DNB Bank DNB Boligkreditt. November 2017

Transcription

1 DNB Bank DNB Boligkreditt November 2017

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 The Norwegian Mortgage Market Capital and Tier 1 Additional slides Financial Performance and Other information 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: Aa2 (negative) S&P: A+ (stable) DBRS: AA (low) (stable) 4

5 The DNB Group DNB ASA DNB Bank ASA Aa2 / A+ / AA (low) 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 Still a Solid Norwegian Economy Budget surplus 3.1 % 4.1 % 1) Oil fund ~ EUR 826 bn ~ EUR 845 bn 2) Unemployment 4.8 % 4.3 % 3) GDP growth % % 3) Central Bank Rate 0.5 % 0.5 % 3) Source: 1) OECD Economic Outlook No. 101, June ) Ministry of Finance (National Budget 2017) 3) DNB Markets Economic Outlook August

8 Government Finances are Rock-Solid Annual budget deficit/surplus forecast for ) General government net financial liabilities 1) As per cent of nominal GDP Iceland 0.9 Norway +4.1 Denmark -0.8 Sweden +0.9 United Kingdom -3.0 Ireland Netherlands Poland Germany -2.9 Belgium Czech R. Slovakia Luxembourg 0.4 Austria Hungary France -2.6 Slovenia Portugal -1.5 Spain -3.1 Italy -2.1 Greece -0.2 Finland -1.7 Estonia ) Source: OECD Economic Outlook No. 101, June

9 The Growth of the Sovereign Wealth Fund Adds Flexibility Government Pension Fund Global H 2017, 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 F 2018F 2019F 2020F DNB Markets (Aug 17) Among the lowest unemployment in Europe Per cent Denmark Finland Norway Sweden United Kingdom Euro area (16 countries) Source: OECD Economic Outlook No. 101, June

11 Economic Growth in Norway is Picking up Again GDP growth Year on year, per cent 6% 5% 4% 3.4 % 3% 2% 1% 1.7 % 2.5 % 2.3 % 2.3 % 1.0 % 1.0 % 2.1 % 2.4 % 2.0 % 2.0 % 2.0 % 1.9 % 0% -1% 5% e 2018e 2019e GDP growth Per cent DNB Markets (Aug 17) Statistics Norway (Sep 17) 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 2014 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 for Updated financial ambitions will be presented on the Capital Markets Day in London on 21 November ROE > 12 per cent C/I ratio < 40 per cent Overriding target towards 2019 Key performance indicator CET1 ratio ~ 16.0 per cent 1) Payout ratio > 50 per cent Requirement including management buffer Cash dividend combined with share buy-back programme 1) Based on transitional rules including increased counter-cyclical buffer requirements in Singapore, Sweden and Norway. 14

15 DNB Delivers Solid Profit Pre-tax operating profit before impairment NOK billion YTD 2017 Pre-tax operating profit before impairment Impairment of loans 15

16 Reduced Volume of Non-Performing and Doubtful Loans There are no signs of spill-over effects from oil-related industries Includes non-performing commitments and commitments subject to individual impairment. Accumulated individual impairment is deducted. Includes the Baltics, reclassified as assets held for sale. 16

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

18 DNB CET1 Capital Generation CET1 build up and dividend Basis points (bps) transitional rules CET1 capital ratio transitional rules Per cent Equity development NOK bn CET1 build up Dividends YTD YTD 18

19 Leverage Ratio DNB versus Nordic Peers Leverage ratio Per cent, 30 September DNB s leverage ratio requirement 1) DNB Nordea SEB Swedbank SHB 1) The Norwegian leverage ratio requirement for banks is 5 per cent effective as of 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. 19

20 SREP CET1 Capital Requirements SREP includes Pillar 2 requirements Pillar 2 requirements in Norway are not included in the MDA trigger level 16.0 % 16.3 % SREP 14.7% ~ 16 % 11.8 % 12.7 % 14.4 % 1.5 % 1.5 % 1.5 % 1.6 % 1.2 % 1.2 % 1) 1.6 % 1) SREP 15.2 % 1.0 % 1.0 % 2.0 % 2.0 % 2.0 % 2.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % YE 2013 YE 2014 YE 2015 YE YE 2017 Target YE 2017 Pillar 1 Minimum Requirement Conservation Buffer Systemic Risk Buffer SIFI Buffer Countercyclical Buffer Pillar 2 Requirement SREP Requirement Management Buffer DNB CET 1 DNB Bank Group CET 1 1) 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 1.5 % and DNB Bank s effective CCyB rate is approximately 1.2 %. As from YE 2017 the CCyB in Norway will increase to 2.0 % increasing DNB s effective CCyB to approximately 1.6 %. 20

21 MDA DNB Well Above CET 1 MDA Trigger Level Pillar 2 requirements in Norway are not included in the MDA trigger level 12.7 % 14.4 % 12.0 % 16.0 % 16.3 % ~16 % target YE % 13.2 % 1) 13.6 % 1) 10.0 % YE 2014 YE 2015 YE YE 2017 MDA Trigger Level DNB CET 1 DNB Bank Group CET1 CET Target 1) 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 1.5 %. DNB Bank s effective CCyB rate is approximately 1.2 %. As from YE 2017 the CCyB in Norway will increase to 2.0 % increasing DNB Bank s effective CCyB to approximately 1.6 %. 21

22 DNB: Significantly Higher RW Density than Nordic Peers Risk Weighted Assets Per cent of total assets, 30 September % 21.0 % 20.8 % 17.1 % 17.0 % DNB SEB Nordea Swedbank SHB Core Equity Tier 1 With and without transitional rules, 30 June ) DNB SEB Nordea Swedbank SHB CET1 ratio transitional rules CET1 ratio Basel III 1) This is just an illustration of a comparable CET1- ratio. DNB s CET1-ratio is calculated based on the average risk-weights on Swedish peers IRB portfolios (corporate and mortgages) as of 30 June

23 Loan Book and Asset Quality 23

24 Loan Book EAD by Segments as of 30 September 2017 Other corporate customers 4 % Commercial real estate 10 % Shipping 5 % Oil, gas and offshore 6 % Power and renewables 2 % Healthcare 2 % Public sector 2 % Mortgages and other exposures, personal customers **) 51 % Fishing and fish farming 2 % Trade 3 % Manufacturing 4 % Residential property Services 5 % 2 % Technology, media and telecom 2 % Including net non-performing and net doubtful loans and guarantees. Includes portfolio in the Baltics. 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 45 per cent. 24

25 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% 51% 49% 2012 YTD 2017 Shipping 2014 YTD 2017 Oil, gas and offshore 2Q Q 2017 Mortgages and other exposures, personal customers Corporate loans 25

26 DNB s Loan Book is Robust No Signs of Spill-over Effects to Other Loan Portfolios From the Oil-related Downturn Personal customers EAD 1) in NOK billion 726 Corporate customers excl. oil-related portfolio EAD 1) in NOK billion Oil-related portfolio EAD 1) in NOK billion Low risk Medium risk High risk Net nonperforming and net doubtful commitments Low risk Medium risk High risk Net nonperforming and net doubtful commitments Low risk Medium risk High risk Net nonperforming and net doubtful commitments 1) EAD = Exposure at default Low risk Medium risk Probability of default (per cent) High risk impaired 26

27 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 27

28 House Price Growth Can be Explained by Fundamentals Nominal House Prices Norwegian House Prices 5, ,000-10,000-15,000 Completed housings less growth in households ,000 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: Statistics Norway/ DNB Markets 28

29 House Prices Peaked in April 2017 From April 2017 we have seen a drop in house prices Prices are still higher than 12 months ago DNB expects a further modest house price drop in 2017 and 2018 House Price Growth All-time-high = April 2017 As of October 2017 Norway 0.7 % Oslo House Price Growth 1 Jan 2007 = Index % -2.8 % % Since all-time-high (April 17) Last 12 months (Oct 17) Source: Eiendomsverdi AS (member of the European AVM Alliance) Norway Source: Eiendomsverdi AS (member of the European AVM Alliance) Oslo 29

30 A Very Robust Residential Loan Portfolio Loan-to-Value (LTV) Per Cent of Residential Mortgage Book, 30 September % 30% 18% 13% 6% >85 - Includes mortgages in DNB Bank and DNB Boligkreditt 30

31 DNB Boligkreditt Covered Bonds Cover Pool Data Rating (Moody s/s&p) Aaa/AAA Cover Pool Size (million) 618,015 Cover Pool Data No. of Mortgages in the Cover Pool 416,869 Average Loan Balance (thousands) 1,483 Regulatory Overcollateralisation Requirement 2.0 % Overcollateralisation 56.8 % Weighted Average LTV (Indexed) 52.8 % Pool statistics as of 30 September Cover pool reporting coincides with DNB quarterly financial reporting. Cover Pool Sensitivity Analysis Stresstest House Price Decline Current 10 % 20 % 30 % WA Indexed LTV 52.8 % 58.7 % 66.0 % 75.4 % Eligible Overcollateralisation 55.9 % 53.7 % 48.3 % 39.5 % 31

32 DNB: Well Diversified Within Norway Limited exposure to the most oil exposed areas Well diversified residential mortgage book within Norway* Eastern Norway 66 % Western Norway 16 % Northern Norway 8 % Southern Norway 5 % Mid- Norway 5 % Limited exposure to most oil exposed areas Rogaland 6.4 % Hordaland 7.8 % Vest-Agder 1.6 % * DNB Boligkreditt cover pool as of 30 September

33 Oil-Related Portfolio Represents 5.9 % of Total EaD Total loan portfolio EaD NOK billion Per cent, as at 30 September 2017 Oil-related portfolio EAD NOK 114 billion 5.9 per cent of DNB s total EaD as at 30 September 2017 Oilfield services 1.0 % 6 % 8 % 3.8 % 2.2 % Oil & Gas 2.8 % 7 % 11 % 2.2 % Offshore The oil-related portfolio has been reduced significantly Down from NOK 167.1bn (8.4 % of total EaD) in September

34 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 commitments Low risk Medium risk High risk Net non-performing and net doubtful commitments EaD: Exposure at Default, PD: Probability of default. Figures from Fact book as at 31 March Based on DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk

35 Offshore Exposure is 2.2 % of DNB s Total Loan Portfolio Total loan portfolio EaD NOK billion Per cent, as at 30 September 2017 Offshore exposure EaD NOK 42 billion Per cent of DNB s portfolio, as at 30 September 2017 Rig 0.7 % 0.4 % Other offshore 2.2 % 1.1 % Offshore Supply Vessels (OSV) 35

36 Shipping Exposure is 4.7 % of DNB s Total Loan Portfolio The Shipping Portfolio is Well Diversified Total loan portfolio EaD NOK billion Per cent, as at 30 September 2017 Shipping portfolio* EaD NOK 91 billion Per cent of DNB s total EAD, as at 30 September 2017 Other shipping 7 % 11 % 6 % 8 % 4.7 % Chemical and product tankers Gas 0.6 % 0.6 % 0.8 % 0.7 % 1.0 % 0.9 % Crude oil tankers 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. 36

37 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. 37

38 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

39 Funding 39

40 Q1 17 Q2 17 Q3 17 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% %

41 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 41

42 Issuance of Long Term Debt 2017 EURO bill Tenor Covered Bonds Senior Bonds Sum Tier 1 / LT Total EURO bill Tenor Covered Bonds Senior Bonds Sum Tier 1 / LT Total EURO bill Tenor Covered Bonds Senior Bonds Sum Tier 1 / LT Total

43 A Well Established International Covered Bond Issuer Volume Tenor Maturity EUR 1,500 mn 5 years 2018 Jan 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 7 years 2023 Apr 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 2,000 mn 5 years Mar USD 1,250 mn 5 years May USD 1,500 mn 5 years Mar GBP 500 mn (FRN) 5 years Feb 43

44 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 Feb 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 44

45 Funding Contacts Long Term Funding: Thor Tellefsen Senior Vice President, Head of Long Term Funding Phone direct: Mobile: thor.tellefsen@dnb.no Håkon Røsand Senior Vice President, Long Term Funding Phone direct: Mobile: hakon.rosand@dnb.no Kristine Øvrebø Senior Vice President, Long Term Funding Phone direct: Mobile: kristine.ovrebo@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 45

46 Appendix Appendix A: Cover Pool Portfolio Information and LCR Eligibility 46

47 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 47

48 Portfolio Characteristics Report date: Report currency: NOK Key Characteristics Overcollateralisation Total cover pool, nominal balance* (mill.) 618,015 Cover pool size: Number of mortgages 416,869 Residential mortgages, loan balance (mill.) 618,015 Number of borrowers 350,133 Covered bonds outstanding (mill.) 394,057 Average loan balance (thousands) 1,483 Overcollateralisation 56.8 % Outstanding covered bonds, nominal balance (mill.) 394,057 Substitute assets (% of total cover pool) 0.0 WA indexed LTV (%) 52.8 WAL of cover pool (contractual maturity in years) 12.7 WAL of outstanding covered bonds (extended maturity in years) 5.1 * 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.) % , % 0 1 6, % , % , % , % , % , % , % , % , % > , % > 10 26, % Total 618, % Total 394, % Expected maturity (years) Loan balance (mill.) % , % , % , % , % , % > 10 25, % Total 394, % 48

49 Portfolio Characteristics cont. Loan Size Concentration Risk Private individuals Loan balance (mill.) Number of loans % 1,000,000 79, , largest exposures 0.2 % > 1,000,000 2,000, , , largest exposures excl. housing cooperatives 0.1 % > 2,000,000 3,000, ,226 63,675 > 3,000,000 4,000,000 84,728 24,640 Property Types > 4,000,000 5,000,000 43,176 9,705 Loan balance (mill.) % > 5,000,000 50,470 7,674 Residential 618, % Total 599, ,255 Commercial % Other % Housing Cooperatives Loan balance (mill.) Number of loans Total 618, % 5,000,000 2,964 1,684 > 5,000,000 10,000,000 3, o/w Housing Cooperatives / Multi-family a 18, % > 10,000,000 20,000,000 4, o/w Forest & Agriculture % > 20,000,000 50,000,000 4, > 50,000, ,000,000 2, Occupancy Type > 100,000, % Total 18,196 2,614 Owner occupied 87.4% Second homes / Holiday houses 0.4% LTV buckets Buy to let / Non owner occupied houses 0.1% Indexed LTV Loan balance (mill.) % Other 12.2% , % Total 100.0% , % , % Repayment Type , % % , % Amortization 73.6 % , % Interest only* 26.4 % , % Total % >100 1, % *No principal payments for a limited period of time. Total 618, % 49

50 Portfolio Characteristics cont. Seasoning Non Performing % Non performing loans 0.10 % Up to 12months 19.7 % months 15.6 % Arrears months 12.7 % 30 - < 60 days 0.11 % months 16.2 % 60 - < 90 days 0.03 % 60 months 35.7 % 90 - < 180 days 0.03 % Total % 180 days 0.07 % Interest Rate Type Fixed Rate 6.9 % Floating Rate 93.1 % Geographical Distribution Loan balance (mill.) % Eastern Norway: 66 % Østfold 35, % Western Norway: 16 % Akershus 116, % Northern Norway: 8 % Oslo 147, % Southern Norway: 5 % Hedmark 11, % Mid-Norway: 5 % Oppland 18, % Buskerud 37, % Vestfold 39, % Telemark 12, % Aust-Agder 8, % Vest-Agder 9, % Rogaland 39, % Hordaland 48, % Sogn og Fjordane 1, % Møre og Romsdal 9, % Sør-Trøndelag 25, % Nord-Trøndelag 7, % Nordland 22, % Troms 16, % Finmark 8, % Svalbard % Total 618, % 50

51 Cover Pool Sensitivity Analysis and Overcollateralisation History Stresstest - House price decline House price decline Current 10 % 20 % 30 % Total cover pool balance (nominal, NOKbn) 618, , , ,015 WA indexed LTV (%) Eligible cover pool balance (nominal, NOKbn) 614, , , ,529 Total outstanding covered bonds (nominal, NOKbn) 394, , , ,057 Eligible overcollateralization 55.9 % 53.7 % 48.3 % 39.5 % Cover Pool Overcollateralisation History 60.0 % 50.0 % 40.0 % Latest overcollateralisation requirement for AAA/Aaa rating: S&P: 16.0 % Moody s: 0 % 30.0 % 20.0 % 10.0 % 0.0 % Actual OC Rating requirements 51

52 Net Non Performing Loans in DNB Boligkreditt AS 0.30% 0.20% 0.10% 9 bp 0.00% 90+ days Arrears 52

53 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 53

54 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 54

55 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). 55

56 Appendix Appendix B: Digitalization 56

57 Percentage of Population Using Online Banking Percentage of population using online banking EU Germany United Kingdom Norway 90 57

58 Transforming the way we do business building future mobile platforms 57 million mobile bank logins (2Q17) 59 % of Population Users* users first month Savings app daily transactions 22% fee-based transactions 22% of all new savings agreements annualised Jan. Feb. Mar. Apr. May June June *Norwegian population > age 15 58

59 Appendix Appendix C: The Norwegian Mortgage Market 59

60 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 24 %: Households are therefore better able to withstand an increase in interest rates. Source: Finance Norway - FNO 60

61 Appendix Appendix D: Capital and Tier 1 61

62 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 % 19.6 % 16.3 % 16.3 % 20.6 % 18.4 % DNB DNB Bank Group DNB Bank ASA CET1 Total Capital Ratio 62

63 DNB versus Nordic peers: S&P RAC Ratio S&P Risk Adjusted Capital Ratios (RAC Ratios) 31 December DNB Swedbank Nordea SHB Danske Bank SEB 63

64 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 64

65 Pillar 2 not Included in the MDA Trigger Level in Norway 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

66 DNB s Solid Profitability Should Ensure AT1 Coupon Payments Profit Before Tax AT1 Coupon Payments Dividend ) 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. 66

67 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 September 2017, DNB Group reported a leverage ratio of 7.1 % 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. 67

68 The DNB Bank Group will need to record a significant net loss in order to reach the MDA trigger level Average profit before loan losses : NOK 31.2 bn + Buffer to MDA: (16.3 % %): NOK 28.5 bn = Loan loss capacity 12 month horizon NOK 59.7 bn Note: Loan loss capacity in per cent of net loans: 3.9 per cent. 68

69 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 DNB Bank ASA (31 December 2016): ADI = NOK 168bn 18bn 2bn = NOK 148bn => Due to the significant amount available for distribution, we don t assess the ADI as a potential restriction for coupon payments. 69

70 Appendix Appendix E: Additional Slides - Financial performance and Other information 70

71 Strong improvement in key figures Profits affected by: Gains of NOK 754 million related to the demerger of Vipps 1) Negative exchange rate effects of NOK 624 million related to AT1 capital Return on equity 2) Per cent Cost/income ratio Per cent Earnings per share NOK Q16 2Q17 3Q17 3Q16 2Q17 3Q17 3Q16 2Q17 3Q17 1) Net gains on fixed and intangible assets 2) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability 71

72 Income Statement Jan.-Sep. Jan.-Sep. Amounts in NOK million 3Q17 2Q17 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 (5 321) (5 518) (5 042) (16 082) (15 481) Restructuring costs and non-recurring effects (199) (97) (1) (493) (658) Pre-tax operating profit before impairment Net gains on fixed and intangible assets (7) Impairment of loans and guarantees (867) (597) (2 176) (2 026) (5 672) Pre-tax operating profit Tax expense (1 677) (1 568) (1 130) (4 608) (3 850) Profit from operations held for sale, after taxes 33 (14) 1 2 (22) Profit for the period Profit attributable to shareholders

73 Higher Net Impairments due to Lower Reversals Jan.-Sep. Jan.-Sep. Amounts in NOK million 3Q17 2Q Personal customers (60) (84) (109) Mortgage loans (2) (7) (47) Other exposures (58) (77) (61) (228) Small and medium-sized enterprises (135) (156) (360) (755) Large corporates and international customers 1) (791) (313) (1 533) (3 211) - Shipping, Offshore and Logistics Division (238) (176) (876) (2 144) - Energy Division (189) (173) (368) (888) - International Corporates Division (238) 2 (231) 80 - Nordic Corporates Division (94) (66) (108) (174) - Other units (32) (86) Total individual impairment (985) (553) (2 003) (3 700) Total collective impairment of loans 118 (44) (24) (1 971) Impairment of loans and guarantees (867) (597) (2 026) (5 672) Total impairment in relation to average volumes, annualised (0.22) (0.15) (0.17) (0.49) Stabilising economic conditions in shipping and oil-related industries Continued positive trend in collective impairment 1) Not adjusted for the reorganisation in September 73

74 Balance Sheet DNB Group 30 Sep. 30 June Amounts in NOK billion Cash and 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 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 Liquidity coverage ratio ) Excluding short-term money market deposits 74

75 CMD Nov 2016 Robust commercial real estate portfolio Healthy and stable portfolio quality Probability of default, per cent Only ~3per cent represents direct exposure to oil and gas lessees * NOK 6.9 billion out of NOK 210 billion, 30 September Dec Dec Dec Dec Dec Mar Jun Sept * >50 per cent of rent from oil & gas lessees; corporate exposure excluded 75

76 Oil Price - Assumptions from DNB Markets (Aug 2017) 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