Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — FY2014 Earnings Presentation
42 slides from Danske Bank A/S's earnings presentation, Feb 3, 2015
Slide 1: Financial results for 2014
Financial results for 2014 Thomas F. Borgen Chief Executive Officer Henrik Ramlau-Hansen Chief Financial Officer 3 February 2015
Slide 2: Agenda
Financial results for 2014 Q1 2013 Agenda Executive summary and financial results 3 Business unit update 5 Selected topics 7 Business review, Baltics 12 Outlook for full-year 2015 13 Q&A 14 Appendix 15 2
Slide 3: Executive summary 2014
Financial results for 2014 Q1 2013 Executive summary 2014 Net profit of DKK 3.8 bn Net profit & ROE Net profit before goodwill impairments of DKK 12.9 bn, corresponding to ROE of 8.5% Income Total income of DKK 43.9 bn – up 10% vs 2013 Expenses Expenses of DKK 22.6 bn ex goodwill impairments – down
Slide 4: Net profit: DKK 12.9 bn, up 82% from 2013
Financial results for 2014 Q1 2013 Net profit: DKK 12.9 bn,* up 82% from 2013 Income statement & key figures (DKK m) Key points, 2014 vs 2013 • Return on equity improved from 2014 2013 Index Q4 2014 Q3 2014 Index 5.0% to 8.5% before goodwill Net interest income 23,107 22,077 105 5,880 5,976 98 impai
Slide 5: The three banking units: Improvement from 2013 at all units
Financial results for 2014 Q1 2013 The three banking units: Improvement from 2013 at all units, particularly at Personal Banking and Business Banking Pre-tax return on allocated capital ex goodwill charge(%) Financial highlights, 2014 vs 2013 2013 2014 Personal Banking • Lower NII was offset by high
Slide 6: Danske Capital and Danica Pension: Good performance in 2014
Financial results for 2014 Q1 2013 Danske Capital and Danica Pension: Good performance in 2014 Danske Capital: Financial highlights, 2014 vs 2013 Danica Pension: Financial highlights, 2014 vs 2013 • Total income up 11% owing to an increase in assets under • Result from insurance business was unchang
Slide 7: Expenses: Reduced by 5% in 2014 as a result of continued cost-efficiency measures
Financial results for 2014 Q1 2013 Expenses: Reduced by 5% in 2014 as a result of continued cost-efficiency measures Total Group expenses ex goodwill charge (DKK m) Change in expenses ex goodwill (DKK m) Consultants etc. Bonuses Severance payments Write-down on Sampo name 2013 23,794 Deposit scheme
Slide 8: Impairments: Loan loss ratio for 2014
Financial results for 2014 Q1 2013 Impairments: Loan loss ratio for 2014 of 15 bp for core activities and 20 bp for the entire Group Group impairments, 2008 to 2014 (DKK bn/bp) Impairments (DKK m) Impairments Loan loss ratio* (rhs) 2014 2013 Index Q414 Q314 Index Personal Banking 1,412 1,887 75 517
Slide 9: Capital: Solid capital base, with CET1 ratio of 15.1%
Financial results for 2014 Q1 2013 Capital: Solid capital base, with CET1 ratio of 15.1% Capital ratios, under Basel III/CRR (%) Capital drivers Tier 2 • In Q4 2014, total REA declined DKK Hybrid tier 1 / Additional tier 1 2 bn to DKK 866 bn, mainly because Common equity tier 1 of developments in th
Slide 10: Non-core: Winding-up of Irish assets is almost completed
Financial results for 2014 Q1 2013 Non-core: Winding-up of Irish assets is almost completed Key points New Non-core loan portfolio,* Q4 2014 (DKK bn) • The loss before tax was reduced from DKK 1.8 bn in Allowance account 2013 to DKK 1.5 bn 39 Non-performing credit exposure 8 • Total loan book reduce
Slide 11: Bridge to above 12.5% ROE in 2018
Financial results for 2014 Q1 2013 Bridge to above 12.5% ROE in 2018 with unchanged macro, CET1 ratio of around 14% and capital management actions Change in ROE (%, after tax) Comments (see appendix for assumptions) ROE target of above 12.5% in 2018 at the latest • Interest rates as per end 2014 ROE
Slide 12: Business Review, Baltics: Investments to strengthen business banking activities
Financial results for 2014 Q1 2013 Business Review, Baltics: Investments to strengthen business banking activities – gradual exit of personal banking activities Rationale behind the strategy Non-core personal customers, 1 Jan 2015 (DKK bn) Supporting business customers outside the Nordic region is
Slide 13: Outlook for 2015: Net profit above DKK 14 bn
Financial results for 2014 Q1 2013 Outlook for 2015: Net profit above DKK 14 bn Macro Economic growth remains slow and fragile, with low interest rates Total income Income is expected to be around the same level as in 2014 Expenses Expenses are expected to be below DKK 22 bn Impairments Impairments
Slide 14: Q&A session
Financial results for 2014 Q1 2013 Q&A session Press * then 1 to ask a question Press “#” to cancel Press “Ask a question” in your webcast player www.danskebank.com/ir 14
Slide 15: Appendix
Financial results for 2014 Q1 2013 Appendix Business units 16 Special topics: NII, trading income and expenses 21 Impairments 25 Macro, credit quality and portfolio reviews 28 Funding, liquidity and ratings 34 Financial targets 37 Danica’s profit model and tax 38 Assumptions behind ROE bridge 40 Con
Slide 16: Personal Banking: Total income up slightly on higher activity
Financial results for 2014 Q1 2013 Personal Banking: Total income up slightly on higher activity; impairments up owing to AQR-related charges Income statement & key figures (DKK m) Key points, Q4 14 vs Q3 14 Q4 2014 Q3 2014 Index Net interest income 2,660 2,761 96 • Total income up 1%, owing mainly
Slide 17: Business Banking: Positive trend in income; impairments significantly lower
Financial results for 2014 Q1 2013 Business Banking: Positive trend in income; impairments significantly lower Income statement & key figures (DKK m) Key points, Q4 14 vs Q3 14 Q4 2014 Q3 2014 Index Net interest income 2,301 2,309 100 • Profit before tax up slightly owing to higher income and Net fe
Slide 18: Corporates & Institutions: Profit declines because of low trading income
Financial results for 2014 Q1 2013 Corporates & Institutions: Profit declines because of low trading income and higher impairments Income statement & key figures (DKK m) Key points, Q4 14 vs Q3 14 Q4 2014 Q3 2014 Index Net interest income 717 713 101 • Profit before tax down 47%, mainly because of l
Slide 19: Danske Capital: Performance fees the key driver of higher income in Q4
Financial results for 2014 Q1 2013 Danske Capital: Performance fees the key driver of higher income in Q4 Income statement (DKK m) Key points, Q4 14 vs Q3 14 Q4 2014 Q3 2014 Index • Total income up 49% due to performance fees Net interest income 2 -1 - Net fee income 825 554 149 • Performance fee in
Slide 20: Danica Pension: Full risk allowance booked for all four interest rate groups
Financial results for 2014 Q1 2013 Danica Pension: Full risk allowance booked for all four interest rate groups and booking from shadow account Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q4 14 (%) Q4 2014 Q3 2014 Index Equities Credit bonds Alternative investments Pre
Slide 21: Net interest income: Q4 affected by lower interest rate environment
Financial results for 2014 Q1 2013 Net interest income: Q4 affected by lower interest rate environment and FX fluctuations Quarterly net interest income (DKK m) Quarterly changes in net interest income (DKK m) +4% 5,976 Q3 14 5,976 5,900 5,880 5,640 Lending effect 50 5,351 Q413 Q114 Q214 Q314 Q414 D
Slide 22: Trading income: Client-driven income slightly up in Q4
Financial results for 2014 Q1 2013 Trading income: Client-driven income slightly up in Q4; significant decrease in income from Market Making in C&I Trading income by business unit (DKK m) Key points Other incl. Treasury C&I Business Personal • Trading income fell owing to a 2,195 significant drop in
Slide 23: Expenses: Increase of 10% owing to restructuring charges and seasonality
Financial results for 2014 Q1 2013 Expenses: Increase of 10% owing to restructuring charges and seasonality Total expenses ex goodwill charge (DKK m) Change in expenses ex goodwill, (DKK m) Consultants etc. Bonuses Severance payments Other costs Q3 2014 5,530 Deposit guarantee scheme/bank packages 6
Slide 24: Impairments: Higher impairments related mainly to AQR charges
Financial results for 2014 Q1 2013 Impairments: Higher impairments related mainly to AQR charges – positive underlying trend continues Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal • Personal Banking: Up from Q3 level owing to collective AQR charges of 1.3 D
Slide 25: Group impairments: Strong underlying trend with individual net reversals in Q4
Financial results for 2014 Q1 2013 Group impairments: Strong underlying trend with individual net reversals in Q4; DKK 40.9 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 0.8
Slide 26: Goodwill impairments: Goodwill write-down of DKK 9.1 bn
Financial results for 2014 Q1 2013 Goodwill impairments: Goodwill write-down of DKK 9.1 bn for Finland, Northern Ireland and Estonia Goodwill impairment charge by business area (DKK m) Goodwill drivers • The goodwill impairments are the result of assumptions about weaker long-term macroeconomic deve
Slide 27: Macro: Trends in the Nordics
Financial results for 2014 Q1 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 2014 Q1 2013 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Affordability index, quarterly data from1989-2014 Change in Fixed rate Mixed rate Average Region Prices Change q/q Preview* 160 peaked since peak Q3 2014 Q4 14 140 Copenhagen
Slide 29: Realkredit Danmark: Portfolio overview
Financial results for 2014 Q1 2013 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q4 14 Loans by LTV ratio and rating, RD, end-Q4 14 (DKK bn) • Approx. 381,000 loans (residential and commercial) Pub. • 2,209 loans in 3- and 6-month arrears LTV ratio (%) 1-3 4-7 8-11
Slide 30: Realkredit Danmark: Increase in fixed-rate loans driven by very low interest rates
Financial results for 2014 Q1 2013 Realkredit Danmark: Increase in fixed-rate loans driven by very low interest rates Key points Expected development in RD portfolio* (%) • Trend away from short-term Flexlån® continued in Q4 Interest-only Amortising 2014 • The share of fixed rate instalment loans am
Slide 31: Realkredit Danmark: New supervision of Danish mortgage institutions
Financial results for 2014 Q1 2013 Realkredit Danmark: New supervision of Danish mortgage institutions Regulatory diamond for Danish mortgage institutions Highlights of the supervisory diamond • As recommended in the Rangvid report on the financial crisis, the Concentration risk: Growth: FSA has int
Slide 32: Credit exposure: Limited agriculture and shipping/oil exposure
Financial results for 2014 Q1 2013 Credit exposure: Limited agriculture and shipping/oil exposure Agriculture exposure (2.9% of Group exposure) Shipping and oil related exposure (1.7% of Group exposure) • Weak market conditions for pig breeding and dairy • The shipping portfolio is booked mainly in
Slide 33: Funding and liquidity: Successful capital issues and high issuance activity in 2014
Financial results for 2014 Q1 2013 Funding and liquidity: Successful capital issues and high issuance activity in 2014 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 108bp 39bp 132bp 586bp 95 51bp 19bp 73 64 50-70 31
Slide 34: Funding: Structure and sources
Financial results for 2014 Q1 2013 Funding: Structure and sources Loan portfolio and long-term funding, Q4 14 (DKK bn) Funding sources (%) Q3 2014 Q4 2014 1,797 103 Senior debt 44 1,564 Bank loans 514 763 Deposits 21 Bank mortgages 305 186 Covered bonds 11 8 7 6 1 2 RD mortgages 745 745 Issued RD bo
Slide 35: Three distinct methods of rating banks
Financial results for 2014 Q1 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 36: Financial targets: Target for ROE of above 12.5% in 2018
Financial results for 2014 Q1 2013 Financial targets: Target for ROE of above 12.5% in 2018 Status at Target Comments 2015 ambition 31 December 2014 Return on equity Above 12.5%* 8.5% before goodwill Initiatives progressing 9.5% impairments as planned Ratings A ratings S&P/Moody’s/Fitch In progress,
Slide 37: Danica Pension's profit model
Financial results for 2014 Q1 2013 Danica Pension’s profit model Profit model Condition/ sensitivity 2014 DKK m Danica Traditionel. Mainly risk Can be booked only if investment return Risk allowance 1,351 1 allowance 75 bp p.a. of technical is high enough and if no use of bonus Other -114 provisions
Slide 38: Tax
Financial results for 2014 Q1 2013 Tax Actual and adjusted tax rates (DKK m) Tax drivers 2014 Q4 14 Q3 14 Q2 14 Q1 14 The permanent non-taxable Profit before tax 7,835 -5,298 4,503 5,000 3,630 difference derives mainly from the following: Pre-tax loss, Ireland core and Non-core 740 434 79 87 140 • G
Slide 39: Assumptions behind ROE bridge to above 12.5% in 2018
Financial results for 2014 Q1 2013 Assumptions behind ROE bridge to above 12.5% in 2018 Assumptions Assumptions (continued) Macroeconomic conditions Costs • Interest rates as per end 2014 • Cost inflation (2%) and increasing payroll tax • Low growth and low credit demand • One-off saving from Sampo-
Slide 40: Financial highlights adjusted for transfer of liquidity portfolio and fee classification
Financial results for 2014 Q1 2013 Financial highlights adjusted for transfer of liquidity portfolio and classification of fee income Restated income statement 2014 (DKK m) Highlights of the restatement Adjusted Internal Bank Highlights Internal Net fee Highlights 2014 Bank income 2014 • The liquidi
Slide 41: Contacts
Financial results for 2014 Q1 2013 Contacts Henrik Ramlau-Hansen Direct: +45 45 14 06 66 Chief Financial Officer Mobile: +45 22 20 73 10 [email protected] Claus Ingar Jensen Direct: +45 45 12 84 83 Head of IR Mobile: +45 25 42 43 70 [email protected] John Bäckman Direct: +45 45 14 07 92 Chief IR
Slide 42: Disclaimer
Financial results for 2014 Q1 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