INVESTOR PRESENTATION September 2015

Transcription

1 INVESTOR PRESENTATION September 2015

2 Executive Summary AAA/Aaa rated Danish Local Government funding agency, established in 1899 Association (membership organization) with direct, joint and several liability of all of the Danish Local Governments Strong guarantee structure based on the entire taxpaying population of Denmark Danish economy is strong with one of the lowest public debt levels in Europe 0% BIS risk weighting in several jurisdictions Closest proxy to Danish sovereign risk Conservative risk management No loan losses in more than 116 years of operation Strong liquidity position Leverage ratio year-end 2014: 3.1% LCR: Confirmedlevel1 by the Danish FSA Page 2

3 Agenda 1. Kingdom of Denmark and the Local Government Sector 2. Organization 3. Business 4. Funding 5. Appendix Page 3

4 Kingdom of Denmark Fundamentals Kingdom constitutional monarchy Capital: Copenhagen Population: 5.6m Size: 44,000 km 2 Credit rating: AAA/Aaa Currency: DKK EU member since 1973 Exceptions: currency, defence and judicial cooperation Economy Strong fundamentals % of GDP * Source: European Commission, bank estimates Source: Ministry of Finance, Denmark and IMF E* DK EU27 DK EU27 DK EU27 Real GDP Growth % CPI % Unemployment Rate General Govt Balance General Govt Debt * Low debt level and low budget deficit Danish government debt is stable compared to EUR countries Page 4

5 Local Government Sector in Denmark Local government structure Danish Local Governments are defined by law and their autonomy is secured through the constitution and other legislation. The Local government system is divided into two levels: Regions and Municipalities. Central Government 5 Regions 98 Municipalities The current Local Government structure is a result of a reform in The objective of the reform was to create room for more efficiency by reducing the number of Municipalities and Regions and change the split of tasks between the different levels of Government. Page 5

6 Local Government Sector in Denmark Central Government: Foreign policy Defense Police Universities Major roads Railways Supervision of lower parts of government Equalisation between local governments Local Government: Municipal tasks Care for children Care for elderly Primary schools Public transportation Utilities Local roads Environment Employment Regional tasks Hospitals and health care Regional development Specialized social institutions Municipalities and Regions are responsible for the majority of the services provided in the Danish welfare system. The Local Government Sector expenditures amount to 2/3 of total public expenditures and approx. 26% of GDP. Page 6

7 Local Government Sector in Denmark Revenues and supervision Main source of revenue is income tax The Local Governments are closely monitored and supervised by the Ministry for Economic Affairs and the Interior Budget cooperation between Central Government and Local Governments Balanced budgets required Equalisation system in place Borrowing is highly regulated only allowed for capital investments Income tax % Grants % Charges % Property tax - 5.4% Other - 2.2% Corporate tax % New loans % Default not allowed Low debt level approx. 5.5% of GDP Page 7

8 Agenda 1. Kingdom of Denmark and the Local Government Sector 2. Organization 3. Business 4. Funding 5. Appendix Page 8

9 Organization Legal basis Association,established by special law in The law was revised in 2006 Guarantee structure KommuneKredit is by law organized as an association (membership organization) Membership is restricted to Danish Municipalities and Regions only Members are directly, jointly and severally liable for all of KommuneKredit s obligations Municipalities have an unlimited right to levy taxes on income and property Currently all Municipalities and Regions are members of KommuneKreditand thereby represent the entire population of Denmark The guarantee of the members can be called upon any member without a preceding court decision the guarantee has never been exercised No loan losses in more than 115 years of operation Substantial reserves Supervised by the Ministry for Economic Affairs and the Interior Page 9

10 Agenda 1. Kingdom of Denmark and the Local Government Sector 2. Organization 3. Business 4. Funding 5. Appendix Page 10

11 Business Mission Provide low cost funding for Danish Local Governments through the non-profit status of KommuneKredit Leading provider of financial products to Local Governments in Denmark Clients Danish Regions and Municipalities Semi-public entities guaranteed by Regions or Municipalities (waterworks, waste incineration, district heating etc.) Cross-border lending not allowed Excellent asset quality as all lending to clients are considered extremely secure and 0% risk weighted In accordance with Central Government regulation clients are only allowed to take up loans for certain capital investments Page 11

12 Risk Management Risk Management policy KommuneKredit spolicy is to minimize financial risks and carefully identify, manage and control these risks Market risk Strict hedging principles for lending and funding transactions Interest rate and currency risk is kept at a minimum Positive liquidity position across the curve required by the Ministry for Economic Affairs and the Interior Reserves are invested in plain vanilla bonds with short duration The Ministry for Economic Affairs and the Interior has set a fixed limit for maximum interest rate risk of 4.5% of equity Credit risk Lending only to Danish Local Governments and 100% guaranteed semi-public entities Conservative investment policy: Only highly rated investments with a minimum rating of AA-/Aa3 Derivatives for hedging purposes only and only with highly rated counterparties Transforming unilateral CSAs to new bilateral CSAs No loan losses in more than 115 years of operation No losses related to defaults in the financial sector Page 12

13 Business Competition KommuneKredit is the sole Local Government funding agency in Denmark KommuneKredit operates in full and open competition with banks and other lenders High market share approx. 90% of total lending Products offered to clients Central Government regulates Local Government s borrowing Loans, overdraft facilities Financial leasing Derivatives for hedging purposes only Debt advisory services Gross lending (EUR/DKK: ) EUR bn Outstanding loans and leases EUR bn Page 13

14 Treasury Portfolio Current portfolio(as of end September 2015): DKK 27.9bn (EUR 3.7bn) Maturity profile Issuer type % Covered bonds 54% Govies, supras etc. 22% Agencies etc. 18% Financials 6% 60% 50% 40% 30% 20% 10% 0% 0-3m 3-6m 6-9m 9-12m 1-2y 2-3y Page 14

15 Agenda 1. Kingdom of Denmark and the Local Government Sector 2. Organization 3. Business 4. Funding 5. Appendix Page 15

16 Funding Budget The funding budget has been growing in past years due to increased lending volumes and new regulations from the Ministry for Economic Affairs and the Interior Maximum pre-funding position set by the Ministry for Economic Affairs and the Interior at 25% of the total loan portfolio Total long-term funding budget for 2015: EUR 6-8bn Sizeable short-term funding budget Funding strategy Diversification on markets, currencies, products and investors Maintaining long-term investor relations Benchmark programme plan to do one or two benchmark issue every year Public issues in other markets eg. Denmark, Switzerland, Japan Private placements that offer flexibility and meet specific investor demand Short term funding in the ECP market Page 16

17 A selection of KK s outstanding bonds

18 DKK issuance KommuneKredit is a frequent issuer in DKK Most liquid issues are: Up to 5 years, fixed rate, bullet, not callable Offered through auctions and according to demand from clients Other issues: Long dated up to 40 years, fixed rate, amortizing, callable ISIN Coupon Maturity Issued Amount DK % bn DK % bn DK % bn DK % bn Page 18

19 Funding Strategic markets Benchmarks Denmark Europe Switzerland Asia, Americas other markets Sources Public issues MTNs Uridashi Private placements, schuldscheine Documentation EUR 25bn EMTN Programme EUR5bn ECP Programme Uridashi/Samurai shelf with sovereign status Funding by markets in 2014 Funding by currency in 2014 Europe 55% Americas 29% Asia 9% Middle East & Africa 4% Denmark 3% USD 58% DKK 20% GBP 10% JPY 6% Other 4% EUR 2% Page 19

20 Agenda 1. Kingdom of Denmark and the Local Government Sector 2. Organization 3. Business 4. Funding 5. Appendix Page 20

21 Import and Export most important goods(2014) 12% 10% 8% 6% 4% 2% 0% Import 14% 12% 10% 8% 6% 4% 2% 0% Export Page 21

22 Import and Export maintradingpartners 25% 20% 15% 10% 5% 0% Exports, goods % 14% 12% 10% 8% 6% 4% 2% 0% Export, services Import, goods Import, services 20% 15% 10% 5% 0% % 14% 12% 10% 8% 6% 4% 2% 0% Page 22

23 Income Taxes in Denmark (2013) The Local Governments can set the local tax rate freely Average tax rate (2013): 24.9% Ranging from 22.5% to 27.8% Income taxes in Denmark Rate Central government taxes 19.83% Local Government tax (average) 24.90% Top tax 15.00% Church tax (optional) 0.88% Total tax rate 60.61% Page 23

24 Total Taxes DKK bn VAT etc. Property Cars etc. Personal income tax Corporate tax Social security Source: Statistics Denmark Page 24

25 Central Government budget 2015 Revenues 2015 (DKK 661,9bn) Expenditures 2015 (DKK 706,9bn) Taxes on personal income 42% VAT 29% Taxes 20% Corporate taxes 8% Other income 0,4% Income transfers 36% Grants to local governments 28% Defence, education etc. 27% Other expenditures 7% Investments 2% Page 25

26 Key Financial Figures EUR m Total gross lending 3,953 4,061 4,807 3,458 4,671 Profit after tax Lending 20,432 19,129 18,269 17,288 16,773 Equity Total assets 27,059 24,696 24,380 23,740 22,278 (Exchange rate: EUR/DKK ) Page 26

27 Ratings KommuneKredit Moody s Standard & Poor s Short-term P-1 A-1+ Long-term in DKK Aaa AAA Long-term in foreign currency Aaa AAA Outlook Stable Stable Kingdom of Denmark Short-term P-1 A-1+ Long-term in DKK Aaa AAA Long-term in foreign currency Aaa AAA Outlook Stable Stable Page 27

28 Peer Group KommuneKredit Denmark NWB The Netherlands BNG The Netherlands KBN Norway Kommuninvest Sweden Municipality Finance Finland Benchmark currency EUR/USD EUR EUR USD USD USD Rating AAA/Aaa AAA/Aaa AAA/Aaa AAA/Aaa AAA/Aaa AA+ /Aaa Ownership Membership by 100% Danish Local Governments 8% Central Government, 91% water-boards, 1% provinces 50% Dutch Central Government, 50% Local Government 100% Central Government 100% Swedish Local Government 30,66% Local Government Pension Institution, 16% Republic of Finland, 53,34% Finnish Local Government Guarantee Direct, joint and several guarantee from members (Danish Local Governments) Local and Central Government owned company Local and Central Government owned company Government owned company Jointly and severally guaranteed by members (Swedish Local Governments) Guaranteed thorough Municipal Guarantee Board (jointly guaranteed by Finnish Local Governments) Risk weighting 0% 20% 20% 20% 0% 0% Purpose Danish public sector lending only Public sector lending and Dutch water control boards Dutch public and semi-public sector lending Norwegian public sector lending only Swedish public sector lending only Finnish public sector lending only Profit orientation Non-profit Profit maximising Non-profit Slight profit maximising Non-profit Slight profit maximising Page 28

29 More information Annual reports, rating reports, funding programmesetccan be found on web.kommunekredit.dk Contacts Eske Hansen Senior Vice President, Head of Funding & Treasury Lasse Vest Vice President, Funding Trine Thomsen Vice President, Funding Louise Rosentoft Vice President, Funding Phone Phone Phone Phone Page 29

30 Disclaimer This presentation has been prepared by KommuneKredit for investors generally and has not been prepared primarily for investors in any specific jurisdiction. Any information contained herein is neither an offer nor a solicitation of an offer to buy or sell securities. Any such offer is made only by the prospectus related to such securities. This document is subject to amendment and completion and should not be relied upon for the purpose of investment decisions. Page 30