Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — 9M 2022 Earnings Presentation
51 slides from Danske Bank A/S's earnings presentation, Oct 27, 2022
Slide 1: Investor Presentation – First nine months 2022
Investor Presentation First nine months 2022
Slide 2: Agenda
Investor Presentation – First nine months 2022 Agenda 01. Danske Bank – brief overview 2–6 02. Financial highlights – first nine months 2022 7 – 13 03. Business & Product Units 14 – 17 04. ESG, Sustainability, Financial Crime Prevention 18 – 26 05. Credit Quality & Impairments 27 – 32 06. Capital 33
Slide 3: We are a Nordic universal bank with strong regional roots
Investor Presentation – First nine months 2022 We are a Nordic universal bank with strong regional roots Finland (AA+) 3.3 m 2,100+ 21,000+ 3rd largest personal and business customers large corporate and institutional employees in Market share: 10% customers 10 countries Share of Group lending: 8% G
Slide 4: Update on the Estonia matter: Additional provision of DKK 14bn in Q3
Investor Presentation – First nine months 2022 Update on the Estonia matter: Additional provision of DKK 14bn in Q3; Net Profit revised to a net loss better than DKK 5.5 bn, incl. goodwill impairment of DKK 1.6 bn Following discussions with the US and Danish authorities, DanskeBank is now able to ma
Slide 5: Traction towards targets remains positive across our sustainability indicators
Investor Presentation – First nine months 2022 Traction towards targets remains positive across our sustainability indicators Sustainable finance Sustainable operations Impact initiatives Responsible Sustainable Governance & Employee Environmental Entrepreneur- Financial investing financing integrit
Slide 6: Our Path to Financial Crime Transformation
Investor Presentation – First nine months 2022 Our Path to Financial Crime Transformation 2020 - 2022 2023 A comprehensive We automate our Group-wide Financial We continue our Policies and We refresh due transaction monitoring Crime Plan is launched ongoing dialogue instructions are diligence data o
Slide 7: Revised net profit outlook for 2022
Investor Presentation – First nine months 2022 Revised net profit outlook for 2022*: Adjusted for additional provision for the Estonia matter and goodwill write down, we now expect net loss better than DKK 5.5 bn We continue to expect income from core banking activities to be higher in 2022, as high
Slide 8: Financial highlights – first nine months 2022
Financial highlights – first nine months 2022
Slide 9: Highlights – Good activity, stringent execution and positive impact from rates
Investor Presentation – First nine months 2022 Highlights – Good activity, stringent execution and positive impact from rates and strategic pricing initiatives underpin commercial progress Good commercial progress driving uplift in core banking income, as volume growth remains robust Solid capit
Slide 10: Net interest income up by 8% YoY driven by repricing, volumes and higher rates
Investor Presentation – First nine months 2022 Net interest income up by 8% YoY driven by repricing, volumes and higher rates; trading/insurance impacted by market turmoil; credit quality remains resilient Key points, 9M 22 vs 9M 21 Income statement and key figures (DKK m) • NII uplift from repricin
Slide 11: NII: Solid credit demand, positive effects from CB rate hikes, and repricing
Investor Presentation – First nine months 2022 NII: Solid credit demand, positive effects from CB rate hikes, and repricing initiatives continue to support the improving NII trend Highlights Net interest income, YTD-22 vs YTD-21 (DKK m) -320 • Net interest income continued the positive trend, as rep
Slide 12: Fee: Strong fee performance in core banking activities
Investor Presentation – First nine months 2022 Fee: Strong fee performance in core banking activities driven by activity fees, mitigating impact from lower AuM and lower activity in capital markets Highlights Net fee income (DKK m) Activity-driven fees / money transfers, accounts etc. 9,700 Money tr
Slide 13: Trading: Improvement in Q3 driven by recovery in Rates & Credit
Investor Presentation – First nine months 2022 Trading: Improvement in Q3 driven by recovery in performance at Rates & Credit; negative valuation effects in Northern Ireland Highlights Net trading income (DKK m) LC&I LC&I ex. xVA xVA PC & BC Other 3,111 • Historically high volatility in Nordic fixed
Slide 14: Expenses: Underlying progress on efficiency despite high remediation costs
Investor Presentation – First nine months 2022 Expenses: Underlying progress on efficiency despite continually high remediation costs; significant impact from additional provision and goodwill write-down Highlights Expenses, 9M-22 vs 9M-21 (DKK m) 35,197 • Progress on structural cost take-out with u
Slide 15: Business & Product Units
Bank Business & Product Units
Slide 16: Business units: Continued progress in PC DK and Business Customers
Investor Presentation – First nine months 2022 Business units: Continued progress in PC DK and Business Customers Key financial metrics Highlights Total Income** NII Fee + Trading Lending* PC DK: Solid NII uplift of 22% Q/Q as higher rates are supported by remortgaging activity and improved market
Slide 17: Business units: Good progress in LC&I; Danica impacted by volatile markets
Investor Presentation – First nine months 2022 Business units: Good progress in LC&I driven by high activity; Danica impacted by volatile financial markets Key financial metrics Highlights Asset under Management Income breakdown (DKK bn) General Banking (index) (index) -1 0 1 2 3 4 5 6 7 8 9 10 11
Slide 18: Realkredit Danmark portfolio overview: Continued strong credit quality
Investor Presentation – First nine months 2022 Realkredit Danmark portfolio overview: Continued strong credit quality with decreasing LTVs Highlights Retail loans, Realkredit Danmark, Q3 22 (%) Fixed rate (10 yrs-30 yrs) Interest-only ( ) = Q2-22 Portfolio facts, Realkredit Danmark, Q3 22 Variable r
Slide 19: Sustainability
Bank Sustainability
Slide 20: Sustainability is an integrated element of our corporate strategy
Investor Presentation – First nine months 2022 Sustainability is an integrated element of our corporate strategy and our corporate targets Sustainability critical in Better Danske Bank’s 2023 sustainability strategy aim to drive Selected highlights Bank plan to improve bank for all change by utilisi
Slide 21: Continued progress on sustainability agenda in Q3
Investor Presentation – First nine months 2022 Continued progress on sustainability agenda in Q3 contributing to strong performance New sustainable investment funds with diversification Successful campaign towards personal customers • Five new Danske Invest funds for investors who want • Increased f
Slide 22: On sustainable finance, Danske Bank aspires to Nordic leadership
Investor Presentation – First nine months 2022 On sustainable finance, Danske Bank aspires to Nordic leadership – our sustainable finance framework has been developed to drive and integrate that ambition Group ambition for Be a leading bank in the Nordics on sustainable finance and the leading bank
Slide 23: Deep dive: Overview of ESG integration in lending operations
Investor Presentation – First nine months 2022 Deep dive: Overview of ESG integration in Danske Bank’s lending operations • Multiple types of approaches are implemented to consider ESG factors both at company and portfolio levels 1. Position statements 2. Single-name ESG analysis 3. Portfolio-level
Slide 24: Danske Bank supports international agreements, goals, partnerships and standards
Investor Presentation – First nine months 2022 Danske Bank supports a range of international agreements, goals, partnerships and standards relating to sustainability – some of these are listed below Principles for Responsible Net-Zero Banking Alliance Net-Zero Asset Managers Net-Zero Asset Owner Pri
Slide 25: Financial Crime prevention - increase in number of full-time employees
Investor Presentation – First nine months 2022 Financial Crime prevention - increase in number of full-time employees Group headcount ~3,600 Full-time employees dedicated to the financial crime prevention agenda* 2015 2016 2017 2018 2019 2020 2021 2022 7 Second Line headcount Employees working in Fi
Slide 26: Committee governance for Compliance Risks
Investor Presentation – First nine months 2022 Committee governance for Compliance Risks Financial Crime Remediation Steering Compliance Risk Conduct and Compliance Committee Committee Committee • Provides governance structure and • Second Line Committee responsible for • Board level committee that
Slide 27: Regulatory Engagements
Investor Presentation – First nine months 2022 Regulatory Engagements • We engage in ongoing dialogue with our regulators through regular meetings with the Financial Supervisory Authority (FSA) and Supervisory College to ensure aligned expectations and transparency between our regulators and the Ban
Slide 28: Credit quality & Impairments
Credit quality & Impairments
Slide 29: Impairments: Continually strong credit quality and individual reversals
Investor Presentation – First nine months 2022 Impairments: Continually strong credit quality and individual reversals, while prudent buffers remain in place; modest macro-charges to reflect deteriorating outlook Highlights Impairment charges by category (DKK bn) • Credit quality remains strong with
Slide 30: Strong footprint within retail lending
Investor Presentation – First nine months 2022 Strong footprint within retail lending Lending by segment 1 Q3 22 (%) Credit exposure by industry Q3 22 (%) Personal Customers DK Personal customers 35.4 Personal Customer Nordic Commercial property 11.3 Business Customers Public institutions 10.3 Asset
Slide 31: Overall strong credit quality in portfolios exposed to current macro developments
Investor Presentation – First nine months 2022 Overall strong credit quality in portfolios exposed to current macro developments CRE: Generally low exposure to property development Retail customers: Strong household finances and Agriculture: Well-provisioned agriculture book activities mortgage back
Slide 32: Fossil fuels (coal and oil) exposure
Investor Presentation – First nine months 2022 Fossil fuels (coal and oil) exposure Key points, Q3 22 • This exposure to fossil fuels and includes customers involved in production, refining, and distribution (including shipping) of oil as well as utilities producing heat or power with coal. • The ex
Slide 33: Credit quality: Low level of actual credit deterioration
Investor Presentation – First nine months 2022 Credit quality: Low level of actual credit deterioration Stage 2 and 3 as % of net exposure Allowance account by business unit (DKK bn) 11 Stage 2 net exposure (% of Total, lhs) 4 PC BC LC&I N.I. Other (Non-core) 10 Stage 3 net exposure (% of Total, rhs
Slide 34: Capital
Bank Capital
Slide 35: Capital: Strong capital base; CET1 capital ratio of 16.9%
Investor Presentation – First nine months 2022 Capital: Strong capital base; CET1 capital ratio of 16.9% (buffer of 4.4%) Capital ratios, under Basel III/CRR (%) Current capital buffer structure (%) 23.0 22.4 Tier 2 Hybrid T1/AT1 Pillar II component (total 2.6%) CET1 Countercyclical capital buffer 2
Slide 36: Strong CET1 capital build-up since 2008
Investor Presentation – First nine months 2022 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) well in excess of DKK 100 bn Common Equity Tier 1, 2008 – 2022 9M (DKK bn) + DKK 66 bn 144 152 143 126 130 134 133 133 127 133 119 107 77 79 85 2008 2009 2010 2011 2012 2013 20
Slide 37: Fully compliant with MREL and subordination requirement
Investor Presentation – First nine months 2022 Fully compliant with MREL and subordination requirement; expect to cover MREL need with both preferred and non-preferred senior MREL and subordination requirement* and eligible funds; Q3 2022; Comments DKK bn (% of Group REA) +19 PS > 1y NPS > 1y CET1,
Slide 38: Funding & Liquidity
Bank Funding & Liquidity
Slide 39: Funding structure and sources: Danish mortgage system is fully pass-through
Investor Presentation – First nine months 2022 Funding structure and sources: Danish mortgage system is fully pass-through Loan port folio and long-term funding, Q3 22 (DKK bn) Funding sources* (%) 59% 60% 2,317 Q2-22 168 Senior & Q3-22 NPS bonds 1,819 1,187 Deposits Bank loans 714 13% 14% Bank mort
Slide 40: Funding programmes and currencies
Investor Presentation – First nine months 2022 Funding programmes and currencies Covered bonds by currency, end-Q3 2022 Largest funding programmes, end-Q3 2022 Utilisation EMTN Programme 42% 24% 28% Limit – EUR 35bn EUR SEK NOK Global Covered Bond 68% Limit – EUR 30bn 48% ECP Programme Total DKK 164
Slide 41: Funding and liquidity: LCR compliant at 159%
Investor Presentation – First nine months 2022 Funding and liquidity: LCR compliant at 159% Changes in funding,* 2022 (DKK bn and bp) Long-term funding excl. RD (DKK bn)*** Cov. bonds Senior Non-Preferred Senior Funding plan Completed 30bp 100 156bp 13bp 79 75 69 60-80 40bp 190bp 114bp 35 26bp 31 31
Slide 42: Danske Bank covered bond universe, a transparent pool structure
Investor Presentation – First nine months 2022 Danske Bank covered bond universe, a transparent pool structure1 Danske Bank A/S C-pool S&P AAA Fitch AAA Residential mortgages • Denmark, D-pool • Norway, I-pool • Sweden, Danske Hypotek AB Danske Bank A/S I-pool Finland • Finland, Danske Mortgage Bank
Slide 43: Credit & ESG Ratings
Bank Credit & ESG Ratings
Slide 44: Danske Bank's credit ratings
Investor Presentation – First nine months 2022 Danske Bank’s credit ratings Long-term instrument ratings Credit rat ings remain unchanged in Q3 2022 Fitch Moody’s Scope S&P Credit ratings remain unchanged in Q3 2022, but the fast evolving direct and AAA Aaa AAA AAA indirect repercussions from the Ru
Slide 45: Danske Bank's ESG ratings
Investor Presentation – First nine months 2022 Danske Bank’s ESG ratings We have chosen to focus on five providers based on their importance to our investors Q3 2022 Q2 2022 Q1 2022 End 2021 End 2020 Range CDP1 B 200 companies, out of the 13,126 B B B B A to F (A highest rating) analysed, made the c
Slide 46: Three distinct methods for rating banks
Investor Presentation – First nine months 2022 Three distinct methods for rating banks Danske Bank’s rating Rating methodology Potential Extraordinary Anchor + 1 + 2 + 3 + 4 = CRA2 = SACP1 + external + ALAC = Issuer rating SACP1 adjustment support A+ bbb+ +1 +1 -1 0 0 a- 0 +2 (Negative) 1=Business P
Slide 47: Tax & Material one-offs
| Danske| Bank Tax & Material one-offs
Slide 48: Tax
Investor Presentation – First nine months 2022 Tax Actual and adjusted tax rates (DKK m) Tax drivers, Q3 2022 • The actual tax rate of 81.1% (excluding prior-year's adjustments) is higher than the Danish rate of 22% - Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 due primarily to the tax effect from tax e
Slide 49: Material extraordinary items in 2022
Investor Presentation – First nine months 2022 Material extraordinary items in 2022 One-off items Effect P&L line affected (DKK m) Q1 Gain from sale of international private banking activities in Luxembourg 421 Other income (pre-tax) Gain from sale of Danica Norway 415 Net income from insurance (tax
Slide 50: Contacts
Investor Presentation – First nine months 2022 Contacts Investor Relations Group Treasury and Funding Claus Ingar Jensen Mobile +45 25 42 43 70 Bent Callisen Direct +45 45 12 84 08 Head of Group Funding Mobile: +45 30 10 23 05 Head of IR [email protected] Group Treasury [email protected] Thomas H
Slide 51: Disclaimer
Investor Presentation – First nine months 2022 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 solici tation of an offer to buy or acquire securities of Danske Bank A/S in any jurisdiction, including t