Adapting to a new banking reality

Transcription

1 Adapting to a new banking reality Morgan Stanley Financials Conference March 21, Bjørn Erik Næss CFO of DNB

2 Profit figures last five years Pre-tax operating profit before impairment (NOK million) Pre-tax operating profit before impairment excl. basis swaps (NOK million) Profit for the period (NOK million) Profit for the period excl. basis swaps (NOK million)

3 Return on equity and cost/income ratio Return on equity (Per cent) Return on equity excl. basis swaps (Per cent) Cost/income ratio (Per cent) Cost/income ratio excl. basis swaps (Per cent)

4 Solid development in equity Tier 1 capital ratio* (CET1) * CET1 ratio requirement of minimum 9% according to EBA transitional rules 4

5 Capital adequacy figures as at 31 December 2012 comparison with Nordic peers Per cent ) DNB SEB Swedbank Handelsbanken Nordea Equity tier 1/total assets "leverage ratio" Equity tier 1/total lending Equity tier 1 ratio transitional rules Equity tier 1 ratio Basel III/Full IRB 1) DNB's risk weights are conservatively estimated based on the Norwegian FSA's requirements. The adjusted capital adequacy figure is estimated based on average observed risk weights for corresponding portfolios in Nordic Banks 5

6 A new banking reality is inevitable Drivers for a new banking reality: Debt crisis in Europe and the US A wave of new regulations Changes in consumer behaviour Capital requirements Stable longterm funding requirements Customer visits per month (1 000) Liquidity requirements Taxes 230 New banking structure in Europe Branch Mobile banking 6

7 New regulatory requirements Higher capital requirements for banks and insurance companies Plans for crisis management and recovery New demands for risk management (risk appetite) Bail-in creditors are forced to take losses Macroeconomic surveillance Better quality of capital Deposit guarantee levy Liquid asset requirements Distinctively Norwegian bank taxation? New structure of banks in Europe is on the drawing board Demand for financial stability Tax on financial transactions? Regulation of bonuses and salaries New requirements for sales and advisory processes Pensions Higher longevity provisions Restrictions on covered bond issues? Basel I, II, III Can we hope for a level playing field? 7

8 Large differences in Nordic regulations Average risk weights, advanced IRB 60 % 50 % ? % % % 10 % Mortgages Corporate 0 % Advanced IRB * Approx. 80% of portfolio reported according to the advanced IRB approach Risk weights 8 in per cent at year-end 2012

9 The bill for a new banking reality is a Dutch treat - It s changing times for owners, the bank and customers Owners DNB s ROE Bank DNB s C/I Customers DNB s lending spread 22.0% 50.6% 2.18% 11.2% 1.46% % % cut in dividend 10% reduction in FTE Wider lending spreads «The new banking reality» 9

10 New longevity assumptions for group pension insurance More stringent than expected NOK 14.4 bn Requires higher premiums and higher technical provisions Provisions to be covered by surplus investment returns Owner s contribution is expected to be 20 per cent Will not affect the Group s long-term financial targets NOK 3.8bn allocated at year-end Longevity reserves

11 Mitigating steps to cope with a new banking reality estimated effects Repricing of deposits: Annual effect of up to NOK 0.55bn Repricing of loans: Annual effect of NOK 1.6bn Temporary reduced dividend RWA efficiency Rebalancing of the portfolio 11

12 2013 outlook soft Q1, stronger Q2/2H due to repricing Deposit guarantee levy reintroduced from 2013: NOK165m/quarter Two interest days less in Q1 than in Q4 with NOK150m effect Low interest accumulation at the start of the year General seasonal variations; volume expected to gradually improve Expected negative mark-to-market effects from fixed-rate mortgages and basis swaps Margin repricing effects partly realised in Q2, full effect from 2H 12

13 Future outlook financial ambitions remain unchanged Well positioned to meet expected regulatory requirements Continued increase in interest rate spreads Moderate growth in lending volumes Flat operating expenses Low impairment losses on loans; on level with last year Further strengthening of Tier 1 capital 13

14 Financial targets towards 2015 NII Annual NII growth above 6 per cent Cost Maximum 2 per cent average annual growth in nominal costs including restructuring costs Cost/income ratio below 45 per cent in 2015 RoE RoE above 12 per cent in 2015 Capitalisation CET1 ratio (Basel III) at per cent in 2015 Dividend Unchanged long-term dividend policy at 50 per cent Temporary payout ratio per cent

15 Vi er i Norden 15