Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — H1 2014 Earnings Presentation
43 slides from Danske Bank A/S's earnings presentation, Jul 24, 2014
Slide 1: Financial results for the first half of 2014
Financial results for the first half of 2014 Thomas F. Borgen Chief Executive Officer Henrik Ramlau-Hansen Chief Financial Officer 24 July 2014
Slide 2: Agenda
Financial results for H1 2014 Q1 2013 Agenda Executive summary and financial results 3 Business unit update 5 4 Selected topics 7 New initiatives 12 Business review update 13 Outlook for 2014 16 Q&A 17 Appendix 18 2
Slide 3: Executive summary for H1 2014
Financial results for H1 2014 Q1 2013 Executive summary for H1 2014 Key message Executing our strategy; with ROE of 9.2% we continue towards our financial targets Net profit Net profit of DKK 6.9 bn (+88% vs. H1 2013) Income Total income DKK 21.7 bn driven by improvements in most income lines Expens
Slide 4: Net profit: DKK 6.9 bn, up 88% from first half of 2013 incl. Nets
Financial results for H1 2014 Q1 2013 Net profit: DKK 6.9 bn, up 88% from first half of 2013 incl. Nets Income statement & key figures (DKK m) Key points, H1 14 vs H1 13 H1 H1 Q2 Q1 • Return on equity improved from Index Index 2014 2013 2014 2014 5.2% to 9.2% Net interest income 11,251 10,876 103 5,
Slide 5: The three banking units: Improvement owing mainly due to lower costs and lower impairments
Financial results for H1 2014 Q1 2013 The three banking units: Improvement owing mainly due to lower costs and lower impairments Profit before tax (DKK m) Key points, H1 14 vs H1 13 H1 2013 Personal Banking H1 2014 • Slightly lower NII from declining volumes +21% • Expenses down 10% owing primarily
Slide 6: Danske Capital and Danica Pension: Satisfactory result
Financial results for H1 2014 Q1 2013 Danske Capital and Danica Pension: Satisfactory result Danske Capital: Financial highlights, H1 2014 Danica Pension: Financial highlights, H1 2014 • Total income up 10% driven by higher assets under • Premiums up 2% management and margin improvement • Result fro
Slide 7: Expenses: Positive trend in underlying cost base
Financial results for H1 2014 Q1 2013 Expenses: Positive trend in underlying cost base and small increase Q/Q relating to cost-saving initiatives and IT Total group expenses (DKK m) Quarterly change in expenses (DKK m) Consultants etc. Bonus Severance payment Write down Sampo name Deposit scheme gua
Slide 8: Impairments: Loan loss ratio of 14 bp for core activities and 17 bp for the entire Group
Financial results for H1 2014 Q1 2013 Impairments: Loan loss ratio of 14 bp for core activities and 17 bp for the entire Group Impairments, 2008 to Q2 14 (DKK bn/bp) Impairments (DKK m) Impairments Loan loss ratio* (rhs) H1 14 H1 13 Index Q214 Q114 Index Personal Banking 553 992 56 216 337 64 10 173
Slide 9: Capital: Strong capital ratios from retained earnings and tier 2 issue in Q2 2014
Financial results for H1 2014 Q1 2013 Capital: Strong capital ratios from retained earnings and tier 2 issue in Q2 2014 Capital ratios, under Basel II/CRD IV (%) Capital drivers Tier 2 • RWA declined DKK 10 bn to DKK 887 bn in Q2 14, Hybrid tier 1 / Additional tier 1 mainly because of portfolio chan
Slide 10: Capital: Successful series of capital issues since late 2013
Financial results for H1 2014 Q1 2013 Capital: Successful series of capital issues since late 2013 New capital issues, Sept 2013 – May 2014 EUR 500 m - tier 2 – 12NC7 – EUR 3M +165 bp* – May 14 EUR 750 m - additional tier 1 – PerpNC6 – coupon: 5.75% - Apr 14 DKK 1,150 m - tier 2 – 12NC7 - EUR 3M +27
Slide 11: Non-core: Unwinding of Irish assets proceeding as planned
Financial results for H1 2014 Q1 2013 Non-core: Unwinding of Irish assets proceeding as planned Key points New Non-core loan portfolio*, Q2 2014 (DKK bn) • Loss before tax reduced by DKK 221 m, from DKK -1,015 Allowance account 49 m in the first half of 2013 to DKK -794 m in the first half Impaired
Slide 12: New market initiatives in H1
Financial results for H1 2014 Q1 2013 New market initiatives in H1 Danske Guide Mobile Pay Post-trade Business & integrated Online solution Advisory International services Banking unit Ung Direkte for BB and C&I easy banking Danske Danske Business One Trader One, Plus and Pro 12
Slide 13: Business review: Danske is a Nordic universal bank
Financial results for H1 2014 Q1 2013 Business review: Danske is a Nordic universal bank Nordic Universal Bank Strong strategic and economic rationale, with solid footprint across Nordic region today Attractive markets Stable Triple-A economies offering value and attractive market opportunities Bene
Slide 14: Personal Banking in Sweden: Business turnaround for innovative challenger
Financial results for H1 2014 Q1 2013 Personal Banking in Sweden: Business turnaround for innovative challenger Personal Banking in Sweden Financial highlights, DKKm Today H1 H1 Index 2014 2013 • Market share of 4% skewed towards high net worth Net interest income 293 265 111 segment Net fee income
Slide 15: Personal Banking in Norway: Fine-tuning a profitable bank
Financial results for H1 2014 Q1 2013 Personal Banking in Norway: Fine-tuning a profitable bank Personal Banking in Norway Financial highlights, DKKm H1 H1 Today Index 2014 2013 Net interest income 546 566 96 • Focused footprint with 4% share in a consolidated market Net fee income 74 75 99 Net trad
Slide 16: Outlook for 2014: Lifting net profit to DKK 10-13 bn
Financial results for H1 2014 Q1 2013 Outlook for 2014: Lifting net profit to DKK 10-13 bn Macro Economic growth remains slow and fragile, with low interest rates NII Lower funding costs are likely to more than compensate for weak demand for loans Income from market making may remain low, but total
Slide 17: Q&A session
Financial results for H1 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 17
Slide 18: Appendix
Financial results for H1 2014 Q1 2013 Appendix Business units 19 Special topics: NII, trading income and expenses 24 4 Impairments 27 Macro, credit quality and portfolio reviews, including Ireland 29 Funding, liquidity and rating 35 Financial targets 39 Danica’s profit model and tax 40 Contact detai
Slide 19: Personal Banking: Higher income and positive trend in impairments
Financial results for H1 2014 Q1 2013 Personal Banking: Higher income and positive trend in impairments Income statement & key figures (DKK m) Key points, Q2 14 vs Q1 14 Q2 2014 Q1 2014 Index Net interest income 2,728 2,615 104 • Profit before tax up 28% to DKK 1.3 bn. Net fee income 1,124 1,062 106
Slide 20: Business Banking: Positive NII development, lower expenses and continued drop in impairments
Financial results for H1 2014 Q1 2013 Business Banking: Positive NII development, lower expenses and continued drop in impairments Income statement & key figures (DKK m) Key points, Q2 14 vs Q1 14 Q2 2014 Q1 2014 Index Net interest income 2,283 2,085 109 • Total income up 4% mainly due to higher net
Slide 21: Corporates & Institutions: Strong improvement in NII, market making remains weak
Financial results for H1 2014 Q1 2013 Corporates & Institutions: Strong improvement in NII, market making remains weak and higher impairments Income statement & key figures (DKK m) Key points, Q2 14 vs Q1 14 Q2 2014 Q1 2014 Index • Profit before tax fell 32%, mainly because of a small Net interest i
Slide 22: Danske Capital: Positive trend in AuM continues
Financial results for H1 2014 Q1 2013 Danske Capital: Positive trend in AuM continues Income statement (DKK m) Key points, Q2 14 vs Q1 14 Q2 2014 Q1 2014 Index • Total income was up 8% from the first quarter of 2014 Net interest income 1 - - Net fee income 529 494 107 • Performance fees fell from DK
Slide 23: Danica Pension: Improved net income
Financial results for H1 2014 Q1 2013 Danica Pension: Improved net income Income statement (DKK m) Investment allocation for Danica Traditionel, end-Q2 14 (%) Q2 2014 Q1 2014 Index Equities Credit bonds Alternative investments Premiums 6,519 7,845 83 Bonds Property Danica Traditionel (insurance resu
Slide 24: Net interest income: Improvement from lower capital cost
Financial results for H1 2014 Q1 2013 Net interest income: Improvement from lower capital cost Quarterly net interest income (DKK m) Quarterly changes in net interest income (DKK m) +8% Q1 14 5,351 5,900 5,640 Lending effect 43 5,561 5,464 5,351 Deposit effect 129 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Capit
Slide 25: Trading income: Positive trend in customer-driven income but market making remains weak
Financial results for H1 2014 Q1 2013 Trading income: Positive trend in customer-driven income but market making remains weak Trading income by business unit (DKK m) Key points Other incl. Treasury C&I Business Personal • Trading income at Group Treasury 2,148 2,195 included the positive effect of D
Slide 26: Expenses: Reduced by 6% compared to H1 2013
Financial results for H1 2014 Q1 2013 Expenses: Reduced by 6% compared to H1 2013 Total expenses (DKK m) Change in expenses, (DKK m) Consultants etc. Bonus Severance payments Other costs YTD 2013 11,747 Deposit guarantee scheme /bank packages Severance 6,587 46 payments IT 49 5,943 Staff costs 329 P
Slide 27: Impairments: Improvement in core activities continues
Financial results for H1 2014 Q1 2013 Impairments: Improvement in core activities continues Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal • Personal Banking: Lower impairments supported by improving 1.2 macroeconomic conditions on most 1.2 markets 1.1 • Busi
Slide 28: Group impairments: Individual charges continue to decline
Financial results for H1 2014 Q1 2013 Group impairments: Individual charges continue to decline; DKK 45.7 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 1.4 1.2 1.1 0.8 0.9 1.
Slide 29: Macro: Trends in the Nordics
Financial results for H1 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 20
Slide 30: Denmark: Housing remains affordable as prices stabilise
Financial results for H1 2014 Q1 2013 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Affordability index, quarterly data from1988–2012 Change in Fixed rate Mixed rate Average Region Prices Change q/q Preview* 140 peaked since peak Q1 2014 Q2 14 120 Copenhag
Slide 31: Realkredit Danmark: Portfolio overview
Financial results for H1 2014 Q1 2013 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-Q2 14 Loans by LTV ratio and rating, RD, end-Q2 14 (DKK bn) • Approx. 383,000 loans (residential and commercial) Pub. • 2,439 loans in 3- and 6-month arrears LTV ratio (%) 1-3 4-7 8-
Slide 32: Realkredit Danmark: Good preference for longer term variable rate loan
Financial results for H1 2014 Q1 2013 Realkredit Danmark: Good preference for longer term variable rate loan driven by flat yields and fee structure Key points Gross lending (DKK bn) • Trend away from short term Flexlån®, continued in H1 Fixed rate loans 2014 Variable rate loans , short-term* • Exte
Slide 33: Impaired exposure: Limited agriculture and shipping exposure
Financial results for H1 2014 Q1 2013 Impaired exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio*, Q2 14 (%) Shipping, breakdown of loan portfolio*, Q2 14 (%) Other Car carrier Other RO-RO Chemical tanker Horticulture 12 8 5 Product tanker 2 8 Mixed operati
Slide 34: Ireland: House price trends and arrears
Financial results for H1 2014 Q1 2013 Ireland: House price trends and arrears Irish house price indices (index 100 = January 2005) Fall from peak (%) CSO index,* houses Residential real estate Internal price index for houses in Dublin Internal price index for houses outside Dublin Dublin 55 140 Non-
Slide 35: Funding and liquidity: Successful capital issues and high issuance activity
Financial results for H1 2014 Q1 2013 Funding and liquidity: Successful capital issues and high issuance activity in first half of 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 133bp 587bp 587bp 145bp 95 42bp 73
Slide 36: Capital & Funding: Good performance for Danske Bank's capital and debt issues
Financial results for H1 2014 Q1 2013 Capital & Funding: Good performance for Danske Banks capital and debt issues AT1: 5.75% PerpNC6 (ASW spread, bp) LT2: 3.875% 10NC5 (ASW spread, bp) 460 240 440 220 200 420 180 160 400 140 0 0 Mar 14 May 14 Jul 14 Oct13 Mar14 Jul 14 Senior: 3.875 Feb 2017 (ASW sp
Slide 37: Funding: Structure and sources
Financial results for H1 2014 Q1 2013 Funding: Structure and sources Loan portfolio and long-term funding, Q2 14 (DKK bn) Funding sources (%) Q1 2014 Q2 2014 1,767 89 Senior debt 44 1,567 Bank loans 510 764 Deposits 22 Bank mortgages 314 171 Covered bonds 11 8 7 5 1 2 RD mortgages 743 743 Issued RD
Slide 38: Three distinct methods of rating banks
Financial results for H1 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=F
Slide 39: Financial targets: Further progress towards 9% ROE in 2015
Financial results for H1 2014 Q1 2013 Financial targets: Further progress towards 9% ROE in 2015 Target Year to be achieved Status at 30 June 2014 Comments 9% 2015 Initiatives progressing Return on equity 9,2% Above 12% Long-term as planned S&P/Moody’s/Fitch Improve ratings by at In progress, upgrad
Slide 40: Danica Pension's profit model
Financial results for H1 2014 Q1 2013 Danica Pension’s profit model Profit model Condition/ sensitivity H1 2014 DKK m Danica Traditionel. Mainly risk Can be booked only if investment return Risk allowance 687 1 allowance 75 bp p.a. of technical is high enough and if no use of bonus Other -50 provisi
Slide 41: Tax development
Financial results for H1 2014 Q1 2013 Tax development Actual and adjusted tax rates (DKK m) Tax drivers Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 • The actual tax rate is relative low, due to permanent non-taxable Profit before tax 5,000 3,630 2,862 2,304 2,677 share price adjustments and Pre-tax loss, Ireland
Slide 42: Contacts
Financial results for H1 2014 Q1 2013 Contacts Henrik Ramlau-Hansen Direct: +45 45 14 06 66 Chief Financial Officer Mobile: +45 22 20 73 10 [email protected] Julie Quist Direct: +45 45 14 07 92 Head of IR Mobile: +45 40 49 78 93 [email protected] Claus Ingar Jensen Direct: +45 45 12 84 83 Chief IR
Slide 43: Disclaimer
Financial results for H1 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