Danske Bank UBS Investor meeting Tonny T. Andersen, CFO Danske Bank 21 September 2004
Agenda Scandinavian economies Danske Bank profile and Strategy Financial performance Capital and risk management 2
1. Scandinavian economies Simultaneous activity upswings driven by private consumption in Denmark and Norway GDP (y/y) % y/y % y/y 7 6 Norway 7 6 5 4 Sweden 5 4 3 2 1 0 Denmark Euroland 95 96 97 98 99 00 01 02 03 04 05 3 2 1 0../figurbibliotek/ Private consumption (y/y) % y/y % y/y 6 Norway 6 Sweden 4 4 2 2 0 Euroland 0 Denmark -2 95../figurbibliotek/ 96 97 98 99 00 01 02 03 04 05-2 3
1. Scandinavian economies But Sweden is primarily driven by exports % y/y % y/y 14 Sweden 14 Denmark 12 10 8 6 4 Euroland 12 10 8 6 4 2 2 Norway 0 0-2 95 96 97 98 99 00 01 02 03 04 05-2../figurbibliotek/ 4
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
2. Danske Bank Profile & Strategy Nordic business model Branding Retail Banking Corporate Banking Fully integrated IT Central Back office Local Central 6
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
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 18 16 14 12 10 8 6 4 2 0 [*] Positive Outlook Source: S&P, Moody's Nordea Danske Bank SHB DnB NOR Swedbank SEB 8
2. Danske Bank Profile Danske Bank - A defensive and low risk share 100 80 60 40 20 0-20 -40-60 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 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
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
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
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
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 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 13
2. Danske Bank Profile & Strategy Take off for Swedish franchise - Local presence with a central backbone Sweden Branches, 46 total Loan book 14 12 10 8 6 4 2 0 <<Branch openings* Lending>> 2000 2001 2002 2003 1H *Accumulated 2004 SEK bn 120 100 80 60 40 20 0 Retail (42%) Corporate (58%) 14
2. Danske Bank Profile & Strategy Norway Take off for Norwegian franchise - Local presence with a central backbone 7 16 14 12 10 Branches, 64 total 0 Loan book 8 6 4 2 <<Branch openings* Lending>> 2000 2001 2002 2003 1H 2004 *Accumulated NOK bn 65 60 55 50 45 40 35 30 Retail (53%) Corporate (47%) 15
3. Financial performance Five year summary - Significant cost improvement DKr m 20000 Costs ( 8 pct.) pct. 65 C/I ( 7.5 pct. points) 15000 60 10000 55 5000 50 2000 2001 2002 2003 1H 2004 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 16
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 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 17
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 (%) H1 2003 H1 2004 Net profit as % of avg. share. equity p.a. 15.4 14.3 Core earnings as % of avg. sh. equity p.a. 17.4 18.4 Cost/core income ratio 54.0 53.7 Core (tier1) capital ratio 7.2 7.6 Solvency ratio 10.0 10.4 Earnings per share (DKr) 6.8 6.6 Earnings per share 3% Earnings per share for the period declined 3% to DKr6.6 DKr 7.0 6.0 Earnings per share YoY 3% 5.0 H1 2003 H1 2004 18
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 800 600 400 200 0 Provisions for bad & doubtful debts Average Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2001 2002 2003 2004 Accumulated provisions Non-performing loans DKr bn DKr bn % 13 5 0.20 Provisions as % of total loans & guarantees 12 4 0.10 11 3 0.00 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2003 2004 2003 2004 2003 2004 19
4. Capital and risk management Rating distribution - internal ratings - Improved credit quality Rating distribution Exposure DKKbn 600 500 400 300 200 100 0 1 2 3 4 5 6 7 8 9 10 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 2002 20
4. Capital and risk management Mortgage lending - Solid LTV ratios DKK bn. Loans LTV Retail 307 62% Urban trade 61 51% Agriculture 26 45% Residential renting 104 68% Total 498 61% Lending is fully match funded with mortgage bonds Mortgage bonds carry a triple-a rating from both S&P and Moodys 21
4. Capital and risk management Increasing debt burdens - but decreasing interest rate burdens % of disp. income 220 200 180 160 Norway Sweden Denmark 140 120 100 80 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 10 9 8 7 6 5 4 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
4. Capital and risk management Credit risk - UK and North America dominated by repos Geographic exposure DKK bn Financial Non-financial Total Denmark 138 720 857 UK 152 48 200 North America 128 15 143 Sweden 66 70 136 Norway 22 56 78 Other EU 32 25 56 Germany 14 9 24 Rest of Europe 6 4 10 Asia 8 1 10 Eastern Europe 2 2 4 Central & South America 0 1 2 Pacific Ocean 0 0 1 Africa 0 0 0 Total 569 952 1,520 23
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 498,100 4.2 460 140 Financial 549,403 2.9 1,936 239 Non financial 472,903 4.5 10,294 1,870 Total 1,520,406 3.8 12,690 2,249 Low provision and loss ratio in mortgage portfolio Exposure to high rated customers in financial portfolio 24
4. Capital and risk management DKr bn 825 750 675 Q2 Q3 Q4 Q1 Q2 Capitalisation 1H 2004 - 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 H2 2004 Use of internal risk models Risk-weighted assets (end-period) Total RWA RWA ex market risk in the trading portfolio 2003 2004 Effect of internal models Loans ex repos (end-period) (local currency, bn) 2003 H1 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 Capital targets and actual levels, H1 2004 (as % of RWA) Target H1 2004 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 9.5 10,4 Core capital after statutory deductions & capital needs (6.5% of RWA) DKr bn 60 56 52 48 Core capital after statutory deductions 6.5% of RWA Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2001 2002 2003 2004 25
4. Capital and risk management Capital Management Successful issue of Hybrid Capital Danske Bank launched a $750m perpetual capital securities transaction The first Danish Tier I issue ever Achieved aggressive pricing versus peers Over six times oversubscribed Other Europe 6% UK 5% Asia 1% Investor allocation US 88% 26
4. Capital and risk management Danske Banks Tier I has shown a good performance in the after-market US$ Tier 1: Spread to Treasuries 150 140 Spread to UST (bp) 130 120 110 100 90 80 4-Jun 4-Jul 4-Aug 4-Sep RBS '13 (A1/A) Rabobank '13 (Aa2/AA) SEB '14 (A2/BBB+) Danske '14 (Aa3/A) 27
4. Capital and risk management Subordinated debt - Limited issuance activity planned for 2004 and 2005 75% 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 Q3 2004 2005 2006 2007 2008 2009 28
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
4. Capital and risk management Utilisation of funding programmes Dkr. bn 100 Programme limit 75 Utilised amount 50 25 0 US CP ECP EMTN UK CD USD CD FIM CD NOK CP SEK CP June 2004 SEK MTN 30
Key points Strong financial group Solid franchise in Scandinavia Focus on: Cost management Capital management Risk management 31
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