Presentation. Annual report 2000 RealDanmark merger Continued focus on profitability

Transcription

1 Presentation Annual report 2000 RealDanmark merger Continued focus on profitability

2 Agenda 1. Financial highlights 2. Merger with RealDanmark 3. Outlook for Group financial developments 5. Business area financial developmen 6. Risk and capital management

3 s Financial highlights Danske Bank excl. RD DKK m 2000 premerger costs Merger costs Core income 18,127-18,127 14,821 Costs 10,080-10,080 9,215 Loan losses Core earnings 7,593-7,593 5,159 Earnings, investment port. 1,439-1, Merger costs - 2,459 2,459 - Net profit 6,437 1,721 4,716 5,028 EPS ROE

4 s Financial highlights Danske Bank pro forma DKK m 2000 pre merger costs Merger costs Core income 26,393-26,393 22,195 Costs 16,148-16,148 15,397 Loan losses 1,100-1, Core earnings 9,145-9,145 6,099 Earnings, investment port. 2,461-2,461 1,848 Merger costs - 2,721 2,721 - Adjustments, acc. pol Net profit 8,394 2,090 6,304 6,905 EPS ROE

5 s Financial highlights Danske Bank DKK bn Pro forma Index 00/99 Bank loans and advances Mortgage loans Bonds and shares etc Due to credit inst., etc Deposits Issued bonds Subordinated debt Shareholders equity Total assets 1, ,

6 s ROE (based on core earnings) % Excl. RD Pro forma

7 with mark The merger with RealDanmark Staff have been reduced by app. 1,000 employees. The organisation has been integrated and adjusted in: Wholesale Banking - CIB - Danske Markets Danske Securities Investment Management - Sale of BG Luxembourg Life and Pension - Acquisition of BG Pensions Retail, mortgage finance and back office functions are b adjusted

8 with mark The merger with RealDanmark Budgets inclusive of cost savings have been negotiated Synergies affect bonus payments Synergies achieved earlier than expected Cost reductions of DKK 2.2bn still expected IT integration is proceeding Planned development of branches in postal offices has been stopped

9 with mark RealDanmark integration etail Banking and Business areas Credit products Treasury products olesale Banking Product systems Investment products Payments Group administration Danske Securities Forex Invest. Managem. E-Systems Core systems Electronic archive Customer Account Organisat. unit Standard system Life and Pensions products Securities products Fee Accou nting Interest Östgöta Enskilda Bank Leasing products Danica Approval system Mortgage products Fok Ba Realkr Danm

10 with mark Shared IT platform Products IT platform Channels Retail Wholesale Danske Securities Life and Pensions Invest. Man. Mortgage Finance New areas Control IT platform Group data Offices Branches Internet Telephone WAP Call Center New channels

11 with mark Benefits of shared IT platform Low operational costs, central back office Less expensive development - more developmen 24*365 real-time system, high accessibility Competitive cash management Relatively smooth integration of new units Better risk control, liquidity, exposures, limits... Relatively simple development of internet produ

12 with mark Internet penetration The number of online customers and payments are growing. At group level we had 520,000 online custo end-2000, corresponding to 21% of our customers. Increasing knowledge and penetration is the basis for continued growth in the number of private online customers. Penetration of Nordic corporates close to saturation Office banking in use in 92 % of the Danish corporate in 84 % of municipalities (PLS Ramböll, Dec. 2000).

13 with mark Payments via Danske Netbank/PC Jan 1998= Paym. via joint paym. fo Total Transactions in DB Transaction to other b Other

14 with mark Percentage of online trading, retail ban % Nu 25% PC and Netbank trading, left hand scale 12 20% 15% 10% 5% 0% Total trading, right hand scale Jan Feb Mar Apr Maj Jun Jul Aug Sep Okt Nov Dec

15 with mark Attractive users % Of population Internet bank use heaviest in the age range (Gallup Index DK) At least one weekly Internet transactio

16 with mark Danske Bank shares Danske Bank bought back shares worth DKK5bn in December AGM proposal to cancel 36,586,497 shares Tier 1 to be kept at the level 6.5% Danske Bank shares 2000 Number of shares, year-end 759,219, ,25 Average number of shares 527,976, ,25 Outstanding shares at year-end Shares carrying dividend end-march 2001/ ,633, ,25 768,586, ,25 Number of shares after cancellation 732,000,000 -

17 with mark Payout ratio Target: 40% payout ratio % Danske Bank Pro forma, excl. merger costs Pro forma, incl. merger costs

18 with mark Price and turnover, Danske Bank shar Monthly turnover 15,000 DKK m. 13,000 11,000 Turnover by volume P 9,000 7,000 Price, RHS 5,000 3,000 1,000 Dec-99 Feb-00 Mar-00 May-00 Jun-00 Jul-00 Sep-00 Oct-00 Dec-00 Jan-01 Monthly turnover by volume, avg. in : DKK3,419m Monthly turnover by volume, avg. in : DKK9,016m

19 with mark Market capitalisation EURm Sep 21-Mar Nordea Danske SHB SEB Swedbank DnB

20 with mark Market capitalisation EURm Sep 21-Mar Nordea SEB Swedbank Danske SHB DnB

21 with mark Upgrading of ratings On January 29, 2001, Moody s upgraded the following Danske Bank ratings Danske Bank and BG Bank A/S were upgraded from Aa3 t Realkredit Danmark bonds and Danske Kredit bonds were upgraded from Aa2 to Aa1 Subordinated debt was upgraded from A1 to Aa3

22 or Outlook for 2001 Lower world economic growth may influence earning potential of Danish companies The Norwegian economy should feel the effects of th central bank s tight monetary stance The Swedish economy is expected to be on a favoura course Hong Kong and Singapore will be closed down, engagements with big US corporates reduced

23 or Outlook for 2001 Net interest income will increase if interest rates are s Cost ratio somewhat below 60 Charge for bad and doubtful debts at similar level to 20 Core earnings will somewhat exceed their 2000 level. However, the increase will not match the increase in 2 Earnings from insurance somewhat higher than in 200 The flat yield curve will reduce current earnings on investment portfolio Tax rate expected to be 30%

24 ncial nts Group financial developments Interest spread increased Fee income growing Cost rationalisations Loan losses stabilised Earnings from investment portfolios were high in 2000

25 ncial nts Increase in interest margin Denmark, excl. repo and mortgage finance % p.a Danske Bank excl. RD BG Bank Municip. Wholesal Retail

26 ncial nts Fee and commission income, net DKK m 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Excl. RD Pro forma As a percentage of total income: 20% 24% 24% 25%/24% 27%/25%

27 ncial nts Fee and commission income growth Growth especially high in: Excl. RD Investment Management: 71% Danske Securities: 33% Payments service: 29% Guarantee commission: 14%

28 ncial nts Cost ratio Excl. RD Pro forma

29 ncial nts Net loan losses Growth in BG in 2000 due to a few large exposures DKK m 1,400 1,200 1, Excl. RD Pro forma

30 area ments Business area financial developmen Core earnings before provision Core earnings before pro in % of allocated cap pro forma excl. RD excl. RD pro forma excl. RD anking 3,545 3,284 1,764 25% 32% ge Finance 1, % 15% ale Banking 2,962 2,580 2,178 17% 18% Securities % 703%. Managem. 1, % 240% Pensions % 14%

31 area ments Retail Banking Excl. RD Pro forma DKK m Change Core income 10,093 8,211 23% 14,583 12,425 Operating expenses and depreciation 6,809 6,447 6% 11,038 10,561 Core earnings before provisions 3,284 1,764 86% 3,545 1,864 Allocated capital 10,246 7,346 40% 14,172 11,431 Core earnings as % of allocated capital 32% 24% 25% 16% Cost/core income ratio 67% 79% 76% 85%

32 area ments Retail Banking - Denmark Excl. RD Pro forma DKK m Change Core income 7,632 6,602 16% 12,122 10,816 Operating expenses and depreciation 5,072 5,269-4% 9,301 9,383 Core earnings before provisions 2,560 1,333 92% 2,821 1,433 Allocated capital 5,949 4,183 42% 9,875 8,268 Core earnings as % of allocated capital 43% 32% 29% 17% Cost/core income ratio 66% 80% 77% 87%

33 area ments Retail Banking - Sweden DKK m Change Core income 1, % Operating expenses and depreciation % Core earnings before provisions % Allocated capital 2,089 1,291 62% Core earnings as % of allocated capital 17% 16% Cost/core income ratio 70% 76%

34 area ments Retail Banking - Norway DKK m Change Core income 1, % Operating expenses and depreciation % Core earnings before provisions % Allocated capital 2,208 1,872 18% Core earnings as % of allocated capital 17% 20% Cost/core income ratio 71% 71% Fokus Bank is included from June 1, 1999

35 area ments Mortgage Finance Excl. RD Pro forma K m Change re income % 2,817 2,64 erating expenses and depreciation % 1,342 1,37 re earnings before provisions % 1,475 1,26 ocated capital 2,712 2,357 15% 14,997 13,82 re earnings as % of allocated capital 14% 13% 10% 9% st/core income ratio 15% 22% 48% 52%

36 area ments Wholesale Banking Excl. RD Pro forma KK m Change re income 4,308 3,786 14% 4,962 4,22 perating expenses and depreciation 1,728 1,608 7% 2,000 1,94 re earnings before provisions 2,580 2,178 18% 2,962 2,27 ocated capital 14,741 15,537-6% 17,039 17,39 re earnings as % of allocated capital 18% 14% 17% 13% st/core income ratio 40% 42% 40% 46%

37 area ments Danske Securities Excl. RD Pro forma K m Change e income % rating expenses and depreciation % e earnings before provisions % cated capital % 48 9 e earnings as % of allocated capital 703% 452% 504% 160% t/core income ratio 70% 80% 74% 80%

38 area ments Investment Management Excl. RD Pro forma DKK m Change Core income 1, % 1,984 1,35 Operating expenses and depreciation % Core earnings before provisions % 1, Allocated capital % Core earnings as % of allocated capital 240% 158% 182% 117% Cost/core income ratio 38% 47% 43% 54%

39 area ments Life and Pensions DKK m Change Profit from life insurance % Non-life technical result % Net interest from investments, etc % Core insurance income % Funding cost, net % Core earnings before provisions % Allocated capital 5,483 5,411 1% Core earnings as % of allocated capital 14% 15%

40 ment Risk and capital management Capital is allocated to optimise risk adjusted return. Danske Bank uses RAROC (risk adjust return on capital) Business areas target cost ratios as well as A (Annual Value Added) Focus on profitability leads to special focus on wholesale and mortgage lending Tier 1 will be kept at 6.5% through dividend payments, possibly by acquisitions or further b back of shares

41 ment RAROC RAROC measures risk adjusted return per unit of economic ris Profit and loss account Income Expenses Expected losses Other adjustments djusted return, pre-tax Economic capital RAROC Expected losses: Substitutes actual losses and provisions Other adjustments: In order to normalise earnings Economic capital: Allocated according to the following risks: Credit, market, operational Shows capital need against default with a 99.97% certainty

42 ment Economic capital Pro forma, DKK bn Economic capital Core capital Credit risk 17 - Market risk 10 - Operational risk 12 - Total 39 51

43 ment Pro forma RAROC Danske Bank Pro forma % Merger effect Group 26 Positive Retail Banking 15 Very positive Mortgage Finance 25 Positive Wholesale Banking 18 - Life and Pensions 15 Positive Danske Securities 44 - Investment Management 216 Positive

44 ment Mortgage Finance, pro forma 200 Return on economic capital higher than return on regulatory cap DKK m Regulatory capital Economic capital Income 2,817 2,817 Core earnings before provisions 1,475 1,475 ROC / RAROC 10% 25%

45 ment Realkredit Danmark Loan to value % % % % % % Private Private sublet Offices and shops Industry and handycraft Agriculture Social Other 10-20% 20-30% 30-40% 40-50% 50-60% 60-70% 70-80% 80-90% >

46 ment Geografical distribution of credits Group credit Enddistribution by region 2000 Pro forma % Denmark 32.8 Western Europe, excl. Denmark 49.0 Eastern Europe 0.2 North America 15.0 Asia/Pasific 2.7 Central and Southern America 0.2 Africa 0.1 Total 100.0

47 ment Group earnings from investment portfoli Interest rate risk end-2000 DKK1,647m Excl. RD Pro forma DKK m Net interest income 392 1, ,521 Dividend from shares Fee and commission income Net interest and fee income 483 1,232 1,044 2,659 Market value adjustments Bonds , ,816 Shares ,114 2 Forex Financial derivatives Holdings in associated und , ,109 2,153 1, Expenses Other operating income Total 1, ,461 1,848