Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2013 Earnings Presentation
46 slides from Danske Bank A/S's earnings presentation, May 2, 2013
Slide 1: Financial results for Q1 2013
Financial results for Q1 2013 Financial results for Q1 2013 Eivind Kolding CEO & Chairman of the Executive Board Henrik Ramlau-Hansen CFO & Member of the Executive Board 2 May 2013
Slide 2: Agenda
Financial results for Q1 2013 Agenda Key messages 3 Business units up-date 6 Financial results 11 Capital, liquidity, funding & rating 19 Outlook for 2013 23 Q&A session 24 Appendix: Trends in focus areas 25 2
Slide 3: Key messages on Q1 2013
Financial results for Q1 2013 Key messages on Q1 2013 Net profit improved 29% from Q4 12 Expenses 10% below Q4 12 and cost programme on track Total impairments down compared with Q4 12 Total income lower than expected and below our ambitions Strong capital and liquidity levels – CT1 of 15.1% a
Slide 4: Customer satisfaction, Q1 2013
Financial results for Q1 2013 Customer satisfaction, Q1 2013 On target Behind target Personal Banking Business Banking Corporates & Institutions Markets measured Markets measured Areas measured • Denmark • Denmark • Relationship management • Sweden • Sweden • Transaction banking • Norway • Norway •
Slide 5: Strategy update: Initiatives taken as a part of New Standards
Financial results for Q1 2013 Strategy update: Initiatives taken as a part of New Standards Personal Banking Business Banking New customer programme Q1 initiatives Almost 600,000 customers have registered and the Selective expansion of Realkredit Danmark products to market share in Denmark impro
Slide 6: Personal Banking
Financial results for Q1 2013 Personal Banking Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Profit before tax significantly up compared with Q1 12 Net interest income 2,772 2,913 95 Net fee income 998 910 110 ROE of 8% in Q1 13, up from 2.2% in Q1 12 Net t
Slide 7: Business Banking
Financial results for Q1 2013 Business Banking Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Profit before tax significantly up compared with Q1 12 Net interest income 2,206 2,268 97 Net fee income 490 428 114 ROE of 9.6% in Q1 13, up from 0.3% in Q1 12 Net
Slide 8: Corporates & Institutions
Financial results for Q1 2013 Corporates & Institutions Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Total income 42% lower, owing mainly to lower trading Net interest income 504 491 103 Net fee income 292 255 115 Income from customer-driven* activity impr
Slide 9: Management actions announced with our Q3 2012 results and status at end-Q1 2013
Financial results for Q1 2013 Management actions announced with our Q3 2012 results and status at end-Q1 2013 Planned actions, 2012 to 2015 (DKK bn) Initiated actions, Q1 12 to Q1 13 (DKK bn) Pricing 2 Pricing 0.3 Sales 3–4 Sales 0.4 Costs 1.5 Costs 0.2 2015E Pre-tax P/L effect of DKK 6–8 bn Q1 13 P
Slide 10: Financial targets: Four targets already reached
Financial results for Q1 2013 Financial targets: Four targets already reached Financial target End-Q1 13 (adj.) Ambitions Status ROE 4.3% Above 12% In progress Ratings S&P/Moody’s/Fitch In progress A-/Baa1/A Improve ratings by at least one notch Improved SACP* Pos./Stable/Neg. from S&P Core tier 1 r
Slide 11: Financial results: Lower impairments key driver for profit improvement
Financial results for Q1 2013 Financial results: Lower impairments key driver for profit improvement, however, profit lower than expected Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Q4 12 Index NII fell 4% owing to reduced deposit Net interest income 5,452
Slide 12: Net interest income: Small drop owing to days, margins and lower volumes
Financial results for Q1 2013 Net interest income: Small drop owing to the number of days, margins and slightly lower volumes Quarterly net interest income (DKK m) NII drivers, Q1 13 vs. Q1 12 NII fell by DKK 198 m, or 4% -4% Negative drivers were lower interest 5,650 5,717 5,698 5,713 rates, de
Slide 13: Net fee income: Satisfactory performance compared with Q112
Financial results for Q1 2013 Net fee income: Satisfactory performance compared with Q112 Quarterly net fee income (DKK m) Fee income drivers Higher fees at Danske Capital in +13% 2,671 Q1 13 driven by solid increases in AuM in both Q1 12 and Q4 12 Q1 12 included fees for state- 2,265 guaranteed
Slide 14: Trading income: Q1 below expectations
Financial results for Q1 2013 Trading income: Q1 below expectations Quarterly trading income (DKK m) Trading income drivers Lower trading income owing to 3,638 lower market activity and uncertainty about Cyprus towards the end of Q1 Trading income included DKK 137 2,895 m in refinancing income o
Slide 15: Insurance: Good performance in line with guidance
Financial results for Q1 2013 Insurance: Good performance in line with guidance Quarterly insurance income (DKK m) Key points Postponed risk allowance Lower insurance income in Q1 13 925 compared with Q4 12 owing to inclusion of postponed risk allowance in Q4 12 Stronger insurance income in Q1 1
Slide 16: Expenses: Expenses lower because there were no extraordinary costs
Financial results for Q1 2013 Expenses: Expenses lower because there were no extraordinary costs in the first quarter Total expenses (DKK m) Quarterly change in expenses (DKK m) Adjustments* Adjusted expenses Q4 12 6,591 6,591 6,324 6,047 5,905 IT 240 5,680 Rebranding 182 Consultants 120 5,913 5,516
Slide 17: Impairments: At the lowest level since the beginning of the crisis
Financial results for Q1 2013 Impairments: At the lowest level since the beginning of the crisis Impairments, 2008 to Q1 13 (DKK bn/bp) Impairments Impairment ratio 10 173 bp 9 8 7 6 99 bp 5 4 57 bp 41 bp 3 2 10 bp 1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 08 08 08 08 09 09
Slide 18: Impairments: Sharp decline driven by Non-core activities
Financial results for Q1 2013 Impairments: Sharp decline driven by Non-core activities; also positive trends in Personal Banking and Business Banking Impairments by business unit (DKK bn) Impairment drivers Non-core Sharp decline of DKK 600 m from C&I Q4 12 driven by lower impairments Business at
Slide 19: Capital: Strong capital ratio, well above the recommended target for Danish SIFIs
Financial results for Q1 2013 Capital: Strong capital ratio, well above the recommended target for Danish SIFIs Capital ratios, under CRD/Basel II (%) Capital drivers Total DB SIFI requirement* Lower RWA effect accounts for rise Tier 2 in CT1 of 0.4 %-point Tier 1 (including state hybrid) State
Slide 20: SIFI report: Key elements and uncertainties
Financial results for Q1 2013 SIFI report: Key elements and uncertainties Key elements Danske Bank capital composition, 2022 (% of RWA) Capital requirements Crisis management buffer CT1 SIFI requirement of 1% to 3.5% Pillar 2, ex Basel 1 floor (Pillar 1+)* Crisis management buffer of 5% covered
Slide 21: Liquidity and funding: Strong and stable liquidity position
Financial results for Q1 2013 Liquidity and funding: Strong and stable liquidity position despite repayment of LTRO liquidity 12-month liquidity,* end of period (DKK bn) Key points, end Q1 13 Q1 2012 Q4 2012 Q1 2013 12-month liquidity of more than DKK 240 bn 400 Liquidity buffer of DKK 449 bn, w
Slide 22: Rating: Positive rating action from S&P
Financial results for Q1 2013 Rating: Positive rating action from S&P, lower funding spread maintained in Q1 13 Key elements, S&P update, 6 March 2013 5Y senior spread to 6M swap rate (bp)* Assessment of Danske Bank’s capital position improved Danske Bank Handelsbanken after capital-raising initia
Slide 23: Outlook for 2013: Unchanged guidance despite slow start to the year
Financial results for Q1 2013 Outlook for 2013: Unchanged guidance despite slow start to the year Macro Economic growth remains low; growth forecast revised down in most markets NII likely flat at 2012 level (DKK 22.8 bn) Income Increasing net fee income (2012: DKK 8.9 bn) Trading income and insuran
Slide 24: Appendix
Financial results for Q1 2013 Appendix Tax 25 NII and margin developments 26 Expenses 28 Credit 29 Funding 40 Danske Capital & Danica 43 24
Slide 25: Adjusted tax rate at 25%, but actual tax rate remains high owing to Ireland
Financial results for Q1 2013 Adjusted tax rate at 25%, but actual tax rate remains high owing to Ireland Actual and adjusted tax rates (DKK m) Tax drivers Adjusted pre-tax profit in Q1 13 in line Q1 13 Q4 12 Q3 12 Q2 12 Q1 12 with Q1 12 Profit before tax 2,216 2,255 2,209 2,500 1,575 Declining
Slide 26: Net interest income: Slightly lower because of lower income at RD
Financial results for Q1 2013 Net interest income: Slightly lower because of lower income at RD, interest days and change in FTP allocation Quarterly change in net interest income (DKK m) Net interest income at RD, ex lending margins (DKK m) 2012 2013 Q4 12 5,713 89 Number of days 106 RD ex. margins
Slide 27: Margins: Flattish in most segments
Financial results for Q1 2013 Margins: Flattish in most segments Quarterly lending margins (%) Quarterly deposit margins (%) Q412 Q412 Q113 Q113 1.12 0.57 Personal* Personal 1.10 0.59 1.11 0.78 Business Business 1.10 0.80 0.95 0.42 C&I C&I 1.08 0.44 * Includes Realkredit Danmark. 27
Slide 28: Expenses: Underlying expenses up 5% YoY, but cost programme continues
Financial results for Q1 2013 Expenses: Underlying expenses up 5% YoY, but cost programme continues, with fewer branches and FTEs Expenses (DKK bn) FTEs, end of period (000s) Q1 13 Q1 12 Index Q1 13 Q4 12 Index Expenses 5,905 6,324 93 5,905 6,591 90 -5% Revaluation of domicile property - - - - 158 -
Slide 29: Impairment dynamics
Financial results for Q1 2013 Impairment dynamics Individual loan impairment charges, ex Baltics (DKK bn) Change in allowance account (DKK m)* New Increased Reversals 3.8 3.5 3.5 2.7 Allowance-end 2007 4,900 2.1 Gross impairments 119,487 2.0 Reversals 32,542 2.2 Write-offs 43,800 -2.1 Allowance, end
Slide 30: Macro trends
Financial results for Q1 2013 Macro trends Bankruptcies (index 1996 = 100) Rating upgrades,* corporates, 12-month moving average (%) Denmark Finland Norway Sweden Denmark Finland Sweden Norway CIB 400 100 Upgrades > downgrades 300 200 50 100 Downgrades > upgrades 0 1996 2000 2004 2008 2012 2009 2010
Slide 31: Denmark: A small decline in house prices
Financial results for Q1 2013 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 Q4 12 Q1 13 Copenhagen Q3 2006 -26.7 -0.4 120 Above a
Slide 32: Realkredit Danmark
Financial results for Q1 2013 Realkredit Danmark Portfolio facts, Realkredit Danmark, end-Q1 13 Loans by LTV and rating, Realkredit Danmark, end-0113 (%) Approx. 395,000 loans (residential and commercial) Rating 1-3 4-7 8-11 Total Public 3,193 loans in 3- and 6-month arrears (0.7%) LTV ratio gua
Slide 33: Realkredit Danmark: Geographical breakdown of residential mortgage portfolio
Financial results for Q1 2013 Realkredit Danmark: Geographical breakdown of RD’s residential portfolio LTV residential residential mortgage portfolio RD lending to households Breakdown of of Dispersion RD’s residential RD’s mortgage residential portfolio portfolio RD’s loan portfolio is concentrat
Slide 34: Limited exposure to agriculture and shipping
Financial results for Q1 2013 Limited exposure to agriculture and shipping Agriculture: breakdown of loan portfolio, Q1 13 (%) Shipping: breakdown of loan portfolio, Q1 13 (%) Other Other Ro-Ro Car Carrier 14 Product tanker 2 6 9 Chemical tanker Mixed operations 25 Agriculture 5 7 6 11 Offshore supp
Slide 35: Core Ireland: Breakdown of loan portfolio
Financial results for Q1 2013 Core Ireland: Breakdown of loan portfolio Individual impairments Value of collateral Personal mortgages (DKK bn) Other (DKK bn) Total (DKK bn) Arrears,* personal customers (%) 15.0 3.4 18.4 91-180 days Market 180+ days 11.9 1.7 0.6 2.3 0.7 1.0 0.3 1.0 1.3 0.3 Gross Impa
Slide 36: Non-core Ireland: Breakdown of loan portfolio
Financial results for Q1 2013 Non-core Ireland: Breakdown of loan portfolio Individual impairments Value of collateral CRE (DKK bn) Personal mortgages (DKK bn) Other* (DKK bn) Total (DKK bn) 13.4 8.7 6.5 28.7 11.4 5.3 20.5 6.1 2.7 10.8 3.9 2.0 5.3 2.6 9.7 1.8 Gross Impaired Gross Impaired Gross Impa
Slide 37: Price trend in the Irish property market and expected loan losses
Financial results for Q1 2013 Price trend in the Irish property market and expected loan losses Irish house price indices (index 100 = January 2005) Fall from peak (%) CSO index* Residential real estate Internal price index for houses in Dublin Internal price index for houses outside Dublin Dublin 6
Slide 38: Geographical breakdown and amortisation type of selected segments in Ireland
Financial results for Q1 2013 Geographical breakdown and amortisation type of selected segments in Ireland Core and Non-core Core: Personal mortgages, Q1 13 (%) Non-core: Commercial real estate portfolio, Q1 13 (%) Interest-only Amortisation Dublin 10 8 Non-Dublin 42 50 58 Non-Dublin Dublin 32 Dubli
Slide 39: Conduits: Gradually reduced exposure and risk
Financial results for Q1 2013 Conduits: Gradually reduced exposure and risk, now part of Non-core activities Gross credit exposure, 2007-Q1 2013 (DKK bn) Credit exposure, rating categories, Q1 2013 (DKK bn) Rating category 10-11 Rating category 1-9 Gross credit exposure Net credit exposure 62 56 44
Slide 40: Solid funding structure and liquidity position
Financial results for Q1 2013 Solid funding structure and liquidity position Loan portfolio and long-term funding, Q1 13 (DKK bn) Maturing funding (DKK bn) Subordinated T2 1,832 Senior 70 122 Senior debt Hybrid T1 1,637 Covered Bonds 58 55 Bank loans 543 797 Deposits 43 38 Bank mortgages 362 179 Cov
Slide 41: Well-diversified funding position
Financial results for Q1 2013 Well-diversified funding position Funding position ex RD and Danica, Q1 13 (%) Funding sources (%) Q1 2012 Q1 2013 43 Equity 7 Deposits Repos 18 43 18 3 Subord. debt 11 11 6 7 11 3 2 Covered bonds 6 2 Subord. debt Equity Repos Credit inst. Deposits Covered unsecured bon
Slide 42: New methods for allocating capital and funding costs
Financial results for Q1 2013 New methods for allocating capital and funding costs; effective from Q1 2013 and restated in 2012 numbers Key elements Capital allocation by business unit (DKK bn) Capital allocation Previously, capital allocation was based on the non-risk- Personal 29 sensitive Basel
Slide 43: Danske Capital: Income up 43% owing to higher fee income
Financial results for Q1 2013 Danske Capital: Income up 43% owing to higher fee income Income statement (DKK m) AuM — customer breakdown (DKK bn) Q1 2013 Q1 2012 Index Private equity Institutions Retail* Life insurance Net interest income -9 -5 - 15 Net fee income 487 346 141 237 - portion from perf
Slide 44: Danica Pension: Risk allowance booked for three out of four interest rate groups
Financial results for Q1 2013 Danica Pension: Risk allowance booked for three out of four interest rate groups Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q1 13 (%) Q1 2013 Q1 2012 Index Equities Bonds Credit bonds Property Premiums (bn) 7.7 6.9 111 Danica Traditionel
Slide 45: Danica Pension's profit model
Financial results for Q1 2013 Danica Pension’s profit model Profit model Condition/ sensitivity Q1-2013 DKK m Danica Traditionel: Mainly risk Can be booked only if investment return Risk allowance 347 1 allowance 70 bp of technical is high enough and if no use of bonus Other -25 provisions (DKK 175
Slide 46: Disclaimer
Financial results for Q1 2013 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,