Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2014 Earnings Presentation
38 slides from Danske Bank A/S's earnings presentation, May 1, 2014
Slide 1: Financial results for Q1 2014
Financial results for Q1 2014 Thomas F. Borgen Chief Executive Officer Henrik Ramlau-Hansen Chief Financial Officer 1 May 2014
Slide 2: Agenda
Financial results for Q1 2014 2013 Agenda Executive summary and financial results 3 Business unit update 5 4 Selected topics 7 Capital, liquidity, funding and rating 10 New initiatives 14 Outlook for 2014 15 Q&A 16 Appendix 17 2
Slide 3: Executive summary
Financial results for Q1 2014 2013 Executive summary Conclusion Solid start to 2014; executing our strategy Net profit & ROE DKK 2.8 bn, 46% increase from Q4 2013; ROE improved from 5.3% to 7.7% Income Total income was down slightly owing primarily to seasonality at Danske Capital and Danica Expense
Slide 4: Net profit: DKK 2.8 bn, up 46% from Q4 2013 and almost doubled from Q1 2013
Financial results for Q1 2014 2013 Net profit: DKK 2.8 bn, up 46% from Q4 2013 and almost doubled from Q1 2013 Income statement & key figures (DKK m) Key points, Q1 14 vs Q4 13 Q1 Q4 Index Q1 Index • NII fell 5% owing to fewer interest 2014 2013 Q1/Q4 2013 14/13 days and changes in FTP Net interest
Slide 5: Three main business units: improvement from Q4 2013 owing to lower expenses
Financial results for Q1 2014 2013 Three main business units: Improvement from Q4 2013 owing to lower expenses; positive trend in imparments continues Profit before tax (DKK m) Key points, Q1 14 vs Q4 13 Q413 Personal Banking Q114 • Lower NII from declining volumes and fewer interest days +5% +27% •
Slide 6: Danske Capital and Danica Pension: Good start to the year
Financial results for Q1 2014 2013 Danske Capital and Danica Pension: Good start to the year Danske Capital: Financial highlights, Q1 2014 Danica Pension: Financial highlights, Q1 2014 • Profit before tax, excluding performance fees and • Premiums were up 15% associated performance-based compensatio
Slide 7: Non-core: Winding-up of Irish assets proceeding as planned
Financial results for Q1 2014 2013 Non-core: Winding-up of Irish assets proceeding as planned Key points, Q1 14 vs Q4 13 New Non-core loan portfolio*, Q1 2014 (DKK bn) • Loss before tax increased by DKK 0.2 bn to DKK 0.6 bn Allowance account 52 • Around half of the loss was related to loan impairmen
Slide 8: Expenses: Positive trend in underlying cost base
Financial results for Q1 2014 2013 Expenses: Positive trend in underlying cost base and large reduction Q/Q from one-offs and seasonality Total group expenses (DKK m) Quarterly change in expenses (DKK m) Consultants etc. Bonus Severance payment Write down SAMPO name Q4 2013 6,587 Deposit Scheme guar
Slide 9: Impairments: Loan loss ratio of 14 bp for core activities
Financial results for Q1 2014 2013 Impairments: Loan loss ratio of 14 bp for core activities and 20 bp for the entire Group Impairments, 2008 to Q1 14 (DKK bn/bp) Impairments (DKK m) Impairments Loan loss ratio* (rhs) Q114 Q413 Index Q113 Index Personal Banking 337 453 74 550 61 10 173 180 Business
Slide 10: Capital: New regulations and repayment of state hybrid
Financial results for Q1 2014 2013 Capital: New regulations and repayment of state hybrid Capital ratios, under Basel II/CRD IV (%) Capital drivers Tier 2 Hybrid tier 1 • DKK 24 bn of state hybrid tier 1 was repaid on 11 April State hybrid Common equity tier 1 with full effect on capital ratio in Q1
Slide 11: Funding and liquidity: Successful AT1 capital issue
Financial results for Q1 2014 2013 Funding and liquidity: Successful AT1 capital issue was the main funding activity in Q1 Changes in funding , 2014 (DKK bn and bp*) Long-term funding ex RD (DKK bn) Cov.bonds Senior Tier 2 Tier 1 Funding plan Completed 133bp 587bp 101bp 95 73 29 478bp 56bp 28 30-50
Slide 12: Realkredit Danmark: Reduction of Flexlån volume continued
Financial results for Q1 2014 2013 Realkredit Danmark: Reduction of Flexlån® volume continued in the February refinancing auction Key points Remortgaging of Flexlån F1® as of April 2014* (DKK bn) • The overall trend was away from Flexlån®, as in Q4 2013 • Extension into loans with a 3-year reset per
Slide 13: S&P upgrades Danske Bank to A/Negative/A-1
Financial results for Q1 2014 2013 S&P upgrades Danske Bank to “A/Negative/A-1” Danske Bank’s long-term issuer rating and outlook* Summary of rating action Moody’s S&P Fitch • On 29 April 2014, S&P raised its rating of Danske Bank Positive Negative Stable to A/A-1, with a negative outlook Aaa AAA AA
Slide 14: New market initiatives in Q1
Financial results for Q1 2014 2013 New market initiatives in Q1 MobilePay Business launch Advisory services Post-trade integrated solution Easy banking Ung Direkte International Banking unit for BB and C&I 14
Slide 15: Outlook for 2014: Net profit at high end of DKK 9-12 bn range
Financial results for Q1 2014 2013 Outlook for 2014: Net profit at high end of DKK 9-12 bn range Macro Economic growth remains slow and fragile, with low interest rates NII Lower funding costs are likely to more than compensate for weak demand for loans Total income Total income expected to exceed t
Slide 16: Q&A session
Financial results for Q1 2014 2013 Q&A session www.danskebank.com/ir 16
Slide 17: Appendix
Financial results for Q1 2014 2013 Appendix Business units 18 Special topics: Trading and expenses 23 Impairments 25 Macro, credit quality and portfolio reviews, including Ireland 27 Funding and ratings 32 Financial targets 35 Deep dives: Danica’s profit model and tax 44 36 17
Slide 18: Personal Banking: Stable income despite lower volume
Financial results for Q1 2014 2013 Personal Banking: Stable income despite lower volume; positive trends in expenses and impairments Income statement & key figures (DKK m) Key points, Q1 14 vs Q1 13 Q1 2014 Q1 2013 Index • Profit before tax up 64%, and pre-tax ROE up 3.4 Net interest income 2,615 2,
Slide 19: Business Banking: Increasing profit owing to drop in impairments
Financial results for Q1 2014 2013 Business Banking: Increasing profit owing mainly to sharp drop in impairments Income statement & key figures (DKK m) Key points, Q1 14 vs Q1 13 Q1 2014 Q1 2013 Index • Profit before tax up 18%, and pre-tax ROE up 2.3 Net interest income 2,085 2,200 95 percentage po
Slide 20: Corporates & Institutions: Strong improvement in NII and fee income
Financial results for Q1 2014 2013 Corporates & Institutions: Strong improvement in NII and fee income and very low impairments Income statement & key figures (DKK m) Key points, Q1 14 vs Q1 13 Q1 2014 Q1 2013 Index • Profit before tax up 21%, and pre-tax ROE at 12.4% Net interest income 599 504 119
Slide 21: Danske Capital: Profit up 26% from Q1 2013
Financial results for Q1 2014 2013 Danske Capital: Profit up 26% from Q1 2013; positive trend in AuM continues Income statement (DKK m) Key points, Q1 14 vs Q1 13 Q1 2014 Q1 2013 Index • Total income was up 3% from the first quarter of 2013 Net interest income - -9 - • Performance fees fell from DKK
Slide 22: Danica Pension: Improved income from insurance business
Financial results for Q1 2014 2013 Danica Pension: Improved income from insurance business Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q1 14 (%) Q1 2014 Q1 2013 Index Equities Bonds Credit bonds Property Premiums 7,845 7,653 103 Danica Traditionel (insurance result) 30
Slide 23: Trading income: Up slightly from Q1 2013
Financial results for Q1 2014 2013 Trading income: Up slightly from Q1 2013, but lower market making activity Trading income by business unit (DKK m) Key points Other incl. Treasury C&I Business Personal • Trading income at C&I improved 2,148 slightly from Q1 14 to Q4 13 1,771 1,467 1,865 • Trading
Slide 24: Expenses: Reduction proceeding according to plan
Financial results for Q1 2014 2013 Expenses: Reduction proceeding according to plan Total expenses (DKK m) FTEs, end of period (000s) Consultants etc. Deposit guarantee scheme /bank packages Other costs Severance payments Bonus 23.2 6,587 21.9 21.4 21.2 19.8 18.9 5,943 5,804 5,460 5,432 5,041 5,208
Slide 25: Impairments: Improvement in core activities continues
Financial results for Q1 2014 2013 Impairments: Improvement in core activities continues Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal • Personal Banking: Improved credit quality for medium and highly rated 2.0 customers, particularly in Denmark • Business B
Slide 26: Group impairments: Quarterly individual charges continue to decline
Financial results for Q1 2014 2013 Group impairments: Quarterly individual charges continue to decline; DKK 46.8 bn in the allowance account Individual loan impairment charges,* ex Baltics (DKK bn) Change in allowance account* (DKK m) New Increased Reversals Allowance, end-2007 4,900 2.1 1.4 1.2 1.1
Slide 27: Macro: Trends in the Nordics
Financial results for Q1 2014 2013 Macro: Trends in the Nordics Bankruptcies (index 1996 = 100) Rating upgrades,* 12-month moving average (%) Denmark Finland Norway Sweden Business Banking C&I (incl. Financials) 500 100 400 Upgrades > downgrades 300 50 200 100 Downgrades > upgrades 0 1996 1999 2002
Slide 28: Denmark: Housing remains affordable as prices stabilise
Financial results for Q1 2014 2013 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Affordability index, quarterly data from1988–2012 Region Prices Change Change in q/q Preview* Fixed rate Mixed rate Average peaked since peak Q4 2013 Q1 14 140 Copenhagen Q3 2
Slide 29: Realkredit Danmark: Portfolio overview
Financial results for Q1 2014 2013 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q1 14 Loans broken down by LTV ratio and rating, RD, end-04 13 (%) • Approx. 385,000 loans (residential and commercial) Rating 1-3 4-7 8-11 Total Public • 2,524 loans in 3- and 6-month
Slide 30: Impaired exposure: Limited agriculture and shipping exposure
Financial results for Q1 2014 2013 Impaired exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio, Q1 14 (%) Shipping, breakdown of loan portfolio, Q1 14 (%) Other Car carrier Other Horticulture 7 Chemical tanker 12 17 7 Mixed Operations 6 1 26 Agriculture RO-R
Slide 31: Ireland: House price trends and arrears
Financial results for Q1 2014 2013 Ireland: House price trends and arrears Irish house price indices (index 100 = January 2005) Fall from peak (%) CSO index*, houses Residential real estate Internal price index for houses in Dublin Internal price index for houses outside Dublin Dublin 55 140 Non-Dub
Slide 32: Funding: Structure and sources
Financial results for Q1 2014 2013 Funding: Structure and sources Loan portfolio and long-term funding, Q1 14 (DKK bn) Funding sources (%) Q1 2013 Q1 2014 1,780 93 Senior debt 43 1,559 Bank loans 490 782 Deposits 23 Bank mortgages 329 165 Covered bonds 10 7 8 5 3 1 RD mortgages 740 740 Issued RD bon
Slide 33: State hybrid refinancing, part II: EUR 750 million of additional tier 1
Financial results for Q1 2014 2013 State hybrid refinancing, part II: EUR 750 million of additional tier 1 from March 2014 Deal Terms Investor orders by region France Issuer: Danske Bank 6% 2% 8% Germany & Austria 6% Benelux 5% 3% Rating: BB+ (Fitch) and BB+ (S&P) 3% Nordics 3% Status: Additional Ti
Slide 34: Three distinct methods of rating banks
Financial results for Q1 2014 2013 Three distinct 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 0 0 a- +2 -1 A (Negative) 1=Business Position 2=Capital & Earnings 3=Risk Position 4=Fund
Slide 35: Financial targets: Further progress towards 9% ROE in 2015
Financial results for Q1 2014 2013 Financial targets: Further progress towards 9% ROE in 2015 Target Year to be achieved Status at 31 March 2014 Comments 9% 2015 Initiatives progressing Return on equity 7.7% Above 12% Long-term as planned S&P/Moody’s/Fitch Improve ratings by at Ratings 2015 A-/Baa1/
Slide 36: Danica Pension's profit model
Financial results for Q1 2014 2013 Danica Pension’s profit model Profit model Condition/ sensitivity Q1 2014 DKK m Danica Traditionel. Mainly risk Can be booked only if investment return Risk allowance 330 1 allowance 75 bp p.a. of technical is high enough and if no use of bonus Other -26 provisions
Slide 37: Tax development
Financial results for Q1 2014 2013 Tax development Actual and adjusted tax rates (DKK m) Tax drivers Q1 14 Q4 13 Q3 13 Q2 13 Q1 13 • The adjusted tax rate is slightly lower than in Q4 2013 because of Profit before tax 3,630 2,862 2,304 2,677 2,216 lower corporate tax rates in 2014 Pre-tax loss, Irel
Slide 38: Disclaimer
Financial results for Q1 2014 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 Sta