Banking in a tough environment

Transcription

1 Banking in a tough environment Carnegie Nordic Large Cap Seminar Stockholm Tonny Thierry Andersen CFO & Member of the Executive Board March 3, 2009

2 The real economy is now severely affected Index Industrial production Denmark Sweden Europe Dec Source: Danske Research. 2

3 Plummeting consumer confidence Index 20 Consumer confidence 10 0 Denmark Europe Jan Source: Danske Research. 3

4 The outlook is deteriorating steadily - Eurozone is forecast to contract more than Denmark % 4.0 GDP forecasts for Denmark Eurozone Finland Norway Sweden -2.0 Jan 2008 Apr 2008 Jul 2008 Oct 2008 Jan 2009 Source: Consensus estimates. 4

5 Sharp downturn in the Nordic economies, but significant fiscal firepower Macroeconomic key figures estimates GDP growth Budget balance Gross publ. debt Unempl. rate % % of GDP % of GDP % = worse than EU average = better than EU average Source: Danske Research. 5

6 There is more bad news to come 12 Correlation between credit tightening and defaults Net % US banks credit tightening Global default rate dec 90 dec 92 dec 94 dec 96 dec 98 dec 00 dec 02 dec 04 dec 06 dec 08 Source: United States, Business Surveys. 6

7 Danske Bank at a glance 5 million customers 2 million active Internet customers 798 branches in 9 countries 23,624 full-time employees Long-term ratings & outlook (Moodys/ S&P): Aa3 (stable)/a+ (negative) 3 rd most actively traded share in the OMX Copenhagen 20 Sweden Other 11% Lending (end of 2008) Nordic countries 89% 7

8 Key challenges in current environment - Close attention and swift action KEY CHALLENGE RESPONSE Secure income stream Continued widening of lending margins 2. Cost containment Staff reduction of 350 FTEs in head offices Natural attrition on the front line 3. Declining credit quality Strict lending criteria and collective impairment charges 4. Ireland Restructuring and centralisation of credit function 5. Balance sheet Reduction of non-lending assets 6. Liquidity State guarantee for wholesale funding until December 31, Solvency Further strengthening through new hybrid capital 8

9 Improving lending margins in Banking Activities Denmark % 4.0 Lending margins Retail bp Total Corporate Jan. 08 Mar. 08 May 08 Jul. 08 Sep. 08 Nov. 08 Jan. 09 9

10 Danske Bank has been successful in improving lending margins - More to come and more is needed % Marginal net interest margins Q4 2008* Danske Bank Nordea DnB NOR SHB SEB Swedbank Source: FPK, Nordic banks, Feb. 23, 2009 * Marginal NIM is absolute change in NII over change in loans YoY. 10

11 Increased focus on cost management DKr bn Goodwill State guarantee fee (adj.)

12 Known and potential problem exposures relatively modest vs. peers % Percentage of total loans SEB DnB NOR Nordea SHB Swedbank Danske Bank Potential problem exposures -Shipping -Nordic real estate - Nordic corporate (non-mortgage) -UK Known problem exposures -Baltics - Ireland & Northern Ireland - Ukraine & other New Europe - Distressed real estate, development & construction Source: FPK, Nordic banks, Feb. 23,

13 Modest Eastern European exposure for Danske Bank SKr bn SKr bn and share (%) of total loans, Q % Poland % 5.7% Russia Ukraine Lithuania Latvia % 1.7% Estonia 0 Swedbank SEB Nordea DnB NOR Danske Source: UBS, Swedbank: Too much uncertainty, Feb. 25,

14 Danske Bank has seen relatively modest lending growth late in the cycle % 50 Growth in loan books from Q to Q % 37% 36% 30 31% 23% 20 18% 10 0 DnB NOR Swedbank Nordea SHB SEB Danske Bank Source: BofA/Merrill Lynch, Nordic banks, Feb. 23,

15 Loan loss ratios outstripping peers bp 75 Loan losses as bp of loans Collective impairments Write-off as bp of loans DB DnB NOR SEB Swedbank Nordea SHB 15

16 Can banks defy gravity? F g = G m 1 m 2 r 2 16

17 Profit before loan impairments - First line of defence against the expected rise in loan impairments bp 120 Profit before loan imp. charges and loan imp. charges / loans and guarantees Profit before imp. charges* Consensus estimates for loan imp. charges * Profit before loans impairment charges & loans and guarantees for E = Act

18 On the capital side Danske Bank looks relatively OK, particularly on the Tier 1 -ratio 10 Tier 1 ratio ex. hybrid - Danske is at the low end vs. Nordic peers, but ok vs. European peers 13 Tier 1 ratio incl. hybrid - Danske will be at the high end Danske Bank Handelsbanken 6 Danske Bank Nordea SEB Swedbank Handelsbanken Nordea SEB Swedbank Reported Adj, ins + IAS 39 Adj + announced cap. European average, Retail Source: BofA/Merrill Lynch. Reported Adj, ins + IAS 39 Adj + announced cap. European average, Retail 18

19 Hybrid capital instead of equity - There are pros and cons for both Hybrid Fulfils legal solvency requirement without diluting shareholders Can be repaid after the crisis Keeps ROE unchanged (except for interest) Improve loss-absorption capacity only if default Equity Dilutes shareholders from day 1 Very expensive due to low P/NAV ROE will decline Improve 1st tranche lossabsorption capacity 19

20 Infrastructure and governance - Model are proven pillars of the Danish mortgage system Mortgage market characteristics Size ( bn) app. 4,000 1, year fixed rate Yes No No No No Maturity match 100% < 100% < 100% < 100% < 100% Pricing risk No Yes Yes Yes Yes LTV max Yes Yes Yes No No Originate/Distribute No No No Yes Yes Use of brokers No No No Yes Yes 20

21 Danish covered bond has proven its superior model - Looking at spread widening 250 5y EUR/DKK/SEK-denominated European covered bonds Asset swap spreads, EUR, bp /Jan/08 8/Mar/08 13/May/08 18/Jul/08 22/Sep/08 27/Nov/08 1/Feb/09 UK (Bank of Scotland, jan. 2013, EUR) Spain (Santander, feb. 2014, EUR) Sweden (Stadshypotek, sep. 2013, SEK) Ireland (BKIR, jul. 2013, EUR) Denmark (Realkredit Danmark, jan. 2013, DKK) Germany (EUROHYPO, jan. 2013, EUR) 21

22 Re-building banks financial business model after year 0? +De-risking +De-leveraging + Deposits + Disclosure =Detoxing +Disciplined economic policies 22

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24 Disclaimer This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of Danske Bank A/S in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation contains forward-looking statements that reflect managements current views with respect to certain future events and potential financial performance. Although Danske Bank believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of various factors many of which are beyond Danske Banks control. This presentation does not imply that Danske Bank has undertaken to revise these forwardlooking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided. 24