Financial results for Q3 2013

Transcription

1 Financial results for Q Thomas F. Borgen Chief Executive Officer Henrik Ramlau-Hansen Chief Financial Officer 31 October 2013

2 Agenda Key messages on Q and financial results 3 Update on strategy and execution 54 ROE target for 2015 and other financial targets 12 Business unit update and selected topics 15 Capital, liquidity and funding 23 Outlook for Q&A session 27 Appendix 28 2

3 Key messages on Q Net profit & ROE DKK 1.5 bn for the quarter is unsatisfactory; ROE declined from 6.2% to 4.3% Income Core lines stable; strong improvement in insurance; large drop in trading income Impairments Impairments remained stable and low Capital Strong capital : CT1 ratio of 14.2% and total capital ratio of 19.1% Cost programme Savings of DKK 1 bn from leaner staff and firm cost control, with full-year effect in 2014 Ireland Discontinuation of Personal Banking and Business Banking activities in Ireland ROE target Short-term 2015 ROE target lowered to 9%; longer-term ROE target unchanged at above 12% Outlook Outlook for net profit in 2013 revised to DKK 6-8 bn 3

4 Net profit: Solid improvement of 45% above 9M 2012 Income statement & key figures (DKK m) Key points, 9M 2013 vs 9M M M 2012 Index Q Q Index Net interest income 16,562 17, ,606 5, Net fee income 6,748 6, ,278 2, Net trading income 4,347 8, , Other income Net income from insurance business 474 1, Total income 29,085 34, ,082 9, Expenses 17,463 18, ,545 6, Profit before loan impairment charges 11,622 16, ,537 3, Loan impairment charges 3,342 6, Profit before tax, core 8,280 9, ,578 2, Profit before tax, Non-core -1,083-3, Profit before tax 7,197 6, ,304 2, Tax 2,005 2, Profit 5,192 3, ,536 2, Return on avg. shareholders' equity (%) Cost/income ratio Core tier 1 capital ratio (%) EPS Lending (DKK bn) 1,579 1,663 1,579 1,590 Deposits (DKK bn) NII fell 3% owing to lower volume and lower deposit margins Trading income declined 50%, primarily because of extraordinary conditions in 2012 and weak Q3 13 Expenses down 3% due to one-offs in 2012 and tight cost control Impairments in core activities dropped 47% Key points, Q3 13 vs Q2 13 NII up 2% from one extra day and higher deposit margins Trading income significantly lower owing to low market activity; Treasury result lower due to oneoffs, value adjustments and high LCR Insurance income up owing to booking of risk allowance Expenses down 8% because of seasonality 4

5 Our vision and mission are unchanged VISION Recognised as the most trusted financial partner Customer satisfaction Financial results MISSION Setting new standards in financial services Advisory services Digitalisation Openness & Transparency 5

6 Strategy: Acceleration of execution Customer attention Simplicity Efficiency 360-degree review of accessibility and service level for customers Empowerment of frontline employees to ensure faster decisions Continued expansion of digital channels, such as mobile and tablet solutions, MobilePay and online meetings Ongoing product development and expansion of selected areas Relief from administrative tasks for customer-facing employees Simpler procedures in head office functions Simplification of performance management structure to ensure focus on execution Firm focus on costs Internal functions will be made more efficient Reduction of expenses Further reduction of number of employees, primarily in noncustomer-facing areas 6

7 Our successes are the foundation for bringing the Bank forward Initiatives launched in 2013 PERSONAL BANKING More than 650,000 downloads of MobilePay since launch in Denmark in May 2013; Finland is next in line Customer Programme with 1.1 m customers registered in Denmark Online customer meetings resulting in high customer satisfaction and loyalty scores BUSINESS BANKING DCM origination for large SMEs in collaboration with C&I New units for large business customers and large real estate customers RD products in Sweden and Norway CORPORATES & INSTITUTIONS Strong growth in income from Equities and improved Prospera rankings DCM origination and growth in high yield bonds Increased focus on competencies pays of with a top 3 ranking in 77% of relevant 2013 Prospera surveys Launch of online Sundhedstjek (Health Check), a unique new opportunity for customers to test their health and to focus on preventing illness and improving general health DANICA PENSION DANSKE CAPITAL Launch of Danske Invest Nordic Corporate Bonds in the entire Nordic region Strong growth in managed accounts sold to Personal and Private Banking customers across the Nordics DKK 1.6 bn raised in Danske Invest Long-Short Dynamic since the beginning of

8 Cost-savings programme: Accelerates savings through firm cost focus and FTE reductions in non-customer-facing functions Costs (DKK bn) Cost drivers and initiatives Restructuring of Ireland Q Severance Costs 1st wave 2nd wave Restructuring charges from discontinuing Personal Banking and Business Banking in Ireland Additional restructuring charges owing to the cost-savings programme Fewer hirings and continued FTE reductions Tight cost control 24 <23 Discontinuation of Personal Banking and Business Banking in Ireland in Q Continued restructuring of branch network and contact points, but at a slower pace Outlook for costs in 2014 will follow in Annual Report M 2013 Q

9 Ireland: Discontinuation of Personal Banking and Business Banking Core: Breakdown of loan portfolio, Q3 2013* (DKK bn) Key points Discontinuation of Personal Banking and Business Banking; existing customers will be moved to the Noncore unit for servicing and discontinuance 14.7 Personal mortgages 3.1 Other 17.8 Total Expected restructuring charges of DKK m from Q to end-2014 Risk of additional impairments of up to DKK 500 m towards end-2014, resulting in total estimated impairments over the coming five quarters of up to DKK 2 bn Non-core: Breakdown of loan portfolio, Q3 2013* (DKK bn) Impairment guidance for Ireland Core and Non-core (DKK bn) 26.6 Realised impairments Possible additional impairments Previously guided impairments < CRE Personal mortgages Other Total Q113-Q313 Q413 to end-2014 * Gross credit exposure. 9

10 Non-core Ireland: Status of divestments and new Non-core portfolio Property pipeline and sales (No. of properties) Key points Q113 Q213 Q313 Sale of properties in Non-core unit is progressing well, and the pipeline of sales is increasing During 9M 2013, a total of 230 properties were sold Over the same period, risk-weighted assets were reduced by DKK 9 bn In Q1 2014, the Non-core portfolio will amount to approx. DKK 58.5 bn On the Market Offer or contract Sold RWA (DKK bn) New Non-core: Pro forma loan portfolio, Q3 2013* (DKK bn) -25% Conduits Other CRE Personal mortgages Q412 Q113 Q213 Q313 Core Ireland** Non-core Ireland Conduits Total * Gross credit exposure. ** Personal Banking and Business Banking. 10

11 SIFI: Key elements of political agreement in October 2013 Key elements Danske Bank s total SIFI requirements, 2019 (% of RWA) Capital requirements CT1 SIFI requirement of 1% to 3% Total minimum requirement for SIFI banks of 11.5% to13.5% in 2019 Possibility of countercyclical capital buffer up to 2.5% in 2019 in periods of high loan growth CT1 CRD IV 7.0 SIFI 3.0* Liquidity and funding requirements LCR requirements will be announced with the final EU rules, including a final decision on the treatment of Danish covered bonds as level 1 assets Legislative process and implementation Q4 2013: Hearings in the Danish Parliament Q1 2014: The Danish Parliament will pass a bill with the final SIFI rules 1 January 2015: Expected implementation of new rules AT1/T2 CRD IV 3.5 Total capital 13.5 * Phased in with 0.6% per annum

12 ROE target: 9% in 2015 on higher income, normalised trading and insurance, lower costs and much lower Non-core loss ROE drivers from 2013 to 2015 (%) 9M 2013 annualised 4.9 Income (new initiatives) Income (normalisation) Costs Non-core loss 2015E 9 ROE drivers and initiatives Income New income initiatives, including measures to expand selected business and product areas and to optimise price structures Slightly longer duration on the Group s bond portfolio Normalisation of conditions for market making and insurance Costs Additional cost savings from internal efficiency measures and further reductions in number of employees Non-core loss Loss at Non-core is driven primarily by impairments, which are expected to be much lower in 2015 Other Lower costs from funding and capital are offsetting higher level of equity 12

13 ROE target: Reduction of 2015 target from 12% to 9% owing to external factors ROE roadmap changes (%) Previous 2015 ROE target ROE above 12% Capital DKK 15 bn in higher average equity -1 Short-term rates Elimination of assumption of S-T rates of 2% -3 Management actions Additional initiatives on costs and income 1 New 2015 ROE target ROE of 9% 13

14 Financial targets: Simplifying our 2015 targets, accelerating execution Target Previous ambition Year to be achieved Status at 30 September 2013 Comments Return on Equity 9% Above 12% 2015 Above 12% Above 12% in 2015 Long-term 4.9% In progress after initiating additional cost savings Ratings Improve ratings by at least one notch Unchanged 2015 Core tier 1 ratio Minimum 13% Unchanged End % Total capital ratio Minimum 17% 19.1% S&P/Moody s/fitch A-/Baa1/A Stable/Stable/Stable Nominal costs Below DKK 23 bn Below DKK 24 bn 2015 DKK 17.5 bn (YTD) Cost/income ratio Below 50% Below 46% 60% In progress Met at end-2012 In progress after initiating additional cost savings Dividend payments About 40% of net profit Unchanged 2015 On track 14

15 Personal Banking: Strong profit growth; positive impairment trend continues Income statement & key figures (DKK m) Financial highlights for Q Q Q Index Net interest income 2,817 2, Net fee income 1,045 1, Net trading income Other income Total income 4,147 4, Expenses 2,919 3, Profit before loan impairment charges 1,228 1, Loan impairment charges Profit before tax Lending 836, , Deposits 358, , FTE 7,400 7, ROE (pre-tax) Loan impairment charges (DKK bn) Profit before tax up 47%, and pre-tax ROE up 2.3 percentage points to 9.5% Total income was unchanged, with higher trading income, lower other income, and stable net interest income and net fee income Recent pricing initiatives compensated for the negative effect of low interest rates and lower volume Expenses down 5% due to lower staff costs Impairments down13% because of lower charges in Ireland and Northern Ireland Loan loss ratio dropped to 21 bp in Q3 from 23 bp in Q2 More than 1.1 million customers have registered for the new customer programme in Denmark The MobilePay app released in Q has become a new standard for easy money transfer More than 650,000 downloads of MobilePay Q312 Q412 Q113 Q213 Q313 15

16 Business Banking: Increasing profit and stable impairments Income statement & key figures (DKK m) Financial highlights for Q Q Q Index Net interest income 2,252 2, Net fee income Net trading income Other income Total income 2,959 2, Expenses 1,290 1, Profit before loan impairment charges 1,669 1, Loan impairment charges Profit before tax 1,279 1, Lending 620, , Deposits 261, , FTE 3,734 3, ROE (pre-tax) Loan impairment charges (DKK bn) Profit before tax up 7% and pre-tax ROE up 1.1 percentage points to 11.5% Total income in line with the level in Q2 Net interest income up from Q2 due to one extra day and recent pricing initiatives Impairments remained at the Q2 level of DKK 0.4 bn with a loan loss ratio of 25 bp Expenses declined 6% owing mainly to holiday payments Pre-tax ROE improved to 11.5% in Q3 from 10.4% in Q2 Credit decisions closer to the frontline; faster loan application process for customers convenience Strong interest in new mobile banking products 794 More than 25,000 customers have downloaded the Mobil Business app and the Tablet Business app since the first release in March Q312 Q412 Q113 Q213 Q313 16

17 Corporates & Institutions: Improvement in most income lines but lower trading income Income statement & key figures (DKK m) Financial highlights for Q Q Q Index Net interest income Net fee income Net trading income 671 1, Other income Total income 1,564 2, Expenses 976 1, Profit before loan impairment charges Loan impairment charges Profit before tax Lending 160, , Deposits 168, , FTE 1,594 1, ROE (pre-tax) Loan impairment charges (DKK bn) Profit before tax down 52% and pre-tax ROE at 6.1% Total income fell 27% from Q2 to Q3 due to low trading income NII rose 4% from Q2 to Q3, primarily because of higher volumes and margins Client-driven income and market making negatively affected by low market activity, but better towards the end of the quarter as markets stabilised Impairments increased by DKK 100 m from an unusually low level in Q2 Income breakdown, Q3 13 (%) Market Making Debt Capital Markets General Banking Sales and research 588 2,715 2,057 2,382 2,131 1, Q312 Q412 Q113 Q213 Q313 Q312 Q412 Q113 Q213 Q313 17

18 Danske Capital: Profit up 7% and solid trend in AuM Income statement (DKK m) Q Q Index Net interest income Net fee income portion from performance fees Other income Total income Expenses Profit before loan impairment charges Loan impairment charges Profit before tax Net inflow in AuM (DKK bn) Financial highlights Total income increased 3% because of higher margins in Q3 From 9M 2012 to 9M 2013, total income rose 26% Assets under management increased from DKK 666 bn at end-q to DKK 712 bn at end-q Net inflow increased DKK 25 bn during the first nine months of 2013 Net inflow in Q3 was negatively affected by changes in tax rules in Denmark In September, a new Danske Invest fund with Nordic corporate bonds raised DKK 900 m 20 Net inflow Net inflow as % of AuM (rhs) 2.7% 3 The new fund was the first mutual fund introduced simultaneously in the four Nordic markets % % % % Q312 Q412 Q113 Q213 Q

19 Danica Pension: Improved income as a result of normalised market conditions Income statement (DKK m) Financial highlights Q Q Index Premiums (bn) 5,968 6, Danica Traditionel (insurance result) Unit-linked (insurance result) Health and accident (ins. result) Investment result Financing result Special allotments Net income bef. postponed risk allow Change in shadow account Net income Possibility of booking risk allowance in 2013 (%) % change in equities 100% Full risk allowance 50% Partial risk allowance 0% -50% No risk allowance -100% -2.00% -1.00% 0.00% 1.00% 2.00% Percentage point change in interest rates Net income from insurance increased in Q3 owing to a higher investment result It was possible to book risk allowance for three out of four interest rate groups, although only partly for two of them At the end of Q3, the shadow account balance was DKK 1.4 bn Gross premiums were largely unchanged in Denmark, up 27% in Sweden and 19% in Norway in comparison with the first nine months of 2012 Investment allocation for Danica Traditionel, end-q3 13 (%) Equities Bonds Credit bonds Property New schemes Low Medium 5 14 High 19

20 Expenses: Firm cost control and seasonality led to drop of DKK 468 million Total expenses (DKK m) Quarterly change in expenses (DKK m) Adjustments* Adjusted expenses 6,591 Q2 13 6,013 5,680 5,905 6,013 5,545 Staff cost incl. bonuses 128 Consultants 69 5,279 5,913 5,585 5,731 5,279 Holiday payments 342 Other 71 Q3 13 5,545 Q312 Q412 Q113 Q213 Q313 * Adjustments include write-down of domicile properties, performance-based compensation, severance, re-branding and impairments on goodwill and rights to names. 20

21 RD: Significant reduction of FlexLån F1 and F2 since 2011 and more to come with our new mortgage product FlexKort Loan portfolio, FlexLån F1 and F2 (DKK bn) Status on FlexKort and Q refinancing 224 DKK 63 bn 161 RD launched a new floating rate mortgage based on the 6-month CITA rate under the name FlexKort The funding of FlexKort is based on 3-year covered bonds issued by RD on a pure pass-through basis FlexKort will provide customers and RD with longer maturity on the underlying bond than FlexLån F1 DKK 105 bn of FlexLån to be refinanced in Q Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 DKK 27.2 bn refinance out of FlexLån F1, hereof 56% into longer maturity on the underlying bond Loan portfolio, FlexLån F1 and F2 (% of total stock) 31 9%-points 22 DKK 27.2 bn refinanced out of FlexLån F1 at Q4 13 auctions Longer term FlexKort Not decided 44% 50% 6% Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 21

22 C&I: Trading income affected by continuation of high market volatility in July and August Trading income (DKK m) Trading income split, Q313 (%) Market making Customer-driven Repos & derivatives Bonds & DCM 12 1, Q312 Q412 Q113 Q Q313 FX & money market Equities Correlation between income and market share Accumulated trading income (DKK bn) Market share High Low RCGP* Cash management DCM Lending Equities Fixed Income Share of income (2012) * Retail Capital Guaranteed Products 0 Q1 Q2 Q3 Q4 22

23 Capital: Solid ratios after partial implementation of IRB orders Capital ratios, under CRD/Basel II (%) Total capital Tier 1 (incl state hybrid) Core tier Capital drivers Core tier 1 declined 1.4 percentage points because of implementation of an IRB order regarding higher risk weights on corporate exposures (drop of 1.6 points), slightly offset by retained earnings (increase of 0.2 of a point) Tier 2 ratio fell 0.7 of a point owing to repayment of USD 1 bn subordinated bonds in October The new EUR 1 bn subordinated bond will affect the capital ratio by about 0.9 of a point from Q State hybrid expected to be repaid in Q CRD IV effect on core tier 1 ratio (%) Q213 Q313 Core tier 1 Q313 Deduction for Danica Other deductions RWA effect Pro forma Q313 CRD IV adj. 23

24 RWA: Significant effect on risk-weighted assets from implementation of IRB order Risk-weighted assets (DKK bn) Q Q Capital drivers 13 percentage point increase in corporate risk weights from implementation of IRB order regarding corporate exposure RWA effect of IRB order is about DKK 20 bn higher than previously guided (based on Q4 2012) The increase is due mainly to changes in corporate risk weights since Q Credit, counterparty & market risk IRB order Effect of implemented IRB order on corporate risk weights (%) Q Corporate risk weight Q412 Increase in exposure with lower avg. RW Corporate risk weight bef. order Q313 Effect of IRB order Adj. for lower RW Corporate risk weight after order Q313 24

25 Liquidity and funding: Strong, stable liquidity position; CDS spread is closing the gap to peers 5Y CDS spread, July - Oct 2013 (bp) Key points, end-q3 13 Danske Bank Swedbank SEB Jul Aug Sep Oct 12-month liquidity,* end of period (DKK bn) Q3 12 Q2 13 Q month liquidity of more than DKK 240 bn Liquidity buffer of DKK 436 bn, with most of the bonds central bank eligible LCR** at end-q3 of 132% DKK 32 bn in funding raised YTD 2013: 32% covered bonds 44% senior debt 24% subordinated debt Long-term funding ex RD (DKK bn) 2014 Funding plan 2013 Funding plan Completed mos 6 mos 9 mos 12 mos * Moody s Financial Strength. Main assumptions: No access to capital markets; no refinancing of debt to credit institutions, issued bonds or subordinated capital; moderate reduction of business activities. ** LCR is calculated in accordance with Danish FSA s specifications and includes holdings of covered bonds and Danish mortgage bonds, including own issued bonds. 25

26 Outlook for 2013: Full-year guidance of DKK 6-8 bn Macro Economic growth remains low NII NII expected to be below the 2012 level (DKK 22.8 bn) Fees Management initiatives expected to lift fee income above the 2012 level (DKK 8.9 bn) Trading and insurance Trading and insurance income well below the 2012 levels (DKK 10.6 bn and DKK 2.2 bn) Expenses Expenses expected to be around DKK 24 bn in 2013 Total impairments Total impairments expected to be well below the 2012 level Net profit for 2013 Net profit revised to DKK 6-8 bn due to weak Q3 and restructuring charges in Q4 This guidance is subject to uncertainty and depends on economic conditions. 26

27 Q&A session Press 1 to ask a question Press # to cancel Press Ask a question in your webcast player 27

28 Appendix Income items and margin developments 29 Expenses 34 Impairments 35 Tax 38 Macro 39 Credit 41 Funding and rating

29 NII: Positive development from deposit margins and one extra day Quarterly NII (DKK m) Quarterly change in NII (DKK m) Q2 13 5,504 5,698 5,713 5,452 5,504 5,606 Lending effect 58 Q312 Q412 Q113 Q213 Q313 Deposit effect 97 NII from RD, ex lending margins (DKK m) Number of days Other Q3 13 5,606 Q1 Q2 Q3 Q4 Short-term interest-rate sensitivity across all currencies: +25 bp = DKK +800 m / -25 bp = DKK -800 m 29

30 NII: Margin trends and short-term rates Margins at Personal Banking* (%) Margins at C&I* (%) Q113 Q213 Q313 Q113 Q213 Q Lending Deposits Lending Deposits Margins at Business Banking* (%) Nordic short-term rates (%) Q113 Q213 Q313 3M Stibor 3M Cibor 3M Nibor Lending Deposits 0 Sep/11 Feb/12 Jul/12 Dec/12 Sep/13 *Excluding Baltics. 30

31 Fees: Higher fee income in Q3 driven by C&I and Danske Capital Quarterly net fee income (DKK m) Fee income drivers 2,671 Fees rose 9% from 9M 2012 to 9M 2013 from initiatives across business units 2,134 2,265 2,205 2,278 From Q2 to Q3, fee income was up 3% from increased fee income in C&I and Danske Capital Fee income split, Q3 13 (%) DC 21 Personal C&I Q312 Q412 Q113 Q213 Q313 Business 31

32 Insurance: Solid investment result allows for booking of risk allowance for one group and part risk allowance for two groups Insurance income (DKK m) Booked income from shadow account Q312 Q412 Q113 Q213 Q313 32

33 Danica Pension s profit model Profit model Condition/ sensitivity Q1-Q DKK m Danica Traditionel. Mainly risk allowance 70 bp p.a. of technical provisions (DKK 175 bn) Unit-linked business. Longterm: approximately 0.4% of AuM Can be booked only if investment return is high enough and if no use of bonus potential of paid-up policies Prices and volume Risk allowance Other Solid income base but also price competition Health and accident business Combined ratio Price competition -129 Return on investment portfolio at shareholders risk Financing result Equity markets, interest rates Investment return: 1.0 % 179 S-T interest rate (equity allocated capital) Low short-term interest rate Special allotments, depending on profit and business volume = Shadow account Uncertainty because of dependency on investment return for the rest of the year Transferred to shadow account from three interest groups, although only partly from two of them. Total

34 Expenses: Adjusted expenses flat for 9M 2013 compared to 9M 2012, while branch and FTE reductions continue Expenses (DKK m) FTEs, end of period (000s) 9M M 2012 Index Q Q Index Expenses 17,463 18, ,545 6, Revaluation of domicile prop Perf. based compensation Severance payments etc Rebranding Write-down, name rights Adjusted expenses 16,595 16, ,279 5, % Branches, end of period % Q313 Q312 Q213 Q313 34

35 Impairments: Generally stable development from Q2 to Q3 with a small increase in C&I Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal Impairments in Business Banking stable and small decline in Personal Banking Increase of DKK 100 m in C&I from a very low level in Q2 Impairments in Non-core unchanged at DKK 0.2 bn Positive trend for impaired loans continued with declining volume of non-performing loans Impaired loans (DKK bn) Non-performing Performing Q312 Q412 Q113 Q213 Q313 Q1 13 Q2 13 Q

36 Impairments: Loan loss ratio of 20 bp for core activities and 24 bp for entire Group Individual loan impairment charges, ex Baltics (DKK bn) Loan loss ratio, annualised (bp) New Increased Reversals Q313 Q Personal Banking Business Banking Corporates & Institutions Total core Non-core Group Q312 Q412 Q113 Q213 Q313 Note: Impaired loans are loans in rating categories 10 and 11 on which individual impairments have been made. 36

37 Impairments: Reduced to pre financial crisis level Impairments, 2008 to Q3 13 (DKK bn/bp) Change in allowance account** (DKK m) Impairments Loan loss ratio* (rhs) Allowance, end , Gross impairments 125, Reversals 35, Write-offs 46, Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q Allowance, end-q ,889 * Loan loss ratio defined as annualised impairment charges as a percentage of loans and guarantees. ** Includes Non-core activities. 37

38 Tax: Actual tax rate declining owing to lower losses in Ireland Actual and adjusted tax rates (DKK m) Q3 13 Q2 13 Q1 13 Q4 12 Q3 12 Profit before tax 2,304 2,679 2,215 2,256 2,220 Pre-tax loss, Ireland core and non-core ,234 1,374 Permanent non-taxable difference Adjusted pre-tax profit, Group 2,655 2,759 2,992 3,341 3,569 Tax according to P&L , Taxes from previous years Adjusted tax Tax drivers Tax on the profit for the third quarter amounted to DKK 768 m, or 33% of the pre-tax profit The tax charge was high relative to the profit, mainly because DKK 120 m was expensed as a result of a decrease in the deferred tax asset owing to lower corporate tax rates in the UK Adjusted for this, the tax rate came in at 24.4% for the quarter Adjusted tax rate 24.4% 24.4% 24.6% 25.3% 25.0% Actual tax rate 33.3% 18.4% 33.6% 49.2% 40.7% 38

39 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) Upgrades > downgrades Downgrades > upgrades Property prices, Nordic countries (index 2003 = 100) House prices/nom. GDP, Nordic countries (index 2005 = 100) Denmark Sweden Finland Norway 220 Denmark 130 Finland Sweden Norway * The relation between upgrades and total rating changes. Ratings since Q4 11 reflect recalibration

40 Denmark: Affordability remains good as house prices stabilise Danish house prices by region (%) Region Prices Change Change in q/q Preview* peaked since peak Q Q3 13 Copenhagen Q Zealand Q South Denmark Q Central Jutland Q Northern Jutland Q Nationwide Q Danish housing market (000s) Affordability index, quarterly data from Fixed rate Mixed rate Average Above average = expensive Below average = cheap Unemployment and foreclosures (%) No. housing units for sale House price per m 2 (rhs) 10Y swap rate Unemployment No. of forced sales (rhs) , * Leading indicator, based on monthly statistics from home (Danske Bank s real estate agency) that cover about one-third of the market. Sources: Danske Research, Statistics Denmark, Association of Danish Mortgage Banks, home, Adam, Danish Central Bank, SKAT and own calculations ,500 1,

41 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-q3 13 Loans by LTV and rating, Realkredit Danmark, end (%) Approx. 390,000 loans (residential and commercial) 2,521 loans in 3- and 6-month arrears 128 repossessed properties DKK 12 bn of loans with LTV > 100%, including DKK 2bn with public guarantee Average LTV ratio of 71% LTV ratio on origination (legal requirement) Residential: max. 80% Commercial: max. 60% 1-month arrears, Realkredit Danmark (% of stock) Rating Total Public LTV ratio guarantee > Total (DKK bn) Trend in mortgage margins, 80% LTV, owner-occupied, (bp) 0.8 All products Fixed rate Adjustable rate Q311 Q112 Q312 Q % Q bp per refinancing 2011 Oct 12: with amortisation Oct 12: interest-only + 20 bp per refinancing 41

42 Personal Banking Denmark: Limited exposure to high-ltv loans that start to amortise before end-2018 at end-q Credit exposure to households with an IO mortgage (DKK bn) Breakdown of loans with high LTV (DKK bn) Danske Prioritet (SDO mortgage) RD mortgage (fixed or variable rate) Credit exposure with LTV above 100% Credit exposure with LTV above 80% IO mortgages that start to amortise before end High LTV** Secured bank lending 53 Rating categories Total credit exposure 194 Rating category Category 11 Portion with acceptable LTV* 174 Rating categories % 70% Collective Category 10 Portion with high LTV** 20.5 Impairments against these households % 80% Individual * Definition of acceptable LTV: 80% or below for RD mortgages and Danske Prioritet, and 100% or below for secured bank lending. ** Definition of high LTV: above 80% for RD mortgages and Danske Prioritet, and above 100% for secured bank lending. 42

43 Credit exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio, Q3 13 (%) Shipping, breakdown of loan portfolio, Q3 13 (%) Other Mixed operations 6 Chemicals and feeds 13 Pig breeding Agriculture 20 Cattle breeding Other Car carrier RO-RO Chemical tanker 10 7 Product tanker Offshore supply Container 11 Offshore rig Gas tanker Crude tanker Cruise/Ferry Dry bulk Agriculture, exposure and allowance, Q3 13 (DKK bn) Shipping, exposure and allowance, Q3 13 (DKK bn) Business unit Gross exposure Allowance Coverage Business unit Gross exposure Allowance Coverage Personal Banking % Business Banking % Corporates & Institutions % Total exposure % Personal Banking % Business Banking % Corporates & Institutions % Total exposure % Portion from RD % Impaired loans: DKK 4.3 bn (6.6%) Impaired loans: DKK 4.1 bn (10.4%) 43

44 Non-core Ireland: Breakdown of loan portfolio Individual impairments Value of collateral CRE (DKK bn) Personal mortgages (DKK bn) Other* (DKK bn) Total (DKK bn) Gross exposure Impaired loans Gross exposure Impaired loans Gross exposure Impaired loans Gross exposure Impaired loans Collective imp. (DKK bn) 0.1 Impaired 87% Collective imp. (DKK bn) 0.2 Impaired 38% Collective imp. (DKK bn) 0.1 Impaired 79% Collective imp. (DKK bn) 0.4 Impaired 70% Note: Value of collateral is capped by size of loan and reflects a haircut of at least 20%. Impaired loans are individually impairment-tested loans in rating categories 10 and 11. * Consists primarily of consumer-related industries. 44

45 Ireland: Price trends and arrears Irish house price indices (index 100 = January 2005) CSO index,* houses Internal price index for houses in Dublin Internal price index for houses outside Dublin 140 Fall from peak (%) Residential real estate Dublin Non-Dublin Commercial real estate Ireland, total Arrears** (%) days 180+ days Market Q210 Q211 Q212 Q213 * The general Irish price index. ** Number of arrears, personal customers, excluding buy-to-let financing. Based on Q

46 Funding: Structure and sources Loan portfolio and long-term funding, Q3 13 (DKK bn) Funding sources (%) 1,791 Q Q , Senior debt 44 Bank loans Deposits 20 Bank mortgages Covered bonds RD mortgages Issued RD bonds Deposits credit inst. CD & CP Repos Deposits Senior unsecured Covered bonds Subord. debt Equity Loans Funding Short-term funding Long-term funding 46

47 Three different methods of rating banks Rating methodology Danske Bank s rating Anchor SACP* Extraord. Add = SACP = + = Support factors Issuer Rating BBB BBB A- (Stable) 1=Business Position 2=Capital & Earnings 3=Risk Position 4=Funding & Liquidity Bank Financial Strength Rating Baseline Credit Assessment (BCA) Parental and Adjusted Systemic + Cooperative = + = BCA Support Support Issuer Rating C- Baa2 0 notches Baa2 1 notch Baa1 (Stable) Individual Rating/Viability Rating Support Rating/Support Rating Floor a A- Issuer Default Rating (IDR) IDR is the higher of the Viability Rating and the Support Floor A (Stable) * Stand-Alone Credit Profile. 47

48 Recommendations from the Rangvid committee report Recommendations for large financial institutions IRB models The committee therefore recommends that banks using internal models should also disclose what the regulatory capital requirement would have been using the standard model The committee furthermore recommends that a lower limit be determined for the risk weights used in internal models Leverage ratio The committee recommends setting up a group of experts to assess whether the general leverage ratio should be higher (with all assets weighting 100 per cent) than the 3 percent requirement on which Basel III standards are based The expert group must also assess whether the general leverage ratio limit should be different for banks and mortgage credit institutions and for banks that use, respectively do not use internal models Supervisory diamond for mortgage institutions The Committee therefore recommends that the FSA prepares a Supervisory Diamond that is particularly aimed at mortgage institutions. The Committee finds that such a Supervisory Diamond should include landmarks that reflect the risks of an institution, including e.g. limits on the share of mortgage credit loans with frequent refinancing (more than every two years) issued by an institution and limits on the share of interest-only loans... 48

49 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 into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The securities referred to herein have not been, and will not be, registered under the Securities Act of 1933, as amended ( Securities Act ), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. This presentation contains forward-looking statements that reflect management s current views with respect to certain future events and potential financial performance. Although Danske Bank believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors many of which are beyond Danske Bank s control. This presentation does not imply that Danske Bank has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided. 49