Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2010 Earnings Presentation
49 slides from Danske Bank A/S's earnings presentation, May 4, 2010
Slide 1: Financial results for Q1 2010
FIRST QUARTER 2010 Financial results for Q1 2010 Peter Straarup CEO & Chairman of the Executive Board Tonny Thierry Andersen CFO & Member of the Executive Board May 4, 2010
Slide 2: Agenda
AGENDA Agenda Slide • Key messages 3 • Macroeconomics 4 • Highlights 5 • Business trends 6 • Basel III / CRD IV 19 • Outlook 20 • Q&A session 21 • Appendix: Trends in focus areas & business units 22 2
Slide 3: Acceptable net profit, with economic recovery marginally visible
Acceptable net profit, with economic recovery marginally visible Quarterly total income and DKK m underlying expenses* 18,000 Total income • Net profit 50% Y/Y and 90% Q/Q to DKK Underlying expenses 15,000 0.8bn in Q1 2010 12,000 • Encouraging and tangible results on continuous cost management 9,0
Slide 4: Indications of macroeconomic improvement, but turnaround is still fragile
Indications of macroeconomic improvement, but turnaround is still fragile % GDP development Public finances 8 2010 estimates 4 Gross publ. debt Budget bal. Sovereign % of GDP % of GDP rating (S&P) 0 Norway Denmark 42.0 -5.6 AAA Euroland Sweden 43.1 -2.8 AAA -4 Denmark Norway 26.0 12.0 AAA Sweden Fin
Slide 5: Income declined to a more normal level; lower expenses and impairment charges led to net profit
Income declined to a more normal level; lower expenses and impairment charges led to net profit DKK m Q1 2009 Q1 2010 Index Q4 2009 Q1 2010 Index Net interest income 7,227 6,007 83 6,765 6,007 89 Net fee income 1,763 2,048 116 2,077 2,048 99 Net trading income 7,479 2,379 32 1,961 2,379 121 Other in
Slide 6: Seasonality lowered net interest income, but underlying trend is steady
Seasonality lowered net interest income, but underlying trend is steady Quarterly net interest income Quarterly trend in net interest income DKK m DKK m Y/Y 12%* 7,500 7,000 Q/Q 11% * * 63 * 147 6,500 42 6,500 490 * 142 6,000 6,765 5,500 5,500 6,007 4,500 5,000 Other *** RD** Q1 08 Q2 08 Q3 08 Q
Slide 7: Net fee income remained stable excluding high performance fees in Q4
Net fee income remained stable excluding high performance fees in Q4 Quarterly fee income DKK m 2,500 2,000 1,500 1,000 500 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Activity based fees Y/Y 26% Q/Q 4% Portfolio based fees Y/Y 12% Q/Q 0% 7
Slide 8: Net trading income returning to normal as market volatility subsides
Net trading income returning to normal as market volatility subsides Breakdown of net trading income VIX Volatility Index DKK m Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 90 Trading Activities 7,534 4,410 3,194 1,791 2,013 75 Group Treasury -589 297 567 -152 119 60 Institutional Banking (non-Nordic) 86
Slide 9: Insurance income up on strong investment and unit-linked results
Insurance income up on strong investment and unit- linked results Net income from insurance business Unit linked insurance business DKK m Q1 2009 Q1 2010 Index Unit linked insurance business Q1 2009 Q1 2010 Premiums (DKK bn) 5.2 6.5 125 Unit-linked insurance result (DKK m) 1 74 Share of technical pr
Slide 10: Decreasing expenses reflect cost control efforts
Decreasing expenses reflect cost control efforts Expenses and number of employees Trend in number of employees and branches FTEs Branches DKKm Q1 2009 Q1 2010 Index 25,000 850 Expenses 6,896 6,423 93 24,000 Integration expenses 98 46 47 Branches 800 Amortisation of intangibles 128 127 99 23,000 14
Slide 11: Loan impairment charges trending down
Loan impairment charges trending down Quarterly loan impairment charges bp DKK m 10,000 200 Total loan imp. charges in basis points 7,500 150 5,000 100 2,500 50 0 0 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Collective impairment charges Individual impairment charges 11
Slide 12: Upgrades/downgrades ratio improving, but Denmark lags
Upgrades/downgrades ratio improving, but Denmark lags % Upgrades / total internal rating changes on the corporate book 80 Downturn Upturn Downturn 60 Upgrades > downgrades Downgrades > upgrades 40 Outside Denmark Denmark 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Q1 2010 Source: Moody’s and o
Slide 13: Loan impairment charges still dominated by SMEs
Loan impairment charges still dominated by SMEs Impairments by customer segment Gross exp. subject to individual imp. test & cov. ratio - SMEs account for most of the Group’s impairments - Coverage ratio incl. collateral nearly 90% Exposure Coverage 100% DKK bn ratio, % 120 Coverage ratio incl. coll
Slide 14: Nordic impairments: Charges still high in Denmark
Nordic impairments: Charges still high in Denmark DKK m DKK m 5,000 1,250 *Acc. imp. DKK 16,662m *Acc. imp. DKK 2,580m Denmark - individual 144bp Finland - individual 150 bp 4,000 1,000 216 bp 59% of Group’s lending - collective 22bp 9% of Group’s lending - collective 15 bp 127 bp 112 bp 114 bp 750
Slide 15: Other impairments: General improvement, most notably in Northern Ireland and Baltics
Other impairments: General improvement, most notably in Northern Ireland and Baltics DKK m DKK m 750 2,100 *Acc. imp. DKK 2,141m *Acc. imp. DKK 8,093m Northern Ireland - individual 365 bp Ireland - individual 966 bp 3% of Group’s lending - collective 63 bp 4% of Group’s lending - collective 105 bp 7
Slide 16: Low funding need in 2010 and extended duration
Low funding need in 2010 and extended duration New funding 2008-11 Funding sources - Low estimated funding need going forward - Move towards long-term funding sources DKK bn % 200 40 Q1 2010 Q4 2008 150 30 100 20 50 10 0 0 Repo Issued bonds Credit inst. (ex. CB) Central banks Certificates Covered bo
Slide 17: Strong loan-to-deposits ratio and liquidity position
Strong loan-to-deposits ratio and liquidity position Loan-to-deposit gap (DKK bn) and ratio (%) 12-month liquidity* Moody’s Financial Strength DKK bn % DKK bn 500 130 450 400 125 300 End-Q1 2010 300 120 150 End-Q4 2009 200 End-Q4 2008 115 0 100 0 110 -150 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 1
Slide 18: Strong capital position maintained
Strong capital position maintained Capital ratios – CRD/Basel II Trend in RWA (DKKm) % 20 17.9% 9 16 1 4 14.2% 12 12.4% 10.3% 9.6% 8 834 838 4 0 Credit quality Q4 08 Q4 09 Q1 10 Change in counterparty Q4 2009 Q1 2010 lending* Market and Solvency ratio risk Total tier 1 ratio Tier 1 ratio incl. conve
Slide 19: Key points on Basel III / CRD IV
Key points on Basel III / CRD IV • Basel III will take ROE out of the banking sector • Potentially huge negative macroeconomic effect if fully implemented • Long-term liquidity rules and leverage ratio are expected to be watered down • Renewed focus on corporate governance • Danske Bank is in a rela
Slide 20: Outlook for 2010
Outlook for 2010 • Macroeconomic improvement, but upswing remains fragile • Robust income from banking activities • Lower trading and insurance income, dependent on market developments • Total expenses to decline in 2010; continued focus on cost management, but also investments in product and IT dev
Slide 21: Q&A session
Q&A session Press 1 to ask a question Press “#” to cancel Press “Ask a question” in your webcast player www.danskebank.com/ir 21
Slide 22: Appendix
APPENDIX Appendix 22
Slide 23: Net interest income - Realkredit Danmark
Net interest income - Realkredit Danmark DKK m 750 2010 2009 500 250 0 Q1 Q2 Q3 Q4 Note: ex. customer margin and interest on convertible gov’t hybrid capital. 23
Slide 24: Improving lending margins in all markets, but pressure beginning to emerge
Improving lending margins in all markets, but pressure beginning to emerge Quarterly lending margins Q1 2009 – Q1 2010 % (loan stock) 2.5 2.0 1.5 1.0 0.5 0.0 Denmark * Finland Sweden Norway Northern Ireland Ireland Baltics * Incl. Realkredit Danmark 24
Slide 25: Narrowing deposit margins because of lower short-term rates and stiff competition
Narrowing deposit margins because of lower short-term rates and stiff competition Quarterly deposit margins Q1 2009 – Q1 2010 % (deposit stock) 1.2 0.8 0.4 0.0 Denmark Finland Sweden Norway Northern Ireland Ireland Baltics 25
Slide 26: Favourable market conditions for Danske Markets, but levelling off as expected
Favourable market conditions for Danske Markets, but levelling off as expected EUR/SEK 12M volatility Bid/offer spreads, 8Y Danish govts % - High FX volatility boosts activity ticks - Government bonds have become profitable 20 100 15 75 10 50 5 25 0 0 Jun-08 Jan-09 Aug-09 Mar-10 Mar-08 Sep-08 Mar-09
Slide 27: Balance sheet reduction driven by lower lending and Danske Markets
Balance sheet reduction driven by lower lending and Danske Markets Trend in total assets DKK bn end of period 4,000 Change Y/Y 3,000 Other assets +10% Trading & inv. -10% 2,000 portfolio Banks & repos +5% 1,000 Lending - 6% 0 Total - 4% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 27
Slide 28: Credit exposure down 4% Y/Y
Credit exposure down 4% Y/Y Credit exposure from lending activity, end-Q1 2010 (DKK 2,344bn, including DKK 1,845bn in lending and repos) Central and local governments Subsidised 6% housing companies 5% Banks Personal 8% customers 36% Commercial property 10% Construction, engineering and building pro
Slide 29: Much larger increase in bankruptcies in Denmark than in the other Nordic countries
Much larger increase in bankruptcies in Denmark than in the other Nordic countries Index Number of monthly bankruptcies in the Nordics (indexed, Jan. 1996 =100) 400 Denmark 300 200 Norway 100 Finland Sweden 0 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Source: Eco
Slide 30: Credit exposure to commercial property and construction
Credit exposure to commercial property and construction Portion Construction Commercial from and building Sector in DKK bn property developers materials total Denmark 109.4 1.1 12.9 122.3 Finland 16.1 0.7 5.3 21.4 Sweden 51.2 0.2 5.1 56.3 Norway 33.8 2.6 2.1 35.9 Northern Ireland 10.2 3.5 4.5 14.7 I
Slide 31: Danish agriculture sector pressured by lower property and output prices
Danish agriculture sector pressured by lower property and output prices Other 11% Mixed operations Agriculture 7% 23% Exposure to agriculture DKK bn Realkredit Danmark 45 Banking Activities Denmark 12 Other business areas 14 Chemicals and Agriculture 71 feeds 15% Agriculture LTV, Realkredit Danmark
Slide 32: Well-diversified shipping exposure
Well-diversified shipping exposure Multipurpose Seismic 1% 1% Other FPSO/FSO 2% 4% Container Offshore supply feeder 13% 3% Offshore rig 9% Crude tanker Ro-ro 13% Shipping exposure DKK bn 4% Shipping 47 Gas tanker Land trans., aviation & insfrastructure 23 6% Transportation and shipping 70 Dry bulk C
Slide 33: Gross exp. subject to individual imp. test; reflects difficult economic conditions
Gross exp. subject to individual imp. test; reflects difficult economic conditions in certain markets bp Gross exposure subject to individual imp. test in basis points of total loans 2,500 2,445 2,167 2,000 1,664 1,500 992 1,000 561 500 402 427 305 185 0 Denmark Finland Sweden Norway Northern Irelan
Slide 34: Signs of housing market stabilising
Signs of housing market stabilising Correlation between house prices Danish house price development by regions Price and consumption in Denmark per sqm. DKK bn 16,000 200 Region Prices peaked Price fall Change in since peak (%) Q110 (%) <= House prices Copenhagen Q3 2006 -28.3 1.5 12,000 180 Zealand
Slide 35: Mortgages in Denmark: low average LTV ratio, arrears picking up, but still low
Mortgages in Denmark: low average LTV ratio, arrears picking up, but still low Breakdown of loans by LTV and rating category Danish mortgages Mortgage finance (residential & commercial) • 81 repossessed properties and 4,862 arrears out of End-Q1 414,818 loans at end-Q1 LTV/rating 1-3 4-7 8-11 Total
Slide 36: Safe and highly rated bond portfolio
Safe and highly rated bond portfolio Bond portfolio Rating distribution (DKK 425bn) AAA 81% AA+ 7% Credit bonds Certificates AA 2% 4% 3% AA- 4% Quasi- government A+ 3% Danish mortgage 2% A 1% bonds A- 0% 39% Swedish BBB+ 0% covered bonds BBB 1% 17% BBB- 0% BB+ 0% BB 0% BB- 0% Lower 0% NA 1% Other co
Slide 37: Well-diversified funding position
Well-diversified funding position Equity 4% Central banks 5% Repos 6% Deposits 31% Banks, net • 55% deposits and fully match- 5% funded Danish mortgage bonds (net) S-T bonds 8% • Long-term bonds DKK 227bn • Issued covered bonds DKK 113bn L-T bonds • Funding market has remained 9% stable during Q1 20
Slide 38: Banking Activities Denmark: Lower costs, but burdened by declining NII and still high imp. charges
Banking Activities Denmark: Lower costs, but burdened by declining NII and still high imp. charges Profit before loan impairment charges 26% Trend in lending volume - Declining NII reduces income, partly offset by lower costs (average) DKK m Q1 2009 Q1 2010 Index Net interest income 4,211 3,421 81
Slide 39: Banking Activities Finland: Lower costs and loan imp. charges, but declining NII reduces profit
Banking Activities Finland: Lower costs and loan imp. charges, but declining NII reduces profit Profit before loan impairment charges 65% Trend in lending volume - Declining net interest income weights heavily (average) DKK m Q1 2009 Q1 2010 Index Retail: Y/Y 1% Corporate: Y/Y 11% DKK bn Net int
Slide 40: Banking Activities Sweden: Higher income and lower imp. charges lead to a positive result
Banking Activities Sweden: Higher income and lower imp. charges lead to a positive result Trend in lending volume Profit before loan impairment charges 37% (average, % -change in local currency) - Affected by 11% appreciation of SEK against DKK DKK m Q1 2009 Q1 2010 Index DKK bn Retail: Y/Y 5% C
Slide 41: Banking Activities Norway: Low loan imp. charges, but also lower income due to declining NII
Banking Activities Norway: Low loan imp. charges, but also lower income due to declining NII Profit before loan impairment charges 17% Trend in lending volume (average % -change in local currency) - Affected by 10% appreciation of NOK against DKK DKK m Q1 2009 Q1 2010 Index DKK bn Retail: Y/Y 6%
Slide 42: Banking Activities Northern Ireland: NII hurt by lower short-term rate, but offset by lower costs
Banking Activities Northern Ireland: NII hurt by lower short-term rate, but offset by lower costs Profit before loan impairment charges 65% Trend in lending volume (average, % -change in local currency) - Lower costs improve profit DKK m Q1 2009 Q1 2010 Index Retail: Y/Y 1% Corporate: Y/Y 9%*
Slide 43: Banking Activities Ireland: Still high commercial property related impairment charges
Banking Activities Ireland: Still high commercial property related impairment charges Profit before loan impairment charges 39% Trend in lending volume - Income under pressure, partly offset by lower costs (average) DKK m Q1 2009 Q1 2010 Index DKK bn Retail: Y/Y 6% Corporate: Y/Y 4% Net intere
Slide 44: Banking Activities Baltics: Significantly lower loan impairment charges
Banking Activities Baltics: Significantly lower loan impairment charges Profit before loan impairment charges 9% Trend in lending volume - Lower income , partly offset by tight cost control (average) DKK m Q1 2009 Q1 2010 Index DKK bn Retail: Y/Y 15% Corporate: Y/Y 27% Net interest income 143
Slide 45: Danske Markets: Income down to more normalised level
Danske Markets: Income down to more normalised level Profit before tax down to more normalised level Quarterly breakdown of income - Reflects exceptionally high income and imp. charges in Q109 DKK m Q1 2009 Q1 2010 Index DKK m Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Total income 7,031 2,207 31 Tradi
Slide 46: Danske Capital: Increasing assets under management improve earnings
Danske Capital: Increasing assets under management improve earnings Profit before loan impairment charges 20% DKK bn AuM – Customer breakdown - Increasing AUM and lower costs improve profit 600 DKK m Q1 2009 Q1 2010 Index Private equity Total income 388 414 107 Expenses 241 238 99 Institutional 40
Slide 47: Danica Pension: Higher investment return and positive unit-link result
Danica Pension: Higher investment return and positive unit-link result Net income from insurance business Investment returns, YTD DKK m Q1 2009 Q1 2010 Index Customers’ funds Premiums (DKK bn) 5.2 6.5 125 % Investment return Investments & liabilities Share of technical provisions 272 276 101 4 Healt
Slide 48: Danica's profit model
Danica’s profit model Profit model Condition / sensitivity Q1 2010 DKK m • Risk allowance 64 bp of • No usage of bonus potential of • Positive technical basis of DKK 1 technical prov. (DKK173bn) paid-up policies and sufficient 2.3bn and restored bonus 276 investment income potential + • Return on in
Slide 49: Disclaimer
Disclaimer 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 or an inducement to enter into investment activity. No part of this presentat