Danske Bank Additional Tier 1 Capital. Investor Roadshow March 2014

Transcription

1 Danske Bank Additional Tier 1 Capital Investor Roadshow March 2014

2 Agenda Overview 3 Financial results 95 Capital, liquidity & funding 12 New issue 17 Appendix

3 Overview: Danske Bank has a strong Nordic franchise 3.8 million customers 2.2 million active internet customers 354 branches and presence in 15 countries * Finland Market position: Leader Branches: 45 Market share: 10% 19,122 full-time employees Northern Ireland Market position: Leader Branches: 53 Market share: 20% Ireland Market share: 4% Norway Market position: Challenger Branches: 32 Market share: 4% Denmark Market position: Leader Branches: 159 Market share: 27% Sweden Market position: Challenger Branches: 39 Market share: 5% Estonia Market position: Challenger Branches: 13 Market share: 7% Latvia Market position: Challenger Branches: 1 Market share: 2% Lithuania Market position: Challenger Branches: 12 Market share: 6% *. Excluding agricultural centres in Denmark. Numbers as of end Market share by lending. 3

4 Overview 3 Financial results 95 Capital, liquidity & funding 12 New issue 17 Appendix

5 Executive summary 2013 Net profit & ROE DKK 7.1bn, a 51% increase from 2012; ROE improved from 3.6% to 5.0% Income Total income was down owing primarily to lower income from trading and insurance activities Expenses Expenses down 1% despite restructuring costs Impairments Impairments down 45%; improvement at all business units Non-core Significant improvement in pre-tax loss owing to lower impairments Capital Strong capital: Danske Bank Group CET1 ratio of 14.7% and total capital ratio of 21.4% Dividend The Board of Directors is proposing a dividend of DKK 2 per share, or 28% of the net profit Outlook Net profit in 2014 of DKK 9-12 bn 5

6 Net profit: DKK 7.1 bn, up 51% from 2012 Income statement & key figures (DKK m) Key points, 2013 vs Index Q Q Index Net interest income 22,245 22, ,683 5, Net fee income 9,525 8, ,777 2, Net trading income 5,818 10, , Other income 1,328 1, Net income from insurance business 1,088 2, Total income 40,004 45, ,919 9, Expenses 24,343 24, ,880 5, Profit before loan impairment charges 15,661 21, ,039 3, Loan impairment charges 4,187 7, Profit before tax, core 11,474 13, ,194 2, Profit before tax, Non-core -1,415-4, Profit before tax 10,059 8, ,862 2, Tax 2,944 3, Profit 7,115 4, ,923 1, Return on avg. shareholders' equity (%) Cost/income ratio Core tier 1 capital ratio (%) EPS Lending (DKK bn) 1,553 1,641 1,553 1,579 Deposits (DKK bn) NII fell 2% owing to lower lending volumes and lower short-term rates Trading income declined 45% owing to extraordinary conditions in 2012 and a relatively weak 2013 Expenses down 1% despite high restructuring costs in Q Impairments and losses from Non-core dropped substantially Key points, Q4 13 vs Q3 13 NII up 1% as higher lending margins offset pressure on deposit margins and lending volumes Fee income up 22% from higher fees at all business units, including performance fees at Danske Capital Trading more normalised Expenses up 24% owing mainly to restructuring charges and seasonality 6

7 Impairments: Loan loss ratio of 18 bp for core activities and 23 bp for entire Group Impairments, 2008 to Q4 13 (DKK bn/bp) Impairments (DKK m) Impairments 173 Loan loss ratio* (rhs) Q413 Q313 Index Index Personal Banking ,935 2, Business Banking ,779 3, C&I , Other activities Total core ,187 7, Non-core ,233 4, Group 1,100 1, ,420 12, Loan loss ratio, annualised (bp) Q413 Q313 Index Index Personal Banking Business Banking Q Q2 09 Q2 10 Q2 11 Q2 12 Q C&I Total core Non-core Group * Loan loss ratio defined as annualised impairment charges as a percentage of loans and guarantees. 7

8 Our Vision and Mission stand firm, and we are accelerating the execution of our strategy Vision Recognised as the most trusted financial partner Mission Setting new standards in financial services Customer satisfaction Financial results Advisory services Digitalisation Openness & Transparency Strategy Customer attention Simplicity Efficiency Business review initiated 8

9 Our achievements in 2013 serve as a strong platform Developments in 2013 PERSONAL BANKING BUSINESS BANKING More than 1 m downloads of MobilePay since launch in Denmark in May 2013; launched in Finland in Q4 Customer Programme: 1.2 m customers registered in Denmark Private Banking was named Best Private Banking Bank in Denmark by the Financial Times New units for large businesses and large real estate customers Leading market solution for tablet and mobile banking for businesses on the go Customer satisfaction on target in three of the five markets CORPORATES & INSTITUTIONS Ranked 1 st in Prospera s Corporate Banking 2013 Nordics and Institutional Banking 2013 Nordics Strong growth in income from Equities and improved Prospera rankings Growth in high-yield bond underwriting Significant increase in customer satisfaction from 4 th to 2 nd place Launch of online Pension Check, which received an Investment & Pensions Europe 2013 award DANICA PENSION Named by Morningstar Best in equities in Denmark for 5 th year running and Best equity fund in Norway Strong growth in managed accounts sold to personal and Private Banking customers across the Nordics DANSKE CAPITAL 9

10 ROE target: 9% in 2015 on income and cost-saving initiatives, income normalisation and lower Non-core loss ROE drivers from 2013 to 2015 (%) ROE drivers 2013 Income (new initiatives) Income (normalisation) Costs Non-core loss 5.0 Current income drivers Continued optimisation of pricing structures for lending, deposits and other products Extension of the duration of the Group s bond portfolio Lower funding costs from planned repayment of state hybrid, low funding need, and refinancing at lower costs Income initiatives at C&I, including guaranteed products, equities and Debt Capital Markets products Normalisation of market making and insurance results Current cost drivers FTEs reduced by 709 in Q Internal efficiency measures on track Non-core loss Loss at Non-core is expected to be marginal in 2015 Capital 2015E 9.0 Capital Higher RWA from implementation of IRB orders increases average equity 10

11 Overview 3 Financial results 95 Capital, liquidity & funding 12 New issue 17 Appendix

12 Funding and liquidity: Outlook for lower funding costs owing to lower volume and prices; strong liquidity position Changes in funding 2013 & 2014 (DKK bn and bp) Lending and funding sources ex. RD, (DKK bn) Cov.bonds 37bp Senior Tier 2 Tier 1 133bp 587bp 1,000 Lending, ex repo Deposits Market funding 30bp* bp 14 Redeemed 2013: DKK 58 bn 46bp 10 60bp 266bp New 2013: DKK 39 bn 56bp bp 2 28 Redemptions 2014: DKK 65 bn Dec 2012 Mar Jun 2013 Sep 2013 Dec Long-term funding ex RD (DKK bn) Liquidity Coverage Ratio** (%) Funding plan Completed *** Q1 13 Q2 13 Q3 13 Q4 13 * Spread over 3M EURIBOR. **LCR is calculated in accordance with Danish FSA s specifications and includes holdings of covered bonds and Danish mortgage bonds, including own issued bonds.. ***Minimum requirement of the Danish FSA. 12

13 Capital: Strong capital ratios from retained earnings and capital issues in Q Group capital ratios, under CRD/Basel II (%) Capital drivers Tier 2 Hybrid tier 1 (incl. state hybrid) CET State hybrid State hybrid represents 2.8 percentage-points of tier 1 and total capital ratio and is expected to be repaid in Q A number of new tier 2 issues, totalling DKK 13.9 bn, were issued in Q4 to replace the USD 1 bn tier 2 RAC issue and to prepare for the planned repayment of the state hybrid capital RWA decreased DKK 16 bn because of lower credit risk and lower operational risk CRD IV leverage ratio: 4.6% according to the transitional rules and 3.3% fully phased-in CRD IV effect on CET1 ratio (%) Q412 Q413 CET1 Q413 RWA effect 20% deduction for Danica etc. Pro forma CET 1 1 Jan % deduction for Danica etc. Pro forma CRD IV Q413 13

14 Capital: Strong build-up since 2009 Capital base, (DKK bn) Key points CET1 capital AT1 capital Tier 2 capital Danske Bank is focusing on an ongoing optimisation of the current capital instruments in relation to CRD IV s grandfathering of non-compliant CRD IV instruments A strengthening of the capital base has primarily been focusing on the CET1 In addition to the CET1 increase, Danske Bank issued tier 2 capital for DKK 13.9 bn in Q RWA and Group capital ratios (DKK bn, %) RWA CET1 ratio Tier 1 ratio Q AT1 capital Other capital increases and decreases Q Decrease in Growth in subordinated CET1 capital debt Q Total capital ratio

15 Financial targets: Dividend payments of 28% for 2013, positive outlook from Moody s and progress towards 9% ROE in 2015 Target Previous ambition Year to be achieved Status at 31 December 2013 Comments Return on equity 9% Above 12% 2015 Above 12% Above 12% in 2015 Long-term 5.0% In progress after initiating additional cost savings and other initiatives Ratings Improve ratings by at least one notch Unchanged S&P/Moody s/fitch A-/Baa1/A Stable/Positive/Stable In progress Core tier 1 ratio Minimum 13% 14.7% Met at end-2012 Unchanged End-2013 Total capital ratio Minimum 17% 21.4% Met at end Nominal costs Below DKK 23 bn Below DKK 24 bn DKK 24.3 bn On track 2015 Cost/income ratio Below 50% Below 46% 60.9% On track Dividend payments About 40% of net profit Unchanged % payout for 2013 On track Positive outlook from Moody's in December 15

16 Overview 3 Financial results 95 Capital, liquidity & funding 12 New issue 17 Appendix

17 New issue: Transaction Rationale Capital Optimisation under CRD IV - Strong CET1 position to be supplemented with Additional Tier 1 capital - Normalisation of capital structure to be efficient under CRD IV - 7.0% trigger allows for recognition in relation to Pillar 2 requirements Supporting Senior Creditors - Support for senior creditors and depositors by enhancing total capital in context of Bank Recovery & Resolution Directive - Incremental capital to support Danske Bank s credit ratings Timing Considerations (Political agreement in place and new law proposed to Parliament) - Finalisation and implementation of CRD IV - Clarity over regulatory framework for AT1: instrument criteria and associated capital recognition - Evolution and stability of market demand for new CRD IV capital instruments - Clarification regarding Danish tax treatment of CRD IV AT1 instruments 17

18 Comparison with other Additional Tier 1 precedents Size / Coupon EUR [ ] bn [ ]% USD 1.5bn 9.000% EUR 1.5bn 7.000% USD 1.25bn 8.250% USD 1.75bn 7.875% USD 2bn 8.250% EUR1bn 8.000% USD 1.75bn 7.875% Issue Date [ ] March Apr Feb 2014 Format Perp-nc-6 Perp-nc-5 Perp-nc-5 First Call Aug Dec 2013 Perp-nc-5 Perp-nc Nov Dec 2013 Perp-nc-5 Perp-nc Jan 2014 Perp-nc Trigger Metric* Transitional CET1 Transitional CET1 Transitional CET1 Fully-loaded CET1 Transitional CET1 Principal Loss Absorption Mechanism Temporary Write-down Share Conversion Temporary Write-down Share Conversion Temporary Write-down PONV Risk Factor Lapsing contractual/risk Factor Risk Factor Risk Factor Risk Factor Instrument Ratings (M/S/F) - / (BB+ )/ [BB+] (Exp.) - / - / BB- Ba3 / BB+ / BB - / B+ / BB+ - / BB+ / BB+ Capital Buffer at issue** Implied buffer to Trigger 7.7% 11.9% 5.975% 7.575% 6.475% 2.600% 4.900% 4.275% Trigger 7.000% 7.000% 5.125% 5.125% 5.125% 7.000% 7.000% 5.125% Group Bank Group Bank Consolidated Consolidated Group Bank Basel II End 2013 Basel II End 2013 Basel 2.5 Sept Basel III fully loaded Sep 2013 (incl. Rights Issue) Basel 2.5 Sept 2013 Source: Transaction documentation, Bloomberg, IFR. The information above relating to capital ratios of other financial institutions represents the Issuer s understanding of the respective institution's capital position when the relevant transaction was marketed, and has been extracted from offering documentation and marketing presentations for the respective transactions. The Issuer takes no responsibility for the accuracy of any such information. * Transitional CET1 means Basel 3 CET 1 phased-in capital definition in the European Union. Fully-loaded CET1 means that all measures used shall be calculated on a fully loaded basis. ** Buffer to trigger relates to the latest AT1 transaction. 18

19 Mandatory distribution restrictions Key points Mandatory restrictions to discretionary distributions* will apply to all European banks under CRD IV. The Maximum Distributable Amount ( MDA ) is calculated in relation to the combined capital buffer requirement ( CBR ) CBR is defined as the capital conservation buffer extended by the systemic risk buffer and countercyclical capital buffer Danske Bank s CBR of 5.8% is currently expected to consist of a 2.5% capital conservation buffer, a 0.3% countercyclical capital buffer reflecting the exposures in Norway and Sweden and a 3.0% systematic risk buffer The analysis on this presentation assumes that the upcoming DK legislation will follow CRD IV, i.e. Pillar II requirement is not relevant for MDA purposes Danske Bank intends to manage its CET1 capital ratio to provide a prudent cushion to its CBR to mitigate against the risk of mandatory distribution restrictions under CRD IV *Dividends on ordinary shares, coupon payments on AT1 instruments and discretionary variable compensation 19

20 Mitigating mandatory distribution restrictions Estimated capital buffer structure, (%) Key points Countercyclical capital buffer (0.3% from 2016) Capital conservation buffer Systemic risk buffer CET1 min req. Sliding scale of restrictions CET1 (End 2013) 14.7% Significant headroom to the MDA CET1 capital target min.13% CET1 trigger point 7% restriction point is anticipated, assuming that the min.13% CET1 ratio target is maintained* Between now and 2017, the effective floor for mandatory restrictions on interest payments will be the 7% CET1 trigger, stepping up to 10.3% by 2019 when the CRD IV transitional rules are fully phased-in Estimated MDA buffers* (DKK bn) E 2015E 2016E 2017E 2018E 2019E 2020E 2014E 2015E 2016E 2017E 2018E 2019E 2020E *Assuming CET1 target of min.13% and that AT1 and T2 requirements are covered by relevant capital instruments. 20

21 New issue: Terms and Conditions 1/3 Issuer Issuer s Senior Ratings (M/S/F) Instrument Rating (S/F) Description Maturity Optional Redemption Interest Interest Cancellation Danske Bank A/S Baa1 (Pos) / A- (Stable) / A (Stable) [BB+*] / [BB+] (expected) EUR [ ] Perpetual Non-cumulative Resettable Additional Tier 1 Capital Notes (the Notes ) Perpetual [] April [2020] ( First Call Date ) at the Outstanding Principal Amount or on any interest payment date thereafter subject to regulatory approval [ ]% p.a. payable semi-annually in arrear up to the First Call Date Thereafter reset to a new fixed rate, payable semi-annually in arrear, based on the underlying swap rate plus the margin, in 2020 and every sixth anniversary thereafter Any payment of interest in respect of the Notes shall be payable only out of the Issuer s Distributable Items and (i) may be cancelled, at any time, in whole or in part, at the option of the Issuer in its sole discretion, or (ii) will be mandatorily cancelled to the extent so required by the Relevant Rules, including the applicable criteria for Additional Tier 1 Capital instruments Note: The summary terms are outlined in their entirety in the full terms and conditions of the Notes * S&P is currently in the process of completing a RfC on rating methodology on Bank Hybrid Capital instruments as described in Risk Factors in the Prospectus 21

22 New issue: Terms and Conditions 2/3 Status/Subordination Special Event Redemption Substitution and Variation The Notes are eligible to constitute Additional Tier 1 under CRD IV. Subject to any Loss Absorption Following a Trigger Event and Reinstatement of the Notes as detailed below, the Notes will constitute direct, unsecured and subordinated debt obligations of the Issuer, and will rank (i) pari passu without any preference among themselves, (ii) pari passu with any other Tier 1 Capital of the Issuer (including the Existing Hybrid Tier 1 Capital Notes) and obligations or capital instruments that rank or are expressed to rank equally with the Notes, (iii) senior to all classes of Issuer s share capital and obligations ranking or expressed to rank junior to the Notes and (iv) junior to all other obligations of the Issuer The Issuer may redeem the Notes at the Outstanding Principal Amount at any time in case of a Tax Event (future additional amounts or loss of deductibility) or a Capital Event (exclusion from or reclassification to a lower form of regulatory capital) (each a Special Event ) subject to regulatory approval If a Special Event has occurred, the Issuer may substitute all (but not some only) of the Notes or vary the terms of all (but not some only) of the Notes, without any requirement for the consent or approval of the Holders, so that they become or remain Qualifying Capital Notes Qualifying Capital Notes must (i) comply with the then current Additional Tier 1 Capital requirements and provide the same amount of regulatory recognition as the Notes, (ii) carry the same rate of interest, (iii) have the same Original and Outstanding Principal Amounts, (iv) rank pari passu with the Notes, (v) not immediately be subject to a Special Event Redemption, (vi) have terms that are not materially less favourable to an investor and (vii) maintain listing Note: The summary terms are outlined in their entirety in the full terms and conditions of the Notes 22

23 New issue: Terms and Conditions 3/3 Loss Absorption following a Trigger Event and Reinstatement PONV Governing Law If at any time the Common Equity Tier 1 ( CET1 ) Capital Ratio of the Issuer and/or the Group has fallen below %, the Outstanding Principal Amounts shall be reduced (in whole or in part) The amount of the write down shall be the lower of (i) the amount that would cure the Trigger Event taking into account first the CET1 generated by any instruments with a higher CET1 trigger than the Notes and second any CET1 generated pro rata by all Parity Trigger Loss Absorbing Instruments (if any), in each case to the extent permitted by the Relevant Rules, and (ii) the amount that would reduce the Outstanding Principal Amounts to EUR 0.01 Following any such reduction of the Outstanding Principal Amounts, the Issuer may, at its discretion, reinstate some or all of the principal amount of the Notes subject to compliance with the Relevant Rules Reinstatement under current rules would be on a pro-rata basis with all other Parity Trigger Loss Absorbing Instruments with triggers at the same level and that feature similar reinstatement provisions The Notes may be subject to statutory provisions as applicable from time to time that could lead to 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 in the Prospectus English Law, except subordination, interest cancellation, loss absorption and reinstatement, Special Event redemption and Enforcement Events which will be under Danish Law Denominations/ Listing Neg. Pledge/ Cross Def. EUR 100k+1k/Irish Stock Exchange None Note: The summary terms are outlined in their entirety in the full terms and conditions of the Notes 23

24 Overview 3 Financial results 95 Capital, liquidity & funding 13 New issue 17 Appendix

25 Appendix Business units 26 Special topics: Trading and expenses 31 Impairments 33 Macro, credit quality and portfolio dives, including Non-core 35 SIFI regulations, funding and ratings 44 Deep dives: Danica s profit model and tax 47 Contact list

26 Personal Banking: Increasing profit; positive impairment trend continues Income statement & key figures (DKK m) Financial highlights for Q Loan impairment charges (DKK bn) Q Q Index Net interest income 2,778 2, Net fee income 1,164 1, Net trading income Other income Total income 4,356 4, Expenses 3,149 2, Profit before loan impairment charges 1,207 1, Loan impairment charges Profit before tax Lending 823, , Deposits 348, , FTE 6,934 7, ROE (pre-tax) Profit before tax up 4%, and pre-tax ROE up 0.3 of a percentage point to 9.8% Total income up 5% on higher trading income from refinancing fees on RD loans Recent pricing initiatives partially mitigated the drop in volumes stemming from lower demand and price competition Expenses up 8% from severance payments and higher IT expenses for development of online solutions Impairment charges remained low, declining 12% from the Q level to DKK 0.4 bn Loan loss ratio dropped from 21 bp in Q3 to 19 bp in Q4 More than 1.2 million customers have registered for the new customer programme in Denmark The MobilePay app released in Q in Denmark has become a new standard for easy money transfer with more than 1 million downloads MobilePay was launched in Finland in Q Q412 Q113 Q213 Q313 Q413 26

27 Business Banking: Increasing income and stable impairments Income statement & key figures (DKK m) Financial highlights for Q Loan impairment charges (DKK bn) Q Q Index Net interest income 2,259 2, Net fee income Net trading income Other income Total income 3,163 2, Expenses 1,552 1, Profit before loan impairment charges 1,611 1, Loan impairment charges Profit before tax 1,196 1, Lending 614, , Deposits 265, , FTE 3,769 3, ROE (pre-tax) Profit before tax down 6%, and pre-tax ROE down 0.6 of a percentage point to 10.9% Total income increased 7% from Q3 because of refinancing income in December and the positive effect of income initiatives NII remained stable despite continued pressure on lending volumes Impairments remained at the Q3 level of DKK 0.4 bn, with a loan loss ratio of 27 bp Expenses rose 20% from the low level in Q3 owing mainly to severance payments and the booking of holiday payments Credit decisions were moved closer to the frontline; faster, more convenient loan application process Strong interest in new mobile banking products Q412 Q113 Q213 Q313 Q413 27

28 Corporates & Institutions: Improvement on all income lines Income statement & key figures (DKK m) Financial highlights for Q Loan impairment charges (DKK bn) Q Q Index Net interest income Net fee income Net trading income 1, Other income Total income 2,358 1, Expenses 1, Profit before loan impairment charges Loan impairment charges Profit before tax Lending 154, , Deposits 173, , FTE 1,565 1, ROE (pre-tax) Profit before tax up 104%, and pre-tax ROE at 12.2% Total income increased 51% from Q3 to Q4 on higher income from all lines NII rose 14%, primarily because of higher margins Sales and Research income rose as improved market visibility led to higher client-driven activity; Market Making income also improved as investors were more active Expenses increased 41%, primarily from bonuses, severance payments and seasonality Income breakdown (%) Market Making Capital Markets Sales and Research General Banking 2,057 2,382 2,131 2, , Q412 Q113 Q213 Q313 Q413 Q412 Q113 Q213 Q313 Q413 28

29 Danske Capital: Profit up 84%, with a positive trend in AuM Income statement (DKK m) Financial highlights for Q and FY 2013 Q Q Index Net interest income Net fee income portion from performance fees Other income Total income Expenses Profit bef. loan imp. charges Loan impairment charges Profit before tax Assets under management (bn) Total income increased 66% owing to performance fees of DKK 302 m in Q4 From 2012 to 2013, total income rose 13%, excluding perfomance fees total income rose 21% Assets under management rose from DKK 687 bn at end-2012 to DKK 727 bn at end-2013 Net inflow increased DKK 28 bn in 2013 evenly divided between the Nordic countries Net inflow in AuM (DKK bn) Net inflow Net inflow as % of AuM (rhs) % 3 Successful expansion of the hedge fund product range with AuM of DKK 11 bn at the end of 2013, an increase of 43% from 2012 Strengthened market position in alternative investments e.g. advisory agreements with Danish pension fund. AuM of 18 bn at the end of % % % % Roll-out of managed account products in most of the Nordic countries in close cooperation with Personal Banking. AuM of 17 bn at the end of Q412 Q113 Q213 Q313 Q413 29

30 % change in equities Danica Pension: Improved income because of more normal market conditions Income statement (DKK m) Financial highlights for Q and FY 2013 Q Q Index Premiums 6,816 5, Danica Traditionel (insurance result) Unit-linked (insurance result) Health and accident (ins. result) Result from insurance business Investment result Financing result Special allotments Net income bef. postponed risk allow Change in shadow account Net income Net income from insurance increased in Q4 owing to a higher investment result and booking from the shadow account It was possible to book risk allowance for three of four interest rate groups, although only partly for one of them In Denmark, total premiums rose 6% to DKK 4.7 bn; in all markets, they rose 14% to DKK 6.8 bn At the end of Q4, the shadow account balance was DKK 1.2 bn Possibility of booking risk allowance in 2014 (%) Investment allocation for Danica Traditionel, end-q4 13 (%) 100% 50% 0% Full risk allowance Partial risk allowance Equities Bonds Credit bonds Property % No risk allowance -100% -2.00% -1.00% 0.00% 1.00% 2.00% Percentage point change in interest rates New schemes Low Medium High 30

31 Trading income: Rebound in Q4 after a difficult Q3 Trading income by business unit (DKK m) Key points Other incl. Treasury 1,830 C&I 1,775 Business 2,154 Personal 418 1,463 More normalised trading income in Q after the subdued Q3 Loss of DKK 0.4 bn at Treasury from redemption of tier 2, continuation of high LCR and some unallocated funding costs Q412 Q113 Q213 Q313 Q413 Personal Banking and Business Banking benefitted from DKK 245 m in refinancing fees, down from DKK 313 m in Q Trading income from C&I (DKK m) Trading income split, Q (%) Market Making Customer-driven 1,285 1,581 1,300 1,342 Repos & derivatives FX & money market Q412 Q113 Q213 Q313 Q413 Equities Bonds & DCM 31

32 Expenses: Adjusted expenses up slightly in 2013, while branch and FTE reductions continue Expenses (DKK m) FTEs, end of period (000s) Index Q Q Index Expenses 24,343 24, ,880 5, Guarantee Fund and bank tax Revaluation of domicile prop Perf. based compensation Severance payments etc Rebranding Write-down, name rights Adjusted expenses 21,820 21, ,948 5, % 19.1 Branches, end of period -56% Q408 Q409 Q410 Q411 Q412 Q413 32

33 Impairments: Stable from Q3 to Q4 Impairments by business unit (DKK bn) Impairment drivers Non-core C&I Business Personal Impairments at Personal Banking and Business Banking were stable 2.7 Drop of DKK 100 m at C&I - back to the very low level of Q2 2.0 Impairments in Non-core largely unchanged at DKK 0.3 bn Positive trend for impaired loans continued, with declining volume of defaults Impaired loans (DKK bn) Defaulted Performing Q412 Q113 Q213 Q313 Q413 Q2 13 Q3 13 Q4 13 Note: Impaired loans are loans in rating categories 10 and 11 on which individual impairments have been made. 33

34 Group impairments: Quarterly individual charges have stabilised with DKK 46.9 bn in the allowance account Individual loan impairment charges*, ex Baltics (DKK bn) Change in allowance account* (DKK m) New Increased Reversals 2.7 Allowance, end , Gross impairments 127, Reversals 35, Write-offs 49, Allowance, end-q ,900 Q412 Q113 Q213 Q313 Q413 * Includes Non-core activities. 34

35 Macro: Trends in the Nordics Bankruptcies (index 1996 = 100) Rating upgrades,* 12-month moving average (%) Denmark Finland Norway Sweden Business Banking C&I (incl. Financials) Upgrades > downgrades Downgrades > upgrades Property prices, Nordic countries (index 2003 = 100) House prices/nom. GDP, Nordic countries (index 2005 = 100) Denmark 220 Finland Norway Sweden Denmark 130 Finland Norway Sweden * The relation between upgrades and total rating changes. Ratings since Q4 11 reflect recalibration. 35

36 Denmark: Housing remains affordable as prices stabilise Danish house prices by region (%) Affordability index, quarterly data from Region Prices Change Change in q/q Preview* Fixed rate Mixed rate Average peaked since peak Q Q Copenhagen Q Zealand Q South Denmark Q Central Jutland Q Northern Jutland Q Nationwide Q Danish housing market (000s) 120 Above average = expensive Below average = cheap Unemployment and foreclosures (%) No. housing units for sale House price per m 2 (rhs) 10Y swap rate Unemployment No. of forced sales (rhs) , ,500 1, * Leading indicator based on monthly statistics from home (Danske Bank s real estate agency) that cover about one-third of the market. Sources: Danske Research, Statistics Denmark, Assoc. of Danish Mortgage Banks, home, Adam, Danish central bank, SKAT (tax authority )and own calculations. 36

37 + refinancing fee* + refinancing fee* Realkredit Danmark: Portfolio overview Portfolio facts, Realkredit Danmark, end-q4 13 Loans broken down by LTV ratio and rating, RD, end (%) Approx. 385,000 loans (residential and commercial) 2,524 loans in 3- and 6-month arrears 122 repossessed properties DKK 12 bn of loans with LTV > 100%, including DKK 2bn with public guarantee Average LTV ratio of 71% LTV ratio at origination (legal requirement) Residential: max. 80% Commercial: max. 60% 1-month arrears, Realkredit Danmark (% of stock) Rating Total Public LTV ratio guarantee > Total (DKK bn) Trend in mortgage margins, 80% LTV, owner-occupied, (bp) 0.8 All products Fixed rate Adjustable rate % Q311 Q411 Q112 Q212 Q312 Q412 Q113 Q213 Q313 Q Jan13: with amortisation Jan 13: interest-only * We charge a fee of 30 bp of the bond price for refinancing of 1- and 2-year floaters and a fee of 20 bp for floaters of 3 or more years. 37

38 Personal Banking Denmark: Limited exposure to high LTV ratio loans that start to amortise before end-2018 Exposure to households with an IO mortgage (DKK bn) Breakdown of loans with high LTV ratio (DKK bn) Danske Prioritet (SDO mortgage) RD mortgage (fixed or variable rate) Exposure with LTV ratio above 100% Exposure with LTV ratio of % IO mortgages that start to amortise before end High LTV ratio** Secured bank lending 56 Rating categories Total credit exposure 174 Rating category Portion with acceptable LTV ratio* 157 Rating categories Category 11 (default) 28% 72% Category 10 Portion with high LTV ratio** 16.7 Reset in Impairments against households with IO mortgages 1.6 Collective 19% 81% Individual * Definition of acceptable LTV ratio: 80% or below for RD mortgages and Danske Prioritet, and 100% or below for secured bank lending. ** Definition of high LTV ratio: above 80% for RD mortgages and Danske Prioritet, or above 100% for secured bank lending. 38

39 Impaired exposure: Limited agriculture and shipping exposure Agriculture, breakdown of loan portfolio, Q4 13 (%) Shipping, breakdown of loan portfolio, Q4 13 (%) Other Mixed operations 6 Chemicals and feeds 13 Pig breeding Cereals etc. 20 Cattle breeding Car carrier Other 6 Chemical tanker RO-RO Product tanker 6 19 Container Offshore supply Offshore rig 7 7 Crude tanker 5 Cruise/Ferry Gas tanker Dry bulk Agriculture, exposure and allowance, Q4 13 (DKK bn) Shipping, exposure and allowance, Q4 13 (DKK bn) Business unit Gross exposure Allowance Coverage Business unit Gross exposure Allowance Coverage Personal Banking % Business Banking % Corporates & Institutions % Total exposure, ex. Non-core % Personal Banking % Business Banking % Corporates & Institutions % Total exposure % Portion from RD % Gross impaired loans: DKK 3.6 bn (5.4%) Gross impaired loans: DKK 4.2 bn (11.0%) 39

40 Ireland: Non-core deleveraging develops according to plan Key points Profit before tax for 2013 of a negative DKK 1.4 bn, loss reduced 71% from DKK 4,801 bn in 2012 Restructuring of core amounted to DKK 141 m in Q4 Guidance for 2014 impairments is maintained at up to DKK 2 bn for core and Non-core Ireland after DKK 95 m in impairments in Q Sales are progressing well, with an increasing number of properties on the market or under offer In Q4 2013, the pro forma Non-core portfolio amounted to DKK 55.6 bn, down from DKK 58.5 bn in Q3 New Non-core: Pro forma loan portfolio,* Q (DKK bn) Conduits etc. Other CRE Personal mortgages Core Ireland** Non-core Ireland 13.2 Non-core Conduits etc Total Property pipeline and sales (No. of properties) RWA (DKK bn) Q113 Q213 1,423 Q313 Q413 Core Ireland and Conduits etc. Non-core Ireland On the market Offer or contract Sold Q412 Q113 Q213 Q313 Q413 * Gross credit exposure. ** Personal Banking and Business Banking Ireland. 40

41 Ireland: Termination of Personal Banking and Business Banking Core: Breakdown of loan portfolio, Q4 2013* (DKK bn) Key points Discontinuation of Personal Banking and Business Banking on 1 January Existing customers are moved to the Non-core unit for servicing and termination Risk of additional impairments of up to DKK 500 m towards end-2014, resulting in estimated total impairments in 2014 of up to DKK 2 bn Personal mortgages Other Total Non-core: Breakdown of loan portfolio, Q4 2013* (DKK bn) Realised impairments and guidance, core & Non-core (DKK bn) 24.0 < CRE Personal mortgages Other Total Realised Q4 13 Guidance for 2014 * Gross credit exposure. 41

42 Ireland: House price trends and arrears Irish house price indices (index 100 = January 2005) CSO index,* houses Internal price index for houses in Dublin Internal price index for houses outside Dublin Fall from peak (%) Residential real estate Dublin Non-Dublin Commercial real estate Ireland, total Arrears** (%) days 180+ days Market Q310 Q311 Q312 Q313 * The general Irish house price index. ** Number of arrears, personal customers, excluding buy-to-let financing. Based on Q

43 Non-core Ireland: Breakdown of loan portfolio Individual impairments Value of collateral CRE (DKK bn) Personal mortgages (DKK bn) Other* (DKK bn) Total (DKK bn) Gross exposure Impaired loans Gross exposure Impaired loans Gross exposure Impaired loans Gross exposure Impaired loans Collective imp. (DKK bn) 0.1 Impaired 85% Collective imp. (DKK bn) 0.1 Impaired 43% Collective imp. (DKK bn) 0.2 Impaired 75% Collective imp. (DKK bn) 0.3 Impaired 70% Note: Value of collateral is capped by size of loan and reflects a haircut of at least 20%. Impaired loans are loans in rating categories 10 and 11 on which individual impairments have been made. * Consists primarily of consumer-related industries. 43

44 SIFI: Key elements of political agreement in October 2013 Key elements Danske Bank s total SIFI requirements, 2019 (% of RWA) Capital requirements CT1 SIFI requirement of 1% to 3% Total minimum requirement for SIFI banks of 11.5% to13.5% in 2019 In periods of high loan growth, possibility of countercyclical capital buffer up to 2.5% in 2019 CT1 CRD IV 7.0 SIFI 3.0* Liquidity and funding requirements LCR requirements will be announced when the final EU rules are in place, including rules on the treatment of Danish covered bonds as level 1 assets Legislative process and implementation H1 2014: The Danish parliament will pass a bill with the final SIFI rules 1 January 2015: Expected implementation of new rules AT1/T2 CRD IV 3.5 Total capital 13.5 * Phased in at 0.6% per annum

45 Deposits credit inst. CD & CP Repos Deposits Senior unsecured Covered bonds Subord. debt Equity Funding: Structure and sources Loan portfolio and long-term funding, Q4 13 (DKK bn) Funding sources (%) 1,785 Q Q Senior debt 46 1,553 Bank loans Deposits Bank mortgages Covered bonds RD mortgages Issued RD bonds Loans Funding Short-term funding Long-term funding 45

46 Three different methods of rating banks Rating methodology Danske Bank s rating Anchor SACP* Extraord. Add = SACP = + = Support factors Issuer Rating BBB BBB A- (Stable) 1=Business Position 2=Capital & Earnings 3=Risk Position 4=Funding & Liquidity Bank Financial Strength Rating Baseline Credit Assessment (BCA) Parental and Adjusted Systemic + Cooperative = + = BCA Support Support Issuer Rating C- Baa2 0 notches Baa2 1 notch Baa1 (Positive) Individual Rating/Viability Rating Support Rating/Support Rating Floor a A- Issuer Default Rating (IDR) IDR is the higher of the Viability Rating and the Support Floor A (Stable) * Stand-Alone Credit Profile. 46

47 Danica Pension s profit model Profit model Condition/ sensitivity 2013 DKK m = Danica Traditionel. Mainly risk allowance 70 bp p.a. of technical provisions (DKK 158 bn) Unit-linked business. Longterm: approximately 0.4% of AuM Can be booked only if investment return is high enough and if no use of bonus potential of paid-up policies Prices and volume Risk allowance Other Solid income base, but also price competition 1, Health and accident business Combined ratio Price competition -167 Return on investment portfolio at shareholders risk Financing result Special allotments, depending on profit and business volume Shadow account 538 Equity markets, interest rates Investment return: 1.9% 349 S-T interest rate (equity allocated capital) Low short-term interest rate -174 Transferred to shadow account from two interest groups, although only partly from one Net income 1,

48 Tax: 29% tax rate for 2013 and 24% adjusted for Ireland Actual and adjusted tax rates (DKK m) 2013 Q4 13 Q3 13 Q2 13 Q1 13 Profit before tax 10,059 2,862 2,304 2,677 2,216 Pre-tax loss, Ireland core and non-core 1, Permanent non-taxable difference Adjusted pre-tax profit, Group 11,108 2,702 2,655 2,757 2,993 Tax according to P&L 2, Taxes from previous years Adjusted tax 2, Tax drivers Tax on the profit for 2013 amounted to DKK 2.9 bn, or 29% of the pre-tax profit The tax charge was high relative to the profit, mainly because DKK 244 m was expensed as a result of a decrease in the deferred tax asset owing to lower corporation tax rates in the UK Adjusted for this charge, the tax rate for the year was 24.3% Adjusted tax rate 24.3% 23.8% 24.4% 24.4% 24.6% Actual tax rate 29.3% 32.8% 33.3% 18.4% 33.6% 48

49 Contact list Henrik Ramlau-Hansen Chief Financial Officer, Member of the Executive Board Tel.: Mobile: Christoffer Møllenbach Head of Treasury Tel.: Mobile: Peter Holm Senior Vice President Tel.: Mobile: Elisabeth Toftmann Klintholm Chief IR Officer Tel.: Mobile: Bent Callisen First Vice President Tel.: Mobile: [email protected] Claus Jensen Chief IR Officer Tel.: Mobile: [email protected] 49

50 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 ( Danske Bank ) 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 50