Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2016 Earnings Presentation
36 slides from Danske Bank A/S's earnings presentation, Apr 29, 2016
Slide 1: Financial results – first quarter 2016
Financial results – first quarter 2016 Thomas F. Borgen Chief Executive Officer Jacob Aarup-Andersen Chief Financial Officer 29 April 2016
Slide 2: Agenda
Financial results – first quarter 2016 Agenda Executive summary and financial results 2 Business unit update 4 Selected topics 7 Outlook for full-year 2016 10 Q&A 11 Appendix 12 1
Slide 3: Executive summary – first quarter of 2016
Financial results – first quarter 2016 Executive summary – first quarter of 2016 Net profit & ROE Net profit of DKK 4.9 bn, corresponding to ROE of 13.1% Income Total income of DKK 11.5 bn — down 9% vs. strong Q1 2015 Expenses Expenses of DKK 5.3 bn, down 8% vs. Q1 2015 Impairments Net reversal of D
Slide 4: Net profit: DKK 4.9 bn, unchanged vs. strong Q1 2015
Financial results – first quarter 2016 Net profit: DKK 4.9 bn, unchanged vs. strong Q1 2015 Income statement & key figures (DKK m) Key points, Q1 2016 vs. Q1 2015 Q1 2016 Q1 2015 Index Q4 2015 Index • Return on equity of 13.1% Net interest income 5,259 5,301 99 5,279 100 • Total income down, reflect
Slide 5: Banking units: lower expenses and net reversals drive profit higher at PB and BB
Financial results – first quarter 2016 Banking units: lower expenses and net reversals drive profit higher at PB and BB; C&I down vs. exceptionally strong Q1 2015 Pre-tax return on allocated capital, new capital framework (%) Financial highlights, Q1 2016 vs. Q1 2015 Q1 2016 Personal Banking • NII d
Slide 6: New business unit: Wealth Management, with DKK 1,351 bn in AuM
Financial results – first quarter 2016 New business unit: Wealth Management, with DKK 1,351 bn in AuM – Q1 affected by declining asset prices Income statement (DKK m) Financial highlights, Q1 2016 vs. Q1 2015 Q1 2016 Q1 2015 Index • Lower total income reflects lower-than-normal activity in Net inter
Slide 7: New business unit: Northern Ireland
Financial results – first quarter 2016 New business unit: Northern Ireland - Profit before tax up 4% vs. Q1 2015, driven by lower expenses Income statement (DKK m) Financial highlights, Q1 2016 vs. Q1 2015 Q1 2016 Q1 2015 Index • Profit before tax up 4%, driven by lower expenses Net interest income
Slide 8: Expenses: Down 8% vs. Q1 2015
Financial results – first quarter 2016 Expenses: Down 8% vs. Q1 2015 owing to efficiency measures, lower guarantee contributions and lower intangible amortisation Total expenses ex goodwill charge, 2011-2015 (DKK m) Total expenses ex goodwill charge (DKK m) Restated** Reported Severance payments 25,
Slide 9: Impairments: Loan loss ratio of –3 bp in Q1 2016
Financial results – first quarter 2016 Impairments: Loan loss ratio of –3 bp in Q1 2016 Group impairments, 2011 to Q1 2016 (DKK bn/bp) Impairment drivers, Q1 2016 vs. Q4 2015 Impairments Loan loss ratio* (rhs) • Impairments remained low at all business units as credit quality continued to improve ac
Slide 10: Capital: Strong capital base; CET1 ratio of 15.0%
Financial results – first quarter 2016 Capital: Strong capital base; CET1 ratio of 15.0% net of full share buy-back Capital ratios, under Basel III/CRR (%) Capital highlights, Q1 2016 Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • Full DKK 9 bn share buy-back deducted in Q1 2016 21.0 20.1 • Total REA in
Slide 11: Outlook for full-year 2016 maintained: Net profit in line with 2015
Financial results – first quarter 2016 Outlook for full-year 2016 maintained: Net profit in line with 2015* We expect continued pressure on margins in 2016, while we will benefit from volume growth and NII lower funding costs We expect the underlying trend in net fee income to continue, but we do no
Slide 12: Q&A session
Financial results – first quarter 2016 Q&A session www.danskebank.com/ir 11
Slide 13: Appendix
Financial results – first quarter 2016 Appendix Business units 13 Special topics 17 Macro and portfolio reviews 21 Funding, liquidity, restatements, ROE bridge and ratings 26 Tax 33 Contact details 34 12
Slide 14: Personal Banking: Lower expenses and net reversals in Q1
Financial results – first quarter 2016 Personal Banking: Lower expenses and net reversals in Q1; good customer activity in Norway continues Income statement & key figures (DKK m) Lending volume by country* (Q4 2014 = Index 100) Q1 2016 Q4 2015 Index Denmark Finland Sweden Norway Net interest income
Slide 15: Business Banking: Good customer activity in all countries
Financial results – first quarter 2016 Business Banking: Good customer activity in all countries; lower expenses and net reversals Income statement & key figures (DKK m) Lending volume by country* (Q4 2014 = Index 100) Q1 2016 Q4 2015 Index Denmark Finland Sweden Norway Net interest income 2,085 2,1
Slide 16: Corporates & Institutions: Profit before tax decreased Q/Q
Financial results – first quarter 2016 Corporates & Institutions: Profit before tax decreased Q/Q, mainly because of increased collective impairments Income statement & key figures (DKK m) Key points, Q1 2016 vs. Q4 2015 Q1 2016 Q4 2015 Index • Trading and fee income declined in Q1 due to challengin
Slide 17: Wealth Management: Q1 affected by seasonality and declining asset prices
Financial results – first quarter 2016 Wealth Management: Q1 affected by seasonality and declining asset prices Income statement (DKK m) Key points, Q1 2016 vs. Q4 2015 Q1 2016 Q4 2015 Index • Adjusted for shadow account booking of DKK 0.2 bn and Net interest income 168 150 112 performance fees of D
Slide 18: Net interest income: Up slightly when adjusted for FX and day effects
Financial results – first quarter 2016 Net interest income: Up slightly when adjusted for FX and day effects; small effect from rate hike in Denmark Change in net interest income (DKK m) 6 5,279 55 5,259 127 43 40 108 25 Q4 2015 Lending Lending Deposit Deposit Days effect FX effect Other Q1 2016 mar
Slide 19: Trading income: Up 6% in Q1 despite subdued customer activity
Financial results – first quarter 2016 Trading income: Up 6% in Q1 despite subdued customer activity Trading income by business unit (DKK m) Key points, Q1 2016 vs. Q4 2015 Other incl. Treasury Wealth Management Business • Trading income up 6% in Q1, driven Northern Ireland C&I Personal primarily by
Slide 20: Expenses: Reduction of 15% owing to seasonality
Financial results – first quarter 2016 Expenses: Reduction of 15% owing to seasonality as well as lower guarantee contributions and lower intangible amortisation 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: Positive trend continued in Q1
Financial results – first quarter 2016 Credit quality: Positive trend continued in Q1 Individual loan impairment charges* (DKK bn) Gross non-performing loans, ex Non-core (DKK bn) New Increased Reversal Individual allowance account Net exposure, in default Net exposure, not in default -27% 0.4 59 43
Slide 22: Nordic macro economy
Financial results – first quarter 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
Slide 23: Nordic housing markets
Financial results – first quarter 2016 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 200 130 125 180 120 160 115 110 140 105 120 100 95 100 90 85 2006 2008 2010 2012 2014 2016 2005 2007 2009 2011 2013 2015 Apartment p
Slide 24: Realkredit Danmark and the Danish housing market: Portfolio overview
Financial results – first quarter 2016 Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q1 2016 Stock of retail loans, Realkredit Danmark, end-Q1 2016 (%) • Approx. 372,000 loans (residential and commercial) Variable rate instalments Varia
Slide 25: Realkredit Danmark: Share of short-term variable rate loans has stabilised
Financial results – first quarter 2016 Realkredit Danmark: Share of short-term variable rate loans has stabilised; compliant with all regulatory requirements Key points Regulatory diamond for Danish mortgage institutions • Continued interest in long-term variable rate loans owing to steeper yield cu
Slide 26: Credit exposure: Limited agriculture and direct oil-related exposure
Financial results – first quarter 2016 Credit exposure: Limited agriculture and direct oil-related exposure Agriculture exposure (2.8% of Group exposure) Oil-related exposure (1% of Group exposure) • Market conditions stayed weak in Q1; pig prices remained • Net exposure amounted to DKK 23 bn and re
Slide 27: Funding and liquidity: DKK 26 bn of long-term funding issued in Q1
Financial results – first quarter 2016 Funding and liquidity: DKK 26 bn of long term-term funding issued in Q1; LCR compliant at 124% Changes in funding,* Q1 2016 (DKK bn and bp) Long-term funding ex RD (DKK bn) Cov. bonds Senior Tier 2 Tier 1 Funding plan Completed 94bp 95 93bp 70 60-80 64 33 57bp
Slide 28: Funding structure and sources: Danish mortgage system is fully pass-through
Financial results – first quarter 2016 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q1 2016 (DKK bn) Funding sources (%) Q4 2015 Q1 2016 1,876 122 Senior debt 54 1,640 Bank loans 563 812 Deposits Bank mortgages 326 191 Covered bond
Slide 29: Restated Group financial highlights 2015
Financial results – first quarter 2016 Restated Group financial highlights 2015 Group financial highlights, 2015 (DKK m) Comments CHANGES TO GROUP INCOME STATEMENT Highlights Changes Adjusted • Until now, income and expenses at Danica Annual Report Danica Equity highlights Pension have been disclose
Slide 30: Breakdown of Wealth Management's reporting lines
Financial results – first quarter 2016 Breakdown of Wealth Management’s reporting lines New accounting principles at Wealth Management Interest income from Private Banking less interest expense from capital funding NII costs Fees from Danske Capital, risk allowance and shadow account from Danica Tra
Slide 31: New capital allocation framework
Financial results – first quarter 2016 New capital allocation framework: More capital allocated to business units based on REA and in line with CET1 ambition Allocated capital (average) and ROAC* (DKK bn/%) Comments Old Model New Model ROAC* (%) • The new capital allocation framework is based on a r
Slide 32: Bridge to above 12.5% ROE in 2018 with negative rates
Financial results – first quarter 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
Slide 33: Three distinct methods of rating banks
Financial results – first quarter 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 0 0 0 a- 0 +1 0 (Stable) 1=Business Position, 2=Capital & Earnings, 3=Risk Pos
Slide 34: Tax
Financial results – first quarter 2016 Tax Actual and adjusted tax rates (DKK m) Tax drivers Q12016 Q42015 Q32015 Q22015 Q12015 • The difference between profit before tax Profit before tax 6,271 866 4,720 5,814 6,362 and adjusted pre-tax profit relates mainly Ireland core and non-core -67 -104 -193
Slide 35: Contacts
Financial results – first quarter 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: +4
Slide 36: Disclaimer
Financial results – first quarter 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