Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Debt Investor Presentation (2016)
36 slides from Danske Bank A/S's debt investor presentation, 2016
Slide 1: Debt investor update First half 2016
Debt investor update First half 2016
Slide 2: Agenda
Debt investor update Agenda Summary of first half of 2016 and financial results 2 Business unit update 4 Selected topics 6 Outlook for full-year 2016 8 Capital and Funding 9 Appendix 16 1
Slide 3: Executive summary: A satisfactory result for the first half of 2016
Debt investor update Executive summary: A satisfactory result for the first half of 2016 Financial results, H1 2016 Low economic growth – continuation of negative interest rates • Net profit of DKK 9.4 bn, in line with first half of 2015 • ROE of 12.4% - on track to meet long-term target above 12.5%
Slide 4: Net profit: DKK 9.4 bn, in line with strong H1 2015
Debt investor update Net profit: DKK 9.4 bn, in line with strong H1 2015 Income statement and key figures (DKK m) Key points, H1 2016 vs. H1 2015 H1 2016 H1 2015 Index Q2 2016 Q1 2016 Index • Return on equity of 12.4% Net interest income 10,747 10,800 100 5,489 5,259 104 • Total income down, reflect
Slide 5: Banking units: Income down, reflecting exceptionally strong H1 2015
Debt investor update Banking units: Income down, reflecting exceptionally strong H1 2015; all units benefit from reduced expenses and low impairments Pre-tax return on allocated capital (%) Financial highlights, H1 2016 vs. H1 2015 H1 2016 Personal Banking • NII down owing to competition and change
Slide 6: C&I and Wealth Management: Less favourable market conditions reduce total income
Debt investor update C&I and Wealth Management: Less favourable market conditions reduce total income; increased lending supports NII C&I: Financial highlights, H1 2016 vs. H1 2015 Wealth Management: Financial highlights, H1 2016 vs. H1 2015 • Total income down 9%, reflecting challenging market cond
Slide 7: Expenses: Continued reduction of expenses in H1 2016
Debt investor update Expenses: Continued reduction of expenses in H1 2016 despite increased regulatory costs Change in expenses (DKK m) Total expenses ex goodwill charge (DKK m) Severance payments 110 169 Deposit guarantee & resolution funds 110 Amortisation of customer relations*** 155 192 71 Bonus
Slide 8: Impairments: Loan loss ratio of –2 bp in H1 2016
Debt investor update Impairments: Loan loss ratio of –2 bp in H1 2016 Group impairments, 2011 to H1 2016 (DKK bn/bp) Impairment drivers, Q2 2016 vs. Q1 2016 Impairments Loan loss ratio* (rhs) • Impairments remained low because of generally strong credit quality across our markets 80 13.2 15 12.5 • N
Slide 9: Outlook for full-year 2016 maintained: Net profit in line with 2015
Debt investor update Outlook for full-year 2016 maintained: Net profit in line with 2015* Revised: We now expect somewhat less pressure on margins for the remainder of 2016, and we will NII benefit from volume growth and somewhat lower funding costs Revised: In light of weak activity levels and unce
Slide 10: Capital: Strong capital base; CET1 capital ratio rises to 15.8%
Debt investor update Capital: Strong capital base; CET1 capital ratio rises to 15.8% driven by earnings and lower risk exposure amount Capital ratios, under Basel III/CRR (%) Capital highlights, Q2 2016 Tier 2 Hybrid T1/AT1 Pillar II CET1 CET1 • Revised CET1 target in the range of 14-15% in the shor
Slide 11: Funding and liquidity: DKK 52 bn of long-term funding issued in H1
Debt investor update Funding and liquidity: DKK 52 bn of long term-term funding issued in H1; LCR-compliant at 136% Changes in funding,* H1 2016 (DKK bn and bp) Long-term funding ex RD (DKK bn) Cov. bonds Senior Tier 2 Tier 1 Funding plan Completed 63bp 95 94bp 93bp 60-80 70 97bp 64 28bp 39 33 38 29
Slide 12: Funding structure and sources: Danish mortgage system is fully pass-through
Debt investor update Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q2 2016 (DKK bn) Funding sources (%) Q1 2016 Q2 2016 1,909 55 124 Senior debt 1,664 Bank loans 575 855 Deposits Bank mortgages 329 174 Covered bonds 13 9 9 7 4 2 0 R
Slide 13: Overview: Danske Bank Group Covered Bond Universe
Debt investor update Overview: Danske Bank Group Covered Bond Universe • Realkredit Danmark, which has been a Covered • Danske Bank A/S, • Danske Bank PLC, • New Swedish CB programme, Bond issuer since 1851 which has been a Covered which has been a Covered which is to be a Covered Bond Bond issuer s
Slide 14: Danske Bank: Adjusted covered bond funding structure
Debt investor update Danske Bank: Adjusted covered bond funding structure New cover pool structure Current asset mix in I-pool: Total issues: DKK 110 bn, Q2 2016 Holiday houses NO 53% • We have ambitions to strengthen our market position in Norway and Sweden, and intend to adjust our covered bond 5%
Slide 15: Danske Bank: Consequences for I- and C-pool
Debt investor update Danske Bank: Consequences for I- and C-pool I- and C-pool going forward Timing • Danske Bank will continue to originate mortgages eligible for • Timing is dependent on the establishment of the Swedish the I-Pool and C-Pool going forward; both pools will remain CB programme. acti
Slide 16: Danske Bank: The four cover pools - Overview
Debt investor update Danske Bank: The four cover pools - Overview Residential Residential Combined Residential 1 Characteristics Cover Pool D Cover Pool I Cover Pool C Danske Bank plc Pool notional DKK 38.1bn DKK 125.4bn DKK 53.9bn DKK 47.6bn (EUR 5.1bn equivalent) (EUR16.8bn equivalent) (EUR 7.2bn
Slide 17: Appendix
Debt investor update Appendix Business units 17 Special topics 22 Macro and portfolio reviews 26 ROE bridge and ratings 31 Tax 33 Contact details 34 16
Slide 18: Personal Banking: Slightly higher customer activity in Q2
Debt investor update Personal Banking: Slightly higher customer activity in Q2; good inflow from our partnerships in Sweden & Norway continues Income statement & key figures (DKK m) Lending volume by country* (Q1 2015 = Index 100) Q2 2016 Q1 2016 Index Denmark Finland Sweden Norway Net interest inco
Slide 19: Business Banking: Lending growth across all countries supports income
Debt investor update Business Banking: Lending growth across all countries supports income; impairments at low level Income statement & key figures (DKK m) Lending volume by country* (Q1 2015 = Index 100) Q2 2016 Q1 2016 Index Denmark Finland Sweden Norway Net interest income 2,117 2,085 102 130 Net
Slide 20: Corporates & Institutions: Profit before tax increased 19%
Debt investor update Corporates & Institutions: Profit before tax increased 19% owing to improved market conditions and lower impairment charges Income statement & key figures (DKK m) Key points, Q2 2016 vs. Q1 2016 Q2 2016 Q1 2016 Index • Total income increased by 10% after very challenging market
Slide 21: Wealth Management: Market conditions remained difficult in Q2 2016
Debt investor update Wealth Management: Market conditions remained difficult in Q2 2016, but improved capital efficiency in Danica Pension Income statement (DKK m) Key points, Q2 2016 vs. Q1 2016 Q2 2016 Q1 2016 Index • Challenging market conditions continued, declining asset values Net interest inc
Slide 22: Non-core: Deleveraging continues
Debt investor update Non-core: Deleveraging continues; full-year pre-tax result is expected to be close to zero Non-core loan portfolio, Q2 2016 (DKK bn) Total REA (DKK bn) Allowance account Non-core conduits, etc. Non-performing credit exposure 30 Non-core Banking Performing credit exposure -50% 4
Slide 23: Net interest income: Up slightly when adjusted for FX effects
Debt investor update Net interest income: Up slightly when adjusted for FX effects despite margin pressure Change in net interest income (DKK m) 187 30 134 10,800 34 10,747 507 384 21 H1 2015 Lending Lending Deposit Deposit Days effect FX effect Other H1 2016 volume margin volume margin 22
Slide 24: Trading income: Up significantly despite negative credit value adjustments
Debt investor update Trading income: Up significantly despite negative credit value adjustments Trading income by business unit (DKK m) Key points, Q2 2016 vs. Q1 2016 Other incl. Treasury Wealth Management Business • Trading income up 34% despite Northern Ireland C&I Personal significant negative C
Slide 25: Expenses: Increase of 9% owing mainly to higher performance-based compensation
Debt investor update Expenses: Increase of 9% owing mainly to higher performance- based compensation, one-offs in Q1 and increased regulatory cost Total expenses ex goodwill charge (DKK m) Change in expenses ex goodwill (DKK m) Severance payments Bonus Deposit guarantee scheme/resolution fund Other
Slide 26: Credit quality: Continued improvement in overall credit quality
Debt investor update Credit quality: Continued improvement in overall credit quality Individual loan impairment charges* (DKK bn) Gross non-performing loans (DKK bn) New Individual allowance account Net exposure, in default Increased Net exposure, not in default Reversal -24% 56.0 51.4 47.8 0.2 43.4
Slide 27: Nordic macro economy
Debt investor update 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 2 0 0 2006 2008 2
Slide 28: Nordic housing markets
Debt investor update Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) 200 130 125 180 120 160 115 110 140 105 100 120 95 100 90 85 2006 2008 2010 2012 2014 2016 2006 2008 2010 2012 2014 2016 Apartment prices (index 2005
Slide 29: Realkredit Danmark and the Danish housing market: Portfolio overview
Debt investor update Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q2 2016 Stock of retail loans, Realkredit Danmark, end-Q2 2016 (%) • Approx. 372,000 loans (residential and commercial) Variable rate instalments Variable rate interest-
Slide 30: Realkredit Danmark: Almost half of new retail loans are fixed rate loans
Debt investor update Realkredit Danmark: Almost half of new retail loans are fixed rate loans; compliant with all regulatory requirements Key points Supervisory diamond for Danish mortgage institutions • For new retail lending, the share of fixed-rate loans increased to 46% from 34% in Q1 2016 • Tot
Slide 31: Credit exposure: Limited agriculture and directly oil-related exposure
Debt investor update Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (2.7% of Group exposure) Oil-related exposure (1% of Group exposure) • The Danish agriculture industry remained under pressure; • Net exposure amounts to DKK 22 bn and related to offshore
Slide 32: Bridge to above 12.5% ROE in 2018 with negative rates
Debt investor update 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 12.5% * Excluding go
Slide 33: Three distinct methods of rating banks
Debt investor update 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 +1 0 0 a 0 0 0 (Stable) 1=Business Position, 2=Capital & Earnings, 3=Risk Position, 4=Funding &
Slide 34: Tax
Debt investor update Tax Actual and adjusted tax rates (DKK m) Tax drivers Q22016 Q12016 Q42015 Q32015 Q22015 • The actual tax rate increased in Q2 2016 Profit before tax 5,780 6,271 866 4,719 5,814 mainly due to unrecognized losses in the Ireland core and non-core -23 -67 -104 -193 -206 Permanent n
Slide 35: Contacts
Debt investor Financial update results for Q1 2013 Contacts Christoffer Møllenbach Claus Ingar Jensen Head of Group Treasury Head of IR Direct: +45 45 14 63 60 Direct: +45 45 12 84 83 Mobile: +45 21 55 10 52 Mobile: +45 25 42 43 70 E-mail: [email protected] E-mail: [email protected] Peter Holm Joh
Slide 36: Disclaimer
Debt investor update 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 States, or an ind