Financial results for the first half of 2014

Transcription

1 Financial results for the first half of 2014 Thomas F. Borgen Chief Executive Officer Henrik Ramlau-Hansen Chief Financial Officer 24 July 2014

2 Agenda Executive summary and financial results 3 Business unit update 54 Selected topics 7 New initiatives 12 Business review update 13 Outlook for Q&A 17 Appendix 18 2

3 Executive summary for H 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 Expenses Continued cost focus lowering expenses by 6% vs. H1 2013, to DKK 11 bn Impairments Reduction in impairments to DKK 1.3 bn down 44% against H Non-core Non-core result of DKK -794 m and according to plan Capital Successful capital issues; CET1 of 14.4% and total capital ratio of 18.6% Outlook Improved net profit outlook for 2014 to DKK bn (previously high end of DKK 9-12 bn) 3

4 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 H H Index Q Q Index Net interest income 11,251 10, ,900 5, Net fee income 4,885 4, ,480 2, Net trading income 4,061 3, ,195 1, Other income Net income from insurance business Total income 21,712 19, ,377 10, Expenses 11,021 11, ,589 5, Profit before loan impairment charges 10,691 8, ,788 4, Loan impairment charges 1,267 2, Profit before tax, core 9,424 5, ,162 4, Profit before tax, Non-core , Profit before tax 8,630 4, ,000 3, Tax 1,771 1, Profit 6,859 3, ,047 2, Return on avg. shareholders' equity (%) Cost/income ratio Common equity tier 1 capital ratio (%) EPS Lending (DKK bn) 1,566 1, ,566 1, Deposits (DKK bn) Return on equity improved from 5.2% to 9.2% Total income up by 9% driven by NII and fee income NII up 3% driven by deposit repricing, lower funding costs and bond portfolio optimisation Expenses down 6% Impairment charges down 44% Key points, Q2 14 vs Q1 14 NII was up 10% primarily driven by lower funding cost Continued execution on cost-saving initiatives Result from the Non-core activities improved due to one-off s in Q1 and quarterly fluctuations 4

5 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 H H % 2,346 1,248 Personal Income statement (DKK m) +21% 2,813 2,324 Business +3% 1,962 2,022 C&I Personal Banking Slightly lower NII from declining volumes Expenses down 10% owing primarily to tight cost control Loan impairments down 44% Business Banking Stable NII; slightly higher lending volume Loan impairments down 47% C&I Higher NII and net fee income due to volume and activity Trading income negatively affected by lower income from market making Personal Business C&I H H Index H H Index H H Index Net interest income 5,343 5, ,368 4, ,288 1, Net fee income 2,186 2, , Net trading income ,535 2, Other income Total income 8,177 8, ,966 5, ,535 4, Expenses 5,278 5, ,649 2, ,303 2, Profit before loan impairment charges 2,899 2, ,317 3, ,232 2, Loan impairment charges Profit before tax 2,346 1, ,813 2, ,022 1,

6 Danske Capital and Danica Pension: Satisfactory result Danske Capital: Financial highlights, H Total income up 10% driven by higher assets under management and margin improvement Profit before tax up 22% Net sales of DKK 19 bn, of which 65% to non-danish clients Assets under management increased 9%, from DKK 704 bn in H to DKK 770 bn in H Danica Pension: Financial highlights, H Premiums up 2% Result from insurance business up 8%, driven by unitlinked business Danske Bank cross-sales of Danica Pension products of DKK 2.2 bn, up 43% Risk allowance booked in full for three of the four interest rate groups At the end of H1, the shadow account balance was DKK 1.3 bn Danske Capital: Income statement (DKK m) Danica Pension: Income statement (DKK m) H H Index Net interest income Net fee income 1, portion from performance fees Other income Total income 1, Expenses Profit bef. loan imp. charges Loan impairment charges Profit before tax Assets under management (bn) H H Index Premiums 14,364 14, Danica Traditionel (insurance result) Unit-linked (insurance result) Health and accident (ins. result) Result from insurance business Return on investments Financing result Special allotments Net income bef. postponed risk allow Change in shadow account Net income

7 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. Severance payment Deposit scheme guarantee / bank packages Bonus Write down Sampo name Other costs Q ,432 23, , Severance payment , IT ,835 20, Staff costs Other costs 25 9,794 Q ,589 Actual 2012 Actual 2013 H

8 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 173 Loan loss ratio* (rhs) H1 14 H1 13 Index Q214 Q114 Index Personal Banking Business Banking C&I Other activities Total core 1,267 2, Non-core Group 1,647 3, Loan loss ratio, annualised (bp) H1 14 H1 13 Index Q214 Q114 Index Personal Banking Business Banking C&I Total core Non-core Group Q208 Q209 Q210 Q211 Q212 Q213 Q214 * Loan loss ratio defined as annualised impairment charges as a percentage of loans and guarantees. 8

9 Capital: Strong capital ratios from retained earnings and tier 2 issue in Q Capital ratios, under Basel II/CRD IV (%) Common equity tier 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 changes CRD IV leverage ratio: 4.0% according to the transitional rules; 3.5% fully phased-in Effect from CRR/CRD IV on fully loaded CET1 of about 1.2 percentage point compared with the Q ratio Removing temporary risk weight add-on will increase CET1 by around 0.4 of a percentage point after full implementation later in 2014 Effect of FSA order on corporate risk weights (%) Q114 Q214 Corporate risk weight after order Q313 Portfolio changes Q313-Q214 Removal of add-on Pro-forma corporate risk weight Q2 14 9

10 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 +271 bp* Dec 13 DKK 1,700 m tier 2 10½NC5½ EUR 3M +251 bp* Dec 13 SEK 1,600 m - tier 2 10½NC5½ - EUR 3M +250 bp* Dec 13 SEK 900 m - tier 2-10½NC5½ - EUR 3M +249 bp* Dec 13 NOK 700 m - tier 2 10NC5 - EUR 3M +242 bp* Dec 13 CHF 150 m - tier 2-12NC7 EUR 3M +255 bp* Dec 13 EUR 1,000 m - tier 2 10NC5 EUR 3M +276 bp* Sep 13 *Equivalent spread to 3M EURIBOR at the time of issue 10

11 Non-core: Unwinding of Irish assets proceeding as planned Key points Loss before tax reduced by DKK 221 m, from DKK -1,015 m in the first half of 2013 to DKK -794 m in the first half of 2014 Sales in the first half of 2014 equalled about 70% of the total sales in 2013 Irish property disposals progressing well, with an agreement to sell a portfolio of almost 700 properties effective in Q3 Guidance for 2014 impairments in Non-core Ireland remains up to DKK 1.5 bn Property pipeline and sales (No. of properties) New Non-core loan portfolio*, Q (DKK bn) Allowance account Impaired credit exposure Non-impaired credit exposure Personal customers RWA (DKK bn) 8 1 CRE 7 3 Other Non-core conduits etc Total 2013 Non-core conduits etc. H , ,345 Non-core Ireland Sold On the market Under offer Under contract Q213 Q313 Q413 Q114 Q2 14 * Gross credit exposure. 11

12 New market initiatives in H1 Danske Guide Mobile Pay Business & Online Post-trade integrated solution International Banking unit for BB and C&I Advisory services easy banking Ung Direkte Danske One Trader Danske Business One, Plus and Pro 12

13 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 Economies of scale Benefits from shared costs associated with critical mass in technology, knowledge sharing, product development and general overhead costs. Diversification Diversification of our business and geographical footprint Synergistic opportunities Cross-border, intra-country and cost synergies; synergies between Personal Banking, Business Banking, Danske Capital and C&I enhancing customer offerings 13

14 Personal Banking in Sweden: Business turnaround for innovative challenger Personal Banking in Sweden Today Market share of 4% skewed towards high net worth segment Successful Private Banking unit and strong virtual bank set-up Challenges in certain areas from scale, inoptimal pricing, low awareness and underdeveloped digital offering have resulted in unsatisfactory profitability Financial highlights, DKKm H1 H Index Net interest income Net fee income Net trading income Other income Total income Expenses Profit before loan impairment charges Loan impairment charges Profit before tax Recapturing challenger position to enhance profitability Strengthened and best in class value proposition on key parameters such as clear advisory services, enhanced digital offering and competitive and fair pricing Investing in people, marketing and leverage of digital platform Loans and advances before impairments 70,008 77, Allowance account, loans Deposits 28,157 32, NII as % p.a. of loans and deposits Cost/income ratio (%)

15 Personal Banking in Norway: Fine-tuning a profitable bank Personal Banking in Norway Today Focused footprint with 4% share in a consolidated market Concentration on strong regional footprint and focus on high-net worth customer segments Challenge from lower awareness and lower geographical diversification Securing today s attractive level of profitability Defend and further develop challenger position Optimising scale and customer product offering, including leverage of digital platform Further geographical expansion Financial highlights, DKKm H1 H1 Index Net interest income Net fee income Net trading income Other income Total income Expenses Profit before loan impairment charges Loan impairment charges Profit before tax Loans and advances before impairments 73,062 77, Allowance account, loans Deposits 27,669 27, NII as % p.a. of loans and deposits Cost/income ratio (%)

16 Outlook for 2014: Lifting net profit to DKK 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 Trading and insurance Income from market making may remain low, but total trading income and insurance income are expected to be above 2013 levels (DKK 5.8 bn and DKK 1.1 bn) Total income Total income expected to exceed the level in 2013 (DKK 39.7 bn) Expenses Expenses below DKK 23 bn in 2014 (DKK 23.8 bn in 2013) Impairments Impairments in core activities expected to be below the level in 2013 (DKK 4.1 bn) and up to DKK 1.5 bn at Non-core Ireland Net profit Net profit in the range of DKK bn This guidance is subject to uncertainty and depends on economic conditions. Comparables for 2013 are adjusted for the transfer of Personal Banking and Business Banking customers in Ireland to Non-core on 1 January

17 Q&A session Press * then 1 to ask a question Press # to cancel Press Ask a question in your webcast player 17

18 Appendix Business units 19 Special topics: NII, trading income and expenses 24 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 details 42 18

19 Personal Banking: Higher income and positive trend in impairments Income statement & key figures (DKK m) Key points, Q2 14 vs Q1 14 Q Q Index Net interest income 2,728 2, Net fee income 1,124 1, Net trading income Other income Total income 4,157 4, Expenses 2,626 2, Profit before loan impairment charges 1,531 1, Loan impairment charges Profit before tax 1,315 1, Lending 801, , Deposits 335, , FTE 6,813 6, Loan impairment charges (DKK m) Profit before tax up 28% to DKK 1.3 bn. Total income increased 3%, mainly because of higher net interest income and fee income resulting from higher customer activity Trading income fell 45% because Q1 14 benefitted from RD refinancing fee Impairment charges down 36% as credit quality improved further across all markets Expenses (DKK bn) ,004 2,821 3,030 2,652 2,626 Q213 Q313 Q413 Q114 Q214 Q213 Q313 Q413 Q114 Q214 19

20 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 Q Q Index Net interest income 2,283 2, Net fee income Net trading income Other income Total income 3,047 2, Expenses 1,301 1, Profit before loan impairment charges 1,746 1, Loan impairment charges Profit before tax 1,541 1, Lending 630, , Deposits 255, , FTE 3,670 3, Loan impairment charges (DKK m) Total income up 4% mainly due to higher net interest income because of income initiatives and slightly higher lending volumes Trading income fell 38% mainly because Q1 14 benefitted from RD refinancing fee Expenses was 3% lower du to tight cost control Impairments down 31%, because of improved credit quality Expenses (DKK bn) ,350 1,271 1,524 1,348 1,301 Q213 Q313 Q413 Q114 Q214 Q213 Q313 Q413 Q114 Q214 20

21 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 Q Q Index Net interest income Net fee income Net trading income 1,155 1, Other income Total income 2,201 2, Expenses 1,177 1, Profit before loan impairment charges 1,024 1, Loan impairment charges Profit before tax 819 1, Lending 167, , Deposits 171, , FTE 1,532 1, Loan impairment charges (DKK m) Profit before tax fell 32%, mainly because of a small increase in impairments from a very low level in the first quarter of 2014 Income from General Banking continued to improve because of higher net interest income Capital Markets saw high bond issuance activity, and Corporate Finance saw a slight rise in fees Income from Market Making remained difficult due to lower volatility and lack of trends in the market. Expenses increased mainly because of staff reduction costs Income breakdown (%) 205 Market Making Capital Markets Sales and Research General Banking 124 2,131 1,564 2,358 2,334 2, Q213 Q313 Q413 Q114 Q214 Q213 Q313 Q413 Q114 Q214 21

22 Danske Capital: Positive trend in AuM continues Income statement (DKK m) Q Q Index Net interest income Net fee income portion from performance fees Other income Total income Expenses Profit bef. loan imp. charges Loan impairment charges Profit before tax Assets under management (bn) Key points, Q2 14 vs Q1 14 Total income was up 8% from the first quarter of 2014 Performance fees fell from DKK 20 million to DKK 8 million Non-performance-based income was up 10 % Expenses rose 14% due to higher marketing expenses in the second quarter Assets under management increased 3%, from DKK 748 bn in Q to DKK 770 bn in Q Net inflow in AuM (DKK bn) AuM customer breakdown (DKK bn) Net inflow Net inflow as % of AuM (rhs) Private equity Institutions Retail* Life insurance % 8.9 Q % -3.0 Q % 2.9 Q % 11.4 Q % 7.7 Q Q213 Q313 Q413 Q Q214 * Retail includes Danske Invest. 22

23 Danica Pension: Improved net income Income statement (DKK m) Investment allocation for Danica Traditionel, end-q2 14 (%) Q Q Index Premiums 6,519 7, Danica Traditionel (insurance result) Unit-linked (insurance result) Health and accident (ins. result) Result from insurance business Investment result Financing result Special allotments Net income bef. postponed risk allow Change in shadow account Net income Possibility of booking risk allowance in 2014 (%) Equities Credit bonds Alternative investments Bonds Property % change in equities 25% Full risk allowance Partial risk allowance -25% -1,00% 0,00% Percentage point change in interest rates 1,00% New schemes Low Medium High 23

24 Net interest income: Improvement from lower capital cost Quarterly net interest income (DKK m) Quarterly changes in net interest income (DKK m) +8% 5,900 Q1 14 5,351 5,464 5,561 5,640 5,351 Lending effect 43 Deposit effect 129 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Capital cost 216 Balance sheet items (DKK bn) Loans and advances Due to customers Shareholders equity 35 1,700 1,600-7bn Number of days 61 1,500 1,400 Other interest bn Q2 14 5, Q2 13 Q3 13 Q4 13 Q1 14 Q

25 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 2,148 C&I 413 Business 1,467 Personal 1,865 2,195 Trading income at Group Treasury included the positive effect of DKK 1 bn relating to Nets Income from Market Making at C&I was lower as market activity remained low in Q2 Q213 Q313 Q413 Q114 Q214 In Q1 Personal Banking and Business Banking benefitted from DKK 147 m in RD refinancing fees at the refinancing auction. Trading income from C&I (DKK m) Trading income split, Q (%) Market Making Customer-driven 1, ,342 1,380 1,155 FX & money market 29 Repos & derivatives Bonds Equities Q213 Q313 Q413 Q114 Q214 DCM 25

26 Expenses: Reduced by 6% compared to H Total expenses (DKK m) Change in expenses, (DKK m) Consultants etc. Severance payments Deposit guarantee scheme /bank packages Bonus Other costs YTD ,747 6,587 Severance payments 46 IT 49 5,943 Staff costs 329 5,460 5,432 5,589 Property, rent etc. Consultants etc ,208 4,847 5,531 4,859 4,929 Bank package 3 etc. Other costs Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 YTD ,021 26

27 Impairments: Improvement in core activities continues Impairments by business unit (DKK bn) Impairment drivers Non-core 1.2 C&I 1.2 Business Personal Personal Banking: Lower impairments supported by improving macroeconomic conditions on most markets Business Banking: Improved credit quality across markets and segments C&I: Impairments related to a few customers Non-core: Impairments related to Ireland only 0.1 Impaired loans* (DKK bn) 0.2 Defaulted Performing Q213 Q313 Q413 Q114 Q214 Q4 13 Q1 14 Q2 14 Note: Impaired loans are loans in rating categories 10 and 11 on which individual impairments have been made. *Excludes Non-core. 27

28 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 , Gross impairments 135, Reversals 42,173 Write-offs 52, Allowance, end-q ,722 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 * Includes Non-core activities. 28

29 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 220 Finland Norway Sweden Denmark 130 Finland Norway Sweden * The relation between upgrades and total rating changes. Ratings since Q4 11 reflect recalibration

30 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Change in Region Prices Change q/q Preview* peaked since peak Q Q2 14 Copenhagen Q Zealand Q Affordability index, quarterly data from Fixed rate Mixed rate Average Above average = expensive 100 South Denmark Q Central Jutland Q Northern Jutland Q Nationwide Q Below average = cheap Danish housing market (000s) Unemployment and foreclosures (%) No. housing units for sale House price per m 2 (rhs) 10Yswap 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, Assoc. of Danish Mortgage Banks, home, Adam, Danish central bank, SKAT (tax authority) and own calculations. 30

31 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-q2 14 Approx. 383,000 loans (residential and commercial) 2,439 loans in 3- and 6-month arrears 91 repossessed properties DKK 11 bn of loans with LTV > 100%, including DKK 3bn with public guarantee Average LTV ratio of 71% LTV ratio at origination (legal requirement) Residential: max. 80% Commercial: max. 60% 1-month arrears, Realkredit Danmark (% of stock) Loans by LTV ratio and rating, RD, end-q2 14 (DKK bn) LTV ratio (%) Total Pub. guarantee > Total Trend in mortgage margins, 80% LTV, owner-occupied, (bp) 0.8 All products Fixed rate Adjustable rate Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q refinancing fee* + refinancing fee* 2011 Jan13: with amortisation Jan 13: interest-only * We charge a fee of 30 bp of the bond price for refinancing of 1- and 2-year floaters and a fee of 20 bp for floaters of 3 or more years. 31

32 Realkredit Danmark: Good preference for longer term variable rate loan driven by flat yields and fee structure Key points Trend away from short term Flexlån, continued in H Extension into FlexKort and RD Cibor 6 / Euribor 3 loans during the refinancing auctions accounted for approx 50% of the gross lending in Q4 13 and Q1 14 The outstanding amount of the new FlexKort product rose from DKK 12bn in Q4 13 to DKK 20 bn Since end-q2 2012, the amount of Flexlån F1 and F2 loans has been reduced by DKK 108 bn, or 50% Gross lending (DKK bn) Fixed rate loans Variable rate loans, short-term* Variable rate loans, long-term* Loan portfolio, FlexLån F1 and F2 (DKK bn) -50% Q212 Q312 Q412 Q113 Q213 Q313 Q413 Q114 Q214 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 *Short term: 2 year, long term: 3 year 32

33 Impaired exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio*, Q2 14 (%) Shipping, breakdown of loan portfolio*, Q2 14 (%) Other Horticulture 12 Mixed operations 1 26 Agriculture 6 Chemicals and feeds 13 1 Poultry 20 Pig breeding 20 Cattle breeding Agriculture, exposure and allowance, Q2 14 (DKK bn) Other RO-RO Product tanker Offshore supply 13 Car carrier Chemical tanker Container 8 Offshore rig 6 11 Crude tanker 9 6 Gas tanker Cruise/Ferry Dry bulk Shipping, exposure and allowance, Q2 14 (DKK bn) Business unit Gross exposure Allowance Coverage Business unit Gross exposure Allowance Coverage Personal Banking % Business Banking % Corporates & Institutions % Total exposure, ex. Non-core % Personal Banking % Business Banking % Corporates & Institutions % Total exposure % Portion from RD % Gross impaired loans: DKK 3.6 bn (5.4%) Gross impaired loans: DKK 4.3 bn (11.9%) * Excluding Non-core 33

34 Ireland: House 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 Fall from peak (%) Residential real estate Dublin Non-Dublin Commercial real estate Ireland, total Arrears** (%) days 180+ days Market Q110 Q111 Q112 Q113 * The general Irish house price index. ** Number of arrears, personal customers, excluding buy-to-let financing. Based on Q Q114 34

35 Funding and liquidity: Successful capital issues and high issuance activity in first half of 2014 Changes in funding, 2014 (DKK bn and bp*) Cov.bonds 56bp 5 133bp bp 2 587bp Redemptions 2014: DKK 65 bn Senior 0 0 Tier 2 145bp 112bp 1 587bp Redeemed H114: DKK 53 bn Tier 1 27bp Maturing funding, (DKK bn and bp*) 7 42bp bp 165bp 6 4 New H1 14: DKK 28 bn Long-term funding ex RD (DKK bn) Funding plan Completed Liquidity coverage ratio** (%) Cov.bonds 51bp 110bp Senior Tier 2 95bp 105bp Tier bp bp : DKK 61 bn : DKK 55 bn 65bp 65bp : DKK 43 bn Q2 13 Q3 13 Q4 13 Q1 14 Q *** * Spread over 3M EURIBOR. **LCR is calculated in accordance with Danish FSA s specifications and includes holdings of covered bonds and Danish mortgage bonds, including own issued bonds.. ***Minimum requirement of the Danish FSA. 35

36 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) Mar 14 May 14 Jul 14 0 Oct13 Mar14 Jul 14 Senior: Feb 2017 (ASW spread, bp) Covered: Nov 2019 (ASW spread, bp) Jan 14 Apr14 Jul 14 0 Jan14 Apr14 Jul 14 36

37 Funding: Structure and sources Loan portfolio and long-term funding, Q2 14 (DKK bn) Funding sources (%) 1,767 Q Q Senior debt 44 1,567 Bank loans Deposits 22 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 37

38 Three distinct methods of rating banks Rating methodology Danske Bank s rating Anchor SACP* Extraord. Add = SACP = + = Support factors Issuer Rating bbb a A (Negative) 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 (Positive) 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. 38

39 Financial targets: Further progress towards 9% ROE in 2015 Target Year to be achieved Status at 30 June 2014 Comments Return on equity 9% 2015 Above 12% Long-term 9,2% Initiatives progressing as planned Ratings Improve ratings by at least one notch 2015 S&P/Moody s/fitch A/Baa1/A Negative/Positive/Stable Core tier 1 ratio Minimum 13% 14,4% Met since end-2012 End-2013 Total capital ratio Minimum 17% 18,6% Met since end-2012 Nominal costs Below DKK 23 bn DKK 11.0 bn 2015 Cost/income ratio Below 50% 50,8% In progress, upgrade from S&P in April 2014 Initiatives progressing as planned Dividend payments About 40% of net profit 2015 For 2013: dividends of 28% of net profit On track 39

40 Danica Pension s profit model Profit model Condition/ sensitivity H DKK m = Danica Traditionel. Mainly risk allowance 75 bp p.a. of technical provisions (DKK 157 bn) Unit-linked business. Long-term: 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 -128 Return on investment portfolio at shareholders risk Financing result Special allotments, depending on profit and business volume Shadow account Equity markets, interest rates Investment return: 1.3 % 237 S-T interest rate (equity allocated capital) Uncertainty because of dependency on investment return for the rest of the year Low short-term interest rate -73 Transferred to shadow account, primarily from one interest rate group Total Danica Pension

41 Tax development Actual and adjusted tax rates (DKK m) Q2 14 Q1 14 Q4 13 Q3 13 Q2 13 Profit before tax 5,000 3,630 2,862 2,304 2,677 Pre-tax loss, Ireland core and non-core Permanent non-taxable difference -1, Tax drivers The actual tax rate is relative low, due to permanent non-taxable share price adjustments and dividends Adjusted pre-tax profit, Group 3,847 3,670 2,702 2,655 2,757 Tax according to P&L Taxes from previous years Adjusted tax Adjusted tax rate 24.6% 23.7% 23.8% 24.4% 24.4% Actual tax rate 19.1% 22.5% 32.8% 33.3% 18.4% 41

42 Contacts Henrik Ramlau-Hansen Direct: Chief Financial Officer Mobile: Julie Quist Direct: Head of IR Mobile: Claus Ingar Jensen Direct: Chief IR Officer Mobile:

43 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. 43