Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Debt Investor Presentation (July 2019)
38 slides from Danske Bank A/S's debt investor presentation, July 2019
Slide 1: Debt investor update Q2 2019
Debt investor update Q2 2019 Bank
Slide 2: Agenda
Agenda 01. Group financial update 2 02. Capital and funding 15 03. Covered bond universe and ratings 21 04. Appendix 23 1
Slide 3: Executive summary: Difficult first half; net profit down 24%
Debt investor update – Q2 2019 Executive summary: Difficult first half; net profit down 24% from H1 2018 and 2019 net profit outlook lowered to DKK 13-15 bn DKK 7.0 bn Net profit, down 24% from H1 2018 due to lower Loan growth of 3% y/y, driven by growth of NII, higher expenses and higher loan impai
Slide 4: Increase in costs driven by upstaffing and AML investments
Debt investor update – Q2 2019 Increase in costs – driven largely by upstaffing and accelerated investments in AML activities Expected change in Group expenses, y/y (DKK bn, subject to roundings) 25.5-26 0.2-0.3 0.1-0.2 Around 25 0.3-0.5 0.3-0.5 0.2 0.1 0.3 23.5 0.4-0.5 2018 ex AML AML digi- SEB VAT
Slide 5: Digitalisation and automation of core AML processes
Debt investor update – Q2 2019 Digitalisation and automation of core AML processes will increase accuracy and reduce labour-intensive tasks going forward Short-term investments: Upstaffing across AML functions in the Group, including strengthened 1st and 2nd lines of defence Long-term investments: D
Slide 6: We are a Nordic universal bank with strong regional roots
Debt investor update – Q2 2019 We are a Nordic universal bank with strong regional roots Norway (AAA) Finland (AA+) Challenger position 3rd largest Market share: 6% Market share: 10% Share of Group lending: 11% Share of Group lending: 8% GDP growth 2019E: 2.6% GDP growth 2019E: 1.3% Unemployment 201
Slide 7: Strong footprint within retail lending
Debt investor update – Q2 2019 Strong footprint within retail lending Lending by business unit1; %; Q2 2019 Credit exposure by industry; %; Q2 2019 Personal Customers 39 Banking DK Wealth Management Commercial Prop 12 Banking Nordic Northern Ireland Public Institutions 10 C&I Other Co-ops & Non-Prof
Slide 8: Financial results overview
Debt investor update – Q2 2019 Financial results overview Total income; DKKbn Total expenses; DKKbn Net interest income Net trading income Donation Underlying costs Net fee income Other income 48.0 48.1 25.0 1.6 44.4 3.1 1.5 7.1 0.7 8.6 4.7 15.7 15.4 14.2 22.6 22.7 23.5 22.0 23.8 23.6 2016 2017 2018
Slide 9: Net profit: DKK 7.0 bn, down 24% from H1 2018
Debt investor update – Q2 2019 Net profit: DKK 7.0 bn, down 24% from H1 2018, including DKK 1.3 bn gain on sale of Danica Pension Sweden Income statement and key figures (DKK m) Key points, H1 2019 vs H1 2018 H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index • Return on equity of 9.0% Net interest income
Slide 10: NII: Down 8% y/y due to margin pressure and higher funding costs
Debt investor update – Q2 2019 NII: Down 8% y/y due to margin pressure, higher funding costs and transfer to Non-core Key points Change in net interest income, y/y (DKK m) Y/Y 11,824 294 • NII down 8%, as lending growth of 3% was offset by 670 lower lending margins, higher funding costs and the 196
Slide 11: NII (cont'd): Volume growth of 6% at Banking Nordic
Debt investor update – Q2 2019 NII (cont’d): Volume growth of 6% y/y at Banking Nordic; Banking DK grew 1% y/y Key points Lending volume and development* (DKK billions) • Banking Nordic lending up 6% y/y with growth in H1 2018 H1 2019 all markets • Banking DK lending up 1% y/y 876 • NII for Other Ac
Slide 12: Fee income: Flat y/y
Debt investor update – Q2 2019 Fee income: Flat y/y, as margin pressure and Flexinvest Fri compensation offset benefit of SEB Pension Danmark acquisition H1 2018 0% Key points Net fee income development, y/y (DKK m) H1 2019 Y/Y -15% 7,547 7,570 • Fees unchanged. Fee income benfitted from the +37% ac
Slide 13: Trading income: Down 15% y/y and 36% q/q
Debt investor update – Q2 2019 Trading income: Down 15% y/y and 36% q/q in challenging market conditions Key points Group net trading income (DKK m) Y/Y • Trading income down 15% from H1 2018, reflecting challenging market conditions -15% • C&I affected by negative value adjustments on derivatives -
Slide 14: Expenses: Up 12% y/y, 2019 outlook raised
Debt investor update – Q2 2019 Expenses: Up 12% y/y due to upstaffing and investments in compliance and AML, 2019 outlook raised to DKK 25.5-26 bn Key points Change in expenses, y/y (DKK m) Y/Y 428 • Expenses up 12% y/y, due mainly to upstaffing and investments 283 in compliance and AML activities,
Slide 15: Impairments: Loan loss ratio of 5 bp in core activities
Debt investor update – Q2 2019 Impairments: Loan loss ratio of 5 bp in core activities in H1, single-name exposures at C&I drive impairments Key points Impairment charges by business unit, H1 2019 (DKK m) Y/Y • Charge of DKK 470 m; core loan loss ratio of 5 bp − Impairments at C&I due to single-name
Slide 16: Capital: Strong capital base; CET1 capital ratio of 16.6%
Debt investor update – Q2 2019 Capital: Strong capital base; CET1 capital ratio of 16.6% Capital ratios; under Basel III/CRR; % Estimated capital buffer structure, % Tier 2 Pillar II component (total 4.0%) Countercyclical capital buffer CET1 target (16%) Hybrid T1/AT1 CET1 Capital conservation buffe
Slide 17: Strong CET1 capital build-up since 2008
Debt investor update – Q2 2019 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) in excess of DKK 100bn Common Equity Tier 1, 2008 – 2018; DKKbn +DKK 50bn 130 134 133 133 126 127 119 107 79 85 77 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20181 REA, CET1, profit and
Slide 18: Update on MREL Requirement & Issuance
Debt investor update – Q2 2019 Update on MREL Requirement & Issuance Overview of MREL Considerations MREL resources and requirements; Q2 2019; % of REA Senior <1Y Own funds The Group has to meet both an MREL requirement and a separate debt Senior >1Y MREL requirement based on Q2 2019 req.* buffer re
Slide 19: Funding structure and sources
Debt investor update – Q2 2019 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q2 2019 (DKK bn) Funding sources (%) Q1 2019 Q2 2019 2,085 52 52 150 Senior & NPS bonds 1,809 Bank loans 627 932 Deposits Bank mortgages 375 196 Covered bo
Slide 20: Funding programmes and currencies
Debt investor update – Q2 2019 Funding programmes and currencies Covered bonds by currency, end-Q2 2019 Largest funding programmes, end-Q2 2019 EUR SEK NOK DKK CHF Utilisation EMTN Programme 34% 3% Limit – EUR 35bn 15% 1% Global Covered Bond 78% Limit – EUR 30bn 22% 59% ECP Programme 2% Limit – EUR
Slide 21: Funding and liquidity: LCR compliant at 129%
Debt investor update – Q2 2019 Funding and liquidity: DKK 60 bn of long-term funding and capital instruments issued in H1 2019; LCR compliant at 129% Changes in funding,* 2018-2019 (DKK bn and bp) Long-term funding excl. RD (DKK bn)** Cov. bonds Senior Non-preferred senior Funding plan Completed 195
Slide 22: Danske Bank covered bond universe
Debt investor update – Q2 2019 Danske Bank covered bond universe, a transparent pool structure1 Residential mortgages from • Denmark, D-pool • Norway, I-pool + • Sweden, Danske Hypotek AB C-pool (AAA/AAA) • Finland, Danske Mortgage Bank Plc Commercial mortgages from Finland • Sweden and Norway, C-po
Slide 23: Danske Bank's credit ratings
Debt investor update – Q2 2019 Danske Bank’s credit ratings Long-term instrument ratings No rating actions on Danske Bank in H1 2019 The credit rating agencies took no rating actions in the first half Fitch Moody’s Scope S&P of 2019. The last time the agencies changed their assessments AAA1 Aaa AAA
Slide 24: Agenda
Debt investor update – Q2 2019 Agenda 01. Business units 24 02. Special topics 31 03. Macroeconomics 33 04. Contact details 36 23
Slide 25: Banking DK: Lending growth of 1% y/y
Debt investor update – Q2 2019 Banking DK: Lending growth of 1% y/y; higher expenses and impairments Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 4,305 4,458 97 2,125 2,181 97 • Total income down 5% Net fee income 1,486 1,750
Slide 26: Realkredit Danmark: Portfolio overview
Debt investor update – Q2 2019 Realkredit Danmark: Portfolio overview 76% of new retail lending in Q2 was fixed-rate vs 42% of stock Portfolio facts, Realkredit Danmark, Q2 2019 Retail loans, Realkredit Danmark, Q2 2019 (%) • Approx. 356,000 loans (residential and commercial) Fixed rate (10 yrs-30 y
Slide 27: Banking Nordic: Lending growth of 6% y/y
Debt investor update – Q2 2019 Banking Nordic: Lending growth of 6% y/y but higher interest rates in Sweden and Norway squeezed margins Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 3,774 3,953 95 1,873 1,900 99 • NII down 5%
Slide 28: Lending growth at Banking DK and Banking Nordic
Debt investor update – Q2 2019 Lending growth: Growth of 1% y/y at Banking DK and 6% at Banking Nordic Comments Banking Nordic: lending volume by segment and country* Banking DK • 83% of lending at Banking DK is at mortgage subsidiary Finland retail Sweden commercial Realkredit Danmark (RD) Finland
Slide 29: Corporates & Institutions: Challenging market conditions
Debt investor update – Q2 2019 Corporates & Institutions: Challenging market conditions and higher impairment charges Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 1,787 1,983 90 857 930 92 • NII down 4% adjusted for the portf
Slide 30: Wealth Management: Gain from sale of Danica Pension Sweden
Debt investor update – Q2 2019 Wealth Management: Gain of DKK 1.3 bn from the sale of Danica Pension Sweden; AuM flat adjusted for the sale Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 335 366 92 160 175 91 • AuM down 4%, owi
Slide 31: Northern Ireland: Lending and NII up y/y
Debt investor update – Q2 2019 Northern Ireland: Lending and NII up y/y despite continued Brexit uncertainty Income statement and key figures (DKK m) Key points H1 2019 H1 2018 Index Q2 2019 Q1 2019 Index Y/Y Net interest income 765 736 104 379 386 98 • Lending and NII up despite continued Net fee i
Slide 32: Credit exposure: Limited agriculture and oil-related exposure
Debt investor update – Q2 2019 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (3.0% of Group exposure) Oil-related exposure (0.7% of Group exposure) • Pork prices rose significantly in Q2 2019, while milk prices • Net exposure was unchanged at DKK 17.0 bn
Slide 33: Non-core: Baltic and Russian exposures
Debt investor update – Q2 2019 Non-core: Portfolio now includes all Baltic and Russian exposures, intended sale of retail portfolio in Estonia announced in June Non-core loan portfolio, Q2 2019 (DKK bn) Non-core REA* (DKK bn) Allowance account Non-core conduits etc. Non-performing credit exposure No
Slide 34: Nordic macroeconomics
Debt investor update – Q2 2019 Denmark Sweden Norway Finland EU Nordic macroeconomics Real GDP, constant prices (index 2005 = 100) Inflation (%) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Interest rates, leading (%) Unemployment (%) 2006 2008 2010 2012 2014 2016 2018 2006
Slide 35: Nordic macroeconomics
Debt investor update – Q2 2019 Denmark Sweden Norway Finland EU Nordic macroeconomics Current account (surplus+/deficit-); % of GDP Gross public debt; % of GDP 2006 2008 2010 2012 2014 2016 2018 Household debt burden; % of disposable income Household interest burden; % of disposable income 34
Slide 36: Nordic housing markets
Debt investor update – Q2 2019 Denmark Sweden Norway Finland Nordic housing markets Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018 Apartment prices (index 2005 = 100) Apartment prices/nom. GDP (index 2
Slide 37: Contacts
Debt investor update – Q2 2019 Contacts Christoffer Møllenbach Claus Ingar Jensen Head of Group Treasury Head of IR Direct: +45 45 14 63 60 Direct: +45 45 12 84 83 Mobile: +45 21 55 10 52 Mobile: +45 25 42 43 70 E-mail: [email protected] E-mail: [email protected] Bent Callisen John Bäckman Head of
Slide 38: Disclaimer
Debt investor update – Q2 2019 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,