Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — FY2020 Earnings Presentation
41 slides from Danske Bank A/S's earnings presentation, Feb 4, 2021
Slide 1: Financial results 2020
Financial results 2020 Chris Vogelzang Chief Executive Officer Stephan Engels Chief Financial Officer 4 February 2021
Slide 2: Agenda
Financial results 2020 Agenda 01. Executive summary 2 02. Strategy update 3 03. Group financials and key lines 6 04. Capital 13 05. Financial outlook for full-year 2021 14 06. Q&A 15 07. Appendix 16 1
Slide 3: Executive summary – Good business momentum and strong focus on executing on the Better Bank agenda
Financial results 2020 Executive summary – Good business momentum and strong focus on executing on the Better Bank agenda 4.6 bn 42.4 bn 28.1 bn Net profit Stable total income Expenses incl. provision for part adjusted for one-offs of transformation costs for ‘21 7 bn 9–11 bn CET1 18.3% Impairments
Slide 4: Multiple deliveries for all four key stakeholder groups during the first year of the Better Bank transformation
Financial results 2020 Multiple deliveries for all four key stakeholder groups during the first year of the Better Bank transformation Customers Employees • Continued to proactively support our customer during • Managed to have almost all employees work remotely the corona crisis, leading to improve
Slide 5: The Better Ways of Working delivery plan is staged towards our ambitions
Financial results 2020 The Better Ways of Working delivery plan is staged towards our ambitions with a strong foundation built in 2020 Full agile organisation New agile governance Ready to accelerate launched, affecting setup in place and clear digitalisation focus 4,500 employees with objectives fo
Slide 6: 2020 status on the 2023 Group sustainability targets
Financial results 2020 2020 status on the 2023 Group sustainability targets 2020 status on sustainability targets for our strategic focus areas (2023 targets in parentheses) Sustainable finance Governance and integrity DKK 102 billion in sustainable financing (100 bn) 95% of employees trained annual
Slide 7: Net profit in line with expectations; stable income and impact from transformation costs
Financial results 2020 Net profit in line with expectations; stable income and impact from transformation costs as well as corona-related impairments Income statement and key figures (DKK m) Key points, 2020 vs 2019 2020 2019 Index Q4 2020 Q3 2020 Index • NII flat as volume growth was offset Net int
Slide 8: NII: Up 1% y/y adjusted for FX effects
Financial results 2020 NII: Up 1% y/y adjusted for FX effects due to higher volumes and deposit margins; stable q/q excl. one-off correction Key points Change in net interest income, y/y (DKK m) Y/Y • NII stable (up 1% adjusted for FX) driven by volume 263 325 growth and higher deposit margins, whic
Slide 9: NII (cont'd): Lending up 4% in local currency at Banking Nordic
Financial results 2020 NII (cont’d): Lending up 4% in local currency at Banking Nordic; Banking DK saw lower credit demand and margin pressure Key points Lending volumes and development* (DKK bn) • Banking Nordic lending up 3% y/y (up 4% in local currency) 2019 2020 with local currency lending growt
Slide 10: Fee income: Stable vs 2019
Financial results 2020 Fee income: Stable vs 2019 as higher investment fees compensate a for lower activity-related and remortgaging fees 2019 0% Key points Net fee income development, y/y (DKK m) 2020 Y/Y +10% 15,201 15,137 • Higher investment fees, due partly to strong perfor- +2% mance fees, offs
Slide 11: Trading income: Up 7% y/y, driven by C&I, excluding one-offs
Financial results 2020 Trading income: Up 7% y/y, driven by C&I, excluding one-offs; Q4 saw relatively high activity levels Key points Group net trading income (DKK m) Y/Y • Trading income down 11%, but up 7% excluding one-offs in 2019 and 2020, despite the turbulence in the financial -11% -25% mark
Slide 12: Expenses: Significant impact from transformation and AML/Estonia in 2020
Financial results 2020 Expenses: Significant impact from transformation and AML/Estonia in 2020; continued execution on cost programme Key points Change in expenses, y/y (DKK m) Y/Y • Transformation costs of DKK 1.7 bn including sizeable 902 1,132 severance costs and a provision for part of the tran
Slide 13: Impairments: Macro-driven model releases countered by post-model adjustments
Financial results 2020 Impairments: Macro-driven model releases countered by post- model adjustments; further oil-related charges Key points, Q4 2020 Impairment charges by business unit, 2020 (DKK m) • Impairments were driven by further charges against single names, +907 Banking DK mainly legacy exp
Slide 14: Capital: Strong capital base; CET1 capital ratio of 18.3%; proposed dividend of DKK 2
Financial results 2020 Capital: Strong capital base; CET1 capital ratio of 18.3% (buffer of 5.1%); proposed dividend of DKK 2 per share Capital highlights, Q4 2020 Capital ratios, under Basel III/CRR (%) • CET1 ratio up 0.1%-points q/q due mainly to earnings as well Tier 2 AT1 Pillar II CET1 CET1 as
Slide 15: 2021 outlook: net profit in the range of DKK 9-11 bn
Financial results 2020 2021 outlook: We expect net profit to be in the range of DKK 9-11 bn We expect total income to be slightly higher than the level in 2020, subject mainly to Total income commercial momentum and broader economic developments Expenses are expected to be no more than DKK 24.5 bn d
Slide 16: Q&A session
Financial results 2020 Q&A session Press 01 to ask a question Press 02 to cancel Press “Ask a question” in your webcast player Want easy access to all relevant Danske Bank material? Download the Danske Bank MyInvestor app on your iPhone, iPad or Android device! www.danskebank.com/ir 15
Slide 17: Appendix
Financial results 2020 Appendix 01. Business units 17 02. Credit quality 24 03. Macro and portfolio reviews 29 04. Funding, liquidity and ratings 33 05. Tax, one-off items and restatements 36 06. Contact details 39 16
Slide 18: Banking DK: Lower activity due to corona crisis affects income and lending
Financial results 2020 Banking DK: Lower activity due to corona crisis affects income and lending; impairments up, driven by post-model adjustments Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 8,927 9,111 98 2,157 2,289 94 • NII do
Slide 19: Banking Nordic: Lending growth in all markets in local currency
Financial results 2020 Banking Nordic: Lending growth in all markets in local currency; impairments driven largely by corona crisis and single names Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 8,105 7,839 103 2,003 2,055 97 • NII
Slide 20: Lending growth: Growth of 4% in local currency at Banking Nordic
Financial results 2020 Lending growth: Growth of 4% in local currency at Banking Nordic; down 1% at Banking DK due to low demand Comments Banking Nordic: lending volume by segment and country* Banking DK • 84% of lending at Banking DK is at mortgage credit subsidiary Finland retail Sweden commercial
Slide 21: Corporates & Institutions: Customer-driven franchise drives strong increase in income
Financial results 2020 Corporates & Institutions: Customer-driven franchise drives strong increase in income; impairment charges from legacy oil exposure Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 4,029 3,656 110 1,019 1,060 96 •
Slide 22: Wealth Management: Fee income up 7% in volatile markets
Financial results 2020 Wealth Management: Fee income up 7% in volatile markets, driven mainly by strong performance fees and AuM Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income -285 -248 - -72 -70 - • Fees up 7% driven by strong Net f
Slide 23: Northern Ireland: The corona crisis heavily affected activity levels and financial results
Financial results 2020 Northern Ireland: The corona crisis heavily affected activity levels and financial results Income statement and key figures (DKK m) Key points 2020 2019 Index Q4 2020 Q3 2020 Index Y/Y Net interest income 1,359 1,524 89 324 332 98 • Income down due to lower UK interest Net fee
Slide 24: Non-core: Winding-up is proceeding according to plan
Financial results 2020 Non-core: Winding-up is proceeding according to plan Non-core loan portfolio, Q4 2020 (DKK bn) Non-core REA (DKK bn) Allowance account Non-core conduits etc. Non-performing credit exposure Non-core banking Performing credit exposure 8 7 2 2 5 5 5 2 1 3 3 5 4 1 4 3 1 2 0 37 0 3
Slide 25: Credit quality: Decreasing NPL trend for the third consecutive quarter
Financial results 2020 Credit quality: Decreasing NPL trend for the third consecutive quarter driven by single-name oil-related exposures Breakdown of core allowance account under IFRS 9 (DKK bn) Core allowance account by business unit (DKK bn) Stage 1 Banking DK Corporates & Institutions Other 24.1
Slide 26: Oil-related exposure: Continued impairments against single-name oil-related exposures
Financial results 2020 Oil-related exposure: Continued impairments against single-name oil-related exposures in Q4 Key points, 2020 • The offshore segment, in which we see credit deterioration, makes up 38% of the exposure and accounts for 77% of expected credit losses. • Uncertainty continues in th
Slide 27: Credit exposure: Limited agriculture and directly oil-related exposure
Financial results 2020 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure Oil-related exposure • African Swine Fewer (ASF), which spread to Germany in Q3, • Gross exposure decreased to DKK 17.8 bn from DKK 20.9 bn in continues to cause uncertainty for the ind
Slide 28: Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure
Financial results 2020 Credit exposure: Limited exposure to transportation, hotels, restaurants and leisure Transportation exposure Hotels, restaurant and leisure exposure • Gross exposure* decreased DKK 2.2 bn to DKK 15.6 bn from • Gross exposure increased slightly to DKK 16.1 bn from 15.7 bn in th
Slide 29: Credit exposure: Limited exposure to retailing and stable credit quality in commercial real estate
Financial results 2020 Credit exposure: Limited exposure to retailing and stable credit quality in commercial real estate Retailing Commercial real estate • Gross exposure increased to DKK 27.1 bn from DKK 26.0 bn in • Gross exposure increased to DKK 331.3 bn from 317.9 bn in Q3 Q3 2020 driven by in
Slide 30: Nordic macroeconomics
Financial results 2020 Denmark Sweden Norway Finland EU Nordic macroeconomics Real GDP, constant prices (index 2005 = 100) Inflation (%) Interest rates, leading (%) Unemployment (%) 29
Slide 31: Nordic housing markets
Financial results 2020 Denmark Sweden Norway Finland Nordic housing markets Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) Apartment prices (index 2005 = 100) Apartment prices/nom. GDP (index 2005 = 100) 30
Slide 32: Resilient property markets and rebound in consumer spending
Financial results 2020 Resilient property markets and rebound in consumer spending; H2 impacted by government support packages C&I lending volume (DKK bn) Consumer spending, Denmark (same weekday 2019 = 100) 230 120 220 110 210 100 200 90 190 80 70 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Feb Apr Jun
Slide 33: Realkredit Danmark portfolio overview
Financial results 2020 Realkredit Danmark portfolio overview: 73% of new retail lending in Q4 was fixed-rate vs 46% of stock Portfolio facts, Realkredit Danmark, Q4 2020 Retail loans, Realkredit Danmark, Q4 2020 (%) • Approx. 340,000 loans (residential and commercial) Fixed rate (10 yrs-30 yrs) Inte
Slide 34: Funding and liquidity: DKK 79 bn of long-term funding issued in 2020
Financial results 2020 Funding and liquidity: DKK 79 bn of long-term funding and capital instruments issued in 2020; LCR compliant at 154% Changes in funding,* 2020-2021 (DKK bn and bp) Long-term funding excl. RD (DKK bn)** Cov. bonds Senior Non-Preferred Senior Funding plan Completed 31bp 27bp 100
Slide 35: Funding structure and sources: Danish mortgage system is fully pass-through
Financial results 2020 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q4 2020 (DKK bn) Funding sources (%) Q3 2020 Q4 2020 2,350 63 63 168 Senior & NPS bonds 1,838 1,193 Deposits Bank loans 628 Bank mortgages 391 170 Covered bonds 13
Slide 36: Three distinct methods for rating banks
Financial results 2020 Danske Bank’s rating Three distinct methods for rating banks Rating methodology Extra- Anchor Additional Issuer + 1 + 2 + 3 + 4 = SACP = ordinary + ALAC + = SACP1 factors rating support bbb+ +1 +1 -1 0 a- 0 +2 -1 A (Stable) 1=Business Position, 2=Capital & Earnings, 3=Risk Pos
Slide 37: Tax
Financial results 2020 Tax Actual and adjusted tax rates (DKK m) Tax drivers, Q4 2020 2020 Q42020 Q32020 Q22020 Q12020 • The actual tax rate of 35.4% (excl. prior- Profit before tax 6,304 2,059 2,796 3,112 -1,663 year regulations) is higher than the Danish Permanent non-taxable difference 1,993 1,40
Slide 38: Material extraordinary items in 2020
Financial results 2020 Material extraordinary items in 2020 One-off items in 2020 (DKK m) Impact Item P&L line affected (DKKm) Correction of income from bonds held in liquidity portfolio (NII effect) -106 Net interest income Correction of income from bonds held in liquidity portfolio (trading effect
Slide 39: Adjusted financial highlights 2020
Financial results 2020 Adjusted financial highlights 2020 Group financial highlights, 2020 (DKK m) Comments Changed Financial Adjusted • As a result of the re-designing of our presentation of highlights 2020 Danica Pension highlights 2020 organisation whereby Wealth Net interest income 21,875 276 22
Slide 40: Contacts
Financial results 2020 Contacts Claus Ingar Jensen Mobile — +45 25 42 43 70 Head of IR [email protected] Robin Hjelgaard Løfgren Mobile — +45 24 75 15 40 Chief IR Officer [email protected] Olav Jørgensen Mobile — +45 52 15 02 94 Chief IR Officer [email protected] Sofie Heerup Friis Mobile — +45 20
Slide 41: Disclaimer
Financial results 2020 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, or an i