Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2016 Earnings Presentation
33 slides from Danske Bank A/S's earnings presentation, Jul 21, 2016
Slide 1: Financial results – first half 2016
Financial results – first half 2016 Thomas F. Borgen Chief Executive Officer Jacob Aarup-Andersen Chief Financial Officer 21 July 2016
Slide 2: Agenda
Financial results – first half 2016 Agenda Summary of first half of 2016 and financial results 2 Business unit update 4 Selected topics 6 Outlook for full-year 2016 9 Q&A 10 Appendix 11 1
Slide 3: Executive summary: A satisfactory result for the first half of 2016
Financial results – first half 2016 Executive summary: A satisfactory result for the first half of 2016 Financial results, H1 2016 Low economic growth – continuation of negative interest rates • Net profit of DKK 9.4 bn, in line with first half of 2015 • ROE of 12.4% - on track to meet long-term tar
Slide 4: Net profit: DKK 9.4 bn, in line with strong H1 2015
Financial results – first half 2016 Net profit: DKK 9.4 bn, in line with strong H1 2015 Income statement and key figures (DKK m) Key points, H1 2016 vs. H1 2015 H1 2016 H1 2015 Index Q2 2016 Q1 2016 Index • Return on equity of 12.4% Net interest income 10,747 10,800 100 5,489 5,259 104 • Total incom
Slide 5: Banking units: Income down, reflecting exceptionally strong H1 2015
Financial results – first half 2016 Banking units: Income down, reflecting exceptionally strong H1 2015; all units benefit from reduced expenses and low impairments Pre-tax return on allocated capital (%) Financial highlights, H1 2016 vs. H1 2015 H1 2016 Personal Banking • NII down owing to competit
Slide 6: C&I and Wealth Management: Less favourable market conditions reduce total income
Financial results – first half 2016 C&I and Wealth Management: Less favourable market conditions reduce total income; increased lending supports NII C&I: Financial highlights, H1 2016 vs. H1 2015 Wealth Management: Financial highlights, H1 2016 vs. H1 2015 • Total income down 9%, reflecting challeng
Slide 7: Expenses: Continued reduction of expenses in H1 2016 despite increased regulatory costs
Financial results – first half 2016 Expenses: Continued reduction of expenses in H1 2016 despite increased regulatory costs Change in expenses (DKK m) Total expenses ex goodwill charge (DKK m) Severance payments 110 169 Deposit guarantee & resolution funds 110 Amortisation of customer relations*** 1
Slide 8: Impairments: Loan loss ratio of –2 bp in H1 2016
Financial results – first half 2016 Impairments: Loan loss ratio of –2 bp in H1 2016 Group impairments, 2011 to H1 2016 (DKK bn/bp) Impairment drivers, Q2 2016 vs. Q1 2016 Impairments Loan loss ratio* (rhs) • Impairments remained low because of generally strong credit quality across our markets 80 1
Slide 9: Capital: Strong capital base; CET1 capital ratio rises to 15.8%
Financial results – first half 2016 Capital: Strong capital base; CET1 capital ratio rises to 15.8% driven by earnings and lower risk exposure amount Capital ratios, under Basel III/CRR (%) Capital highlights, Q2 2016 Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • Revised CET1 target in the range of 14-
Slide 10: Outlook for full-year 2016 maintained: Net profit in line with 2015
Financial results – first half 2016 Outlook for full-year 2016 maintained: Net profit in line with 2015* Revised: We now expect somewhat less pressure on margins for the remainder of 2016, and we will NII benefit from volume growth and somewhat lower funding costs Revised: In light of weak activity
Slide 11: Q&A session
Financial results – first half 2016 Q&A session www.danskebank.com/ir 10
Slide 12: Appendix
Financial results – first half 2016 Appendix Business units 12 Special topics 17 Macro and portfolio reviews 21 Funding, liquidity, ROE bridge and ratings 26 Tax 30 Contact details 31 11
Slide 13: Personal Banking: Slightly higher customer activity in Q2
Financial results – first half 2016 Personal Banking: Slightly higher customer activity in Q2; good inflow from our partnerships in Sweden & Norway continues Income statement & key figures (DKK m) Lending volume by country* (Q1 2015 = Index 100) Q2 2016 Q1 2016 Index Denmark Finland Sweden Norway Ne
Slide 14: Business Banking: Lending growth across all countries supports income
Financial results – first half 2016 Business Banking: Lending growth across all countries supports income; impairments at low level Income statement & key figures (DKK m) Lending volume by country* (Q1 2015 = Index 100) Q2 2016 Q1 2016 Index Denmark Finland Sweden Norway Net interest income 2,117 2,
Slide 15: Corporates & Institutions: Profit before tax increased 19%
Financial results – first half 2016 Corporates & Institutions: Profit before tax increased 19% owing to improved market conditions and lower impairment charges Income statement & key figures (DKK m) Key points, Q2 2016 vs. Q1 2016 Q2 2016 Q1 2016 Index • Total income increased by 10% after very chal
Slide 16: Wealth Management: Market conditions remained difficult in Q2 2016
Financial results – first half 2016 Wealth Management: Market conditions remained difficult in Q2 2016, but improved capital efficiency in Danica Pension Income statement (DKK m) Key points, Q2 2016 vs. Q1 2016 Q2 2016 Q1 2016 Index • Challenging market conditions continued, declining asset values N
Slide 17: Non-core: Deleveraging continues
Financial results – first half 2016 Non-core: Deleveraging continues; full-year pre-tax result is expected to be close to zero Non-core loan portfolio, Q2 2016 (DKK bn) Total REA (DKK bn) Allowance account Non-core conduits, etc. Non-performing credit exposure 30 Non-core Banking Performing credit e
Slide 18: Net interest income: Up slightly when adjusted for FX effects
Financial results – first half 2016 Net interest income: Up slightly when adjusted for FX effects despite margin pressure Change in net interest income (DKK m) 187 30 134 10,800 34 10,747 507 384 21 H1 2015 Lending Lending Deposit Deposit Days effect FX effect Other H1 2016 volume margin volume marg
Slide 19: Trading income: Up significantly despite negative credit value adjustments
Financial results – first half 2016 Trading income: Up significantly despite negative credit value adjustments Trading income by business unit (DKK m) Key points, Q2 2016 vs. Q1 2016 Other incl. Treasury Wealth Management Business • Trading income up 34% despite Northern Ireland C&I Personal signifi
Slide 20: Expenses: Increase of 9% owing mainly to higher performance-based compensation
Financial results – first half 2016 Expenses: Increase of 9% owing mainly to higher performance- based compensation, one-offs in Q1 and increased regulatory cost Total expenses ex goodwill charge (DKK m) Change in expenses ex goodwill (DKK m) Severance payments Bonus Deposit guarantee scheme/resolut
Slide 21: Credit quality: Continued improvement in overall credit quality
Financial results – first half 2016 Credit quality: Continued improvement in overall credit quality Individual loan impairment charges* (DKK bn) Gross non-performing loans (DKK bn) New Individual allowance account Net exposure, in default Increased Net exposure, not in default Reversal -24% 56.0 51.
Slide 22: Nordic macro economy
Financial results – first half 2016 Nordic macro economy Denmark Sweden Norway Finland Real GDP, constant prices (index 2005 = 100) Inflation (%) 135 6 4 120 2 105 0 2006 2008 2010 2012 2014 2016 90 2005 2007 2009 2011 2013 2015 -2 Interest rates, leading (%) Unemployment (%) 6 10 5 8 4 6 3 4 2 1 2
Slide 23: Nordic housing markets
Financial results – first half 2016 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 200 130 125 180 120 160 115 110 140 105 100 120 95 100 90 85 2006 2008 2010 2012 2014 2016 2006 2008 2010 2012 2014 2016 Apartment pric
Slide 24: Realkredit Danmark and the Danish housing market: Portfolio overview
Financial results – first half 2016 Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q2 2016 Stock of retail loans, Realkredit Danmark, end-Q2 2016 (%) • Approx. 372,000 loans (residential and commercial) Variable rate instalments Variable
Slide 25: Realkredit Danmark: Almost half of new retail loans are fixed rate loans
Financial results – first half 2016 Realkredit Danmark: Almost half of new retail loans are fixed rate loans; compliant with all regulatory requirements Key points Supervisory diamond for Danish mortgage institutions • For new retail lending, the share of fixed-rate loans increased to 46% from 34% i
Slide 26: Credit exposure: Limited agriculture and directly oil-related exposure
Financial results – first half 2016 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (2.7% of Group exposure) Oil-related exposure (1% of Group exposure) • The Danish agriculture industry remained under pressure; • Net exposure amounts to DKK 22 bn and rela
Slide 27: Funding and liquidity: DKK 52 bn of long-term funding issued in H1
Financial results – first half 2016 Funding and liquidity: DKK 52 bn of long term-term funding issued in H1; LCR-compliant at 136% Changes in funding,* H1 2016 (DKK bn and bp) Long-term funding ex RD (DKK bn) Cov. bonds Senior Tier 2 Tier 1 Funding plan Completed 63bp 95 94bp 93bp 70 60-80 97bp 64 2
Slide 28: Funding structure and sources: Danish mortgage system is fully pass-through
Financial results – first half 2016 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q2 2016 (DKK bn) Funding sources (%) Q1 2016 Q2 2016 1,909 55 124 Senior debt 1,664 Bank loans 575 855 Deposits Bank mortgages 329 174 Covered bonds 1
Slide 29: Bridge to above 12.5% ROE in 2018 with negative rates
Financial results – first half 2016 Bridge to above 12.5% ROE in 2018 with negative rates ROE 2015-18E, after tax (%) ROE 2015* 11.6% Adjustments** 0.2% Costs 0.5-1% Funding & ratings 0.5% Volume effect 0.5-1% Income initiatives 0.5% Loan losses 0.5% & other Capital effect 0.5% ROE 2018E Above 12.5%
Slide 30: Three distinct methods of rating banks
Financial results – first half 2016 Danske Bank’s rating Three distinct methods of rating banks Rating methodology Anchor Extraord. Add. Issuer + 1 + 2 + 3 + 4 = SACP = + ALAC + = SACP1 Support factors Rating A bbb+ +1 +1 0 0 a 0 0 0 (Stable) 1=Business Position, 2=Capital & Earnings, 3=Risk Positio
Slide 31: Tax
Financial results – first half 2016 Tax Actual and adjusted tax rates (DKK m) Tax drivers Q22016 Q12016 Q42015 Q32015 Q22015 • The actual tax rate increased in Q2 2016 Profit before tax 5,780 6,271 866 4,719 5,814 mainly due to unrecognized losses in the Ireland core and non-core -23 -67 -104 -193 -
Slide 32: Contacts
Financial results – first half 2016 Contacts Direct: +45 45 12 84 83 Claus Ingar Jensen Mobile: +45 25 42 43 70 Head of IR [email protected] Direct: +45 45 14 07 92 John Bäckman Mobile: +45 30 51 46 85 Chief IR Officer [email protected] Direct: +45 45 14 06 04 Robin Hjelgaard Løfgren Mobile: +45 2
Slide 33: Disclaimer
Financial results – first half 2016 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 St