DNB Bank DNB Boligkreditt. March 2018

Transcription

1 DNB Bank DNB Boligkreditt March 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+ (stable) 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, November

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 Q 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 Statistics Norway (Nov 17) 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 % 1.8 % 1.9 % 2.5 % 2.1 % 2.4 % 2.3 % 2.3 % 2.2 % 0% -1% e 2018e 2019e 2020e GDP growth Per cent 5% DNB Markets (Jan 18) Statistics Norway (Nov 17) 4% 3% 2% 1% 0% -1% -2% Norway Sweden Denmark Finland Euro Area Source: DNB Markets, Economic Outlook January

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 Pre-tax operating profit before impairment Impairment of loans 16

17 Reduction in Non-Performing and Doubtful Loans Stable development in net non-performing and doubtful loans when adjusting for Baltics Includes non-performing commitments and commitments subject to individual impairment. Accumulated individual impairment is deducted. Includes the Baltics up to 30 September

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

19 DNB CET1 Capital Build-Up CET1 capital ratio transitional rules Per cent Equity development NOK bn

20 Leverage Ratio and RAC-ratios DNB versus Nordic Peers Leverage ratio Per cent, 31 December S&P Risk Adjusted Capital Ratios (RAC Ratios) Per Cent, 30 June DNB s leverage ratio requirement 1) 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 Management buffer must be seen in connection with DNB s capital generation abilities 16.0 % 16.4 % 1.5 % 1.6 % 1.2 % 1.6 % 2.0 % 2.0 % ~ 16.1 % SREP 15.2 % Capital generation Basispoints (bps) transitional rules % 3.0 % 2.5 % 2.5 % % 4.5 % YE 2016 YE 2017 Target Management Buffer SREP Requirement Pillar 2 Requirement Countercyclical Buffer SIFI Buffer Systemic Risk Buffer Pillar 1 Minimum Requirement DNB CET 1 DNB Bank Group CET Dividends and Buy-backs CET1 build up 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 2.0 % and DNB Bank s effective CCyB rate is approximately 1.6 %. 21

22 IFRS 9 / Basel IV / MREL - DNB is well positioned for future regulatory requirements IFRS 9 The implementation effect of IFRS 9 is estimated at NOK 3 billion and is expected to reduce the common equity Tier 1 capital ratio by approximately 25 basis points. 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. MREL The Norwegian FSA has not yet given clear indication regarding MREL-requirements. DNB is not expecting MREL issuance requirements ( tier 3 ) which exceeds the outstanding volume of senior unsecured debt. 22

23 MDA DNB well above CET 1 MDA Trigger Level Pillar 2 requirements in Norway are not included in the MDA trigger level MDA buffer must be seen in connection with DNB s capital generation abilities 16.0 % 16.4 % 14.4 % 12.0 % 13.2 % 13.6 % Capital generation Basispoints (bps) transitional rules YE 2015 YE 2016 YE 2017 MDA Trigger Level DNB CET 1 DNB Bank Group CET Dividends and Buy-backs CET1 build up 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 2.0 % and DNB Bank s effective CCyB rate is approximately 1.6 %. 23

24 DNB: Significantly Higher RW Density than Nordic Peers Risk Weighted Assets Per cent of total assets, 31 December % 23.9 % 21.6 % 21.3 % 18.5 % 18.4 % DNB SEB Nordea Danske Swedbank SHB Core Equity Tier 1 With and without transitional rules, 31 December DNB SEB Nordea Danske Swedbank SHB CET1 ratio transitional rules CET1 ratio Basel III 24

25 Loan Book and Asset Quality 25

26 Loan Book EAD by Segments as of 31 December 2017 Other corporate customers 4 % Commercial real estate 10 % Shipping 5 % Oil, gas and offshore 6 % Mortgages and other exposures, personal customers **) 52 % Power and renewables 2 % Healthcare 2 % Public sector 4) 0 % Fishing and fish 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 45 per cent. 26

27 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% Shipping Oil, gas and offshore 2Q Q 2017 Mortgages and other exposures, personal customers Corporate loans 27

28 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 28

29 House Prices Fundamental Factors Explaining the Past House Price Increase Nominal House Prices Norwegian House Prices 4,000 2, ,000-4,000-6,000-8,000-10,000-12,000-14,000-16,000-18,000 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 29

30 House Price Development in Norway and Oslo 1) House prices peaked in April 2017 Prices grew by 2 % in January House prices are now 2.2 % lower than 12 months ago DNB expects a further modest house price drop in 2018 House Price Growth All-time-high = April 2017 for Norway, February 2017 for Oslo As of January 2018 House Price Growth 1 Jan 2007 = Index Norway Oslo % -2.2 % % % 75 Since all-time-high Last 12 months (Jan 18) 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. 30

31 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 31

32 The Cover Pool is Robust Against House Price Declines OC around 50 % 60% 40% 20% 41% 50% 50% 0% LTV below 55 % (Weighted average) 70% 60% 50% 40% 55% 54% 54% House Price Decline Current 10 % 20 % 30 % Stresstest WA Indexed LTV 54.0 % 59.8 % 67.3 % 76.9 % Eligible OC 48.8 % 45.8 % 40.2 % 31.5 % 32

33 A Very Robust Residential Loan Portfolio Loan-to-Value (LTV) Per Cent of Residential Mortgage Book, 31 December % 31% 16% 14% 7% >85 - Includes mortgages in DNB Bank and DNB Boligkreditt 33

34 Oil-Related Portfolio Represents 5.8 % of Total EaD Total loan portfolio EaD NOK billion Per cent, as at 31 December 2017 Oil-related portfolio EAD NOK 109 billion 5.8 per cent of DNB s total EaD as at 31 December % 8 % 3.7 % 2.1 % Oil & Gas 2.7 % Oilfield services 0.9 % 7 % 11 % 2.1 % Offshore The oil-related portfolio has been reduced significantly Down from NOK 167.1bn (8.4 % of total EaD) in September

35 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

36 Offshore Exposure is 2.1 % of DNB s Total Loan Portfolio Total loan portfolio EaD NOK billion Per cent, as at 31 December 2017 Offshore exposure EaD NOK 40 billion Per cent of DNB s portfolio, as at 31 December % Rig 0.7 % 1.1 % 0.3 % Other offshore Offshore Supply Vessels (OSV) 36

37 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 31 December 2017 Shipping portfolio* EaD NOK 88 billion Per cent of DNB s total EAD, as at 31 December 2017 Other shipping 8 % 4.7 % Chemical and product tankers 0.6 % 0.6 % 1.1 % Crude oil tankers 7 % 11 % 6 % Gas 0.8 % 0.7 % 0.9 % 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. 37

38 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. 38

39 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

40 Funding 40

41 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% %

42 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 42

43 Issuance of Long Term Debt 2018 EURO bill Tenor Covered Bonds Senior Bonds Sum Tier 1 / Tier Total EURO bill Tenor Covered Bonds Senior Bonds Sum Tier 1 / Tier Total EURO bill Tenor Covered Bonds Senior Bonds Sum Tier 1 / Tier Total

44 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 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 44

45 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 45

46 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 Lars Ekeland Senior Vice President, Long Term Funding Phone direct: Mobile: lars.ekeland@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 46

47 Appendix Appendix A: Cover Pool Portfolio Information and LCR Eligibility 47

48 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 48

49 DNB Boligkreditt Covered Bonds Cover Pool Data Rating (Moody s/s&p) Aaa/AAA Cover Pool Size (million) 620,637 Cover Pool Data No. of Mortgages in the Cover Pool 412,374 Average Loan Balance (thousands) 1,505 Regulatory Overcollateralisation Requirement 2.0 % Overcollateralisation 49.9 % Weighted Average LTV (Indexed) 54.0 % Pool statistics as of 31 December Cover pool reporting coincides with DNB quarterly financial reporting. Cover Pool Sensitivity Analysis Stresstest House Price Decline Current 10 % 20 % 30 % WA Indexed LTV 54.0 % 59.8 % 67.3 % 76.9 % Eligible Overcollateralisation 48.8 % 45.8 % 40.2 % 31.5 % 49

50 Well diversified residential mortgage book within Norway 2.7 % 1.3 % Eastern Norway 66 % Western Norway 16 % 3.7 % Northern Norway 8 % Southern Norway 5 % Mid- Norway 5 % 1.6 % 4.2 % 1.1 % 6.4 % 0.3 % 7.8 % 2.0 % 1.4 % 1.6 % 3.0 % 6.1 % 6.5 % 1.8 % 5.8 % 24.0 % 19.0 % DNB Boligkreditt cover pool as of 31 December

51 Portfolio Characteristics Report date: Report currency: NOK Key Characteristics Overcollateralisation Total cover pool, nominal balance* (mill.) 620,637 Cover pool size: Number of mortgages 412,374 Residential mortgages, loan balance (mill.) 620,637 Number of borrowers 348,546 Covered bonds outstanding (mill.) 414,167 Average loan balance (thousands) 1,505 Overcollateralisation 49.9 % Outstanding covered bonds, nominal balance (mill.) 414,167 Substitute assets (% of total cover pool) 0.0 WA indexed LTV (%) 54.0 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 27, % Total 620, % Total 414, % Expected maturity (years) Loan balance (mill.) % , % , % , % , % , % > 10 26, % Total 414, % 51

52 Portfolio Characteristics cont. Loan Size Concentration Risk Private individuals Loan balance (mill.) Number of loans % 1,000,000 77, , largest exposures 0.2 % > 1,000,000 2,000, , , largest exposures excl. housing cooperatives 0.1 % > 2,000,000 3,000, ,986 63,960 > 3,000,000 4,000,000 86,635 25,185 Property Types > 4,000,000 5,000,000 44,645 10,037 Loan balance (mill.) % > 5,000,000 52,948 8,024 Residential 620, % Total 602, ,761 Commercial % Other % Housing Cooperatives Loan balance (mill.) Number of loans Total 620, % 5,000,000 2,955 1,681 > 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 1, Occupancy Type > 100,000, % Total 18,110 2,613 Owner occupied 86.4% Second homes / Holiday houses 0.3% LTV buckets Buy to let / Non owner occupied houses 0.1% Indexed LTV Loan balance (mill.) % Other 13.2% , % Total 100.0% , % , % Repayment Type , % % , % Amortization 74.4 % , % Interest only* 25.6 % , % Total % >100 2, % *No principal payments for a limited period of time. Total 620, % 52

53 Portfolio Characteristics cont. Seasoning Non Performing % Non performing loans 0.10 % Up to 12months 18.1 % months 16.5 % Arrears months 12.8 % 30 - < 60 days 0.11 % months 16.4 % 60 - < 90 days 0.03 % 60 months 36.2 % 90 - < 180 days 0.04 % Total % 180 days 0.07 % Interest Rate Type Fixed Rate 6.4 % Floating Rate 93.6 % Geographical Distribution Loan balance (mill.) % Eastern Norway: 66 % Østfold 35, % Western Norway: 16 % Akershus 117, % Northern Norway: 8 % Oslo 148, % Southern Norway: 5 % Hedmark 11, % Mid-Norway: 5 % Oppland 18, % Buskerud 37, % Vestfold 40, % 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 6, % Nordland 22, % Troms 16, % Finmark 8, % Svalbard % Total 620, % 53

54 Cover Pool Sensitivity Analysis and Overcollateralisation History Stresstest - House price decline House price decline Current 10 % 20 % 30 % Total cover pool balance (nominal, NOKbn) 620, , , ,637 WA indexed LTV (%) Eligible cover pool balance (nominal, NOKbn) 616, , , ,462 Total outstanding covered bonds (nominal, NOKbn) 414, , , ,167 Eligible overcollateralization 48.8 % 45.8 % 40.2 % 31.5 % Cover Pool Overcollateralisation History 60.0 % 50.0 % 40.0 % Latest overcollateralisation requirement for AAA/Aaa rating: S&P: 15.3 % Moody s: 0 % 30.0 % 20.0 % 10.0 % 0.0 % Actual OC Rating requirements 54

55 Net Non Performing Loans in DNB Boligkreditt AS 0.30% 0.20% 0.10% 10 bp 0.00% 90+ days Arrears 55

56 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 56

57 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 57

58 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). 58

59 Appendix Appendix B: Digitalization/Vipps 59

60 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 60

61 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 61

62 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 62

63 Appendix Appendix C: The Norwegian Mortgage Market 63

64 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 64

65 Appendix Appendix D: Capital and Tier 1 65

66 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 % 20.0 % 16.4 % 16.2 % 20.6 % 17.9 % DNB DNB Bank Group DNB Bank ASA CET1 Total Capital Ratio 66

67 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 67

68 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

69 DNB s Solid Profitability Should Ensure AT1 Coupon Payments Profit Before Tax AT1 Coupon Payments Dividend and share buy-back ) 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. 69

70 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 31 December 2017, DNB Group reported a leverage ratio of 7.2 % 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. 70

71 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 29.7 bn + Buffer to MDA: (16.2 % %): NOK 26.3 bn = Loan loss capacity 12 month horizon NOK 56.0 bn Note: Loan loss capacity in per cent of net loans: 3.2 per cent. 71

72 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. 72

73 Appendix Appendix E: Additional Slides - Financial performance and Other information 73

74 Improved performance through 2017 in all customer segments Driven by an increase in net interest income and net commissions and fees compared with 2016 Backed by strong Norwegian macroeconomic fundamentals and profitable growth Lower impairment losses Pre-tax operating profit NOK million 9,662 9,995 9,043 4,762 5,899 5, Personal customers Small and medium-sized enterprises Large corporates and international customers 74

75 Income Statement Full year Full year Amounts in NOK million 4Q17 3Q17 4Q Net interest income 8,863 9,007 8,372 35,422 34,110 Net commissions and fees 2,064 2,150 2,136 8,448 8,280 Net gains on financial instruments at fair value 1,693 1,065 1,689 4,548 6,513 Net financial and risk result, DNB Livsforsikring , Net insurance result, DNB Forsikring Other operating income (9) 744 1,948 Net other operating income, total 4,415 3,922 4,230 15,718 18,053 Total income 13,278 12,929 12,602 51,140 52,163 Operating expenses (5,346) (5,321) (5,213) (21,429) (20,693) Restructuring costs and non-recurring effects (672) (199) 19 (1,165) (639) Pre-tax operating profit before impairment 7,260 7,409 7,409 28,547 30,830 Net gains on fixed and intangible assets (35) 750 (12) 738 (19) Impairment of loans and guarantees (402) (867) (1,753) (2,428) (7,424) Pre-tax operating profit 6,823 7,292 5,644 26,858 23,387 Tax expense (446) (1,677) (290) (5,054) (4,140) Profit from operations held for sale, after taxes (3) (1) 4 Profit for the period 6,374 5,648 5,380 21,803 19,251 Profit attributable to shareholders 6,132 5,430 5,143 20,865 18,656 75

76 Net impairment losses reduced mainly due to reversals (of collective impairment) Full Year Full Year Amounts in NOK million 4Q17 3Q Personal customers (126) (60) (234) Mortgage loans (37) (2) (84) Other exposures (88) (58) (150) (149) Small and medium-sized enterprises (102) (135) (463) (1 088) Large corporates and international customers (1 465) (791) (2 999) (4 533) - Shipping, Offshore and Logistics (844) (238) (1 720) (2 988) Positive macroeconomic development Reduction in high-risk volumes Positive portfolio migration - Energy 4 (189) (364) (1 126) - International Corporates 26 (238) (205) (25) - Nordic Corporates (651) (94) (759) (283) - Other (0) (32) 50 (112) Total individual impairment (1 693) (985) (3 696) (5 280) Total collective impairment of loans (2 144) Impairment of loans and guarantees (402) (867) (2 428) (7 424) Total impairment in relation to average volumes, annualised (0.10) (0.22) (0.15) (0.48) Total impairment in relation to exposure at default (0.13) 76

77 Oil Price - Assumptions from DNB Markets (Aug 2017) 77

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