Jyske Bank Interim Financial Report Q1 - Q3 2015

Transcription

1 Jyske Bank Interim Financial Report Q1 - Q3 Jyske Bank corporate announcement No. 11/, of 29 October Page 1 of 54

2 Interim Financial Report, first nine months of Management s Review The Jyske Bank Group 3 Summary 4 Comments by Management 4 First nine months of 5 Loan impairment charges and provisions for guarantees and value 11 adjustments of acquired assets Investment portfolio earnings 13 Banking activities 14 Mortgage activities 16 Leasing activities 18 Core profit and investment portfolio earnings 19 Capital structure and capital management 20 Liquidity management 21 Other information 23 Statement by the Executive and Supervisory Boards Statement by the Executive and Supervisory Boards 25 Interim financial statements Income statement and statement of comprehensive income 26 Balance sheet 27 Statement of changes in equity 28 Capital statement 29 Summary of cash flow statement 30 Notes 31 Jyske Bank A/S 46 Jyske Bank A/S Vestergade 8-16 DK-8600 Silkeborg Tel.: jyskebank@jyskebank.dk Business Reg. No Jyske Bank corporate announcement No. 11/, of 29 October Page 2 of 54

3 The Jyske Bank Group CORE PROFIT AND PROFIT FOR THE PERIOD Q1-Q3 Q1-Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 The year Net interest income 4,453 3, ,500 1,513 1,440 1,428 1,529 5,315 Net fee and commission income 1,339 1, ,761 Value adjustments Other income 180 2, ,074 Income from operating lease (net) Core income 6,175 8, ,703 2,494 1,978 1,902 2,212 10,186 Core expenses 3,953 3, ,321 1,294 1,338 1,341 1,297 5,231 Core earnings before impairment 2,222 4, , ,955 Loan impairment charges 381 1, ,953 Core profit 1,841 3, , ,002 Investment portfolio earnings Pre-tax profit 2,129 3, , ,103 Tax Net profit or loss for the period 1,639 3, ,089 SUMMARY OF BALANCE SHEET, END OF PERIOD Loans and advances 380, , , , , , , ,799 - of which mortgage loans 242, , , , , , , ,864 - of which bank loans 109, , , , , , , ,423 - of which repo loans 28,275 25, ,275 27,654 28,148 22,512 25,106 22,512 Bonds and shares, etc. 78,836 89, ,836 87,686 98,779 92,309 89,155 92,309 Total assets 531, , , , , , , ,679 Due to credit institutions and central banks 31,947 51, ,947 39,865 46,176 49,885 51,761 49,885 Deposits 138, , , , , , , ,693 - of which bank deposits 125, , , , , , , ,198 - of which repo deposits 13,272 19, ,272 12,056 19,999 19,495 19,627 19,495 Issued bonds at fair value 225, , , , , , , ,539 Issued bonds at amortised cost 52,556 37, ,556 47,947 54,061 43,413 37,750 43,413 Subordinated debt 1,354 1, ,354 1,355 1,362 1,355 1,354 1,355 Equity 29,233 27, ,233 28,996 27,970 27,561 27,830 27,561 SELECTED DATA AND FINANCIAL RATIOS Earnings per share for the period (DKK) Profit for the period, per share (diluted) (DKK) Pre-tax profit p.a. as a percentage of opening equity Profit for the period as a pct. of av. equity Expenses as a percentage of income Capital ratio (%) Common Equity Tier 1 capital ratio (CET1 %) Individual solvency requirement (%) Capital base () 29,473 28,986-29,473 30,177 29,206 28,990 28,986 28,990 Weighted risk exposure () 174, , , , , , , ,433 Share price at end of period (DKK) Book value per share (DKK) Price/book value per share (DKK) No. of full-time employees at end-period¹ 4,102 4,289-4,102 4,112 4,168 4,191 4,289 4,191 BRFkredit has been included in the income statement as of 1 May and in the balance sheet as of the end of the second quarter. ¹) In the third quarter of, 29 Financial Management degree holders were hired. Jyske Bank corporate announcement No. 11/, of 29 October Page 3 of 54

4 SUMMARY Core income: DKK 6,175m (Q1-Q3 : DKK 5,924m excl. of bargain purchases of DKK 2,360m). Pre-tax profit or loss: DKK 2,129m (Q1-Q3 : DKK 1,044m excl. of bargain purchases of DKK 2,360m). The pre-tax profit corresponded to an annualised return of 10.3% on opening equity (Q1-Q3 : 6.0% p.a. excl. of bargain purchases). Value adjustments under core profit: DKK 135m (Q1-Q3 : DKK 208m). Loan impairment charges under core profit: DKK 381m (Q1-Q3 : DKK 1,236m). Loans and advances: DKK 381bn (End-: DKK 362bn). o o Mortgage loans: DKK 242bn (End-: DKK 219bn). Traditional bank loans and advances: DKK 96bn (End-: DKK 102bn). Bank deposits: DKK 125bn (End-: DKK 133bn). Capital adjustment o The launch of a share buy-back programme in the equivalent value of up to DKK 500m. o It is the intention, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m. Capital ratio 16.9%, of which Common Equity Tier 1 capital ratio of 15.8% (end-: 16.4% and 15.3%). o Capital buffer: DKK 10.3bn (End-: DKK 9.7bn). o Target: capital ratio of 17.5% and Common Equity Tier 1 capital ratio of 14.0%. Merger with BRFkredit proceeds faster than expected: Pre-tax profit, BRFkredit: DKK 617m COMMENTS BY MANAGEMENT In connection with the publication of the interim financial report for the first nine months of, Anders Dam, CEO and Managing Director, states: "The third quarter of is the first quarter since the merger with BRFkredit that is fully comparable with the corresponding period in. A pre-tax profit of DKK 326m is, seen in isolation, not satisfactory. However, the interestrate development had an adverse effect on the profit in the amount of about DKK 250m. The management expects that earnings and cost synergies will be realised in line with its most recent statement about these. Therefore, considering the Group's strength in respect of capital, the Supervisory Board has decided to launch a share buy-back programme in an amount of up to DKK 500m, which is expected to be completed on 1 July Moreover, it is the intention of the Supervisory Board, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m," concludes Anders Dam. Jyske Bank corporate announcement No. 11/, of 29 October Page 4 of 54

5 First nine months of Economic trends It is expected that the cautious economic recovery will continue, particularly fuelled by low interest rates and a gradually lower propensity to save in Denmark as well as the euro zone. But uncertainty has increased. Nationally, GDP growth was slightly weaker in the second quarter, and also, consumer confidence fell. After the first half of the year where house prices rose markedly all over the country, the increase has slowed down in recent months. Internationally, the growth signals have turned for the worse, and in particular there is focus on the slowdown in China. Capital adjustment Jyske Bank pursues a conservative and long-term capital policy. Jyske Bank's Supervisory Board reviews at least every quarter the expected long-term capital base for the Group. The assessment includes expectations of earnings as well as earnings under a stress scenario, the weighted risk exposure, other capital transactions, including acquisitions and capital payments as well as regulatory initiatives and requirements on the part of Standard & Poor's. Considering the current strong capital position and the Supervisory Board's recent review of the capital base and expectations of this, it has been decided that Jyske Bank will initiate a capital adjustment with a view to optimising and balancing the capital structure and the capital levels in line with the long-term capital management objective and capital policy. Jyske Bank will launch a share buy-back programme in the equivalent value of up to DKK 500m. The share buy-back programme is part of Jyske Bank s adjustment of its capital level. The programme will be carried out during the period of early November to June Jyske Bank will, at the same time, explore the market for opportunities to issue subordinated capital instruments. The programme will be carried out according to the EU Commission's regulation No. 2273/2003 of 22 December The share buybacks will be conducted through ABG Sundal Collier. It is the intention of the Supervisory Board, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m. The Group's capital target is unchanged, namely a Common Equity Tier 1 capital ratio of 14% and a capital ratio of 17.5% when the capital adequacy rules have been fully phased in in After recognising the planned and expected initiatives, the Common Equity Tier 1 capital ratio amounted to 15.8% and the capital ratio to 16.9% as at 30 September. Material circumstances Like the second quarter, the third quarter was also characterised by turmoil in the interest-rate markets, but while the second quarter saw rising long-term interest rates, the third quarter saw falling long-term rates. The long-term interest rates had a negative effect on value adjustments of clients' transactions relating to interest-rate hedging. On 26 August, Danmarks Nationalbank, the central bank of Denmark, lowered its current-account ceiling to a third of the previous level, and hence it limited the Bank's possibility of investing funds at an interest rate of 0%. The rate on the certificates of deposit of Danmarks Nationalbank is unchanged at -0.75% and hence the business activities relating to deposits are to an even greater extent affected by the negative interest rates. At end-january, Jyske Bank and Jyske Invest Fund Management entered into an agreement on portfolio management advice and distribution so that, in future, Jyske Bank will render advice to Jyske Invest on all investments and handle the sale of Jyske Bank corporate announcement No. 11/, of 29 October Page 5 of 54

6 Jyske Invest's funds to distributors, primarily other financial institutions. Through the conclusion of the agreement, Jyske Bank desires to create opportunities of generating additional growth in the capital management area and hence position Jyske Bank as an important asset manager. The merger was implemented in the second quarter of. In this connection, Jyske Bank took over 23 employees. On 13 July, Standard & Poor's confirmed Jyske Bank's rating. The increasingly robust capital and risk position of Jyske Bank offsets the fact that Standard & Poor's no longer allows for government support in its rating. Current status of the merger of Jyske Bank and BRFkredit The Group maintains its focus on the integration of Jyske Bank and BRFkredit and is working determinedly to reap the synergies. The integration with BRFkredit proceeds faster than expected. The goal for annual synergies are unchanged at a minimum of DKK 600m, and it is expected that the synergies will have full annual effect as of mid-2018, while earlier expectations pointed to end Integration costs are expected to be in the range of DKK m. As at 30 September, about half of the integration costs has been expensed. Earnings and cost synergies Growth in new home loans continued in the third quarter of and had, at the end of September reached the level of DKK 53bn and as at today DKK 55bn. The annual earnings on these will in future more than match the commission previously received from Totalkredit. Distribution of mortgage loans to corporate clients has begun. A selective strategy towards selected corporate clients and types of commercial property is being pursued. Cost of capital of BRFkredit has fallen by about DKK 100m annually compared with the level in The development of the Group's expenses proceeds according to plans, including the plan to reduce the number of employees to the level of about 4,000 full-time employees. At the end of the third quarter of, the number of full-time employees was 4,102 and is thus still falling even though 29 Financial Management degree holders were hired in August. The number of full-time employees was 4,444 on 30 April when Jyske Bank and BRFkredit merged. The growth in respect of the Group's home loans contributes to reducing the average risk on the loan portfolio, and, despite the lower interest rate margins on home loans than on traditional bank loans and advances, there is a reasonable relationship between return and risk. Two-channel strategy The objective is to obtain more full-service clients for the Group. Jyske Bank still caters to clients' need for home financing, among other things, through Jyske Bank's branch network, and also, BRFkredit still distributes home financing products through its mobile corps of senior advisers and also through its telephone and internet services. By maintaining both distribution channels, the Group has the opportunity to reach a wider group and hence attract more clients. Organisation Group functions have been established within a number of areas relating to staff functions. The purposes of these are to eliminate overlapping functions with a view to saving resources and also to making better use of core competences. Jyske Bank corporate announcement No. 11/, of 29 October Page 6 of 54

7 BRFkredit Bank In May, BRFkredit Bank migrated to the Bankdata IT platform. The personal clients have been transferred to Finansnetbanken and therefore they continue within a self-service set-up. Corporate clients have been transferred to Jyske Bank's corporate client branches. Jyske Bank corporate announcement No. 11/, of 29 October Page 7 of 54

8 Net profit or loss for the period Over the first nine months of, the Jyske Bank Group generated a pre-tax profit of DKK 2,129m. Calculated tax amounted to DKK 490m, and after tax the profit amounted to DKK 1,639m. The pre-tax profit corresponded to a return on opening equity of 10.3% p.a. against a return of 26% p.a. for the corresponding period of, where bargain purchases of DKK 2,360m were recognised. Exclusive of bargain purchases, the return on opening equity in the first nine months of came to 6.0%. CORE PROFIT AND PROFIT FOR THE PERIOD Q1-Q3 Q1-Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 The year Net interest income 4,453 3, ,500 1,513 1,440 1,428 1,529 5,315 Net fee and commission income 1,339 1, ,761 Value adjustments Other income 180 2, ,074 Income from operating lease (net) Core income 6,175 8, ,703 2,494 1,978 1,902 2,212 10,186 Core expenses 3,953 3, ,321 1,294 1,338 1,341 1,297 5,231 Core earnings before impairment 2,222 4, , ,955 Loan impairment charges 381 1, ,953 Core profit 1,841 3, , ,002 Investment portfolio earnings Pre-tax profit 2,129 3, , ,103 Tax Net profit or loss for the period 1,639 3, ,089 BRFkredit has been included in the income statement as of 1 May and in the balance sheet as of the end of the second quarter. Core income amounted to DKK 6,175m against DKK 8,284m in the first nine months of, and core expenses amounted to DKK 3,953m against DKK 3,890m in the first nine months of. Core profit amounted to DKK 1,841m against DKK 3,158m in the first nine months of. Net interest income amounted to DKK 4,453m against DKK 3,887m in the first nine months of. Net interest income is supported by the continued growth in home loans and the merger with BRFkredit, yet affected negatively by the low interest-rate level and Danmarks Nationalbank's (the central bank of Denmark), lower current-account ceiling, increasing pressure on interest rate margins due to the competitive situation and a decline in traditional bank loans and advances by DKK 6bn in the first nine months of. Net fee and commission income amounted to DKK 1,339m against DKK 1,135m in the first nine months of. The increase can be attributed to the first quarter of when the favourable development in the financial markets resulted in high performance-related fees, and the low interest-rate level resulted in much refinancing activity at BRFkredit. Jyske Bank still offers transfers of home loans without charging any fees. Value adjustments amounted to DKK 135m against DKK 208m in the first nine months of. In the third quarter of, the falling market rates had a negative effect on clients' transactions relating to interest-rate hedging. The ensuing effect was a negative value adjustment of DKK 64m. For the first nine months of, the total effect is a positive value adjustment of DKK 232m against a negative value adjustment of DKK 355m for the same period last year. Also, the third quarter of saw negative value adjustments in respect of the liquidity buffer. New home loans are recognised at amortised cost and risk management takes place in a portfolio calculated at fair value. According to the joint funding agreement between Jyske Bank and BRFkredit, the loans are transferred at fair value. In the third quarter of, this resulted in a negative value adjustment of DKK 86m. It is expected that as of 1 January 2016, home loans will be recognised at fair value at the first recognition. Jyske Bank corporate announcement No. 11/, of 29 October Page 8 of 54

9 Due to the issue of fixed-rate home loans at a discount, it is expected that net interest income from the discount will be recognised as income in the magnitude of DKK 150m in the coming quarters. Other income amounted to DKK 180m against DKK 2,996m in the first nine months of. The difference can primarily be ascribed to the recognition of bargain purchases of DKK 2,360 relating to the merger with BRFkredit and the profit of DKK 296m from the sale of Silkeborg Data. Core expenses amounted to DKK 3,953m against DKK 3,890m in the first nine months of. In the third quarter of, the provision for holiday pay obligations at BRFkredit was adjusted, as a result of which core expenses were reduced by about DKK 20m for the third quarter of. The salary increase of 1.8% as of 1 July prescribed by the collective agreement caused an increase in core expenses of about DKK 15m in the third quarter of. Moreover, core expenses were also affected because payments to the statutory Resolution Fund was recognised as an expense as of 1 July. In the third quarter of, about DKK 20m were recognised as an expense. The contributions to the Guarantee Fund for Depositors and Investors will presumably cease at the end of. It is expected that the annual payment to the Resolution Fund will amount to about DKK 75m against the payment of DKK 145m to the Guarantee Fund for Depositors and Investors. The Group's impairment charges under core profit amounted to DKK 381m in the first nine months of against DKK 1,236m in the corresponding period of last year. Jyske Bank corporate announcement No. 11/, of 29 October Page 9 of 54

10 Business volume and financial position SUMMARY OF BALANCE SHEET, END OF PERIOD Q3 Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 Loans and advances 380, , , , , , , ,799 - of which mortgage loans 242, , , , , , , ,864 - of which loans and advances, traditional loans and advances 95, , ,706 96, , , , ,331 - of which loans and advances, new home loans 14,209 11, ,209 16,964 18,796 18,092 11,957 18,092 - of which repo loans 28,275 25, ,275 27,654 28,148 22,512 25,106 22,512 Bonds and shares, etc. 78,836 89, ,836 87,686 98,779 92,309 89,155 92,309 Total assets 531, , , , , , , ,679 Due to credit institutions and central banks 31,947 51, ,947 39,865 46,176 49,885 51,761 49,885 Deposits 138, , , , , , , ,693 - of which bank deposits 125, , , , , , , ,198 - of which repo deposits 13,272 19, ,272 12,056 19,999 19,495 19,627 19,495 Issued bonds at fair value 225, , , , , , , ,539 Issued bonds at amortised cost 52,556 37, ,556 47,947 54,061 43,413 37,750 43,413 Subordinated debt 1,354 1, ,354 1,355 1,362 1,355 1,354 1,355 Equity 29,233 27, ,233 28,996 27,970 27,561 27,830 27,561 The year Jyske Bank is still seeing satisfactory demand for its new home loan products. Since the launch of Jyske Bank's own new home loan products in mid-december 2013, Jyske Bank had at the end of the third quarter of granted loans totalling DKK 53bn, and as at today DKK 55bn. At the end of the third quarter of, an amount of DKK 52bn, against DKK 31bn at end-, was recognised in the Group's balance sheet. The new home loan products are primarily sold to existing clients with mortgage loans with Totalkredit and to a lesser degree to new clients. A small proportion of the clients who switch from Totalkredit, raise home loans that are higher than their mortgage loans. The reason for this is that rising house prices have allowed home owners to raise additional loans or to refinance existing bank loans into home loans. The demand for new loans from existing corporate clients is still limited, and solid corporate clients are in a position to reduce the drawdown under their commercial credit facilities. An inflow of corporate clients has been recorded, and to some extent the ensuing volume offsets existing clients' lower drawdown under their commercial credit facilities. Since end-, traditional bank loans and advances have on the whole fallen from DKK 102bn to DKK 96bn, corresponding to a 6% decline. At the end of the third quarter of, bank deposits (exclusive of repo deposits) amounted to DKK 125bn, i.e. about DKK 8bn less than at end- and about DKK 4bn less than at the end of the first half of. This development is a consequence of the low interest-rate level and the business initiatives implemented with a view to optimising the extent and pricing of the deposit portfolio. At the end of the third quarter, the business volume within asset management amounted to DKK 117bn against DKK 94bn at end-. The development of the business volume was affected by negative returns in the third quarter of. At the end of the third quarter, the Jyske Bank Group's equity amounted to DKK 29.2bn against DKK 27.6bn at end-. Jyske Bank corporate announcement No. 11/, of 29 October Page 10 of 54

11 Loan impairment charges and provisions for guarantees and value adjustments of acquired assets Under core profit, an amount of DKK 381m was recognised as an expense under loan impairment charges and provisions for guarantees against DKK 1,236m in the same period in. In the statutory reporting format, an amount of DKK 1,085m has been recognised as an expense under loan impairment charges and provisions for guarantees. The difference from impairment charges under core profit can be attributed to reclassification relating to write-downs on impaired loans and advances from BRFkredit Bank, BRFkredit and SparLolland. In the third quarter of, impairment charges were, on a net basis, kept at a stable and low level. Extensive losses and impairment charges were established in the agricultural segments. In the third quarter of, individual impairment charges relating to agricultural clients rose by DKK 75m. At the end of the third quarter of, management's estimates amounted to DKK 360m, of which DKK 224m related to agricultural clients, against DKK 406m as at 30 June. LOANS, ADVANCES AND GUARANTEES AS WELL AS VALUE ADJUSTMENTS OF LOANS AND ADVANCES, ETC. Q1 - Q3 Q1 - Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 The year Loans, advances and guarantees 394, , , , , , , ,017 Non-performing loans and past due exposures 3,160 3, ,160 4,016 3,771 3,795 3,084 3,795 Loans and advances assessed individually: Loans and advances with OEI before loan impairment charges 28,433 31, ,433 29,327 31,097 31,659 31,740 31,659 Impairment charges 4,516 3, ,516 4,572 4,647 4,233 3,778 4,233 Loans and advances with OEI after loan impairment charges 23,917 27, ,917 24,755 26,450 27,426 27,962 27,426 Balance of loan impairment charges and provisions for guarantees 6,762 5, ,762 6,780 6,718 6,360 5,545 6,360 Individual impairment charges and provisions for guarantees 4,913 4, ,913 4,965 5,161 4,706 4,250 4,706 Collective impairment charges and provisions for guarantees 1,849 1, ,849 1,815 1,557 1,654 1,295 1,654 Value adjustments of acquired assets: Balance of discounts for acquired assets, beginning of period 2, ,105 2,338 2,625 3,024 3, Discounts relating to business combinations 0 2, ,717 Other additions Positive value adjustments (interest income) Negative value adjustments (loss) Balance of discounts for acquired assets, end of period 1,878 3, ,878 2,105 2,338 2,625 3,024 2,625 Total balance for loan impairment charges and provisions for guarantees and balance of discounts for acquired assets 8,640 8, ,640 8,885 9,056 8,985 8,569 8,985 Operational loan impairment charges and provisions for guarantees 1,085 1, , ,538 Operating loss ,139 Jyske Bank corporate announcement No. 11/, of 29 October Page 11 of 54

12 The total balance of loan impairment charges and provisions for guarantees and the balance of discounts for assets taken over amounted to 2.1% of total loans, advances and guarantees. At the end of the third quarter of, the Jyske Bank Group had no exposures amounting to more than 10% of the adjusted capital base. The Group had two exposures amounting to between 5% and 7.5% of the adjusted capital base and two exposures between 7.5% and 10% of the adjusted capital base. Jyske Bank corporate announcement No. 11/, of 29 October Page 12 of 54

13 Investment portfolio earnings INVESTMENT PORTFOLIO EARNINGS Q1-Q3 Q1-Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 The year Net interest income Net fee and commission income Value adjustments Other income Income Expenses Investment portfolio earnings before loan impairment charges Loan impairment charges Investment portfolio earnings Investment portfolio earnings amounted to DKK 288m against DKK 246m for the same period in. In comparison with the first nine months of, it must be considered that earnings from investment portfolios from BRFkredit were not recognised until 1 May. For the first nine months of, net interest income was in line with the corresponding period last year. The decline in net interest income in the third quarter of can be attributed to lower bond holdings. Value adjustments were negatively affected by the widening of the Danish-German yield spread and in particular by the widening of credit spreads on Danish mortgage bonds. Market risk At the end of the third quarter of, the aggregate interest-rate, currency and equity-price risk expressed as Value-at- Risk (VaR) amounted to DKK 58m (calculated with a time frame of one day and 99% probability) against DKK 60m at the end of the second quarter of.the net decline of DKK 2m was a result of opposing effects. Generally, volatility within equity risk, currency risk and interest-rate risk increased in the third quarter, which increased the VaR, but at the same time the Group reduced its holding of non-callable mortgage bonds, which reduced the VaR due to a lower OAS effect on the VaR on these. % 0.3 0,3 Value-at-Risk as a percentage of equity 0.2 0, , , Total Interest-rate Currency Equities The Group s portfolio of held-to-maturity bonds amounted to DKK 4.6bn against DKK 6.9bn at end-. The portfolio is still dominated by low-risk securities. At the end of the third quarter of, the market value was DKK 168m higher than the carrying amount against DKK 246m at end-. Jyske Bank corporate announcement No. 11/, of 29 October Page 13 of 54

14 Segment information The business segments reflect all activities with respect to banking, mortgage finance and leasing, inclusive of investing activities relating to clients' regular transactions. The investment portfolio earnings of the legal entities relate to the activities of the relevant entities. Banking activities SUMMARY OF INCOME STATEMENT Q1-Q3 Q1-Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 The year Net interest income 2,757 2, ,019 3,795 Net fee and commission income 1,215 1, ,621 Value adjustments Other income 147 2, ,046 Core income 4,515 7, ,102 2,051 1,362 1,215 1,700 8,468 Core expenses 3,135 3, ,056 1,010 1,069 1,048 1,043 4,425 Core profit before loan impairment charges 1,380 3, , ,043 Loan impairment charges 361 1, ,882 Core profit 1,019 2, ,161 Investment portfolio earnings Pre-tax profit 1,255 2, , ,313 SUMMARY OF BALANCE SHEET, END OF PERIOD Loans and advances 125, , , , , , , ,741 - of which bank loans 96, , , , , , , ,229 - of which repo loans 28,275 25, ,275 27,654 28,148 22,512 25,106 22,512 Total assets 252, , , , , , , ,301 Deposits 138, , , , , , , ,467 - of which bank deposits 125, , , , , , , ,972 - of which repo deposits 13,272 19, ,272 12,056 19,999 19,495 19,627 19,495 Issued bonds 47,840 32, ,840 43,232 48,883 38,210 32,378 38,210 Pre-tax profit The pre-tax profit from banking activities amounted to DKK 1,255m against DKK 2,880m for the same period in where bargain purchases of DKK 2,360m were recognised. The new home loans made a positive contribution to net interest income, which was, generally, affected by fierce competition in the market place and the falling volume of traditional bank loans and advances. To this must be added, that business activities relating to deposits were still under pressure due to the low interest-rate level and the lower currentaccount ceiling of Danmarks Nationalbank. Trading and investing activities saw a continued increase in the number of clients and, therefore, a sound activity level. The results of the trading and investing activities in the third quarter of were in line with those of the second quarter of. Net fee and commission income were still satisfactory but adversely affected by falling equity and bond markets, which resulted in lower performance-related investment fees in the second and the third quarters of. To this must be added that Jyske Bank still offers transfers of home loans without charging fees. Jyske Bank corporate announcement No. 11/, of 29 October Page 14 of 54

15 Value adjustments amounted to DKK 396m against DKK 272m in the first nine months of. In the third quarter of, the falling market rates had a negative effect on clients' transactions relating to interest-rate hedging. The ensuing effect was a negative value adjustment of DKK 64m. For the first nine months of, the total effect from clients' transactions relating to interest-rate hedging was a positive value adjustment of DKK 232m against a negative value adjustment of DKK 355m for the corresponding period last year. Also, the third quarter of saw negative value adjustments in respect of the liquidity buffer. New home loans are recognised at amortised cost and risk management takes place in a portfolio calculated at fair value. According to the joint funding agreement between Jyske Bank and BRFkredit, the loans are transferred at fair value. In the third quarter of, this resulted in a negative value adjustment of DKK 86m. It is expected that as of 1 January 2016, home loans will be recognised at fair value at the first recognition. Due to the issue of fixed-rate home loans at a discount, it is expected that net interest income from the discount will be recognise as income in the magnitude of DKK 150m in the coming quarters. For the first nine months of, core expenses amounted to DKK 3,135m against DKK 3,377m for the corresponding period in. The increase in core expenses from the second quarter of to the third quarter of can primarily be attributed to expenses for the statutory Resolution Fund and the 1.8% increase in salaries prescribed by the collective agreement as of 1 July. Business volume Satisfactory demand for new home loan products was still recorded. Growth in new home loan products was not reflected in Banking activities as, at the same time, in the first nine months of a large volume was transferred to BRFkredit, and therefore this growth is recognised under Mortgage activities. The demand for new loans from existing corporate clients is still limited, and solid corporate clients are in a position to reduce the drawdown under their commercial credit facilities. An inflow of corporate clients has been recorded, and to some extent the ensuring volume offsets the existing clients' lower drawdown under their commercial credit facilities. Volatility in the financial markets continued and resulted in satisfactory client activities within risk management in respect of assets, equity and liabilities. Trading and investing activities saw a stable development in respect of business volume and market share. Jyske Bank corporate announcement No. 11/, of 29 October Page 15 of 54

16 Mortgage activities SUMMARY OF INCOME STATEMENT Q1-Q3 Q1-Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 The year Contribution income, etc.1 1, Other net interest income Net fee and commission income Value adjustments Other income Core income 1, ,211 Core expenses Core profit before loan impairment charges Loan impairment charges Core profit Investment portfolio earnings Pre-tax profit ) Contribution income, etc. covers contribution income as well as interest rate margin on jointly funded loans. SUMMARY OF BALANCE SHEET, END OF PERIOD Loans and advances 242, , , , , , , ,665 - of which mortgage loans 242, , , , , , , ,864 - of which bank loans 0 3, ,668 2,801 3,019 2,801 Total assets 263, , , , , , , ,300 Bank deposits 0 5, ,554 4,990 5,041 4,990 Issued bonds 230, , , , , , , ,742 Mortgage activities were included in the income statement as of 1 May and in the balance sheet as of the end of the second quarter. Pre-tax profit For the third quarter, the pre-tax profit from leasing activities amounted to DKK 255m against DKK 223m for the corresponding period in. Contribution income etc. were still positively affected by the increasing loan portfolio, including, in particular, jointly funded home loans. Moreover, the contribution rates were raised in early. The transfer of banking activities to Jyske Bank in May affected other net interest income adversely, taking full effect in the third quarter of. In the third quarter of, net fee and commission income amounted to DKK 60m, hence being at a stable level in. The increase in the third quarter of relative to the third quarter of can primarily be attributed to higher commission income from restructuring of loans, refinancing and conclusion of fixed-price agreements. Value adjustments in the third quarter of improved relative to the corresponding period last year, primarily because last year a negative return was recorded on the company's core portfolio of mortgage bonds. In the third quarter of, core expenses amounted to DKK 225m, including DKK 8m allocated for the new statutory Resolution Fund. Generally, core expenses fell, and the falling level can materially be attributed to a decline in payroll costs. The increase in expenses from the third quarter of to the third quarter of can be attributed to the adjustment of the provision for holiday pay obligations in the third quarter of. Impairment charges amounted to an income of DKK 27m in the third quarter of, which was mainly attributable to reversals of previous impairment charges relating to corporate clients. Jyske Bank corporate announcement No. 11/, of 29 October Page 16 of 54

17 Business volume Mortgage loans grew by DKK 8.7bn in the third quarter of, which was mainly attributable to jointly funded home loans transferred from Jyske Bank. Also BRFkredit's other loan segments recorded higher lending over the period. In the second quarter of, BRFkredit's banking activities were transferred to Jyske Bank. Of these, loans and advances amounted to DKK 2.6bn and deposits to DKK 4.5bn. For further details about BRFkredit, please see BRFkredit's interim report for the first nine months of. Jyske Bank corporate announcement No. 11/, of 29 October Page 17 of 54

18 Leasing activities SUMMARY OF INCOME STATEMENT Q1-Q3 Q1-Q3 Index 15/14 Q3 Q2 Q1 Q4 Q3 The year Net interest income Net fee and commission income Value adjustments Other income Income from operating lease (net) Core income Core expenses Core profit before loan impairment charges Loan impairment charges Pre-tax profit SUMMARY OF BALANCE SHEET, END OF PERIOD Loans and advances 13,092 12, ,092 12,698 12,486 12,393 12,295 12,393 Total assets 15,069 13, ,069 14,564 14,251 14,078 13,897 14,078 Deposits Pre-tax profit The pre-tax profit from leasing activities amounted to DKK 257m against DKK 248m for the corresponding period in. The results were satisfactory and were achieved due to an increasing business volume and focus on cost control. Improvements were recorded within operating lease, including private leasing. The increasing use of contracts with dealer bonus affected net fee and commission income adversely as fee income is recognised over the term of the contract. Expenses amounted to DKK 121m and were 10% below the level for the corresponding period in. Business volume In the first nine months of, new sales were satisfactory, and there was a net increase in business volume. A positive future development of the business volume is still expected. Jyske Bank corporate announcement No. 11/, of 29 October Page 18 of 54

19 Core profit and investment portfolio earnings The pre-tax profit for the first nine months of broken down by core earnings and investment portfolio earnings is stated below: BREAKDOWN OF THE PERIOD'S PROFIT Q1 - Q3 Q1 - Q3 Investment portfolio Investment portfolio earnings Reclassification Total Core profit earnings Reclassification Total Core profit Net interest income 4, ,652 3, ,641 Net fee and commission income 1, ,338 1, ,133 Value adjustments Other income , ,006 Income from operating lease (net) Income 6, ,413 8, ,008 Expenses 3, ,199 3, ,115 Profit before loan impairment charges 2, ,214 4, ,893 Loan impairment charges ,085 1, ,489 Pre-tax profit 1, ,129 3, ,404 Jyske Bank corporate announcement No. 11/, of 29 October Page 19 of 54

20 Capital structure and capital management Common Equity Tier 1 capital and capital base At the end of the third quarter of, Common Equity Tier 1 capital (CET1) amounted to DKK 27,714m and 94% of the capital base against DKK 26,956m and 93% at end-. The Common Equity Tier 1 capital ratio fell to 15.8% due to the share buy-back programme and an expected ordinary dividend totalling DKK 1.0bn. CAPITAL AND CORE CAPITAL RATIOS End- Q3 Q2 Q1 Q4 Q3 Capital ratio (%) Core capital ratio incl. hybrid capital (%) Common Equity Tier 1 capital ratio (CET 1) (%) The Jyske Bank Group s total weighted risk exposure amounted to DKK 175bn at the end of the third quarter of against DKK 176bn at end-. The Jyske Bank Group's total weighted risk exposure with credit risk was unchanged at DKK 138bn, corresponding to 79% of the total weighted risk exposure. The total weighted risk exposure with credit risk was affected by two opposing circumstances: lower volume within traditional bank loans and advances, reducing the risk exposure, and growth in new home loans, increasing the risk exposure. Jyske Bank has established a long-term goal of achieving a capital ratio of 17.5% and a Common Equity Tier 1 capital ratio of 14.0% when the capital adequacy rules have been fully implemented in Capital policy A share buy-back programme of up to DKK 500m will be launched and the programme is expected to be completed on 1 July Moreover, it is the intention of the Supervisory Board, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m. As a consequence of this, the capital ratio has changed from 17.4% to 16.9% and the Common Equity Tier 1 capital ratio from 16.4% to 15.8%. See also page 5 for further details. Jyske Bank will, at the same time, explore the market for opportunities to issue subordinated capital instruments. Individual solvency requirement and capital buffer The individual solvency requirement for the Jyske Bank Group is determined as the higher one of the requirements based on the internal method, the FSA s 8+ method as well as statutory limits. In addition to the minimum capital requirement, the individual solvency requirement is subject to the transitional provisions pertaining to AIRB institutions. At the end of the third quarter of, the Jyske Bank Group calculated its individual solvency requirement to be 10.7% of the total weighted risk exposure against 10.9% at end-. To this must be added a SIFI requirement of 0.3% at the end of the third quarter of. Compared with the actual capital base of DKK 29bn, the capital buffer amounted at the end of the third quarter of to DKK 10.3bn, corresponding to 5.9 percentage points. The capital buffer plus earnings from operations denote the maximum sustainable loss without the need for additional capital. The Jyske Bank Group s large proportion of Common Equity Tier 1 capital cements the quality of the total capital. According to the Basel I transitional rules, the capital requirement was 9.4% against 9.2% at end-. Jyske Bank corporate announcement No. 11/, of 29 October Page 20 of 54

21 Liquidity management The Group's liquidity buffer At the end of the third quarter of, the Jyske Bank Group's liquidity buffer amounted to DKK 70bn against DKK 55bn at end-. The breakdown of the liquidity buffer by the three different internal liquidity classes is shown in the chart below. 9% 11% Eligible at the Danish Central Bank Eligible at the ECB Non Central Bank eligible securities 80% Under a stress scenario assuming that the Group is precluded from re-financing in the international financial money markets for unsecured senior debt as well as the market for so-called senior secured bonds, the Group's liquidity buffer would after a 12-month period amount to DKK 31.4bn and after a 24-month period to DKK 25.9bn. LIQUIDITY RESERVE AND RUN-OFF DKKbn Q3 Q2 Q1 Q4 Q3 End- End of period mths mths mths mths The liquidity reserve according to S.152(1)(2) of the Danish Financial Business Act was high throughout the period. At the end of the third quarter of, the liquidity ratio was 28.9%, corresponding to a liquidity surplus of 189% compared with 144% at end-. Liquidity Coverage Ratio Jyske Bank is a systemically important financial institution and must therefore fully meet the new Liquidity Coverage Ratio (LCR) of 100% as of 1 October. As at 30 September, the Group's LCR ratio was 167%. The Group's funding profile At the end of the third quarter, the portfolio of traditional bank loans and advances was still more than fully funded by bank deposits. Mortgage loans were funded through issue of mortgage bonds. The run-off profile of the Group's senior debt as well as senior secured issues through BRFkredit's capital centre is illustrated by the chart below. Jyske Bank corporate announcement No. 11/, of 29 October Page 21 of 54

22 DKKbn Q > 2020 Jyske Bank senior unsecured EMTN bonds & long term senior debt BRF senior secured bonds BRF senior unsecured bonds Capital market funding At the end of the third quarter of, liquidity procured under the CP programme amounted to DKK 29.3bn (EUR 3.9bn) against DKK 20.6bn (EUR 2.8bn) at end-. Issues of long-term senior debt under Jyske Bank s EMTN programme as well as other long-term senior debt amounted to DKK 18.5bn against DKK 17.2bn at end-. Increasing interest rate volatility and long-term interest-rate levels over the first half of as well as increasing geopolitical unrest and uncertainty in the third quarter of caused - in combination with the coming into force of the LCR and the implementation in Europe of the new Bank Recovery and Resolution Directive BRRD - a change in the sentiment in the capital markets. The market expects a steep increase in the supply of capital market instruments over the coming quarters, and the supply/demand dynamics have changed in the favour of investors, as a result of which the international capital markets were characterised by increasing volatility and widening credit spreads for senior debt and also, and not least, for supplementary capital in the second and third quarters. Jyske Bank took advantage of the attractive market conditions in the period up to May to be active in the private placement market and issued 2-year bonds in the amount of SEK 1bn, 5-year bonds in the amount of SEK 1.35bn and 7-year bonds in the smaller amount of EUR 10m. Furthermore, in March, 3-year public benchmark bonds in the amount of EUR 500m were issued. More than 90% of the bonds was sold to foreign investors, which goes to show that Jyske Bank has built up strong access to the European investor base. In the course of the ordinary management of the run-off profile, Jyske Bank had at end-september bought back EMTN issues with a shorter time to maturity in the amount of DKK 1.3bn. The greater part of Jyske Bank's new home loan products are funded under the joint funding agreement. At the end of the third quarter of, under the joint funding agreement, funding amounted to DKK 35.3bn, against DKK 14.1bn at end-. Refinancing in mortgage activities The strongest effect from BRFkredit on the Group's liquidity risk profile is in the form of refinancing risk. To reduce this refinancing risk, refinancing has been spread out over three annual settling periods, with the intention that the individual series must be so large that they can be included in the credit institutions' liquidity buffers in connection with the LCR requirements. Moreover, in the course of, BRFkredit financed and re-financed the so-called F1 loans and joint funding home loans through RTL F bonds (pre-financed bonds). Jyske Bank corporate announcement No. 11/, of 29 October Page 22 of 54

23 The table below gives a comprehensive overview of planned re-financing of mortgage bonds as well as a breakdown of debt outstanding by type of mortgage loan. PLANNED RE-FINANCING AND BREAKDOWN OF DEBT OUTSTANDING DKKbn Repayment dates Planned re-financing amount Funding Loan Maturities per (amount offered) Maturities per re-financing dates re-financing dates + 2 years (RTL F) F1 F3 F5 Other Jan Apr Oct Note: The table does not include fixed-rate loans. Breakdown of BRFkredit's loan portfolio by loan type 5% 39% Refinancing within one year 56% Refinancing beyond one year Other loan types (fixed rate etc.) Other information The supervisory diamond for Jyske Bank A/S The supervisory diamond defines a number of special risk areas including specified limits that financial institutions should generally not exceed. The supervisory diamond limits applicable to Jyske Bank A/S are shown below. THE SUPERVISORY DIAMOND FOR JYSKE BANK A/S Q3 Q2 Q1 Q4 Q3 End- Sum of large exposures < 125% of the adjusted capital base 0% 0% 0% 0% 0% 0% Increase in loans and advances < 20% annually -4% 0% 4% 9% 5% 9% Exposures to property administration and property transactions < 25% of total loans and advances 7% 7% 7% 7% 7% 7% Stable funding < Liquidity surplus > 50% 189% 174% 137% 129% 130% 129% Jyske Bank A/S meets all the benchmarks of the supervisory diamond. Jyske Bank corporate announcement No. 11/, of 29 October Page 23 of 54