DNB Bank DNB Boligkreditt November 2017
Content DNB A Brief Overview The Norwegian Economy Financial Targets, Performance and Capital Loan Book and Asset quality Funding Appendix: Cover Pool Portfolio Information and LCR eligibility Digitalization The Norwegian Mortgage Market Capital and Tier 1 Additional slides Financial Performance and Other information 2
DNB A Brief Overview 3
DNB - Norway s Leading Financial Services Group Approximately 30 % market share in Norway 34 % owned by the Norwegian Government Credit Ratings: Moody's: Aa2 (negative) S&P: A+ (stable) DBRS: AA (low) (stable) 4
The DNB Group DNB ASA DNB Bank ASA Aa2 / A+ / AA (low) DNB Life and Asset Management (Senior/ short term issuance) DNB Boligkreditt AS (Covered Bonds: AAA/Aaa) 100% owned by DNB Bank and functionally an integrated part of the parent Mortgages originated within DNB Bank s distribution network in accordance with the bank's credit policy 5
The Norwegian Economy 6
Still a Solid Norwegian Economy 2016 2017 Budget surplus 3.1 % 4.1 % 1) Oil fund ~ EUR 826 bn ~ EUR 845 bn 2) Unemployment 4.8 % 4.3 % 3) GDP growth + 1.0 % + 2.0 % 3) Central Bank Rate 0.5 % 0.5 % 3) Source: 1) OECD Economic Outlook No. 101, June 2017 2) Ministry of Finance (National Budget 2017) 3) DNB Markets Economic Outlook August 2017 7
Government Finances are Rock-Solid Annual budget deficit/surplus forecast for 2017 1) General government net financial liabilities 1) As per cent of nominal GDP 2017-300 -250 Iceland 0.9 Norway +4.1 Denmark -0.8 Sweden +0.9 United Kingdom -3.0 Ireland Netherlands Poland -0.5 1.1 Germany -2.9 Belgium 0.7-1.9 Czech R. Slovakia Luxembourg 0.4 Austria -1.2 +0.7-1.0 Hungary France -2.6 Slovenia -3.0-1.0 Portugal -1.5 Spain -3.1 Italy -2.1 Greece -0.2 Finland -1.7 Estonia -0.4-200 -150-100 -50 0 50 100 150 200 1) Source: OECD Economic Outlook No. 101, June 2017 8
The Growth of the Sovereign Wealth Fund Adds Flexibility Government Pension Fund Global 2001 1H 2017, NOK billion Oil income versus spending 2006 2017, NOK billion 9000 8000 Annual return, GPFG Annual net petro cash flow Annual actual "spending of oil-money" 7000 6000 5000 4000 3000 2000 1000 600 500 400 300 200 100 0 2001 2004 2007 2010 2013 2016 0 2006 2008 2010 2012 2014 2016 Source: Ministry of Finance (National Budget 2017), DNB Markets, NBIM 9
Unemployment - Among the Lowest in Europe Forecasted unemployment Per cent 10 8 6 4 2 4.8 4.3 4.2 4.1 4.0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F DNB Markets (Aug 17) Among the lowest unemployment in Europe Per cent 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Denmark Finland Norway Sweden United Kingdom Euro area (16 countries) Source: OECD Economic Outlook No. 101, June 2017 10
Economic Growth in Norway is Picking up Again GDP growth Year on year, per cent 6% 5% 4% 3.4 % 3% 2% 1% 1.7 % 2.5 % 2.3 % 2.3 % 1.0 % 1.0 % 2.1 % 2.4 % 2.0 % 2.0 % 2.0 % 1.9 % 0% -1% 5% 2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2019e GDP growth Per cent DNB Markets (Aug 17) Statistics Norway (Sep 17) 4% 3% 2% 1% 0% -1% -2% 2013 2014 2015 2016 2017 2018 2019 Norway Sweden Denmark Finland Euro Area Source: DNB Markets, Economic Outlook August 2017 11
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Oil Investments are Stabilising at a High Level Lower break-even price ensures a competitive continental shelf Petroleum investments in Norway NOK billion, share of GDP in per cent Break-even price: Sanctioned vs April 2017 USD per barrel, Brent Blend 250 10 200 9 8 7 80 150 100 6 5 4 3 38 35 30 25 52 45 35 50 2 1 0 0 Johan Sverdrup Johan Castberg Sanctioned March 2016 September 2016 April 2017 Constant 2014 prices (lha) Share of GDP (rha) Source: Thomson Datastream, DNB Markets Source: Rystad Energy, Statoil, Wall Street Journal 12
Financial Targets, Performance and Capital 13
Financial Ambitions for 2017-2019 Updated financial ambitions will be presented on the Capital Markets Day in London on 21 November ROE > 12 per cent C/I ratio < 40 per cent Overriding target towards 2019 Key performance indicator CET1 ratio ~ 16.0 per cent 1) Payout ratio > 50 per cent Requirement including management buffer Cash dividend combined with share buy-back programme 1) Based on transitional rules including increased counter-cyclical buffer requirements in Singapore, Sweden and Norway. 14
DNB Delivers Solid Profit Pre-tax operating profit before impairment NOK billion 35 30 28.7 34.1 30.8 25 20 18.7 21.3 15 10 7.7 7.4 5 1.6 2.3 2.0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017 Pre-tax operating profit before impairment Impairment of loans 15
Reduced Volume of Non-Performing and Doubtful Loans There are no signs of spill-over effects from oil-related industries Includes non-performing commitments and commitments subject to individual impairment. Accumulated individual impairment is deducted. Includes the Baltics, reclassified as assets held for sale. 16
Key Financial Ratios YTD 17 2016 2015 2014 2013 2012 2011 2010 Return on equity (%) 10.2 10.1 14.5 13.8 13.1 11.7 11.4 13.6 Cost income (%) 43.8 40.9 36.9 41.9 45.7 49.1 47.1 47.6 Comb. weighted total average spread (%) 1.30 1.32 1.32 1.31 1.31 1.18 1.12 1.15 Write down ratio (%) 0.17 0.48 0.15 0.12 0.17 0.24 0.28 0.26 Common Equity tier 1 ratio (%) 16.3 16.0 14.4 12.7 11.8 10.7 9.4 9.2 Total capital ratio (%) 19.6 19.5 17.8 15.2 14.0 12.6 11.4 12.4 17
DNB CET1 Capital Generation CET1 build up and dividend Basis points (bps) transitional rules CET1 capital ratio transitional rules Per cent Equity development NOK bn 32 65 89 175 160 8.5 9.2 9.4 10.7 11.8 12.7 14.4 16.0 16.3 118 127 142 159 190 206 211 138 40 55 101 92 2012 2013 2014 2015 2016 CET1 build up Dividends 2009 10 11 12 13 14 15 16 17 YTD 2011 2012 2013 2014 2015 2016 2017 YTD 18
Leverage Ratio DNB versus Nordic Peers Leverage ratio Per cent, 30 September 2017 7.1 6.0 DNB s leverage ratio requirement 1) 4.9 4.7 4.7 4.4 DNB Nordea SEB Swedbank SHB 1) The Norwegian leverage ratio requirement for banks is 5 per cent effective as of 30 June 2017. For systemically important banks, such as DNB, the minimum requirement is 6 per cent. A potential breach of the leverage ratio requirement will not trigger automatic restrictions on AT1 coupon payments. 19
SREP CET1 Capital Requirements SREP includes Pillar 2 requirements Pillar 2 requirements in Norway are not included in the MDA trigger level 16.0 % 16.3 % SREP 14.7% ~ 16 % 11.8 % 12.7 % 14.4 % 1.5 % 1.5 % 1.5 % 1.6 % 1.2 % 1.2 % 1) 1.6 % 1) SREP 15.2 % 1.0 % 1.0 % 2.0 % 2.0 % 2.0 % 2.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 2.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % 4.5 % YE 2013 YE 2014 YE 2015 YE 2016 30.09.2017 YE 2017 Target YE 2017 Pillar 1 Minimum Requirement Conservation Buffer Systemic Risk Buffer SIFI Buffer Countercyclical Buffer Pillar 2 Requirement SREP Requirement Management Buffer DNB CET 1 DNB Bank Group CET 1 1) In accordance with CRD IV, the institution-specific CCyB rate will be a weighted average of the rates in the jurisdictions in which the institution operates. In Norway the countercyclical buffer is currently 1.5 % and DNB Bank s effective CCyB rate is approximately 1.2 %. As from YE 2017 the CCyB in Norway will increase to 2.0 % increasing DNB s effective CCyB to approximately 1.6 %. 20
MDA DNB Well Above CET 1 MDA Trigger Level Pillar 2 requirements in Norway are not included in the MDA trigger level 12.7 % 14.4 % 12.0 % 16.0 % 16.3 % ~16 % target YE 2017 13.2 % 13.2 % 1) 13.6 % 1) 10.0 % YE 2014 YE 2015 YE 2016 30.09.2017 YE 2017 MDA Trigger Level DNB CET 1 DNB Bank Group CET1 CET Target 1) In accordance with CRD IV, the institution-specific CCyB rate will be a weighted average of the rates in the jurisdictions in which the institution operates. In Norway the countercyclical buffer is currently 1.5 %. DNB Bank s effective CCyB rate is approximately 1.2 %. As from YE 2017 the CCyB in Norway will increase to 2.0 % increasing DNB Bank s effective CCyB to approximately 1.6 %. 21
DNB: Significantly Higher RW Density than Nordic Peers Risk Weighted Assets Per cent of total assets, 30 September 2017 38.1 % 21.0 % 20.8 % 17.1 % 17.0 % DNB SEB Nordea Swedbank SHB Core Equity Tier 1 With and without transitional rules, 30 June 2017 23.2 1) 24.6 23.4 15.8 18.9 19.3 10.6 12.0 10.6 9.4 DNB SEB Nordea Swedbank SHB CET1 ratio transitional rules CET1 ratio Basel III 1) This is just an illustration of a comparable CET1- ratio. DNB s CET1-ratio is calculated based on the average risk-weights on Swedish peers IRB portfolios (corporate and mortgages) as of 30 June 2017. 22
Loan Book and Asset Quality 23
Loan Book EAD by Segments as of 30 September 2017 Other corporate customers 4 % Commercial real estate 10 % Shipping 5 % Oil, gas and offshore 6 % Power and renewables 2 % Healthcare 2 % Public sector 2 % Mortgages and other exposures, personal customers **) 51 % Fishing and fish farming 2 % Trade 3 % Manufacturing 4 % Residential property Services 5 % 2 % Technology, media and telecom 2 % Including net non-performing and net doubtful loans and guarantees. Includes portfolio in the Baltics. Exposures at default are based on full implementation of IRB. The portfolio banks and financial institutions is still subject to final IRB approval from the Norwegian FSA (Finanstilsynet). *) Of which mortgages 45 per cent. 24
Aiming to Reduce Volatility and Increase Profitability Through Rebalancing of the Portfolio Reducing Exposure in Cyclical Industries USD billion Rebalancing Between Large Corporates and Personal Customers 21 20 11 14 46% 54% 51% 49% 2012 YTD 2017 Shipping 2014 YTD 2017 Oil, gas and offshore 2Q 2015 3Q 2017 Mortgages and other exposures, personal customers Corporate loans 25
DNB s Loan Book is Robust No Signs of Spill-over Effects to Other Loan Portfolios From the Oil-related Downturn Personal customers EAD 1) in NOK billion 726 Corporate customers excl. oil-related portfolio EAD 1) in NOK billion Oil-related portfolio EAD 1) in NOK billion 599 173 233 16 2 53 13 48 18 39 10 Low risk Medium risk High risk Net nonperforming and net doubtful commitments Low risk Medium risk High risk Net nonperforming and net doubtful commitments Low risk Medium risk High risk Net nonperforming and net doubtful commitments 1) EAD = Exposure at default Low risk 0.01 0.75 Medium risk 0.75 3.00 Probability of default (per cent) 31.12.2015 31.03.2016 30.06.2016 30.09.2016 31.12.2016 30.06.2017 30.09.2017 High risk 3.00 - impaired 26
Mortgage Lending in DNB is Based on Cash Flow 1. Willingness to repay the loan Credit history 2. Capability of repaying the loan Including 5 per cent interest rate stress Amortization requirement above 60 % LTV Max 5x gross income 2% Current mortgage rate 5 % 7% Mortgage rate including stress test 3. Collateral LTV max 85 % 4. Monthly behavior scoring of borrowers 27
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 House Price Growth Can be Explained by Fundamentals Nominal House Prices 2000-2017 350 300 250 200 150 100 800 700 600 500 400 300 200 100 Norwegian House Prices 5,000 0-5,000-10,000-15,000 Completed housings less growth in households 50 0-20,000 Norway Sweden USA UK Denmark Nominal prices CPI-deflated prices Income per capita-deflated prices Source: Eiendomsverdi AS (member of the European AVM Alliance) Source: Real Estate Norway, Statistics Norway Source: Statistics Norway/ DNB Markets 28
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 House Prices Peaked in April 2017 From April 2017 we have seen a drop in house prices Prices are still higher than 12 months ago DNB expects a further modest house price drop in 2017 and 2018 House Price Growth All-time-high = April 2017 As of October 2017 Norway 0.7 % Oslo House Price Growth 1 Jan 2007 = Index 100 200 175 150-4.5 % -2.8 % 125 100 75-10.1 % Since all-time-high (April 17) Last 12 months (Oct 17) Source: Eiendomsverdi AS (member of the European AVM Alliance) Norway Source: Eiendomsverdi AS (member of the European AVM Alliance) Oslo 29
A Very Robust Residential Loan Portfolio Loan-to-Value (LTV) Per Cent of Residential Mortgage Book, 30 September 2017 34% 30% 18% 13% 6% 0-40 40-60 60-75 75-85 >85 - Includes mortgages in DNB Bank and DNB Boligkreditt 30
DNB Boligkreditt Covered Bonds Cover Pool Data Rating (Moody s/s&p) Aaa/AAA Cover Pool Size (million) 618,015 Cover Pool Data No. of Mortgages in the Cover Pool 416,869 Average Loan Balance (thousands) 1,483 Regulatory Overcollateralisation Requirement 2.0 % Overcollateralisation 56.8 % Weighted Average LTV (Indexed) 52.8 % Pool statistics as of 30 September 2017. Cover pool reporting coincides with DNB quarterly financial reporting. Cover Pool Sensitivity Analysis Stresstest House Price Decline Current 10 % 20 % 30 % WA Indexed LTV 52.8 % 58.7 % 66.0 % 75.4 % Eligible Overcollateralisation 55.9 % 53.7 % 48.3 % 39.5 % 31
DNB: Well Diversified Within Norway Limited exposure to the most oil exposed areas Well diversified residential mortgage book within Norway* Eastern Norway 66 % Western Norway 16 % Northern Norway 8 % Southern Norway 5 % Mid- Norway 5 % Limited exposure to most oil exposed areas Rogaland 6.4 % Hordaland 7.8 % Vest-Agder 1.6 % * DNB Boligkreditt cover pool as of 30 September 2017 32
Oil-Related Portfolio Represents 5.9 % of Total EaD Total loan portfolio EaD NOK 1 930 billion Per cent, as at 30 September 2017 Oil-related portfolio EAD NOK 114 billion 5.9 per cent of DNB s total EaD as at 30 September 2017 Oilfield services 1.0 % 6 % 8 % 3.8 % 2.2 % Oil & Gas 2.8 % 7 % 11 % 2.2 % Offshore The oil-related portfolio has been reduced significantly Down from NOK 167.1bn (8.4 % of total EaD) in September 2015 33
Oil-Related Portfolio Offshore the Most Challenging Sector DNB s oil-related portfolio split by sub-segment in terms of exposure (EaD) and by risk grade Total Oil related segments EaD in NOK billion Offshore EaD in NOK billion 48 39 28 18 10 2 3 9 Low risk Medium risk High risk Net non-performing and net doubtful commitments Oil and Gas EaD in NOK billion Low risk Medium risk High risk Net non-performing and net doubtful commitments Oilfield Service EaD in NOK billion 37 9 7 1 10 6 4 1 Low risk Medium risk High risk Net non-performing and net doubtful commitments Low risk Medium risk High risk Net non-performing and net doubtful commitments EaD: Exposure at Default, PD: Probability of default. Figures from Fact book as at 31 March 2017. Based on DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. 31.12.2015 31.03.2016 30.06.2016 30.09.2016 31.12.2016 31.03.2017 30.06.2017 30.09.2017 34
Offshore Exposure is 2.2 % of DNB s Total Loan Portfolio Total loan portfolio EaD NOK 1 930 billion Per cent, as at 30 September 2017 Offshore exposure EaD NOK 42 billion Per cent of DNB s portfolio, as at 30 September 2017 Rig 0.7 % 0.4 % Other offshore 2.2 % 1.1 % Offshore Supply Vessels (OSV) 35
Shipping Exposure is 4.7 % of DNB s Total Loan Portfolio The Shipping Portfolio is Well Diversified Total loan portfolio EaD NOK 1 930 billion Per cent, as at 30 September 2017 Shipping portfolio* EaD NOK 91 billion Per cent of DNB s total EAD, as at 30 September 2017 Other shipping 7 % 11 % 6 % 8 % 4.7 % Chemical and product tankers Gas 0.6 % 0.6 % 0.8 % 0.7 % 1.0 % 0.9 % Crude oil tankers Dry bulk The shipping portfolio has been reduced significantly Down from NOK 138.1bn (6.9 % of total EAD) in September 2015 Container * Excluding offshore portfolio. Offshore is included in oil-related portfolio. 36
Risk Classification and Migration DNB s Shipping Book - Excluding Offshore Shipping* EaD distribution by PD bracket NOK billion 57 14 17 3 Low risk Medium risk High risk Net non-performing and net doubtful commitments 31.12.2015 31.03.2016 30.06.2016 30.09.2016 31.12.2016 31.03.2017 30.06.2017 30.09.2017 * Numbers for the Shipping Offshore and Logistics Division excluding offshore portfolio. Offshore is included in oil-related portfolio. 37
Previous Shipping Experience Provides Comfort Accumulated shipping impairments, 2010-2014 Per cent of lending book 21.5 8.6 5.1 2.4 DNB (shipping) Nordic peer (shipping and offshore) Norwegian banks (shipping and pipe transportation)* European peer (Shipping) *Aggregate numbers for Norwegian banks are from the 2009-2013 period (including DNB) Source: DNB Markets, company reports. Presented at DNB CMD 2015. 38
Funding 39
2009 2010 2011 2012 2013 2014 2015 2016 Q1 17 Q2 17 Q3 17 DNB Funding Structure Net Stable Funding Ratio (NSFR) Average Life of Long-term Funding Senior debt and covered bonds, years Ratio of Deposits to Net Loans Per Cent 105% 4.1 53 55 58 63 65 65 61 62 66 65 66 79% 2.4 2012 2013 2014 2015 2016 2017 2008 2010 2012 2014 2016 40
DNB is a Well Established International Borrower With a Strong Focus on Diversification of Funding Sources DNB Bank EMTN program of Samurai Shelf (JPY) USD 144A program USCP program of Yankee CD program of ECP/CD program of EUR 45 billion JPY 500 billion USD 10 billion USD 18 billion USD 15 billion EUR 15 billion DNB Boligkreditt (Covered Bonds) Covered Bond program of EUR 60 billion Covered Bond program of USD 12 billion 41
Issuance of Long Term Debt 2017 EURO bill Tenor Covered Bonds 6.0 8.0 Senior Bonds 1.7 3.0 Sum 7.6 6.9 Tier 1 / LT 2 1.1 Total 8.7 2016 EURO bill Tenor Covered Bonds 7.0 7.7 Senior Bonds 2.8 5.7 Sum 9.8 7.1 Tier 1 / LT 2 0.9 Total 10.7 2015 EURO bill Tenor Covered Bonds 5.1 6.0 Senior Bonds 1.8 5.0 Sum 6.9 5.7 Tier 1 / LT 2 1.3 Total 8.3 42
A Well Established International Covered Bond Issuer Volume Tenor Maturity EUR 1,500 mn 5 years 2018 Jan EUR 1,500 mn 5 years 2018 Nov EUR 1,500 mn 7 years 2019 Jun EUR 1,250 mn 5 years 2019 Oct EUR 1,250 mn 5 years 2020 Oct EUR 1,500 mn 5 years 2021 Jan EUR 1,500 mn 10 years 2021 Jun EUR 2,000 mn 5 years 2022 Jan EUR 2,000 mn 10 years 2022 Mar EUR 1,000 mn 10 years 2022 Nov EUR 1,500 mn 7 years 2023 Apr EUR 1,500 mn 10 years 2026 Sep EUR 1,000 mn (FRN) 5 years 2019 Jan EUR 1,000 mn (FRN) 7 years 2021 Nov USD 2,000 mn 5 years 2018 - Mar USD 1,250 mn 5 years 2020 - May USD 1,500 mn 5 years 2022 - Mar GBP 500 mn (FRN) 5 years 2020 - Feb 43
DNB Senior Curve Volume Tenor Maturity EUR 1,000 mn 10 years 2020 Jun EUR 2,000 mn 10 years 2021 Feb EUR 1,000 mn 10 years 2022 Jan EUR 750 mn 7 years 2023 Feb EUR 1,000 mn (FRN) 5 years 2019 Jan EUR 1,000 mn (FRN) 5 years 2020 Jan EUR 650 mn (FRN) 5 years 2020 Aug USD 1,250 mn 3 years 2020 Oct USD 1,250 mn 5 years 2021 Jun USD 500 mn (FRN) 3 years 2020 Oct USD 250 mn (FRN) 5 years 2021 Jun 44
Funding Contacts Long Term Funding: Thor Tellefsen Senior Vice President, Head of Long Term Funding Phone direct: + 47 24 16 91 22 Mobile: + 47 915 44 385 E-mail: thor.tellefsen@dnb.no Håkon Røsand Senior Vice President, Long Term Funding Phone direct: + 47 24 16 91 27 Mobile: + 47 906 16 892 E-mail hakon.rosand@dnb.no Kristine Øvrebø Senior Vice President, Long Term Funding Phone direct: + 47 24 16 91 25 Mobile: + 47 916 08 005 E-mail: kristine.ovrebo@dnb.no Short Term Funding: Åsmund Midttun Senior Dealer, Rates, FICC Phone direct: +47 24 16 90 28 Mobile: +47 901 13 559 E-mail: asmund.midttun@dnb.no / amidttun@bloomberg.net Erik Brække Senior Vice President, Rates, FICC Phone direct: +47 24 16 90 31 Mobile: +47 930 47 504 E-mail: erik.brakke@dnb.no / ebraekke@bloomberg.net Stephen Danna First Vice President, FX/Rates/Commodities, New York Phone direct: +1 212 681 2550 Mobile: +1 646 824 0072 E-mail: stephen.danna@dnb.no / sdanna@bloomberg.net https://www.ir.dnb.no/funding-and-rating 45
Appendix Appendix A: Cover Pool Portfolio Information and LCR Eligibility 46
Future Updates On Cover Pool Developments DNB has implemented the common Harmonised Transparency Template of the European Covered Bond Council which is available on the DNB website. Information about the cover pool of DNB Boligkreditt may be accessed via DNB s web page: https://www.ir.dnb.no/funding-and-rating/cover-pool-data Contacts DNB Boligkreditt AS: - Per Sagbakken, CEO: per.sagbakken@dnb.no +47 906 61 159 Portfolio information is updated when DNB quarterly results are released 47
Portfolio Characteristics Report date: 30.09.2017 Report currency: NOK Key Characteristics Overcollateralisation Total cover pool, nominal balance* (mill.) 618,015 Cover pool size: Number of mortgages 416,869 Residential mortgages, loan balance (mill.) 618,015 Number of borrowers 350,133 Covered bonds outstanding (mill.) 394,057 Average loan balance (thousands) 1,483 Overcollateralisation 56.8 % Outstanding covered bonds, nominal balance (mill.) 394,057 Substitute assets (% of total cover pool) 0.0 WA indexed LTV (%) 52.8 WAL of cover pool (contractual maturity in years) 12.7 WAL of outstanding covered bonds (extended maturity in years) 5.1 * All cover pool assets are denominated in NOK. ** Seasoning indicates the number of months since collateral for the loan was established. Maturity Structure Cover Pool Maturity Structure Covered Bonds Contractual maturity (years) Loan balance (mill.) % Extended maturity (years) Loan balance (mill.) % 0 1 21,136 3.4 % 0 1 6,276 1.6 % 1 2 22,274 3.6 % 1 2 51,162 13.0 % 2 3 23,784 3.8 % 2 3 42,100 10.7 % 3 5 51,787 8.4 % 3 5 116,588 29.6 % 5 10 117,703 19.0 % 5 10 151,795 38.5 % > 10 381,331 61.7 % > 10 26,137 6.6 % Total 618,015 100.0 % Total 394,057 100.0 % Expected maturity (years) Loan balance (mill.) % 0 1 52,816 13.4 % 1 2 42,481 10.8 % 2 3 50,810 12.9 % 3 5 143,837 36.5 % 5 10 78,228 19.9 % > 10 25,884 6.6 % Total 394,057 100.0 % 48
Portfolio Characteristics cont. Loan Size Concentration Risk Private individuals Loan balance (mill.) Number of loans % 1,000,000 79,045 182,255 10 largest exposures 0.2 % > 1,000,000 2,000,000 187,175 126,306 10 largest exposures excl. housing cooperatives 0.1 % > 2,000,000 3,000,000 155,226 63,675 > 3,000,000 4,000,000 84,728 24,640 Property Types > 4,000,000 5,000,000 43,176 9,705 Loan balance (mill.) % > 5,000,000 50,470 7,674 Residential 618,015 100.0 % Total 599,818 414,255 Commercial 0 0.0 % Other 0 0.0 % Housing Cooperatives Loan balance (mill.) Number of loans Total 618,015 100.0 % 5,000,000 2,964 1,684 > 5,000,000 10,000,000 3,115 433 o/w Housing Cooperatives / Multi-family a 18,196 2.9 % > 10,000,000 20,000,000 4,392 310 o/w Forest & Agriculture 0 0.0 % > 20,000,000 50,000,000 4,786 151 > 50,000,000 100,000,000 2,043 30 Occupancy Type > 100,000,000 897 6 % Total 18,196 2,614 Owner occupied 87.4% Second homes / Holiday houses 0.4% LTV buckets Buy to let / Non owner occupied houses 0.1% Indexed LTV Loan balance (mill.) % Other 12.2% 0 40 138,633 22.4 % Total 100.0% 40 50 97,558 15.8 % 50 60 139,928 22.6 % Repayment Type 60 70 145,873 23.6 % % 70 80 84,593 13.7 % Amortization 73.6 % 80 90 7,475 1.2 % Interest only* 26.4 % 90 100 2,119 0.3 % Total 100.0 % >100 1,835 0.3 % *No principal payments for a limited period of time. Total 618,015 100.0 % 49
Portfolio Characteristics cont. Seasoning Non Performing % Non performing loans 0.10 % Up to 12months 19.7 % 12-24 months 15.6 % Arrears 24-36 months 12.7 % 30 - < 60 days 0.11 % 36-60 months 16.2 % 60 - < 90 days 0.03 % 60 months 35.7 % 90 - < 180 days 0.03 % Total 100.0 % 180 days 0.07 % Interest Rate Type Fixed Rate 6.9 % Floating Rate 93.1 % Geographical Distribution Loan balance (mill.) % Eastern Norway: 66 % Østfold 35,521 5.7 % Western Norway: 16 % Akershus 116,345 18.8 % Northern Norway: 8 % Oslo 147,037 23.8 % Southern Norway: 5 % Hedmark 11,439 1.9 % Mid-Norway: 5 % Oppland 18,468 3.0 % Buskerud 37,537 6.1 % Vestfold 39,991 6.5 % Telemark 12,853 2.1 % Aust-Agder 8,590 1.4 % Vest-Agder 9,910 1.6 % Rogaland 39,739 6.4 % Hordaland 48,433 7.8 % Sogn og Fjordane 1,700 0.3 % Møre og Romsdal 9,777 1.6 % Sør-Trøndelag 25,862 4.2 % Nord-Trøndelag 7,064 1.1 % Nordland 22,758 3.7 % Troms 16,836 2.7 % Finmark 8,144 1.3 % Svalbard 9 0.0 % Total 618,015 100.0 % 50
Cover Pool Sensitivity Analysis and Overcollateralisation History Stresstest - House price decline House price decline Current 10 % 20 % 30 % Total cover pool balance (nominal, NOKbn) 618,015 618,015 618,015 618,015 WA indexed LTV (%) 52.8 58.7 66.0 75.4 Eligible cover pool balance (nominal, NOKbn) 614,509 605,572 584,517 549,529 Total outstanding covered bonds (nominal, NOKbn) 394,057 394,057 394,057 394,057 Eligible overcollateralization 55.9 % 53.7 % 48.3 % 39.5 % Cover Pool Overcollateralisation History 60.0 % 50.0 % 40.0 % Latest overcollateralisation requirement for AAA/Aaa rating: S&P: 16.0 % Moody s: 0 % 30.0 % 20.0 % 10.0 % 0.0 % 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Actual OC Rating requirements 51
Net Non Performing Loans in DNB Boligkreditt AS 0.30% 0.20% 0.10% 9 bp 0.00% 90+ days Arrears 52
Covered Bonds Issued by DNB Boligkreditt AS Qualifies for Level 1-Assets Pursuant to LCR-regulation (Slide 1 of 2) Covered bonds issued by DNB Boligkreditt AS fulfil the requirements to qualify as Level 1-assets pursuant to Commission Delegated Regulation (EU) 2015/61 regarding liquidity coverage requirement for credit institutions ( LCR-regulation ). With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS confirms the following: Covered bonds issued by DNB Boligkreditt AS meet the requirements to be eligible for the treatment set out in Article 129(4) of Regulation (EU) No 575/2013 ( CRR ) and the requirements referred to in Article 52(4) of Directive 2009/65/EC, cf. the European Commission s website: http://ec.europa.eu/finance/investment/legal_texts/index_en.htm The exposures to institutions in the cover pool meet the conditions laid down in Article 129(1)(c) and in Article 129(1) last subparagraph of CRR 53
Covered Bonds Issued by DNB Boligkreditt AS Qualifies as Level 1-Assets Pursuant to LCR-regulation (Slide 2 of 2) With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS confirms the following (cont.): DNB Boligkreditt AS gives the information required in Article 129(7) of CRR to its investors Covered bonds issued by DNB Boligkreditt AS are assigned a credit assessment by a nominated ECAI which is at least credit quality step 1 in accordance with Article 129(4) of CRR, and the equivalent credit quality step in the event of short term credit assessment The cover pool does at all times meet an asset coverage requirement of at least 2 % in excess of the amount required to meet the claims attaching to the covered bonds issued by DNB Boligkreditt AS 54
ECB Eligibility and CRD-Compliance of Covered Bonds Issued by DNB Boligkreditt AS All covered bonds issued by DNB Boligkreditt AS fulfil the eligibility criteria for marketable assets set by the Eurosystem and are thus eligible for Eurosystem monetary policy operations. The Eurosystem set additional criteria for own use of eligible instruments in the Eurosystem monetary policy operations. In the case of covered bonds, the instruments must be issued in accordance with the criteria set out in Part 1, points 68 to 70 of Annex VI to Directive 2006/48/EC. The covered bonds issued by DNB Boligkreditt AS fulfil these criteria, but the Eurosystem has not checked the fulfilment of these conditions for Norway, since Norway is not part of the EU. Therefore, covered bonds issued by DNB Boligkreditt AS are marked with a "N/A" what regards own-use covered bonds in ECB's eligible asset database. DNB Boligkreditt AS confirms that the covered bonds it issues are compliant with the CRD-requirement set forth in the Eurosystem guidelines. In addition, DNB Boligkreditt AS confirms that it gives the information required in Regulation (EU) No 575/2013 ("CRR") article 129 (7) to its investors, so that the covered bonds issued by DNB Boligkreditt AS are eligible for the preferential treatment set out in CRR article 129 (4). 55
Appendix Appendix B: Digitalization 56
Percentage of Population Using Online Banking Percentage of population using online banking EU Germany United Kingdom 46 51 58 Norway 90 57
Transforming the way we do business building future mobile platforms 57 million mobile bank logins (2Q17) 59 % of Population Users* 180 000 users first month Savings app 300 000 daily transactions 22% fee-based transactions 22% of all new savings agreements 2010 2011 2012 2013 2014 2015 2016 2017 annualised Jan. Feb. Mar. Apr. May June June *Norwegian population > age 15 58
Appendix Appendix C: The Norwegian Mortgage Market 59
The Norwegian Residential Mortgage Market Nearly 80% of Norwegians own their home: Few mortgages are buy-to-let. Norway is primarily a floating interest rate market: The large majority of mortgages originated by DNB are floating rate. Rates on floating rate mortgages can be reset at any time and at the bank s own discretion, by giving debtors six weeks notice. Loans are normally underwritten with a term of 15-25 years: Average size for new mortgages originated by DNB is approximately NOK 1,000,000 (EUR 110,000). In Norway, all borrowing costs are deductible from taxable income at the current rate of 24 %: Households are therefore better able to withstand an increase in interest rates. Source: Finance Norway - FNO 60
Appendix Appendix D: Capital and Tier 1 61
Capital Adequacy Across the Key Relevant Entities DNB has to meet all capital requirements on DNB ASA group level ( DNB ), DNB Bank Group level ( DNB Bank Group ) and DNB Bank ASA solo level ( DNB Bank ) CET1 and Total Capital Ratio Transitional rules, per 30.09.17 23.7 % 19.6 % 16.3 % 16.3 % 20.6 % 18.4 % DNB DNB Bank Group DNB Bank ASA CET1 Total Capital Ratio 62
DNB versus Nordic peers: S&P RAC Ratio S&P Risk Adjusted Capital Ratios (RAC Ratios) 31 December 2016 12.3 11.6 10.9 10.4 10.2 10.0 DNB Swedbank Nordea SHB Danske Bank SEB 63
Overall Capital Requirements under SREP Pillar 1 capital requirements in Norway consist of minimum requirements and combined buffer requirements As a result of the SREP, the supervisors may decide on additional capital add-on (pillar 2), which together with the pillar 1 requirements form the Overall capital requirement If there is a breach of the combined buffer requirements under Pillar 1, there will be automatic restrictions on dividends etc. (ref. CRD IV article 141) However a breach of the Overall capital requirement under SREP will not cause automatic restrictions: The Bank will have to present a plan to the NFSA how to restore the capital ratios If the plan is not sufficient, the NFSA will consider other measures. The measures will depend on the reasons behind the breach 64
Pillar 2 not Included in the MDA Trigger Level in Norway MDA restrictions will only apply if there is a breach of the Pillar 1 requirements (Minimum capital requirements + Combined buffer requirements) Pillar 2 requirements in Norway do not influence the MDA trigger level Stated in a letter from the Ministry of Finance dated 15 January 2016 Confirmed by the NFSA in a response letter dated 15 February 2016, and stated in a circular from the NFSA dated 27 June 2016 65
DNB s Solid Profitability Should Ensure AT1 Coupon Payments 40 35 Profit Before Tax AT1 Coupon Payments Dividend 31.9 30 25 23.4 20 15 10 7.3 9.3 5 0 2.9 0.1 0.5 1.0 1.0 1) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Dividend payments on ordinary shares and coupon payments on Additional Tier 1 (AT1) instruments are at the discretion of the issuer DNB will give due consideration to the capital hierarchy and look to preserve the seniority of claims going forward* * Statement given at the DNB Capital Markets Day (27 November 2014) 1) Estimated AT1 coupon payments. 66
Leverage Ratio Requirement Norwegian leverage ratio requirement effective as from 30 June 2017: Minimum leverage ratio 3 % 1) Bank requirement 2 % SIFI requirement 1 % Total SIFI/DNB requirement 6 % As at 30 September 2017, DNB Group reported a leverage ratio of 7.1 % Well above regulatory requirement A breach of the leverage ratio requirements will not trigger automatic restrictions on AT1 coupon payments. If there is a breach of the leverage ratio requirement, the financial institution will have to present to the NFSA a plan how to restore the leverage ratio. Regulation dated 20 December 2016 1) Requirement for credit institutions such as DNB Boligkreditt AS. 67
The DNB Bank Group will need to record a significant net loss in order to reach the MDA trigger level Average profit before loan losses 2014 2016: NOK 31.2 bn + Buffer to MDA: (16.3 % - 13.6 %): NOK 28.5 bn = Loan loss capacity 12 month horizon NOK 59.7 bn Note: Loan loss capacity in per cent of net loans: 3.9 per cent. 68
ADI Available Distributable Items Items available for distribution is defined in the Norwegian Public Limited Company Act:* Following this definition the ADI level is calculated as follows: ADI = total equity share capital fund for unrealized gains DNB Bank ASA (31 December 2016): ADI = NOK 168bn 18bn 2bn = NOK 148bn => Due to the significant amount available for distribution, we don t assess the ADI as a potential restriction for coupon payments. 69
Appendix Appendix E: Additional Slides - Financial performance and Other information 70
Strong improvement in key figures Profits affected by: Gains of NOK 754 million related to the demerger of Vipps 1) Negative exchange rate effects of NOK 624 million related to AT1 capital Return on equity 2) Per cent Cost/income ratio Per cent Earnings per share NOK 10.4 11.2 40.6 43.1 42.7 3.07 3.34 8.5 2.43 3Q16 2Q17 3Q17 3Q16 2Q17 3Q17 3Q16 2Q17 3Q17 1) Net gains on fixed and intangible assets 2) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability 71
Income Statement Jan.-Sep. Jan.-Sep. Amounts in NOK million 3Q17 2Q17 3Q16 2017 2016 Net interest income 9 007 9 031 8 481 26 559 25 738 Net commissions and fees 2 150 2 161 2 016 6 384 6 143 Net gains on financial instruments at fair value 1 065 982 1 411 2 855 4 824 Net financial and risk result, DNB Livsforsikring 335 454 154 1 029 432 Net insurance result, DNB Forsikring 176 189 148 519 467 Other operating income 197 196 200 517 1 957 Net other operating income, total 3 922 3 982 3 929 11 303 13 823 Total income 12 929 13 014 12 409 37 863 39 561 Operating expenses (5 321) (5 518) (5 042) (16 082) (15 481) Restructuring costs and non-recurring effects (199) (97) (1) (493) (658) Pre-tax operating profit before impairment 7 409 7 399 7 366 21 288 23 421 Net gains on fixed and intangible assets 750 17 20 773 (7) Impairment of loans and guarantees (867) (597) (2 176) (2 026) (5 672) Pre-tax operating profit 7 292 6 819 5 209 20 035 17 743 Tax expense (1 677) (1 568) (1 130) (4 608) (3 850) Profit from operations held for sale, after taxes 33 (14) 1 2 (22) Profit for the period 5 648 5 237 4 080 15 429 13 871 Profit attributable to shareholders 5 430 5 000 3 952 14 734 13 513 72
Higher Net Impairments due to Lower Reversals Jan.-Sep. Jan.-Sep. Amounts in NOK million 3Q17 2Q17 2017 2016 Personal customers (60) (84) (109) 265 - Mortgage loans (2) (7) (47) 493 - Other exposures (58) (77) (61) (228) Small and medium-sized enterprises (135) (156) (360) (755) Large corporates and international customers 1) (791) (313) (1 533) (3 211) - Shipping, Offshore and Logistics Division (238) (176) (876) (2 144) - Energy Division (189) (173) (368) (888) - International Corporates Division (238) 2 (231) 80 - Nordic Corporates Division (94) (66) (108) (174) - Other units (32) 99 50 (86) Total individual impairment (985) (553) (2 003) (3 700) Total collective impairment of loans 118 (44) (24) (1 971) Impairment of loans and guarantees (867) (597) (2 026) (5 672) 0 0 0 0 Total impairment in relation to average volumes, annualised (0.22) (0.15) (0.17) (0.49) Stabilising economic conditions in shipping and oil-related industries Continued positive trend in collective impairment 1) Not adjusted for the reorganisation in September 73
Balance Sheet DNB Group 30 Sep. 30 June Amounts in NOK billion 2017 2017 Cash and deposits with central banks 326 266 Due from credit institutions 156 161 Loans to customers 1 536 1 552 Other assets 749 745 Total assets 2 767 2 723 Due to credit institutions 246 216 Deposits from customers 1 010 1 009 Short-term debt securities issued 183 157 Long-term debt securities issued 573 602 Other liabilities and provisions 544 533 Additional Tier 1 capital 16 16 Other equity 195 191 Total liabilities and equity 2 767 2 723 Ratio of deposits to net loans (%) 65.8 65.0 Adjusted ratio of deposits to net loans (%) 1) 61.8 62.1 Total combined assets 3 076 3 026 Currency-adjusted loans to customers 1 544 1 545 Currency-adjusted deposits from customers 1 018 1 004 Liquidity coverage ratio 118 123 1) Excluding short-term money market deposits 74
CMD Nov 2016 Robust commercial real estate portfolio Healthy and stable portfolio quality Probability of default, per cent Only ~3per cent represents direct exposure to oil and gas lessees * NOK 6.9 billion out of NOK 210 billion, 30 September 2016 1.09 1.01 203 Dec. 2011 Dec. 2012 Dec. 2013 Dec. 2014 Dec. 2015 Mar. 2016 Jun. 2016 Sept. 2016 * >50 per cent of rent from oil & gas lessees; corporate exposure excluded 75
Oil Price - Assumptions from DNB Markets (Aug 2017) 76
Disclaimer This material has been prepared on the basis of the information provided by DNB Bank ASA (referred to as "DNB Bank") and public available sources. DNB ASA the holding company of the DNB group is referred to as "DNB " in this presentation. This material is presented solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this material are subject to change without notice and DNB Bank is not under any obligation to update or keep current the information contained herein. In addition, institutions mentioned in this material, their affiliates, agents, directors, partners and employees may make purchases and/or sales of the Notes as principal or agent or may act as market maker or provide investment banking or other services in respect of the Program or the Notes which may be issued from time to time thereunder. DNB, the Arranger and the Dealers and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. The Notes are not to be offered or sold in any jurisdiction in circumstances in which the distribution of this document or the Notes would be prohibited in such jurisdiction. This document must not be acted on or relied on by persons who are not eligible to invest in the Notes. Any investment or investment activity to which this communication relates is available only to persons eligible to invest in the Notes and will be engaged in only with such persons. Furthermore, you should consult with your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that you deem it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of an investment in the Notes which may be offered from time to time) based upon your own judgment and advice from such advisers as you deem necessary and not upon any view expressed in this presentation. 77