Financial results for Q1 2015

Transcription

1 Financial results for Q Thomas F. Borgen Chief Executive Officer Henrik Ramlau-Hansen Chief Financial Officer 30 April 2015

2 Agenda Executive summary and financial results 3 Business unit update 5 Selected topics 7 Outlook for full-year Q&A 13 Appendix 14 2

3 Executive summary Q Net profit & ROE Net profit of DKK 5.0 bn and ROE of 13.2% Income Total income of DKK 12.2 bn up 18% vs Q Expenses Expenses of DKK 5.4 bn flat vs Q and cost/income ratio of 44.5% Impairments Impairments of DKK 0.5 bn down 22% vs Q Non-core Non-core result of DKK 0.1 bn vs DKK -0.6 bn in Q Capital Common equity tier 1 ratio of 14.1% and total capital ratio of 18.4% Share buy-back The DKK 5 bn share buy-back programme in 2015 commenced on 30 March Outlook Reaffirm guidance of net profit for 2015 of above DKK 14 bn 3

4 Net profit: DKK 5 bn, up 76% from Q Income statement & key figures (DKK m) Key points, Q vs Q Q Q Index Q Index Net interest income 5,313 5, , Net fee income 3,046 2, , Net trading income 2,715 1, Other income Net income from insurance business , Total income 12,211 10, , Expenses 5,437 5, , Goodwill impairment charges ,099 - Profit before loan impairment charges 6,774 4, ,968 - Loan impairment charges Profit before tax, core 6,272 4, ,821 - Profit before tax, Non-core Profit before tax 6,362 3, ,298 - Tax 1, Net profit 4,951 2, ,285 - Net profit before goodwill impairments 4,951 2, , Return on avg. shareholders' equity (%) ROE before goodwill impairments (%) Cost/income ratio* Common equity tier 1 capital ratio (%) EPS Lending (DKK bn) 1,605 1, , Deposits (DKK bn) Return on equity improved from 7.7% to 13.2% Total income up 18%, with gains in all income lines Expenses flat, with cost/income ratio of 44.5% Impairments down 22% Lending volume up 3% and deposit volume up 6% Key points, Q vs Q NII fell owing primarily to declining interest rates Fee income held up well because of higher activity in mortgage refinancing; Q4 14 included performance fees Trading income up owing to high client activity in financial markets Expenses down 11% owing mainly to seasonality 4

5 Banking units: Strong performance vs. Q at all units Pre-tax return on allocated capital ex goodwill charge (%) Financial highlights, Q vs Q Q Personal Q Business 12.4 C&I 17.3 Personal Banking Lower NII offset by higher fees and trading income Expenses down 1% owing to further cost efficiencies Impairments down 27% Business Banking Higher total income, with gains in all income lines Impairments down 70% C&I Strong improvement in NII, fees and trading income Capital markets income up 17% to DKK 0.5 bn Impairments up owing to a few large exposures Income statement (DKK m) Personal Business C&I Q Q Index Q Q Index Q Q Index Net interest income 2,398 2, ,224 2, Net fee income 1,351 1, Net trading income ,732 1, Other income Total income 4,170 4, ,182 2, ,971 2, Expenses 2,627 2, ,322 1, ,158 1, Profit before loan impairment charges 1,543 1, ,860 1, ,813 1, Loan impairment charges Profit before tax 1,298 1, ,769 1, ,649 1, Lending (DKK bn) Deposits (DKK bn)

6 Danske Capital and Danica Pension: Strong performance continued in Q Danske Capital: Financial highlights, Q vs Q Total income up 15% owing primarily to an increase in assets under management Performance fees in Q1 amounted to DKK 14 m Net sales of DKK 11 bn, with 40% from non-danish clients Assets under management up 9% to DKK 813 bn vs DKK 748 bn in Q Danica Pension: Financial highlights, Q vs Q Result from insurance business up 7% owing to volume growth Premiums of DKK 8.4 bn, up 6% Risk allowance booked in full for all four interest rate groups Shadow account balance unchanged at DKK 0.6 bn Profit before tax up 22% Danske Capital: Income statement (DKK m) Danica Pension: Income statement (DKK m) Q Q Index Net interest income Net fee income portion from performance fees Other income Total income Expenses Profit before tax Assets under management (bn) Q Q Index Premiums 8,353 7, 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: Flat vs. Q despite higher activity, bonuses and one-off pension charge Total expenses ex goodwill charge (DKK m) Change in expenses ex goodwill (DKK m) Consultants etc. Severance payments Deposit scheme guarantee / bank packages 23, , Bonuses Other costs Q ,432 Staff costs ex pension and bonuses 37 Pension and bonuses 103 Severance payments IT ,627 19,810 5, Rent of premises Marketing and consultancy ,867 Depreciation, tangibles 103 Other costs Q Q ,437 7

8 Impairments: Loan loss ratio for Q1 of 11 bp for core activities and 8 bp for the entire Group Group impairments, 2011 to Q1 15 (DKK bn/bp) Impairments (DKK m) Impairments Loan loss ratio* (rhs) Q115 Q114 Index Q414 Index Personal Banking Business Banking C&I Other activities Total core Non-core Group , Loan loss ratio, annualised (bp) Q115 Q114 Index Q414 Index Personal Banking Business Banking C&I Total core Non-core Group Q111 Q112 Q113 Q114 Q115 0 * The loan loss ratio is defined as annualised impairment charges as a percentage of loans and guarantees. 8

9 Capital: Solid capital base, CET1 ratio of 14.1% net of full share buy-back, volume growth and Danica phase-in Capital ratios, under Basel III/CRR (%) Capital drivers Tier Hybrid T1 / AT1 Common Equity Tier Q In Q1 2015, total REA increased to DKK 896 bn, mainly because of volume growth and increased counterparty exposure and market risk Share buy-backs of DKK 5 bn in 2015 caused a decrease of 0.6 of a percentage point in the CET1 ratio compared with end-2014 Effect of CRR/CRD IV on fully loaded CET1 ratio is a decline of about 1 percentage point from the Q ratio CRD IV leverage ratio: 4.1% according to the transitional rules; 3.7% fully phased-in CET1 ratio development, Q4 14 to Q1 15 (%) REA development, Q4 14 to Q1 15 (DKK bn) Other Volume Q Net profit* Higher REA Share buy back CRD IV phase-in Q Q Credit risk Counterparty risk Market risk Q * Excluding 50% dividend. 9

10 Non-core: Sale of SME portfolio agreed, transfer of Baltic personal customers to Non-core in Q1 Key points The profit before tax increased to DKK 0.1 bn compared with a loss before tax of DKK 0.6 bn in Q Total loan book reduced by DKK 6.6 bn since Q1 2014, although exposure to Personal Banking Baltics of DKK 8.3 bn entered the book in Q REA increased after the inclusion of Baltic exposure The SME portfolio of around DKK 4 bn (nominal amount) was sold in Q1 with effect from April 2015 (the reason the exposure is still included in total REA) New Non-core loan portfolio,* Q (DKK bn) Allowance account Non-performing credit exposure Personal customers (incl. Baltics) 7 3 Commercial portfolio Performing credit exposure Conduits etc Total Property pipeline and sales (No. of properties) Total REA (DKK bn) , Q ,423 Non-core conduits, etc. Non-core Banking Sold Agreed to sale On the market Q114 Q214 Q314 Q414 Q115 Q115 proforma** * Gross credit exposure. ** Excluding the SME portfolio expected to be off the books in H

11 Impact of monetary policy events in early 2015 by business unit Illustration of ceteris paribus impact Personal Banking Business Banking C&I Short-term NII NII Trading Long-term Loan losses Fees Loan losses Activity Yield curve Volatility Danske Capital Inflow Asset allocation Danica Pension Investment gains Reinvestment 11

12 Outlook for 2015: Net profit of above DKK 14 bn Macro Economic growth remains slow and fragile, with low interest rates Total income Income is expected to be around the same level as in 2014 Expenses Expenses are expected to be below DKK 22 bn Impairments Impairments charges in core activities to remain low Non-core Non-core pre-tax result is expected at around DKK 0 million Net profit Net profit of above DKK 14 bn Note: This guidance is subject to uncertainty and depends on economic conditions, including the development in monetary policy by the central banks. 12

13 Q&A session 13

14 Appendix Business units 15 Special topics: NII, trading income and expenses 20 Impairments 23 Macro, credit quality and portfolio reviews 25 Funding, liquidity and ratings 30 Tax 33 Contact details 34 14

15 Personal Banking: Positive trend in impairments and income except for NII; good momentum in Norway Income statement & key figures (DKK m) Lending volume by country,* Q = Index 100 Q Q Index Net interest income 2,398 2, Net fee income 1,351 1, Net trading income Other income Total income 4,170 4, Expenses 2,627 2, Goodwill impairment charges - 5,539 - Profit before loan impairment charges 1,543-4,093 - Loan impairment charges Profit before tax 1,298-4,610 - Profit before tax excl. goodwill 1, Lending Deposits FTE 6,713 6, Profit before tax by country (DKK m) Other Northern Ireland Norway Sweden Finland Denmark Denmark Finland Sweden Norway Northern Ireland 1,031 1,315 1, , Q Q Q Q Q Q Q Q Q Q Q * Based on local currency lending volumes. 15

16 Business Banking: Positive trend in most income lines and impairments; good momentum in Nordic lending Income statement & key figures (DKK m) Lending volume by country,* Q = Index 100 Q Q Index Net interest income 2,224 2, Net fee income Net trading income Other income Total income 3,182 3, Expenses 1,322 1, Goodwill impairment charges - 3,559 - Profit before loan impairment charges 1,860-1,933 - Loan impairment charges Profit before tax 1,769-2,094 - Profit before tax excl. goodwill 1,769 1, Lending Deposits FTE 3,115 3, Denmark Finland Sweden Norway Northern Ireland Profit before tax by country (DKK m) Other Northern Ireland Sweden Baltics Norway Finland Denmark ,272 1,541 1,455 1,465 1, Q Q Q Q Q Q Q Q Q Q Q * Based on local currency lending volumes. 16

17 Corporates & Institutions: Trading income drives PBT higher as client activity increased and market conditions improved Income statement & key figures (DKK m) Key points, Q1 15 vs Q4 14 Q Q Index Net interest income Net fee income Net trading income 1, Other income Total income 2,971 2, Expenses 1,158 1, Profit before loan impairment charges 1, Loan impairment charges Profit before tax 1, Lending Deposits FTE 1,826 1, Profit before tax up 126%, mainly because of higher net trading income Net trading income up 119% from a low level owing to increased client activity and better market conditions Impairments relating to a few large exposures Pre-tax return on allocated capital of 17.3% FTE rose owing to transfer of Transaction Banking FTEs from Business Banking ROE before tax (%) Income breakdown (DKK m) FICC Capital Markets General Banking ,334 2,201 2,483 2,103 2,971 Q114 Q214 Q314 Q414 Q115 Q114 Q214 Q314 Q414 Q115 17

18 Danske Capital: Higher AuM drives 3% increase in total income, excluding performance fees; expenses down 4% Income statement (DKK m) Q Q Index Net interest income Net fee income portion from performance fees Other income Total income Expenses Profit before tax Key points, Q1 15 vs Q4 14 Non-performance-based income was up 3% Performance fee income of DKK 14 m vs DKK 288 m in Q4 14 Expenses fell 4% because of lower marketing costs Assets under management up 2% to DKK 813 bn Assets under management (bn) Net inflow AuM (DKK bn) AuM customer breakdown (DKK bn) Net inflow Net inflow as % of AuM (rhs) % 1.4% % % % Q114 Q214 Q314 Q414 Q115 Private Equity Retail* Institutions Life insurance Q114 Q214 Q314 Q Q115 * Retail includes Danske Invest. 18

19 % change in equities Financial results for Q Danica Pension: Strong improvement in insurance result; full risk allowance booked for all four interest rate groups Income statement (DKK m) Investment allocation for Danica Traditionel, end-q1 15 (%) Q Q Index Premiums 8,353 6, 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 777 1, Possibility of booking risk allowance in 2015 (%) Equities Credit bonds Alternative investments Bonds Property % Full risk allowance Partial risk allowance -25% -1.00% 0.00% 1.00% Percentage point change in interest rates New schemes Low Medium High 19

20 Net interest income: Q1 affected by lower interest rate environment Quarterly net interest income (DKK m) Quarterly changes in net interest income (DKK m) +3% 5,681 5,735 5,742 Q4 14 5,742 5,155 5,313 Lending effect 189 Q114 Q214 Q314 Q414 Q115 Deposit effect 425 Balance sheet items (DKK bn) Loans and advances Deposits (rhs) Days 116 1,610 1,600 1,590 1,580 1,570 1, Other 77 Q1 15 5,313 Q114 Q214 Q314 Q414 Q115 20

21 Trading income: High customer activity in financial markets and positive fair value adjustments in Q1 Trading income by business unit (DKK m) Key points Other incl. Treasury C&I Business Personal 2,715 Trading income increased owing to high customer activity in financial markets 2,252 Income from Treasury lifted by positive fair value adjustments 1,903 1,613 Personal Banking and Business Banking benefitted from DKK 141 m in refinancing fees, down from DKK 186 m in Q Refinancing income (DKK m) Q114 Q214 Q314 Q414 Q115 Q Q Q Q Q

22 Expenses: Drop of 11% owing to seasonality and restructuring charges in Q Total expenses ex goodwill charge (DKK m) Consultants etc. Severance payments Deposit guarantee scheme/bank packages Bonuses Other costs 6,090 Change in expenses ex goodwill (DKK m) Q ,090 Staff costs 58 Severance payments 260 5,432 5,589 5,530 5,437 IT 252 Marketing and consultancy 123 Deposit guarantee scheme 56 4,853 Q1 14 4,921 Q2 14 4,861 Q3 14 5,174 Q4 14 4,867 Q1 15 Other costs 20 Q ,437 22

23 Impairments: Positive underlying trend in impairments continues; Q4 impairments included AQR charges Impairments by business unit (DKK bn) Individual loan impairment charges,* ex Core Baltics (DKK bn) Non-core C&I Business Personal New Increased Reversal Q114 Q214 Q314 Q414 Q115 Q114 Q214 Q314 Q414 Q115 Note: Non-performing loans are loans in rating categories 10 and 11 against which individual impairments have been made. *Excludes Non-core. 23

24 Group impairments: DKK 40.9 bn in the allowance account Allowance account (DKK m) Impairment drivers Personal Banking Business Banking Corporates & Institutions Non-core Personal Banking: Down from Q4 level owing to collective AQR charges of DKK 0.3 bn in Q4; individual impairments remain low % Business Banking: Impairments down owing to improving credit quality C&I: Impairments related to a few large exposures 8.3 Non-core: Reversals of DKK 0.1bn primarily due to the improved property market in Ireland Non-performing loans* (DKK bn) 21.2 Not in default In default Q114 Q214 Q314 Q414 Q115 Q114 Q214 Q314 Q414 Q115 * Includes Non-core activities. 24

25 Nordic macro Real GDP, (constant prices, index 2005 = 100) Inflation, (%) Denmark 90 Sweden Norway Finland 2014 Denmark (CPI) Norway (CPI) Sweden (CPI) Finland (HICP) Interest rates, (leading, %) Unemployment, (Labour Force Survey %) Denmark Sweden Norway Euro Area Denmark Sweden Norway Finland

26 Nordic housing market House prices, (index 2005 = 100) House prices/nom. GDP, (index 2005 = 100) Denmark Sweden Norway Finland Denmark Sweden Norway Finland Apartment prices, (index 2005 = 100) Apartment prices/nom. GDP, (index 2005 = 100) Denmark 250 Sweden Norway Finland Denmark Sweden Norway Finland

27 + refinancing fee* + refinancing fee* Financial results for Q Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, end-q1 15 Stock of retail loans, Realkredit Danmark, end-q1 15 (%) Approx. 379,000 loans (residential and commercial) 2,131 loans in 3- and 6-month arrears 67 repossessed properties DKK 15 bn of loans with LTV ratio > 100%, including DKK 1bn with public guarantee Average LTV ratio of 70% Variable rate instalments Fixed rate instalments 24% Variable rate interest-only Fixed rate interest-only 43% LTV ratio at origination (legal requirement) Residential: max. 80% Commercial: max. 60% 25% 8% Unemployment and foreclosures (%) Trend in mortgage margins, 80% LTV, owner-occupied (bp) 10Y swap rate Unemployment 10 No. of forced sales (rhs) 1,500 All products Fixed rate 86 Adjustable rate , 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. 27

28 Realkredit Danmark: Increase in fixed-rate loans driven by very low interest rates Key points Expected development in RD portfolio* (%) Trend away from short-term Flexlån continued in Q The share of total new mortgages represented by fixedrate instalment loans increased to 65% in Q from 23% in Q Since end-q4 2012, the amount of Flexlån F1 and F2 loans has been reduced by DKK 101 bn, or 53% Interest-only Amortising Loan portfolio, FlexLån F1 and F2 (DKK bn) -53% Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q E 2016E 2017E 2018E 2019E * Based on the assumption that the portion of interest-only mortgages of new loans is unchanged and that the observed trend in customers who start to amortise at the end of the IO period continues. 2020E 28

29 Credit exposure: Limited agriculture and shipping/oil exposure Agriculture exposure (2.8 % of Group exposure) Market conditions remain weak although output prices have improved through Q1 supported by a stronger USD. Impairment charges decreased in Q due to collective impairments charges booked in Q RD represent 70% of total gross exposure and 5% of total accumulated impairment charges to agriculture in Business Banking. Shipping and oil related exposure (2.3 % of Group exposure) The shipping portfolio is mainly booked in C&I and the coverage ratio is generally high. Oil-related exposure amounts to DKK 17bn and relates to Offshoring (DKK 10bn), Oil majors (DKK 1bn) and Oil service providers (DKK 6bn). The credit quality is generally good, and no impairment charges were booked in % of oil related exposure is denominated in USD. The Group s shipping exposure is managed by specialist teams for customer relationships and credit management. Agriculture by segments, Q (DKK bn) Gross credit exposure Portion from RD Acc. Individual impairment charges Net credit exposure NPL coverage ratio Business Banking 60,323 42,619 2,444 57,879 80% Growing of crops, cereals, etc. 17,620 14, ,187 75% Dairy 13,809 7, ,981 91% Pig breeding 13,360 10,556 1,013 12,347 75% Mixed operations etc. 15,534 10, ,365 67% C&I 7,028 2, , % Others Total before collective impairments 67,799 2,484 65,314 80% Collective impairment charges Total gross exposure 68,438 Shipping exposure, Q (DKK bn) Gross credit exposure Acc. impairment charges Net credit exposure NPL coverage ratio C&I 37,663 1,868 35,795 68% Offshore 10,890-10,890 - Tank 8,436 1,454 6,982 63% Container 3, ,489 87% LNG/LPG 5,257-5,257 - Dry Bulk 2, ,350 99% Car carriers 1,878-1,878 - Others 5, , % Personal & Business Banking 1, ,696 88% Total 39,427 1,936 37,491 69% * Gross credit exposure is excluding accumulated collective impairment charges. 29

30 Funding and liquidity: 20 bn of long-term funding issued in Q1; expensive funding up for redemption in 2015 Changes in funding, 2014 (DKK bn and bp*) Long-term funding ex RD (DKK bn) Cov. Bonds 107bp Senior Tier 2 Tier 1 Funding plan Completed 95 51bp bp 55bp 6 39bp 73bp bp 8 29bp 7 574bp Redemptions 2015: DKK 65bn Redeemed Q1 2015: DKK 11bn New Q1 2015: DKK 20bn E Maturing funding, (DKK bn and bp*) Liquidity coverage ratio** (%) Cov.bonds 94bp 98bp Senior Tier 2 Tier 1 118bp 42bp : DKK 60 bn 49bp bp : DKK 54 bn 26 53bp 192bp : DKK 52 bn Q Q Q Q4 14 Q *** * Spread over 3M EURIBOR. **LCR is calculated in accordance with the Danish FSA s specifications and includes holdings of covered bonds and Danish mortgage bonds, including own issued bonds. ***Minimum requirement of the Danish FSA. 30

31 Deposits credit inst. CD & CP Repos Deposits Senior unsecured Covered bonds Subord. debt Equity Financial results for Q Funding: Structure and sources; Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q1 15 (DKK bn) Funding sources (%) 1,880 Q Q Senior debt 45 1,605 Bank loans Deposits 21 Bank mortgages Covered bonds RD mortgages Issued RD bonds Loans Funding Short-term funding Long-term funding 31

32 Three distinct methods of rating banks; Moody s rating under review for possible upgrade 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 Loss Given Systemic + Cooperative + + = Failure Support Support Issuer Rating C- Baa1 0 notches 0 notches** 1 notch A3 (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. **Moody s rating is under review for possible upgrade owing to introduction of loss-given-failure analysis. 32

33 Tax Actual and adjusted tax rates (DKK m) Q12015 Q42014 Q32014 Q22014 Q12014 Profit before tax 6,362-5,298 4,503 5,000 3,630 Ireland core and non-core Permanent non-taxable difference 20 8, , Adjusted pre-tax profit, Group 5,949 4,105 4,627 3,847 3,670 Tax drivers The difference between profit before tax and adjusted pre-tax profit relates mainly to previous years losses in Ireland Tax according to P&L 1, , Taxes from previous years Adjusted tax 1,445 1,031 1, Adjusted tax rate 24.3% 25.1% 25.3% 24.6% 23.7% Actual tax rate 22.2% N/A 27.3% 19.1% 22.5% 33

34 Contacts Henrik Ramlau-Hansen Direct: Chief Financial Officer Mobile: Claus Ingar Jensen Direct: Head of IR Mobile: John Bäckman Direct: Chief IR Officer Mobile: Robin Hjelgaard Løfgren Direct: IR Officer Mobile: Louisa Grue Baruch Direct: IR Officer Mobile:

35 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. 35