Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2013 Earnings Presentation
45 slides from Danske Bank A/S's earnings presentation, Aug 1, 2013
Slide 1: Financial results for the first half of 2013
Financial results for the first half of 2013 Eivind Kolding CEO & Chairman of the Executive Board Henrik Ramlau-Hansen CFO & Member of the Executive Board 1 August 2013
Slide 2: Agenda
Financial results for H1 Q1 2013 Agenda Key messages 3 Financial results and business unit update 4 Capital, liquidity & funding 11 Selected topics 14 Strategy update 16 Outlook for 2013 23 Q&A session 24 Appendix 25 2
Slide 3: Key messages on Q2 2013
Financial results for H1 Q1 2013 Key messages on Q2 2013 Net profit Net profit increased 48% from the level in Q1 2013 to DKK 2.2 bn Total income Stable development in most income lines, but large drop in insurance Expenses Expenses were in line with Q1 Impairments Total impairments declined 43% to
Slide 4: Net profit: Solid improvement of 61% from H1 2012
Financial results for H1 Q1 2013 Net profit: Solid improvement of 61% from H1 2012 Income statement & key figures (DKK m) Key points, H1 13 vs H1 12 H1 2013 H1 2012 Index Q2 2013 Q1 2013 Index • NII fell 4% owing to lower volume Net interest income 10,956 11,367 96 5,504 5,452 101 and lower deposit
Slide 5: Personal Banking: Income stable, and positive impairment trend continues
Financial results for H1 Q1 2013 Personal Banking: Income stable, and positive impairment trend continues Income statement & key figures (DKK m) Financial highlights Q2 2013 Q1 2013 Index • Total income was unchanged despite a drop in trading Net interest income 2,793 2,772 101 Net fee income 1,043
Slide 6: Business Banking: Increasing profit driven by 32% drop in impairments
Financial results for H1 Q1 2013 Business Banking: Increasing profit driven by 32% drop in impairments Income statement & key figures (DKK m) Financial highlights Q2 2013 Q1 2013 Index Net interest income 2,191 2,206 99 • Total income in line with the level in Q1 Net fee income 471 490 96 • Net inte
Slide 7: Corporates & Institutions: Lower trading income offset by drop in impairment charges
Financial results for H1 Q1 2013 Corporates & Institutions: Lower trading income owing to market turbulence was offset by drop in impairment charges Income statement & key figures (DKK m) Financial highlights Q2 2013 Q1 2013 Index Net interest income 557 504 111 • Total income fell 11% from Q1 to Q2
Slide 8: Danske Capital: Profit up 9% and solid trend in AuM
Financial results for H1 Q1 2013 Danske Capital: Profit up 9 % and solid trend in AuM Income statement (DKK m) Financial highlights Q2 2013 Q1 2013 Index • Total income fell 6% because of lower performance- Net interest income -8 -9 - related fees in Q2 Net fee income 454 487 93 - portion from perfo
Slide 9: Danica Pension: Result significantly lower because of market turbulence
Financial results for H1 Q1 2013 Danica Pension: Result significantly lower because of market turbulence in June; risk allowance postponed Income statement (DKK m) Financial highlights Q2 2013 Q1 2013 Index • Net income from insurance was negative in Q2 owing to Premiums (bn) 6,372 7,653 83 turbulen
Slide 10: Expenses: Almost unchanged from Q1, and cost-saving programme remains on track
Financial results for H1 Q1 2013 Expenses: Almost unchanged from Q1, and cost-saving programme remains on track Total expenses (DKK m) Quarterly change in expenses (DKK m) Adjustments* Adjusted expenses Q1 13 5,905 6,591 6,047 6,013 5,905 5,680 Performance 84 based comp. Consultants 83 Holiday 5,913
Slide 11: Capital: Strong capital ratios
Financial results for H1 Q1 2013 Capital: Strong capital ratios Capital ratios, under CRD/Basel II (%) Capital drivers Total capital • Lower RWA caused a rise in core Tier 1 (including state hybrid) tier1 of 0.4 %-point Core tier 1 • Tier 2 ratio fell 0.5 %-point owing to repayment of EUR 500 m 21.8
Slide 12: Capital: Remains solid after FSA orders and effect of CRD IV implementation
Financial results for H1 Q1 2013 Capital: Remains solid after FSA orders and effect of CRD IV implementation Effect of FSA orders on capital ratios, Q213 (%) Solvency need determined by transitional rules (DKK bn) Total capital Shortfall to transitional rules Tier 1 (including state hybrid) Pillar 2
Slide 13: Liquidity and funding: Strong, stable liquidity position
Financial results for H1 Q1 2013 Liquidity and funding: Strong, stable liquidity position 12-month liquidity,* end of period (DKK bn) Key points, end Q2 13 Q2 12 Q1 13 Q2 13 • 12-month liquidity of more than DKK 250 bn 400 • Liquidity buffer of DKK 479 bn, with most of the bonds central bank–eligibl
Slide 14: Personal Banking Denmark: Limited exposure to high-LTV loans
Financial results for H1 Q1 2013 Personal Banking Denmark: Limited exposure to high-LTV loans that start to amortise before end-2018 Credit exposure to households with an IO mortgage (DKK bn) Breakdown of loans with high LTV (DKK bn) Danske Prioritet (SDO mortgage) Credit exposure with LTV above 100
Slide 15: C&I: Trading income affected by high market volatility in June
Financial results for H1 Q1 2013 C&I: Trading income affected by high market volatility in June Trading income (DKK m) Trading income split, Q2 13 (%) Market making Customer driven Repos & derivatives Bonds & DCM 32 1,206 38 933 650 441 397 785 767 847 931 903 11 19 Equities Q212 Q312 Q412 Q113 Q213
Slide 16: We are working to become the most trusted financial partner
Financial results for H1 Q1 2013 We are working to become the most trusted financial partner Customer satisfaction 2015 Financial results 2015 We will rank No. 1 or 2 in customer Our ROE will be among the top three satisfaction in our focus segments in our Nordic peer group 16
Slide 17: We are setting new standards in financial services
Financial results for H1 Q1 2013 We are setting new standards in financial services Stronger customer focus by consolidating and Advisory services investing in our employees’ competencies Tailor-made products and solutions From individual products to 360◦ advisory services Digitalisation Simpler pro
Slide 18: Many new digital initiatives at Personal Banking
Financial results for H1 Q1 2013 Many new digital initiatives at Personal Banking Initiatives, H1 2013 Customer developments • About 750,000 customers in Denmark registered Spending overview for the customer programme in the first half-year • About 40,000 customers have left us in Denmark, but our m
Slide 19: Online meetings set new standards
Financial results for H1 Q1 2013 Online meetings set Over 300,000 have new standards downloaded MobilePay Uses Electronic Immediate Secure Flexible Simple Telephone wallet transfer contacts 19
Slide 20: Business Banking can now give customers access to the entire product range
Financial results for H1 Q1 2013 In close collaboration with C&I, Business Banking can now give customers access to the entire product range Large SMEs Small SMEs Corporates Business Online & Institutions New unit for large Strengthening of Products business customers Erhverv Direkte Competencies Ne
Slide 21: Access to the business's finances any time and anywhere
Financial results for H1 Q1 2013 Access to the business’s finances any time and anywhere 21
Slide 22: Financial targets: Four targets already reached
Financial results for H1 Q1 2013 Financial targets: Four targets already reached Ambition Year Assumptions Status 30 June 2013 Comments Return on Equity Above 12% 2015 Loan loss ratio of 30 bps 5.2% On track Short-term interest rates of 2% Ratings Improve ratings by at 2015 S&P/Moody’s/Fitch In prog
Slide 23: Outlook for 2013: Full-year guidance revised
Financial results for H1 Q1 2013 Outlook for 2013: Full-year guidance revised Macro Economic growth remains low NII expected to be below the 2012 level (DKK 22.8 bn) Income Management initiatives expected to lift fee income above the 2012 level (2012: DKK 8.9 bn) Trading and insurance income well be
Slide 24: Q&A session
Financial results for H1 Q1 2013 Q&A session Press 1 to ask a question Press “#” to cancel Press “Ask a question” in your webcast player www.danskebank.com/ir 24
Slide 25: Appendix
Financial results for H1 Q1 2013 Appendix Income items and margin developments 26 Expenses 31 Impairments 32 Tax 35 Credit 36 Funding and rating 43 44 25
Slide 26: NII: Flat when adjusted for one extra day
Financial results for H1 Q1 2013 NII: Flat when adjusted for one extra day Quarterly NII (DKK m) Quarterly change in NII (DKK m) Q1 13 5,452 5,717 5,698 5,713 5,452 5,504 Lending effect 88 RD ex. margins 31 Q212 Q312 Q412 Q113 Q213 NII from RD, ex lending margins (DKK m) Deposit effect 43 2012 2013
Slide 27: NII: Margin trends and short-term rates
Financial results for H1 Q1 2013 NII: Margin trends and short-term rates Margins at Personal Banking* (%) Margins at C&I* (%) Q412 Q113 Q213 Q412 Q113 Q213 1.12 1.10 1.10 1.08 1.05 0.95 0.57 0.59 0.61 0.51 0.42 0.44 Lending Deposit Lending Deposit Margins at Business Banking* (%) Nordic short-term r
Slide 28: Fees: Higher fees in H1 driven by performance and increased AuM
Financial results for H1 Q1 2013 Fee’s: Higher fees in H1 driven by performance and increased AuM at Danske Capital Quarterly net fee income (DKK m) Fee income drivers • Fees rose 10% from H1 12 to H1 2,671 13 because of performance fees and increases in AuM at Danske Capital 2,265 • H1 12 included
Slide 29: Insurance: Risk allowance postponed for three of four interest rate groups
Financial results for H1 Q1 2013 Insurance: Risk allowance postponed for three of the four interest rate groups in Q2 Insurance income (DKK m) Booked income from shadow account 925 679 514 403 341 411 -346 Q212 Q312 Q412 Q113 Q213 29
Slide 30: Danica Pension's profit model
Financial results for H1 Q1 2013 Danica Pension’s profit model Profit model Condition/ sensitivity H1 2013 DKK m Danica Traditionel: Mainly risk Can be booked only if investment return is Risk allowance 666 allowance 70 bp of technical high enough and bonus potential of paid-up Other -57 provisions
Slide 31: Expenses: Cost-saving programme continues, with branch and FTE reductions
Financial results for H1 Q1 2013 Expenses: Cost-saving programme continues, with branch and FTE reductions Expenses (DKK m) FTEs, end of period (000s) H1 13 H1 12 Index Q2 13 Q1 13 Index Expenses 11,918 12,371 96 6,013 5,905 102 -5% Performance-based compensation 384 457 84 150 234 64 Severance paym
Slide 32: Impairments: Significant drop continues in Q2
Financial results for H1 Q1 2013 Impairments: Significant drop continues in Q2, confirming trend towards improving asset quality Impairments by business unit (DKK bn) Impairment drivers Non-core • Sharp decline of DKK 869 m from C&I Q1 13 Business • Largest declines in Business Personal Banking, C&I
Slide 33: Impairments: Loan loss ratio of 19 bp for core activities
Financial results for H1 Q1 2013 Impairments: Loan loss ratio of 19 bp for core activities and 23 bp for entire Group Individual loan impairment charges, ex Baltics (DKK bn) Loan loss ratio, annualised (bp) New Increased Reversals Q2 13 Q1 13 2012 Personal Banking 24 27 31 3.5 3.5 Business Banking 2
Slide 34: Impairments: Lowest level since start of the financial crisis
Financial results for H1 Q1 2013 Impairments: Lowest level since start of the financial crisis Impairments, 2008 to Q2 13 (DKK bn/bp) Change in allowance account** (DKK m) Impairments Loan loss ratio* (rhs) 10 173 180 Allowance, end-2007 4,900 9 150 8 Gross impairments 121,149 7 120 6 99 5 90 Revers
Slide 35: Tax: Actual tax rate declining due to lower losses in Ireland
Financial results for H1 Q1 2013 Tax: Actual tax rate declining due to lower losses in Ireland Actual and adjusted tax rates (DKK m) Tax drivers Q2 13 Q1 13 Q4 12 Q3 12 Q2 12 • Lower actual tax rate and tax charge in Q2 primarily due to Profit before tax 2,677 2,216 2,255 2,209 2,500 income from def
Slide 36: Macro: Trends in the Nordics
Financial results for H1 Q1 2013 Macro: Trends in the Nordics Bankruptcies (index 1996 = 100) Rating upgrades,* corporates, 12-month moving average (%) Denmark Finland Norway Sweden Denmark Finland Sweden Norway CIB 400 100 300 Upgrades > downgrades 200 50 100 Downgrades > upgrades 0 1996 2000 2004
Slide 37: Denmark: Affordability remains good as house prices stabilise
Financial results for H1 Q1 2013 Denmark: Affordability remains good as house prices stabilise Danish house prices by region (%) Affordability index, quarterly data from1988–2012 Region Prices Change Change in Preview* Fixed rate Mixed rate Average peaked since peak Q1 13 Q2 13 140 Copenhagen Q3 200
Slide 38: Realkredit Danmark: Portfolio overview
Financial results for H1 Q1 2013 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q2 13 Loans by LTV and rating, Realkredit Danmark, end-0213 (%) • Approx. 395,000 loans (residential and commercial) Rating 1-3 4-7 8-11 Total Public • 3,043 loans in 3- and 6-month arrea
Slide 39: Credit exposure: Limited agriculture and shipping exposure
Financial results for H1 Q1 2013 Credit exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio, Q2 13 (%) Shipping, breakdown of loan portfolio, Q2 13 (%) Car carrier Other Other Chemical tanker 14 RO-RO 13 5 7 Mixed operations 25 Agriculture Product tanker 2 6
Slide 40: Non-core Ireland: Breakdown of loan portfolio
Financial results for H1 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) 12.2 7.7 7.9 27.8 10.4 6.2 19.7 6.0 3.3 10.5 3.1 1.2 4.4 2.9 9.2 1.9 Gross Impaired Gross Impaired Gross I
Slide 41: Ireland: Price trends and arrears
Financial results for H1 Q1 2013 Ireland: Price trends and arrears 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 63 140 -50% Non-Dublin 65 120
Slide 42: Ireland: Geographical breakdown and amortisation type
Financial results for H1 Q1 2013 Ireland: Geographical breakdown and amortisation type Core: Personal mortgages, Q2 13 (%) Non-core: Commercial real estate portfolio, Q2 13 (%) Interest-only Dublin Amortisation 10 Non-Dublin 8 Non-Dublin 43 Non-Dublin 48 57 Dublin 35 Dublin Non-core: Personal mortga
Slide 43: Funding: Structure and sources
Financial results for H1 Q1 2013 Funding: Structure and sources Loan portfolio and long-term funding, Q2 13 (DKK bn) Funding sources (%) Q2 2012 Q2 2013 1,812 121 Senior debt 44 1,590 Bank loans 513 797 Deposits 18 Bank mortgages 348 165 Covered bonds 11 9 8 6 3 1 RD mortgages 729 729 Issued RD bond
Slide 44: Three different methods of rating banks
Financial results for H1 Q1 2013 Three different methods of rating banks Rating methodology Danske Bank’s rating Anchor Extraord. Add. Issuer + 1 + 2 + 3 + 4 = SACP = + = SACP** Support factors Rating BBB+ +1 0 -1 0 BBB+ +2 -1 A- (Stable) 1=Business Position 2=Capital & Earnings 3=Risk Position 4=Fu
Slide 45: Disclaimer
Financial results for H1 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 State