Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2012 Earnings Presentation
52 slides from Danske Bank A/S's earnings presentation, May 10, 2012
Slide 1: Financial results for Q1 2012
Roadshow presentation Q1 2012 Financial results for Q1 2012 Eivind Kolding CEO & Chairman of the Executive Board Henrik Ramlau-Hansen CFO & Member of the Executive Board 10 May 2012
Slide 2: Agenda
Financial results for Q1 2012 Agenda Key points Financial results Capital and funding New organisation, ambitions and restructuring Outlook for 2012 Appendix: Trends in focus areas & business units 2
Slide 3: Key points
Financial results for Q1 2012 Key points Income statement & key figures (DKK m) Q1 2012 Q1 2011 Index Q1 2012 Q4 2011 Index Strong trend in NII Net interest income 6,172 5,554 111 6,172 6,182 100 Net fee income 1,987 2,093 95 1,987 2,218 90 Net trading income 3,222 2,975 108 3,222 1,638 197 Other in
Slide 4: Net interest income: Flat Q/Q, but significant underlying dynamics
Financial results for Q1 2012 Net interest income: Flat Q/Q, but significant underlying dynamics Quarterly net interest income (DKK m) Quarterly change in net interest income (DKK m) +11% Q4 11 6,182 6,182 6,172 Deposit margin 337 6,016 Equity 139 5,785 Lending volume 97 5,554 RD 96 No. of days 60 L
Slide 5: Net fee income: Robust even though activity remains subdued
Financial results for Q1 2012 Net fee income: Robust even though activity remains subdued Quarterly net fee income (DKK m) Quarterly fee income at Danske Capital (DKK m) Portfolio fees Performance fee Activity fees Fee income adjusted for performance fees -5% -10% 2,218 566 2,093 2,049 1,987 1,938 2
Slide 6: Net trading income: Improved market conditions and solid customer activity
Financial results for Q1 2012 Net trading income: Improved market conditions and solid customer activity Breakdown of net trading income (DKK m) Danske Markets’ income split (%) Bonds & DCM Q1 2012 Q1 2011 Index Q1 2012 Q4 2011 Index Danske Markets 3,190 2,270 141 3,190 1,428 223 Repos & derivatives
Slide 7: Net insurance income: Solid underlying earnings placed in shadow account
Financial results for Q1 2012 Net insurance income: Solid underlying earnings placed in shadow account because of outlook for rest of the year Net income from insurance business (DKK m) Danica Traditionel customers’ funds (%) Q1 12 Q1 11 Index Q1 12 Q4 11 Index Investment return Premiums (bn) 6.9 7.
Slide 8: Expenses: In line with guidance excluding a charge related to Sampo Bank name rights
Financial results for Q1 2012 Expenses: In line with guidance excluding a charge related to rights to Sampo Bank name; declining adjusted costs Expenses (DKK m) Quarterly change in expenses (DKK m) Q1 12 Q1 11 Index Q1 12 Q4 11 Index Expenses 6,850 7,351 93 6,850 6,459 106 Q4 11 6,459 Perf. based co
Slide 9: Impairment charges: DKK 850 million drop because of lower corporate impairments
Financial results for Q1 2012 Impairment charges: DKK 850 million drop because of lower corporate impairments Impairments by customer segment (DKK bn) Impairments by region (DKK m) Financials Q4 11 SMEs 4.8 Q1 12 Large corp. 1.667 Personal Denmark 1.330 3.9 130 Finland 2.8 110 2.8 155 2.8 1.9 Sweden
Slide 10: Loan quality: Individual impairment-tested loans remain low in most regions
Financial results for Q1 2012 Loan quality: Individual impairment-tested loans remain low in most regions Impairment-tested loans (%) Coverage, individual allowance /impairment-tested loans (%) Q4 11 Q4 11 Q1 12 Q1 12 5.2 31 Denmark Denmark 5.7 31 3.8 31 Finland Finland 3.8 31 1.8 33 Sweden Sweden 2
Slide 11: Increasing CT1; 2012 funding plan almost completed
Financial results for Q1 2012 Increasing CT1; 2012 funding plan almost completed Capital ratios, under CRD/Basel II (%) Funding plan (DKK bn) Total capital Funding plan Tier 1 Completed funding (until end of April 2012) Core tier 1 73 ---- Solvency need 17.9 17.6 17.4 60 8 16.0 16.0 51 14.6 ---- 10.
Slide 12: We will take three fundamental steps towards a more customer centric bank
Financial results for Q1 2012 We will take three fundamental steps towards a more customer centric bank CEO 1 Eivind Kolding* Three new segment oriented Business Units Personal Banking Business Banking Corporates & Institutions Tonny Thierry Andersen* Lars Mørch* Thomas F. Borgen* Group Group Group
Slide 13: The goals of the re-organisation are three-fold
Financial results for Q1 2012 The goals of the re-organisation are three-fold: Strengthened customer focus under one brand is the overriding ambition Overall ambition Strong customer focus across all markets under one name: Three main goals 1. Become a truly customer-focused bank 2. Cut costs 3. Cre
Slide 14: There will be multiple benefits for the customers
Financial results for Q1 2012 There will be multiple benefits for the customers Leverage best common products and More consistent services across the bank and integrated Deploy the best customer oriented services and distribution channel formats products Develop the best common competencies an
Slide 15: Restructuring and impairment outlook for Ireland
Financial results for Q1 2012 Restructuring and impairment outlook for Ireland Loan portfolio, gross lending (DKK bn) Loan impairment charges (DKK bn) 35 28 19.7 Mainly Mainly CRE & mortgages & buy-to-let corporates mortgages 5-7 Core Non-core 2008-Q112 Q212-2014E Note: The potential impairments are
Slide 16: Outlook for 2012: Net profit is expected to remain low
Financial results for Q1 2012 Outlook for 2012: Net profit is expected to remain low Net profit for 2012 will be at a low level, but there is much uncertainty. Higher net interest income because of higher lending margins, assuming unchanged central bank rates. Low result expected for Danica because
Slide 17: Appendix
Financial results for Q1 2012 Appendix Tax 18 NII and margin developments 19 Credit 22 Capital and funding 36 Business units 40 17
Slide 18: Adjusted tax rate close to normal, but actual tax rate remains high owing to Ireland
Financial results for Q1 2012 Adjusted tax rate close to normal, but actual tax rate remains high owing to Ireland Actual and adjusted tax rates (DKK m) Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011 Pre-tax profit 1,581 615 10 2,081 1,499 Pre-tax loss, BA Ireland 1,371 1,522 1,491 1,780 1,204 Permanent no
Slide 19: Net interest income: Margin improvement visible in all markets
Financial results for Q1 2012 Net interest income: Margin improvement visible in all markets Net interest income (DKK m) Net interest margins, NII/loan stock (%) Q1 11 Q1 12 Q1 2011 5,554 1.2 Denmark Deposit margin 417 1.3 1.4 Finland Equity 88 1.6 1.3 Volume 76 Sweden 1.5 RD 43 1.2 Norway 1.4 Fundi
Slide 20: Higher lending margins are beginning to feed through
Financial results for Q1 2012 Higher lending margins are beginning to feed through, but low central bank rates put pressure on deposit margins Quarterly lending margins (%) Quarterly deposit margins (%) 1.11 0.71 Q2 11 1.10 0.79 Q3 11 Denmark* 1.17 0.60 1.31 0.29 Q4 11 0.53 0.73 Q1 12 0.47 0.66 Finl
Slide 21: Net interest income: Trend in Realkredit Danmark
Financial results for Q1 2012 Net interest income: Trend in Realkredit Danmark Net interest income at Realkredit Danmark, excluding lending margins (DKK m) 2010 2011 2012 193 170 155 132 128 100 102 96 54 Q1 Q2 Q3 Q4 21
Slide 22: Impairments from 2008 to Q1 2012
Financial results for Q1 2012 Impairments from 2008 to Q1 2012 Impairments by customer segment (%) Change in allowance account (DKK m) SMEs CRE Personal Financials Large corp. Allowance, end-2007 4,900 32 32 31 29 27 Gross impairments 97,318 16 Reversals 22,568 13 12 8 Write-offs 28,032 Allowance, e
Slide 23: Impairments by category
Financial results for Q1 2012 Impairments by category: mainly individual impairments and increases on loans already impaired Loan impairment charges (DKK bn) Individual loan impairment charges, ex Baltics (DKK bn) Total impairments New Collective impairment charges Increased Reversals 5 9 3.9 4 6 3
Slide 24: Impairment tested loans, arrears and loan-to-values
Financial results for Q1 2012 Impairment tested loans, arrears and loan-to-values Net exposure in rating categories 10 and 11 (DKK bn) No. of customers in arrears*, Ireland (%) Rating category 10 91-180 days 180+ days Market Rating category 11 10 9.2 40 8 6 4 3.1 2 35 0 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12
Slide 25: Impairments in the Nordics
Financial results for Q1 2012 Impairments in the Nordics Denmark, 55% of Group’s lending (DKK m) Finland, 9% of Group’s lending (DKK m) Allowance* 18,731 m Allowance* 2,051 m Individual 176 bp Individual 118 bp Collective 20 bp 1,667 Collective 17 bp 1,330 1,117 130 110 790 742 62 29 -34 Q1 11 Q2 11
Slide 26: Impairments outside the Nordics & CIB
Financial results for Q1 2012 Impairments outside the Nordics & CIB Northern Ireland, 3% of Group’s lending (DKK m) Ireland, 4% of Group’s lending (DKK m) Allowance* 5,727 m Allowance* 15,297 m Individual 1,099 bp Individual 2,286 bp Collective 90 bp Collective 146 bp 719 1,850 606 646 1,578 1,623 1
Slide 27: Commercial property exposure
Financial results for Q1 2012 Dividend Commercial property exposure Individual impairments Value of collateral Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) 121.2 19.8 10.2 2.2 16.3 2.4 8.8 4.6 1.0 0.1 2.6 15.4 0.5 4.5 3.4 5.2 1.9 7.5 0.3 Gross Impaired Gross Impaired
Slide 28: Impairments from 2008 to Q1 2012 by sector and business unit
Financial results for Q1 2012 Impairments from 2008 to Q1 2012 by sector and business unit Commercial property, 13% of Group’s lending* (DKK m) Construction & building products , 2% of Group’s lending* (DKK m) Business unit Q1 2012 2008 - Q1 2012 Gross loans & guarantees Business unit Q1 2012 2008 -
Slide 29: Residential mortgage exposure
Financial results for Q1 2012 Dividend Residential mortgage exposure Individual impairments Value of collateral Denmark (DKK bn) Ireland (DKK bn) Northern Ireland (DKK bn) Baltics (DKK bn) 517.5 25.1 15.5 11.8 3.4 0.5 1.8 9.8 0.3 0.2 2.9 0.1 1.5 0.7 1.3 0.4 5.6 1.6 0.9 Gross Impaired Gross Impaired
Slide 30: Retail Banking Denmark, including Realkredit Danmark
Financial results for Q1 2012 Retail Banking Denmark, including Realkredit Danmark Impairments at Retail Banking Denmark, Q1 2012 (DKK m) Loans by LTV and rating, Realkredit Danmark, end-Q1 2012 (%) Individual Collective Total Rating 1-3 4-7 8-11 Total Public LTV ratio guarantee Bank Personal custom
Slide 31: Denmark: Housing is affordable, but prices are still declining
Financial results for Q1 2012 Denmark: Housing is affordable, but prices are still declining Danish house price by region (%) Affordability index, quarterly data from1985 - 2011 Region Prices Change Change in Preview* Fixed rate Mixed rate Average peaked since peak Q4 11 Q1 12 140 Copenhagen Q3 2006
Slide 32: Agricultural exposure
Financial results for Q1 2012 Agricultural exposure Breakdown of loan portfolio, Q1 2012 (%) Agricultural exposure and allowance, Q1 2012 (DKK bn) Other Business unit Gross Allowance Coverage 14 Agriculture exposure Mixed operations 25 6 Realkredit Danmark 45,1 0,3 0,7% Retail Banking Denmark 8,5 2,
Slide 33: Shipping exposure
Financial results for Q1 2012 Shipping exposure Breakdown of shipping exposure by segment (%) Shipping exposure and impairments, Q1 2012 (DKK bn) Gross Allowance Coverage Business unit exposure CIB 43.4 0.8 1.9% -portion from Danish customers 11.6 0.6 5.4% -portion from Norwegian customers 13.6 0.0
Slide 34: Nordics: rating changes and property prices
Financial results for Q1 2012 Nordics: rating changes and property prices Rating upgrades*, corporates, 12-month rolling average (%) Property prices, Nordic countries (index 1996 = 100) Denmark Norway Sweden Finland CIB Denmark Norway Sweden Finland 100 400 Upgrades > downgrades 300 50 200 Downgrade
Slide 35: Economic climate in Denmark is still lagging the other Nordics
Financial results for Q1 2012 Economic climate in Denmark is still lagging the other Nordics’ Bankruptcies (index 1996=100) Business confidence indicator (index 1996=100) Denmark Finland Norway Sweden Sweden Finland Denmark 400 160 140 300 120 200 100 100 80 60 1996 2000 2004 2008 2012 1996 2000 200
Slide 36: Development in risk-weighted assets
Financial results for Q1 2012 Development in risk-weighted assets Risk-weighted assets (DKK bn) Risk-weighted assets (DKK bn) Market risk Operational risk Credit risk Q4 2011 906 906 900 64 65 89 89 Market risk 2 Model changes 5 753 745 Portfolio changes etc. 3 Q1 2012 900 Q4 11 Q1 12 36
Slide 37: Solid funding structure and strong liquidity position
Financial results for Q1 2012 Solid funding structure and strong liquidity position Loan portfolio and long-term funding (DKK bn) 12-month liquidity,* end of period (DKK bn) Q1 2011 Q4 2011 Q1 2012 1,826 166 Senior debt 300 1,684 Bank loans 585 774 Deposits 200 Bank mortgages 377 148 Covered bonds 1
Slide 38: Funding profile and sources
Financial results for Q1 2012 Funding profile and sources Maturing funding (DKK bn) Issued funding, types and duration (DKK bn) Hybrid T1 Covered bonds 69 Subordinated T2 Senior 63 Senior Covered bonds 5-10 years 50 11 3-8 45 years 44 8 29 25 19 16 16 1-5 2-5 3-18 years years years 10 10 9 3-5 years
Slide 39: Well-diversified funding position
Financial results for Q1 2012 Well-diversified funding position Funding position (%) Funding sources (%) Q4 08 Q1 12 40 Equity Central banks 5 30 7 Subordinated debt 3 Deposits 31 20 Repos 10 10 Banks, net 5 0 Short-term bonds Due to credit inst. Mortgage finance Shareholders’ eq. Long-term bonds 2
Slide 40: Retail Banking Denmark: Increasing NII despite lower interest levels
Financial results for Q1 2012 Retail Banking Denmark: Increasing NII despite lower interest levels Income statement (DKK m) Trend in lending volume, average (DKK bn) Q1 2012 Q1 2011 Index Retail Corporate Net interest income 3.081 2.872 107 0% Net fee income 817 833 98 Other income 246 277 89 -1% To
Slide 41: Retail Banking Finland: High return because of improved C/I ratio
Financial results for Q1 2012 Retail Banking Finland: High return because of improved C/I ratio Income statement (DKK m) Trend in lending volume, average (DKK bn) Q1 2012 Q1 2011 Index Retail Corporate Net interest income 588 490 120 +5% Net fee income 258 249 104 Other income 104 103 101 +8% Total
Slide 42: Retail Banking Sweden: Strong growth in net interest income
Financial results for Q1 2012 Retail Banking Sweden: Strong growth in net interest income Income statement (DKK m) Trend in lending volume, average (DKK bn) Q1 2012 Q1 2011 Index Retail Corporate Net interest income 712 569 125 -1% Net fee income 129 157 82 Other income 46 47 98 +5% Total income 887
Slide 43: Retail Banking Norway: Strong result due to improving net interest income
Financial results for Q1 2012 Retail Banking Norway: Strong result due to improving net interest income and flat cost development Income statement (DKK m) Trend in lending volume, average (DKK bn) Q1 2012 Q1 2011 Index Retail Corporate Net interest income 471 382 123 +3% Net fee income 67 66 102 Oth
Slide 44: Banking Activities Northern Ireland
Financial results for Q1 2012 Banking Activities Northern Ireland: Satisfactory development in income and costs, while impairments continue to disappoint Income statement (DKK m) Trend in lending volume*, average (DKK bn) Q1 2012 Q1 2011 Index Retail Corporate Net interest income 303 270 112 Net fee
Slide 45: Banking Activities Ireland: Impairment charges for commercial property remain high
Financial results for Q1 2012 Banking Activities Ireland: Impairment charges for commercial property remain high Income statement (DKK m) Trend in lending volume, average (DKK bn) Q1 2012 Q1 2011 Index Retail Corporate Net interest income 230 231 100 -11% Net fee income 18 14 129 -6% Other income 11
Slide 46: Banking Activities Baltics: Strong earnings despite declining volumes
Financial results for Q1 2012 Banking Activities Baltics: Strong earnings despite declining volumes Income statement (DKK m) Trend in lending volume, average (DKK bn) Q1 2012 Q1 2011 Index Retail Corporate Net interest income 124 121 102 -22% Net fee income 34 33 103 -8% Other income 30 23 130 Total
Slide 47: CIB: High, stable earnings, but impairments on a few customers
Financial results for Q1 2012 CIB: High, stable earnings, but impairments on a few customers affect bottom-line performance Income statement (DKK m) Trend in lending volume, average (DKK bn) Q1 2012 Q1 2011 Index +6% Net interest income 526 454 116 Net fee income 183 220 83 102 103 107 108 101 Other
Slide 48: Danske Markets & Treasury: High activity and benign market conditions
Financial results for Q1 2012 Danske Markets & Treasury: High activity and benign market conditions Income statement (DKK m) Market positions in the Nordics** (rank) Q1 2012 Q1 2011 Index Product area Denmark Sweden Norway Finland Total income 2.925 2.527 116 Expenses 875 742 118 Fixed income 1 1 3
Slide 49: Danske Capital: Lower margins and one-offs reduce income
Financial results for Q1 2012 Danske Capital: Lower margins and one-offs reduce income Income statement (DKK m) AuM – customer breakdown (DKK bn) Q1 2012 Q1 2011 Index Private equity Institutional Retail* Life insurance Net interest income 30 27 111 Net fee income 378 420 90 16 - portion from perfor
Slide 50: Danica Pension: Higher result due to strong investment return
Financial results for Q1 2012 Danica Pension: Higher result due to strong investment return Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q1 2012 (%) Q1 12 Q1 11 Index Equities Bonds Credit bonds Property Premiums (bn) 6,9 7,1 96 Danica Traditionel (insurance result) 321
Slide 51: Danica Pension's profit model
Financial results for Q1 2012 Danica Pension’s profit model Profit model Condition/ sensitivity Q1 2012 DKK m Danica Traditionel. Mainly risk Can be booked only if investment Risk allowance 332 1 allowance 69 bp of technical return is high enough and if no use of Other -11 provisions (DKK 173 bn) bo
Slide 52: Disclaimer
Financial results for Q1 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,