DNB Boligkreditt AS. January 2016

Transcription

1 DNB Boligkreditt AS January 2016

2 Content DNB ASA ("DNB") A brief overview The Norwegian Economy Financial Performance, Targets and Capital Loan Book and Asset quality Funding Appendix : Cover Pool Portfolio Information and LCR eligibility The Norwegian Mortgage Market DNB Asset Quality Update CMD 25 Nov 2015 Additional slides Financial performance, Capital and Oil price 2

3 DNB A Brief Overview 3

4 DNB - Norway s Leading Financial Services Group Approximately 30% market share in Norway 34% owned by the Norwegian Government Credit Ratings: Moody's Aa3 (stable) S&P A+ (negative) DBRS AA (low) (stable) 4

5 The DNB Group DNB ASA DNB Bank ASA Aa3 / A+ / AA DNB Life and Asset Management (Senior/ short term issuance) DNB Boligkreditt AS (Covered Bonds: AAA/Aaa) 100% owned by DNB Bank and functionally an integrated part of the parent Mortgages originated within DNB Bank s distribution network in accordance with the bank's credit policy 5

6 The Norwegian Economy Just how bad is it?

7 Still a solid Norwegian Economy Outlook for the Norwegian Economy 2016 Budget surplus 1) > 5 % Oil fund (continued positive net inflow ) > EUR 730 bn Unemployment 2) < 5% GDP growth 2) % Source: 1) OECD Economic Outlook Nov ) DNB Markets Economic Outlook Jan

8 Percent Government finances are still rock-solid Annual budget deficit/surplus forecast for ) General government net financial liabilities 1) (As a percentage of nominal GDP 2016*) Estimated Norwegian budget surplus 2016: > 5% 8 Note: Current account balance as a percentage share of country GDP; forecasts for ) Source: OECD Economic Outlook No. 98, November 2015

9 The growth of the sovereign wealth fund adds flexibility Government Pension Fund Global Beginning of the year, NOK billion Oil income versus spending , NOK billion Annual return, GPFG Annual net petro cash flow Annual actual "spending of oil money" Source: Ministry of Finance (National Budget 2016), DNB Markets, NBIM 9

10 GAS is becoming more important than oil for Norway Production of oil and gas, billion of tonnes (oil equivalent) Gas production is exceeding oil Crude oil and Natural Gas prices, USD/barrel Gas prices has been relatively stable Gas exports exceeding oil exports Exports of crude oil and natural gas, NOK bn 10

11 Oil investments will stay high from a historical perspective such fluctuations are not new Petroleum investments in Norway NOK billion, share of GDP in per cent Constant 2013 prices (lha) Share of GDP (rha) Source: Thomson Datastream, DNB Markets

12 Weak NOK increases competitiveness ten years of lost competitiveness have been reversed in one year Development in NOK versus USD and EURO Relative manufacturing wage costs Measured in same currency, index 2003 = 100 Current account balance NOK billion 10 USD/NOK EURO/NOK nov.12 nov.13 nov.14 nov Source: Central Bank of Norway, The Norwegian Technical Calculation Committee for Wage Settlements, DNB Markets * Isolated effect of NOK weakening, October average 12

13 Unemployment - Expected to increase, but still among the lowest in Europe Forecasted unemployment : ,4 4,6 5,3 5,6 4,3 5, F 2017F 2018F 2019F DNB Markets (Jan) Statistics Norway (Dec) Still among the lowest unemployment in Europe (Source: OECD November 2015) 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0, Denmark Finland Norway Sweden United Kingdom Euro area (15 countries) 13

14 Economic Growth in Norway is Slowing Down - but Norway is still expected to perform well versus EU area GDP growth Year on year, per cent 8,00% 6,00% 4,00% 2,00% 0,00% -2,00% 4,0 % 3,0 % 2,0 % 1,0 % 0,0 % -1,0 % -2,0 % 3,4 % 1,7 % 2,5 % 2,3 % 2,3 % Oljeinvesteringer 1,9 % 2,2 % 1,3 % Prognose 1,2 % 1,5 % Oljeinvesteringer Prognose e 2016e 2017e 2018e e Norway still expected to perform well versus Euro area (GDP growth) Norway Sweden Denmark Finland 155 Euro Area Source: DNB Markets, Economic Outlook January e 2018e e 2018e

15 Positive GDP growth also with an oil price of $35 until 2018 Average yearly oil price, $/brl. GDP growth and unemployment rate, % , ,5 5, ,4 1,3 1,3 1,2 1 1,5 1,9 0,5 0,4 2,2 1, Oil Price Base Case Oil Price Risk Case Mainland GDP Base Case Unemployement rate Base Case Mainland GDP Risk Case Unemployement rate Risk Case Source: DNB Markets 15

16 Financial Targets, Performance and Capital 16

17 DNB Delivers Healthy Profit Pre-tax operating profit before impairment (NOK bn) Jan-Sep 15 Pre-tax operating profit before impairment Impairment of loans 17

18 Key Financial Ratios Jan-Sep Return on equity Cost income Comb. weighted total average spread Write down ratio (%) Common Equity tier 1 ratio * Total capital ratio Estimated CET 1-ratio Full IRB as of : 15.4% 18

19 Net Non-performing Loans Net non-performing and net doubtful loans and guarantees Per cent NOK billion Dec. 31 Dec. 31 Dec. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept DNB Group As a percentage of net loans 1) Includes non-performing commitments and commitments subject to individual impairment. Accumulated individual impairment is deducted. 19

20 CET 1 Capital Requirements 18,0 % Targeted CET ~15,5% 16,0 % 15,0% 0,5 % 14,0 % 13,4%* 13,5% 1,5 % 1,5 % 12,0 % 10,0 % 9,0% 10,0% 1,5 % 1,0 % 1,0 % 1,5 % 2,0 % 8,0 % 2,0 % 3,0 % 3,0 % 3,0 % 6,0 % 2,5 % 2,5 % 2,5 % 2,5 % 13,5 % 4,0 % 2,0 % 0,0 % 4,5 % 4,5 % 4,5 % 4,5 % Source: Norges Bank Pillar 1 Minimum Requirement Conservation Buffer Systemic Risk Buffer SIFIs Countercyclical Buffer Pillar 1 requirement Pillar 2 requirement Management buffer Actual CET 1 * As of 30 September 2015 (including 70% of YTD 2015 profit) 20

21 Well-positioned for future regulations favourable position compared to Nordic peers Expected impact of Basel IV* Change in CET1 ratio Leverage ratio 2014 Reported CET1 ratio CRD IV/Basel III 2015e CET1 Basel IV 5.7 Leverage ratio as of 3Q15 European hurdle (9.6) (9.2) (4.8) (4.9) DNB Peer 1 Peer 2 Peer 3 Peer 4 *Source: Deutsche Bank, Basel IV Truth and Advertising, 17 June 2015 Companies annual reports DNB Peer 1 Peer 2 Peer 3 Peer 4 ** TLAC = Total loss-absorbing capacity MREL= Minimum requirement for own funds and eligible liabilities for bail-in BRRD= Bank recovery and resolution directive 21

22 Strong Capital Position vs. Peers Capital adequacy figures as at comparison with Nordic peers Per cent 42,5 Leverage ratio RWAs (as % of total assets) Leverage Basis 22,0 17,5 16,1 21,6 5,7 4,5 4,5 3,6 4,4 DNB SEB Swedbank Handelsbanken Nordea Risk Weighted Basis Per cent *) DNB SEB Swedbank Handelsbanken Nordea Common equity tier1 ratio transitional rules Common equity tier1 ratio Basel III *) DNB's risk weights are conservative set due to requirements from the Norwegian FSA. Applying average risk weights on mortgages and corporate portfolio as used by Swedish peers (Year-end 2014), the CET1-ratio would increase by approximately 4.9%-points. 22

23 Loan Book and Asset Quality 23

24 Prepared for rougher weather robust asset quality when entering the economic slowdown Probability of default DNB Group Per cent Net non-performing and net doubtful loans and guarantees NOK billion, per cent 50 DNB Group (lha) As a percentage of net loans (rha) 1, ,2 30 0, ,4 13,6 10 0, Q Q Q Q Q Q Q Q Q Q

25 Mortgage Lending in DNB Is Based on Cash Flow Approval of a loan is based on 1. Willingness to repay the loan: By means of scoring model based on historical behaviour 2. Capability of repaying the loan: In calculating the capability or ability to repay, an adequate margin (currently 5.0%), accommodate the effects of a possible increase in interest rates, is included in the model 3. Collateral: Credit should thus not be approved solely on the basis of the proposed collateral 10% 8% 6% 4% 2% 0% 3% Current mortgage rate 5 % 8% Mortgage rate including stress test All borrowers are subsequently classified monthly by behaviour scoring FSA regulation* Loan to value (LTV) max 85% Must amortise > 70% LTV Yearly amortisation: the lower of 30 years annuity payment and 2,5% Debt-servicing capability. Must be able to tolerate +500 bp interest rate increase * Subject to quarterly Board meeting reporting, banks are allowed to deviate from requirements for max. 10% of granted loans 25

26 House Price Growth Can be Explained by Fundamentals Nominal House Prices Norwegian Real House Prices - Selected deflators Norway UK Sweden Denmark USA Source: Eiendomsverdi AS (member of the European AVM Alliance) Nominal Wages Disposable income CPI Source: Real Estate Norway, Statistics Norway * Disposable income per capita deflated house prices 26

27 Housing Market: Real Demand Exceeding Supply for Several Years 1) 27

28 DNB Boligkreditt Covered Bonds Cover Pool Data Rating: AAA / Aaa Portfolio Characteristics Cover Pool Size Number of Mortages in the Cover Pool Average Loan Balance Over Collateralisation * 35,6 % Weighted Average LTV Indexed 52,8 % Weighted Average Seasoning (in months) 58 Pool statistics as at 30 September The pool cut date is coinciding with our financial quarterly reporting * Eligible loan balance, nominal loans. Stresstest House price decline House price decline Current 10 % 20 % 30 % WA indexed LTV 52.8 % 58.2 % 65.4 % 74.8% Eligible overcollateralization 35.6% 33.3 % 28.4 % 20.1% 28

29 DNB: Well diversified within Norway Well diversified residential mortgage book within Norway Eastern Norway: 64 % Western Norway: 17 % Northern Norway: 8 % Southern Norway: 6 % Mid- Norway: 5 % Limited mortgage exposure to the most oil affected areas Rogaland: 6,6 % Hordaland: 7,9 % Vest-Agder: 1,7 % 29

30 Funding 30

31 DNB Funding Structure 135% 125% 115% Share of stable long-term funding* 126.2% 5 Average life of long term funding (Senior debt and covered bonds) 123.8% 50, Ratio of deposits to net loans 53,0 54,8 57,8 62,5 64,7 65,4 65,2 65,0 63,3 105% 3 95% 85% % Q1 15 Q * Deposits from customers, subordinated debt, covered bonds and senior debt > 12 months residual maturity. 31

32 DNB is a Well Established International Borrower - with a strong focus on diversification of funding sources DNB Bank EMTN program of EUR 45 billion Samurai Shelf (JPY) JPY 500 billion Inaugural Samurai issue 2011, Shelf 2013 USD 144A program USD 10 billion Established 2012 USCP program of USD 18 billion Yankee CD program of USD 15 billion ECP/CD program of EUR 15 billion DNB Boligkreditt (Covered Bonds) Covered Bond program of EUR 60 billion Established 2007 Covered Bond program of USD 12 billion Established 2010 Covered Bond program of AUD 4 billion Established

33 Issuance of Long Term Debt 2015 EURO bill Tenor Covered Bonds 5,2 5,9 Senior Bonds 1,8 5,1 Sum 7,0 5,7 Tier 1 / LT 2 1,4 Total 8,4 TLTRO 0, EURO bill Tenor Covered Bonds 5,8 6,3 Senior Bonds 1,8 5,4 Sum 7,5 6,1 Subordinated debt 0,0 Total 7, EURO bill Tenor Covered Bonds 7,1 6,3 Senior Bonds 1,5 5,6 Sum 8,6 6,2 Subordinated debt 0,9 10nc5 Total 9,5 33

34 A Well Established International Covered Bond Issuer Tenor Redeems EUR 2,000 mn 5 years ( Oct) EUR 1,500 mn 7 years ( Jan) EUR 2,000 mn 5 years (2017 Apr) EUR 1,500 mn 7 years ( Aug) EUR 1,500 mn 5 years ( Jan) EUR 1,500 mn 5 years (2018 Nov) EUR 1,500 mn 7 years ( Jun) EUR 1,250 mn 5 years (2019 Oct) EUR 1,250 mn 5 years (2020 Oct) EUR 1,500 mn 5 years ( Jan) EUR 1,500 mn 10 years ( Jun) EUR 2,000 mn 10 years ( Mar) EUR 1,000 mn 10 years ( Nov) Best USD issuer 2013 Best USD deal 2013 EUR 1,000 mn (FRN) 5 years (2019 Jan) EUR 1,000 mn (FRN) 7 years (2021 Nov) USD 2,000 mn 5 years (2016) USD 2,000 mn 5 years (2018) USD 1,250 mn 5 years (2020) AUD 600 mn 5 years (2016) GBP 500 mn (FRN) 5 years (2020) 34

35 DNB Senior Curve Tenor Redeems EUR 1,000 mn 10 years ( Jun) EUR 2,000 mn 10 years ( Feb) EUR 1,000 mn 10 years ( Jan) EUR 1,000 mn (FRN) 5 years (2019 Jan) EUR 1,000 mn (FRN) 5 years (2020 Jan) EUR 600 mn (FRN) 5 years (2020 Aug) USD 2,000 mn 5 years (2017 Apr) 35

36 Funding Contacts Long Term Funding: Short Term Funding: Thor Tellefsen, Senior Vice President, Head of Long Term Funding Phone direct: Mobile thor.tellefsen@dnb.no Aasmund Midttun, Senior Dealer, Rates, FICC Phone direct: Mobile: asmund.midttun@dnb.no / amidttun@bloomberg.net Trond Sannes Marthinsen, Senior Vice President, Long Term Funding Phone direct: Mobile: trond.marthinsen@dnb.no Erik Braekke, Senior Vice President, Rates, FICC Phone direct: Mobil: erik.brakke@dnb.no / ebraekke@bloomberg.net Kristine Øvrebø, Senior Vice President, Long Term Funding Phone direct: Mobile: kristine.ovrebo@dnb.no New York: Stephen Danna, First Vice President, FX/Rates/Commodities, New York Phone direct: Mobil: stephen.danna@dnb.no / sdanna@bloomberg.net 36

37 Appendix Appendix A: Cover Pool Portfolio Information and LCR eligibility 37

38 Portfolio Characteristics Report date: Report currency: NOK General cover pool information 1.1 Key characteristics Total cover pool, nominal balance* Number of mortgages Number of borrowers Average loan balance Outstanding covered bonds, nominal balance Substitute assets (% of total cover pool) 0,0 WA indexed LTV (%) 52,8 WA seasoning (in months)** 58 WAL of cover pool (contractual maturity in years) 12,4 WAL of outstanding covered bonds (contractual maturity in years) 4,7 * All cover pool assets are denominated in NOK. ** Seasoning indicates the number of months since collateral for the loan was established. *** The method for calculating LTV is changed from Sept 2015 Description of hedging arrangements: All issuances of covered bonds in foreign currency are swapped to NOK to eliminate FX-risk entirely. Fixed interest rate exposures in the form of fixed rate covered bonds and fixed rate mortgages are swapped to 3 month NIBOR. 1.2 Overcollateralisation Cover pool size Nominal Market value Residential mortgages, eligible loan balance Residential mortgages, non eligible loan balance Substitue assets 0 0 Market value derivatives (net MtM) Total cover pool (incl. non eligible loan balance) Total cover pool, eligible loan balance Covered bonds outstanding Overcollateralisation (incl. non eligible loan balance) 36,3 % 31,4 % Overcollateralisation, eligible loan balance 35,6 % 30,8 % 38

39 Cover Pool Overcollateralisation History 39

40 Maturity Structure 1.3 Maturity structure cover pool Contractual maturity (years) Loan balance % ,2 % ,4 % ,5 % ,9 % ,5 % > ,5 % Total ,0 % 1.4 Maturity structure covered bonds Contractual maturity (years) Loan balance % ,4 % ,7 % ,8 % ,8 % ,7 % > ,5 % Total ,0 % Expected maturity (years) Loan balance % ,1 % ,1 % ,2 % ,4 % ,8 % > ,4 % Total ,0 % 40

41 Loan Size 2.1 Loan size Private individuals Loan balance Number of loans 1,000, > 1,000,000 2,000, > 2,000,000 3,000, > 3,000,000 4,000, > 4,000,000 5,000, > 5,000, Total Housing cooperatives 5,000, > 5,000,000 10,000, > 10,000,000 20,000, > 20,000,000 50,000, > 50,000, ,000, > 100,000, Total

42 Property Types, Largest Borrowers and Occupancy Types 2.2 Property types Loan balance % WA LTV Private ownership Detached ,2 % 53,2 Semi-detached ,2 % 53,4 Apartment ,7 % 53,6 Share in housing cooperative Semi-detached ,7 % 56,9 Apartment ,7 % 55,6 Housing cooperative ,9 % 26,3 Second home (vacation) ,7 % 48,1 Other ,0 % 55,3 Total ,0 % 52,8 2.3 Largest borrowers Private individuals 5 largest (% of total mortgages) 0,03 % 10 largest (% of total mortgages) 0,06 % Housing cooperatives 5 largest (% of total mortgages) 0,12 % 10 largest (% of total mortgages) 0,21 % 2.4 Occupancy type Loan balance % WA LTV Owner occupied ,6 % 53,9 Housing cooperative ,9 % 26,3 Second home ,7 % 48,1 Buy-to-let ,1 % 56,2 No data ,6 % 51,5 Total ,0 % 52,8 42

43 Composition of the Residential Mortgage Cover Pool 2.5 Repayment type Loan balance % WA LTV Amortization ,5 % 51,5 Interest only* ,5 % 55,3 Total ,0 % 52,8 *No principal payments for a limit period of time. 2.6 Flexible loans Drawn balance Total limit on flexible loans Percentage drawn of limit 72,1 % WA LTV* 51,3 * The WA LTV is calculated based on limit. 2.7 LTV buckets Indexed LTV % % % % % % % % % % % % > % Total % 43

44 Composition of the Residential Mortgage Cover Pool 2.8 Seasoning* Loan balance % WA LTV < 12 months ,6 % 62,4 12 < 24 months ,9 % 58,2 24 < 36 months ,7 % 55,6 36 < 60 months ,3 % 53,1 60 months ,5 % 44,9 Total ,0 % 52,8 * Seasoning indicates the number of months since collateral for the loan was established. 2.9 Interest rate type Loan balance % WA LTV Floating rate ,7 % 53,1 Fixed rate with reset < 2 years ,0 % 46,9 Fixed rate with reset 2 but < 5 years ,3 % 54,8 Fixed rate with reset 5 years ,1 % 46,9 Total ,0 % 52, Loan performance Loan balance % WA LTV Performing loans ,72 % 52,8 Delinquent loans (arrears 31 to 90 days) ,16 % 54,7 Gross non performing loans (arrears 91 days +) ,13 % 58,7 Total %

45 Geographical Distribution 2.11 Geographical distribution Loan balance % WA LTV Average loan balance Akershus 105,204,289, % ,464,812 Aust-Agder 9,327,418, % ,174,590 Buskerud 36,030,893, % ,217,424 Finnmark 8,536,149, % ,093,257 Hedmark 12,384,101, % ,028,153 Hordaland 45,347,452, % ,390,131 Møre og Romsdal 9,580,644, % ,260,611 Nordland 22,393,618, % ,104,549 Nord-Trøndelag 7,700,272, % ,180,480 Oppland 19,477,226, % ,945 Oslo 123,952,491, % ,548,883 Østfold 34,794,898, % ,049,683 Rogaland 38,303,833, % ,617,561 Sogn og Fjordane 2,123,056, % ,043,784 Sør-Trøndelag 23,428,662, % ,498,763 Telemark 13,441,569, % ,046,118 Troms 15,167,472, % ,403,226 Vest-Agder 9,778,257, % ,384,630 Vestfold 39,827,082, % ,116,449 Total 576,799,393, % ,316,698 Northern Norway: 8 % Mid- Norway: 5 % Western Norway: 17 % Southern Norway: 6 % Eastern Norway: 64 % 100 % 45

46 Cover Pool sensitivity analysis 3.1 Stresstest - House price decline House price decline Current 10 % 20 % 30 % Total cover pool balance (nominal, NOKbn) 576,8 576,8 576,8 576,8 WA indexed LTV (%) Eligible cover pool balance (nominal, NOKbn) 574,0 564,2 543,5 508,3 Total outstanding covered bonds (nominal, NOKbn) 423,2 423,2 423,2 423,2 Eligible overcollateralization 35.6% 33.3 % 28.4 % 20.1% 46

47 Net Non Performing Loans in DNB Boligkreditt AS 0,30% 0,20% 12 bp 0,10% 0,00% 90+ days Arrears 47

48 Covered bonds issued by DNB Boligkreditt AS qualifies for Level 1-assets pursuant to LCR-regulation (Slide 1 of 2) Covered bonds issued by DNB Boligkreditt AS fulfil the requirements to qualify as Level 1-assets pursuant to Commission Delegated Regulation (EU) 2015/61 regarding liquidity coverage requirement for credit institutions ( LCR-regulation ). With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS confirms the following: Covered bonds issued by DNB Boligkreditt AS meet the requirements to be eligible for the treatment set out in Article 129(4) of Regulation (EU) No 575/2013 ( CRR ) and the requirements referred to in Article 52(4) of Directive 2009/65/EC, cf. the European Commission s website: The exposures to institutions in the cover pool meet the conditions laid down in Article 129(1)(c) and in Article 129(1) last subparagraph of CRR 48

49 Covered bonds issued by DNB Boligkreditt AS qualifies as Level 1-assets pursuant to LCR-regulation (Slide 2 of 2) With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS confirms the following (cont.): DNB Boligkreditt AS gives the information required in Article 129(7) of CRR to its investors Covered bonds issued by DNB Boligkreditt AS are assigned a credit assessment by a nominated ECAI which is at least credit quality step 1 in accordance with Article 129(4) of CRR, and the equivalent credit quality step in the event of short term credit assessment The cover pool does at all times meet an asset coverage requirement of at least 2 % in excess of the amount required to meet the claims attaching to the covered bonds issued by DNB Boligkreditt AS 49

50 ECB eligibility and CRD-compliance of covered bonds issued by DNB Boligkreditt AS All covered bonds issued by DNB Boligkreditt AS fulfil the eligibility criteria for marketable assets set by the Eurosystem and are thus eligible for Eurosystem monetary policy operations. The Eurosystem set additional criteria for own use of eligible instruments in the Eurosystem monetary policy operations. In the case of covered bonds, the instruments must be issued in accordance with the criteria set out in Part 1, points 68 to 70 of Annex VI to Directive 2006/48/EC. The covered bonds issued by DNB Boligkreditt AS fulfil these criteria, but the Eurosystem has not checked the fulfilment of these conditions for Norway, since Norway is not part of the EU. Therefore, covered bonds issued by DNB Boligkreditt AS are market with a "N/A" what regards CRD-compliance in ECB's eligible asset database. DNB Boligkreditt AS confirms that the covered bonds it issues are compliant with the CRD-requirement set forth in the Eurosystem guidelines. In addition, DNB Boligkreditt AS confirms that it gives the information required in Regulation (EU) No 575/2013 ("CRR") article 129 (7) to its investors, so that the covered bonds issued by DNB Boligkreditt AS are eligible for the preferential treatment set out in CRR article 129 (4). 50

51 Future Updates On Cover Pool Developments Information about the cover pool of DNB Boligkreditt may be accessed via DNB Boligkreditt s web page: Contacts DNB Boligkreditt AS: - Per Sagbakken, CEO: per.sagbakken@dnb.no Portfolio information will be updated when DNB quarterly results are released 51

52 Appendix Appendix B: The Norwegian Mortgage Market and DNB Mortgage portfolio 52

53 The Norwegian Residential Mortgage Market Nearly 80% of Norwegians own their home: Few mortgages are buy-to-let. Norway is primarily a floating interest rate market: The large majority of mortgages originated by DNB are floating rate. Rates on floating rate mortgages can be reset at any time and at the bank s own discretion, by giving debtors six weeks notice. Loans are normally underwritten with a term of years: Average size for new mortgages originated by DNB is approximately NOK 1,000,000 (EUR 125,000). In Norway, all borrowing costs are deductible from taxable income at the current rate of 27%: Households are therefore better able to withstand an increase in interest rates. 53 Source: Finance Norway - FNO

54 Norwegian Households are Solid Per cent Household assets and debt 2013 (NOK billion) Debt Assets Housing assets Financial assets Household assets and debt (NOK billion) Housing assets Debt Financial assets Source: Statistics Norway, EFF, NEF, Finn.no, Econ Pöyry, DNB Markets and Norwegian Central Bank 1) Loan debt as a percentage of disposable income adjusted for estimated reinvested dividend income for and redemption/reduction of equity capital for Q3 2) Interest expenses after tax as a percentage of disposable income adjusted for estimated reinvested dividend income for and redemption/reduction of equity capital for plus interest expenses Sources: Statistics Norway and Norges Bank 54

55 A Very Robust Residential Loan Portfolio LTV 30 September 2015 Percentage of Residential Mortgage book 35% 33% 30% 31% 25% 20% 15% 16% 13% 10% 7% 5% 0% >85 LTV Collateral categories 55

56 Appendix Appendix C: Asset Quality Update CMD - 25 November

57 DNB does not expect significant secondary effects from reduced oil and gas activity 1. Mainland Norway 2. International exposure 3. Oil and gas-related activity Personal customers Other international Oil, gas & offshore Other corporates Shipping Commercial real estate 57

58 Robust and stable portfolio quality for mortgages at both a national and regional level Low and stable PD for mortgages Probability of default mortgages, per cent Loan-to-value provides significant buffers Retail mortgages, weighted loan-to-value, per cent 1 Norway Rogaland 0, ,5 60 0, Q Q Q Q Q Q

59 Stable and robust corporate portfolio in Mainland Norway Stable probability of default Per cent Stable utilisation of overdraft facilities across regions Per cent North East South/West West Q Q Q Q Q Q Q Q Q Q Q Q Q

60 Robust commercial real estate portfolio 1 limited oil and gas exposure Healthy and improving portfolio quality Probability of default, per cent Only NOK 6 billion out of NOK 203 billion (<3%) represents direct exposure to oil and gas tenants NOK 6 billion 0.96 Remaining contractual life of 9 years 90 per cent assessed as comfortable level of risk Q Q Q Domestic portfolio 2 >50 per cent of rent from oil & gas lessees; corporate exposure excluded 60

61 Oil and gas-related slowdown has less impact on international industry and geography exposure 1. Mainland Norway 2. International exposure 3. Oil and gas-related activity Personal customers Other international Oil, gas & offshore Other corporates Shipping Commercial real estate 61

62 Fragmented shipping market dry bulk and container at a cyclical low; majority of impairment is behind us Dry bulk and container markets are challenging other earnings are satisfactory Clarkson index; rebased, average earnings Majority of impairment is behind us Dry bulk recovery is pushed out in time 300 Dry bulk LPG Carrier Limited deliveries expected in the short term 250 Container Tanker Rates at operating cost; further reduction not sustainable in the long term 200 The most challenging exposures have already been written down, worked out or sold 150 Majority of dry bulk clients have a diversified fleet Container has a diversified portfolio with focus on leading operators

63 Primary effects are evident in some oil and gas segments - mainly OSV and rig 1. Mainland Norway 2. International exposure 3. Oil and gas-related activity Personal customers Other international Oil, gas & offshore Other corporates Shipping Commercial real estate 63 OSV: Offshore Supply Vessel

64 DNB s direct exposure to oil is manageable OSV and rig (2.3% of group EAD) are where we see the main challenges Oil & gas EAD NOK 77 billion 12,8 Oilfield services EAD NOK 37 billion Offshore EAD NOK 62 billion 1,5 25 1,9 22 Downstream & petchem Midstream incl. LNG Upstream mid-caps (sub IG) Reserve Based Lending Exploration Financing Facilities Upstream / integrated large-caps and NOCs (IG) Large-caps, IG companies Sub-investment grade Seismic LBOs challenged LBOs less challenged Other OSV Rig FPSO/FSO Subsea construction Other IG: Investment grade, E&P: Exploration & Production, LBO: Leveraged Buyout, RBL: Reserve Based Lending, OSV: Offshore Support Vessels, NOCs: National Oil Companies, F(P)SO: Floating (Production,) Storage and Offloading vessels 64

65 Rigged for the downturn DNB s clients relatively strong; preparing for challenging 2017 E&P spending is falling; rig fleet is growing Entering 2016 with relative strength 12 largest rig clients in random order; YE2015e; per cent Rig market imbalance driven by falling E&P spending and a growing fleet No improvement in market uptake expected in the near term Newbuilding cancellations/postponements contribute to improved supply/demand balance DNB s clients well equipped for 2016; some will need to restructure from Book equity Liquidity ratio 2016 contract cover

66 OSV needs to restructure from 2016 ongoing discussions to find balanced solutions OSV demand is falling towards 2010 level Historical and expected demand; number of ships e Downturn hits earlier for OSV than for rigs AHTS PSV Reduced rig activity leads to reduced OSV demand Weaker balance sheets and shorter contracts Primarily leading operators with a long history with DNB and a modern and flexible fleet Most of our clients will encounter covenant issues over next two years. Advanced discussions ongoing with clients facing cash flow and financing issues the next twelve months e AHTS: Anchor Handling Tug Supply, PSV: Platform Supply Vessel 66 Source: Companies, DNB Markets, IHS Petrodata

67 Stress test indicates max. potential impairment around 5 bn. conservative assumptions support manageable downside through 2019 Stress test potential accumulated impairment through 2019; Bars indicate total EAD Key assumptions Potential accumulated impairment Working fleet: Rates at operating cost through 2019; cash break-even thereafter Rig: Utilisation per cent; idle fleet charged with lay-up cost OSV: Negative EBITDA for entire fleet after current contracts expires (Scenario corresponds to ~50 per cent utilisation and 50/50 of idle fleet warm-stacked / cold-stacked) Asset values derived from these assumptions are stressed an additional ~ 25 per cent => less than 50 per cent of current values as of first half of 2015 Stress test represents a static picture; a real life scenario will be more dynamic Rig OSV 67

68 Oil-related portfolio - 58 % is low risk and 37 % medium risk DNB s oil-related portfolio split by sub-segment in terms of exposure (EaD) and by risk grade Total oil related segments 100 NOK billion March June Sept Dec March June Sept PD 0.01% - PD 0.75% - PD 3.0% - Offshore NOK billion PD 0.01% - PD 0.75% - PD 3.0% Net non-performing and net doubtful commitments 31 March June Sept Dec March June Sept Net non-performing and net doubtful commitments Oil and Gas NOK billion March Oilfield services EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see backup slide for details. DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. Figures from Fact book as at 30 Sep PD 0.01% - PD 0.75% - PD 3.0% June Sept Dec March June Sept Net non-performing and net doubtful commitments NOK billion March 2014 PD 0.01% - PD 0.75% - PD 3.0% - 30 June Sept Dec March June Sept Net non-performing and net doubtful commitments

69 Recent experience provides comfort shipping impairment losses lower than peers since financial crisis Accumulated impairment, Per cent of lending book DNB (shipping) Nordic peer (shipping and offshore) Norwegian banks (shipping and pipe transportation)* European peer (Shipping) *Aggregate numbers for Norwegian banks are from the period (including DNB) Source: DNB Markets, company reports 69

70 Appendix Appendix D: Additional slides - Financial performance, capital and oil price 70

71 Profit Figures Pre-tax operating profit before impairment NOK million Pre-tax operating profit before impairment excl. basis swaps NOK million Q14 4Q14 1Q15 2Q15 3Q15 Profit for the period NOK million 3Q14 4Q14 1Q15 2Q15 3Q15 Profit for the period excl. basis swaps NOK million Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 71

72 Income Statement Jan.-Sept. Jan.-Sept. Amounts in NOK million 3Q15 2Q15 1Q15 4Q14 3Q Net interest income Net commissions and fees Net gains on financial instruments at fair value Net financial and risk result, DNB Livsforsikring Net insurance result, DNB Forsikring Other operating income Net other operating income, total Total income Operating expenses (5 103) (5 312) (5 215) (5 045) (5 088) (15 630) (15 406) Restructuring costs and non-recurring effects (216) (215) (223) (42) (74) (654) (181) Pre-tax operating profit before impairment Net gains on fixed and intangible assets (3) Impairment of loans and guarantees 392 (667) (575) (821) (183) (849) (817) Pre-tax operating profit Tax expense (2 136) (1 695) (2 130) (1 236) (1 828) (5 961) (5 227) Profit from operations held for sale, after taxes (14) (17) (47) 16 (8) (79) (39) Profit for the period Profit attributable to shareholders

73 Impairment of loans and guarantees Jan.-Sept. Jan.-Sept. Amounts in NOK million 3Q15 2Q15 1Q15 4Q14 3Q Personal customers 942 (58) (84) 918 (185) - Mortgage loans (33) 107 (12) - Consumer finance 932 (75) (46) (74) (51) 811 (173) Small and medium-sized enterprises (129) (284) (308) (450) (165) (721) (387) Large corporates and international customers (527) (425) (256) (496) (18) (1 209) (529) - Nordic Corporates Division (6) 5 15 (333) 3 14 (37) - International Corporates Division (22) (93) 39 (166) (86) (77) (124) - Shipping, Offshore and Logistics Division (379) (302) (242) (923) (188) - Energy Division (88) (43) (12) (5) (5) (144) (27) - Baltics and Poland (12) (47) (50) (1) (39) (110) (123) - Other units (19) 56 (7) (13) (8) 30 (30) Total individual impairment 285 (767) (530) (879) (267) (1 013) (1 101) Total collective impairment of loans (44) Impairment of loans and guarantees 392 (667) (575) (821) (183) (849) (817) Total impairment in relation to average volumes (annualised) 0.10 (0.18) (0.16) (0.23) (0.05) (0.08) (0.08) 73

74 DNB s Maritime Business is Diversified and Profitable -Shipping, Offshore and Logistic Pre-tax operating profit before write-downs Shipping, Offshore and Logistics, NOK million EAD by segments as at 30 September 2015 Pre-tax operating profit incl interest on allocated capital, before impairment Individual impairment RoRo/PCC 3 % Other shipping 5 % Other nonshipping 2 % Chemical and product tankers 8 % Container 10 % Offshore 28 % Crude oil tankers 12 % YTD 3Q Logistics 4 % Gas 11 % Dry cargo 12 % Cruise 5 % 74

75 Core Capital Generation CET1 capital ratio - transitional rules Per cent * CET1 build up and dividend Basis points (bps) transitional rules Q CET1 build up Dividends * Assuming 30 % dividend payout ratio. A 50 % dividend ratio results in 13.1 % CET1 as of 3Q A 10 percentage point change in retained earnings corresponds to a 15 percentage point change in the CET1 ratio at end September

76 Capital Adequacy Across the Key Relevant Entities 20,0 % 18,0 % 16,0 % 16,3 % 16,3 % 17,8 % 14,0 % 13,1 % 12,8 % 13,7 % 12,0 % 10,0 % 8,0 % 6,0 % 4,0 % 2,0 % 0,0 % DNB Group DNB Bank Group DNB Bank ASA CET1* Total Capital Ratio* * Transitional rules, as per

77 DNB versus Nordic peers: S&P RAC Ratio S&P RAC Ratio as of 30 June 2015 * 10,0 9,0 8,0 7,0 6,0 DNB Swedbank Nordea SEB SHB Danske Bank * Source: S&P report November 27, 2015 «Nordic Banks Extend Their Capital Advantage Despite Lower Revenues» 77

78 Balance sheets DNB Group DNB Bank ASA 30 Sept. 31 Dec. 30 Sept. 31 Dec. Amounts in NOK billion Deposits with central banks Due from credit institutions Loans to customers Other assets Total assets Due to credit institutions Deposits from customers Short-term debt securities issued Long-term debt securities issued Other liabilities and provisions Additional Tier 1 capital 8 8 Other equity Total liabilities and equity Ratio of deposits to net loans (%) Adjusted ratio of deposits to net loans (%) 1) Total combined assets Currency-adjusted loans to customers Currency-adjusted deposits from customers ) Excluding short-term money market deposits 78

79 Oil Price - Assumptions from DNB Markets as of August 2015 Oil price development 79

80 Disclaimer This material has been prepared on the basis of the information provided by DNB Bank ASA (referred to as "DNB Bank") and public available sources. DNB ASA the holding company of the DNB group is referred to as "DNB " in this presentation. This material is presented solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this material are subject to change without notice and DNB Bank is not under any obligation to update or keep current the information contained herein. In addition, institutions mentioned in this material, their affiliates, agents, directors, partners and employees may make purchases and/or sales of the Notes as principal or agent or may act as market maker or provide investment banking or other services in respect of the Program or the Notes which may be issued from time to time thereunder. DNB, the Arranger and the Dealers and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. The Notes are not to be offered or sold in any jurisdiction in circumstances in which the distribution of this document or the Notes would be prohibited in such jurisdiction. This document must not be acted on or relied on by persons who are not eligible to invest in the Notes. Any investment or investment activity to which this communication relates is available only to persons eligible to invest in the Notes and will be engaged in only with such persons. Furthermore, you should consult with your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that you deem it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of an investment in the Notes which may be offered from time to time) based upon your own judgment and advice from such advisers as you deem necessary and not upon any view expressed in this presentation. 80