DNB Bank DNB Boligkreditt. September 2018

Transcription

1 DNB Bank DNB Boligkreditt September 2018

2 Content DNB A Brief Overview The Norwegian Economy Financial Targets, Performance and Capital Loan Book and Asset quality Funding Appendix: Cover Pool Portfolio Information and LCR eligibility Digitalization / Vipps The Norwegian Mortgage Market Capital and Tier 1 Additional slides Financial Performance and Other information CRO Presentation Capital Markets Day

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: Aa2 (negative) S&P: A+ (positive) 4

5 The DNB Group DNB ASA DNB Bank ASA Aa2 / A+ 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 6

7 A Solid Norwegian Economy Budget surplus 1) 4.0 % 5.4 % 5.8 % Oil fund 2) ~ EUR 769 bn ~ EUR 809 bn ~ EUR 843 bn Unemployment 3) 4.7 % 4.2 % 3.9 % GDP growth 3) % % % Central Bank Rate 3) 0.5 % 0.5 % 0.5 % Source: 1) OECD Economic Outlook No. 102, November ) Ministry of Finance (National Budget 2018) 3) Statistics Norway, March

8 Government Finances are Rock-Solid Annual budget deficit/surplus forecast for ) General government net financial liabilities 1) As per cent of nominal GDP ) Source: OECD Economic Outlook No. 102, November

9 The Growth of the Sovereign Wealth Fund Adds Flexibility Government Pension Fund Global , 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 2017), DNB Markets, NBIM 9

10 Unemployment - Among the Lowest in Europe Forecasted unemployment Per cent ,2 3,7 3,6 3, F 2019F 2020F DNB Markets (Aug 18) Among the lowest unemployment in Europe Per cent Denmark Finland Norway Sweden United Kingdom Euro area (16 countries) Source: OECD Economic Outlook No. 102, November

11 Economic Growth in Norway is Picking up Again GDP growth Year on year, per cent 6% 5% 4% 3% 2% 1% 1,9 % 1,9 % 3,7 % 2,3 % 2,2 % 1,4 % 1,0 % 1,9 % 2,4 % 2,3 % 2,3 % 2,3 % 2,0 % 2,1 % 0% -1% e 2019e 2020e GDP growth Per cent 5% DNB Markets (Aug 18) Statistics Norway (Mar 18) 4% 3% 2% 1% 0% -1% -2% Norway Sweden Denmark Finland Euro Area Source: DNB Markets, Economic Outlook August

12 Oil Investments are Stabilising at a High Level Lower break-even price ensures a competitive continental shelf Petroleum investments in Norway NOK billion, share of GDP in per cent Break-even price: Sanctioned vs April 2017 USD per barrel, Brent Blend Johan Sverdrup Johan Castberg Sanctioned March 2016 September 2016 April 2017 Constant 2015 prices (lha) Share of GDP (rha) Source: Thomson Datastream, DNB Markets Source: Rystad Energy, Statoil, Wall Street Journal 12

13 Financial Targets, Performance and Capital 13

14 Financial Ambitions Towards Year-End 2019 ROE > 12 per cent Payout ratio > 50 per cent Overriding target Dividend policy < 40 per cent C/I ratio ~ 16.1 per cent CET1 ratio 1) Key performance indicator As capital level 1) Based on transitional rules. 14

15 Norway is a Digital Front Runner Enabling Change 96 % of Norwegians use the internet 91 % of Norwegians use online banking services 61 % of Norwegian population is using Vipps (payment app) 6 % of payments are made in cash Mobile platform driving growth in digital banking Annual visits to our digital platforms in millions Transforming our branch network Number of branch offices Desktop Mobile

16 DNB Delivers Solid Profit Pre-tax operating profit before impairment NOK billion ,7 34,1 30,8 28, , ,8 10 7,7 7,4 5 0 (5) 1,6 2,3 2,4 (0,4) H1 18 Pre-tax operating profit before impairment Impairment of loans 16

17 Stage 3 Net Loans and Financial Commitments (IFRS 9) ( Former net Non-Performing and Doubtful Loans IAS39 ) 1) As a result of the transition to IFRS 9 from 1 January 2018, unutilised credit lines and other financial commitments have been included. 17

18 Key Financial Ratios H Return on equity (%) Cost income (%) Comb. weighted total average spread (%) Write down ratio (%) Common equity tier 1 ratio (%) Total capital ratio (%)

19 DNB A Very Strong Capital Position DNB CET1 Capital Build-Up CET1 capital ratio transitional rules Per cent Equity development NOK bn 16,0 16,4 16,2 8,5 9,2 9,4 10,7 11,8 12,7 14,

20 DNB A Very Strong Capital Position Leverage Ratio and RAC-ratios DNB versus Nordic Peers Leverage ratio Per cent, as of 30 June S&P Risk Adjusted Capital Ratios (RAC Ratios) Per Cent, 30 June DNB s leverage ratio requirement 1) 13, ,6 11,9 11,4 10,3 9,8 DNB Nordea SEB Swedbank SHB Danske Bank 1) The Norwegian leverage ratio requirement for banks is 5 per cent effective as from 30 June For systemically important banks, such as DNB, the minimum requirement is 6 per cent. A potential breach of the leverage ratio requirement will not trigger automatic restrictions on AT1 coupon payments. 20

21 SREP CET1 Capital Requirements and Generation SREP includes Pillar 2 requirements Pillar 2 requirements in Norway are not included in the MDA trigger level 1) Management buffer must be seen in connection with DNB s capital generation abilities 16,4 % 16,2 % 1,6 % 1,6 % ~ 16.1 % SREP 15.2 % Capital generation Basispoints (bps) transitional rules 1,6 % 1,6 % 2,0 % 2,0 % ,0 % 3,0 % 2,5 % 2,5 % ,5 % 4,5 % YE Target Pillar 1 Min Requirement Conservation Buffer Systemic risk Buffer SIFI Buffer Countercyclical Buffer Pillar 2 Requirement SREP Requirement Management Buffer DNB CET 1 DNB Bank Group CET Dividends and Buy-backs CET1 build up 1) On 27 April 2018 the Norwegian FSA published a consultation paper with its proposal for final implementation of CRR/CRD IV. The FSA suggests to include the Pillar 2 requirements in the calculation of the MDA trigger level when the CRR/CRD IV is to be fully implemented in Norway. The Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted. 2) In accordance with CRD IV, the institution-specific CCyB rate will be a weighted average of the rates in the jurisdictions in which the institution operates. In Norway the countercyclical buffer is currently 2.0 % and DNB Bank s effective CCyB rate is approximately 1.6 %. 21

22 MREL proposal from NFSA 29 June 2018 Proposed legislation Loss absorption requirement to be covered by existing own funds requirement Recapitalization requirement to be covered by a any excess capital and tier 3 capital contractually subordinated to senior debt. Timeframe It is still uncertain when MREL requirements for Norwegian banks will enter into force. Subordination requirement must be fulfilled before 31 December Expected requirement The full implications of the proposals still has to be clarified. The final MREL requirement will be set on an individual basis. DNB s preliminary calculations indicate a need for approximately NOK 150 billion (~EUR 16 billion) of tier 3 capital. Outstanding senior debt as of 1Q18 is approximately NOK 150 billion of which NOK 135 billion will redeem before 31 December Outstanding senior debt with remaining maturity of more than one year, will count as eligible liabilities in the transitional period. Preliminary conclusion During the transitional period until 31 December 2022, DNB will gradually replace maturing senior debt with tier 3/ senior non-preferred debt. 22

23 IFRS 9 / Basel IV - DNB is well positioned for future regulatory requirements IFRS 9 IFRS 9 was implemented from 1 January 2018 and reduced the common equity Tier 1 capital ratio by approximately 28 basis points in Q12018 as a one off effect. IFRS 9 is now fully implemented, hence, DNB will not apply for transitional rules. Basel IV DNB is well positioned due to already high risk weights. The implementation of Basel IV is expected to have minimal effects for DNB. 23

24 MDA DNB above CET 1 MDA Trigger Level Pillar 2 requirements in Norway are currently not included in the MDA trigger level FSA has proposed to include Pillar 2 in MDA trigger level, but no final decision is taken 1) MDA buffer must be seen in connection with DNB s capital generation abilities 16,0 % 16,4 % 16,2 % 13,2 % 13,6 % 13,6 % Capital generation Basispoints (bps) transitional rules YE 2016 YE MDA Trigger Level DNB CET 1 DNB Bank Group CET Dividends and Buy-backs CET1 build up 1) On 27 April 2018 the Norwegian FSA published a consultation paper with its proposal for final implementation of CRR/CRD IV. The FSA suggests to include the Pillar 2 requirements in the calculation of the MDA trigger level when the CRR/CRD IV is to be fully implemented in Norway. The Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted. 2) In accordance with CRD IV, the institution-specific CCyB rate will be a weighted average of the rates in the jurisdictions in which the institution operates. In Norway the countercyclical buffer is currently 2.0 % and DNB Bank s effective CCyB rate is approximately 1.6 %. 24

25 DNB: Significantly Higher RW Density than Nordic Peers Risk Weighted Assets Per cent of total assets, 30 June ,9 % 21,2 % 21,1 % 21,3 % 16,6 % 18,4 % DNB SEB Nordea Danske Swedbank SHB Core Equity Tier 1 30 June ,2 19,3 19,9 15,9 23,6 21,4 10,6 12,1 11,0 10,5 9,0 DNB SEB Nordea Danske Swedbank SHB CET1 ratio transitional rules CET1 ratio Basel III * Transitional rules for other banks as of 31 December

26 Loan Book and Asset Quality 26

27 Loan Book EAD by Segments as of 30 June 2018 Other corporate customers 4 % Commercial real estate 10 % Shipping 4 % Oil, gas and offshore 6 % Power and renewables 2 % Healthcare 2 % Public sector 1 % Mortgages and other exposures, personal customers 52 % **) Fishing, fish farming and farming 2 % Trade 3 % Manufacturing 4 % Residential property 5 % Services 3 % Technology, media and telecom 2 % Including net non-performing and net doubtful loans and guarantees. Exposures at default are based on full implementation of IRB. The portfolio banks and financial institutions is still subject to final IRB approval from the Norwegian FSA (Finanstilsynet). **) Of which mortgages 46 per cent. 27

28 Aiming to Reduce Volatility and Increase Profitability Through Rebalancing of the Portfolio Reducing Exposure in Cyclical Industries USD billion Rebalancing Between Large Corporates and Personal Customers % 54% 52% 48% Q18 Shipping Q18 Oil, gas and offshore 2Q Q 2018 Mortgages and other exposures, personal customers Corporate loans 28

29 Mortgage Lending in DNB is Based on Cash Flow 1. Willingness to repay the loan Credit history 2. Capability of repaying the loan Including 5 per cent interest rate stress Amortization requirement above 60 % LTV Max 5x gross income 2% Current mortgage rate 5 % 7% Mortgage rate including stress test 3. Collateral LTV max 85 % 4. Monthly behavior scoring of borrowers 29

30 House Prices Fundamental Factors Explaining the Past House Price Increase Nominal House Prices ,00 300,00 250,00 200,00 150,00 100,00 50, Norwegian House Prices Completed housings less growth in households Norway Sweden USA UK Denmark Nominal prices CPI-deflated prices Income per capita-deflated prices Source: Eiendomsverdi AS (member of the European AVM Alliance) Source: Real Estate Norway, Statistics Norway Source: Norges Bank, Statistics Norway 30

31 House Price Development in Norway and Oslo 1) Prices are now 6,35 % higher than at the start of 2018 and 2,2 % higher than 12 months ago. DNB expects relative flat development in house prices going forward. House Price Growth As of August 2018 All-time-high = April -17/Mai -18 for Norway, Feb 2017 for Oslo House Price Growth 1 Jan 2007 = Index Norway 2,2 % -0,2 % Since all-time-high Oslo 3,4 % -4,5 % Last 12 months Norway Oslo Source: Eiendomsverdi AS (member of the European AVM Alliance) Source: Eiendomsverdi AS (member of the European AVM Alliance) 1) The methodology for house price data was revised in January 2018, hence there are some differences in data points from previous versions of this presentation. 31

32 Mortgage Lending Regulation Tightened Regulation from January 2017 has Impacted House Price Growth Max 5x gross income Max 85 % LTV 60 % for secondary home in Oslo Debt servicing capacity 5 percentage points interest rate increase Amortization requirement above 60 % LTV 2.5 % of approved loan or principal payment as for 30 year annuity House Price Growth 1 Jan 2007 = Index Banks have some flexibility Banks can deviate in 10 % of mortgage applications each quarter 100 In Oslo this flexibility is limited to 8 % 75 Norway Oslo 32

33 A Very Robust Cover Pool OC close to 50 % 60% 40% 20% 41% 50% 50% 48% 0% Q18 LTV around 55 % (Weighted average) 70% 60% 50% 40% 55% 54% 54% 53% Q18 House Price Decline Current 10 % 20 % 30 % Stresstest WA Indexed LTV 53.2 % 59,1 % 66,5 % 76,0 % Eligible OC 47,1 % 44,8 % 39,7 % 31,4 % 33

34 A Very Robust Residential Loan Portfolio Loan-to-Value (LTV) Per Cent of Residential Mortgage Book, 30 June % 29% 17% 15% 5% >85 - Includes mortgages in DNB Bank and DNB Boligkreditt 34

35 Oil-Related Portfolio represents 5.4 % of Total EaD Total loan portfolio EaD NOK billion Per cent, as at 30 June Oil-related portfolio EAD NOK 104 billion 5.4 per cent of DNB s total EaD as at 30 June 2018 Oilfield services 6 % 8 % 3,6 % 1,9 % Oil & Gas 2,6 % 1,0 % 7 % 11 % 1,9 % Offshore The oil-related portfolio has been reduced significantly Down from NOK 167.1bn (8.4 % of total EaD) in September

36 Oil-Related Portfolio Offshore the Most Challenging Sector DNB s oil-related portfolio split by sub-segment in terms of exposure (EaD) and by risk grade Total Oil related segments EaD in NOK billion Offshore EaD in NOK billion Low risk Medium risk High risk Net non-performing and net doubtful commitments Oil and Gas EaD in NOK billion Low risk Medium risk High risk Net non-performing and net doubtful commitments Oilfield Service EaD in NOK billion Low risk Medium risk High risk Net non-performing and net doubtful Probability of default (per cent) commitments Low risk Medium risk High risk impaired Low risk Medium risk High risk Net non-performing and net doubtful commitments

37 Offshore Exposure is 1,9 % of DNB s Total Loan Portfolio Total loan portfolio EaD NOK billion Per cent, as at 30 June 2018 Offshore exposure EaD NOK 36 billion Per cent of DNB s portfolio, as at 30 June 2018 Rig 0,6 % 0,3 % Other offshore 1,9 % 0,9 % Offshore Supply Vessels (OSV) 37

38 Shipping Exposure is 3.8 % of DNB s Total Loan Portfolio The Shipping Portfolio is Well Diversified Total loan portfolio EaD NOK billion Per cent, as at 30 June 2018 Shipping portfolio* EaD NOK 73 billion Per cent of DNB s total EAD, as at 30 June 2018 Other shipping 0,5 % 0,9 % Crude oil tankers 7 % 11 % 6 % 8 % 3.8 % Chemical and product tankers Gas 0,5 % 0,6 % 0,6 % 0,7 % Dry bulk The shipping portfolio has been reduced significantly Down from NOK 138.1bn (6.9 % of total EAD) in September 2015 Container * Excluding offshore portfolio. Offshore is included in oil-related portfolio. 38

39 Risk Classification and Migration DNB s Shipping Book - Excluding Offshore Shipping* EaD distribution by PD bracket NOK billion Low risk Medium risk High risk Net non-performing and net doubtful commitments * Numbers for the Shipping Offshore and Logistics Division excluding offshore portfolio. Offshore is included in oil-related portfolio. 39

40 Previous Shipping Experience Provides Comfort Accumulated shipping impairments, 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. Presented at DNB CMD

41 Funding 41

42 DNB Funding Structure Net Stable Funding Ratio (NSFR) Average Life of Long-term Funding Senior debt and covered bonds, years Ratio of Deposits to Net Loans Per Cent 105% % 2,

43 DNB is a Well Established International Borrower With a Strong Focus on Diversification of Funding Sources DNB Bank EMTN program of Samurai Shelf (JPY) USD 144A program USCP program of Yankee CD program of ECP/CD program of EUR 45 billion JPY 500 billion USD 10 billion USD 18 billion USD 15 billion EUR 15 billion DNB Boligkreditt (Covered Bonds) Covered Bond program of EUR 60 billion Covered Bond program of USD 12 billion 43

44 Issuance of Long Term Debt 2018 EURO bill Tenor Covered Bonds 6,0 7,5 Senior Bonds 0,0 0,0 Sum 6,0 7,5 Tier 1 / Tier 2 1,0 Total 7, EURO bill Tenor Covered Bonds 7,5 8,0 Senior Bonds 1,6 3,0 Sum 9,1 7,1 Tier 1 / Tier 2 1,1 Total 10, EURO bill Tenor Covered Bonds 7,0 7,7 Senior Bonds 2,8 5,7 Sum 9,8 7,1 Tier 1 / Tier 2 0,9 Total 10,7 44

45 A Well Established International Covered Bond Issuer Volume Tenor Maturity EUR 1,500 mn 5 years 2018 Nov EUR 1,500 mn 7 years 2019 Jun EUR 1,250 mn 5 years 2019 Oct EUR 1,250 mn 5 years 2020 Oct EUR 1,500 mn 5 years 2021 Jan EUR 1,500 mn 10 years 2021 Jun EUR 2,000 mn 5 years 2022 Jan EUR 2,000 mn 10 years 2022 Mar EUR 1,000 mn 10 years 2022 Nov EUR 1,500 mn 5 years Jan EUR 1,500 mn 7 years 2023 Apr EUR 1,500 mn 7 years Nov EUR 1,500 mn (Green ) 7 years 2025 Jun EUR 1,500 mn 10 years 2026 Sep EUR 1,000 mn (FRN) 5 years 2019 Jan EUR 1,000 mn (FRN) 7 years 2021 Nov USD 1,250 mn 5 years May USD 1,500 mn 5 years Mar USD 1,000 mn 5 years 2023 Jun GBP 500 mn (FRN) 5 years Feb 45

46 DNB Green Covered Bonds Eligibility criterion for DNB s green covered bonds: Residential buildings completed in 2012 or later (derived from the implementation of the TEK10 and TEK17 building codes) ~NOK 53 bn eligible green assets (within 15% of the most energy efficient residential buildings in Norway) An aggregated portfolio approach has been used to manage the green assets Eligible green assets at all times exceeds all outstanding green liabilities For further information, see 46

47 DNB Senior Curve Volume Tenor Maturity EUR 1,000 mn 10 years 2020 Jun EUR 2,000 mn 10 years 2021 Feb EUR 1,000 mn 10 years 2022 Jan EUR 750 mn 7 years 2023 Mar EUR 1,000 mn (FRN) 5 years 2019 Jan EUR 1,000 mn (FRN) 5 years 2020 Jan EUR 650 mn (FRN) 5 years 2020 Aug USD 1,250 mn 3 years 2020 Oct USD 1,250 mn 5 years 2021 Jun USD 500 mn (FRN) 3 years 2020 Oct USD 250 mn (FRN) 5 years 2021 Jun 47

48 Funding Contacts Long Term Funding: Thor Tellefsen Senior Vice President, Head of Long Term Funding Phone direct: Mobile: thor.tellefsen@dnb.no Lars Ekeland Senior Vice President, Long Term Funding Phone direct: Mobile: lars.ekeland@dnb.no Lene Bergwitz-Larsen Senior Vice President, Long Term Funding Phone direct: Mobile: lene.bergwitz-larsen@dnb.no Short Term Funding: Åsmund Midttun Senior Dealer, Rates, FICC Phone direct: Mobile: asmund.midttun@dnb.no / amidttun@bloomberg.net Erik Brække Senior Vice President, Rates, FICC Phone direct: Mobile: erik.brakke@dnb.no / ebraekke@bloomberg.net Stephen Danna First Vice President, FX/Rates/Commodities, New York Phone direct: Mobile: stephen.danna@dnb.no / sdanna@bloomberg.net 48

49 Appendix Appendix A: Cover Pool Portfolio Information and LCR Eligibility 49

50 Future Updates On Cover Pool Developments DNB has implemented the common Harmonised Transparency Template of the European Covered Bond Council which is available on the DNB website. Information about the cover pool of DNB Boligkreditt may be accessed via DNB s web page: Contacts DNB Boligkreditt AS: - Per Sagbakken, CEO: per.sagbakken@dnb.no Portfolio information is updated when DNB quarterly results are released 50

51 DNB Boligkreditt Covered Bonds Cover Pool Data Cover Pool Data Rating (Moody s/s&p) Aaa/AAA Cover Pool Size (million) 622,778 No. of Mortgages in the Cover Pool 403,266 Average Loan Balance (thousands) 1,544 Regulatory Overcollateralisation Requirement 2.0 % Overcollateralisation 48,0 % Weighted Average LTV (Indexed) 53,2% Pool statistics as of 31 March Cover pool reporting coincides with DNB quarterly financial reporting. Cover Pool Sensitivity Analysis Stresstest House Price Decline Current 10 % 20 % 30 % WA Indexed LTV 53.2 % 59,1 % 66,5% 76,0 % Eligible Overcollateralisation 47,1 % 44,8 % 39,7 % 31,4 % 51

52 Well diversified residential mortgage book within Norway 2.7 % 1.3 % Eastern Norway 66 % Western Norway 16 % 3.6 % Northern Norway 8 % Southern Norway 5 % Mid- Norway 5 % 1.5 % 5,2% 6.3 % 0.3 % 7.8 % 2.0 % 1.3 % 1.6 % 2,9 % 6.0 % 6.4 % 1.8 % 5.7 % 24.3 % 19.2 % DNB Boligkreditt cover pool as of 30 June

53 Portfolio Characteristics Report date: Report currency: NOK Key Characteristics Overcollateralisation Total cover pool, nominal balance* (mill.) Cover pool size: Number of mortgages Residential mortgages, loan balance (mill.) Number of borrowers Covered bonds outstanding (mill.) Average loan balance (thousands) Overcollateralisation 48,0 % Outstanding covered bonds, nominal balance (mill.) Substitute assets (% of total cover pool) 0,0 WA indexed LTV (%) 53,2 WAL of cover pool (contractual maturity in years) 12,7 WAL of outstanding covered bonds (extended maturity in years) 5,6 * All cover pool assets are denominated in NOK. ** Seasoning indicates the number of months since collateral for the loan was established. Maturity Structure Cover Pool Maturity Structure Covered Bonds Contractual maturity (years) Loan balance (mill.) % Extended maturity (years) Loan balance (mill.) % ,4 % ,9 % ,7 % ,8 % ,9 % ,1 % ,5 % ,0 % ,2 % ,9 % > ,2 % > ,2 % Total ,0 % Total ,0 % Expected maturity (years) Loan balance (mill.) % ,6 % ,6 % ,3 % ,5 % ,0 % > ,1 % Total ,0 % 53

54 Portfolio Characteristics cont. Loan Size Concentration Risk Private individuals Loan balance (mill.) Number of loans % 1,000, largest exposures 0,2 % > 1,000,000 2,000, largest exposures excl. housing cooperatives 0,1 % > 2,000,000 3,000, > 3,000,000 4,000, Property Types > 4,000,000 5,000, Loan balance (mill.) % > 5,000, Residential ,0 % Total Commercial 0 0,0 % Other 0 0,0 % Housing Cooperatives Loan balance (mill.) Number of loans Total ,0 % 5,000, > 5,000,000 10,000, o/w Housing Cooperatives / Multi-family a ,0 % > 10,000,000 20,000, o/w Forest & Agriculture 0 0,0 % > 20,000,000 50,000, > 50,000, ,000, Occupancy Type > 100,000, % Total Owner occupied 78,8% Second homes / Holiday houses 0,3% LTV buckets Buy to let / Non owner occupied houses 0,1% Indexed LTV Loan balance (mill.) % Other 20,7% ,1 % Total 100,0% ,6 % ,9 % Repayment Type ,2 % % ,8 % Amortization 75,9 % ,5 % Interest only* 24,1 % ,5 % Total 100,0 % > ,4 % *No principal payments for a limited period of time. Total ,0 % 54

55 Portfolio Characteristics cont. Seasoning Non Performing % Non performing loans 0,12 % Up to 12months 17,2 % months 16,5 % Arrears months 12,6 % 30 - < 60 days 0,09 % months 17,3 % 60 - < 90 days 0,04 % 60 months 36,4 % 90 - < 180 days 0,04 % Total 100,0 % 180 days 0,08 % Interest Rate Type Fixed Rate 6,1 % Floating Rate 93,9 % Geographical Distribution Loan balance (mill.) % Eastern Norway: 66 % Østfold ,7 % Western Norway: 16 % Akershus ,2 % Northern Norway: 8 % Oslo ,3 % Southern Norway: 5 % Hedmark ,8 % Mid-Norway: 5 % Oppland ,9 % Buskerud ,0 % Vestfold ,4 % Telemark ,0 % Aust-Agder ,3 % Vest-Agder ,6 % Rogaland ,3 % Hordaland ,8 % Sogn og Fjordane ,3 % Møre og Romsdal ,5 % Trøndelag ,2 % Nordland ,6 % Troms ,7 % Finmark ,3 % Svalbard 9 0,0 % Total ,0 % 55

56 Cover Pool Sensitivity Analysis and Overcollateralisation History Stresstest - House price decline House price decline Current 10 % 20 % 30 % Total cover pool balance (nominal, NOKbn) WA indexed LTV (%) 0,5 0,6 0,7 0,8 Eligible cover pool balance (nominal, NOKbn) Total outstanding covered bonds (nominal, NOKbn) Eligible overcollateralization 47,1 % 44,8 % 39,7 % 31,4 % Cover Pool Overcollateralisation History Latest overcollateralisation requirement for AAA/Aaa rating: S&P: 15.3 % Moody s: 0 % 56

57 Non Performing Loans in DNB Boligkreditt AS 90+ days in arrears 0,40% 0,35% 0,30% 0,25% 0,20% 0,15% 0,10% 12 bp 0,05% 0,00% 90+ days arrears 57

58 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 58

59 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 59

60 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 marked with a "N/A" what regards own-use covered bonds 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). 60

61 Appendix Appendix B: Digitalization/Vipps 61

62 Strategic Partnership to Fend Off International Competition 105 Norwegian banks rally around the Vipps payment platform, while an additional four banks have a distribution agreement 109 out of 128 Norwegian banks are distributing Vipps Vipps a single, strong and distinct payment service provider Two main bank-backed competitors in the mobile payment market have terminated their operations Norwegian banks stand united behind the Vipps platform; ensures strong distribution Vipps spun off as an autonomous joint venture 105 banks as owners Four banks with distribution agreements DNB as the majority shareholder 62

63 Norway Loves Vipps The fastest growing brand in Norway Growth in user base by age group Age group Per cent of population % 79% % 76% 95% % 71% % 63% Brand recognition % 29% Source: Statistics Norway 63

64 Expanding from a P2P service to a leading payment platform Leveraging on a strong P2P customer base to increase the number of fee-based transactions Active users, million Vipps roadmap % 45% 35% 25% Strong link between P2P customer base and P2B attractiveness 61 per cent of the Norwegian population (above the age of 15) is using Vipps P2P > businesses, associations and sports clubs accept payments via Vipps P2B InStore solution in pilot with McDonalds 22 per cent of transactions are generating fees % Expanding to the Nordics 0.2 May15 Sept.15 Jan.16 May16 Sept.16 Jan.17 May17 Sept.17 Highlights P2P Settle P2B ecom Invoice InStore Spinoff P2P users (lhs) Fee-based transactions, per cent (P2B share of total transactions) 5% Ambition to make Vipps the preferred payment partner for companies operating across the Nordics Will make our technological platform available across the Nordics 64

65 Appendix Appendix C: The Norwegian Mortgage Market 65

66 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 110,000). In Norway, all borrowing costs are deductible from taxable income at the current rate of 23 %: Households are therefore better able to withstand an increase in interest rates. Source: Finance Norway - FNO 66

67 Appendix Appendix D: Capital and Tier 1 67

68 Capital Adequacy Across the Key Relevant Entities DNB has to meet all capital requirements on DNB ASA group level ( DNB ), DNB Bank Group level ( DNB Bank Group ) and DNB Bank ASA solo level ( DNB Bank ) CET1 and Total Capital Ratio Transitional rules, per ,7 % 20,2 % 21,3 % 16,2 % 16,2 % 17,6 % DNB DNB Bank Group DNB Bank ASA CET1 Total Capital Ratio 68

69 Overall Capital Requirements under SREP Pillar 1 capital requirements in Norway consist of minimum requirements and combined buffer requirements As a result of the SREP, the supervisors may decide on additional capital add-on (pillar 2), which together with the pillar 1 requirements form the Overall capital requirement If there is a breach of the combined buffer requirements under Pillar 1, there will be automatic restrictions on dividends etc. (ref. CRD IV article 141) However a breach of the Overall capital requirement under SREP will not cause automatic restrictions: The Bank will have to present a plan to the NFSA how to restore the capital ratios If the plan is not sufficient, the NFSA will consider other measures. The measures will depend on the reasons behind the breach 69

70 Pillar 2 requirements in Norway are currently not included in the MDA Trigger Level 1) MDA restrictions will only apply if there is a breach of the Pillar 1 requirements (Minimum capital requirements + Combined buffer requirements) Pillar 2 requirements in Norway do not influence the MDA trigger level Stated in a letter from the Ministry of Finance dated 15 January 2016 Confirmed by the NFSA in a response letter dated 15 February 2016, and stated in a circular from the NFSA dated 27 June ) On 27 April 2018 the Norwegian FSA published a consultation paper with its proposal for final implementation of CRR/CRD IV. The FSA suggests to include the Pillar 2 requirements in the calculation of the MDA trigger level when the CRR/CRD IV is to be fully implemented in Norway. The Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted. 70

71 DNB s Solid Profitability Should Ensure AT1 Coupon Payments Profit Before Tax AT1 Coupon Payments Dividend and share buy-back 31, ,4 26, ,3 9,3 15,2 13, ,9 0,1 0,5 1, ) YTD Dividend payments on ordinary shares and coupon payments on Additional Tier 1 (AT1) instruments are at the discretion of the issuer DNB will give due consideration to the capital hierarchy and look to preserve the seniority of claims going forward* * Statement given at the DNB Capital Markets Day (27 November 2014) 1) Estimated AT1 coupon payments for

72 Leverage Ratio Requirement Norwegian leverage ratio requirement effective as from 30 June 2017: Minimum leverage ratio 3 % 1) Bank requirement 2 % SIFI requirement 1 % Total SIFI/DNB requirement 6 % As at 30 June 2018, DNB Group reported a leverage ratio of 6.8 % Well above regulatory requirement A breach of the leverage ratio requirements will not trigger automatic restrictions on AT1 coupon payments. If there is a breach of the leverage ratio requirement, the financial institution will have to present to the NFSA a plan how to restore the leverage ratio. Regulation dated 20 December ) Requirement for credit institutions such as DNB Boligkreditt AS. 72

73 ADI Available Distributable Items Items available for distribution is defined in the Norwegian Public Limited Company Act:* Following this definition, the ADI level is calculated as follows: ADI = total equity share capital fund for unrealized gains For 2017 DNB has decided also to deduct additional tier 1 capital from the ADI. DNB Bank ASA (31 December 2017): ADI = NOK 170bn 18bn 2bn 16bn (AT1) = NOK 133bn => Due to the significant amount available for distribution, we don t assess the ADI as a potential restriction for coupon payments. * The Norwegian CRD IV Regulation does not include any definition of ADI 73

74 Appendix Appendix E: Additional Slides - Financial performance and Other information 74

75 Second quarter financial highlights Return on equity Per cent, 12-month trailing average Return on equity 11.8 per cent in 2Q18 On track to target Earnings per share NOK 3.65 Up from NOK 3.07 in 2Q Strong growth in loans to customers Annualised growth of 5.7 per cent in first half ) 9.7 Continued improvement in asset quality Net impairment reversals of NOK 54 million 2Q17 3Q17 4Q17 1Q18 2Q18 Increased revenue from commissions and fees High IBD activity and income from money transfers 1) Total customer segments currency adjusted 75

76 Asset quality continued to improve Net impairment losses had a positive impact on the income statement of NOK 54 million in the period Overall, the most significant macroeconomic drivers (Norway and oil industry) were stable in the quarter Impairment of financial instruments per customer segment Amounts in NOK million IFRS 9 IAS 39 2Q18 1Q18 2Q17 1Q17 Personal customers (101) (53) (84) 110 Small and medium-sized enterprises (33) (215) (156) 10 Large corporates and international customers (313) (697) Other 0 0 (44)* 15 Total (597) (562) *Total collective impairments of loans 76

77 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. 77