Danske Bank. UBS Investor meeting. Tonny T. Andersen, CFO Danske Bank 21 September 2004

Transcription

1 Danske Bank UBS Investor meeting Tonny T. Andersen, CFO Danske Bank 21 September 2004

2 Agenda Scandinavian economies Danske Bank profile and Strategy Financial performance Capital and risk management 2

3 1. Scandinavian economies Simultaneous activity upswings driven by private consumption in Denmark and Norway GDP (y/y) % y/y % y/y 7 6 Norway Sweden Denmark Euroland /figurbibliotek/ Private consumption (y/y) % y/y % y/y 6 Norway 6 Sweden Euroland 0 Denmark /figurbibliotek/

4 1. Scandinavian economies But Sweden is primarily driven by exports % y/y % y/y 14 Sweden 14 Denmark Euroland Norway /figurbibliotek/ 4

5 2. Danske Bank Profile & Strategy Danske Bank - a leading Nordic bank Market cap: 94bn DKr Total assets: 1,827bn DKr 3m retail customers 150,000 corporate customers High ratings Legal Structure (Aa1)* (AA-)** Mortgage credit Life and Pensions (Aaa)* (AA-)** (AAA)** *Moodys rating **Standard & Poors rating 5

6 2. Danske Bank Profile & Strategy Nordic business model Branding Retail Banking Corporate Banking Fully integrated IT Central Back office Local Central 6

7 2. Danske Bank Profile & Strategy Danske Bank Business universe - Strong market position Banking activities Norway Banking Activities Denmark Market position #1 28% (lending) Part of earnings 46% Market position #4 4% (lending) Part of earnings 4% Mortgage business Market position #1 35% (stock) Part of earnings 18% Market position #5 8% (lending) Part of earnings 6% Banking activities Sweden Life & Pension Danske Markets Market position #1 34% (premiums) Part of earnings 8% Market position #1 app. 30% (depending on segment) Part of earnings 10% 7

8 2. Danske Bank Profile & Strategy Nordic Banking Groups - Danske Bank - the best rated Nordic Banking Group Long Term Rating S&P Moody's Danske Bank AA- Aa1 Handelsbanken A+ [*] Aa1 Nordea A+ Aa3 Swedbank A Aa3 [*] SEB A Aa3 DnB NOR A [*] Aa3 Bn EURO [*] Positive Outlook Source: S&P, Moody's Nordea Danske Bank SHB DnB NOR Swedbank SEB 8

9 2. Danske Bank Profile Danske Bank - A defensive and low risk share ML Lilli %6m Danske Rel to World %6m LILLI stands for leading indicator of leading indicators and is a Merrill Lynch proprietary data set. Source: Merrill Lynch, Datastream 9

10 2. Danske Bank Profile Lower volatility than peers 12% 10% 8% 6% 4% 2% 0% Danske Bank Volatility in Scandinavian banks (2004) SHB FSB Nordea SEB DnB Annualised volatility based on daily share prices (y-t-d 2004) 10

11 2. Danske Bank Profile Danske Bank less sensitive to competition in the mortgage market Change in EPS from a harmonisation of mortgage spreads to 50bp in the Nordics 0% -5% Danske Bank SEB Nordea SHB Swedbank DnB NOR -10% -15% -20% -25% Source: ABG 11

12 2. Danske Bank Profile & Strategy Scandinavia Norway >10% growth No. 1 in customer satisfaction Market share target: 10% Good opportunities for organic growth Financial targets Solvency of about 9.5% Core (tier 1) of about 7.0% Payout ratio of about 50% Cost/income ratio of 50% Competitive return Denmark >10% lending growth Recovery of market shares for banking and mortgage finance Good growth opportunities for Danica Sweden >10% growth No. 1 in customer satisfaction Market share target: 10% Good opportunities for organic growth 12

13 2. Danske Bank Profile & Strategy Innovation in Retail - New products are contributing to core earnings Core earnings supported by strong growth in sales of new products i.e. Open plan Customer packages Unit link Number of packages Customer packages in Banking Activities Denmark Q Q Q Q Q Q Q Q Q Packages in Danske Bank brand Packages in BG Bank brand Open plan products in Banking Activities Denmark Unit link volume Billions May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Billions ,1 5,8 3,3 1, H 2004 Danske Prioritet BG Bolig Plus Unit link volume 13

14 2. Danske Bank Profile & Strategy Take off for Swedish franchise - Local presence with a central backbone Sweden Branches, 46 total Loan book <<Branch openings* Lending>> H *Accumulated 2004 SEK bn Retail (42%) Corporate (58%) 14

15 2. Danske Bank Profile & Strategy Norway Take off for Norwegian franchise - Local presence with a central backbone Branches, 64 total 0 Loan book <<Branch openings* Lending>> H 2004 *Accumulated NOK bn Retail (53%) Corporate (47%) 15

16 3. Financial performance Five year summary - Significant cost improvement DKr m Costs ( 8 pct.) pct. 65 C/I ( 7.5 pct. points) H H ,000 Employees ( 17 pct.) 700 Branches ( 22 pct.) , , H H

17 3. Financial performance First half of 2004 Core earnings affected by lower interest rates Net profit for the period 8% to DKr 4.4bn Core income declined 5% Operating expenses and depreciation fell 5% Provisions for bad & doubtful debts remain low Acceptable return on investment portfolios, given market conditions (DKr m) 1H H 2004 Index Core income 13,872 13, Expenses 7,494 7, Core earnings before prov. 6,378 6, Provisions for bad debts Core earnings 5,431 5, Earnings from inv. portfolios 1, Profit before tax 6,713 6, Tax 1,910 1, Net profit for the period 4,803 4, Banking lending ex repos 7% Corporate lending picked up again in 1H 2004 Strong growth in retail lending Mortgage lending rose 5% Loans ex repos (end-period) (local currency, bn) H 2004 Index Danske Bank - Retail Danske Bank - Corp BG Bank - Retail BG Bank - Corporate BA NO - Retail BA NO - Corporate BA SE - Retail BA SE - Corporate

18 3. Financial performance Key figures and ratios - Rise in core earnings in relation to shareholders equity Sound ROE, given lower investment returns Return on equity fell to 14.3% because of lower return on investment portfolios Rise in core earnings in relation to shareholders equity C/I ratio held steady despite declining income Key ratios (%) H H Net profit as % of avg. share. equity p.a Core earnings as % of avg. sh. equity p.a Cost/core income ratio Core (tier1) capital ratio Solvency ratio Earnings per share (DKr) Earnings per share 3% Earnings per share for the period declined 3% to DKr6.6 DKr Earnings per share YoY 3% 5.0 H H

19 4. Capital and risk management Provisions for bad & doubtful debts - Provisioning level remains low Provisions for bad & doubtful debts 52% Provisions equal 8 bp of loans & guarantees per annum Healthy macroeconomic climate in the Nordic region Average expected loss over a business cycle of 19 bp per annum DKr m Provisions for bad & doubtful debts Average Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Accumulated provisions Non-performing loans DKr bn DKr bn % Provisions as % of total loans & guarantees Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q

20 4. Capital and risk management Rating distribution - internal ratings - Improved credit quality Rating distribution Exposure DKKbn Rating categories 1-4 correspond largely to the investment grade level of external rating agencies Rating categories 9 and 10 apply to doubtful and nonperforming exposures Rating category Exposure 2003 Exposure

21 4. Capital and risk management Mortgage lending - Solid LTV ratios DKK bn. Loans LTV Retail % Urban trade 61 51% Agriculture 26 45% Residential renting % Total % Lending is fully match funded with mortgage bonds Mortgage bonds carry a triple-a rating from both S&P and Moodys 21

22 4. Capital and risk management Increasing debt burdens - but decreasing interest rate burdens % of disp. income Norway Sweden Denmark Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Debt burden % of disp. income Norway Denmark Sweden Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Interest rate burden 22

23 4. Capital and risk management Credit risk - UK and North America dominated by repos Geographic exposure DKK bn Financial Non-financial Total Denmark UK North America Sweden Norway Other EU Germany Rest of Europe Asia Eastern Europe Central & South America Pacific Ocean Africa Total ,520 23

24 4. Capital and risk management Credit exposure break-down - Three major portfolios DKK m Creditexposure Weighted Provisions Loss 2003 as at December 31, 2003 Rating Mortgage 498, Financial 549, , Non financial 472, ,294 1,870 Total 1,520, ,690 2,249 Low provision and loss ratio in mortgage portfolio Exposure to high rated customers in financial portfolio 24

25 4. Capital and risk management DKr bn Q2 Q3 Q4 Q1 Q2 Capitalisation 1H Hybrid capital raised and share repurchase executed Active capital management continues Increased use of capital for organic growth $750m in hybrid capital raised Share repurchases worth DKr3bn, including DKr0.5bn in the July 1-13 period Additional buybacks for DKr3bn in H Use of internal risk models Risk-weighted assets (end-period) Total RWA RWA ex market risk in the trading portfolio Effect of internal models Loans ex repos (end-period) (local currency, bn) 2003 H Index Danske Bank - Retail Danske Bank - Corp BG Bank - Retail BG Bank - Corporate BA NO - Retail BA NO - Corporate BA SE - Retail BA SE - Corporate Capital targets and actual levels, H (as % of RWA) Target H Core capital 6.5 7,0 Hybrid capital 0.5 0,6 Core (tier 1) capital ratio 7.0 7,6 Supplementary capital 2.5 2,8 Solvency ratio ,4 Core capital after statutory deductions & capital needs (6.5% of RWA) DKr bn Core capital after statutory deductions 6.5% of RWA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q

26 4. Capital and risk management Capital Management Successful issue of Hybrid Capital Danske Bank launched a $750m perpetual capital securities transaction The first Danish Tier I issue ever Achieved aggressive pricing versus peers Over six times oversubscribed Other Europe 6% UK 5% Asia 1% Investor allocation US 88% 26

27 4. Capital and risk management Danske Banks Tier I has shown a good performance in the after-market US$ Tier 1: Spread to Treasuries Spread to UST (bp) Jun 4-Jul 4-Aug 4-Sep RBS '13 (A1/A) Rabobank '13 (Aa2/AA) SEB '14 (A2/BBB+) Danske '14 (Aa3/A) 27

28 4. Capital and risk management Subordinated debt - Limited issuance activity planned for 2004 and % Acc. run off in eligible subordinated debt 50% 25% JPY EUR GBP USD 0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q

29 4. Capital and risk management Balance sheet Danske Bank Group Liabilities Assets Other Credit inst. Issued bonds 8% 18% 13% 7% 11% 23% Other Credit inst. Bonds Deposits 28% 31% Bank loans etc. Mortgage bonds Equity 30% 3% 28% Mortgage loans 29

30 4. Capital and risk management Utilisation of funding programmes Dkr. bn 100 Programme limit 75 Utilised amount US CP ECP EMTN UK CD USD CD FIM CD NOK CP SEK CP June 2004 SEK MTN 30

31 Key points Strong financial group Solid franchise in Scandinavia Focus on: Cost management Capital management Risk management 31

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