Debt investor update. First half 2016

Transcription

1 First half 2016

2 Agenda Summary of first half of 2016 and financial results Business unit update Selected topics Outlook for full-year 2016 Capital and Funding Appendix

3 Executive summary: A satisfactory result for the first half of 2016 Low economic growth continuation of negative interest rates Financial results, H Net profit of DKK 9.4 bn, in line with first half of 2015 ROE of 12.4% - on track to meet long-term target above 12.5% Financial markets improved from the weak environment in the beginning of the year Solid capital position, with a CET1 capital ratio of 15.8% after deducting for full share buy-back in Q1 Increased lending activity across customer segments continued strong focus on costs Overall customer satisfaction continued to improve Net profit ROE H1 15 H1 16 2

4 Net profit: DKK 9.4 bn, in line with strong H Income statement and key figures (DKK m) H H Index Q Q Index Net interest income 10,747 10, ,489 5, Net fee income 6,737 7, ,354 3, Net trading income 3,735 4, ,138 1, Other income 1,794 1, , Total income 23,012 23, ,543 11, Expenses 11,115 11, ,805 5, Profit before loan impairment charges 11,897 12, ,738 6, Loan impairment charges Profit before tax, core 12,004 12, ,715 6, Profit before tax, Non-core Profit before tax 12,051 12, ,780 6, Tax 2,688 2, ,362 1, Net profit 9,363 9, ,418 4, Return on avg. shareholders' equity (%) Cost/income ratio (%) Common equity tier 1 capital ratio (%) EPS Lending (DKK bn) 1,664 1, ,664 1, Deposits and RD funding (DKK bn) 1,611 1, ,611 1, of which deposits (DKK bn) Risk exposure amount (DKK bn) Key points, H vs. H Return on equity of 12.4% Total income down, reflecting high fees and trading income in H1 15 Property sale in Q1 and sale of VISA Europe in Q2 Negative credit value adjustments (CVA) of DKK -0.6 bn in Q2 Expenses down 3%; cost/income ratio of 48.3% Lending volume up 4% Key points, Q vs. Q Total income benefited from improved NII and trading income Fee income down, reflecting lower assets under management Expenses up 9%, reflecting one-offs in Q1, expenses for regulatory requirements and property rent CET1 capital ratio rose to 15.8%, mainly because of lower total risk exposure amount 3

5 Banking units: Income down, reflecting exceptionally strong H1 2015; all units benefit from reduced expenses and low impairments Pre-tax return on allocated capital (%) Financial highlights, H vs. H H Personal 15.8 Business 14.6 Northern Ireland Personal Banking NII down owing to competition and change in product composition Lower fee income, reflecting lower remortgaging activity Profit before tax benefited from lower expenses and impairments Business Banking Total income down 6%, reflecting strong activity in H Lending up 7%, supported by growth in all markets Asset quality continued to improve Northern Ireland The result was adversely affected by exchange rate developments Cost reduction and net reversals of impairment charges continued Income statement (DKK m) Personal Business Northern Ireland H H Index H H Index H H Index Net interest income 3,823 3, ,202 4, Net fee income 1,596 1, , Net trading income Other income Total income 5,995 6, ,571 5, ,070 1, Expenses 3,735 4, ,329 2, Profit before loan impairment charges 2,260 2, ,242 3, Loan impairment charges Profit before tax 2,440 1, ,265 3, Lending (DKK bn) Deposits (DKK bn)

6 C&I and Wealth Management: Less favourable market conditions reduce total income; increased lending supports NII C&I: Financial highlights, H vs. H Wealth Management: Financial highlights, H vs. H Total income down 9%, reflecting challenging market conditions at the beginning of the year and extraordinarily high activity in the first quarter of 2015 NII up 9% as a result of slightly less margin pressure and increased lending Despite increased client activity in Q2, trading income fell 17% owing to negative CVA of DKK -0.6 bn and an exceptionally strong Q Expenses up slightly owing to a higher share of contributions to the new Resolution Fund The weak financial markets had an adverse affect on total income, especially in the beginning of the year Fee income down 7% owing to lower performance fees as a result of lower assets under management and lower risk allowance fees Trading income fell from the unusually high level in the first half of 2015 Expenses up by 6%, reflecting the establishment of the new business unit Improved credit quality, especially in Denmark, resulted in further reversals of impairment charges C&I: Income statement (DKK m) H H Index Net interest income 1,488 1, Net fee income 1,117 1, Net trading income 2,374 2, Other income Total income 4,996 5, Expenses 2,322 2, Profit before loan impairment charges 2,673 3, Loan impairment charges Profit before tax 2,353 3, Pre-tax return on allocated capital (%)* Lending (DKK bn) Deposits (DKK bn) C&I Wealth Management: Income statement (DKK m) Wealth Managment H H Index Net interest income Net fee income 3,052 3, Net trading income Other income Total income 3,789 4, Expenses 1,882 1, Profit before loan impairment charges 1,907 2, Loan impairment charges Profit before tax 1,981 2, Pre-tax return on allocated capital (%)* Lending (DKK bn) Deposits (DKK bn) * H reflects new capital allocation framework. 5

7 Expenses: Continued reduction of expenses in H despite increased regulatory costs Change in expenses (DKK m) Total expenses ex goodwill charge (DKK m) 11, ,115 Severance payments Deposit guarantee & resolution funds Amortisation of customer relations*** Bonuses Other costs 23,972 H Staff costs IT Net of guarantee fund Rent Consultants* Depr. intangibles Other costs H , Total expenses ex goodwill charge, (DKK m) Restated** 25,826 Reported , ,642 23,794 23,972 1,331 22,641 23,237 1,410 21,827 21,362 20, , H * Owing mainly to increased regulatory requirements. ** Expenses for 2014 and 2015 are restated to reflect the new Wealth Management unit. ***2015 charge represents 11 months of amortisation because of write-down in December

8 Impairments: Loan loss ratio of 2 bp in H Group impairments, 2011 to H (DKK bn/bp) Impairment drivers, Q vs. Q Impairments Loan loss ratio* (rhs) H Impairments remained low because of generally strong credit quality across our markets Net reversals in Personal Banking and Wealth Management owing mainly to stronger household finances and increasing property prices in Denmark Low impairments at Business Banking driven by better macroeconomic conditions in Denmark, although agriculture continued to suffer from low output prices Improved collateral values, especially in commercial property, caused net reversals in Northern Ireland Additional collective impairments booked against oil-related exposure at Business Banking and C&I Impairments (DKK m) Loan loss ratio,* annualised (bp) H H Q Q Personal Banking Business Banking C&I Wealth Management Northern Ireland Total core Non-core Group H H Q Q Personal Banking Business Banking C&I Wealth Management Northern Ireland Total core Non-core Group * The loan loss ratio is defined as annualised quarterly impairment charges as a percentage of loans and guarantees. 7

9 Outlook for full-year 2016 maintained: Net profit in line with 2015* NII Revised: We now expect somewhat less pressure on margins for the remainder of 2016, and we will benefit from volume growth and somewhat lower funding costs Fee income Revised: In light of weak activity levels and uncertainty in the financial markets, we now expect net fee income to be lower than in 2015 Trading income Net trading income remains subject to customer activity and volatility in the financial markets Expenses Expenses are expected to decline from the level in 2015 Impairments Loan impairments are expected to be at a low level because of our ongoing efforts to improve credit quality and generally unchanged macroeconomic climate Non-core Non-core pre-tax result is expected to be close to zero Net profit Net profit is expected to be in line with net profit before goodwill impairments in 2015 * Before goodwill impairments. Note: This guidance is subject to uncertainty and depends on economic conditions, including developments in monetary policy at central banks. 8

10 Capital: Strong capital base; CET1 capital ratio rises to 15.8% driven by earnings and lower risk exposure amount Capital ratios, under Basel III/CRR (%) Capital highlights, Q Tier Q Hybrid T1/AT1 Q reported Pillar II CET1 Q fully loaded CET Regulatory min. CET1 required* Revised CET1 target in the range of 14-15% in the short to medium term in the light of regulatory uncertainty, and revised total capital ratio target of around 19% Credit risk exposure amount reflects new treatment of LR Realkredit A/S and Danmarks Skibskredit, although CET1 ratio was unaffected owing to a corresponding capital reduction Market risk fell because of lower risk in C&I Leverage ratio of 4.3% under transitional rules and 4.0% fully phased-in Effect of CRR/CRD IV on fully loaded CET1 ratio is a drop of 0.2 of a percentage point from the Q level CET1 capital ratio, Q to Q (%) 15.8 Total REA, Q to Q (DKK bn) Q Net profit Expected dividends Deductions** REA effect** Q Q Credit risk** Counterparty risk Market risk Q * Pro-forma fully phased-in minimum CET1 requirement in 2019: min. CET1 requirement 4.5%, capital conservation buffer 2.5%, SIFI requirement 3%, countercyclical buffers 0.5% and CET1 component of Pillar II requirement. NB: Pillar II requirement is not relevant for Maximum Distributable Amount (MDA) purposes. ** Incl. new treatment of LR Realkredit A/S & Skibskredit. 9

11 Funding and liquidity: DKK 52 bn of long term-term funding issued in H1; LCR-compliant at 136% Changes in funding,* H (DKK bn and bp) Long-term funding ex RD (DKK bn) Cov. bonds Senior Tier 2 Tier 1 Funding plan Completed 94bp 93bp 97bp 63bp bp 1 Redemptions 2016: DKK 62 bn 66bp 25 9 Redeemed H DKK: 34 bn 28bp New H1 2016: DKK 52 bn E Maturing funding,* (DKK bn and bp) Liquidity coverage ratio** (%) Cov. bonds Senior Tier 2 Tier 1 84bp 57bp 41bp 45bp 50bp bp bp 52bp bp : DKK 65 bn 2018: DKK 64 bn 2019: DKK 48 bn Q Q Q Q Q * Spread over 3M EURIBOR. ** Until Q3 2015, LCR was calculated in accordance with the Danish FSA s specifications and included holdings of covered bonds and Danish mortgage bonds, including own issued bonds. Since October 2015, Danske Bank s LCR has been calculated according to the new EU standards. 10

12 Funding structure and sources: Danish mortgage system is fully pass-through Loan portfolio and long-term funding, Q (DKK bn) Funding sources (%) 1, Senior debt Q Q ,664 Bank loans Deposits Bank mortgages Covered bonds 13 RD mortgages Issued RD bonds Deposits credit inst. CD & CP Repos, net Deposits Senior Covered unsecured bonds Subord. debt Equity Loans Funding Short-term funding Long-term funding 11

13 Overview: Danske Bank Group Covered Bond Universe Realkredit Danmark, which has been a Covered Bond issuer since 1851 Based on Danish legislation Specialized Mortgage Bank Fully-owned subsidiary in Danske Bank Group Primarily loans from Denmark Follows the Specific Balance Principle = matched funding Funding via daily tap issues in DKK through the Danish Market AAA/AA+ rating Danske Bank A/S, which has been a Covered Bond issuer since 2007 Cover-Pools D, I and C Based on Danish legislation Loans from the Group s banking activities in Denmark, Norway and Sweden Issued directly on the balance sheet Multiple Cover Pool set-up Follows the General Balance Principle Multi currency benchmarks and PP, 30 bn Global Covered Bond programmeme Danske Bank PLC, which has been a Covered Bond issuer since 2005 Sampo Pankki changed name to Danske Bank Plc on 15 November 2012 Based on Finnish Legislation Fully-owned subsidiary in the Danske Bank Group Issued directly on the balance sheet Only residential loans from Finland Funding through benchmarks and PP issues in EUR, 10 bn Medium Term Note and Covered Bond programme Aaa programme rating New Swedish CB programme, which is to be a Covered Bond issuer from 2017 Based on Swedish legislation Fully-owned subsidiary in Danske Bank Group Only loans from Sweden Funding via frequent tap issues in SEK through the Swedish Market supplemented by EUR benchmarks Expected AAA rating (rating agency to be determined) AAA/AAA programme rating 12

14 Danske Bank: Adjusted covered bond funding structure New cover pool structure We have ambitions to strengthen our market position in Norway and Sweden, and intend to adjust our covered bond funding structure accordingly. Our Swedish and Norwegian residential assets in Cover Pool I will migrate into two pools: a) The Norwegian assets will remain in the I-pool, which in time will consist of only Norwegian assets and b) a new Swedish pool. Eligible assets from the C-pool may in time support the new Swedish pool. The Swedish pool will be managed by a newly established mortgage institution under Swedish law and will be operated as a domestic Swedish Covered Bond (CB) Programme with all that this entails in terms of governing law, tap issues, market making etc. This adjustment to our cover pools will bring our covered bond funding structure in line with that of our biggest Nordic peers, providing the best possible access to funding in both Scandinavian and international currencies. When fully migrated, the new setup will provide investors with clearly diversified alternatives from a transparent pool structure backed by either purely residential Norwegian assets (I-pool) or purely residential Swedish assets (Swedish CB programme). On top of this we will maintain the Combined pool consisting of both Norwegian and Swedish assets (C-pool). The D-pool and the Finnish pool are not affected by these changes. Current asset mix in I-pool: Total issues: DKK 110 bn, Q Cooperative Housing Holiday houses 20% 5% 75% Owner-occupied homes (All Swedish assets eligible for Swedish Covered Bond Programme) Offices and Business Other Cooperative Housing NO 30% Agriculture 4% 4% 10% 22% SE 70% Rental Housing 44% 16% SE 47% Industrial 23 % expected to be eligible for Swedish Covered Bond Programme (Cooperative Housing and Rental Housing) NO 53% Current asset mix in C-pool: Total issues: DKK 44bn, Q

15 Danske Bank: Consequences for I- and C-pool I- and C-pool going forward Danske Bank will continue to originate mortgages eligible for the I-Pool and C-Pool going forward; both pools will remain active. Danske Bank expects the ratings of both the I-Pool and the C- Pool to remain unchanged (AAA/AAA by S&P/Fitch). The I-pool will gradually become a pure Norwegian pool as the Swedish assets are migrated into the Swedish CB programme. However, we expect that the I-pool will continue to include a share of Swedish assets at least until The I-pool will be partly dedicated to NOK issues with a focus on liquid LCR-eligible issues We expect to continue to issue EUR covered bond benchmarks on a regular basis from both the I-pool and the C- pool. The Swedish CB programme will to a high degree be focused on SEK funding but will have the option to issue in other currencies. The C-pool, the Combined Pool, will remain a pool consisting of both Norwegian and Swedish assets and, at least until 2020, the C-pool will retain a significant share of Swedish residential-like assets. After 2020 eligible Swedish assets may migrate into the Swedish CB programme. Timing Timing is dependent on the establishment of the Swedish CB programme. Applications to the Swedish FSA has been submitted in the first half of 2016 and we will issue in SEK from the Swedish CB programme once ready, expected at the earliest in the beginning of The pace of adjustments to the compositions of the underlying assets in the I-Pool will follow the timing of issuance under the Swedish CB programme and respect the maturity profile of the outstanding I-Pool covered bonds. Subject to pool dynamics and market conditions, the current share of Swedish assets in the I-Pool allows for a migration of DKK 53 bn (issue-equivalent) by the end of This could imply that the I-Pool no longer contains Swedish assets after Maturity profile as of June Retained I C 14

16 Danske Bank: The four cover pools - Overview Characteristics Cover Pool D Cover Pool I Cover Pool C Danske Bank plc 1 Pool notional DKK 38.1bn (EUR 5.1bn equivalent) DKK 125.4bn (EUR16.8bn equivalent) DKK 53.9bn (EUR 7.2bn equivalent) Number of Loans 67, ,535 6,309 91,440 Substitution collateral Number of Borrowers 65,714 80,052 4,491 91,440 Total Value of Properties DKK 162bn (EUR 22bn equivalent) DKK 296bn (EUR 40bn equivalent) DKK 135bn (EUR 18bn equivalent) Number of Properties 66,113 87,900 6, Average Loan Size DKK 0.6m (EUR 76,000 equivalent) Average Property Value DKK 2.4m (EUR 0.3m equivalent) DKK 1.0m (EUR 129,000 equivalent) DKK 3,4m (EUR 0.4m equivalent) Property Type 100% owner-occupied 80% owner-occupied, 20% housing cooperatives DKK 8.5m (EUR 1.1m equivalent) DKK 20,5m (EUR 2.8m equivalent) 10% Agriculture, Forestry, Horticulture, 16% Industrial, 4% Cooperative Housing, 22% Rental Housing, 44% Retail, 4% Other WA LTV (Indexed) 57.3% 56.5% 60.6% 54% WA Seasoning 8 years 4 years 2 years 5.2 years WA Remaining Term 22 years 31.7 years 3.8 years 15.3 years DKK 47.6bn (EUR 6.4bn equivalent) DKK 0.51m (EUR 69th equivalent) Rate type Floating rate Floating rate Floating rate Fixed (11.2%), Floating (88.8%) Geographical location 100% Denmark 47% Sweden, 53% Norway 70% Sweden, 30% Norway 100 % Finland Issuance Notional DKK 33.6bn (EUR 4.5bn equivalent) DKK 110bn (EUR 14.8bn equivalent) DKK 44.1bn (EUR 5.0bn equivalent) N/A N/A DKK 37.3bn (EUR 5bn equivalent) OC at cut-off date 12.9% (2% committed) 12.45% (2% committed) 25.9% (2% committed) 24% (2% committed) Cut-off date 30 June June June June 2016 Rating (S&P/Fitch/Moody s) Residential Residential Combined Residential AAA/AAA/- AAA/AAA/- AAA/AAA/- - /- /Aaa 15

17 Appendix Business units Special topics Macro and portfolio reviews ROE bridge and ratings Tax Contact details

18 Personal Banking: Slightly higher customer activity in Q2; good inflow from our partnerships in Sweden & Norway continues Income statement & key figures (DKK m) Lending volume by country* (Q = Index 100) Q Q Index Net interest income 1,919 1, Net fee income Net trading income Other income Total income 3,017 2, Expenses 1,939 1, Profit before loan impairment charges 1,079 1, Loan impairment charges Profit before tax 1,093 1, Lending (DKK bn) Deposits (DKK bn) Denmark Finland Sweden Norway Q Q Q Q Q Q Personal Banking NII bridge** (DKK m) 1,919 1, Q Lending volume Lending margin Deposit volume Deposit margin FX effect Other*** Q * Based on local currency lending volumes. ** Based on average volumes. *** Includes capital costs and off-balance sheet items. 17

19 Business Banking: Lending growth across all countries supports income; impairments at low level Income statement & key figures (DKK m) Lending volume by country* (Q = Index 100) Q Q Index Net interest income 2,117 2, Net fee income Net trading income Other income Total income 2,808 2, Expenses 1,187 1, Profit before loan impairment charges 1,621 1, Loan impairment charges Profit before tax 1,616 1, Lending (DKK bn) Deposits (DKK bn) Denmark Finland Sweden Norway Q Q Q Q Q Q Business Banking NII bridge** (DKK m) 2, ,117 Q Lending volume Lending margin Deposit volume Deposit margin FX effect Other*** Q * Based on local currency lending volumes. ** Based on average volumes. *** Includes capital costs and off-balance sheet items. 18

20 Corporates & Institutions: Profit before tax increased 19% owing to improved market conditions and lower impairment charges Income statement & key figures (DKK m) Key points, Q vs. Q Q Q Index Net interest income Net fee income Net trading income 1,284 1, Other income Total income 2,622 2, Expenses 1,219 1, Profit before loan impairment charges 1,403 1, Loan impairment charges Profit before tax 1,278 1, Lending (DKK bn) Deposits (DKK bn) Total income increased by 10% after very challenging market conditions in the first quarter Fee income was supported by higher income from Capital Markets as market activity picked up in Q2 Increased income from FICC drove trading income up despite significant negative value adjustments Impairments declined, mainly because of lower collective impairment charges against oil-related exposure Allocated capital decreased DKK 3.5 bn owing to lower market and credit risk Income breakdown (DKK m) C&I NII bridge* (DKK m) FICC 2,523 Capital Markets General Banking 2,343 2,374 2,036 2,622 1, ,089 Q Q Q Q Q Q Lending volume Lending margin Deposit volume Deposit margin FX effect Other** Q * Based on average volumes. ** Includes capital costs and off-balance sheet items. 19

21 Wealth Management: Market conditions remained difficult in Q2 2016, but improved capital efficiency in Danica Pension Income statement (DKK m) Key points, Q vs. Q Q Q Index Net interest income Net fee income 1,501 1, Net trading income Other income Total income 1,882 1, Expenses Profit before loan impairment charges Loan impairment charges Profit before tax 941 1, Lending (DKK bn) Deposits (DKK bn) Allocated capital (average, DKK bn) Pre-tax return on allocated capital (%) AuM, DKK bn 1,336 1, Life conventional (Traditionel) Asset Management (unit-linked) Assets under advice* Challenging market conditions continued, declining asset values reduced AuM and fee income Operating expenses were up 5%, primarily because of costs related to the new business unit Net reversals continued, reflecting increased collateral values in Denmark Net sales increased by DKK 5.8 bn mainly due to inflow from institutional clients Allocated capital down DKK 3.2 bn, primarily because of lower solvency capital requirement in Danica Pension AuM breakdown (DKK bn) Life conventional Asset management Assets under advice 1,388 1,339 1,369 1,351 1, Q Q Q Q Q * Assets under advice from personal, business and private banking customers, where the investment decisions is taken by the client. 20

22 Non-core: Deleveraging continues; full-year pre-tax result is expected to be close to zero Non-core loan portfolio, Q (DKK bn) Total REA (DKK bn) Allowance account Non-performing credit exposure Performing credit exposure 30 4 Non-core conduits, etc. Non-core Banking 30-50% Personal customers Commercial portfolio Conduits etc. Total Q Q Q Q Q

23 Net interest income: Up slightly when adjusted for FX effects despite margin pressure Change in net interest income (DKK m) 10, , H Lending volume Lending margin Deposit volume Deposit margin Days effect FX effect Other H

24 Trading income: Up significantly despite negative credit value adjustments Trading income by business unit (DKK m) Key points, Q vs. Q Other incl. Treasury Northern Ireland Wealth Management C&I Business Personal 2,138 Trading income up 34% despite significant negative CVA of DKK 0.6 bn At C&I, the increase was driven by increased client activity 1,371 1,500 1,597 Other activities rose owing to a oneoff gain from the sale of VISA Europe of DKK 0.3 bn and positive fair value adjustments of the liquidity portfolio 954 Refinancing income (DKK m) Q Q Q Q Q Q Q Q Q Q

25 Expenses: Increase of 9% owing mainly to higher performancebased compensation, one-offs in Q1 and increased regulatory cost Total expenses ex goodwill charge (DKK m) Severance payments Bonus Deposit guarantee scheme/resolution fund Other costs 6,273 Change in expenses ex goodwill (DKK m) Q ,310 Staff costs 117 5,805 Severance payments 25 5,649 5,554 IT 77 VAT refund Q1 68 5,310 Rent & marketing 86 5,238 5,027 5,349 4,967 5,342 Other costs 122 Q Q Q Q Q Q ,805 24

26 Credit quality: Continued improvement in overall credit quality Individual loan impairment charges* (DKK bn) New Increased Reversal Gross non-performing loans (DKK bn) Individual allowance account Net exposure, in default Net exposure, not in default -24% Q Q Q Q Q Allowance account by business unit (DKK bn) Northern Ireland Wealth Management Corporates & Institutions Business Banking Personal Banking Q Q Q Q Q Q Q Q Q Q * Ex Baltics. Note: Non-performing loans are loans in rating categories 10 and 11 against which individual impairments have been made. 25

27 Nordic macro economy Denmark Sweden Norway Finland Real GDP, constant prices (index 2005 = 100) Inflation (%) Interest rates, leading (%) Unemployment (%)

28 Nordic housing markets Denmark Sweden Norway Finland Property prices (index 2005 = 100) House prices/nom. GDP (index 2005 = 100) Apartment prices (index 2005 = 100) 280 Apartment prices/nom. GDP (index 2005 = 100)

29 Realkredit Danmark and the Danish housing market: Portfolio overview Portfolio facts, Realkredit Danmark, end-q Stock of retail loans, Realkredit Danmark, end-q (%) Approx. 372,000 loans (residential and commercial) 1,652 loans in 3- and 6-month arrears 56 repossessed properties DKK 13 bn of loans with LTV ratio>100%, including DKK 5 bn with public guarantee Average LTV ratio of 65% Variable rate instalments Fixed rate instalments 26% Variable rate interest-only Fixed rate interest-only 40% LTV ratio at origination (legal requirement) Residential: max. 80% Commercial: max. 60% 25% 9% Unemployment and foreclosures (%/No.) 10Y swap rate Unemployment No. of forced sales (rhs) Mortgage margins, 80% LTV, owner-occupied (bp) New fees from 1 Oct. 1-2y: +25 bp 3-4y: +20 bp refinancing fee* Fixed rate 101 Adjustable rate refinancing fee* With amortisation Interest-only * We charge a fee of 30 bp of the bond price for refinancing of 1- and 2-year floaters and a fee of 20 bp for floaters of 3 or more years. 28

30 Realkredit Danmark: Almost half of new retail loans are fixed rate loans; compliant with all regulatory requirements Key points Supervisory diamond for Danish mortgage institutions For new retail lending, the share of fixed-rate loans increased to 46% from 34% in Q Total stock of fixed rate loans to retail customers amounted to 35% Since Q1 2013, the amount of Flexlån F1 and F2 loans has been reduced by DKK 93 bn, or 55% Loan portfolio, FlexLån F1 and F2 (DKK bn) Concentration risk: Sum of 20 largest exposures/cet1 < 1 Refinancing need: Max. 12.5% of portfolio quarterly and max. 25% annually Growth: Max.15% annually in certain segments Interest risk: (LTV ratio > 75% of legal limit and interest rate fixed < 2 years) < 25% of portfolio -55% Q1 Q2 Q3 Q4 Q1 Q2 Q3 99 Q4 90 Q1 80 Q2 78 Q3 74 Q4 76 Q1 76 Q2 Interest-only loans: Max. 10% of portfolio with LTV ratio > 75% of legal limit

31 Credit exposure: Limited agriculture and directly oil-related exposure Agriculture exposure (2.7% of Group exposure) The Danish agriculture industry remained under pressure; impairment charges increased by DKK 266 m in Q2 owing to declining collateral values Milk prices deteriorated 8% further and reached a new low, while pig prices improved to the highest level since 2014 Total collective impairment charges amounted to DKK 866 m, covering 1.4% of net credit exposure RD represented 68% of total gross exposure and 14% of total accumulated impairment charges Oil-related exposure (1% of Group exposure) Net exposure amounts to DKK 22 bn and related to offshore (DKK 9 bn), oil majors (DKK 4 bn) and oil service providers (DKK 9 bn) The vast majority of oil-related exposure is managed by specialist teams for customer relationship and credit management at C&I In Q2, DKK 50 m in collective impairment charges was booked against direct oil exposure; total collective charges now stand at DKK 481 m In addition, we booked DKK 50 m in charges against secondround effects, which now stand at DKK 198 m Agriculture by segment, Q (DKK m) Gross credit exposure Portion from RD Acc. Individual impairment charges Net credit exposure NPL coverage ratio Business Banking 55,652 43,196 3,048 52,603 89% Growing of crops, cereals, etc. 17,552 14, ,154 96% Dairy 9,369 7,161 1,083 8,286 86% Pig breeding 13,583 10,648 1,364 12,219 91% Mixed operations etc. 15,148 10, ,945 85% Northern Ireland 5, ,937 83% C&I 5,340 2,465-5, % Others Total before collective impairments 66,256 45,669 3,151 63,105 82% Collective impairment charges Total gross exposure 67,122 Oil-related exposure, Q (DKK m) Gross credit exposure Acc. Individual impairment charges Net credit exposure C&I 21, ,455 Oil majors 3,612-3,612 Oil service 8,624-8,624 Offshore 9, ,219 Business Banking Oil majors 2-2 Oil service Offshore Others Total before collective impairments 22, ,285 Collective impairment charges 481 Total gross exposure 22,909 30

32 Bridge to above 12.5% ROE in 2018 with negative rates ROE E, after tax (%) ROE 2015* 11.6% Adjustments** 0.2% Costs 0.5-1% Funding & ratings 0.5% Volume effect 0.5-1% Income initiatives 0.5% Loan losses & other 0.5% Capital effect 0.5% ROE 2018E Above 12.5% * Excluding goodwill impairment charges. ** Adjustments for equity effect of goodwill impairment charges, remortgaging fees, payroll tax refund, one-off gain on property sales, resolution fund payment and tax. 31

33 Three distinct methods of rating banks Danske Bank s rating Rating methodology Anchor Extraord. Add SACP = SACP = + ALAC + = Support factors Issuer Rating bbb a =Business Position, 2=Capital & Earnings, 3=Risk Position, 4=Funding & Liquidity A (Stable) Macro Profile Strong Plus Qualitative BCA 2 Affiliate Gov = + + LGF 3 + = Support Support Factors a3 a1 baa2 baa2 a3 0 Baa =Asset Risk, 2=Capital, 3=Profitability, 4=Funding Structure, 5=Liquidity Resources Issuer Rating A2 (Stable) Individual Rating/Viability Rating Support Rating/Support Rating Floor a NF 4 Issuer Default Rating (IDR) IDR is the higher of the Viability Rating and the Support Floor A (Stable) 1. Stand-Alone Credit Profile. 2. Baseline Credit Assessment. 3. Loss Given Failure. 4. No Floor. 32

34 Tax Actual and adjusted tax rates (DKK m) Q22016 Q12016 Q42015 Q32015 Q22015 Profit before tax 5,780 6, ,719 5,814 Ireland core and non-core Permanent non-taxable difference , Adjusted pre-tax profit, Group 5,981 5,930 5,467 4,439 5,330 Tax according to P&L 1,362 1, ,051 1,346 Taxes from previous years Adjusted tax 1,354 1,348 1,153 1,039 1,240 Tax drivers The actual tax rate increased in Q mainly due to unrecognized losses in the Baltics and increased income from countries with a relatively higher tax rate The Danish tax rate was reduced to 22% in 2016 from 23.5% in 2015 Adjusted tax rate 22.6% 22.7% 21.1% 23.4% 23.3% Actual tax rate 23.6% 21.1% 95.9% 22.3% 23.2% 33

35 Financial Debt investor results update for Q Contacts Christoffer Møllenbach Head of Group Treasury Direct: Mobile: Peter Holm Senior Vice President, Group Treasury Direct: Mobile: Bent Callisen First Vice President, Group Treasury Direct: Mobile: Klaus Zacchi Rindholt First Vice President, Group Treasury Direct: Mobile: Claus Ingar Jensen Head of IR Direct: Mobile: John Bäckman Chief IR Officer Direct: Mobile: Robin Hjelgaard Løfgren Senior IR Officer Direct: Mobile: Louisa Grue Baruch IR Officer Direct: Mobile:

36 Disclaimer Important Notice 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, including the United States, 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. The securities referred to herein have not been, and will not be, registered under the Securities Act of 1933, as amended ( Securities Act ), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. This presentation contains forward-looking statements that reflect management s current views with respect to certain future events and potential financial performance. Although Danske Bank believes that the expectations reflected in such forwardlooking 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 Bank s control. This presentation does not imply that Danske Bank has undertaken to revise these forward-looking 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. 35