UBS Nordic Banking Conference Revenue drivers in recovering economies Peter Straarup, CEO, Danske Bank 26 August 2004
Macro development - Economy about to pick up GDP % YOY 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 130 120 110 100 GDP Growth USA Euroland 1999 2000 2001 2002 2003 Investments (index) Germany USA Denmark pct. Short Term Money Market Rates 7.0 6.0 5.0 Euroland USA 4.0 3.0 2.0 1.0 0.0 1999 2000 2001 2002 2003 2004 170 150 130 110 90 70 Equity markets E300 Index (Europe) SPX Index (US) KFX Index (DK) 90 1999 2000 2001 2002 2003 2004 Source: Danske Analyse 50 1999 2000 2001 2002 2003 2004 2
Key agenda points in the future Distribution capabilities Staff quality Product quality Customer focus & segmentation Cost development Shareholder relations 3
DKr mn 20000 Five year summary - Significant cost improvement Costs ( 8 pct.) pct. 65 C/I ( 7.5 pct. points) 15000 60 10000 55 5000 2000 2001 2002 2003 1H 2004 50 2000 2001 2002 2003 1H 2004 20,000 Employees ( 17 pct.) 700 Branches ( 22 pct.) 600 17,500 500 400 15,000 2000 2001 2002 2003 1H 2004 300 2000 2001 2002 2003 1H 2004 4
Margins in Denmark - Effective mortgage market with low margins Danske Bank C/I ratio (2003) Reported: 55 @ Nordic margins: 49 @ European margins: 40 pct. 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Net interest income/average RWA European average: 3.3% (Simple) Grece Benelux Spain UK Austria Source: UBS and Danske Bank Italy Ireland France Germany Nordic Danske Bank 5
Central platform since Central Development Reporting Risk management Production e-banking Fokus Bank in 2001 BG Bank in 2002 London Branch in 1998 Hamburg Branch in 1999 Östgöta Enskilda in 2000 & 2002 Danske Bank Intl. Lux. in 2003 Danske Bank Polska in 2003 6
Effective use of IT Shared data Multi currency Multi language Full product range Flexible distribution Effective production Data safety Resilience Branches Call centre Netbank ATM Datawarehouse CRM STP Etc. Consolidated IT platform Products and services Common Data Store Finance centres 7
Open architecture Sales channels Products Internal provider External provider Branches Real estate agencies Merchant Bank e-banking Etc. Danske Prioritet BG Bolig Plus DuoFlex FlexLån Danica Link (DK) Danica Link (S) Danica Link (N) Danske Invest Danske Forsikring 8
Employee and private customers -Building on core values Core values Integrity in business conduct and in dealings with the community at large Accessibility electronic and physical in business and communications Value creation for shareholders, customers and employees Expertise through high standards of quality and professionalism Commitment to customers financial affairs 9
Employee and private customers - Rising satisfaction Index Customers Index Employees 75 90 70 80 70 65 60 DB BG DB BG 2003 2002 60 50 DB BG DB BG Satisfaction Loyalty Satisfaction & Motivation Loyalty 10
Customer Relationship Management CRM - Allows us to lead a targeted dialog with the customer Full view over engagement Customer signals Customer possibilities Notes about the customer 11
e-banking Restructuring the Danish distribution - To provide financial solutions Comprehensive internet banking solution 24/7 telephone bank for handling most common transactions Market share above 30% Market share around 30% Market share around 20% Branches Finance centres Retail and SME customers Standard packages Focus on advice Easy access Relationship Manager Private banking and large corporate customers Complex competencies Tailor-made solutions First floor banking RM and specialist team 12
Branding in Denmark - Two strong brands Banking Activities, Denmark 173 app.10% > 900,000 Green segment: contemporary and idealistic Loyal customers with rising satisfaction level Separate credit department Branches Market share No. of customers Customer type Customer satisfaction & loyalty 291 >20% > 1,600,000 Blue segment: contemporary, individualistic, pragmatic Very loyal customers with sound satisfaction level Separate credit department 13
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 600.000 500.000 400.000 300.000 200.000 100.000 0 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Packages in Danske Bank brand Packages in BG Bank brand Open plan products in Banking Activities Denmark Unit link volume Billions 16 14 12 10 8 6 4 2 0 May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Billions 8 7 6 5 4 3 2 1 0 7,1 5,8 3,3 1,2 2001 2002 2003 1H 2004 Danske Prioritet BG Bolig Plus Unit link volume 14
Sweden Take off for Nordic franchise - Local presence with a central backbone Norway 7 14 12 10 8 6 4 2 0 Branches, 46 total <<Branch openings* Lending>> 2000 2001 2002 2003 1H 2004 *Accumulated SEK bn 120 100 80 60 40 20 0 16 14 12 10 8 6 4 2 0 Branches, 64 total <<Branch openings* Lending>> 2000 2001 2002 2003 1H 2004 *Accumulated NOK bn 65 60 55 50 45 40 35 30 15
Successful start-up of new banks and branches Danske Bank Sweden has today 45 branches About 50% of the branches have started or relocated after Danske Bank acquired Östgöta Enskilda Bank Average time to break even under 2 years Average time to pay back under 4 year Branch openings 31 29 27 25 23 21 19 17 15 13 11 9 7 5 3 1 Deficit Break even Payback Start up of new banks The flow to profitability 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 16
Value creation in Danske Bank Size Earnings Growth in EPS Effective use of Capital 17
Focus on shareholder interests DKr 15.0 EPS ( 61pct.) Pct. 40 RAROC 12.5 35 10.0 30 7.5 25 5.0 2000 2001 2002 2003 1H 2004* * 2x 1H 04 20 2000 2001 2002 2003 1H 2004 DKr bn 12 Total distribution 10 8 6 4 2 0 2000 2001 2002 2003 2004e Share repurchases Dividends DKr bn 45 40 35 30 25 20 15 10 5 0 Economic Capital 2000 2001 2002 2003 1H 2004 18
Developments since the merger Solid improvement in EPS EPS EPS up 61% Profit after tax up 40% Number of shares down 15% DKr 15 10 5 EPS 2000 2001 2002 2003 H1 2004* * 2xEPS 1H 2004 19
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 2003 1H 2004 Index Core income 13,872 13,226 95 Expenses 7,494 7,102 95 Core earnings before prov. 6,378 6,124 96 Provisions for bad debts 947 452 48 Core earnings 5,431 5,672 104 Earnings from inv. portfolios 1,282 601 47 Profit before tax 6,713 6,273 93 Tax 1,910 1,850 97 Net profit for the period 4,803 4,423 92 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) 2003 1H 2004 Index Danske Bank - Retail 43 50 117 Danske Bank - Corp. 97 102 105 BG Bank - Retail 24 27 112 BG Bank - Corporate 23 24 102 BA NO - Retail 31 34 110 BA NO - Corporate 29 30 106 BA SE - Retail 33 37 111 BA SE - Corporate 59 65 110 20
Effects of lower interest rates DKr bn 8,500 Net interest income 8,000 Adjusted NII Total effect: Since 1H 2002: Dkr1.7bn 7,500 Reported NII 7,000 1H '02 2H '02 1H '03 2H '03 1H '04 21
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 2003 1H 2004 Index Core income 13,872 13,226 95 Expenses 7,494 7,102 95 Core earnings before prov. 6,378 6,124 96 Provisions for bad debts 947 452 48 Core earnings 5,431 5,672 104 Earnings from inv. portfolios 1,282 601 47 Profit before tax 6,713 6,273 93 Tax 1,910 1,850 97 Net profit for the period 4,803 4,423 92 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) 2003 1H 2004 Index Danske Bank - Retail 43 50 117 Danske Bank - Corp. 97 102 105 BG Bank - Retail 24 27 112 BG Bank - Corporate 23 24 102 BA NO - Retail 31 34 110 BA NO - Corporate 29 30 106 BA SE - Retail 33 37 111 BA SE - Corporate 59 65 110 22
Core earnings - More than 2/3 in banking activities Share First half First half Index First half (DKr m) 2004 2003 04/03 2004 Banking Activities, Danske Bank 1,548 1,474 105 27% Banking Activities, BG Bank 751 681 110 13% Banking Activities, Norway 178 182 98 3% Banking Activities, Sweden 358 194 185 7% Other Banking Activities 788 709 111 14% Total Banking Activities 3,623 3,240 112 64% Mortgage Finance 1,094 1,075 102 19% Danske Markets 504 631 80 9% Danske Capital 193 133 145 3% Danica Pension 505 551 92 9% Other areas -247-199 - -4% Total Group 5,672 5,431 104 100% 23
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