RESULTS DNB GROUP SECOND QUARTER 2015 AS OF 10 JULY 2015 INVESTOR MEETINGS ZÜRICH & GENÈVE. Terje Turnes (CRO) Jan Erik Gjerland (IR)

Transcription

1 Q2 RESULTS DNB GROUP SECOND QUARTER 2015 AS OF 10 JULY 2015 INVESTOR MEETINGS ZÜRICH & GENÈVE Terje Turnes (CRO) Jan Erik Gjerland (IR)

2 Second quarter 2015 Pre-tax operating profit before impairment in NOK billion 7.4 (6.7) Cost/income ratio in per cent 42.8 (43.8) Return on equity in per cent 12.1 (12.4) Earnings per share in NOK 3.04 (2.80) Common equity Tier 1 capital ratio in per cent (transitional rules) 13.0 (12.1) Figures in parentheses refer to 2Q14 2

3 Profit figures Pre-tax operating profit before impairment NOK million Pre-tax operating profit before impairment excl. basis swaps NOK million Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 Profit for the period NOK million Profit for the period excl. basis swaps NOK million Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 3

4 Return on equity and cost/income ratio Return on equity 1) Return on equity excl. basis swaps 1) Per cent Per cent Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 Cost/income ratio Per cent Cost/income ratio excl. basis swaps Per cent Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 1) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability 4

5 Ratio of deposits to net loans and earnings per share Ratio of deposits to net loans Per cent Earnings per share NOK June Sept Dec March June Q14 3Q14 4Q14 1Q15 2Q15 The ratio of deposits to net loans excl. short-term money market investments 5

6 Customer segments NOK million Pre-tax operating profit after impairment 2Q15 1Q15 2Q Personal customers Small and mediumsized enterprises Large corporates and international customers 6

7 Development in loans NOK billion June Sept Dec March June Sept Dec March June 15 Loans at end of period Loans adjusted for exchange rate movements 7

8 Development in loans and RWA NOK billion June Sept Dec March June Sept Dec March June 15 Loans at end of period RWA 8

9 Development in deposits adjusted for short-term money market investments NOK billion June Sept Dec March June Sept Dec March June 15 Deposits adjusted for short-term money market investments Deposits adjusted for short-term money market investments and exchange rate movements 9

10 Development in average interest rate spreads Per cent Lending spread Combined spread - weighted average (0.24) (0.29) (0.30) (0.29) (0.27) (0.17) (0.15) (0.11) (0.02) Deposit spread 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 10

11 Development in commissions and fees NOK million % growth ) ) 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 Sale of insurance products Asset management and custodial services Real estate broking Money transfer and banking services Investment banking services Net commissions and fees 1) The figures for 2014 and 2015 are adjusted for income from public sector activities within life insurance that are in the process of being wound up. 11

12 Income statement 1st half 1st half Amounts in NOK million 2Q15 1Q15 4Q14 3Q14 2Q 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 Restructuring costs and non-recurring effects Pre-tax operating profit before impairment Net gains on fixed and intangible assets (3) 56 (3) Impairment of loans and guarantees Pre-tax operating profit Tax expense Profit from operations held for sale, after taxes (17) (47) 16 (8) (11) (64) (30) Profit for the period Profit attributable to shareholders

13 Net gains on financial instruments Change 1Q15-2Q14 - Amounts in NOK million 2Q15 1Q15 2Q14 2Q15 2Q15 Customer revenues in DNB Markets (49) 127 Trading in foreign exchange/fixed income/equities in DNB Markets Changes in credit spreads on bonds in DNB Markets (132) (272) (282) The bank's own equity investments 12 (193) (29) Exchange rate effects, additional Tier 1 capital (191) (361) (191) Other mark-to-market adjustments (132) 57 Net gains on financial instruments at fair value, excl. basis swaps (362) 128 Basis swaps (54) (1 864) (87) Net gains on financial instruments at fair value (2 226) 42 13

14 Changes in net interest income NOK million From 2nd quarter 2014 to 2nd quarter (72) Q14 Exchange rate effects Lending and deposit volumes Interest rate instruments Commitment fees etc. Lending and deposit spreads Other net interest income 2Q15 14

15 Changes in net interest income NOK million From 1st quarter 2015 to 2nd quarter (14) (126) Q15 Lending and deposit volumes Interest days Interest rate instruments Other net interest income Exchange rate effects Lending and deposit spreads 2Q15 15

16 Continued growth in net interest income Net interest income NOK million 35,000 30,000 25,000 Net interest income expectations for 2015 Expected lending growth of 3-4 per cent Stable development in volumeweighted spreads 20,000 CAGR 8.5% 15,

17 Deposit repricing potential across customer segments Deposits in retail banking* LCI** maturing volumes and spreads public clients NOK billion, bps Deposits with repricing potential Low-yielding deposits / other Volume Average spread Total NOK 536 billion 38% 15 Total = NOK 522 billion 62% Average maturity May March April 17 * Personal customers and SMEs, ** Large Corporates and International

18 Changes in net other operating income NOK million From 2nd quarter 2014 to 2nd quarter (25) (49) (87) (108) Q14 Net commissions and fees Net gains on other financial instruments Net financial and risk result from DNB Livsforsikring Other operating income Basis swaps Profit from associated companies 2Q15 18

19 Changes in net other operating income NOK million From 1st quarter 2015 to 2nd quarter (104) (362) (1 864) Q15 Net commissions and fees Net financial and risk result from DNB Livsforsikring Other operating income Profit from associated companies Net gains on other financial instruments Basis swaps 2Q15 19

20 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Sound growth in other quality earnings New pension products Assets under management, NOK billion Private banking Assets under management, NOK billion Corporate finance Revenues in NOK million Investments Deposits CAGR 55% Q Q115 Expect underlying growth of 5% in net commissions and fees 20

21 Changes in operating expenses Change in Amounts in NOK million 2Q15 Change 2Q14 per cent Total adjusted operating expenses Of which : Exchange rate effects for units outside Norway 86 Currency-adjusted operating expenses Total adjusted operating expenses Income-related costs Ordinary depreciation on operational leasing 15 Expenses directly related to operations IT expenses 124 Pension expenses 23 Fees 21 Properties and premises (57) Other costs 37 Non-recurring effects Restructuring costs, employees Other restructuring costs and non-recurring effects 3 (5) 8 IT restructuring Operating expenses

22 Changes in operating expenses Change in Amounts in NOK million 2Q15 Change 1Q15 per cent Total adjusted operating expenses Expenses directly related to operations IT expenses 100 Properties and premises (17) Other costs 15 Non-recurring effects 215 (8) 223 Restructuring costs, employees Other restructuring costs and non-recurring effects 3 (62) 64 IT restructuring 78 (30) 108 Operating expenses

23 Our customers prefer digital banking Share of customer traffic Sales digital vs. traditional Savings agreements Car loans Mobile banking: 42% Text message banking: 25 % Manual 14% Digital 86% Manual, 50% Digital, 50% Call Center: 2% Online banking: 30% Insurance Digital 11% Consumer loans Manual, 36% Branch office: 1% Manual 89% Digital, 64% 23

24 Modernising the way we do banking Number of manual transactions in branches Key takeaways 70, ,000 50,000 40,000 30,000 20,000 Reduction so far: 67% Goal: 75% Fundamentally changing the way we operate our branches: o Eliminated manual cash handling o Moving manual banking transactions to digital channels Continued reduction in number of branches 10,

25 Keeping our best-in-class cost-efficiency position Cost/income DNB vs peer groups Per cent C/I ambition for 2017 European banks (top 50)* Nordic peer group DNB ~40% Combination of top-line growth and cost focus 25 * Based on total assets Source: SNL Financial

26 DNB s Exposure (EAD*) as of 30 June 2015 = NOK1912bn** Private individuals 7% Commercial real estate 11% Shipping 7% Logistics 1% Oil, gas and offshore 7% Energy 3% Other corporate customers 6% Residential mortgages 43% Services 2% Telecom and media 2% Manufacturing 5% Trade 3% Public sector 1% Fishing and fish farming 2% 26 *EAD = Exposure at Default **NOK1912bn is excluding NOK 27.3bn of credit inst exposure

27 Impairment of loans and guarantees 1st half 1st half Amounts in NOK million 2Q15 1Q15 4Q14 3Q14 2Q Personal customers 58 (34) (67) Mortgage loans (17) (81) (141) 33 (5) (98) (21) - Consumer finance Small and medium-sized enterprises Large corporates and international customers Nordic Corporates Division (5) (15) 333 (3) 97 (20) 40 - International Corporates Divison 93 (39) (17) Shipping, Offshore and Logistics Division (21) (116) Energy Division (2) Baltics and Poland Other units (56) (50) 22 Total individual impairment Total collective impairment of loans (101) 44 (58) (84) 52 (57) (200) Impairment of loans and guarantees Total impairment in relation to average volumes (annualised)

28 Net non-performing and net doubtful loans and guarantees 1) Per cent NOK billion Dec. 31 Dec. 31 Dec. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 30 June DNB Group As a percentage of net loans 1) Includes non-performing commitments and commitments subject to individual impairment. Accumulated individual impairment is deducted. 28

29 No visible effect on credit card defaults 12% 10% 8% 8.0 % 6% 6.1 % 4.6 % 4% 2% 0% 29

30 DNB has a well-diversified oil-related portfolio ~8% of total Group EaD to oil-related portfolios Oil & Gas exposure NOK 74bn (3.8% of total Group EaD) Offshore exposure NOK 55bn (2.8% of total Group EaD) Oilfield Services NOK 34bn (1.7% of total Group EaD) NOK bn and per cent of NOK 76bn NOK bn and per cent of NOK 55bn NOK bn and per cent of NOK 34bn Refining & petchem % Midstream incl LNG % Other 0.9 1% Exploration & Production IG % Exploration & Prod. Sub-IG 4.0 5% Subsea constructi on % FPSO/FSO % Rig % Other % OSV % Seismic 1.4 4% Sub-IG or similar % Leveraged Buyout (LBO) % Other 0.1 0% Investment grade or similar % Exploration Financing (EFF) 2.9 4% Reserve Based Lending (RBL) % OSV: Offshore Service Vessels, F(P)SO: Floating (Production) Storage Offloading. LNG: Liquid Natural Gas. IG: Investment grade. All figures as at 30 June

31 Oil-related portfolio - 59% of portfolio is low risk and 37% is medium risk DNB s oil-related portfolio split by sub-segment in terms of exposure (EaD) and by risk grade NOK 153bn as at 30 June 2015 (and NOK 160bn as at 31 Mar 2015) Oilfield Services Offshore Oil & Gas Sep-14 Dec-14 Mar-15 Jun-15 Sep-14 Dec-14 Mar-15 Jun-15 Sep-14 Dec-14 Mar-15 Jun-15 Sep-14 Dec-14 Mar-15 Jun-15 Grade 1-4 "Low risk" Grade 5-7 "Medium" Grade 8-10 "High" Grade "Doubtful & NPL" EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see backup slide for details. DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. Figures from Fact book as at 30 June

32 Balance sheets DNB Group DNB Bank ASA 30 June 31 Dec. 30 June 31 Dec. Amounts in NOK billion 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 8 8 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 ) Excluding short-term money market deposits 32

33 Common equity Tier 1 capital ratio 1) 12.1 Transitional rules Per cent Leverage ratio Per cent 2) June Sept Dec March June June Sept Dec March June Future Basel III estimate Per cent ) Estimate applying average weights used by Swedish banks 3) 17.3 Per cent June Sept Dec March June June Sept Dec March June ) Common equity Tier 1 capital includes 50 per cent of interim profits in all quarters, apart from the leverage ratio figures. Annual figures are exclusive of dividend payments. A 10 percentage point change in retained earnings corresponds to a 10 basis point change in the CET1 ratio at end-june ) The calculations at end-june 2015 have been altered in accordance with the proposed new rules 3) Average weights used by Swedish banks on corporate loans and loans secured by real estate 33

34 Changes in the common equity Tier 1 capital ratio Per cent From 31 Dec 2014 to 30 June (0.1) (0.3) Dec % of profit for the period Volume reducing measures Other effects Exchange rate effect on existing portfolio Lending growth 30 June

35 The minimum 14% common equity Tier 1 capital target by year-end 2016 remains firm Financial restructuring Realisation of capital gains CET 1 RWA CET 1 ratio Asset disposal Active portfolio management Capital-efficient products IRB approvals (does not apply under transitional rules) 35

36 The Group s financial ambitions stay firm Build-up of adequate common equity Tier 1 capital through dynamic management of balance sheet items Stable volumeweighted spreads Commissions and fees underlying growth of 5 per cent Flat nominal costs in the period ahead (excluding restructuring costs and exchange rate effects) Impairment expected to stay below NOK 3 billion no noticeable effects from oil and gas thus far 36

37 Q2 APPENDIX

38 Economic growth in Norway is slowing down - but the landing is soft and at a comfortable level GDP growth and unemployment Year on year, per cent 4.5 % 3.5 % 2.4 % 1.2 % e 2016e 2017e 2018e Mainland GDP growth Unemployment rate 1) Source: Statistics Norway/DNB Markets forecasts. Consensus forecast GDP 15=1.6%, GDP 16=2.0, GDP 17=2.1%, Consensus unemployment 2015e=4.0%, 2016e=4.0%, 2017e=4.3% as of June

39 Two powerful tools to ensure a stable macroeconomic development Monetary policy Higher interest rates in Norway than in the rest of Europe Fiscal policy Large public wealth gives ample leeway to smooth business cycles Central bank rates Per cent National budget structural, non-oil deficit 2015 prices, NOK billion Structural, non-oil deficit 7 ECB Sweden Norway per cent return on the fund capital e Source: Thomson Datastream, DNB Markets, Norges Bank

40 Houseprice inflation Norway - deflated at different levels 40

41 Houseprice inflation main cities and Norway - in NOK1000/square meter 41