DNB on track Rune Bjerke CEO
Financial ambitions - 2016 and 2017 Return on equity > 12 per cent Min. 14% CET1-ratio* as capital plateau > 50% dividend when capital plateau is reached 1 * Based on transitional rules
Capital generation ahead of plan expecting to reach the capital plateau in 2016 at the latest CET1 capital ratio - transitional rules Per cent Management buffer (min. 1.0) Capital plateau min. 14.0 12.6* 11.8 10.7 9.2 9.4 8.5 2009 2010 2011 2012 2013 30.09.2014 2016e 2017e-> 2 * Including 50 per cent of profits for YTD 3Q14
Increasing our payout ratio Dividend ambition during the capital build-up period Long-term ambition when capital plateau is reached > 50per cent 25per cent Potentially in combination with buybacks when dividend payout ratio exceeds 50 per cent A gradual return to long-term ambition. Intention to start in 2014 3
Committed to deliver on our ROE target despite increased capital level Return on equity Illustration, per cent 13.2 13.7 Increased capital base requires higher profit 11.7 12.0 Income generation Operational and capital efficiency 2012 2013 2014* 2014* 2016 and 2017 target 2016 capital base: CET1 ratio at 14 per cent 4 * Based on annualised YTD 3Q14 operating profit and adjusted for one-offs. Equals 14.4 per cent unadjusted
Five reasons to choose DNB towards 2017 and beyond
1 Proven financial track record DNB has delivered in the past Previous targets Current target 2007 2009 2012 2012 2013 NOK 20 bn in 2010 NOK 8-10 bn in 2009 Above 6 per cent in 2013 Flat costs towards 2015 >12 per cent Pre-tax operating profit before impairment Impairment losses Annual NII growth Annual growth in nominal costs excl. restructuring costs Return on equity 6
Proven financial track record Stable double-digit return in a challenging period with strong capital accumulation Return on equity Per cent, NOK million Equity Return on equity 22,0 21,0 20,0 19,0 18,0 17,0 16,0 15,0 14,0 13,0 12,0 11,0 10,0 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 1,0-22.0 153 072 75 976 12.4 13.6 13.2 14.4* 11.4 11.7 10.6 2007 2008 2009 2010 2011 2012 2013 30.09.2014 7 * Annualised YTD 3Q14
2 Prudent growth in quality earnings Continued growth in net interest income Net interest income NOK billion 35 30 25 Net interest income expectations Stable development in volume-weighted spreads Lending volume is expected to grow at around 3-4 per cent annually 20 CAGR 7.0% 15 2009 2010 2011 2012 2013 2014* 2015e 8 * Based on YTD 3Q14 net interest income annualised
Deposit repricing potential across customer segments Prudent growth in quality earnings Deposits in Personal banking and SMEs Deposits with repricing potential Low-yielding deposits / other LCI* maturing volumes and spreads public clients NOK billion, bps Volume Average spread Total NOK 522 billion 33% -99 15-110 22-136 67% Total = NOK 522 billion 7 Average maturity 2015 2016 2017 May March April 9 * LCI: Large Corporates and International
Multiple factors influence the level of NII growth Prudent growth in quality earnings Elements affecting net interest income + + + Scope of impact + Pressure on lending spreads Repricing of deposits Lending and deposit growth Reduced funding costs Additional Tier 1 capital General interest rate level 10
Net commissions and fees are increasingly important Prudent growth in quality earnings Net commissions and fees* NOK million, per cent Expectations for net commissions and fees Underlying growth of 5 per cent 9 500 8 500 7 500 6 500 CAGR 6.0% 2012 2013 2014** 2015e Expectations for other non-interest income Life insurance: contribution above NOK 300 million per quarter Non-life insurance: positive trends in cross-sales to households Net gains: lower non-recurring income 11 * Excluding SF AB and SalusAnsvar. ** Annualised net commissions and fees YTD 3Q14
Several areas with untapped potential capital-light commissions and fees Prudent growth in quality earnings Real estate broking Investment banking Trade finance Defined contribution Private Banking 12
3 Best-in-class cost efficiency Increasing our cost/income ambition Cost/income DNB vs peer groups Per cent Cost/income ambition for 2017 Per cent 75 European banks (top 50)* Nordic peer group DNB From below 70 65 60 45per cent to 55 50 ~40per cent 45 40 Flat nominal costs throughout 2015 (excluding restructuring costs) 13
4 Operating in a strong Norwegian economy Norway has performed well throughout the cycle higher and more stable GDP growth Historical average real GDP growth and standard deviation 1990-2013, per cent Average Standard deviation 2.8 2.8 1.6 1.8 1.7 1.9 Norway* Nordics** Eurozone 14 Source: Statistics Norway/DNB Markets. * Mainland Norway. ** Finland, Sweden and Denmark
Operating in a strong Norwegian economy Slower speed ahead still GDP growth at around 2 per cent GDP growth and unemployment Year on year, per cent 7% Mainland GDP growth Unemployment rate 6% 5% 4% 3.4 4.1 3% 2% 1% 0% -1% 2009 2.2 2.3 2004 2005 2006 2007 2008 2010 2011 2012 2013 2014e 2015e 2016e 2017e -2% 15 Source: Statistics Norway/DNB Markets forecasts
Operating in a strong Norwegian economy Substantial petroleum investments despite lower oil price Long-term oil price forecast US $ per barrel 160 140 Norwegian petroleum investments 2013 prices, NOK billion 215 120 100 112 95 185 80 60 80 40 20 53 0 1995 1998 2001 2004 2007 2010 2013 2016e 2019e 1980 1985 1990 1995 2000 2005 2010 2015e 16 Source: Statistics Norway/DNB Markets forecast/norwegian Oil and Gas forecast
From natural resources to financial wealth Operating in a strong Norwegian economy General government net financial liabilities Per cent of nominal GDP 2014 Government Pension Fund Global Beginning of the year, NOK billion -250% -200% 6 015-150% -100% -50% 0% 50% 100% 150% 387 17 Source: Norwegian Ministry of Finance, OECD
Operating in a strong Norwegian economy Two powerful tools to ensure a stable macro development Fiscal policy Large public wealth gives ample leeway to smooth business cycles National budget structural, non-oil deficit 2015 prices, NOK billion Central bank rates Per cent Monetary policy Higher interest rates in Norway than in the rest of Europe 250 Structural, non-oil deficit 4 per cent return on the fund capital 7 ECB Sweden Norway 200 150 100 50 0 2001 2003 2005 2007 2009 2011 2013 2015e 58 6 5 4 3 2 1 0 2008 2010 2012 2014 2016e 2018e 18 Source: Thomson Datastream, DNB Markets
5 Robust asset quality Continued reduction in non-performing loans Net non-performing and net doubtful loans and guarantees As a percentage of net loans As a percentage of net loans excl. Baltics and Poland Baltics and Poland DNB Group excl. Baltics and Poland 1.71 1.55 1.50 1.50 1.38 Per cent 0.42 0.35 0.99 0.73 1.05 19.1 0.88 18.4 1.10 1.16 19.5 19.7 1.10 20.7 1.01 0.78 14.9 NOK billion 11.9 4.2 2007 2008 2009 2010 2011 2012 2013 30.09.2014 19
Impairment expected to stay below normalised levels in 2015 Robust asset quality Expected development in impairment of loans and guarantees 2014-2015 New individual impairment Reversals Collective impairment Impairment Flat Reduced? Losses in 2015 below normalised levels* Key factors affecting collective impairment Portfolio migration Volume growth Sector-specific economic cycles (Clark Sea Index, production gap, housing prices) 20 * Normalised losses = 20 bps of EaD
Key takeaways from the CEO On track towards 2017 and beyond ROE target firm at above 12 per cent A step up towards our increased long-term dividend ambition of above 50 per cent Delivering on our promises five reasons to choose DNB Proven financial track record Prudent growth in quality earnings Best-in-class cost efficiency Operating in a strong and stable Norwegian economy Robust asset quality
DISCLAIMER CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS The statements contained in this presentation may include forward-looking statements such as statements of future expectations. These statements are based on the management s current views and assumptions and involve both known and unknown risks and uncertainties. Although DNB believes that the expectations reflected in any such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results, performance or events may differ materially from those set out or implied in the forward-looking statements. Important factors that may cause such a difference include, but are not limited to: (i) general economic conditions, (ii) performance of financial markets, including market volatility and liquidity (iii) the extent of credit defaults, (iv) interest rate levels, (v) currency exchange rates, (vi) changes in the competitive climate, (vii) changes in laws and regulations, (viii) changes in the policies of central banks and/ or foreign governments, or supra-national entities. DNB assumes no obligation to update any forward-looking statement. 22