Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Investor Day (November 2012)
91 slides from Danske Bank A/S's investor day presentation, Nov 8, 2012
Slide 1: New Standards
Danske Bank Capital Markets Day New Standards Eivind Kolding, CEO & Chairman of the Executive Board 8 November 2012
Slide 2: Agenda
Agenda New Standards Eivind Kolding The Personal Banking strategy Tonny Thierry Andersen The Business Banking strategy Lars Stensgaard Mørch The Corporates & Institutions strategy Thomas F. Borgen Q&A Session on Business Unit strategies Break The road to profitability Henrik Ramlau-Hansen Q&A Sessio
Slide 3: We are operating in a New Normal
We are operating in a New Normal
Slide 4: Lack of trust
New Normal Lack of trust 4
Slide 5: Regulation
New Normal Regulation 5
Slide 6: Customer behaviour
New Normal Customer behaviour 6
Slide 7: Economic uncertainty
New Normal Economic uncertainty 7
Slide 8: Tougher competition
New Normal Tougher competition 8
Slide 9: Nevertheless, we still play a crucial role in society
Nevertheless, we still play a crucial role in society Deposits Lending Advisory Pension & Transactions Risk Investments services life insurance management 9
Slide 10: Where do we want to be in 2015?
Where do we want to be in 2015? 10
Slide 11: Recognised as the most trusted financial partner
“To be trusted is a greater compliment than being loved” George McDonald New vision for 2015 Recognised as the most trusted financial partner 11
Slide 12: The most trusted financial partner
The most trusted financial partner Customer satisfaction 2015 Financial results 2015 We want to be in the top two in We want to be in the top three of customer satisfaction in our our Nordic peer group as prioritised customer segments measured by return on equity (ROE) 12
Slide 13: Setting new standards in financial services
Our new mission Setting new standards in financial services Customer Advisory Openness & Digitalisation focus services responsibility 13
Slide 14: We are a universal bank in our Nordic home market
We are a universal bank in our Nordic home market Strategic Business Units Danica Danske Capital Nordania Divestment Non-core Ireland 14
Slide 15: CEO priorities
CEO priorities 2013 - 15 15
Slide 16: Execution of New Standards
Execution of New Standards Personal Business C&I Banking Banking strategy strategy strategy 16
Slide 17: Think Execution, Think Simple, Think Lean
Think Execution Simple, of newThink standards Lean Number of 20% Personal 50% Business customer reduction in Banking reduction Banking in C&I strategy meetings processing strategy frontstrategy office per adviser time admin tasks up 20% 17
Slide 18: Financial targets
Financial targets Q3 2012 Ambitions ROE 3.8% Above 12% in 2015 S&P/Moody’s/Fitch Improve ratings at least one notch Ratings A-/Baa1/A Core tier 1 12.7% Minimum 13% by the end of 2013 Total capital 19.4% Minimum 17% by the end of 2013 Liquidity Meet EU 2015 LCR requirement by the end of 2012 Nominal
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Slide 20: Disclaimer
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 inducement to enter in
Slide 21: Executing a turnaround in Personal Banking
Danske Bank Capital Markets Day Executing a turnaround in Personal Banking Tonny Thierry Andersen, Head of Personal Banking 8 November 2012
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Slide 23: The tale of the tape for Personal Banking
The tale of the tape for Personal Banking Personal Banking Rest of the Group Lending and deposits Total income 35% 49% 49% Customers and FTEs Market position 42% #1 #3 #5 #3 #1-2 #6 93% 3
Slide 24: Our point of departure necessitates a resolute turnaround
Our point of departure necessitates a resolute turnaround Group goals Business unit observations - 2012 Financial results 2015 • Profitability significantly below full potential In the top three of our Nordic peer • >40% of customers are unprofitable group as measured by ROE • Significant pricing in
Slide 25: We will focus on prioritised segments
We will focus our efforts on prioritised segments: Mass affluent, Private Banking and young people/students w. potential Profitable Break-even + Unprofitable Old Private Banking Mass Mass Age market affluent Young people/students Young Low High Net household income Note: Size of boxes represents num
Slide 26: Committed to improving customer satisfaction in prioritised segments
We are committed to improving customer satisfaction in prioritised segments Satisfaction relative to competitor average, Q3 2012 80% 90% 100% 110% 120% 6
Slide 27: Our response to the challenges is comprehensive yet highly integrated
Our response to the challenges is comprehensive yet highly integrated Clear Customer customer programme Distribution segmentation launch channel revamp Best-in-class Think Lean FTE and Selective efficiency think simple pricing 7
Slide 28: New standards #1: Clear customer segmentation
New standards #1: Clear customer segmentation To make customers financially confident, we will meet different preferences with different value propositions Private Banking Mass Affluent Mass Market Expertise, exclusivity and Quid pro quo, confidence Simplicity, transparency proactivity and proactivi
Slide 29: New standards #2: Customer programme
New standards #2: Customer programme Customer programme to be launched in Q1 2013 Proactivity FTE allocation A fair solution for every customer – and for the bank Accessibility Products and and channels Group benefits Pricing and fees 9
Slide 30: New standards #3: Distribution channel revamp
New standards #3: Distribution channel revamp While reducing branch footprint, we are building state-of-the art branches with the new Danske Bank look and feel Number of branches -40% Integrated 2011 2012 Goal multi-channel Branch density per 100,000 adults1 distribution 41 26 23 16 8 DK UK SE FI NO
Slide 31: New standards #4: Best-in-class FTE efficiency
New standards #4: Best-in-class FTE efficiency The goal is to be best-in-class in terms of efficiency by 2015. Current position: mid-field FTE development Efficiency comparison Bain benchmark DB 2015 target 350 -15% DB 2012 actual Advisory 350 customers +17% 300 850 Mass market customers 850 +60% 53
Slide 32: New standards #5: Think Lean and think simple
New standards #5: Think Lean and think simple 90% of loan approvals to be made automatically — triple-win! Current level of automation (%) Target (%) 90 64 57 58 50 34 25 DK FI IE NO SE NI All markets 12 12
Slide 33: New standards #6: Selective pricing
New standards #6: Selective pricing Still potential for selective pricing to better reflect risk, cross- selling and LTV in the new regulatory environment Effect of repricing, lending margins1 (%) Market 2010-12 repricing 2013-15 potential 2011 1.4 2012 1.3 1.2 1.0 0.9 0.9 0.7 0.4 DK FI SE NO 1 Marg
Slide 34: Same enablers on various markets with differing effects
The same enablers will work on the various markets, but with differing effects and timing Potential of new standards Clear customer segmentation Customer programme Distribution network revamp Best-in-class FTE efficiency Think lean and think simple Pricing 14
Slide 35: Ambitious financial targets for Personal Banking
Ambitious financial targets for Personal Banking, but much has already been executed P&L effect, pre-tax (DKK bn) Management actions Pricing • Pricing of DKK 2 billion already executed in 2012 Pricing 0.8 1.3 • Continued margin increases in all markets (although to a lesser extent in Denmark) Sales
Slide 36: Profound turnaround enabled by six new key standards
Profound turnaround in Personal Banking enabled by six new key standards – we are already in full execution mode 16 16
Slide 37: Disclaimer
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 inducement to enter in
Slide 38: Reaching full potential in Business Banking
Danske Bank Reaching full potential in Business Banking Lars Stensgaard Mørch, Head of Business Banking
Slide 39: The tale of the tape for Business Banking
The tale of the tape for Business Banking Business Banking Rest of Group Lending & deposits 38% 34% Facts 3,800 FTEs 90% of income in the Nordic countries Total income & FTEs 154 physical locations and 5 Business Direct centres 18% 31% Co-located with Personal Banking & Private Banking 2
Slide 40: Business Banking Strategy – reaching full potential
Business Banking Strategy – reaching full potential Unfocused “one size fits all” approach Capability to compete Comprehensive and accelerated change programme is set in motion 3
Slide 41: Attractive market with unexploited potential
Attractive market with unexploited potential SME market Business Banking 680,000 Robust 85% Attractive of income generated market Nordic companies Nordic by the biggest 20% (customer groups) economies companies Need for 2/3 Customer satisfaction Substantial improvement! of income is from & loyalty h
Slide 42: Building on Business Banking's core strength
NEW AMBITION Setting building on Business Banking’s core strength – being the reliable, preferred bank for SMEs with advanced needs 5
Slide 43: Five strategic actions will set New Standards
Five strategic actions will set New Standards 5. Upgrade organisation 1. Make clear customer segmentation 2. 4. Leverage product strength Ensure credit quality 3. Align distribution channels 6
Slide 44: Differentiated approach supports sharper focus and prioritisation
Differentiated approach supports sharper focus and prioritisation — and alignment of sales and credits Core Selective Optimise Efficiency Restrictive Total income 44% 28% 11% 5% 12% Resources Invest Reduce Lending & credit Segmentation effect Increased capital efficiency and reduced risk 7
Slide 45: From unexploited pool of products to targeted customer advisory
From unexploited pool of products to targeted customer advisory and tailored solutions Creating A bundle of offers, but consistency Strategic financial risk no clear red for each customer analysis thread... segment FX/derivative Cash sales management Debt capital Trade finance markets 8
Slide 46: Value propositions developed for each customer segment
Value propositions, programmes and product offerings developed for each customer segment Strategic stances Segmentation Programmes Core Selective Value packages Advisory competencies and instructions Optimise Efficiency 15 segments Credit policies Work processes Restrictive Tools and IT support appl
Slide 47: Distribution platform re-aligned with customer needs
Distribution platform will be re-aligned with customer needs and segment priorities Business Advisory Finance Centre of Direct centres centres excellence Resources Job- Certified Certified specialists & Skills specific banker business segment adviser relationship managers IT & Expand and upgrade sel
Slide 48: Extensive credit transformation
Extensive credit transformation to further improve credit quality and customer experience Establish clear “Lean” credit Prioritise and Rebuild credit credit policies processes specialise accountability and and guidelines competencies B ...a step-by-step change 11
Slide 49: Upgrade organisation
Upgrade organisation Strengthen capabilities and customer-centric culture Certification programme for all customer segments AML, MiFID Credit & risk Specialist segment advisory Responsibility back at the frontline (incl. P/L) Scorecards to support and measure execution of strategy 12
Slide 50: Segmentation model tested: significant effect on satisfaction and profit
Segmentation model tested: Significant effect on customer satisfaction & profit Strategy Strategy Customer benefits implementation implementation • Specialised segment advisory & tools • Clear segment distribution channels • Reduced risk & interest rates Our benefits • Lower risk • Lower allocat
Slide 51: New segmentation will improve capital efficiency and lower risk
New segmentation will improve capital efficiency and lower risk Core Selective Optimise Efficiency Restrictive AC 2012 ROAC 2012 AC 2015E ROAC 2015E Effect from Non-NII Effect from NII ROAC 2012 2015 2015 2015 2015 2015 14
Slide 52: Superior product range and great cross sale opportunities
Superior product range and great cross sale opportunities prioritised by segment Product quality Above market Core Selective Optimise Efficiency Restrictive At market Below market Cross sale potential Trade finance Cash management FX & derivatives Debt capital market Asset finance Business Online In
Slide 53: Business Banking management actions
Business Banking management actions P&L effect, pre-tax (DKK bn) Management actions Pricing Additional effects of implemented pricing Pricing 0.5 0.7 measures Continue pricing measures selectively, e.g. customers with low ROAC Sales Sales 0.8 Segmented product offerings aimed at increasing bus
Slide 54: Key take-aways
Key take-aways Protecting and developing core business New segmentation supports de-risking and capital efficiency Pricing and increased sales have already improved PTP More profitable, competent and efficient Business Banking unit 17
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Slide 56: To protect and selectively grow
Danske Bank Capital Markets Day To protect and selectively grow Thomas F. Borgen, Head of Corporates & Institutions 8 November 2012
Slide 57: Customer relations with major clients are the foundation for C&I
Customer relations with major corporate and # of employees institutional clients are the foundation for C&I 740 corporate clients Transaction Banking 316 Sales, Synergies with Personal Research Relationship Capital & Business Banking & Risk Management Markets Advisory 195 166 250 Trading & Risk 725
Slide 58: C&I generates a significant part of Group income
C&I generates a significant part of Group income, but accounts for a small portion of the balance sheet and FTEs Key figures for new C&I organisation Lending Deposits FTE C&I 9% 7% Rest of Group 17% Split of total income 2011 (approx. DKK 9bn) 9M 2012 (approx. DKK 10bn) Markets 8% 5% CIB Other 23% 3
Slide 59: All major C&I client segments are value creating
All major C&I client segments are value creating Return on allocated capital, 9M 2012 (%) International clients Institutional clients Corporate clients Shipping clients Allocated capital utilisation 4
Slide 60: Trading activities show low volatility
Trading activities show low volatility, but earnings run rate varies according to market opportunities Trading activities, accumulated income (DKK bn) Weeks with gain/loss 2010 2011 2012 Loss week Profit week 8,000 6,000 4,000 52 49 48 51 48 44 42 43 2,000 0 Q1 Q2 Q3 Q4 2005 2006 2007 2008 2009 2010
Slide 61: Low-risk asset base
Low-risk asset base Markets RWA split, September 2012 (%) Trading activities Counterparty risk Stress VaR of DKK 185 m in Q3 2012 50 Markets income is split between customer 4 Credit risk income (60-40%) and market making (40– 60%) 13 34 Operational risk Market risk Bond portfolio split, Septemb
Slide 62: Getting used to the 'New Normal'
Getting used to the ‘New Normal’ Economy Capital Regulation Funding Competition 7
Slide 63: New ambition: setting for wholesale banking
NEW AMBITION Setting for wholesale banking Reliable Competent Coordinated Dynamic Solutions-oriented Partner 8
Slide 64: Focus areas
Focus areas Capital Adaptation to new capital requirements Clients Prioritisation of clients Products Prioritisation of product offering 9
Slide 65: New regulatory effects to be largely mitigated
New regulatory effects to be largely mitigated Expected effects on RWA – Markets (DKK bn) General market risk Specific market risk Counterparty risk 60 70 127 102 15 13 28 61 Today (Basel 2.5) IRC CVA charge Mitigation Post Basel 3 10
Slide 66: C&I positioned towards clients where core strengths can be leveraged
C&I will be positioned towards clients in respect of which core strengths can be leveraged Clients with complex needs International footprint Capital-efficient client offering Leverage competitive Nordic products for global Optimise the capital efficiency of advantages and product clients prod
Slide 67: C&I has a strong product palette, but room for improvement
C&I has a strong product palette, but room for improvement PROSPERA RANKING Cash management Trade finance FX DCM FI SE Derivatives DK NO FI SE Fixed income DK NO FI SE Equities DK NO Source: Prospera 12
Slide 68: Strategic initiatives will increase normalised income by approx. DKK 2 bn
Strategic initiatives will increase ‘normalised’ income by approximately DKK 2 bn over the next three years Strategic Changing Private alignment equity business fundsmodel ‘Normalised’ Selected client SMEsTrade From Finance pure cash to Working equities to growth income Capital Management
Slide 69: C&I management actions
C&I management actions Effect from normalised level to 2015 (DKK bn) Management actions Non-NII Equities strategy Increase customer penetration Non-NII 2.0 Product development Transaction Banking growth Enhancement of DCM offerings Investments Investments 0.6 E-trade capabilities Centr
Slide 70: C&I will combine protecting the franchise with selective growth
In summary, C&I will combine protecting the existing franchise with selective growth 15
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Slide 72: Disclaimer
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 inducement to enter in
Slide 73: The road to profitability
Danske Bank Capital Markets Day The road to profitability Henrik Ramlau-Hansen, Chief Financial Officer 8 November 2012
Slide 74: Agenda
Agenda Results for 9M 2012 Roadmap to ROE above 12% in 2015 Rationale behind the share issue ROE sensitivity to key assumptions 2
Slide 75: Setting the scene
Setting the scene Income statement (DKK m) Key points 9M 2012 9M 2011 Index Total income up 14% Net interest income 18,588 17,355 107 Stable expenses despite Net fee income 6,129 6,080 101 restructuring costs Net trading income 7,469 5,687 131 ÷ Impairment charges Other income 2,323 2,799 83 hig
Slide 76: Outlook for 2012
Outlook for 2012 Macro Economic growth to remain low in most markets Income Improvement of income is an ongoing process Expenses Expected to increase 4% above 2011 level Loan losses In line with 2011 level, around DKK 13 bn Net profit Results remain low 4
Slide 77: Financial targets
Financial targets Q3 2012 Ambitions ROE 3.8% Above 12% in 2015 S&P/Moody’s/Fitch Improve ratings at least one notch Ratings A-/Baa1/A Core tier 1 12.7% Minimum 13% by the end of 2013 Total capital 19.4% Minimum 17% by the end of 2013 Liquidity Meet EU 2015 LCR requirement by the end of 2012 Nominal
Slide 78: ROE above 12% in 2015
ROE above 12% in 2015 Change in ROE from 2012 to 2015 9M 2012 annualised (after tax) 3.8% Management actions (pre-tax) 1 4–6% points Declining loan losses (pre-tax) 2 5–6% points Short term rates (pre-tax) 3 4–5% points Capital, regulation, inflation, tax 4 6–7% points 2015E (after tax) ROE above 12
Slide 79: Management actions increase profit by DKK 6–8 bn in 2015
Management actions increase profit by DKK 6–8 bn in 2015 Effect from 9M 2012 annualised to 2015 (DKK bn pre-tax) Initiatives 1 Pricing Additional effects of Pricing 2 implemented pricing measures Continue pricing measures Fees Sales Sales 3–4 Reduce fee discounts Increase cross sales in Pe
Slide 80: Management actions by business unit
Management actions by business unit Effect from 9M 2012 annualised to 2015 (DKK bn pre-tax) 1 Personal Banking 3–4 Business Banking 2–2.5 C&I 1–1.5 Danske Capital 0.4 Total actions Total management actions of DKK 6–8 bn Corresponds to a positive ROE effect of 4–6 % points 8
Slide 81: Growth at Danske Capital through 2015
Growth at Danske Capital through 2015 Effect from 9M 2012 annualised to 2015 (DKK bn pre-tax) Initiatives 1 Sales Through Danske Bank to – Institutional clients Sales 0.5 (solution products) – Retail clients (managed accounts) Through external channels to international institutional clients (alp
Slide 82: Cost efficiency leads to costs below DKK 26 bn in 2015
Cost efficiency leads to costs below DKK 26 bn in 2015 Effect on total expenses from 2012 guidance to 2015 (DKK bn pre-tax) Staff reduction (1,000s) 1 24 2012E 27 20 16 One-offs 1 12 2008 Q312 2015E Cost efficiency 1.5 Branch network reduction 900 Inflation 1.5 600 2015E Cost below DKK 26 bn 300 200
Slide 83: Towards more normal market conditions
Towards more normal market conditions Effect of lower impairments (DKK bn pre-tax) 2 Effect of higher S-T rate (DKK bn pre-tax) 3 Floor risk Denmark 1–2 3-4 on deposits Effect on Ireland 5–6 2 equity Rest of group 0.5 Increased equity 0.5 2015E Impairments drop by DKK 7–8 bn 2015E DKK 6 bn Correspon
Slide 84: Negative ROE effects between 2012 and 2015
Negative ROE effects between 2012 and 2015 Effect of headwinds (DKK bn pre-tax) Assumptions 4 Inflation assumed to be around 2% p.a. Inflation 1.5 More expensive capital and funding Capital & funding 2-3 Effects of regulation are almost offset by capital efficiency Negative ROE effect of low
Slide 85: Growth at Danica through 2015
Growth at Danica through 2015 Effect from 9M 2012 annualised to 2015 (DKK bn) Management actions at Danica 4 Technical result pre-tax Premiums to increase by DKK Result after tax 5–6 bn from 2012 to 2015 1.7 AuM to grow moderately; 1.5 changes in taxation are a 1.4 negative driver in 2013 Inve
Slide 86: Capital efficiency is a critical ROE improvement driver
Capital efficiency is a critical ROE improvement driver Change in risk-weighted assets for Group (DKK bn) Assumptions 4 Flattish RWA towards 2015 Q3 12 851 New regulation Specific risk CRD III (IRC) Counterparty risk (CVA) New regulation 90–110 Capital efficiency Sampo Bank Foundation IRB Pa
Slide 87: Impact of DKK 7 bn in new share capital and rating upgrade
Illustration of impact of DKK 7 bn in new share capital and rating upgrade Full-year 2014 effect (DKK bn pre-tax) Pro forma EPS 2014 based on consensus (DKK) Lower volume -0.1 0.6 AT1 capital 1.1 1 Lower price 0.1 AT1/T2 instruments Lower price 0.6 14.2 14.1 ST and LT funding Increased activity 0.2
Slide 88: Significant spread tightening after 30 October share issue
Significant spread tightening after 30 October share issue 5Y senior bond spread,* 6M ASW, Jun-Nov 2012 (bp) 5Y senior bond spread,* 6M ASW, Oct-Nov 2012 (bp) Swedbank Handelsbanken Swedbank Handelsbanken Nordea Danske Bank Nordea Danske Bank 200 1 Sep-5 Nov 160 -96bp 140 150 29 Oct -5 Nov 120 -21bp
Slide 89: 2015 ROE sensitivity
2015 ROE sensitivity ROE 14% ROE 13% ROE 12% ROE 11% Condition1: 10.7 11.7 13.0 14.5 40 30 20 10 Condition 2: Core tier 1(%) Loan loss ratio (bps) 1.3 2.0 ROE ambition 2.7 Given all three conditions, ROE reaches 12% 3.4 Sensitivity If one condition changes, Condition 3: level of ROE changes S-T rate
Slide 90: Top CFO priorities through 2015
Top CFO priorities through 2015 Rating upgrade Improved net profit Follow-up on business unit targets 18
Slide 91: Disclaimer
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 inducement to enter in