Danske Bank A/S · OMXCOP:DANSKE
Danske Bank A/S — Q1 2023 Earnings Presentation
56 slides from Danske Bank A/S's earnings presentation, April 2023
Slide 1: Investor Presentation Q1 2023
Investor Presentation Q1 2023
Slide 2: Agenda
Investor Presentation – First quarter 2023 Agenda 01. Danske Bank – brief overview 2–7 02. Financial highlights – First quarter 2023 8 – 13 03. Business & Product Units 14 – 17 04. ESG, Sustainability, Financial Crime Prevention 18 – 30 05. Credit Quality & Impairments 31 – 37 06. Capital 38 – 41 07
Slide 3: We are a Nordic universal bank with strong regional roots
Investor Presentation – First quarter 2023 We are a Nordic universal bank with strong regional roots Finland (AA+) 3.3 m 2,000+ 20,000+ 3rd largest personal and business customers large corporate and institutional employees in Market share: 10% customers 10 countries Share of Group lending: 8% GDP g
Slide 4: Highlights – strong execution and financial performance in Q1 led to profit upgrade for 2023
Investor Presentation – First quarter 2023 Highlights – strong execution and financial performance in Q1 led to 13 April profit upgrade for 2023 ✓ Strong start to the year a testament to the value of Danske Bank’s diversified business model underpinned by consistently improved PBI across business un
Slide 5: Danske Bank's fortress balance sheet underpins our resilient business model
Investor Presentation – First quarter 2023 Danske Bank’s fortress balance sheet underpins our resilient business model which includes a well-balanced ALM strategy and a very strong liquidity position ➢ Danske Bank has a sound funding structure and remains very well capitalised with a CET1 capital bu
Slide 6: Traction towards our sustainability targets remains positive
Investor Presentation – First quarter 2023 Traction towards our sustainability targets remains positive Sustainable finance Sustainable operations Impact initiatives Responsible Sustainable Governance & Employee Environmental Entrepreneur- Financial investing financing integrity well-being & footpri
Slide 7: Our Path to Financial Crime Transformation
Investor Presentation – First quarter 2023 Our Path to Financial Crime Transformation 2022 2023 We continue to recruit new We incorporate all core employees with financial We take a number of specific We develop a set of clearly scenarios into our enhanced crime expertise, and by the and extraordina
Slide 8: Revised net profit outlook for 2023
Investor Presentation – First quarter 2023 Revised net profit outlook* for 2023; We now expect net profit to be in the range of DKK 16.5 - 18.5bn We expect core income line to grow in 2023, driven mainly by higher net interest income following further normalisation of interest rates and our continue
Slide 9: Financial highlights – First quarter 2023
Financial highlights – First quarter 2023
Slide 10: Financial results – Q1 2023
Financial results – Q1 2023 Net interest income up 43% Y/Y driven by normalisation of interest rates; strong recovery in trading/insurance; impairments driven by macro model charges Key points Q123 vs Q122 Income statement and key figures (DKK m) Q1 23 Q1 22 Index Q4 22 Index ➢ NII uplift from norma
Slide 11: NII: Continued positive margin development; deposit volumes remain stable
Investor Presentation – First quarter 2023 NII: Continued positive margin development; deposit volumes remain stable at an elevated level Highlights Net interest income Q123 vs Q122 (DKKm) Deposit margin development (bps) PC -1,040 2.2 2.18 ➢ Net interest income continued the positive trend, 8,023 2
Slide 12: Fees: Resilient fee income despite lower housing market activity
Investor Presentation – First quarter 2023 Fees: Resilient fee income despite lower housing market activity and investment fees impacted by lower AuM Highlights Net fee income (DKK m) Activity-driven fees (transfers, accounts etc.) 3,379 19 ➢ Resilient income supported by good activity in everyday -
Slide 13: Trading: Good customer activity at LC&I
Investor Presentation – First quarter 2023 Trading: Good customer activity at LC&I and positive contribution from repositioned fixed income strategy as well as valuation effects drive higher trading income Highlights Net trading income (DKK m) 1,612 LC&I 208 ➢ Significantly improved trading income d
Slide 14: Expenses: Continued progress on cost efficiency
Investor Presentation – First quarter 2023 Expenses: Continued progress on cost efficiency; substantially improved cost-income ratio of 47% Highlights Expenses (DKK m) ➢ Lower staff costs following structural cost efficiency measures helped mitigate inflation as well as higher resolution fund fee an
Slide 15: Business & Product Units
| Danske Ea Business & Product Units
Slide 16: Business units: Solid progress, high customer activity, enhanced profitability
Investor Presentation – First quarter 2023 Business units: Solid progress, high customer activity, enhanced profitability, and strong lending uplift Y/Y for corporates Personal Customers Business Customers LC&I ✓ Multi-year high financial performance driven by trading ✓ Net interest income increased
Slide 17: Business units: Improved result in Danica; strong performance in Northern Ireland
Investor Presentation – First quarter 2023 Business units: Improved result in Danica; strong income and profitability performance in Northern Ireland driven by primarily higher income Profit before imp. (DKK m) Lending (index) ✓ Strong performance in core banking lines as net interest income increas
Slide 18: Realkredit Danmark portfolio overview: Continued strong credit quality
Investor Presentation – First quarter 2023 Realkredit Danmark portfolio overview: Continued strong credit quality Highlights Retail loans, Realkredit Danmark, Q1 23 (%) Portfolio facts, Realkredit Danmark, Q1 23 Fixed rate (10 yrs-30 yrs) Interest-only ( ) = Q4 22 Variable rate (6m-10 yrs) Repayment
Slide 19: Sustainability
Sustainability Bank
Slide 20: Sustainability is an integrated element of our corporate strategy
Investor Presentation – First quarter 2023 Sustainability is an integrated element of our corporate strategy and our corporate targets Sustainability is integral to our Danske Bank’s 2023 sustainability strategy aims to drive Selected highlights Better Bank 2023 plan to deliver progress by utilising
Slide 21: Climate Action Plan aligned with Paris Agreement launched in January 2023
Investor Presentation – First quarter 2023 Climate Action Plan aligned with Paris Agreement launched in January 2023 Carbon footprint of 41.1 mtCO2e across the Group, with 99.9% related to financed emissions Increased and expanded 2030 targets based on SBTi guidance to align with Paris Agreement goa
Slide 22: Our Climate Action Plan sets a clear direction across business activities
Investor Presentation – First quarter 2023 Our Climate Action Plan sets a clear direction for our efforts across business activities and customer segments, with increased and expanded 2030 targets We are committed to achieving net zero Why and supporting our customers in their green transition Lendi
Slide 23: Comprehensive suite of intermediate 2030 emission reduction targets
Investor Presentation – First quarter 2023 Targets submitted for SBTi, validation pending Based on methodologies supported by the SBTi, we have developed a comprehensive Targets not submitted for SBTi validation suite of intermediate 2030 emission reduction targets covering our four impact areas Ove
Slide 24: Recent highlights on sustainability agenda
Investor Presentation – First quarter 2023 Recent highlights on sustainability agenda contributing to strong performance Continued success with sustainable housing campaign Joined PBAF and Finance for Biodiversity Pledge • Increased focus on our favourable products for energy • As the first Nordic B
Slide 25: On sustainable finance, Danske Bank aspires to Nordic leadership
Investor Presentation – First quarter 2023 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 in D
Slide 26: Deep dive: ESG integration in lending operations
Investor Presentation – First quarter 2023 Deep dive: Overview of ESG integration in Danske Bank’s lending operations 1. Position statements 2. Single-name ESG analysis 3. Portfolio-level ESG analysis ➢ Our position statements are a key tool for aligning ➢ ESG analysis is conducted for all large cor
Slide 27: International agreements, goals, partnerships and standards supported
Investor Presentation – First quarter 2023 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 Princip
Slide 28: Completion of our Financial Crime Transformation by the end of 2023
Investor Presentation – First quarter 2023 Completion of our Financial Crime Transformation by the end of 2023 Establishing a robust compliance function Key remaining work for 2023 In the recent years, the Bank has made significant Technical development and implementation investments to ensure that
Slide 29: Regulatory Engagements
Investor Presentation – First quarter 2023 Regulatory Engagements • We engage in ongoing dialogue with our regulators through regular meetings with the Financial Supervisory Authorities (“FSAs”) and Ongoing Supervisory College to ensure aligned expectations and transparency between our regulators an
Slide 30: Committee Governance for Compliance Risks
Investor Presentation – First quarter 2023 Committee Governance for Compliance Risks Financial Crime Remediation Steering Compliance Risk Committee Conduct and Compliance Committee Post-Resolution Committee Committee ➢ Provides governance structure and ➢ Second Line Committee responsible ➢ Board lev
Slide 31: The Resolutions with the Danish and U.S. Authorities
Investor Presentation – First quarter 2023 The Resolutions with the Danish and U.S. Authorities In December 2022, Danske Bank reached the final resolutions with the U.S. Department of Justice (DOJ), the U.S. Securities and Exchange Commission (SEC) and the Danish Special Crime Unit (SCU) following t
Slide 32: Credit quality & Impairments
Credit quality & Impairments
Slide 33: Impairments: Strong credit quality with modest charges
Investor Presentation – First quarter 2023 Impairments: Strong credit quality with modest charges related to macro model adjustments; prudent buffers remain in place to mitigate potential downturn tail risks Highlights Impairment charges by category (DKK bn) 4.3 Credit quality deterioration Macro mo
Slide 34: Strong footprint within retail lending
Investor Presentation – First quarter 2023 Strong footprint within retail lending Lending by segment1 Q1 23 (%) Credit exposure by industry Q1 23 (%, rounded) Personal Customers DK Personal customers 34 Personal Customer Nordic Public institutions 12 Commercial property 11 of which residential (5%)
Slide 35: Overall strong credit quality in portfolios exposed to macro cyclicality
Investor Presentation – First quarter 2023 Overall strong credit quality in portfolios exposed to macro cyclicality CRE: Well diversified and prudently managed growth Agriculture: Well-provisioned agriculture book Housing: Low leverage and strong household finances DKK 294 bn in gross exposure and E
Slide 36: Commercial property; prudently managed with sound credit quality
Investor Presentation – First quarter 2023 Commercial property; prudently managed and cash-flow based underwriting standards; sound credit quality and adequate buffers in place to mitigate tail risks Highlights Lending to CRE segment by major peer banks (index)* CRE share of total portfolio by major
Slide 37: Fossil fuels (coal, oil and gas) exposure
Investor Presentation – First quarter 2023 Fossil fuels (coal, oil and gas) exposure Key points, Q1 23 • The current exposure to fossil fuels and includes customers involved in production, refining, and distribution (including shipping) of oil and gas as well as utilities producing heat or power wit
Slide 38: Credit quality: Low level of actual credit deterioration
Investor Presentation – First quarter 2023 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) 23
Slide 39: Capital
Capital Bank
Slide 40: Capital: Prudent CET1 ratio at 18.0%
Investor Presentation – First quarter 2023 Capital: Prudent CET1 ratio at 18.0%; comfortable buffer to current regulatory requirements Capital ratios, under Basel III/CRR (%) Current capital buffer structure (%) Tier 2 Pillar II component (total 2.7%) Countercyclical capital buffer 22.4 22.1 22.3 22
Slide 41: Strong CET1 capital build-up since 2008
Investor Presentation – First quarter 2023 Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) well in excess of DKK 100 bn Common Equity Tier 1, 2008 – 2023 (DKK bn) +71bn 152 149 148 144 130 134 133 133 127 133 119 126 107 77 79 85 2008 2009 2010 2011 2012 2013 2014 2015 2
Slide 42: Fully compliant with MREL and subordination requirement
Investor Presentation – First quarter 2023 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; Q1 2023; Comments DKK bn (% of Group REA) +35 PS > 1y NPS > 1y CET1, AT1,
Slide 43: Funding & Liquidity
Funding & Liquidity Bank
Slide 44: Funding structure and sources: Danish mortgage system is fully pass-through
Investor Presentation – First quarter 2023 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q1 23 (DKK bn) Funding sources* (%) 2,311 Senior & 62% 170 60% NPS bonds Q4-22 Q1-23 1,770 1,156 Deposits Bank loans 625 13% 12% Bank mortgages
Slide 45: Funding programmes and currencies
Investor Presentation – First quarter 2023 Funding programmes and currencies Covered bonds by currency, end-Q1 2023 Largest funding programmes, end-Q1 2023 Utilisation EMTN Programme 47% 25% 29% Limit – EUR 35bn EUR SEK NOK Global Covered Bond 71% Limit – EUR 30bn 46% ECP Programme Total DKK 154 bn
Slide 46: Funding and liquidity: LCR compliant at 169%
Investor Presentation – First quarter 2023 Funding and liquidity: LCR compliant at 169% Changes in funding,* 2023 (DKK bn and bp) Long-term funding excl. RD (DKK bn)*** Cov. bonds Senior Non-Preferred Senior Completed 13bp 100 Funding plan 80-100 54bp 69bp 106bp 79 75 61 31 29 24 24 165bp 21bp 60bp
Slide 47: Danske Bank covered bond universe, a transparent pool structure
Investor Presentation – First quarter 2023 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 Plc
Slide 48: Credit & ESG Ratings
Credit & ESG Ratings Bank
Slide 49: Danske Bank's credit ratings
Investor Presentation – First quarter 2023 Danske Bank’s credit ratings Long-term instrument ratings Credit ratings remain unchanged in Q1 2023 Fitch Moody’s Scope S&P S&P, Fitch and Moody’s all have a stable outlook on Danske Bank. AAA Aaa AAA AAA Following the market turmoil caused by the failures
Slide 50: Danske Bank's ESG ratings
Investor Presentation – First quarter 2023 Danske Bank’s ESG ratings We have chosen to focus on five providers based on their importance to our investors Q1 2023 Q4 Q3 Q2 Q1 End End Range 2022 2022 2022 2022 2021 2020 CDP1 B 283 companies, out of the 18,700 analysed, made the B B B B B B A to F (A h
Slide 51: Three distinct methods for rating banks
Investor Presentation – First quarter 2023 Three distinct methods for rating banks Danske Bank’s rating Rating methodology Potential Extraordinary Anchor + 1 + 2 + 3 + 4 = CRA1 = SACP2 + external + ALAC = Issuer rating SACP1 adjustment support A+ bbb+ +1 +1 -1 0 0 a- 0 +2 (Stable) 1=Business Positio
Slide 52: Tax & Material one-offs
| Danske| Bank Tax & Material one-offs
Slide 53: Tax
Investor Presentation – First quarter 2023 Tax Actual and adjusted tax rates (DKK m) Tax drivers, Q1 2023 ➢ The actual tax rate of 26.7% (excluding prior-year's Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 adjustments) is higher than the Danish rate of 25.2% - due to the tax effect from tax exempt income
Slide 54: Material extraordinary items in 2023
Investor Presentation – First quarter 2023 Material extraordinary items in 2023 ➢ In Q1 2023, Danske Bank did not report extraordinary items 53
Slide 55: Contacts
Investor Presentation – First quarter 2023 Contacts Investor Relations Group Treasury and Funding Kasper Refslund Kirkegaard Claus Ingar Jensen Mobile +45 25 42 43 70 Head of Group Treasury Mobile: +45 23 82 94 88 Head of IR [email protected] [email protected] Bent Callisen Nicolai Brun Tvernø Mo
Slide 56: Disclaimer
Investor Presentation – First quarter 2023 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 Un