Financial results for Q1 2013

Transcription

1 Financial results for Q Eivind Kolding CEO & Chairman of the Executive Board Henrik Ramlau-Hansen CFO & Member of the Executive Board 2 May 2013

2 Agenda Key messages 3 Business units up-date 6 Financial results 11 Capital, liquidity, funding & rating 19 Outlook for Q&A session 24 Appendix: Trends in focus areas 25 2

3 Key messages on Q Net profit improved 29% from Q4 12 Expenses 10% below Q4 12 and cost programme on track Total impairments down compared with Q4 12 Total income lower than expected and below our ambitions Strong capital and liquidity levels CT1 of 15.1% and LCR of 126% ROE improved from 3.7% in 2012 to 4.3% Outlook for net profit in 2013 of DKK bn 3

4 Customer satisfaction, Q On target Behind target Personal Banking Markets measured Denmark Sweden Norway Finland Northern Ireland Ireland Business Banking Markets measured Denmark Sweden Norway Finland Northern Ireland Corporates & Institutions Areas measured Relationship management Transaction banking Capital markets Sales & Trading All four areas are on target Main target is to be ranked No. 1 or 2 among key peers in focus segments Additional target is to have a score above the average for all peers in focus segments Rank is based on 6-month moving average in survey conducted by Ennova on a monthly basis Main target is to be ranked No. 1, 2 or 3 in selected customer surveys Rank is based on 24 selected surveys from Prospera covering the strategically prioritised fields within the four areas A minimum of 75% of the rankings in each area should be on target 4

5 Strategy update: Initiatives taken as a part of New Standards Personal Banking New customer programme Almost 600,000 customers have registered and the market share in Denmark improved in Q1 13 The programme has advantages for all customers the benefits depend on the customer s business volume The new prices in the programme will take effect on 1 September 2013 Business Banking Q1 initiatives Selective expansion of Realkredit Danmark products to Norway and Sweden has been successful because of customer demand for this attractive loan type First successful corporate bond issue in the Danish SME segment Launch of Mobile Business, a market-leading app that lets customers do business banking on the go Simple & transparent More benefits Fair 5

6 Personal Banking Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Net interest income 2,772 2, Net fee income Net trading income Other income Total income 4,113 4, Expenses 2,956 2, Profit before loan impairment charges 1,157 1, Loan impairment charges 589 1, Profit before tax Lending 860, , Deposits 370, , FTE 7,713 8, ROE Income distribution, Q1 13 (%) Profit before tax significantly up compared with Q1 12 ROE of 8% in Q1 13, up from 2.2% in Q1 12 Improvement in ROE driven by lower impairments, primarily in Denmark Total income flattish as repricing initiatives were offset by the low interest rates environment Number of FTEs reduced by 967, or 11%, since Q1 12 Initiatives Northern Ireland Norway 10 Sweden 5 Ireland 5 1 Customer loyalty programme implemented in Denmark, to be followed in the other countries. Next in line: Finland Further investments in digitalisation to increase customer satisfaction and efficiency in delivery and distribution. Finland Denmark Repricing of lending products continues in order to offset the adverse effects of lower interest rates 6

7 Business Banking Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Net interest income 2,206 2, Net fee income Net trading income Other income Total income 3,019 2, Expenses 1,361 1, Profit before loan impairment charges 1,658 1, Loan impairment charges 579 1, Profit before tax 1, Lending 644, , Deposits 257, , FTE 3,769 3, ROE Profit before tax significantly up compared with Q1 12 ROE of 9.6% in Q1 13, up from 0.3% in Q1 12 Improvement in ROE driven by lower impairments in most markets Strong improvement in fee income and trading income Profit before tax rose DKK 1 bn from Q1 12 Number of FTEs reduced by 121, or 3%, since Q1 12 Income distribution, Q1 13 (%) Ireland Baltics Northern Ireland Norway Sweden 10 Finland 53 Denmark Initiatives Development of Business Direct into an attractive new service channel with additional expertise, technology and resources Fee leakage initiatives have been identified across markets, and relevant actions have been planned or initiated Launch of large SME teams to increase product offerings and quality New unit for property customers that uses internal knowledge to benefit both customers and the Bank 7

8 Corporates & Institutions Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Net interest income Net fee income Net trading income 1,581 3, Other income Total income 2,382 4, Expenses 1,100 1, Profit before loan impairment charges 1,282 2, Loan impairment charges Profit before tax 991 2, Lending 167, , Deposits 168, , FTE 1,531 1, ROE Income distribution, Q1 13 (%) Total income 42% lower, owing mainly to lower trading Income from customer-driven* activity improved 3% Net interest income and net fee income up 3% and 15% respectively due to increasing business with customers Trading income dropped 53% owing to extraordinarily good trading in Q1 12 and low activity in Q1 13 ROE of 12.3% in Q1 13, down from 39.7% in Q1 12 Number of FTEs rose 59, or 4%, since Q1 12 Initiatives Market Making Sales & Research General Banking 35 7 Capital Markets Investments in Transaction Banking to expand our role in our customers' everyday business and to continue to increase market share Continued investments in capital markets activities to further increase the scope of our already strong DCM franchise and improve the corporate finance franchise Continue work to mitigate and in some instances take advantage of changes in the markets caused by new regulation * Customer driven income is income from General Banking, Capital Markets and Sales & Research. 8

9 Management actions announced with our Q results and status at end-q Planned actions, 2012 to 2015 (DKK bn) Initiated actions, Q1 12 to Q1 13 (DKK bn) Pricing 2 Pricing 0.3 Sales 3 4 Sales 0.4 Costs 1.5 Costs E Pre-tax P/L effect of DKK 6 8 bn Q1 13 Pre-tax P/L effect of DKK 0.9 bn 9

10 Financial targets: Four targets already reached Financial target End-Q1 13 (adj.) Ambitions Status ROE 4.3% Above 12% In progress Ratings S&P/Moody s/fitch A-/Baa1/A Pos./Stable/Neg. Improve ratings by at least one notch In progress Improved SACP* from S&P Core tier 1 ratio Total capital ratio LCR compliance 15.1% 21.6% 126% Min. 13% by end of 2013 Min. 17% by end of 2013 Meet EU 2015 requirement by end-2012 Above Above Above Nominal costs DKK 5.9 bn Below DKK 24 bn in 2015 In progress C/I ratio FTE target 2012 FTE target % 20,184 Below 46% in 2015 Reduced by 1,000 in 2012 Reduced by 2,000 in In progress Reached In progress Dividend payment About 40% of annual profit, although lower until capital and rating targets are reached In progress * Stand Alone Credit Profile. 10

11 Financial results: Lower impairments key driver for profit improvement, however, profit lower than expected Income statement & key figures (DKK m) Key points, Q1 13 vs. Q1 12 Q1 13 Q1 12 Index Q4 12 Index Net interest income 5,452 5, , Net fee income 2,265 2, , Net trading income 1,775 3, , Other income Net income from insurance business Total income 10,129 11, , Expenses 5,905 6, , Profit before loan impairment charges 4,224 5, , Loan impairment charges 1,459 2, , Profit before tax, core 2,765 2, , Profit before tax, Non-core ,179 - Profit before tax 2,216 1, , Tax , Profit 1, , Return on avg. shareholders' equity (%) Cost/income ratio Core tier 1 capital ratio (%) NII fell 4% owing to reduced deposit margins Trading income dropped by half, mostly because of favourable conditions in Q1 12 Expenses fell 7% owing mainly to write-down of the Sampo name in Q1 12 Impairments down 50% with drop in both core and Non-core Key points, Q1 13 vs. Q4 12 NII fell by 5% owing partly to reduced deposit margins Trading was low owing to uncertain market conditions but in line with Q4 Expenses fell 10%, mainly because of one-offs in Q4 Impairments in core activities in line with Q4, but 54% lower in Noncore 11

12 Net interest income: Small drop owing to the number of days, margins and slightly lower volumes Quarterly net interest income (DKK m) NII drivers, Q1 13 vs. Q1 12 5,650 5,717-4% 5,698 5,713 5,452 NII fell by DKK 198 m, or 4% Negative drivers were lower interest rates, deposit margins and volumes Effects of increased liquidity levels and higher funding costs in RD were also negative Seasonality from one day less accounted for a drop of around DKK 50 m Key points, Q1 13 vs. Q4 12 NII fell by DKK 261 m, or 5% Seasonality from two fewer days accounted for a drop of around DKK 100 m Seasonality from RD caused a drop of DKK 60 m lower than in earlier years because refinancing auctions were moved from Q4 to Q1 Q112 Q212 Q312 Q412 Q113 Short-term interest rate sensitivity across all currencies: +25 bp = DKK +800 m / -25 bp = DKK -800 m 12

13 Net fee income: Satisfactory performance compared with Q1 12 Quarterly net fee income (DKK m) Fee income drivers +13% 2,671 Higher fees at Danske Capital in Q1 13 driven by solid increases in AuM in both Q1 12 and Q4 12 2,012 2,049 2,134 2,265 Q1 12 included fees for stateguaranteed bond issues Seasonality in performance fees caused a drop of DKK 366 m from Q4 12 to Q1 13 Fee income split, Q1 13 (%) DC 21 C&I Personal 22 Q112 Q212 Q312 Q412 Q113 Business 13

14 Trading income: Q1 below expectations Quarterly trading income (DKK m) Trading income drivers 3,638 Lower trading income owing to lower market activity and uncertainty about Cyprus towards the end of Q1 2,895 Trading income included DKK 137 m in refinancing income on floaters at RD 2,199 Interest rate sensitivity (Group) 1 percentage point increase in yield curve: DKK -222 m 1,830 1,775 Trading income split, Q1 13 (%) FX & money market Equities Repos & derivatives 40 Q112 Q212 Q312 Q412 Q113 Bonds & DCM 14

15 Insurance: Good performance in line with guidance Quarterly insurance income (DKK m) Key points Postponed risk allowance Lower insurance income in Q compared with Q4 12 owing to inclusion of postponed risk allowance in Q Stronger insurance income in Q1 13 compared with Q1 12 owing to higher inclusion of risk allowance Risk allowance booked for three out of four interest rate groups No risk allowance for group with low guarantee owing to need to reestablish bonus potential of paid-up policies At the end of Q1 13, the shadow account balance was DKK 0.8 bn Q112 Q212 Q312 Q412 Q113 15

16 Expenses: Expenses lower because there were no extraordinary costs in the first quarter Total expenses (DKK m) Quarterly change in expenses (DKK m) Adjustments* Adjusted expenses Q4 12 6,591 6,324 6,047 5,680 6,591 5,905 IT 240 Rebranding 182 Consultants 120 5,516 5,560 5,279 5,913 5,585 Branches 220 Other 76 Q1 13 5,905 Q112 Q212 Q312 Q412 Q113 *Q1 13: Performance-based compensation and severance payments. 16

17 Impairments: At the lowest level since the beginning of the crisis Impairments, 2008 to Q1 13 (DKK bn/bp) Impairments Impairment ratio bp bp bp 41 bp bp 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q

18 Impairments: Sharp decline driven by Non-core activities; also positive trends in Personal Banking and Business Banking Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal Sharp decline of DKK 600 m from Q4 12 driven by lower impairments at Non-core Slightly higher impairments in core activities, primarily at C&I Lower impairments at Personal Banking and Business Banking Slightly higher impairments for personal customers in Denmark Loan-loss ratio, annualised (bp) Q Personal Banking Business Banking C&I Non-core 664 1,217 Q112 Q212 Q312 Q412 Q113 Group

19 Capital: Strong capital ratio, well above the recommended target for Danish SIFIs Capital ratios, under CRD/Basel II (%) Capital drivers Total DB SIFI requirement* Tier 2 Tier 1 (including state hybrid) Core tier 1 Lower RWA effect accounts for rise in CT1 of 0.4 %-point State hybrid represents 3 %-points of tier 1 ratio and total capital ratio Lower tier 2 ratio due to repayment of subordinated bond in March Individual solvency need ratio was 11.4 % at end of Q1 RWA (bn) Q Portfolio 14 Capital efficiency 8 Q412 Q113 SIFI incl. CRD 4 by 2022 Q * Based on Q1 13 individual solvency need of 11.4%. 19

20 SIFI report: Key elements and uncertainties Key elements Capital requirements CT1 SIFI requirement of 1% to 3.5% Crisis management buffer of 5% covered by contingent debt instruments (could be covered by AT1 or T2 under certain conditions) Danske Bank capital composition, 2022 (% of RWA) Crisis management buffer Pillar 2, ex Basel 1 floor (Pillar 1+)* Liquidity and funding requirements LCR fully met by 2015 CT1 CRD4 7.0 SIFI Compliance with higher stable funding requirement beginning in 2014 Legislative process 14 March 2013: Announcement from SIFI Committee Q2-Q3 2013: Discussion of SIFI recommendations October 2013: The Danish Parliament is expected to pass a bill with the final SIFI rules AT1/T2 COCO CRD4 3.5 SIFI Expected implementation 1 January 2014: Expected implementation of new rules 1 January 2014 to 1 January 2019: Phasing-in of SIFI CET1 requirements 1 January 2020: Start of build-up resolution fund 1 January 2020 to 1 January 2022: Phasing-in of crisis management buffer Total capital Total SIFI requirement of 17.6 * Based on Q1 13 individual solvency need of 11.4%. 20

21 Liquidity and funding: Strong and stable liquidity position despite repayment of LTRO liquidity 12-month liquidity,* end of period (DKK bn) Key points, end Q1 13 Q Q Q month liquidity of more than DKK 240 bn 400 Liquidity buffer of DKK 449 bn, with most of the bonds central bank eligible Utilisation of LTRO reduced by DKK 30 bn in Q1 300 LCR** end-q1 of 126% DKK 15 bn funding raised in 2013: 60% covered bonds 40% senior debt 200 Long-term funding (DKK bn) 100 Completed YTD 73 Funding plan 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 subordinatedcapital; moderate reduction of business activities. ** LCR includes holdings of covered bonds and Danish mortgage bonds, incl. own issued bonds. 21

22 Rating: Positive rating action from S&P, lower funding spread maintained in Q1 13 Key elements, S&P update, 6 March Y senior spread to 6M swap rate (bp)* Assessment of Danske Bank s capital position improved after capital-raising initiatives in H Stand-alone credit profile (SACP) raised one notch from BBB to BBB+ Subordinated debt rating raised one notch from BB+ to BBB- owing to higher SACP Long-term rating affirmed at A-/Positive outlook. Potential upgrade subject to sustainable improvement in profitability Danske Bank Handelsbanken 200 Nordea Swedbank Sep Oct Nov Dec Jan Feb Mar Rating methodology Anchor SACP** Extraord. Add = SACP = + = Support factors Issuer Rating BBB BBB A- 1=Business Position 2=Capital & Earnings 3=Risk Position 4=Funding & Liquidity *Outstanding senior benchmark issues with maturity in February 2017 (Handelsbanken in July 2017).** Stand-alone credit profile. 22

23 Outlook for 2013: Unchanged guidance despite slow start to the year Macro Economic growth remains low; growth forecast revised down in most markets Income NII likely flat at 2012 level (DKK 22.8 bn) Increasing net fee income (2012: DKK 8.9 bn) Trading income and insurance income below 2012 levels (DKK 10.6 bn and DKK 2.2 bn) Expenses Cost programme on track; full-year guidance of flat expenses (2012: DKK 24.6 bn) Loan losses Core activities: Slightly below 2012 level (DKK 7.7 bn) Non-core activities: Significantly below 2012 level (DKK 4.9 bn) Net profit* Net profit guidance unchanged in the range of DKK bn, management actions expected to mitigate slow start to the year * The profit guidance is subject to uncertainty and depends on normalised trading income and insurance income. 23

24 Q&A session Press 1 to ask a question Press # to cancel Press Ask a question in your webcast player 24

25 Appendix Tax 26 NII and margin developments 27 Expenses 29 Credit 30 Funding 41 Danske Capital & Danica

26 Adjusted tax rate at 25%, but actual tax rate remains high owing to Ireland Actual and adjusted tax rates (DKK m) Tax drivers Q1 13 Q4 12 Q3 12 Q2 12 Q1 12 Profit before tax 2,216 2,255 2,209 2,500 1,575 Pre-tax loss, Ireland core and non-core 626 1,234 1,374 1,616 1,371 Permanent non-taxable difference Adjusted pre-tax profit, Group 2,993 3,340 3,558 4,023 2,980 Tax according to P&L 744 1, , Taxes from previous years Adjusted pre-tax profit in Q1 13 in line with Q1 12 Declining actual tax rate in Q1 13 owing to significantly lower losses in Ireland Change in permanent non-taxable adjustments from Q4 12 to Q1 13 is due primarily to non-taxable dividends and differences in non-taxable value adjustments Adjusted tax Adjusted tax rate 24.6% 25.3% 25.0% 24.4% 23.9% Actual tax rate 33.6% 49.2% 40.8% 40.2% 50.6% 26

27 Net interest income: Slightly lower because of lower income at RD, interest days and change in FTP allocation Quarterly change in net interest income (DKK m) Net interest income at RD, ex lending margins (DKK m) Q4 12 5, Number of days 106 RD ex. margins Additional FTP 75 Lending effect Other 19 Deposit effect 56 Q1 13 5,452-4 Q1 Q2 Q3 Q4 27

28 Margins: Flattish in most segments Quarterly lending margins (%) Quarterly deposit margins (%) Q412 Q113 Q412 Q Personal* 1.10 Personal Business Business C&I C&I * Includes Realkredit Danmark. 28

29 Expenses: Underlying expenses up 5% YoY, but cost programme continues, with fewer branches and FTEs Expenses (DKK bn) FTEs, end of period (000s) Q1 13 Q1 12 Index Q1 13 Q4 12 Index Expenses 5,905 6, ,905 6, % Revaluation of domicile property Performance-based compensation Severance payments etc Rebranding Write-down of name rights Adjusted expenses 5,585 5, ,585 5, Branches (number of branches) Q1 13 Q112 Q412 Q113 29

30 Impairment dynamics Individual loan impairment charges, ex Baltics (DKK bn) Change in allowance account (DKK m)* New Increased Reversals Allowance-end , Gross impairments 119,487 Reversals 32, Write-offs 43, Allowance, end period 48,045 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 * Incl. Non-core activities. 30

31 Macro trends Bankruptcies (index 1996 = 100) Rating upgrades,* corporates, 12-month moving average (%) Denmark Finland Norway Sweden Denmark Finland Sweden Norway CIB Upgrades > downgrades Downgrades > upgrades Property prices, Nordic countries (index 2005 = 100) House price/nom. GDP, Nordic countries (index 2005 = 100) Danmark Finland Sweden Norway 180 Denmark 130 Finland Sweden Norway * The relation between upgrades and total rating changes. Ratings since Q4 11 reflect recalibration

32 Denmark: A small decline in house prices Danish house prices by region (%) Region Prices Change Change in Preview* peaked since peak Q4 12 Q1 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 (rha) * 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

33 Realkredit Danmark Portfolio facts, Realkredit Danmark, end-q1 13 Loans by LTV and rating, Realkredit Danmark, end-0113 (%) Approx. 395,000 loans (residential and commercial) 3,193 loans in 3- and 6-month arrears (0.7%) 149 repossessed properties DKK 16 bn of loans with LTV > 100%, including DKK 3bn with public guarantee Average LTV ratio of 73% 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) 1.0 All products Fixed rate Adjustable rate Q111 Q311 Q112 Q312 Q bp per refinancing 2011 Oct 12: with amortisation Oct 12: interest-only + 20 bp per refinancing 33

34 Realkredit Danmark: Geographical breakdown of residential mortgage portfolio Breakdown Dispersion of of RD s RD s residential residential mortgage portfolio portfolio RD s residential portfolio LTV residential RD lending to households RD s loan portfolio is concentrated in Greater Copenhagen and Zealand, where prices have declined the most Homeowner equity remains highest in the Greater Copenhagen, although LTV ratios have risen significantly Although the affordability ratio in Greater Copenhagen is expected to rise, it is still below index 100 Household mortgage debt fell slightly in Q Northern Jutland 70.9% 25bn Central Jutland 71.8% 73bn Copenhagen Area 73.6% Zealand 82.8% 89bn Southern Denmark 72.6% 71bn 169bn 6% 17% 39% 21% 17% Loan to value ratios Covered bonds are secured by a first claim on the mortgage collateral and the reserves of the issuer LTV ratios of the mortgage collateral on origination are limited by law to 80% for residential property and to 60% for commercial property (70% if the final 10% is secured by additional collateral). Lending beyond these limits is prohibited LTV ratios are monitored on an ongoing basis according to the current market values of the property and current prepayment values of the mortgages Currently, 33% of mortgage collateral securing covered bonds issued by Realkredit Danmark has an LTV ratio of 20% or less, and 60% has an LTV ratio below 40% Foreclosure costs are typically less than 15% of the outstanding loan balance 34

35 Limited exposure to agriculture and shipping Agriculture: breakdown of loan portfolio, Q1 13 (%) Shipping: breakdown of loan portfolio, Q1 13 (%) Other Mixed operations 6 Chemicals and feeds 15 Pig breeding Other Ro-Ro Product tanker Agriculture 5 Car Carrier Chemical tanker 7 11 Offshore supply 17 Container 13 Offshore rig 8 Cattle breeding Crude tanker Gas tanker Cruise/Ferry Dry bulk Agricultural exposure and allowance, Q1 13 (DKK bn) Shipping exposure and allowance, Q1 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 3.6 bn (5,2%) Impaired loans: DKK 4.6 bn (10,2%) 35

36 Core Ireland: Breakdown of loan portfolio Individual impairments Value of collateral Personal mortgages (DKK bn) Other (DKK bn) Total (DKK bn) Arrears,* personal customers (%) days 180+ days Market Gross exposure Impaired loans Gross exposure Impaired loans Gross exposure Impaired loans Collective imp. (DKK bn) 0.1 Impaired 11% Collective imp. (DKK bn) 0.1 Impaired 17% Collective imp. (DKK bn) 0.2 Impaired 12% Q4 09 Q2 10 Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 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. * Number of arrears, excluding buy-to-let financing. 36

37 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 85% Collective imp. (DKK bn) 0.1 Impaired 44% Collective imp. (DKK bn) 0.1 Impaired 81% Collective imp. (DKK bn) 0.3 Impaired 72% 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. 37

38 Price trend in the Irish property market and expected loan losses Irish house price indices (index 100 = January 2005) Fall from peak (%) CSO index* Internal price index for houses in Dublin Internal price index for houses outside Dublin Residential real estate Dublin Non-Dublin Commercial real estate Ireland, total Ireland, core & Non-core (DKK bn) Expected impairments Realised impairments Q212 - Q113 Q * The general Irish price index. 38

39 Geographical breakdown and amortisation type of selected segments in Ireland Core and Non-core Core: Personal mortgages, Q1 13 (%) Non-core: Commercial real estate portfolio, Q1 13 (%) Interest-only Amortisation 10 Dublin 8 Non-Dublin 42 Non-Dublin Dublin Non-Dublin 58 Dublin Non-core: Personal mortgages, Q1 13 (%) Non-core: Personal mortgages, Q1 13 (%) Interest-only Amortisation 11 Primary residential 28 Buy-to-let Primary residential Buy-to-let Non-Dublin Dublin 39

40 Conduits: Gradually reduced exposure and risk, now part of Non-core activities Gross credit exposure, 2007-Q (DKK bn) Credit exposure, rating categories, Q (DKK bn) Rating category Rating category 1-9 Gross credit exposure Net credit exposure Q Q Q Q Q Credit exposure, underlying asset class, Q (DKK bn) Credit exposure, mortgages, Q (DKK bn) Commercial mortgages Corporate risk Non-prime residential mortgages 2% 6% UK, non-prime UK, prime NL, non-prime 7% 8% Prime residential mortgages Other 25% 56% 11% 86% Total: DKK 14.2 bn Total: DKK 3.8 bn 40

41 Solid funding structure and liquidity position Loan portfolio and long-term funding, Q1 13 (DKK bn) Maturing funding (DKK bn) 1,637 1, Senior debt 70 Subordinated T2 Senior Hybrid T1 Covered Bonds Bank loans Deposits Bank mortgages Covered bonds RD mortgages Issued RD bonds Loans Funding * Maturity calculated as earliest possible call. 41

42 Well-diversified funding position Funding position ex RD and Danica, Q1 13 (%) Funding sources (%) Q Q Equity 7 Deposits 43 Repos Subord. debt Covered bonds 6 2 Senior unsecured CD & CP 11 Deposits, credit inst. Deposits Deposits Credit inst. CD & CP 2 6 Senior unsecured Covered bonds 3 Subord. debt Repos Equity 7 Short-term funding Long-term funding 42

43 New methods for allocating capital and funding costs; effective from Q and restated in 2012 numbers Key elements Capital allocation by business unit (DKK bn) Capital allocation Previously, capital allocation was based on the non-risksensitive Basel I RWA The new capital allocation is risk-sensitive, with extended use of risk parameters. It is based on the individual units contributions to total risk Capital allocation is now based on economic capital (internal measure), regulatory capital (Basel II RWA) and considerations regarding new regulation (Basel III RWA) The framework makes a full allocation of the Group s total equity, including goodwill, defined according to IFRS Personal Business C&I Non-core Funds transfer pricing (FTP) The aim is to represent the alternative opportunity rate for the Group s use of funds and the true cost of funding The model provides granularity, with a focus on product and customer type, including type of lending, maturity and currency, and it incorporates underlying interest rate risk The model increases business units focus on liquidity risk, supports the correct pricing of risk and return at the customer level, and is fully embedded at the customer profitability level Danica 11 Danske Capital 3 Other 12 Total

44 Danske Capital: Income up 43% owing to higher fee income Income statement (DKK m) AuM customer breakdown (DKK bn) Q Q Index Private equity Institutions Retail* Life insurance 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 Q112 Q212 Q312 Q412 Q113 Margin trends** (%) AuM asset breakdown (%) Cash Equity Bonds Q112 Q212 Q312 Q412 Q113 Q112 * Retail includes Danske Invest. ** Margin for asset management is adjusted income, including performance fees, divided by AuM, end of period. Q212 Q312 Q412 Q113 44

45 Danica Pension: Risk allowance booked for three out of four interest rate groups Income statement (DKK m) Investment allocation for Danica Traditionel, end-q1 13 (%) Q Q Index Premiums (bn) Danica Traditionel (insurance result) Unit-linked (insurance result) Health and accident (ins. result) Investment result Financing result Special allotments Net income bef. postp. risk allow Change in shadow account Net income Possibility of booking risk allowance in 2013 (%) Equities Bonds Credit bonds Property % change in equities 100% 50% 0% Full risk allowance Partial risk allowance -50% No risk allowance -100% -2,00% -1,00% 0,00% 1,00% 2,00% % point change in interest rate New schemes 14 6 Low 15 7 Medium 13 3 High 45

46 Danica Pension s profit model Profit model Condition/ sensitivity Q DKK m 1 + Danica Traditionel: Mainly risk allowance 70 bp of technical provisions (DKK 175 bn) Can be booked only if investment return is high enough and if no use of bonus potential of paid-up policies Risk allowance Other Unit-linked business; Long-term: approximately 0.4% of AuM Prices and volume Solid income base but also price competition Health and accident business Combined ratio Price competition -59 Return on investment portfolio at shareholders risk Financing result Special allotments, depending on profit and business volume Equity markets, interest rates Investment return: 2.6 % 96 S-T interest rate (equity allocated capital) Low short-term interest rate Shadow account Uncertainty because of dependency on investment return for the rest of the year Transferred to shadow account from one interest group. -32 = Total

47 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. 47