by 10% Impairments down by 5% - Q4 12 lowest level since 2008 Net profit improved by DKK 3 bn to DKK 4.7 bn Strong capital and liquidity levels – CT1 of 14.5% and LCR of 121% Outlook for net profit in 2013 of DKK 7.5-10 bn 3
Slide 4: Net profit improved by DKK 3 bn in 2012 mainly because of higher income
Financial results for 2012 Financial results: Net profit improved by DKK 3 bn in 2012 mainly because of higher income Income statement & key figures (DKK m) Key points for full-year 2012 2012 2011 Index Q4 2012 Q3 2012 Index Strong improvement in net profit Net interest income 24,788 23,537 105 6,
Slide 5: Net interest income: Higher lending margins at RD offset by higher funding costs
Financial results for 2012 Net interest income: Higher lending margins at RD offset by higher funding costs and lower deposit margins Quarterly net interest income (DKK m) Net interest income drivers Positive 6,218 Higher lending margins at RD 6,198 6,200 6,182 6,172 Full-quarter effect of highe
Slide 6: Net fee income: Strong fee income due to record-high performance fee
Financial results for 2012 Net fee income: Strong fee income due to record-high performance fee at Danske Capital Quarterly net fee income (DKK m) Fee income drivers Portfolio fees Activity fees Strong fee income in Q4 12 due to 2,653 performance fee of DKK 416 m at Danske Capital, up DKK 214 m fr
Slide 7: Trading income: Q4 below expectations due to low activity
Financial results for 2012 Trading income: Q4 below expectations due to low activity, mainly within derivatives Quarterly trading income (DKK m) Trading income drivers RD refinancing income Lower trading income due to slow Trading income market activity towards the end of the year 3,222 Trading
Slide 8: Insurance: Strong performance in 2012 as shadow account partly booked
Financial results for 2012 Insurance: Strong performance in 2012 as shadow account partly booked Quarterly insurance income (DKK m) Key points Strong insurance income in 2012 of 976 DKK 2.3 bn against DKK 0.6 bn in 953 2011 Risk allowance booked for three out of four groups No risk allowance f
Slide 9: Expenses: Elevated by seasonality and one-offs, but cost-saving programme on track
Financial results for 2012 Expenses: Elevated by seasonality and one-offs, but cost-saving programme on track Total expenses (DKK m) Expense drivers Adjustments* Adjustments related mainly to Adjusted expenses rebranding in Finland, Norway, Baltics and the Irish units and severance payments 6,850
Slide 10: Impairments: Declining for four consecutive quarters
Financial results for 2012 Impairments: Declining for four consecutive quarters Impairments by customer segment (DKK bn) Impairment drivers Financials Decline in quarterly impairments of 4.8 SMEs DKK 300 m driven by lower Large corp. impairments at CIB and Non-core Ireland; increase in Denmark Per
Slide 11: Impairments: Quarterly drop at CIB and Non-core Ireland, but increase in Denmark
Financial results for 2012 Impairments: Quarterly drop at CIB and Non-core Ireland, but increase in Denmark Impairments (DKK m) Loan-loss ratio (bp, annualised) Q312 Q412 Q312 737 Q412 Denmark Denmark 37 30 891 48 Finland 57 Finland 14 12 44 Sweden 99 Sweden 20 9 34 Norway 64 Norway 17 9 214 Norther
Slide 12: New strategy: Two new initiatives taken under New Standards
Financial results for 2012 New strategy: Two new initiatives taken under New Standards Personal Banking Business Banking New customer programme New financing Almost 250,000 customers have registered New financial options for businesses Net outflow of personal customers since 1 January: Up to
Slide 13: Capital: Strong core tier 1 ratio, exceeding target of 13%
Financial results for 2012 Capital: Strong core tier 1 ratio, exceeding target of 13% Capital ratios, under CRD/Basel II (%) Capital drivers Total capital New equity of DKK 7.1 bn issued in Tier 1 (including state hybrid) October accounts for 0.9 % point of Core tier 1 CT1 ratio Inclusion of DKK
Slide 14: Risk-weighted assets: Decline of DKK 87 bn in full year
Financial results for 2012 Risk-weighted assets: Decline of DKK 87 bn in full year and DKK 32 bn in the quarter RWA (DKK bn) RWA drivers Operational risk Significant RWA reduction in 2012 Market risk related primarily to sale of several Credit risk securitisation positions and capital 906 efficien
Slide 15: Statements from Danish FSA regarding liquidity
Financial results for 2012 Statements from Danish FSA regarding liquidity: All three requirements fulfilled ahead of time Measure Requirement Status, end-2012 Future policy 1. LCR* 100% by end-2012 110% by 1 January 2014 121% √ At least 110% 2. Funding A suitable balance between funding of at least
Slide 16: Liquidity: Continues to improve
Financial results for 2012 Liquidity: Continues to improve; more than DKK 230 bn in 12-month liquidity 12-month liquidity,* end of period (DKK bn) Key points Q4 2011 Q3 2012 Q4 2012 12-month liquidity of more than DKK 230 bn, up more than DKK 70 bn 400 since Q3 and positive for more than five year
Slide 17: Deposits and funding: Year-end increase in deposit base
Financial results for 2012 Deposits and funding: Year-end increase in deposit base after downgrade in Q2 Deposits, end of period (DKK bn) Long term funding Markets Funding raised in 2012: CIB – 42% covered bonds BA, other – 49% senior debt – 9% tier 2 capital 795 789 774 Deposits increased by DK
Slide 18: Financial highlights adjusted for funds transfer pricing, Non-core and leasing
Financial results for 2012 Financial highlights adjusted for funds transfer pricing, Non-core activities and leasing Adjusted financial highlights (DKK m) Drivers for new financial highlights 2012 Funds transfer pricing 2012 Adjusted 2013 Guidance 2015 targets New internal funds transfer pricing N
Slide 19: Future reporting will be based on the three business units
Financial results for 2012 Future reporting will be based on the three business units and our strategic business units Income statement & key figures (DKK m) Personal Business Danske Danica Other Highlights Banking Banking C&I Capital Pension Activities Non-core (adjusted) Net interest income 11,172
Slide 20: Financial targets: Four targets already reached
Financial results for 2012 Financial targets: Four targets already reached Financial target End-2012 (adj.) Ambitions Status ROE 3.7% Above 12% In progress Rating S&P/Moody’s/Fitch In progress A-/Baa1/A Improve ratings by at least one notch Pos. outlook Pos./Stable/Neg. from S&P Core tier 1 14.5% Mi
Slide 21: Outlook for 2013: Net profit of DKK 7.5-10 bn
Financial results for 2012 Outlook for 2013: Net profit of DKK 7.5-10 bn, another step towards target Macro Economic growth to remain low in most markets NII flat at 2012 level (DKK 22.7 bn) Income Increasing net fee income (2012: DKK 8.9 bn) Trading income and insurance income below 2012 levels (DK
Slide 22: Q&A session
Financial results for 2012 Q&A session Press 1 to ask a question Press “#” to cancel Press “Ask a question” in your webcast player www.danskebank.com/ir 22
Slide 23: Appendix
Financial results for 2012 Appendix Tax 24 NII and margin developments 25 Expenses 28 Credit 29 Funding and rating 41 Business units 45 44 23
Slide 24: Adjusted tax rate at 25%, but actual tax rate remains high owing to Ireland
Financial results for 2012 Adjusted tax rate at 25%, but actual tax rate remains high owing to Ireland Actual and adjusted tax rates (DKK m) Tax drivers High actual tax rate in 2012 2012 Q4 12 Q3 12 Q2 12 Q1 12 because the tax value of losses in Pre-tax profit 8,568 2,257 2,220 2,510 1,581 Ireland
Slide 25: Net interest income: Margin improvement visible in most markets
Financial results for 2012 Net interest income: Margin improvement visible in most markets Quarterly change in net interest income (DKK m) Net interest margins, NII/loan stock (%) Q4 11 Q4 12 Q3 12 6,198 1.3 Denmark 1.4 Deposit margin 56 1.5 Finland 1.2 Lending volume 54 1.5 Sweden 1.4 Funding 95 1.
Slide 26: Increasing lending margins are levelling off
Financial results for 2012 Increasing lending margins are levelling off Quarterly lending margins (%) Quarterly deposit margins (%) Q1 12 1.31 0.29 Q2 12 Denmark* 1.35 0.33 1.38 0.09 Q3 12 1.42 0.07 Q4 12 0.77 0.16 Finland 0.66 0.38 0.64 0.36 0.66 0.37 1.32 0.57 1.20 0.72 Sweden 1.19 0.72 1.16 0.59
Slide 27: Net interest income: Trend at Realkredit Danmark
Financial results for 2012 Net interest income: Trend at Realkredit Danmark Net interest income at Realkredit Danmark, excluding lending margins (DKK m) 2010 2011 2012 193 170 155 132 128 124 121 107 100 102 96 54 Q1 Q2 Q3 Q4 27
Slide 28: Expenses: Underlying expenses down from 2011 to 2012
Financial results for 2012 Expenses: Underlying expenses down from 2011 to 2012, but up from Q3, primarily because of seasonality Expenses (DKK bn) Quarterly change in expenses (DKK m) 2012 2011 Index Q4 2012 Q3 2012 Index Expenses 26.6 26.0 102 7.0 6.1 114 Q3 12 6,116 Revaluation of domicile prop.
Slide 29: Impairment dynamics
Financial results for 2012 Impairment dynamics Individual loan impairment charges, ex Baltics (DKK bn) Change in allowance account (DKK m) New Increased Reversals 5.4 Allowance, end 2007 4,900 3.8 3.5 3.5 2.7 Gross impairments 112,628 1.8 Reversals 27,895 3.4 Write-offs 41,840 -2.5 Allowance, end 20
Slide 30: Loan quality
Financial results for 2012 Loan quality Impaired loans/gross lending (%) Coverage, individual allowance/impaired loans (%) Q3 12 Q4 12 Q3 12 Q4 12 4.9 38 Denmark Denmark 4.3 42 3.3 35 Finland Finland 3.1 39 1.8 37 Sweden Sweden 1.6 43 2.6 40 Norway Norway 2.3 34 18.4 68 Northern Ireland Northern Ire
Slide 31: Macro trends
Financial results for 2012 Macro trends Bankruptcies (index 1996 = 100) Business confidence indicator (index 1996 = 100) Denmark Finland Sweden Norway Denmark Finland Sweden 400 140 300 120 200 100 100 80 60 1996 2000 2004 2008 2012 1996 2000 2004 2008 2012 Rating upgrades,* corporates, 12-month mov
Slide 32: Denmark: A small decline in house prices
Financial results for 2012 Denmark: A small decline in house prices Danish house prices by region (%) Affordability index, quarterly data from1988–2012 Fixed rate Mixed rate Average Region Prices Change Change in Preview* 140 peaked since peak Q3 12 Q4 12 Copenhagen Q3 2006 -27.1 -0.3 120 Above aver
Slide 33: Retail Banking Denmark, including Realkredit Danmark
Financial results for 2012 Retail Banking Denmark, including Realkredit Danmark Impairments at Retail Banking Denmark, Q4 12 (DKK m) Loans by LTV and rating, Realkredit Danmark, end-Q4 12 (%) Individual Collective Total Rating 1-3 4-7 8-11 Total Public LTV ratio guarantee Bank Personal customers 196
Slide 34: Mortgages: Pricing has been made more risk-sensitive
Financial results for 2012 Mortgages: Pricing has been made more risk-sensitive Denmark, mortgage margins, 80% LTV, owner-occupied, (bp) Margin increases All products Fixed rate Adjustable rate 2011–2012 106 Margin increase on personal customers (Q1 12) 98 Refinancing fee of 5 bp at each refinan
Slide 35: Realkredit Danmark: Gross lending shows change from floaters to fixed-rate
Financial results for 2012 Realkredit Danmark: Gross lending in 2012 shows a clear change from floaters to fixed-rate loans Gross lending – Retail (%) Total stock of loans - Retail (%) Installment loans Installment loans Interest-only loans Interest-only loans 67 61 62 56 21 20 20 42 40 31 31 15 28
Slide 36: Limited exposure to agriculture and shipping
Financial results for 2012 Limited exposure to agriculture and shipping Agriculture: breakdown of loan portfolio, Q4 12 (%) Shipping: breakdown of loan portfolio, Q4 12 (%) Other Other 14 Car carriers Mixed Ro-Ro 25 Agriculture 7 9 Chemical tanker operations Product tanker 5 2 6 7 Offshore supply 11
Slide 37: Denmark and Northern Ireland: Loan portfolio
Financial results for 2012 Denmark and Northern Ireland: Loan portfolio Dividend Individual impairments Value of collateral Residential mortgage exposure Commercial property exposure Denmark (DKK bn) Northern Ireland (DKK bn) Denmark (DKK bn) Northern Ireland (DKK bn) 520.3 16.6 122.4 9.9 10.6 0.5 1
Slide 38: Ireland: Breakdown of loan portfolio
Financial results for 2012 Ireland: Breakdown of loan portfolio Dividend Individual impairments Value of collateral Personal mortgages (DKK bn) Other (DKK bn) Total (DKK bn) Arrears,* personal customers (%) 91-180 days Market 15.6 10.5 26.0 180+ days 11.3 1.3 0.6 1.9 0.1 0.1 0.1 0.5 0.9 0.4 0.7 0.9
Slide 39: Non-core Ireland: Breakdown of loan portfolio
Financial results for 2012 Non-core Ireland: Breakdown of loan portfolio Dividend Individual impairments Value of collateral CRE (DKK bn) Personal mortgages (DKK bn) Other* (DKK bn) Total (DKK bn) 13.9 9.0 8.1 30.8 12.0 1.2 5.9 21.0 1.1 2.3 3.1 6.5 1.6 2.9 11.0 4.3 1.4 1.9 7.7 Gross Impaired Gross I
Slide 40: Valuations of Irish properties based on internal house price indices
Financial results for 2012 Valuations of Irish properties are based on internal house price indices instead of the CSO index Irish house price indices (index 100 = January 2005) CSO index* Internal price index for houses in Dublin 140 Internal price index for houses outside Dublin 120 100 80 60 40 2
Slide 41: Solid funding structure and liquidity position
Financial results for 2012 Solid funding structure and liquidity position Loan portfolio and long-term funding, Q4 12 (DKK bn) Maturing funding (DKK bn) Hybrid T1* 1,812 69 Subordinated T2* 1,674 120 Senior debt Senior Covered bonds 57 Bank loans 538 52 789 Deposits 50 42 Bank mortgages 400 167 Cove
Slide 42: Well-diversified funding position
Financial results for 2012 Well-diversified funding position Funding position ex RD and Danica, Q4 12 (%) Funding sources (%) 2011 2012 Equity 42 7 Deposits Repos 18 42 18 Subord. debt 3 12 11 11 6 7 Covered bonds 3 2 6 2 12 unsecured credit inst. Senior unsecured Deposits Deposits CD & CP Covered S
Slide 43: Danske Bank's ratings
Financial results for 2012 Danske Bank’s ratings Danske Bank’s long-term issuer rating and outlook Rating agency issues Moody’s S&P Fitch General focus Stable Positive Negative • Profitability: A sustainable improvement in net profit will be positive Aaa AAA AAA • Asset quality: A significant decrea
Slide 44: Three different methods of rating banks
Financial results for 2012 Three different methods of rating banks Rating methodology Danske Bank’s rating Anchor Business Capital & Risk Funding & Extraord. Issuer + + + + = SACP + = SACP* Position Earnings Position Liquidity Support Rating 0 2 BBB+ +1 notch -1 notch -1 notch BBB A- notches notches
Slide 45: Retail Banking Denmark: Profit before tax up 12%
Financial results for 2012 Retail Banking Denmark: Profit before tax up 12% owing mainly to lower impairments Income statement (DKK m) Trend in lending volume, average (DKK bn) Retail Corporate 2012 2011 Index Net interest income 12,605 12,269 103 2% Net fee income 3,254 3,214 101 -2% Other income 1
Slide 46: Retail Banking Finland: Lower result due to higher impairments
Financial results for 2012 Retail Banking Finland: Lower result due to higher impairments Income statement (DKK m) Trend in lending volume, average (DKK bn) 2012 2011 Index Retail Corporate Net interest income 2,113 2,108 100 +1% Net fee income 1,111 993 112 Other income 292 480 61 +4% Total income
Slide 47: Retail Banking Sweden: NII up 12% y/y
Financial results for 2012 Retail Banking Sweden: NII up 12% y/y owing to higher lending margins Income statement (DKK m) Trend in lending volume, average (DKK bn) 2012 2011 Index Retail Corporate Net interest income 2,733 2,440 112 -3% Net fee income 562 577 97 Other income 183 208 88 +9% Total inc
Slide 48: Retail Banking Norway: Significantly higher NII and fee income
Financial results for 2012 Retail Banking Norway: Significantly higher NII and fee income owing to repricing Income statement (DKK m) Trend in lending volume, average (DKK bn) 2012 2011 Index Retail Corporate Net interest income 2,120 1,553 137 +3% Net fee income 314 255 123 +11% Other income 677 75
Slide 49: Banking Activities Northern Ireland: Decline in pre-tax losses
Financial results for 2012 Banking Activities Northern Ireland: Decline in pre-tax losses driven by improved income, expenses and impairments Income statement (DKK m) Trend in lending volume*, average (DKK bn) 2012 2011 Index Retail Corporate Net interest income 1,226 1,141 107 -8% Net fee income 36
Slide 50: Banking Activities Ireland: Significant drop in pre-tax losses
Financial results for 2012 Banking Activities Ireland: Significant drop in pre-tax losses and lending because of the separation of the Non-core portfolio Income statement (DKK m) Trend in lending volume, end of period (DKK bn) 2012 2011 Index Retail Corporate Net interest income 379 936 - Net fee in
Slide 51: Non-core Ireland: Still dominated by high impairments
Financial results for 2012 Non-core Ireland: Still dominated by high impairments, but declining trend throughout the year Income statement (DKK m) Trend in lending volume, end of period (DKK bn) Retail Corporate 2012 2011 Index Net interest income 393 - - -26% Net fee income 4 - - Other income 5 - -
Slide 52: Banking Activities Baltics: Increased result
Financial results for 2012 Banking Activities Baltics: Increased result due to improved profitability and substantial reversal of loan losses Income statement (DKK m) Trend in lending volume, average (DKK bn) 2012 2011 Index Retail Corporate Net interest income 467 478 98 -15% Net fee income 158 151
Slide 53: CIB: Lower result owing to higher impairments, mainly shipping
Financial results for 2012 CIB: Lower result owing to higher impairments, mainly from shipping Income statement (DKK m) Trend in lending volume, average (DKK bn) 2012 2011 Index -4% Net interest income 2,120 2,031 104 107 108 109 110 Net fee income 839 850 99 103 Other income 104 148 70 Total income
Slide 54: Danske Markets & Treasury: Strong performance at Danske Markets
Financial results for 2012 Danske Markets & Treasury: Strong performance at Danske Markets Income statement (DKK m) Trading income split, Q4 12 (%) FX & money market Bonds & DCM 2012 2011 Index Danske Markets 7,999 5,305 151 Repos & derivatives Equities Group Treasury -543 411 - Total income 7,456 5
Slide 55: Danske Capital: Pre-tax profit up 20% owing to high performance fees
Financial results for 2012 Danske Capital: Pre-tax profit up 20% owing to high performance fees Income statement (DKK m) AuM — customer breakdown (DKK bn) 2012 2011 Index Private equity Institutional Retail* Life insurance Net interest income 114 119 96 15 Net fee income 2,057 1,795 115 - portion fr
Slide 56: Danica Pension: Very strong income due to partly booked risk allowance
Financial results for 2012 Danica Pension: Very strong income due to partly booked risk allowance and postponed risk allowance Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q4 12 (%) Equities Bonds Credit bonds Property 2012 2011 Index Premiums (bn) 24.6 27.3 90 Danica T
Slide 57: Danica Pension's profit model
Financial results for 2012 Danica Pension’s profit model Profit model Condition/ sensitivity Q1-Q4 2012 DKK m Danica Traditionel. Mainly risk Can be booked only if investment return Risk allowance 1,336 1 allowance 77 bp of technical is high enough and if no use of bonus Other -104 provisions (DKK 1
Slide 58: Disclaimer
Financial results for 2012 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 in any jurisdiction, including the United States, or