Danske Bank Tier 2 Capital Henrik Ramlau-Hansen CFO & Member of the Executive Board Steen Blaafalk Head of Treasury Global Conference Call 23 September 2013
Agenda Financial results 3 Capital, liquidity & funding 9 New issue 14 14 16 23 24 25 2
Net profit: Increase of 61% under difficult market conditions Income statement (DKK m) H1 2013 H1 2012 Index Net interest income 10,956 11,367 96 Net fee income 4,470 4,061 110 Net trading income 3,929 6,533 60 Other income 653 646 101 Net income from insurance business -5 843 - Total income 20,003 23,450 85 Expenses 11,918 12,371 96 Profit before loan imp. charges 8,085 11,079 73 Loan impairment charges 2,383 4,598 52 Profit before tax, core 5,702 6,481 88 Profit before tax, Non-core -809-2,406 - Profit before tax 4,893 4,075 120 Tax 1,237 1,802 69 Profit 3,656 2,273 161 3
Income: Personal & Business Banking stable; Danske Capital up Income breakdown (DKK m) H1 2012 H1 2013 Personal Banking 8.317 8,233 Business Banking 6.004 5,983 Corporates & Institutions 4,513 6.624 Danske Capital 709 929 Danica* -5 843 * Net income. 4
Impairments: Sharp decline across the board Loan impairment charges (DKK bn) Loan impairment charges, 2008-2013 (DKK bn) H1 2012 Impairments Loan loss ratio* (rhs) H1 2013 10 180 Personal 1.638 Banking 1,098 9 8 150 Business Banking 974 2.449 7 6 5 120 90 Corporates 536 & Institutions 311 Non-core 766 2.433 4 3 2 1 0 Q2 08 33 Q2 09 Q2 10 Q2 11 Q2 12 23 Q2 13 60 30 0 * The loan loss ratio is defined as the Group s annualised quarterly impairments as a percentage of loans and guarantees. 5
Earnings: Personal Banking and Business Banking triple Profit before tax (DKK m ) H1 2012 H1 2013 Personal Banking 338 1,100 Business Banking 865 2,277 Corporates & Institutions 1,962 3.907 Danske Capital 253 438 Danica -5 843 6
Outlook for 2013 Strategy Implementation of New Standards proceeding according to plan Financial results Net profit of DKK 6.5-9.0 bn Income Total income expected below 2012 level Expenses Expenses likely below the 2012 level Impairments Impairment level well below 2012 7
Financial results 3 Capital, liquidity & funding 9 New issue 14 14 16 23 24 25 8
Capital: Strong build-up through the crises Capital ratios, under CRD/Basel II (%) Tier 1 + 2 Core Tier 1 +72% 21.2 21.8 17.8 17.8 17.9 6.7 6.2 12.7 13.6 8.3 7.7 6.1 5.0 5.5 7.7 8.1 9.5 10.1 11.8 14.5 15.6 2007 2008 2009 2010 2011 2012 H1-13 9
Capital: Ratios remain high after FSA orders; solid buffer Effect of FSA orders on capital base* (%) Total capital ratio Tier 1 ratio (including state hybrid) Core tier 1 ratio Effect of FSA orders on individual solvency need (DKK bn) Capital buffer Individual solvency needed 0% 21.8-2.6 170 170 20.3 19.2 17.9 82 82 15.6 13.8 88 88 Q2 13 Q2 13 incl. orders Q2 13 Q2 13 incl. orders * CRD/Basel II. 10
SIFI proposal: 2022 requirements broadly in line with our capital targets Capital composition, 2022 (% of RWA) Capital base vs. capital targets, (% of RWA) Crisis management buffer Proforma Q2 13 capital ratios incl. orders Target CT1 ratio Target total capital ratio 10.5 5.0 SIFI 1.5 CRD4 3.5 13.8 19.2 SIFI 3.5 15.5 17 13 CRD4 7.0 CT1 AT1/T2 COCO Total capital CT1 Total capital 11
Liquidity and funding: Strong, stable liquidity position 12-month liquidity,* end of period (DKK bn) Key points, end Q2 13 Q2 12 400 300 Q1 13 Q2 13 12-month liquidity of more than DKK 250 bn Liquidity buffer of DKK 479 bn, with most of the bonds central bank eligible LCR** at end-h1 of 132% 200 100 DKK 19 bn in funding raised in H1 2013: 48% covered bonds 52% senior debt 0 3 mos 6 mos 9 mos 12 mos Maturing funding (DKK bn) Long-term funding ex RD (DKK bn) 70 58 54 43 Subordinated T2 Senior Hybrid T1 Covered bonds Completed YTD 73 95 Funding plan 21 28 24 12 10 9 2 1 2 1 2 0 1 2 40-50 19 H213 2016 2019 2022 2025 2028 2011 2012 2013 H1 2013 * Moody s Financial Strength. Main assumptions: No access to capital markets; no refinancing of debt to credit institutions, issued bonds or subordinated capital; moderate reduction of business activities. ** LCR includes holdings of covered bonds and Danish mortgage bonds, including own issued bonds. 12
Financial results 3 Capital, liquidity & funding 9 New issue 14 14 16 23 24 25 13
Danske Bank Tender Offer and Issue of T2 18 September: Tender Offer for USD 1bn Subordinated Fixed Resettable Notes due 2037, with purchase price of 101.50 to existing holders. 23 September: To issue Tier 2 capital in the form of a bond loan denominated in EUR. Minimum size EUR 500 million, maturity 10 years, option to prepay at par after five years. S&P publish revised methodology 16 July 2013 Launch Tender 18 Sep Launch Tier 2 23 Sept Bookbuilding and Pricing Announce Tender result 2 Oct Announcement of exercise of call Expected 18 Oct Danske Bank announce potential variation 17 July Danske Bank announce intent to call and vary terms 18 Sep Closing of Tender 1 Oct Settlement on Tender 4 Oct End 2013 Clean up call of RAC Tier 2 at par on or around 18 Nov 14
New issue Terms & Conditions Issuer Issuer Ratings Expected Instrument Ratings Description Status of the Notes Danske Bank A/S Baa1 (Stable) / A- (Stable) / A (Stable) (Moody s / S&P / Fitch) BBB- / A- (S&P / Fitch) Maturity October 2023 Step-up Call Date Coupon structure Deferral of Interest Loss Absorption EUR (benchmark) Dated Subordinated Fixed Rate Resettable Tier 2 Notes (the Notes ) CRD IV Compliant Tier 2 Capital. The Notes will on issue constitute Tier 2 Capital of the Issuer The Notes will constitute direct, unsecured and subordinated obligations of the Issuer, rank pari passu without any preference among themselves, pari passu with Tier 2 Capital of the Issuer (including the existing subordinated capital), junior to other unsubordinated creditors and senior to all classes of share capital and obligations ranking or expressed to rank junior to the Notes None October 2018 at par [ ]% fixed payable annually to Call Date Resets at Call Date to prevailing EUR 5-year Mid-Swap Rate + margin None The Notes include a write-down loss absorption feature (in respect of principal and unpaid interest) as required under the current Danish capital adequacy rules. The write-down feature may only be used after (i) the equity capital of the Issuer has been lost, (ii) a general meeting effectively resolved to reduce the share capital to zero, and (iii) provided that following such action either, sufficient new capital is raised so as to enable the Issuer to comply with the capital requirement under the Danish Financial Business Act or the Issuer discontinues its business without a loss to its non-subordinated creditors Such write-down may only occur following a write-down of Tier 1 Capital Reduction Event will only apply until (but excluding) 1 January 2014 or, if later, the date on which none of the Existing Tier 2 Capital Notes is outstanding Optional Redemption following a Special Event Listing The Issuer may redeem the Notes at par at any time in case of a Tax Event (additional amounts or loss of deductibility) or a Capital Event (full or partial exclusion from Tier 2 Capital (to the extend not prohibited by the Relevant Rules), Irish Stock Exchange 15
New issue Terms & Conditions PONV Cross Default Negative Pledge Substitution and Variation Law Denominations Selling restrictions The Notes may be subject to statutory provisions as applicable from time to time that could lead to the write down and/or conversion to ordinary shares of the Issuer of the Outstanding Principal Amounts of the Notes, as further described in the Risk Factors. None None None The Notes will be governed by, and construed in accordance with, English law, except for certain Conditions, which will be under Danish Law (Status, Reduction of Amount, Early Redemption for Special Events, Enforcement) The Notes will be issued in the denominations of EUR 100k and integral multiples of EUR 1k in excess thereof up to (and including) EUR 199k For a description of additional restrictions on offers, sales and deliveries of the Notes and on the distribution of offering material in the United States of America, the United Kingdom and Denmark, see Prospectus 16
Financial results for the first half of 2013 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. 17