Q3 RESULTS DNB GROUP THIRD QUARTER 2015 Roadshow London, Edinburgh and Dublin 22.10.2015
Third quarter 2015 Pre-tax operating profit before impairment in NOK billion 8.1 (7.6) Cost/income ratio in per cent 39.6 (40.4) Return on equity in per cent 14.7 (14.8) Earnings per share in NOK 3.83 (3.45) Common equity Tier 1 capital ratio in per cent 1) (transitional rules) 13.1 (12.6) Figures in parentheses refer to 3Q14 1) Assuming 50 percent retained earnings. Based on a dividend payout ratio of 30 per cent, the common equity Tier 1 capital ratio was 13.4 per cent as at 30 September 2
Clarifications Pillar 2/CET1 Requirements from FSA 1) Takeaways 15,0 13,0 13,5 Dividend policy is unchanged with ambitions above 50% payout ratio when the requirement has been reached For 2015 the ambition is to maintain a dividend level at approximately the same level as for 2014 Initiatives to reach the requirements will be presented at our capital markets day CMD 2014 31. Dec. 2015 31. Dec. 2016 1) Assuming current buffer requirements, including counter-cyclical buffer 3
Profit figures Pre-tax operating profit before impairment NOK million Pre-tax operating profit before impairment excl. basis swaps NOK million 7 626 6 964 9 273 7 396 8 125 7 177 6 456 7 462 7 450 7 192 3Q14 4Q14 1Q15 2Q15 3Q15 Profit for the period NOK million 3Q14 4Q14 1Q15 2Q15 3Q15 Profit for the period excl. basis swaps NOK million 5 620 4 965 6 533 5 062 6 363 5 292 4 594 5 211 5 101 5 682 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 4
Return on equity and cost/income ratio Return on equity 1) Return on equity excl. basis swaps 1) Per cent Per cent 14.8 12.6 16.1 12.1 14.7 14.0 11.7 12.9 12.2 13.1 3Q14 4Q14 1Q15 2Q15 3Q15 Cost/income ratio Per cent 3Q14 4Q14 1Q15 2Q15 3Q15 Cost/income ratio excl. basis swaps Per cent 40.4 42.2 37.0 42.8 39.6 41.8 44.1 42.2 42.6 42.5 3Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 1) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability 5
Ratio of deposits to net loans and earnings per share Ratio of deposits to net loans Per cent Earnings per share NOK 4.01 3.83 3.45 64.0 65.4 65.2 65.0 63.3 3.05 3.04 63.9 63.5 64.1 64.4 63.2 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 Sept. 2015 3Q14 4Q14 1Q15 2Q15 3Q15 The ratio of deposits to net loans excl. short-term money market investments 6
Customer segments NOK million 2 557 2 363 3 425 995 2 430 Pre-tax operating profit after impairment 3 059 Sale of portfolios 3Q15 2Q15 3Q14 3 371 2 863 911 872 1 047 975 Personal customers Small and mediumsized enterprises Large corporates and international customers 7
Development in loans NOK billion 1 531 1 388 1 431 1 333 1 379 1 333 30 Sept. 13 31 Dec. 13 31 March 14 30 June 14 30 Sept. 14 31 Dec. 14 31 March 15 30 June 15 30 Sept. 15 Loans at end of period Loans adjusted for exchange rate movements 8
Development in deposits adjusted for short-term money market investments NOK billion 831 831 887 968 879 891 30 Sept. 13 31 Dec. 13 31 March 14 30 June 14 30 Sept. 14 31 Dec. 14 31 March 15 30 June 15 30 Sept. 15 Deposits adjusted for short-term money market investments Deposits adjusted for short-term money market investments and exchange rate movements 9
Development in average interest rate spreads customer segments Per cent 2.42 2.42 2.40 2.37 2.29 2.28 2.28 2.17 2.13 Lending spread 1.34 1.35 1.31 1.31 1.31 1.31 1.34 1.32 1.32 Combined spread - weighted average (0.32) (0.33) (0.33) (0.31) (0.19) (0.17) (0.13) (0.02) 0.08 Deposit spread 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Margin calculations for finance leases were adjusted in the third quarter of 2015. Figures for previous periods have been restated accordingly. 10
Development in commissions and fees NOK million 2 000 2 040 1 960 2 182 6.1% YoYgrowth 2 183 1) 2 074 1) 3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 Real estate broking Investment banking services Asset management and custodial services Money transfer and banking services Sale of insurance products 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
Income statement Jan.-Sept. Jan.-Sept. Amounts in NOK million 3Q15 2Q15 1Q15 4Q14 3Q14 2015 2014 Net interest income 8 981 8 728 8 587 8 700 8 228 26 296 23 787 Net commissions and fees 2 080 2 489 2 212 2 313 2 229 6 781 6 656 Net gains on financial instruments at fair value 1 945 1 174 3 400 279 1 817 6 519 5 038 Net financial and risk result, DNB Livsforsikring 64 158 52 185 136 273 424 Net insurance result, DNB Forsikring 128 153 99 129 121 379 362 Other operating income 247 221 361 446 256 830 1 044 Net other operating income, total 4 463 4 194 6 124 3 352 4 560 14 782 13 525 Total income 13 444 12 923 14 711 12 052 12 788 41 078 37 311 Operating expenses (5 103) (5 312) (5 215) (5 045) (5 088) (15 630) (15 406) Restructuring costs and non-recurring effects (216) (215) (223) (42) (74) (654) (181) Pre-tax operating profit before impairment 8 125 7 396 9 273 6 964 7 626 24 793 21 724 Net gains on fixed and intangible assets (3) 45 12 42 13 54 11 Impairment of loans and guarantees 392 (667) (575) (821) (183) (849) (817) Pre-tax operating profit 8 514 6 774 8 710 6 184 7 456 23 998 20 918 Tax expense (2 136) (1 695) (2 130) (1 236) (1 828) (5 961) (5 227) Profit from operations held for sale, after taxes (14) (17) (47) 16 (8) (79) (39) Profit for the period 6 363 5 062 6 533 4 965 5 620 17 958 15 652 Profit attributable to shareholders 6 238 4 952 6 519 4 965 5 620 17 709 15 652 12
Net gains on financial instruments Change 2Q15-3Q14 - Amounts in NOK million 3Q15 2Q15 3Q14 3Q15 3Q15 Customer revenues in DNB Markets 508 573 454 (65) 54 Trading revenues in DNB Markets (excl. CVA/DVA and credit spread effects) 474 440 516 34 (42) Credit spread effects on bonds in DNB Markets (582) (132) 200 (450) (782) Financial guarantees 228 233 211 (5) 18 Basis swaps 933 (54) 449 987 484 CVA/DVA (414) 252 (108) (667) (306) Other mark-to-market adjustments 798 (139) 95 937 703 Net gains on financial instruments at fair value 1 945 1 174 1 817 771 129 13
Changes in net interest income NOK million From 3rd quarter 2014 to 3rd quarter 2015 287 23 (23) 8 981 466 8 228 3Q14 Exchange rate effects Lending and deposit volumes Lending and deposit spreads Other net interest income 3Q15 14
Changes in net other operating income NOK million From 3rd quarter 2014 to 3rd quarter 2015 4 560 484 (76) (149) (356) 4 463 3Q14 Basis swaps Other operating income Net commissions and fees Net gains on other financial instruments 3Q15 15
Changes in operating expenses Change in Amounts in NOK million 3Q15 Change 3Q14 per cent Total adjusted operating expenses (5 103) (15) (5 088) (0.3) Of which : Exchange rate effects for units outside Norway (167) Currency-adjusted operating expenses (4 936) 152 (5 088) 3.0 Total adjusted operating expenses (5 103) (15) (5 088) Income-related costs Ordinary depreciation on operational leasing (24) Expenses directly related to operations Pension expenses (21) Fees (18) Properties and premises 78 Other costs (30) Non-recurring effects (216) (142) (74) Restructuring costs, employees (63) (31) (33) Other restructuring costs and non-recurring effects (97) (55) (41) IT restructuring (56) (56) 0 Operating expenses (5 319) (157) (5 162) (3.0) 16
Changes in operating expenses Change in Amounts in NOK million 3Q15 Change 2Q15 per cent Total adjusted operating expenses (5 103) 209 (5 312) 3.9 Of which : Exchange rate effects for units outside Norway (72) Currency-adjusted operating expenses (5 031) 281 (5 312) 5.3 Total adjusted operating expenses (5 103) 209 (5 312) Expenses directly related to operations IT expenses 110 Marketing expenses 39 Performance-based pay 37 Other costs 23 Non-recurring effects (216) (1) (215) Restructuring costs, employees (63) 71 (134) Other restructuring costs and non-recurring effects (97) (94) (3) IT restructuring (56) 22 (78) Operating expenses (5 319) 208 (5 527) 3.8 17
Impairment of loans and guarantees Jan.-Sept. Jan.-Sept. Amounts in NOK million 3Q15 2Q15 1Q15 4Q14 3Q14 2015 2014 Personal customers 942 (58) 34 67 (84) 918 (185) - Mortgage loans 10 17 81 141 (33) 107 (12) - Consumer finance 932 (75) (46) (74) (51) 811 (173) Small and medium-sized enterprises (129) (284) (308) (450) (165) (721) (387) Large corporates and international customers (527) (425) (256) (496) (18) (1 209) (529) - Nordic Corporates Division (6) 5 15 (333) 3 14 (37) - International Corporates Division (22) (93) 39 (166) (86) (77) (124) - Shipping, Offshore and Logistics Division (379) (302) (242) 21 116 (923) (188) - Energy Division (88) (43) (12) (5) (5) (144) (27) - Baltics and Poland (12) (47) (50) (1) (39) (110) (123) - Other units (19) 56 (7) (13) (8) 30 (30) Total individual impairment 285 (767) (530) (879) (267) (1 013) (1 101) Total collective impairment of loans 106 101 (44) 58 84 163 284 Impairment of loans and guarantees 392 (667) (575) (821) (183) (849) (817) Total impairment in relation to average volumes 1) (annualised) 0.10 (0.18) (0.16) (0.23) (0.05) (0.08) (0.08) 1) Excluding the sale of non-performing loan portfolios, the ratio was (0.18) for 3Q15 Excluding the sale of non-performing loan portfolios, the ratio was (0.17) for YTD 2015 18
Net non-performing and net doubtful loans and guarantees 1) Per cent 1.55 1.50 1.50 1.38 1.19 1.05 1.01 0.96 0.83 0.77 0.78 NOK billion 18.4 19.5 19.7 20.7 16.4 16.1 14.9 17.3 13.9 13.1 13.6 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept. 2010 2011 2012 2013 2014 2015 DNB Group As a percentage of net loans 1) Includes non-performing commitments and commitments subject to individual impairment. Accumulated individual impairment is deducted 19
Balance sheets DNB Group DNB Bank ASA 30 Sept. 31 Dec. 30 Sept. 31 Dec. Amounts in NOK billion 2015 2014 2015 2014 Deposits with central banks 187 59 184 54 Due from credit institutions 238 373 535 608 Loans to customers 1 531 1 439 715 723 Other assets 787 779 633 613 Total assets 2 744 2 649 2 067 1 998 Due to credit institutions 253 214 324 269 Deposits from customers 970 942 921 903 Short-term debt securities issued 187 207 187 207 Long-term debt securities issued 644 605 179 160 Other liabilities and provisions 508 523 310 332 Additional Tier 1 capital 8 8 Other equity 174 159 138 128 Total liabilities and equity 2 744 2 649 2 067 1 998 Ratio of deposits to net loans (%) 63.3 65.4 128.9 124.8 Adjusted ratio of deposits to net loans (%) 1) 63.2 63.5 128.7 121.0 Total combined assets 3 033 2 936 2 067 1 998 Currency-adjusted loans to customers 1 485 687 Currency-adjusted deposits from customers 936 889 1) Excluding short-term money market deposits 20
Common equity Tier 1 capital ratio 1) Transitional rules Per cent Leverage ratio 2) Per cent 12.6 12.7 12.7 13.0 13.1 5.7 6.0 5.7 5.8 5.7 30 Sept. 2014 31 Dec. 2014 31 March 2015 Future Basel III estimate 2) Per cent 30 June 2015 30 Sept. 2015 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 Sept. 2015 Estimate applying average weights used by Swedish banks 2) 3) 18.0 18.3 Per cent 18.8 19.8 20.3 15.0 15.1 14.6 15.2 15.4 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 Sept. 2015 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 Sept. 2015 1) 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 15 basis point change in the CET1 ratio at end-september 2015 2) The calculations from 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 21
Changes in the common equity Tier 1 capital ratio Per cent From 31 Dec. 2014 to 30 Sept. 2015 0.2 0.2 0.1 (0.5) 0.7 (0.3) 13.1 12.7 31 Dec. 2014 50% of profit for the period Exchange rate effect on equity Capital efficiency gains Other effects Exchange rate effect on existing portfolio Lending growth 30 Sept. 2015 22
Welcome to DNBs Capital Markets Day London 25 November 2015
Appendix The Norwegian Economy Capital requirements Loan book and asset quality
Percent A solid Norwegian economy - Expect expansionary fiscal policy, but no crisis package is expected by the Government budget Annual budget deficit/surplus for 2014 1) -300-250 -200-150 -100-50 0 50 100 150 200 General government net financial liabilities 1) (As a percentage of nominal GDP 2015*) Norwegian Pension/Oil Fund: EUR 760 bn (as of today) Expected development 2016 Net oil revenues Oil fund accrued interest Government spending EUR 22 bn EUR 23 bn EUR 21 bn (2014: EUR 16 bn) Estimated Norwegian budget surplus 2016: > 5% 2) Source: Proposed National Budget 2016 Note: Current account balance as a percentage share of country GDP; forecasts for 2015-16 1) Source: OECD Economic Outlook No. 97, June 2015 2) Source: DNB Markets 25
Lower oil-price and lower oil investments Oil price development Oil investments 2012 prices. NOK billion. 250 200 150 100 50 0 1996 1999 2002 2005 2008 2011 2014 2017E Oil investments DNB Markets Forecast Source: Thomson Datastream,, Norges Bank. SSB, DNB Markets forecast 26
but, weaker currency and stronger mainland investments Relative man-hour cost in common FX Index. 2003 = 100. 2015: Isolated effect of 14 % weaker NOK Mainland investments (ex Oil sector) 2012 prices. NOK billions 130 600 120 500 400 110 300 100 200 100 90 2003 2005 2007 2009 2011 2013 2015 0 1996 1999 2002 2005 2008 2011 2014 2017E Mainland investments Forecast Source: Thomson Datastream, DNB Markets, Norges Bank, SSB 27
giving a soft landing for Norwegian economy GDP growth and unemployment Year on year, per cent 5,0 % 3,6 % 2,1 % 1,4 % 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e Mainland GDP growth Unemployment rate Source: Statistics Norway/DNB Markets forecasts 28
Appendix The Norwegian Economy Capital requirements Loan book and asset quality
CET 1 Capital Requirements 15,0 % 11.8 % 12.7 % 13,5 % 1,5 % 1,5 % 1,5% 9,0 % 10,0 % 1,0 % 1,0 % 2,0 % 2,0 % 3,0 % 3,0 % 3,0 % 2,5 % 2,5 % 2,5 % 2,5 % 4,5 % 4,5 % 4,5 % 4,5 % 2013 2014 2015 2016 Source: Norges Bank CET1 Minimum Requirement Systemic Risk Buffer Countercyclical Buffer Conservation Buffer SIFIs Pillar 2 requirement As at 30 September 2015 (including 70% of YTD 2015 profit) CET 1 ratio is 13.4% 30
Agenda The Norwegian Economy Financial performance, targets and capital Loan book and asset quality
Loan Book EAD by segments as at 30 September 2015 1) Private individuals 7% Commercial real estate 11% Shipping 7% Logistics 1% Oil, gas and offshore 7% Energy 3% Other corporate customers 6% Residential mortgages 42% Services 2% Telecom and media 2% Manufacturing 5% Trade 3% Public sector 2% Fishing and fish farming 2% 32
Development in Loan to Value, Residential Mortgages Per cent 31% 33% 16% 13% 7% 0-40 40-60 60-75 75-85 >85 31 March 2015 30 June 2015 30 Sept. 2015 Collateral categories 33
No visible effect on credit card defaults 12% 10% 10.3 % 8% 8.0 % 6% 6.1 % 4.6 % 4% 2% 0% 34
DNB has a well-diversified oil-related portfolio ~9% of total Group EaD to oil-related portfolios Oil & Gas exposure NOK 77bn (3.9% of total Group EaD) NOK bn and per cent of NOK 77bn Offshore exposure NOK 62bn (3.1% of total Group EaD) NOK bn and per cent of NOK 62bn Oilfield Services NOK 37bn (1.85% of total Group EaD) NOK bn and per cent of NOK 36bn Other; 0,7; 1% Refining & petchem; 10,7; 14 % Midstream incl LNG; 22,7; 30 % Exploration Financing (EFF); 3,5; 5 % Reserve Based Lending (RBL); 11,0; 14 % Exploration & Production IG; 23,8; 31 % Exploration & Prod. Sub-IG; 4,8; 6 % Subsea construct.; 4,1; 7 % FPSO/FS O 4,9; 8 % Other; 6,2; 10 % Rig; 21,7; 35 % OSV; 24,6; 40 % Seismic; 1,6; 5 % Sub-inv. grade or similar; 5,5; 15 % Leveraged Buy Out (LBO); 8,1; 22 % Other; 0,4; 1 % Investment grade; 21,0; 58 % OSV: Offshore Service Vessels, F(P)SO: Floating (Production) Storage Offloading. LNG: Liquid Natural Gas. IG: Investment grade. All figures as at 30 September 2015. 35
Oil-related portfolio - 58 % is low risk and 37 % medium risk DNB s oil-related portfolio split by sub-segment By exposure (EaD) and risk grade Total oil related segments 100 NOK billion 96 31 March 2014 90 30 June 2014 30 Sept. 2014 80 31 Dec. 2014 31 March 2015 70 60 30 June 2015 60 30 Sept. 2015 50 40 30 20 10 0 100 90 80 70 60 50 40 30 20 10 0 PD 0.01% - PD 0.75% - PD 3.0% - NOK billion Offshore 19 39 PD 0.01% - PD 0.75% - PD 3.0% - 7 4 2 Net non-performing and net doubtful commitments 31 March 2014 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 Sept. 2015 1 Net non-performing and net doubtful commitments 90 80 70 60 50 40 30 20 10 0 Oil and Gas NOK billion 100 31 March 2014 90 80 70 60 50 40 30 20 10 0 60 15 PD 0.01% - PD 0.75% - PD 3.0% - Oilfield services 16 6 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 Sept. 2015 0 1 Net non-performing and net doubtful commitments NOK billion 100 31 March 2014 PD 0.01% - PD 0.75% - PD 3.0% - 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 Sept. 2015 2 0 Net non-performing and net doubtful commitments 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 Sep 2015. 36