Financial results for February 2014

Transcription

1 Financial results for February 2014

2 Agenda Executive summary 2013 and financial results 3 Business unit update 54 Selected topics 7 Capital, liquidity and funding 10 Update on strategy, execution and ROE target 13 Outlook for Q&A session 17 Appendix 18 2

3 Executive summary 2013 Net profit & ROE DKK 7.1bn, a 51% increase from 2012; ROE improved from 3.6% to 5.0% Income Total income was down owing primarily to lower income from trading and insurance activities Expenses Expenses down 1% despite restructuring costs Impairments Impairments down 45%; improvement at all business units Non-core Significant improvement in pre-tax loss owing to lower impairments Capital Strong capital: CT1 ratio of 14.7% and total capital ratio of 21.4% Dividend The Board of Directors is proposing a dividend of DKK 2 per share, or 28% of the net profit Outlook Net profit in 2014 of DKK 9-12 bn 3

4 Net profit: DKK 7.1 bn, up 51% from 2012 Income statement & key figures (DKK m) Key points, 2013 vs Index Q Q Index Net interest income 22,245 22, ,683 5, Net fee income 9,525 8, ,777 2, Net trading income 5,818 10, , Other income 1,328 1, Net income from insurance business 1,088 2, Total income 40,004 45, ,919 9, Expenses 24,343 24, ,880 5, Profit before loan impairment charges 15,661 21, ,039 3, Loan impairment charges 4,187 7, Profit before tax, core 11,474 13, ,194 2, Profit before tax, Non-core -1,415-4, Profit before tax 10,059 8, ,862 2, Tax 2,944 3, Profit 7,115 4, ,923 1, Return on avg. shareholders' equity (%) Cost/income ratio Core tier 1 capital ratio (%) EPS Lending (DKK bn) 1,553 1,641 1,553 1,579 Deposits (DKK bn) NII fell 2% owing to lower lending volumes and lower short-term rates Trading income declined 45% owing to extraordinary conditions in 2012 and a relatively weak 2013 Expenses down 1% despite high restructuring costs in Q Impairments and losses from Noncore dropped substantially Key points, Q4 13 vs Q3 13 NII up 1% as higher lending margins offset pressure on deposit margins and lending volumes Fee income up 22% from higher fees at all business units, including performance fees at Danske Capital Trading more normalised Expenses up 24% owing mainly to restructuring charges and seasonality 4

5 Three main business units: Improvement from 2012 at Personal and Business; lower income at C&I Profit before tax (DKK m) Financial highlights % 2,698 1,650 Personal +55% 4,752 3,061 Business -43% 5,929 3,374 C&I Personal Banking Lower NII from declining volumes was offset by higher fees Trading income down due to lower refinancing fees at RD Loan impairments down 30% Business Banking Lower NII and fee income offset by higher trading income Loan impairments down 53% C&I NII up 20% from lending margins and deposit growth Client-driven income up 9%, but market-making income lower owing to difficult market conditions in the summer Income statement (DKK m) Personal Business C&I Index Index Index Net interest income 11,160 11, ,908 9, ,306 1, Net fee income 4,250 3, ,937 2, ,218 1, Net trading income ,894 8, Other income Total income 16,736 16, ,105 12, ,435 11, Expenses 12,103 12, ,574 5, ,588 4, Profit before loan impairment charges 4,633 4, ,531 6, ,847 7, Loan impairment charges 1,935 2, ,779 3, , Profit before tax 2,698 1, ,752 3, ,374 5,

6 Danske Capital & Danica Pension: Solid improvement at Danske Capital, but difficult conditions for Danica Pension Danske Capital: Financial highlights 2013 Total income increased 13% from higher assets under management and increased margins Performance fees amounted to DKK 365 m Profit before tax rose 21% Net sales of DKK 28 bn were evenly split across all Nordic countries Assets under management increased 6%, from DKK 687 bn in 2012 to DKK 727 bn in 2013 Danica Pension: Financial highlights 2013 Premiums were up 9% owing to increases in Sweden and Denmark Underlying insurance income rose 4% on strong growth in income from the unit-linked business It was possible to book the risk allowance for three of the four interest rate groups, although only partly for one of them At the end of 2013, the shadow account balance was DKK 1.2 bn Danske Capital: Income statement (DKK m) Danica Pension: Income statement (DKK m) Index Net interest income Net fee income 2,186 1, portion from performance fees Other income Total income 2,164 1, Expenses 1, Profit bef. loan imp. charges 1, Loan impairment charges Profit before tax 1, Assets under management (bn) Index Premiums 26,808 24, Danica Traditionel (insurance result) 1,139 1, Unit-linked (insurance result) Health and accident (ins. result) Result from insurance business 1,511 1, Investment result Financing result Special allotments Net income bef. postponed risk allow. 1,526 1, Change in shadow account Net income 1,088 2,

7 Ireland: Non-core deleveraging develops according to plan Key points Profit before tax for 2013 of a negative DKK 1.4 bn, loss reduced 71% from DKK 4,801 bn in 2012 Restructuring of core amounted to DKK 141 m in Q4 Guidance for 2014 impairments is maintained at up to DKK 2 bn for core and Non-core Ireland after DKK 95 m in impairments in Q Sales are progressing well, with an increasing number of properties on the market or under offer In Q4 2013, the pro forma Non-core portfolio amounted to DKK 55.6 bn, down from DKK 58.5 bn in Q3 New Non-core: Pro forma loan portfolio,* Q (DKK bn) Conduits etc. Other CRE Personal mortgages Core Ireland** Non-core Ireland 13.2 Non-core Conduits etc Total Property pipeline and sales (No. of properties) RWA (DKK bn) Q113 Q213 1,423 Q313 Q413 Core Ireland and Conduits etc. Non-core Ireland On the market Offer or contract Sold Q412 Q113 Q213 Q313 Q413 * Gross credit exposure. ** Personal Banking and Business Banking Ireland. 7

8 Expenses: Large increase Q/Q from one-offs and seasonality; 2013 actions will reduce costs in 2014 Total expenses (DKK m) Quarterly change in expenses (DKK m) Adjustments* Adjusted expenses 6,591 5,758 5,905 5,297 6,013 5,504 5,545 5,071 6,880 5,948 Q3 13 5,545 Severance/ restructuring incl. Ireland Property, rent etc Q412 Q113 Q213 Expected cost developments (DKK bn) 1st wave Q313 2nd wave Q413 Holiday payments Marketing & consultants Bonus Around 23 Below 23 Other 216 Q4 13 6, E 2015E * Adjustments include write-downs of domicile properties, bonus, severance payments, rebranding, impairments on goodwill and rights to names. 8

9 Impairments: Loan loss ratio of 18 bp for core activities and 23 bp for entire Group Impairments, 2008 to Q4 13 (DKK bn/bp) Impairments (DKK m) Impairments 173 Loan loss ratio* (rhs) Q413 Q313 Index Index Personal Banking ,935 2, Business Banking ,779 3, C&I , Other activities Total core ,187 7, Non-core ,233 4, Group 1,100 1, ,420 12, Loan loss ratio, annualised (bp) Q413 Q313 Index Index Personal Banking Business Banking C&I Total core Q2 08 Q2 09 Q2 10 Q2 11 Q2 12 Q Non-core Group * Loan loss ratio defined as annualised impairment charges as a percentage of loans and guarantees. 9

10 Capital: Strong capital ratios from retained earnings and capital issues in Q Capital ratios, under CRD/Basel II (%) Capital drivers Tier 2 Hybrid tier 1 (incl. state hybrid) State hybrid represents 2.8 %-points of tier 1 and total capital ratio and is expected to be repaid in Q Core tier A number of new tier 2 issues, totalling DKK 13.9 bn, were issued in Q4 to replace the USD 1 bn tier 2 RAC issue and to prepare for the planned repayment of the state hybrid capital State hybrid RWA decreased DKK 16 bn because of lower credit risk and lower operational risk CRD IV leverage ratio: 4.6% according to the transitional rules and 3.3% fully phased-in CRD IV effect on core tier 1 ratio (%) Q412 Q413 Core tier 1 Q413 Deduction for Danica RWA effect Pro forma CRDIV Q413 10

11 Funding and liquidity: Outlook for lower funding costs owing to lower volume and prices; strong liquidity position Changes in funding 2013 & 2014 (DKK bn and bp) Lending and funding sources ex. RD, (DKK bn) Cov.bonds 37bp Senior Tier 2 Tier 1 133bp 587bp 1,000 Lending, ex repo Deposits Market funding 30bp* bp 14 Redeemed 2013: DKK 58 bn 46bp 10 60bp 266bp New 2013: DKK 39 bn 56bp bp 2 28 Redemptions 2014: DKK 65 bn Dec 2012 Mar Jun 2013 Sep 2013 Dec Long-term funding ex RD (DKK bn) Liquidity Coverage Ratio** (%) Funding plan Completed *** Q1 13 Q2 13 Q3 13 Q4 13 * Spread over 3M EURIBOR. **LCR is calculated in accordance with Danish FSA s specifications and includes holdings of covered bonds and Danish mortgage bonds, including own issued bonds.. ***Minimum requirement of the Danish FSA. 11

12 Realkredit Danmark: New price structure drives portfolio changes towards longer term funding Key points New price structure gives incentive to amortise and choose longer interest reset periods on FlexLån In Q4 2013, the outstanding volume of FlexLån F1 and F2 to be refinanced 1 January 2014 was DKK 105 bn, which was reduced by 30 % or DKK 31 bn Since end-q4 2011, the amount of FlexLån F1 and F2 loans has been reduced by DKK 94 bn, or 42% Interest-only loans in the residential loan book peaked in 2011 at 58%; at end-2013, the percentage was 51% Loan portfolio, FlexLån F1 and F2 (DKK bn) New price structure for personal customers, Q (bp) Fixed rate LTV 40% If LTV extended to 80% If interest-only 32.5 From 31% to 18% of the total stock If floater (FlexLån ) 17.5 If 1-year floater (F1)* All of the above 148 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q413 * 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. 12

13 Our Vision and Mission stand firm, and we are accelerating the execution of our strategy Vision Recognised as the most trusted financial partner Mission Setting new standards in financial services Customer satisfaction Financial results Advisory services Digitalisation Openness & Transparency Strategy Customer attention Simplicity Efficiency Business review initiated 13

14 Our achievements in 2013 serve as a strong platform Developments in 2013 PERSONAL BANKING BUSINESS BANKING More than 1 m downloads of MobilePay since launch in Denmark in May 2013; launched in Finland in Q4 Customer Programme: 1.2 m customers registered in Denmark Private Banking was named Best Private Banking Bank in Denmark by the Financial Times New units for large business and large real estate customers Leading market solution for tablet and mobile banking for businesses on the go Customer satisfaction on target in three of the five markets CORPORATES & INSTITUTIONS Ranked 1 st in Prospera s Corporate Banking 2013 Nordics and Institutional Banking 2013 Nordics Strong growth in income from Equities and improved Prospera rankings Growth in high-yield bond underwriting Significant increase in customer satisfaction from 4 th to 2 nd place Launch of online Pension Check, which received an Investment & Pensions Europe 2013 award DANICA PENSION Named by Morningstar Best in equities in Denmark for 5 th year running and Best equity fund in Norway Strong growth in managed accounts sold to personal and Private Banking customers across the Nordics DANSKE CAPITAL 14

15 ROE target: 9% in 2015 on income and cost-saving initiatives, income normalisation and lower Non-core loss ROE drivers from 2013 to 2015 (%) ROE drivers 2013 Income (new initiatives) Income (normalisation) Costs Non-core loss 5.0 Current income drivers Continued optimisation of pricing structures for lending, deposits and other products Extension of the duration of the Group s bond portfolio Lower funding costs from planned repayment of state hybrid, low funding need, and refinancing at lower costs Income initiatives at C&I, including guaranteed products, equities and Debt Capital Markets products Normalisation of market making and insurance results Current cost drivers FTEs reduced by 709 in Q Internal efficiency measures on track Non-core loss Loss at Non-core is expected to be marginal in 2015 Capital 2015E 9.0 Capital Higher RWA from implementation of IRB orders increases average equity 15

16 Outlook for 2014: Net profit of DKK 9 to 12 bn Macro Economic growth remains fragile, with low interest rates NII Lower funding costs are likely to more than compensate for weak demand for loans Total income Total income expected to be above the level in 2013 (DKK 39.7 bn) Trading and insurance Expected to return to normal and thus rise from 2013 levels (DKK 5.8 bn and DKK 1.1 bn) Expenses Expenses expected to be reduced to around DKK 23 bn in 2014 (DKK 23.8) Impairments Impairments in core activities expected to be broadly in line with 2013 (DKK 4.1 bn) Net profit Net profit of DKK 9-12 bn This guidance is subject to uncertainty and depends on economic conditions. Comparables for 2013 are adjusted for the transfer of Personal Banking and Business Banking customers in Ireland to Non-core on 1 January

17 17

18 Appendix Business units 19 Special topics: Trading and expenses 24 Impairments 26 Macro, credit quality and portfolio dives, including Non-core 28 SIFI regulations, funding and ratings 36 Financial targets 39 Deep dives: Danica s profit model and tax

19 Personal Banking: Increasing profit; positive impairment trend continues Income statement & key figures (DKK m) Financial highlights for Q Q Q Index Net interest income 2,778 2, Net fee income 1,164 1, Net trading income Other income Total income 4,356 4, Expenses 3,149 2, Profit before loan impairment charges 1,207 1, Loan impairment charges Profit before tax Lending 823, , Deposits 348, , FTE 6,934 7, ROE (pre-tax) Loan impairment charges (DKK bn) Profit before tax up 4%, and pre-tax ROE up 0.3 of a percentage point to 9.8% Total income up 5% on higher trading income from refinancing fees on RD loans Recent pricing initiatives partially mitigated the drop in volumes stemming from lower demand and price competition Expenses up 8% from severance payments and higher IT expenses for development of online solutions Impairment charges remained low, declining 12% from the Q level to DKK 0.4 bn Loan loss ratio dropped from 21 bp in Q3 to 19 bp in Q4 More than 1.2 million customers have registered for the new customer programme in Denmark The MobilePay app released in Q in Denmark has become a new standard for easy money transfer with more than 1 million downloads MobilePay was launched in Finland in Q Q412 Q113 Q213 Q313 Q413 19

20 Business Banking: Increasing income and stable impairments Income statement & key figures (DKK m) Financial highlights for Q Q Q Index Net interest income 2,259 2, Net fee income Net trading income Other income Total income 3,163 2, Expenses 1,552 1, Profit before loan impairment charges 1,611 1, Loan impairment charges Profit before tax 1,196 1, Lending 614, , Deposits 265, , FTE 3,769 3, ROE (pre-tax) Loan impairment charges (DKK bn) Profit before tax down 6%, and pre-tax ROE down 0.6 of a percentage point to 10.9% Total income increased 7% from Q3 because of refinancing income in December and the positive effect of income initiatives NII remained stable despite continued pressure on lending volumes Impairments remained at the Q3 level of DKK 0.4 bn, with a loan loss ratio of 27 bp Expenses rose 20% from the low level in Q3 owing mainly to severance payments and the booking of holiday payments Credit decisions were moved closer to the frontline; faster, more convenient loan application process Strong interest in new mobile banking products Q412 Q113 Q213 Q313 Q413 20

21 Corporates & Institutions: Improvement on all income lines Income statement & key figures (DKK m) Financial highlights for Q Q Q Index Net interest income Net fee income Net trading income 1, Other income Total income 2,358 1, Expenses 1, Profit before loan impairment charges Loan impairment charges Profit before tax Lending 154, , Deposits 173, , FTE 1,565 1, ROE (pre-tax) Loan impairment charges (DKK bn) Profit before tax up 104%, and pre-tax ROE at 12.2% Total income increased 51% from Q3 to Q4 on higher income from all lines NII rose 14%, primarily because of higher margins Sales and Research income rose as improved market visibility led to higher client-driven activity; Market Making income also improved as investors were more active Expenses increased 41%, primarily from bonuses, severance payments and seasonality Income breakdown (%) Market Making Capital Markets Sales and Research General Banking 2,057 2,382 2,131 2, , Q412 Q113 Q213 Q313 Q413 Q412 Q113 Q213 Q313 Q413 21

22 Danske Capital: Profit up 84%, with a positive trend in AuM Income statement (DKK m) Financial highlights for Q and FY 2013 Q Q Index Net interest income Net fee income portion from performance fees Other income Total income Expenses Profit bef. loan imp. charges Loan impairment charges Profit before tax Assets under management (bn) Total income increased 66% owing to performance fees of DKK 302 m in Q4 From 2012 to 2013, total income rose 13%, excluding perfomance fees total income rose 21% Assets under management rose from DKK 687 bn at end-2012 to DKK 727 bn at end-2013 Net inflow increased DKK 28 bn in 2013 evenly divided between the Nordic countries Net inflow in AuM (DKK bn) Net inflow Net inflow as % of AuM (rhs) % 3 Successful expansion of the hedge fund product range with AuM of DKK 11 bn at the end of 2013, an increase of 43% from 2012 Strengthened market position in alternative investments e.g. advisory agreements with Danish pension fund. AuM of 18 bn at the end of % % % % Roll-out of managed account products in most of the Nordic countries in close cooperation with Personal Banking. AuM of 17 bn at the end of Q412 Q113 Q213 Q313 Q413 22

23 Danica Pension: Improved income because of more normal market conditions Income statement (DKK m) Financial highlights for Q and FY 2013 Q Q Index Premiums 6,816 5, Danica Traditionel (insurance result) Unit-linked (insurance result) Health and accident (ins. result) Result from insurance business Investment result Financing result Special allotments Net income bef. postponed risk allow Change in shadow account Net income Net income from insurance increased in Q4 owing to a higher investment result and booking from the shadow account It was possible to book risk allowance for three of four interest rate groups, although only partly for one of them In Denmark, total premiums rose 6% to DKK 4.7 bn; in all markets, they rose 14% to DKK 6.8 bn At the end of Q4, the shadow account balance was DKK 1.2 bn Possibility of booking risk allowance in 2014 (%) Investment allocation for Danica Traditionel, end-q4 13 (%) % change in equities 100% 50% 0% -50% Full risk allowance Partial risk allowance No risk allowance -100% -2,00% -1,00% 0,00% 1,00% 2,00% Percentage point change in interest rates Equities Bonds Credit bonds Property New schemes Low Medium 7 12 High 23

24 Trading income: Rebound in Q4 after a difficult Q3 Trading income by business unit (DKK m) Key points Other incl. Treasury 1,830 C&I 1,775 Business 2,154 Personal 418 1,463 More normalised trading income in Q after the subdued Q3 Loss of DKK 0.4 bn at Treasury from redemption of tier 2, continuation of high LCR and some unallocated funding costs Q412 Q113 Q213 Q313 Q413 Personal Banking and Business Banking benefitted from DKK 245 m in refinancing fees, down from DKK 313 m in Q Trading income from C&I (DKK m) Trading income split, Q (%) Market Making Customer-driven 1,285 1,581 1,300 1,342 Repos & derivatives FX & money market Q412 Q113 Q213 Q313 Q413 Equities Bonds & DCM 24

25 Expenses: Adjusted expenses up slightly in 2013, while branch and FTE reductions continue Expenses (DKK m) FTEs, end of period (000s) Index Q Q Index Expenses 24,343 24, ,880 5, Guarantee Fund and bank tax Revaluation of domicile prop Perf. based compensation Severance payments etc Rebranding Write-down, name rights Adjusted expenses 21,820 21, ,948 5, % 19.1 Branches, end of period -56% Q408 Q409 Q410 Q411 Q412 Q413 25

26 Impairments: Stable from Q3 to Q4 Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal Impairments at Personal Banking and Business Banking were stable 2.7 Drop of DKK 100 m at C&I - back to the very low level of Q2 2.0 Impairments in Non-core largely unchanged at DKK 0.3 bn Positive trend for impaired loans continued, with declining volume of defaults Impaired loans (DKK bn) Defaulted Performing Q412 Q113 Q213 Q313 Q413 Q2 13 Q3 13 Q4 13 Note: Impaired loans are loans in rating categories 10 and 11 on which individual impairments have been made. 26

27 Group impairments: Quarterly individual charges have stabilised with DKK 46.9 bn in the allowance account Individual loan impairment charges*, ex Baltics (DKK bn) Change in allowance account* (DKK m) New Increased Reversals 2.7 Allowance, end , Gross impairments 127, Reversals 35, Write-offs 49, Allowance, end-q ,900 Q412 Q113 Q213 Q313 Q413 * Includes Non-core activities. 27

28 Macro: Trends in the Nordics Bankruptcies (index 1996 = 100) Rating upgrades,* 12-month moving average (%) Denmark Finland Norway Sweden Business Banking C&I (incl. Financials) Upgrades > downgrades Downgrades > upgrades Property prices, Nordic countries (index 2003 = 100) House prices/nom. GDP, Nordic countries (index 2005 = 100) Denmark 220 Finland Norway Sweden Denmark 130 Finland Norway Sweden * The relation between upgrades and total rating changes. Ratings since Q4 11 reflect recalibration. 28

29 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Affordability index, quarterly data from Region Prices Change Change in q/q Preview* Fixed rate Mixed rate Average peaked since peak Q Q Copenhagen Q Zealand Q South Denmark Q Central Jutland Q Northern Jutland Q Nationwide Q Danish housing market (000s) 120 Above average = expensive Below average = cheap Unemployment and foreclosures (%) No. housing units for sale House price per m 2 (rhs) 10Y swap rate Unemployment No. of forced sales (rhs) , ,500 1, * Leading indicator based on monthly statistics from home (Danske Bank s real estate agency) that cover about one-third of the market. Sources: Danske Research, Statistics Denmark, Assoc. of Danish Mortgage Banks, home, Adam, Danish central bank, SKAT (tax authority )and own calculations. 29

30 Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-q4 13 Loans broken down by LTV ratio and rating, RD, end (%) Approx. 385,000 loans (residential and commercial) 2,524 loans in 3- and 6-month arrears 122 repossessed properties DKK 12 bn of loans with LTV > 100%, including DKK 2bn with public guarantee Average LTV ratio of 71% LTV ratio at origination (legal requirement) Residential: max. 80% Commercial: max. 60% 1-month arrears, Realkredit Danmark (% of stock) Rating Total Public LTV ratio guarantee > Total (DKK bn) Trend in mortgage margins, 80% LTV, owner-occupied, (bp) 0.8 All products Fixed rate Adjustable rate Q311 Q411 Q112 Q % Q312 Q412 Q113 Q213 Q313 Q refinancing fee* + refinancing fee* 2011 Jan13: with amortisation Jan 13: 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. 30

31 Personal Banking Denmark: Limited exposure to high LTV ratio loans that start to amortise before end-2018 Exposure to households with an IO mortgage (DKK bn) Breakdown of loans with high LTV ratio (DKK bn) Danske Prioritet (SDO mortgage) RD mortgage (fixed or variable rate) Exposure with LTV ratio above 100% Exposure with LTV ratio of % IO mortgages that start to amortise before end High LTV ratio** Secured bank lending 56 Rating categories Total credit exposure 174 Rating category Portion with acceptable LTV ratio* 157 Rating categories Category 11 (default) 28% 72% Category 10 Portion with high LTV ratio** 16.7 Reset in Impairments against households with IO mortgages 1.6 Collective 19% 81% Individual * Definition of acceptable LTV ratio: 80% or below for RD mortgages and Danske Prioritet, and 100% or below for secured bank lending. ** Definition of high LTV ratio: above 80% for RD mortgages and Danske Prioritet, or above 100% for secured bank lending. 31

32 Impaired exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio, Q4 13 (%) Shipping, breakdown of loan portfolio, Q4 13 (%) Other Mixed operations 6 Chemicals and feeds 13 Pig breeding Cereals etc. 20 Cattle breeding Car carrier Other 6 Chemical tanker RO-RO Product tanker 6 19 Container Offshore supply Offshore rig Crude tanker Cruise/Ferry Gas tanker Dry bulk Agriculture, exposure and allowance, Q4 13 (DKK bn) Shipping, exposure and allowance, Q4 13 (DKK bn) Business unit Gross exposure Allowance Coverage Business unit Gross exposure Allowance Coverage Personal Banking % Business Banking % Corporates & Institutions % Total exposure, ex. Non-core % Personal Banking % Business Banking % Corporates & Institutions % Total exposure % Portion from RD % Gross impaired loans: DKK 3.6 bn (5.4%) Gross impaired loans: DKK 4.2 bn (11.0%) 32

33 Ireland: Termination of Personal Banking and Business Banking Core: Breakdown of loan portfolio, Q4 2013* (DKK bn) Key points Discontinuation of Personal Banking and Business Banking on 1 January Existing customers are moved to the Non-core unit for servicing and termination Risk of additional impairments of up to DKK 500 m towards end-2014, resulting in estimated total impairments in 2014 of up to DKK 2 bn Personal mortgages Other Total Non-core: Breakdown of loan portfolio, Q4 2013* (DKK bn) Realised impairments and guidance, core & Non-core (DKK bn) 24.0 < CRE Personal mortgages Other Total Realised Q4 13 Guidance for 2014 * Gross credit exposure. 33

34 Ireland: House price trends and arrears Irish house price indices (index 100 = January 2005) CSO index,* houses Internal price index for houses in Dublin Internal price index for houses outside Dublin Fall from peak (%) Residential real estate Dublin Non-Dublin Commercial real estate Ireland, total Arrears** (%) days 180+ days Market Q310 Q311 Q312 Q313 * The general Irish house price index. ** Number of arrears, personal customers, excluding buy-to-let financing. Based on Q

35 Non-core Ireland: Breakdown of loan portfolio Individual impairments Value of collateral CRE (DKK bn) Personal mortgages (DKK bn) Other* (DKK bn) Total (DKK bn) Gross exposure Impaired loans Gross exposure Impaired loans Gross exposure Impaired loans Gross exposure Impaired loans Collective imp. (DKK bn) 0.1 Impaired 85% Collective imp. (DKK bn) 0.1 Impaired 43% Collective imp. (DKK bn) 0.2 Impaired 75% Collective imp. (DKK bn) 0.3 Impaired 70% Note: Value of collateral is capped by size of loan and reflects a haircut of at least 20%. Impaired loans are loans in rating categories 10 and 11 on which individual impairments have been made. * Consists primarily of consumer-related industries. 35

36 SIFI: Key elements of political agreement in October 2013 Key elements Danske Bank s total SIFI requirements, 2019 (% of RWA) Capital requirements CT1 SIFI requirement of 1% to 3% Total minimum requirement for SIFI banks of 11.5% to13.5% in 2019 In periods of high loan growth, possibility of countercyclical capital buffer up to 2.5% in 2019 CT1 CRD IV 7.0 SIFI 3.0* Liquidity and funding requirements LCR requirements will be announced when the final EU rules are in place, including rules on the treatment of Danish covered bonds as level 1 assets Legislative process and implementation Q1 2014: The Danish parliament will pass a bill with the final SIFI rules 1 January 2015: Expected implementation of new rules AT1/T2 CRD IV 3.5 Total capital 13.5 * Phased in at 0.6% per annum

37 Funding: Structure and sources Loan portfolio and long-term funding, Q4 13 (DKK bn) Funding sources (%) 1,785 Q Q Senior debt 46 1,553 Bank loans Deposits Bank mortgages Covered bonds RD mortgages Issued RD bonds Deposits credit inst. CD & CP Repos Deposits Senior unsecured Covered bonds Subord. debt Equity Loans Funding Short-term funding Long-term funding 37

38 Three different methods of rating banks Rating methodology Danske Bank s rating Anchor SACP* Extraord. Add = SACP = + = Support factors Issuer Rating BBB BBB A- (Stable) 1=Business Position 2=Capital & Earnings 3=Risk Position 4=Funding & Liquidity Bank Financial Strength Rating Baseline Credit Assessment (BCA) Parental and Adjusted Systemic + Cooperative = + = BCA Support Support Issuer Rating C- Baa2 0 notches Baa2 1 notch Baa1 (Positive) Individual Rating/Viability Rating Support Rating/Support Rating Floor a A- Issuer Default Rating (IDR) IDR is the higher of the Viability Rating and the Support Floor A (Stable) * Stand-Alone Credit Profile. 38

39 Financial targets: Dividend payments of 28% for 2013, positive outlook from Moody s and progress towards 9% ROE in 2015 Target Previous ambition Year to be achieved Status at 31 December 2013 Comments Return on equity 9% Above 12% 2015 Above 12% Above 12% in 2015 Long-term 5.0% In progress after initiating additional cost savings and other initiatives Ratings Improve ratings by at least one notch Unchanged S&P/Moody s/fitch A-/Baa1/A Stable/Positive/Stable In progress Core tier 1 ratio Minimum 13% 14.7% Met at end-2012 Unchanged End-2013 Total capital ratio Minimum 17% 21.4% Met at end Nominal costs Below DKK 23 bn Below DKK 24 bn DKK 24.3 bn On track 2015 Cost/income ratio Below 50% Below 46% 60.9% On track Dividend payments About 40% of net profit Unchanged % payout for 2013 On track Positive outlook from Moody's in December 39

40 Danica Pension s profit model Profit model Condition/ sensitivity 2013 DKK m = Danica Traditionel. Mainly risk allowance 70 bp p.a. of technical provisions (DKK 158 bn) Unit-linked business. Longterm: approximately 0.4% of AuM Can be booked only if investment return is high enough and if no use of bonus potential of paid-up policies Prices and volume Risk allowance Other Solid income base, but also price competition 1, Health and accident business Combined ratio Price competition -167 Return on investment portfolio at shareholders risk Financing result Special allotments, depending on profit and business volume Shadow account 538 Equity markets, interest rates Investment return: 1.9% 349 S-T interest rate (equity allocated capital) Low short-term interest rate -174 Transferred to shadow account from two interest groups, although only partly from one Net income 1,

41 Tax: 29% tax rate for 2013 and 24% adjusted for Ireland Actual and adjusted tax rates (DKK m) 2013 Q4 13 Q3 13 Q2 13 Q1 13 Profit before tax 10,059 2,862 2,304 2,677 2,216 Pre-tax loss, Ireland core and non-core 1, Permanent non-taxable difference Adjusted pre-tax profit, Group 11,108 2,702 2,655 2,757 2,993 Tax according to P&L 2, Taxes from previous years Adjusted tax 2, Tax drivers Tax on the profit for 2013 amounted to DKK 2.9 bn, or 29% of the pre-tax profit The tax charge was high relative to the profit, mainly because DKK 244 m was expensed as a result of a decrease in the deferred tax asset owing to lower corporation tax rates in the UK Adjusted for this charge, the tax rate for the year was 24.3% Adjusted tax rate 24.3% 23.8% 24.4% 24.4% 24.6% Actual tax rate 29.3% 32.8% 33.3% 18.4% 33.6% 41

42 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 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 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. 42