Jyske Realkredit A/S (formerly BRFkredit a/s) Interim Financial Report First half of 2018

Transcription

1 Jyske Realkredit A/S (formerly BRFkredit a/s) Interim Financial Report First half of Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 1 / 25

2 Interim Financial Report, first half of Management s Review 3 Jyske Realkredit 4 Summary 4 Comments by Management 5 Financial Review 10 Capital 13 Other information Interim financial statements 15 Income statement and statement of comprehensive income 16 Balance sheet 17 Statement of changes in equity 17 Capital statement 18 Notes 25 Statement by the Executive and Supervisory Boards Jyske Realkredit A/S Klampenborgvej 205 DK Kgs. Lyngby Telephone: brfkredit@brf.dk Website: brf.dk Business Reg. No. (CVR): Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 2 / 25

3 Jyske Realkredit Core profit and net profit for the period, DKKm Index 18/17 Q2 Q1 Q4 Q3 Q2 Full year Administration margin income, etc ,881 Other net interest income Net fee and commission income, etc Value adjustments, etc Other income , Core income 1,221 1, ,135 Core expenses Core profit before loan impairment charges and provisions for guarantees ,284 Loan impairment charges (minus = income) Core profit ,082 Investment portfolio earnings Profit before IFRS 9 implementation ,131 IFRS 9 adjustment of impairment charges, beginning of Pre-tax profit ,131 Tax (minus = income) Net profit or loss for the period As of, the return on Jyske Realkredit s portfolio of securities (investment portfolio earnings) is recognized as core income under Other net interest income and Value adjustments, etc. as the purpose of the portfolio of securities is now primarily to support mortgage operations, including compliance with LCR rules, etc. Summary of Balance Sheet, end of period, DKKm Mortgage loans, fair value 315, , , , , , , ,121 Bonds and shares, etc. 18,081 15, ,081 14,715 18,397 16,265 15,882 18,397 Total assets 339, , , , , , , ,732 Issued bonds, fair value 319, , , , , , , ,305 Equity 16,057 13, ,057 15,679 15,731 13,511 13,235 15,731 Financial ratios and key figures Pre-tax profit p.a. as a percentage of average equity Profit for the period p.a. as a pct. of average equity Expenses as a percentage of income Capital ratio Common Equity Tier 1 capital ratio (CET1 %) Individual solvency requirement (%) Capital base (DKKm) 16,080 12,636-16,080 15,490 15,529 13,180 12,636 15,529 Weighted risk exposure (DKKm) 75,097 70,553-75,097 74,862 74,686 72,439 70,553 74,686 No. of full-time employees at end of period Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 3 / 25

4 Summary Pre-tax profit, exclusive of derived effects from IFRS 9: DKK 785m, corresponding to a return of 9.9% p.a. on average equity. Post-tax profit, exclusive of derived effects from IFRS 9: DKK 630m, corresponding to a return of 7.9% p.a. on average equity. Pre-tax profit: DKK 378m ( : DKK 543m) corresponding to a return of 4.8% p.a. on average equity ( : 8.3% p.a.). Net profit for the period amounted to DKK 312m ( : DKK 423m) corresponding to a return of 3.9% p.a. on average equity ( : 6.5% p.a.). Core profit : DKK 784m ( : DKK 479m). Core expenses at DKK 375m fell by 14% relative to. Ordinary impairment charges affected core profit by DKK 62m ( : DKK 120m). The effect from the implementation of IFRS 9 and adjustments to the standard amounted to DKK 407m at the beginning of. At the end of the first half of, the capital ratio and the Core Tier 1 capital ratio came to 21.4% (end of : 20.8%) and 21.3% (end of : 20.8%). Comments by Management In connection with the presentation of the Interim Financial Report for the first half of, Lars Waalen Sandberg, Chief Executive Officer, states: 'Today Jyske Realkredit publishes a profit of DKK 312m, corresponding to a return of on equity of 3.9% p.a. Adjusted for derived effects from IFRS 9, the return amounts to 7.9% p.a. Core profit increased compared to the first half of. The profit before the IFRS 9 implementation was favourably affected by impairment charges, which fell due to the improving credit quality while at the same time the institution reported falling costs. The capital base is solid and amounted to 21.4%. In the first half of, the portfolio increased by DKK 8 bn. It is expected that lending will still show a positive trend, albeit at a more moderate pace than until now. Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 4 / 25

5 Financial Review Material circumstances Company-specific circumstances In consequence of the Jyske Bank Group s decision in future only to use one brand, the company changed its name to Jyske Realkredit A/S on 21 June, with BRFkredit a/s as its secondary name. Carsten Tirsbæk Madsen resigned from the company s Executive Board on 30 June. The Supervisory Board appointed Lars Waalen Sandberg to Chief Executive Officer as of 1 July, and Torben Hansen to Director as of 1 October. Carsten Tirsbæk Madsen continues in the Jyske Bank Group as Director of Jyske Bank Retail Clients. Anders Dam and Laila Busted resigned from the Supervisory Board of the company on 30 June, and Carsten Tirsbæk Madsen, Peter Schleidt and Anette Lykke Poulsen joined on 1 July. Now the Supervisory Board consists of Carsten Tirsbæk Madsen, Niels Erik Jakobsen, Per Skovhus, Peter Schleidt, Kim Henriksen and Anette Lykke Poulsen, the latter two elected by the employees. The Supervisory Board elected Carsten Tirsbæk Madsen chairman and Niels Erik Jakobsen deputy chairman. Implementation of new impairment rules, IFRS 9 IFRS 9 took effect on 1 January and have been incorporated in the Danish accounting rules. As a consequence of the new rules, impairment charges are calculated as the expected loss on all loans, advances and guarantees. Due to the company s implementation of and adjustment to IFRS 9 derived effects, the balance of impairment charges was on 1 January increased by DKK 407m, which affected the profit in early. The overall effect was fully recognised in the financial statements and solvency ratio in the first quarter of. Sale of owner-occupied property Jyske Realkredit s owner-occupied property, Klampenborgvej 205, was sold at the end of June. The sale affected Other income by DKK 185m. In connection with the sale, Jyske Bank has entered into an 11-year lease agreement for the property with the buyer. Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 5 / 25

6 Net profit for the period For the first half of, the pre-tax profit amounted to DKK 378m. Calculated tax amounted to an expense of DKK 65m, and the net profit for the period then amounted to DKK 312m. The pre-tax profit was affected by the implementation of derived effects from IFRS 9, resulting in a non-recurring adjustment on loan impairment charges and provisions for guarantees of DKK 407m at the beginning of. The adjustment is presented as a special item, and therefore comparability of the individual items is still possible. In addition, the sale of the owner-occupied property Klampenborgvej 205 resulted in an accounting gain of DKK 185m. Exclusive of the above special items, pre-tax profit amounted to DKK 600m. Core profit and net profit for the period, DKKm Index 18/17 Q2 Q1 Q4 Q3 Q2 Full year Administration margin income, etc ,881 Other net interest income Net fee and commission income, etc Value adjustments, etc Other income , Core income 1,221 1, ,135 Core expenses Core profit before loan impairment charges and provisions for guarantees ,284 Loan impairment charges and provisions for guarantees (minus = income) Core profit ,082 Investment portfolio earnings Profit before IFRS 9 implementation ,131 IFRS 9 adjustment of impairment charges, beginning of Pre-tax profit ,131 Tax (minus = income) Net profit for the period As of, the return on Jyske Realkredit s portfolio of securities (investment portfolio earnings) is recognized as core income under Other net interest income and Value adjustments, etc. as the purpose of the portfolio of securities is now primarily to support mortgage operations, including compliance with LCR rules, etc. Core income consisting primarily of administration margin income, etc. as well as brokerage and fee income from mortgage activities amounted to DKK 1,221m in the first half of against DKK 1,037m in the first half of. Administration margin income amounted to DKK 937m in the first half of against DKK 932m in the first half of. Administration margin income was positively affected by the increasing portfolio, yet negatively affected by falling administration margin rates. The increase within the Personal client area related primarily to Jyske Bank's home loans. For the remaining products in the Personal client area, a minor decline of the average administration margin rate was recorded, which could be attributed to a shift to fixed-rate loans, etc. and/or amortized loans, for which administration margins are lower. In respect of the Corporate client area, the falling administration margin rates can chiefly be attributed to the decline in the portfolio of weak loans with high administration margin rates due to redemptions, among other things. Moreover, in the first half of, a non-recurring income relating to an individual major corporate client was recognised. Other net interest income consisted, among other things, of interest on the portfolio of securities, interest expenses for senior debt incurred in order to comply with SDO and rating requirements as well as various interest income and amounted to an income of DKK 48m in the first half of against an expense of DKK 34m in the first half of. To some extent, the increase can be attributed to reclassification of the portfolio of securities and also to the fact that Jyske Realkredit redeemed senior debt in January. In the first half of, net fee and commission income amounted to DKK 91m against DKK 116m in the first half of. The decline could primarily be attributed to a decline in income from refinancing as, in the first half of, one refinancing event was held compared to two in the first half of. Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 6 / 25

7 Value adjustments etc. amounted to an expense of DKK 49m in the first half of against an income of DKK 7m in the first half of. Among other things, the difference was caused by a negative value adjustment of the portfolio of securities, which was previously included in the return on the portfolio. Typically, the portfolio of securities consists of bonds with a short time to maturity that have been bought at a price above par and are held to maturity, which results in a positive interest yield and a negative value adjustment. Other income amounted to DKK 194m in the first half of against DKK 16m in the first half of. The increase could primarily be attributed to an accounting gain of DKK 185m from the sale of Jyske Realkredit s owner-occupied property, Klampenborgvej 205, at the end of June. In connection with the sale, Jyske Bank has entered into an 11- year lease agreement for the property with the buyer. Core expenses amounted to DKK 375m in the first half of against DKK 438m in the first half of. The decline of DKK 63m can be attributed to the on-going adjustment of the staff as well as the fact that a number of work functions/areas have been outsourced to Jyske Bank. Based on group-internal service agreements, Jyske Realkredit pays Jyske Bank to perform these tasks. Core profit before loan impairment charges and provisions for guarantees rose by 41% and amounted to DKK 846m in the first half of against DKK 599 in the first half of. Loan impairment charges The implementation of IFRS 9, which took effect on 1 January, caused effects that resulted in a non-recurrent adjustment in the amount of DKK 407m of loan impairment charges and provisions for guarantees at the beginning of. Exclusive of the derived effects from IFRS 9, loan impairment charges and provisions for guarantees amounted to DKK 62m against DKK 120m in the first half of. Relative to total loans, the effect from the impairment charges on the income statement amounted to 0.02% in the first half of (0.15% inclusive of the derived effects from IFRS 9) against 0.04% in the first half of. It is assessed that the observed credit events are getting close to the expected average seen over an economic cycle. Jyske Realkredit's holding of assets held temporarily amounted to DKK 379m as at 30 June against DKK 435m at the end of. The decline could primarily be attributed to value adjustments of properties already acquired through foreclosure. Jyske Realkredit had no exposures after deductions that accounted for more than 10% of the capital base. The concentration risk is followed closely and all large exposures are monitored on an on-going basis. The total balance of impairment charges amounted to DKK 1,533m at the end June (end of : DKK 1,219m), corresponding to 0.5% of total loans. Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 7 / 25

8 Loans, advances and guarantees, DKKm Index 18/17 Q2 Q1 Q4 Q3 Q2 Full year Non-performing loans and guarantees: Loans, advances and guarantees before impairment charges 4,391 9, ,391 4,944 8,377 8,738 9,670 8,377 Impairment charges 602 1, , Loans, advances and guarantees after impairment charges 3,789 8, ,789 4,230 7,449 7,758 8,633 7,449 NPL ratio (%) NPL contribution ratio (%) Past due mortgage loans (90 days) Operational loan impairment charges and provisions for guarantees Operating loss Non-performing loans, advances and guarantees fell significantly from the fourth quarter of to the first quarter of, which can materially be attributed to changed definitions in consequence of the implementation of IFRS 9. Arrears rate The arrears rate measured 90 days after the March repayment date amounted to 0.2%, i.e. an unchanged level relative to the corresponding repayment date in. The arrears rate measured 15 days after the June repayment date amounted to 0.9%, was also unchanged against the same repayment date in. Arrears rate June March December September June March After 90 days After 15 days Core profit and investment portfolio earnings Pre-tax profit for the first half of and the first half of broken down by core earnings and investment portfolio earnings is stated below: Breakdown of pre-tax profit, DKKm Core operations: Core profit Investment Reclassification Total Core portfolio profit earnings Reclassification Administration margin income, etc Other net interest income Net fee and commission income Value adjustments, etc Other income Core income 1,221-1,221 1, ,101 Core expenses Core earnings before loan impairment charges and provisions for guarantees Loan impairment charges Pre-tax profit Total Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 8 / 25

9 Alternative performance targets The alternative performance targets applied in the management's review constitute valuable information for readers of financial statements as they provide a more uniform basis for comparison of accounting periods. No adjusting entries are made, and therefore the net profit or loss for the period will be the same in the alternative performance targets of the management's review and in the financial statements prepared according to the provisions of the Danish Executive Order on the Preparation of Financial Statements. Administration margin income, etc. covers administration margin income as well as interest rate margin for products with no administration margin. In Jyske Realkredit's reporting format of core earnings and investment portfolio earnings, the total interest income, interest expenses and value adjustments relating to the balance principle are recognised under 'Other net interest income, etc.' Balance sheet At the end of the first half of, Jyske Realkredit s balance sheet amounted to DKK 340 bn (DKK 338 bn at the end of ). The positive business volume growth continued in as the volume grew from DKK 308 bn at the end of to DKK 316 bn at the end of the first half of, corresponding to 2.5% growth. Equity was affected by the net profit for the period by DKK 312m as well as other comprehensive income of DKK 13m, and amounted then to DKK 16,057m at the end of the first half of (DKK 15,731m at the end of ). Summary of Balance Sheet, end of period, DKKm Index 18/17 Q2 Q1 Q4 Q3 Q2 Full year Assets / equity and liabilities 339, , , , , , , ,732 Mortgage loans, nominal value 307, , , , , , , ,516 Loans and advances, fair value 315, , , , , , , ,121 Issued bonds, fair value 319, , , , , , , ,305 Equity 16,057 13, ,057 15,679 15,731 13,511 13,235 15,731 Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 9 / 25

10 Capital Jyske Realkredit's long-term capital management objective is in line with that of the Jyske Bank Group, i.e. a capital ratio of 17.5% and a Common Equity Tier 1 capital ratio of 14.0%. At these levels, Jyske Realkredit is comfortable in respect of the capital base requirements. At the end of the second quarter of, Jyske Realkredit met both targets due to its capital ratio of 21.4% and its Common Equity Tier 1 capital ratio of 21.3%. The development of Jyske Realkredit's capital and Core Tier 1 capital ratios appears from the table below. At the end of the first half of, the capital and Core Tier 1 capital ratios had increased by 0.6 percentage point and 0.5 percentage point, respectively, relative to the end of. Jyske Realkredit still has a solid base compared to the Group's target. Capital and core capital ratios 30 June 31 Dec. Change 18/17 Capital ratio Tier 1 Capital ratio (%) Common Equity Tier 1 capital ratio (%) Capital base At the end of the first half of, the capital base of Jyske Realkredit amounted to DKK 16.1 bn against DKK 15.5 bn at the end of previous quarter. The increase could be attributed to the recognition of the profit for the second quarter of and also that a deduction in core capital was changed to an addition in the capital base. Jyske Realkredit still has a high proportion of Common Equity Tier 1 capital in its capital base, which is in line with the desired capital structure. Capital base and total risk exposure, DKKm 30 June 31 Dec. Equity 16,057 15,731 Intangible assets 0-1 Prudent valuation Deferred tax assets -5 - Diff. between expected loss and impairment charges (deduction) Core capital/common Equity Tier 1 capital 16,029 15,529 Diff. between expected loss and impairment charges (addition) 50 - Capital base 16,080 15,529 Total weighted risk exposure 75,097 74,686 Minimum capital requirement Determination of the minimum capital requirement expresses the regulatory capital requirement and rests on the risk types credit, market and operational risk. Jyske Realkredit has been approved to apply the advanced internal ratingbased approach (AIRB) when determining credit risk. The approval extends to the application of advanced methods for determining the minimum capital requirement for the main part of Jyske Realkredit's credit portfolio. The minimum capital requirements for market and operational risks are measured according to the standardised approach. Minimum capital requirement by risk type, DKKm 30 June 31 Dec. Credit risk 5,721 5,569 Market risk Operational risk Minimum capital requirement, Pillar I 6,008 5,975 Capital requirement, transitional provisions - 3,726 Total minimum capital requirement 6,008 9,701 Transitional rules for capital requirements according to Basel I ended at the end of Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 10 / 25

11 Individual solvency requirement and capital buffer At the end of the first half of, Jyske Realkredit calculated an individual solvency requirement of 9.3% (end of : 9.3%). The table below shows the contribution from the individual types of risk to the adequate capital base and the individual solvency requirement. Individual solvency requirement, DKKm 30 June % of REA 31 Dec. % of REA Credit risk 6, , Market risk Operational risk Total 6, , The statutory buffers are currently the SIFI buffer and the capital conservation buffer of 1.2% and 1.875%, respectively, of the total risk exposure. Hence the individual solvency requirement plus statutory buffers amount to 12.4% of the total risk exposure. The Systemic Risk Council has recommended to the government that the countercyclical buffer rate be activated by 0.5 percentage point with effect as of the first quarter of 2019 with the possibility of another 0.5 percentage point subsequently. The capital buffer plus earnings from operations denote the maximum sustainable loss without the need for additional capital. Jyske Realkredit s large proportion of Tier 1 capital cements the quality of the total capital. Capital buffer, DKKm 30 June % of REA 31 Dec. % of REA Capital base 16, , Core capital 16, , Individual solvency requirement 6, , Individual solvency requirement plus buffers 9, , Capital requirement, transitional provisions - - 9, Capital buffer 6, ,828 7, 8 The capital buffer also meets the requirement of the size of the debt buffer, which when fully phased in in 2020 will amount to 2% of total loans. Due to the end of the transitional rule at the end of, the capital buffer has increased. On an on-going basis, Jyske Realkredit assesses the capital requirements the institution is subject to in respect of risk appetite and future capital requirements. LCR The binding requirement for Jyske Realkredit s holding of liquid assets originates from the LCR floor requirement of 2.5% of total mortgage loans, which at the end of the first half of corresponded to almost DKK 7.9 bn. Jyske Realkredit has liquid assets in the amount of DKK 12.7 bn and hence a significant buffer relative to the LCR floor requirement. Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 11 / 25

12 Refinancing The breakdown of loans has changed over the past couple of years, as products with very short-term funding, such as F1 loans (adjustable-rate loans) account for a smaller proportion of the total loans. A larger proportion of borrowers now have loans with longer-term funding, such as CIBOR loans with or without an interest rate cap. In the second half of, Jyske Realkredit will continue its efforts to reduce the refinancing risk. This takes place in consideration of the requirement that the individual series must be so large that, in respect of the liquidity buffer of the investors, they meet the LCR requirement (Liquidity Coverage Ratio). Jyske Realkredit s loan portfolio, on 30 June, by time of refinancing 18% 33% Refinansiering Refinancing and og maturity fundingudløb of funding inden within for the det next næste year år Refinansiering Refinancing and og maturity fundingudløb of efter after mere more end than et år 1 year Øvrige Other types lånetyper of loan 49% The information according to the Article 129(7) CRR on covered bonds (SDO) (among other things, disclosure of the value of the cover pool and outstanding covered bonds (SDO), geographical distribution and type of covered assets, maturity structure and loans more than 90 days past due) will be disclosed in an ECBC label template quarterly simultaneously with interim and annual reports. Please see BRF.com. Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 12 / 25

13 Other information Rating Jyske Bank's and Jyske Realkredit's joint issuer rating by Standard and Poor s (S&P) is A- (positive outlook). As of 5 April, the issuer rating was improved from 'neutral' to 'positive'. Jyske Realkredit's bonds issued out of Capital Centre E, Capital Centre B and the General Capital Centre have been assigned a triple A (AAA) rating (Stable). Rating, 30 June Rating Date of rating / change of rating Covered bonds - issued out of Capital Centre E AAA 17/ Mortgage credit bonds - issued out of Capital Centre B AAA 17/ issued out of the General Capital Centre AAA 27/ Issuer rating (long-term rating) A- 1) 12/ Issuer rating (short-term rating) A-2 1) 12/ ) On 5 April, S&P confirmed Jyske Realkredit's issuer rating at A-/positive/A-2 Standard & Poor's requirements for supplementary security to maintain the AAA rating was increased in the course of the past year. This increase was solely based on an increase in the portfolio, while the average requirement to maintain an AAA rating fell slightly. The decline in the average requirement of supplementary security can generally be attributed to the improved credit quality. Requirement of supplementary security, Standard & Poor's DKKbn % of loans 8% 7% 6% 5% 4% 3% 2% 1% 0% Mia. DKKb kr. % of af loans udlån (right-hand (højre akse) axis) Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 13 / 25

14 The supervisory diamond for mortgage credit institutions The supervisory diamond defines a number of special risk areas stating the limits that financial institutions should generally not exceed. The supervisory diamond limits applicable to Jyske Realkredit are shown below. Supervisory diamond - benchmarks, % 30 June 31 Dec. Concentration risk <100% Increase in loans <15% annually in the segment: - Owner-occupied home and vacation homes Residential rental property Other sectors Borrower's interest-rate risk <25% - Residential property Interest-only schemes <10% - Owner-occupied home and vacation homes Loans with short-term funding: - Refinancing (annually) <25% Refinancing (quarterly) <12.5% At the end of the first half of, Jyske Realkredit met all benchmarks of the supervisory diamond. On an on-going basis, Jyske Realkredit reviews the institution's positions relative to the benchmarks. Resolutions by the Supervisory Board Please see the section on Material circumstances, regarding Company-specific circumstances. In addition, no other resolution that falls within the duty of disclosure set out in the Rules for Issuers of Securities Listed on NASDAQ Copenhagen A/S was adopted by the Supervisory Board during the first half of. Additional information For further information, please see brf.com, which website also gives detailed financial information about Jyske Realkredit. Jyske Realkredit's Interim Report for the first half of can be downloaded on brf.com. Contact Lars Waalen Sandberg, Chief Executive Officer or Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 14 / 25

15 Income statement and Statement of Comprehensive Income Note Income statement DKKm 4 Interest income 3,131 3,300 5 Interest expenses 2,156 2,339 Net interest income Dividends, etc Fees and commission income Fees and commission expenses Net interest and fee income 1,071 1,079 7 Value adjustment (- is an expense) Other operating income Employee and administrative expenses Amortisation, depreciation and impairment charges 3 3 Other operating expenses Loan impairment charges Profit on investments in associates and group enterprises 10 2 Pre-tax profit Tax Net profit or loss for the period Distributed to: Jyske Realkredit A/S shareholders Total Statement of Comprehensive Income Net profit or loss for the period Other comprehensive income: Items that cannot be recycled to the income statement: Value adjustment of owner-occupied properties 17 - Tax on other comprehensive income -4 - Other comprehensive income after tax 13 - Comprehensive income for the period Distributed to: Jyske Realkredit A/S shareholders Total Jyske Realkredit Corporate Announcement No. 73 / of 21 August 15 / 25

16 Balance sheet Note 30 June 31 Dec. 30 June Assets DKKm Cash balance and demand deposits with central banks Due from credit institutions and central banks 5,190 9,762 3, Loans and advances at fair value 315, , ,152 Bonds at fair value 17,864 18,182 15,670 Shares, etc Equity investments in group enterprises Intangible assets Land and buildings, total of which investment property of which owner-occupied properties Other property, plant and equipment Deferred tax assets Assets in temporary possession Other assets Prepayments Total assets 339, , ,078 Equity and liabilities Liabilities Due to credit institutions and central banks 1, Issued bonds at fair value 319, , ,044 Issued bonds at amortised cost - 1,871 3,715 Current tax liabilities Other liabilities 2,551 2,815 2,369 Deferred income Liabilities, total 323, , ,805 Provisions Provisions for deferred tax Other provisions Provisions, total Equity Share capital 3,306 3,306 1,306 Share premium Revaluation reserve Reserve according to the equity method Retained profit 12,648 12,176 11,747 Total equity 16,057 15,731 13,235 Total equity and liabilities 339, , , Off-balance sheet items Guarantees, etc Other contingent liabilities, etc. (loan offers) 19,181 19,152 19,435 Total guarantees and other contingent liabilities 19,183 19,160 19,443 Jyske Realkredit Corporate Announcement No. 73 / of 21 August 16 / 25

17 Statement of changes in equity Reserve the equity Share Share Revaluation equity Retained capital premium reserves 1) method 2) profit Total Equity at 1 January 3, ,176 15,731 Adjustment at beginning of period according to new accounting rules Net profit or loss for the period Transferred to Retained profit Other comprehensive income Comprehensive income for the period Equity at 30 June 3, ,648 16,057 DKKm Equity at 1 January 1, ,354 12,812 Net profit or loss for the period Transferred to Retained profit Comprehensive income for the period Equity at 30 June 1, ,747 13,235 1) Revaluation reserve relates to the revaluation of a owner-occupied property, which is wound up and transferred to Retained profit in connection with the sale of the property. 2) Revaluation according to the equity method is wound up and transferred to Retained profit in connection with the sale of a subsidiary. Capital statement DKKm 30 June 31 Dec. 30 June Equity 16,057 15,731 13,235 Offsetting the profit for the period Intangible assets Deferred tax assets Difference between expected loss and the carrying amount of impairment charges Prudent valuation Common Equity Tier 1 capital / Core capital 16,029 15,529 12,636 Difference between expected loss and the carrying amount of impairment charges Capital base 16,080 15,529 12,636 Weighted risk exposure involving credit risk etc. 71,514 69,615 65,327 Weighted risk exposure involving market risk 32 1,906 2,061 Weighted risk exposure involving operational risk 3,551 3,165 3,165 Total weighted risk exposure 75,097 74,686 70,553 Capital requirement, Pillar I 6,008 5,975 5,644 Capital requirement, transitional provisions - 3,726 3,720 Capital requirement, total 6,008 9,701 9,364 Capital ratio Core Tier 1 Capital ratio (%) Common Equity Tier 1 capital ratio (%) Transitional rules for capital requirements according to Basel I ended at the end of. For further information on the individual solvency requirement, please see the section in the management's review on "Capital". Jyske Realkredit Corporate Announcement No. 73 / of 21 August 17 / 25

18 Notes 1 Accounting policies The Interim Financial Report for the period 1 January - 30 June for Jyske Realkredit A/S was prepared according to the Danish Financial Business Act as well as the relevant accounting rules which is in compliance with IFRS. Furthermore, the Interim Financial Report was prepared in accordance with the additional Danish disclosure requirements for the interim reports of listed financial undertakings. On 1 January, a number of new and changed rules took effect in the Danish Executive Order on the Preparation of Financial Statements relating to the implementation of IFRS 9. Classification and measurement According to the new rules, classification and measurement of financial assets are made on the basis of the business model for the financial assets and the contractual cash flows that relate to the financial assets. The application of the new rules on measurement categories for financial assets on the basis of the business model does not result in material changes to measuring principles for Jyske Realkredit's reporting. Mortgage loans etc., own bond portfolio and issued mortgage bonds in Jyske Realkredit will be recognised in the category of fair value recognized through the income statement according to the provisions of the Danish Executive Order on the Preparation of Financial Statements (exemption clauses in IFRS 9 on accounting mismatch). This choice has been made to eliminate financial inconsistency between the recognition of mortgage loans at amortised cost and the fair value of the listed bonds resulting from the purchase and sale of own issued bonds. Impairment charges (adjustment for credit risk) According to the Danish Executive Order on the Preparation of Financial Statements and the accompanying instructions on loan impairment charges measured at fair value, the calculation of the credit risk for loans at fair value shall be similar to that for loan impairment charges at amortised cost. The new rules imply earlier recognition of impairment charges for financial assets, as already at the first recognition, impairment charges corresponding to a 12-month expected credit loss must be recognised. If, subsequently, the probability of loss on the asset increases materially, recognition of the expected credit loss over the remaining life of the loan will take place. According to the new rules, financial assets must be divided into three categories/stages depending on the credit deterioration. Stage 1 covers exposures without material deterioration in credit quality, while stage 2 covers assets with significant deterioration in credit quality, and stage 3 covers exposures in default. The ranking in the various stages will affect the calculation method applied and it is determined on the basis of the calculated probability of default over 12-month or the remaining life of the exposures. For exposures in stage 1 impairment charges corresponding to a 12 month expected loss are recognised, while for exposures in stages 2 and 3 the expected losses over the remaining life of the exposures are recognised. Exposures with evidence of credit deterioration are placed in stage 3 or in the weakest part of stage 2. The assessment of the indication of impairment for these exposures is based on individual expert assessments of the probability-weighted expected loss. The new rules have not resulted in any material changes in the extent of impairment of these exposures. The transition to these new impairment rules resulted in an increase by DKK 407m of Jyske Realkredit's balance of impairment charges. As mortgage loans are stated at fair value, the adjustment of the balance of impairment charges is to be accounted for as a changed estimate and is recognised in the income statement for the first quarter of. Moreover, the accounting policies are identical to those applied to and described in detail in the Annual Report. 2 Material accounting estimates Measurement of the carrying value of certain assets and liabilities requires the management's estimate of the influence of future events on the value of such assets and liabilities. Estimates of material importance to the financial reporting are, among other things, based on the impairment of loans and advances and also assets in temporary possession, cf. the detailed statement in the Annual Report. The estimates are based on assumptions which management finds reasonable, but which are inherently uncertain. Besides, the company is subject to risks and uncertainties which may cause the actual results to differ from those estimates. The financial statements reflect adjusting events until 21 August. Jyske Realkredit Corporate Announcement No. 73 / of 21 August 18 / 25

19 Notes - cont. 30 June 31 Dec. 30 June 3 Financial ratios and key figures Capital ratio Core Tier 1 Capital ratio (%) Return on equity (average) before tax for the period (%) Return on equity (average) after tax for the period (%) Income/cost ratio (%) Currency position (%) Accumulated impairment ratio (%) Impairment ratio for the period (%) Increase in loans and advances for the period (%) Loans relative to equity Return on capital employed Interest income Due from credit institutions and central banks 1) -5-0 Loans and advances 2,218 2,382 Administration margin Bonds Derivatives, interest-rate and currency contracts Other interest income - 0 Interest income before offsetting of interest on own bonds 3,211 3,382 Interest on own bonds, set off against interest on issued bonds Total 3,131 3,300 1) Of which interest income on reverse repos carried under "Due from credit institutions and central banks" Interest expenses Due to credit institutions and central banks 1) 8 11 Issued bonds 2,188 2,384 Other interest expenses Interest expenses before offsetting of interest on own bonds 2,236 2,420 Interest on own bonds, set off against interest on issued bonds Total 2,156 2,339 1) Of which interest expenses on genuine repo carried under "Due to credit institutions and central banks" -3-0 Jyske Realkredit Corporate Announcement No. 73 / of 21 August 19 / 25

20 Notes - cont. DKKm 6 Fees and commission income Securities trading and custody services Loan application fees Other fees and commissions 0 0 Total Value adjustment (- is an expense) Mortgage loans ,233 Other loans, advances and receivables at fair value 0 0 Bonds Shares, etc. 5 1 Investment properties - 0 Currency -1 0 Currency, interest-rate and other contracts as well as other derivatives Issued bonds 235-1,062 Total Value adjustment of the balance principle amounted to an expense of DKK 13m (: DKK +2m), resulting from a net value adjustment of the following items: Mortgage loans by DKK -374m (DKK +1,233m), issued mortgage bonds by DKK +235m (DKK -1,062m), which are recognised under 'Issued bonds', and derivatives by DKK +126m (DKK -169m), recognised under"currency, interest-rate and other contracts as well as other derivatives". 8 Employee and administrative expenses Employee expenses Wages and salaries, etc Pensions 3 25 Payroll tax 4 30 Social security 0 1 Total Salaries and remuneration to the Executive Board and Supervisory Board Executive Board 4 3 Supervisory Board 0 0 Total 4 3 Other administrative expenses IT Rent, lighting, heating, etc Other administrative expenses Total Total Jyske Realkredit Corporate Announcement No. 73 / of 21 August 20 / 25

21 Notes - cont. DKKm 9 Loan impairment charges Loan impairment charges for the period Recognised as a loss, not covered by impairment charges Recoveries Total Balance of impairment charges Balance of impairment charges, beginning of period 1,219 1,183 Implementation of IFRS 9 (changes to accounting rules) 0 - Loan impairment charges for the period Recognised as a loss, covered by impairment charges Balance of impairment charges, end of period 1,533 1,240 Mortgage loan impairment charges 1,465 1,151 Impairment charges on other loans and receivables, etc Impairment charges on Balances due from credit institutions and central banks, etc.' 0 - Balance of impairment charges, end of period 1,533 1,240 Breakdown of balance of impairment charges by stage Stage 1 Stage 2 Stage 3 Total Balance according to IAS 39, (previous accounting rules) 1,219 Transitional effect, IFRS 9, incl. effect on loans at fair value Movements over the period Balance of impairment charges, end of period ,533 Implementation of IFRS 9 (changes to accounting rules) relate to the adjustment at the beginning the period of impairment charges for financial assets recognised at amortised cost, which is adjusted in equity. The breakdown of impairment charges in stages 1, 2 and 3 allows in the transitional effect, IFRS 9 for the adjustment of impairment charges relating to loans at fair value, which are adjusted in the income statement at the beginning of. Of 'Recognised as a loss, not covered by loan impairment charges', value adjustment of properties acquired in previous financial years amounted to an expense of DKK 58m (: an income of DKK 17m), and operating profit on properties during the period of foreclosure an expense of DKK 0m (expense of DKK 4m). 10 Tax Effective tax rate Corporation tax rate in Denmark Non-taxable income and non-deductible expenses, etc Total The effective tax rate for the first half of was affected by the sale of the property Klampenborgvej 205, as the accounting gain exceeded the taxable gain. Jyske Realkredit Corporate Announcement No. 73 / of 21 August 21 / 25

22 Notes - cont. DKKm 30 June 31 Dec. 30 June 11 Loans and advances at fair value Mortgage loans, nominal value 307, , ,334 Adjustment for interest-rate risk, etc. 8,817 9,189 7,430 Adjustment for credit risk -1,465-1,139-1,151 Mortgage loans at fair value 315, , ,613 Arrears and outlays Other loans and receivables Total 315, , ,152 Of 'Arrears and outlays', arrears before impairment charges amounted to DKK 84m (31.12.: DKK 85m). Mortgage loans at fair value broken down by property category Owner-occupied homes 157, , ,778 Vacation homes 7,919 7,699 7,451 Subsidised Housing (rental housing) 52,557 50,167 49,342 Cooperative housing 16,240 15,893 15,652 Private rental properties (rental housing) 40,403 37,225 34,158 Industrial properties 1,728 1,156 1,229 Office and business properties 34,206 34,077 33,156 Agricultural properties, etc Properties for social, cultural and educational purposes 4,389 4,041 3,724 Other properties Total 315, , , Assets held temporarily Properties acquired through foreclosure Subsidiaries in possession with a view to sale 1) Total ) Consisted on 30 June of a company acquired in connection with a loan exposure. 13 Other assets Positive fair value of derivatives Interest and commission receivable Loan applications in process Other assets Total Issued bonds at fair value Issued mortgage bonds, nominal value 321, , ,996 Adjustment to fair value 8,780 9,300 7,249 Own mortgage bonds, fair value -11,307-25,457-25,201 Total 319, , , Other liabilities Negative fair value of derivatives Interest and commission payable 1,366 2,085 1,634 Other liabilities Total 2,551 2,815 2,369 Jyske Realkredit Corporate Announcement No. 73 / of 21 August 22 / 25

23 Notes - cont. DKKm 30 June 31 Dec. 30 June 16 Off-balance sheet items Guarantees, etc. Other guarantees Total Other contingent liabilities, etc. Irrevocable credit commitments 19,141 19,102 19,373 Other contingent liabilities Total 19,181 19,152 19,435 Irrevocable credit commitments relate materially to the obligation to pay out loans according to offers for mortgage loans with a term of up to six months made by Jyske Realkredit (the term may be longer within the subsidised housing sector). All offers were made in accordance with Jyske Realkredit's credit policy and constitute a customary part of the process of paying out mortgage loans. However, in the event that a client is subsequently registered with the RKI debtor register, etc., Jyske Realkredit shall not be bound by the loan offer. 17 Related parties Jyske Realkredit has debit/credit balances, including bank accounts etc., with a number of its related parties. Transactions between related parties are characterised as ordinary financial transactions and services of an operational nature. Transactions with related parties were executed on an arm s length basis or at cost. Over the period 1 January to 30 June, no unusual related party transactions took place. Please see Jyske Realkredit's Annual Report (BRFkredit's annual report) for a detailed description of transactions with related parties. Jyske Realkredit Corporate Announcement No. 73 / of 21 August 23 / 25

24 Notes - cont. DKKm 30 June 31 Dec. 30 June 18 Contractual time to maturity Assets Due from credit institutions and central banks Demand deposits 1, Up to 3 months 4,027 8,982 3,404 Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Total 5,190 9,762 3,645 Loans and advances at fair value Up to 3 months 1,987 1,983 1,828 Over 3 months and up to 1 year 5,778 6,451 6,975 Over 1 year and up to 5 years 33,827 34,928 34,325 Over 5 years 274, , ,024 Total 315, , ,152 Bonds at fair value Up to 3 months 3,910 4,470 2,620 Over 3 months and up to 1 year 2,275 8,044 4,434 Over 1 year and up to 5 years 11,630 5,580 8,538 Over 5 years Total 17,864 18,182 15,670 Liabilities Due to credit institutions and central banks Demand deposits Up to 3 months 1, Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Total 1, Issued bonds at fair value 1) Up to 3 months 3,384 8,527 3,741 Over 3 months and up to 1 year 49,213 23,316 42,213 Over 1 year and up to 5 years 143, , ,652 Over 5 years 123, , ,438 Total 319, , ,044 Issued bonds at amortised cost Up to 3 months - 1,871 - Over 3 months and up to 1 year - - 3,715 Over 1 year and up to 5 years Over 5 years Total - 1,871 3,715 The above amounts are exclusive of interest. 1) The cash flow imbalance between mortgage loans (the main item of "Loans and advances at fair value") and "Issued bonds at fair value" is due to the fact that 30-year adjustable rate mortgage loans (ARM) are funded by bonds with maturities of 1-10 years. Jyske Realkredit Corporate Announcement No. 73 / of 21 August 24 / 25

25 Statement by the Executive and Supervisory Boards We have today discussed and approved the Interim Financial Report of Jyske Realkredit A/S for the period 1 January to 30 June. The Interim Financial Statements of Jyske Realkredit A/S are prepared according to the Danish Financial Business Act. Further, the Interim Financial Report was prepared in accordance with the additional Danish disclosure requirements for interim financial reports of issuers of listed bonds. The Interim Financial Report is unaudited and has not been reviewed, but the external auditor verified the profit, and this verification included audit procedures in line with the requirements relating to a review, and hence it was ascertained that the conditions for on-going recognition of the profit for the period in the capital base were met. In our opinion, the Interim Financial Statements give a true and fair view of Jyske Realkredit's assets, equity and liabilities as well as its financial position at 30 June and also of Jyske Realkredit's financial performance for the period 1 January to 30 June. In our opinion, the Management s Review gives a fair presentation of the development in the company's performance and financial position, the profit for the period and the company s financial position as a whole as well as a description of the most material risks and elements of uncertainty that may affect the company. Kgs. Lyngby, 21 August Executive Board Lars Waalen Sandberg Chief Executive Officer Supervisory Board Carsten Tirsbæk Madsen Chairman Niels Erik Jakobsen Deputy Chairman Per Skovhus Peter Schleidt Anette Lykke Poulsen Employee Representative Kim Henriksen Employee Representative Jyske Realkredit Corporate Announcement No. 73 /, of 21 August 25 / 25