Q2 RESULTS DNB GROUP SECOND QUARTER 2015 AS OF 10 JULY 2015 INVESTOR MEETINGS ZÜRICH & GENÈVE Terje Turnes (CRO) Jan Erik Gjerland (IR)
Second quarter 2015 Pre-tax operating profit before impairment in NOK billion 7.4 (6.7) Cost/income ratio in per cent 42.8 (43.8) Return on equity in per cent 12.1 (12.4) Earnings per share in NOK 3.04 (2.80) Common equity Tier 1 capital ratio in per cent (transitional rules) 13.0 (12.1) Figures in parentheses refer to 2Q14 2
Profit figures Pre-tax operating profit before impairment NOK million 6 722 7 626 6 964 9 273 7 396 Pre-tax operating profit before impairment excl. basis swaps NOK million 6 689 7 177 6 456 7 462 7 450 2Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 Profit for the period NOK million Profit for the period excl. basis swaps NOK million 4 553 5 620 4 965 6 533 5 062 4 529 5 292 4 594 5 211 5 101 2Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 3
Return on equity and cost/income ratio Return on equity 1) Return on equity excl. basis swaps 1) Per cent Per cent 12.4 14.8 12.6 16.1 12.1 12.3 14.0 11.7 12.9 12.2 2Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 Cost/income ratio Per cent Cost/income ratio excl. basis swaps Per cent 43.8 40.4 42.2 37.0 42.8 43.9 41.8 44.1 42.2 42.6 2Q14 3Q14 4Q14 1Q15 2Q15 2Q14 3Q14 4Q14 1Q15 2Q15 1) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability 4
Ratio of deposits to net loans and earnings per share Ratio of deposits to net loans Per cent Earnings per share NOK 4.01 3.45 2.80 3.05 3.04 64.4 64.0 65.4 65.2 65.0 64.3 63.9 63.5 64.1 64.4 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 2Q14 3Q14 4Q14 1Q15 2Q15 The ratio of deposits to net loans excl. short-term money market investments 5
Customer segments NOK million Pre-tax operating profit after impairment 2Q15 1Q15 2Q14 3 371 2 865 2 402 2 393 2 363 2 414 790 869 872 Personal customers Small and mediumsized enterprises Large corporates and international customers 6
Development in loans NOK billion 1 491 1 369 1 422 1 330 1 358 1 330 30 June 13 30 Sept. 13 31 Dec. 13 31 March 14 30 June 14 30 Sept. 14 31 Dec. 14 31 March 15 30 June 15 Loans at end of period Loans adjusted for exchange rate movements 7
Development in loans and RWA NOK billion 1 491 1 369 1 330 1 098 1 095 1 141 30 June 13 30 Sept. 13 31 Dec. 13 31 March 14 30 June 14 30 Sept. 14 31 Dec. 14 31 March 15 30 June 15 Loans at end of period RWA 8
Development in deposits adjusted for short-term money market investments NOK billion 960 849 849 881 873 906 30 June 13 30 Sept. 13 31 Dec. 13 31 March 14 30 June 14 30 Sept. 14 31 Dec. 14 31 March 15 30 June 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 Per cent 2.32 2.42 2.42 2.42 2.39 2.31 2.32 2.32 2.21 Lending spread 1.28 1.29 1.30 1.25 1.27 1.25 1.27 1.28 1.28 Combined spread - weighted average (0.24) (0.29) (0.30) (0.29) (0.27) (0.17) (0.15) (0.11) (0.02) Deposit spread 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 10
Development in commissions and fees NOK million + 14.5% growth 2 482 1) 1 961 2 114 2 113 2 252 2 167 1) 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 Sale of insurance products Asset management and custodial services Real estate broking Money transfer and banking services Investment banking services 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 1st half 1st half Amounts in NOK million 2Q15 1Q15 4Q14 3Q14 2Q14 2015 2014 Net interest income 8 728 8 587 8 700 8 228 7 867 17 315 15 559 Net commissions and fees 2 489 2 212 2 313 2 229 2 242 4 701 4 426 Net gains on financial instruments at fair value 1 174 3 400 279 1 817 1 132 4 574 3 221 Net financial and risk result, DNB Livsforsikring 158 52 185 136 183 209 288 Net insurance result, DNB Forsikring 153 99 129 121 139 252 241 Other operating income 221 361 446 256 391 582 788 Net other operating income, total 4 194 6 124 3 352 4 560 4 087 10 318 8 965 Total income 12 923 14 711 12 052 12 788 11 954 27 633 24 523 Operating expenses 5 312 5 215 5 045 5 088 5 150 10 527 10 318 Restructuring costs and non-recurring effects 215 223 42 74 83 438 106 Pre-tax operating profit before impairment 7 396 9 273 6 964 7 626 6 722 16 668 14 099 Net gains on fixed and intangible assets 45 12 42 13 (3) 56 (3) Impairment of loans and guarantees 667 575 821 183 554 1 241 634 Pre-tax operating profit 6 774 8 710 6 184 7 456 6 165 15 483 13 462 Tax expense 1 695 2 130 1 236 1 828 1 600 3 825 3 399 Profit from operations held for sale, after taxes (17) (47) 16 (8) (11) (64) (30) Profit for the period 5 062 6 533 4 965 5 620 4 553 11 594 10 032 Profit attributable to shareholders 4 952 6 519 4 965 5 620 4 553 11 471 10 032 12
Net gains on financial instruments Change 1Q15-2Q14 - Amounts in NOK million 2Q15 1Q15 2Q14 2Q15 2Q15 Customer revenues in DNB Markets 573 622 446 (49) 127 Trading in foreign exchange/fixed income/equities in DNB Markets 713 468 337 245 376 Changes in credit spreads on bonds in DNB Markets (132) 140 150 (272) (282) The bank's own equity investments 12 (193) (29) 206 41 Exchange rate effects, additional Tier 1 capital (191) 170 - (361) (191) Other mark-to-market adjustments 252 384 195 (132) 57 Net gains on financial instruments at fair value, excl. basis swaps 1 228 1 590 1 099 (362) 128 Basis swaps (54) 1 810 33 (1 864) (87) Net gains on financial instruments at fair value 1 174 3 400 1 132 (2 226) 42 13
Changes in net interest income NOK million From 2nd quarter 2014 to 2nd quarter 2015 322 90 58 21 (72) 8 728 442 7 867 2Q14 Exchange rate effects Lending and deposit volumes Interest rate instruments Commitment fees etc. Lending and deposit spreads Other net interest income 2Q15 14
Changes in net interest income NOK million From 1st quarter 2015 to 2nd quarter 2015 8 587 154 88 24 14 (14) (126) 8 728 1Q15 Lending and deposit volumes Interest days Interest rate instruments Other net interest income Exchange rate effects Lending and deposit spreads 2Q15 15
Continued growth in net interest income Net interest income NOK million 35,000 30,000 25,000 Net interest income expectations for 2015 Expected lending growth of 3-4 per cent Stable development in volumeweighted spreads 20,000 CAGR 8.5% 15,000 2010 2011 2012 2013 2014 16
Deposit repricing potential across customer segments Deposits in retail banking* LCI** maturing volumes and spreads public clients NOK billion, bps Deposits with repricing potential Low-yielding deposits / other Volume Average spread -99-110 22-136 Total NOK 536 billion 38% 15 Total = NOK 522 billion 62% 7 2015 2016 2017 Average maturity May March April 17 * Personal customers and SMEs, ** Large Corporates and International
Changes in net other operating income NOK million From 2nd quarter 2014 to 2nd quarter 2015 4 087 247 128 (25) (49) (87) (108) 4 194 2Q14 Net commissions and fees Net gains on other financial instruments Net financial and risk result from DNB Livsforsikring Other operating income Basis swaps Profit from associated companies 2Q15 18
Changes in net other operating income NOK million From 1st quarter 2015 to 2nd quarter 2015 6 124 277 106 17 (104) (362) (1 864) 4 194 1Q15 Net commissions and fees Net financial and risk result from DNB Livsforsikring Other operating income Profit from associated companies Net gains on other financial instruments Basis swaps 2Q15 19
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Sound growth in other quality earnings New pension products Assets under management, NOK billion Private banking Assets under management, NOK billion Corporate finance Revenues in NOK million Investments Deposits 551 27 34 37 CAGR 55% 27 344 340 20 10 22 30 35 46 2012 2013 2014 Q215 2012 2013 2014 Q115 Expect underlying growth of 5% in net commissions and fees 20
Changes in operating expenses Change in Amounts in NOK million 2Q15 Change 2Q14 per cent Total adjusted operating expenses 5 312 162 5 150 3.1 Of which : Exchange rate effects for units outside Norway 86 Currency-adjusted operating expenses 5 226 76 5 150 1.5 Total adjusted operating expenses 5 312 162 5 150 Income-related costs Ordinary depreciation on operational leasing 15 Expenses directly related to operations IT expenses 124 Pension expenses 23 Fees 21 Properties and premises (57) Other costs 37 Non-recurring effects 215 132 83 Restructuring costs, employees 134 59 75 Other restructuring costs and non-recurring effects 3 (5) 8 IT restructuring 78 78 0 Operating expenses 5 527 294 5 233 5.6 21
Changes in operating expenses Change in Amounts in NOK million 2Q15 Change 1Q15 per cent Total adjusted operating expenses 5 312 97 5 215 1.9 Expenses directly related to operations IT expenses 100 Properties and premises (17) Other costs 15 Non-recurring effects 215 (8) 223 Restructuring costs, employees 134 83 50 Other restructuring costs and non-recurring effects 3 (62) 64 IT restructuring 78 (30) 108 Operating expenses 5 527 89 5 438 1.6 22
Our customers prefer digital banking Share of customer traffic Sales digital vs. traditional Savings agreements Car loans Mobile banking: 42% Text message banking: 25 % Manual 14% Digital 86% Manual, 50% Digital, 50% Call Center: 2% Online banking: 30% Insurance Digital 11% Consumer loans Manual, 36% Branch office: 1% Manual 89% Digital, 64% 23
Modernising the way we do banking Number of manual transactions in branches Key takeaways 70,000 2013 2014 2015 60,000 50,000 40,000 30,000 20,000 Reduction so far: 67% Goal: 75% Fundamentally changing the way we operate our branches: o Eliminated manual cash handling o Moving manual banking transactions to digital channels Continued reduction in number of branches 10,000 0 24
Keeping our best-in-class cost-efficiency position Cost/income DNB vs peer groups Per cent C/I ambition for 2017 European banks (top 50)* Nordic peer group DNB 75 70 65 ~40% 60 55 50 45 40 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Combination of top-line growth and cost focus 25 * Based on total assets Source: SNL Financial
DNB s Exposure (EAD*) as of 30 June 2015 = NOK1912bn** Private individuals 7% Commercial real estate 11% Shipping 7% Logistics 1% Oil, gas and offshore 7% Energy 3% Other corporate customers 6% Residential mortgages 43% Services 2% Telecom and media 2% Manufacturing 5% Trade 3% Public sector 1% Fishing and fish farming 2% 26 *EAD = Exposure at Default **NOK1912bn is excluding NOK 27.3bn of credit inst exposure
Impairment of loans and guarantees 1st half 1st half Amounts in NOK million 2Q15 1Q15 4Q14 3Q14 2Q14 2015 2014 Personal customers 58 (34) (67) 84 53 24 101 - Mortgage loans (17) (81) (141) 33 (5) (98) (21) - Consumer finance 75 46 74 51 58 122 122 Small and medium-sized enterprises 284 308 450 165 157 592 222 Large corporates and international customers 425 256 496 18 292 682 511 - Nordic Corporates Division (5) (15) 333 (3) 97 (20) 40 - International Corporates Divison 93 (39) 166 86 (17) 54 39 - Shipping, Offshore and Logistics Division 302 242 (21) (116) 152 544 304 - Energy Division 43 12 5 5 (2) 56 22 - Baltics and Poland 47 50 1 39 53 98 84 - Other units (56) 7 13 8 9 (50) 22 Total individual impairment 767 530 879 267 502 1 298 834 Total collective impairment of loans (101) 44 (58) (84) 52 (57) (200) Impairment of loans and guarantees 667 575 821 183 554 1 241 634 Total impairment in relation to average volumes (annualised) 0.18 0.16 0.23 0.05 0.16 0.17 0.10 27
Net non-performing and net doubtful loans and guarantees 1) Per cent 1.55 1.50 1.50 1.38 1.19 NOK billion 18.4 19.5 19.7 20.7 1.05 1.01 16.4 16.1 14.9 0.96 17.3 0.83 13.9 0.77 13.1 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 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. 28
No visible effect on credit card defaults 12% 10% 8% 8.0 % 6% 6.1 % 4.6 % 4% 2% 0% 29
DNB has a well-diversified oil-related portfolio ~8% of total Group EaD to oil-related portfolios Oil & Gas exposure NOK 74bn (3.8% of total Group EaD) Offshore exposure NOK 55bn (2.8% of total Group EaD) Oilfield Services NOK 34bn (1.7% of total Group EaD) NOK bn and per cent of NOK 76bn NOK bn and per cent of NOK 55bn NOK bn and per cent of NOK 34bn Refining & petchem 11.7 16% Midstream incl LNG 21.1 28% Other 0.9 1% Exploration & Production IG 23.6 32% Exploration & Prod. Sub-IG 4.0 5% Subsea constructi on 4.2 7.9% FPSO/FSO 5.2 9.8% Rig 18.0 32.7% Other 3.5 6.6% OSV 23.5 42.6% Seismic 1.4 4% Sub-IG or similar 5.3 16% Leveraged Buyout (LBO) 6.8 20% Other 0.1 0% Investment grade or similar 20.1 60% Exploration Financing (EFF) 2.9 4% Reserve Based Lending (RBL) 10.1 14% OSV: Offshore Service Vessels, F(P)SO: Floating (Production) Storage Offloading. LNG: Liquid Natural Gas. IG: Investment grade. All figures as at 30 June 2015. 30
Oil-related portfolio - 59% of portfolio is low risk and 37% is medium risk DNB s oil-related portfolio split by sub-segment in terms of exposure (EaD) and by risk grade NOK 153bn as at 30 June 2015 (and NOK 160bn as at 31 Mar 2015) 140 120 100 80 60 40 20 0 Oilfield Services Offshore Oil & Gas 20 18 16 16 18 18 16 16 7 6 6 7 56 63 62 58 40 25 32 35 14 0.10 0.11 0.75 0.63 0.04 0.00 0.00 0.01 10 15 14 1.47 0.31 0.30 3.96 0.00 1.17 1.29 1.20 0.26 0.27 0.26 1.03 0.05 0.02 0.02 0.02 Sep-14 Dec-14 Mar-15 Jun-15 Sep-14 Dec-14 Mar-15 Jun-15 Sep-14 Dec-14 Mar-15 Jun-15 Sep-14 Dec-14 Mar-15 Jun-15 Grade 1-4 "Low risk" Grade 5-7 "Medium" Grade 8-10 "High" Grade 11-12 "Doubtful & NPL" 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 June 2015. 31
Balance sheets DNB Group DNB Bank ASA 30 June 31 Dec. 30 June 31 Dec. Amounts in NOK billion 2015 2014 2015 2014 Deposits with central banks 159 59 156 54 Due from credit institutions 248 373 545 608 Loans to customers 1 491 1 439 710 723 Other assets 744 779 585 613 Total assets 2 642 2 649 1 996 1 998 Due to credit institutions 229 214 308 269 Deposits from customers 970 942 923 903 Short-term debt securities issued 172 207 172 207 Long-term debt securities issued 604 605 165 160 Other liabilities and provisions 494 523 286 332 Additional Tier 1 capital 8 8 Other equity 166 159 135 128 Total liabilities and equity 2 642 2 649 1 996 1 998 Ratio of deposits to net loans (%) 65.0 65.4 130.0 124.8 Adjusted ratio of deposits to net loans (%) 1) 64.4 63.5 128.7 121.0 Total combined assets 2 939 2 936 1 996 1 998 Currency-adjusted loans to customers 1 479 702 Currency-adjusted deposits from customers 961 913 1) Excluding short-term money market deposits 32
Common equity Tier 1 capital ratio 1) 12.1 Transitional rules Per cent 12.6 12.7 12.7 13.0 5.3 5.7 Leverage ratio Per cent 2) 6.0 5.7 5.8 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 14.4 Future Basel III estimate Per cent 15.0 15.1 2) 14.6 15.0 Estimate applying average weights used by Swedish banks 3) 17.3 Per cent 18.0 18.3 18.8 19.4 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 2015 30 June 2014 30 Sept. 2014 31 Dec. 2014 31 March 2015 30 June 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 10 basis point change in the CET1 ratio at end-june 2015 2) The calculations at 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 33
Changes in the common equity Tier 1 capital ratio Per cent From 31 Dec 2014 to 30 June 2015 0.5 0.2 0.1 (0.1) (0.3) 13.0 12.7 31 Dec. 2014 50% of profit for the period Volume reducing measures Other effects Exchange rate effect on existing portfolio Lending growth 30 June 2015 34
The minimum 14% common equity Tier 1 capital target by year-end 2016 remains firm Financial restructuring Realisation of capital gains CET 1 RWA CET 1 ratio Asset disposal Active portfolio management Capital-efficient products IRB approvals (does not apply under transitional rules) 35
The Group s financial ambitions stay firm Build-up of adequate common equity Tier 1 capital through dynamic management of balance sheet items Stable volumeweighted spreads Commissions and fees underlying growth of 5 per cent Flat nominal costs in the period ahead (excluding restructuring costs and exchange rate effects) Impairment expected to stay below NOK 3 billion no noticeable effects from oil and gas thus far 36
Q2 APPENDIX
Economic growth in Norway is slowing down - but the landing is soft and at a comfortable level GDP growth and unemployment Year on year, per cent 4.5 % 3.5 % 2.4 % 1.2 % 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e Mainland GDP growth Unemployment rate 1) Source: Statistics Norway/DNB Markets forecasts. Consensus forecast GDP 15=1.6%, GDP 16=2.0, GDP 17=2.1%, Consensus unemployment 2015e=4.0%, 2016e=4.0%, 2017e=4.3% as of June 2015 38
Two powerful tools to ensure a stable macroeconomic development Monetary policy Higher interest rates in Norway than in the rest of Europe Fiscal policy Large public wealth gives ample leeway to smooth business cycles Central bank rates Per cent National budget structural, non-oil deficit 2015 prices, NOK billion Structural, non-oil deficit 7 ECB Sweden Norway 300 4 per cent return on the fund capital 6 250 5 4 3 2 1 0 2008 2010 2012 2014 2016 2018-1 200 150 100 50 0 2001 2003 2005 2007 2009 2011 2013 2015e 88 39 Source: Thomson Datastream, DNB Markets, Norges Bank
Houseprice inflation Norway - deflated at different levels 40
Houseprice inflation main cities and Norway - in NOK1000/square meter 41