Danske Bank A/S : Conference call presentation 2019

Financial results 2019

Chris Vogelzang

Chief Executive Officer

Jacob Aarup-Andersen Chief Financial Officer

5 February 2020

Financial results 2019

Agenda

01.	Executive summary and recap of 2023 ambitions	2
02.	Group financials and key lines	5
03.	Capital	13
04.	Financial outlook for full-year 2020	14
05.	Q&A	15
06.	Appendix	16

1

Financial results 2019

Executive summary: Challenging 2019; net profit down 1% from 2018, including significant extraordinary items in 2019

Lending growth of 3% y/y, driven by growth

of 5% y/y at Banking Nordic and 1% y/y at Banking DK. However, growth is at lower margins

Strong capitalisation with a CET1 capital

ratio of 17.3%; target for CET1 ratio of above 16%; REA decrease in Q4 driven mainly by counterparty credit risk

DKK 15.1 bn net profit, down 1% from 2018, however including significant net positive extraordinary items in 2019

9.6% return on equity after tax, including significant extraordinary items

10% increase in expenses y/y due mainly to upstaffing and investments in compliance and AML-related activities, expenses related to the Estonia case as well as extraordinary items

DKK 8-10bn net profit outlook for 2020

2018 2019

Proposed dividend of DKK 8.5 per share, representing a 49% pay-out ratio, in line with the policy of 40-60%

The result for 2019 was affected by significant net positive one-offitems, including deferred tax, goodwill impairment charges, and the sales of Danica Pension Sweden and LR Realkredit A/S

15.2

15.1

Net profit (DKK bn)

9.8% 9.6%

ROE (%)

17.0% 17.3%

CET1 ratio (%)

Note: Please see slide 33 for extraordinary items in 2019

2

Financial results 2019

Dedicated Better Bank Transformation will help us deliver on our ambitions

	Clear ambitions for all		Transformation towards a			Key focus areas 2020
	our stakeholders in 2023		Better Bank
	Customers: On average among the
				Compliance under control
	top 2 in customer satisfaction in
	everything we do
	Employees: At least 90% of our						Cost programme
	employees are engaged
	Society: We operate sustainably,
				Agile transformation
	ethically and transparently - and
	have a positive impact on the
	societies we are a part of
				Complexity reduction and
								product optimisation
	Investors: We aim to achieve a
	return on shareholders' equity of
				Societal Impact &
	9-10% and a cost/income ratio in
						Sustainability
	the low 50s

3

Financial results 2019

Danske Bank's 2023 targets for the seven focus areas within Societal Impact & Sustainability

					2023 targets		Status 2019
Sustainable finance	1	Sustainable investing		DKK 30 bn in green investments by Danica Pension;		DKK 10 bn
	setting a climate target for our corporate lending
2	Sustainable financing			DKK 46.1 bn
				towards DKK 100 bn by 2030
				Well above DKK 100 bn in sustainable financing - and
				portfolio by 2023
	3	Governance		More than 95% of employees trained annually in risk &	96%
		compliance and passed tests
Sustainable operations
4	Diversity & inclusion		35% women in senior leadership positions	23%
	5	Environmental footprint		Reducing our CO2 emissions by 10% vs. 2019 and 75%		15,230 tonnes CO2
		vs. 2010*
Impact initiatives	6	Entrepreneurship		10,000 startups & scaleups supported with growth &	3,851
	2 million people supported with financial literacy tools
				impact tools, services and expertise
	7	Financial literacy		and expertise	719,763
* Baseline is 54,823 tonnes CO2 emissions in 2010.				4

Financial results 2019

Net profit: DKK 15.1 bn, down 1% from 2018, however including significant net positive extraordinary items

Income statement and key figures (DKK m)

	2019	2018	Index	Q4 2019	Q3 2019	Index
Net interest income	21,877	23,571	93	5,541	5,445	102
Net fee income	15,895	15,402	103	4,214	4,111	103
Net trading income	4,985	4,676	107	2,078	779	-
Other income	2,225	716	-	320	160	200
Total income	44,982	44,365	101	12,153	10,495	116
Expenses	27,548	25,011	110	8,342	6,382	131
Goodwill impairment charges	1,603	0	-	1,603	0	-
Profit before loan impairment charges	15,831	19,354	82	2,208	4,113	54
Loan impairment charges	1,516	-650	-	703	343	205
Profit before tax, core	14,315	20,004	72	1,505	3,771	40
Profit before tax, Non-core	-493	-282	-	-244	22	-
Profit before tax	13,822	19,722	70	1,261	3,793	33
Tax	-1,249	4,548	-	-3,780	782	-
Net profit	15,072	15,174	99	5,041	3,011	167
Return on avg. shareholders' equity (%)	9.6	9.8		12.6	7.6
Cost/income ratio* (%)	61.2	56.4		68.6	60.8
Common equity tier 1 capital ratio (%)	17.3	17.0		17.3	16.4
EPS (DKK)	16.7	16.5		5.7	3.3
Lending (DKK bn)	1,821	1,769	103	1,821	1,818	100
Deposits and RD funding (DKK bn)	1,759	1,636	107	1,759	1,740	101
- of which deposits (DKK bn)	963	894	108	963	926	104
Risk exposure amount (DKK bn)	767	748	103	767	782	98

Key points, 2019 vs 2018

• Return on equity of 9.6%
• NII down 7% due mainly to higher funding costs and margin pressure
• Fee income up 3% due to high remortgaging activity and the SEB Pension Danmark acquisition
• Trading income up 7%, includes gain on sale of LR Realkredit A/S
• Expenses up 10%, due mainly to upstaffing and investments in compliance and AML activities
• Impairment charges driven by C&I

Key points, Q4 2019 vs Q3 2019

• NII up 2% driven by higher deposit margins, lending volumes and FX effects
• Fee income up 3% due mainly to performance fees
• Trading income includes gain on sale of LR Realkredit A/S
• Expenses up 31% due to extraordinary items
• Impairments affected by review of portfolio in Q4

* Before goodwill impairment charges.	5
Note: Please see slide 33 for extraordinary items in 2019

Financial results 2019

NII: Down 7% y/y due to margin pressure, higher funding costs and transfer to Non-core

Key points

Y/Y

• NII down 7%. Lending growth of 3% offset by lower margins, higher funding costs and transfer of Rus- sian and remaining Baltic exposures to Non-core
• Other includes capital costs, retained liquidity costs related to the Estonia case and lower income from

liquidity portfolios, partly offset by FX hedge of CET1

Q/Q

• NII up 2% as positive deposit margins, lending volumes and FX effects more than offset decrease in lending margins

Change in net interest income, y/y (DKK m)
23,571	538
		1,283
			124	127	139	146
							915	21,877
2018	Lending	Lending	Deposit	Deposit FX effect Non-core	Other	2019
	volume	margin	volume	margin		transf.*

Group net interest income (DKK m)

Change in net interest income, q/q (DKK m)

-7%
23,571	21,877
2018	2019

									5,541
+2%							38
5,445	5,541						26
		5,445	29
				75		78
					0
Q3 2019	Q4 2019	Q3 2019	Lending	Lending	Deposit	Deposit	FX effect	Other	Q4 2019
			volume	margin	volume	margin

* Includes transfer of local Baltic commercial customers to Non-core on 1 April 2018 and transfer of the remaining Baltic and Russian expsoures to Non-core on 1 February 2019	6

Financial results 2019

NII (cont'd): Volume growth of 5% y/y (5% in local currency) at Banking Nordic; Banking DK grew 1% y/y

Key points

• Banking Nordic lending up 5% y/y (5% in local currency) with growth in Norway and Finland
• Banking DK lending up 1% y/y, driven by retail lending
• NII for Other Activities was impacted by higher funding costs attributable to the Estonia case being retained at the Internal Bank rather than being allocated to business units
• C&I lending up 5%. Lending in General Banking grew 2% y/y

Change in NII by business unit (DKK m)

Lending volumes and development* (DKK bn)

2018	2019
		938
Banking DK		+1%
		944
		605
Banking Nordic	+5%
		635

Group NII 2018

Banking DK

Banking Nordic

Corporates & Institutions

Wealth Management

Northern Ireland

Other Activities

Group NII 2019

23,571
511
344
272
81
33
519
21,877

Corporates &	198
+5%
Institutions
209
Northern	50
+9%
Ireland
54
	1,769
Group	+3%
	1,821

* Business unit lending is before impairments. Group lending is after impairments.	7

Financial results 2019

Fee income: Up 3% y/y as high activity and SEB Pension DK acquisition more than offset margin pressure and negative one-off

Key points

Y/Y

• Fee income up 3% due to high remortgaging activity and the acquisition of SEB Pension Danmark, offset by margin pressure and the one-off Flexinvest Fri compensation amount of DKK 180 m booked in Q2
• Fees also affected by the sale of Danica Pension Sweden in May 2019

Q/Q

• Fee income up 3% due mainly to performance fees booked in Q4

Group net fee income (DKK m)

Net fee income development, y/y (DKK m)	2018	+3%
2019
-7%	+15%				15,402 15,895
5,666 5,271		-2%	+17%
3,610 4,166			+2%
	2,759 2,696 2,126 2,497
		1,241 1,264
Investment	Pension &	Money	Lending &	Capital	Total
	Insurance	transfers,	guarantees	Markets
		account fees,
		cash
		management
Net fee income development, q/q (DKK m)	Q3 2019	Q4 2019
	+3%

+3%

+3%

15,402	15,895
363
392
6,119	6,596
2,914	2,909
1,875	1,857
4,363	4,397
-261	-227

4,111

86

1,694

673

470

1,235

-47

4,214

89

1,658

836

479

1,209

-57

	+25%												4,111 4,214
		1,605	-27%		-7%				-5%			+71%
1,281		1,145 836
				715 664	724 689
					246 420
Investment Pension &	Money	Lending &	Capital	Total
				Insurance	transfers,	guarantees	Markets
					account fees,
						cash

2018

2019

Q3 2019 Q4 2019

management

Banking DK	Corporates & Institutions	Northern Ireland
Banking Nordic	Wealth Management	Other Activities

8

Financial results 2019

Trading income: Up 7% y/y including gain on sale of LR Realkredit

Key points

Y/Y

• Trading income up 7% including gain on sale of LR Realkredit A/S of DKK 767 million. Adjusted for this gain, trading income was down 10% y/y

Q/Q

• Gain on sale of LR Realkredit A/S booked in Other Activities in Q4
• At Corporates & Institutions, the improvement was driven by better performance in Danish fixed income following a weak Q3

Refinancing income (DKK m)

	145
92
				61
		42
			6
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

Group net trading income (DKK m)
+7%		+167%
	4,985		2,078
4,676
933	1,422
82			993
110
2,440	2,114		111
		779
		96	586
		43
		110
323	280	182
	72
	61
948	1,176	288	318
-50	-117		-3
2018	2019	Q3 2019	Q4 2019
Banking DK	Corporates & Institutions	Northern Ireland
Banking Nordic	Wealth Management	Other Activities	9

Financial results 2019

Expenses: Up 10% y/y, due mainly to upstaffing and investments in compliance and AML, now totalling around 2,800 FTEs

Key points

Y/Y

• Expenses up 10% y/y, due mainly to upstaffing and investments in compliance and AML activities, consultancy costs related mainly to the Estonia case and extraordinary items
• Adjusted for the DKK 1.5 bn donation related to the Estonia case in 2018, expenses increased 17%

Q/Q

• Expenses up 31% q/q due to software impairments, transformation costs, an adjustment of the expected value of a distribution contract and a provision for operational risk- related losses

Change in expenses, y/y (DKK m)

				1,006	554
			990
	1,500	1,487
25,011						27,548
2018	Donation	2019	Staff	Consul-	Other	2019
		one-offs*	costs ex.	tancy	costs
			severance
			pay

Group operating expenses (DKK m)

Change in expenses, q/q (DKK m)

+10%

25,012	27,547
2,903
2,416	1,216
1,207	3,589
3,545
	4,834
4,689
5,324	6,269
7,831	8,736
2018	2019

+31%

	8,342
6,382	1,521
344
643
879
277
784	1,318
1,128
	1,757
1,480
2,070	2,523
Q3 2019	Q4 2019

					274	115
			56	121
		127
	1,267
							8,342
6,382
Q3	One-	Staff	IT	Rent &	Consul-	Other	Q4
2019	offs*	costs ex.		marketing	tancy	costs	2019

Banking DK	Corporates & Institutions	Northern Ireland
Banking Nordic	Wealth Management	Other Activities

* Please see slide 33 for extraordinary items in 2019

severance

pay

10

Financial results 2019

Significant costs for AML and other compliance in 2019 to peak in 2020; guidance towards 2023 unchanged

Expenses for compliance-related activities (DKK bn, subject to roundings)		Estonia case

AML digitalisation

AML programme, other compliance and regulation

			3.3-3.5
		3.1
				2.4-2.6
	1.8	1.9			1.7-1.9
				1.5-1.7
1.0	1.4	0.3
				Of which
1.0		0.9				AML:
0.3				~1.1-1.3
0.0
2017	2018	2019	2020E	2021E	2022E	2023E

Comments on AML-related investments

• AML investments expected to peak in 2020E, thereafter falling to reach steady-state level of DKK 1.1-1.3 bn in 2023
• AML investments are driven by FTE increase to strengthen our lines of defence and to increase the capacity for handling KYC/ODD and monitoring processes
• Increased IT investments are also planned in 2020 to secure progress on digitalisation and automation of core AML processes

11

Financial results 2019

Impairments: Loan loss ratio of 8 bp in core activities in 2019, driven by Corporates & Institutions

Key points Y/Y

Impairment charges by business unit, 2019 (DKK m)

• Charge of DKK 1.5 bn; core loan loss ratio of 8 bp
• • Impairments at C&I due to single-name exposures
  • Portfolio review led to charges of DKK 450 m as some exposures were reclassified as non-performing
  • Charges also reflect increased downside risk in the macroeconomic outlook for the Nordic countries

Q/Q

• Charge of DKK 703 m; core loan loss ratio of 15 bp − Portfolio review led to charges of DKK 450 m

Impairment charges, core (DKK m and bp)

15bp

8bp	7bp
703

						2bp		357	2bp	343
						100	-43		113
		-166
-235	-231	-241	-330	-377		-1bp
		-3bp
-5bp	-5bp	-5bp
				-7bp	-8bp
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4

Banking DK	-342
Banking Nordic	+510
Corporates &
Institutions
Wealth
Management
Northern
Ireland
Other
Activities
Total impairments,
core

+1,348

0

+5

-5

+1,516

2017

2018

2019

Non-core+213

12

Financial results 2019

Capital: Strong capital base; CET1 capital ratio of 17.3%

Capital highlights, Q4 2019

Capital ratios, under Basel III/CRR (%)

• CET1 ratio increased by 0.9%-points, driven mainly by net
	profit including extraordinary items
•	REA down DKK 15 bn, driven mainly by reduction in
	counterparty risk
•	CET1 ratio negatively impacted by 0.1%-points due to higher

Tier 2

21.0

1.4

3.1

AT1	Pillar II CET1	CET1
	22.7
	2.3	17.1
	3.1
		14.9

deduction for Danica Pension following increased solvency

capital requirement

• CET1 ratio target of above 16% in the short term

• Issuance of EUR 750 m and SEK 1 bn of Tier 2 instruments in

Q4

• Leverage ratio of 4.7% (transitional rules) and 4.6% (fully

phased-in rules)

			3.2
16.4	17.3	17.1	11.7
Q3 2019	Q4 2019	Q4 2019	Regulatory
reported	reported	fully	min. CET1
		loaded*	required**

CET1 capital ratio, Q3 2019 to Q4 2019 (%)			Total REA, Q3 2019 to Q4 2019 (DKK bn)
	0.3	0.1	17.3	782	2
0.2
			8
0.9					3
16.4
				5	767

Q3 2019 Net profit	Proposed	REA effect Change in	Q4 2019 Q3 2019 Credit risk Counter-	Market risk Operational Q4 2019
excl. goodwill	dividend	deductions	party risk	risk

impairments

* Based on fully phased-in requirement including fully phased-in impact of IFRS 9. ** Pro forma fully phased-in min. CET1 requirement in 2019 of 4.5%, capital conservation buffer of	13
2.5%, SIFI requirement of 3%, countercyclical buffer of 1.7% and CET1 component of Pillar II requirement.

Financial results 2019

2020 outlook: We expect net profit in the range of DKK 8-10 bn, equivalent to an ROE of 5-6%

Net interest	We expect net interest income to be lower than the level in 2019, as margin pressure and
income	higher funding costs will more than offset continued volume growth
Net fee	income	Net fee income is expected to be slightly lower than the level in 2019, due to lower
remortgaging activity and subject to customer activity and market developments
Expenses		Expenses are expected to be in the range of DKK 28-29 bn, driven by acceleration of
	investments of up to DKK 2 billion and a continued increase in compliance costs
Impairments	Loan impairments are expected to be higher
Net profit		We expect net profit to be in the range of DKK 8-10 bn (equivalent to 5-6% ROE as
	communicated on 1 November 2019)
Financial		We maintain our ambition for ROE of 9-10% in 2023
target

Note: This guidance is subject to uncertainty and depends on economic conditions, including developments in monetary policy at central banks.

14

Financial results 2019

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15

Financial results 2019

Appendix

01.	Business units	17
02.	Credit quality	24
03.	Macro and portfolio reviews	26
04.	Funding, liquidity and ratings	29
05.	Tax and one-off items	32
06.	ROE bridge and assumptions	34
07.	Contact details	36

16

Financial results 2019

Banking DK: Lending growth of 1% y/y; higher expenses and impairments

Income statement and key figures (DKK m)

	2019	2018	Index Q4 2019 Q3 2019	Index
Net interest income	9,111	9,622	95	2,231	2,251	99
Net fee income	4,397	4,363	101	1,209	1,235	98
Net trading income	1,176	948	124	318	288	110
Other income	227	237	96	53	59	90
Total income	14,912	15,170	98	3,812	3,834	99
Expenses	8,736	7,831	112	2,523	2,070	122
Profit before loan impairment charges	6,176	7,339	84	1,289	1,764	73
Loan impairment charges	-342	-798	-	-261	-109	-
Profit before tax	6,518	8,137	80	1,549	1,873	83
Lending (DKK bn)	944	938	101	944	949	99
Deposits and RD funding* (DKK bn)	1,162	1,124	103	1,162	1,157	100
Deposits (DKK bn)	358	330	108	358	348	103

Key points

Y/Y

• Total income down 2%
• Expenses up 12% owing mainly to investments in AML activities
• Lower impairment reversals due to model adjustment and changed macro outlook
• Lending up 1%, deposits up 8%

Q/Q

• NII down 1% due to margin pressure
• Expenses up 22% due to compliance
• Lending down due to fair value adjustments, nominal lending flat

Banking DK NII bridge** (DKK m)

Realkredit Danmark lending spread (bp)

								Retail	Commercial
2,251	7						85	83
									81
										80
		44				2,231	80
				3
				22
			2
						75	74
										72	72
							0
Q3 2019	Lending	Lending	Deposit	Deposit	Other*** Q4 2019	Q418	Q119	Q219	Q319	Q419
	volume	margin	volume	margin

* Before the elimination of the Group's holding of own covered bonds. ** Based on average volumes. *** Includes capital costs, day effect and off-balance-sheet items.

17

Financial results 2019

Banking Nordic: Headwind from lower margins, higher expenses and impairments despite lending growth of 5% y/y

Income statement and key figures (DKK m)

		2019	2018	Index Q4 2019 Q3 2019	Index
	Net interest income	7,839	8,183	96	1,992	1,959	102
	Net fee income	1,857	1,875	99	479	470	102
	Net trading income	280	323	87	72	61	118
	Other income	592	649	91	136	133	102
	Total income	10,567	11,029	96	2,678	2,623	102
	Expenses	6,269	5,324	118	1,757	1,480	119
	Profit before loan impairment charges	4,298	5,706	75	921	1,143	81
	Loan impairment charges	510	-161	-	511	86	-
	Profit before tax	3,788	5,867	65	410	1,058	39
	Lending (DKK bn)	635	605	105	635	626	101
	Deposits (DKK bn)	271	246	110	271	258	105

Key points

Y/Y

• NII down 4% as higher interest rates and funding costs put pressure on margins
• Expenses up 18% due mainly to investments in compliance and AML
• Lending up 5% with growth in Norway

and Commercial Finland

Q/Q

• NII up 2% as repricing more than offset pressure from higher rates
• Expenses up 19% due to seasonality and a one-off portfolio adjustment
• Lending up 1%

Banking Nordic NII bridge* (DKK m)

Banking Nordic margins (bp)

								Lending	Deposit	Weighted avg.
						1,992	120
									105	105
										104
1,959					35		100	95
6								89	89
								88
	27		6			90
		14
		1				50
									51	53
										48
							0
Q3	Lending Lending Deposit Deposit	FX	Other**	Q4	Q418	Q119	Q219	Q319	Q419
2019	volume	margin volume	margin	effect		2019
* Based on average volumes. ** Includes capital costs, day effect and off-balance-sheet items.						18

Financial results 2019

Lending growth: Growth of 1% y/y at Banking DK and 5% at Banking Nordic

Comments

Banking DK

• 82% of lending at Banking DK is at mortgage credit subsidiary Realkredit Danmark (RD)
• Growth of 1% y/y at Banking DK
• Lending down 1% q/q due to fair value adjustments; flat development in nominal lending

Banking Nordic

• Growth of 5% y/y on reported basis and in local currency
• Retail Norway saw lending growth of 18% y/y following inflow from TEKNA (union for engineers)
• Commercial Finland grew 2% q/q while Retail Finland was stable

Lending volume by segment at Banking DK (DKK bn)

Retail RD	Retail non-RD
Commercial RD	Commercial non-RD

938	941	946	949	944
				82% of
				lending
				is at RD
Q418	Q119	Q219	Q319	Q419

* Based on local currency lending volumes.

Banking Nordic: lending volume by segment and country*

Finland retail			Sweden commercial
Finland commercial				Norway retail
Sweden retail				Norway commercial

120
115
110
105
100
95
Q318	Q418	Q119	Q219	Q319	Q419
					19

Financial results 2019

Corporates & Institutions: Challenging market conditions, goodwill impairment and higher impairment charges

Income statement and key figures (DKK m)

		2019	2018	Index Q4 2019 Q3 2019	Index
	Net interest income	3,656	3,928	93	985	885	111
	Net fee income	2,909	2,914	100	836	673	124
	Net trading income	2,114	2,440	87	586	182	-
	Other income	8	7	114	7	-	-
	Total income	8,688	9,289	94	2,413	1,739	139
	Expenses	4,834	4,689	103	1,318	1,128	117
	Goodwill impairment charges	803	-	-	803	-	-
	Profit before loan impairment charges	3,051	4,600	66	292	612	48
	Loan impairment charges	1,348	278	-	459	369	124
	Profit before tax	1,703	4,322	39	-167	243	-
	Profit before tax and goodwill	2,506	4,322	58	637	243	262
	Lending (DKK bn)	209	198	105	209	210	99
	Deposits (DKK bn)	271	261	104	271	262	103

Key points

Y/Y

• NII down 2% adjusted for portfolio transfers
• Expenses up 3%, driven by compliance
• Trading income affected by xVA

Q/Q

• Trading income improved from a weak Q3, driven by Danish fixed income
• Expenses up 17%, driven primarily by compliance costs
• Impairments driven by portfolio review, affecting mainly shipping, oil & gas

C&I NII bridge* (DKK m)

			985
			53
			1
			35
885	14	0	1

Q3 Lending Lending Deposit Deposit	FX	Other** Q4
2019 volume margin volume margin	effect	2019

C&I income breakdown (DKK m)

FI&C Capital Markets General Banking

	2,536			2,413
2,093
	1,999		688
		1,739
			287	499
			309
			1,143	1,227
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

* Based on average volumes. ** Includes capital costs, day effect and off-balance-sheet items.

20

Financial results 2019

Wealth Management: Profit before tax up 39% due mainly to gain on the sale of Danica Pension Sweden; AuM up 5% y/y

Income statement and key figures (DKK m)

		2019	2018	Index Q4 2019 Q3 2019	Index
	Net interest income	-248	-167	-	-75	-69	-
	Net fee income	6,596	6,119	108	1,658	1,694	98
	Net trading income	-117	-50	-	111	110	101
	Other income	1,167	-197	-	-6	-120	-
	Total income	7,398	5,705	130	1,688	1,615	105
	Expenses	3,589	3,545	101	879	784	112
	Goodwill impairment charges	800	-		800	-	-
	Profit before tax	3,009	2,161	139	9	831	1
	Profit before tax and goodwill	3,809	2,161	176	809	831	97
	AuM (DKK bn)	1,651	1,575	105	1,651	1,610	103

Key points

Y/Y

• Fee income up 8%, driven by inclusion of SEB Pension Danmark
• Expenses up 1% due mainly to the acquisition of SEB Pension Danmark
• AuM up 5%. Danica Pension Sweden

(DKK 64 bn in AuM) was sold in Q2

Q/Q

• Fees down 2% owing to higher fees from Tidspension in Q3; performance fees of DKK 358 m in Q4
• Expenses up 12% due mainly to consultancy costs

AuM breakdown (DKK bn)		Breakdown of net fee income (DKK m)
	Life conventional	Asset management	Assets under advice*	Performance fees		Risk allowance fees	Management fees

1,575	1,642	1,587	1,610	1,651
			210	209
				953
			951	489
			450
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

1,864	1,659		1,694		1,658
	1,584	4
			409	358
					334
			1,281		966
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

* Assets under advice from retail, commercial and private banking customers, where the investment decision is taken by the customer.

21

Financial results 2019

Northern Ireland: Lending and NII up y/y despite continued Brexit uncertainty

Income statement and key figures (DKK m)									Key points
	2019	2018	Index Q4 2019 Q3 2019	Index		Y/Y
Net interest income	1,524	1,491	102		391	368	106		• Lending and NII up despite continued
Net fee income	363	392	93		89	86	103
		Brexit uncertainty
Net trading income	110	82	134		-3	43	-
		• Expenses up 1% as continued cost focus
Other income	14	12	117		3	4	75		was offset by investments in improved
Total income	2,011	1,978	102		480	500	96		customer solutions
Expenses	1,216	1,207	101		344	277	124
Profit before loan impairment charges	794	770	103		136	222	61		Q/Q
Loan impairment charges	5	26	19		-5	-4	-		• Expenses up due to strengthening GBP
Profit before tax	789	744	106		141	226	62
Lending (DKK bn)	54	50	109		54	53	103
Deposits (DKK bn)	71	63	113		71	67	106

Northern Ireland NII bridge* (DKK m)	FX-adjusted developments y/y
		Reported		Local currency

			7	391
			21
368	2		7
4	4

Q3	Lending	Lending	Deposit	Deposit FX effect Other**	Q4
2019	volume	margin	volume	margin	2019

			13%
		9%	7%
6%
4%
	3%
Profit before	Loan growth	Deposit growth
tax growth

* Based on average volumes. ** Includes capital costs, day effect and off-balance-sheet items.

22

Financial results 2019

Non-core: Estonia and Russia now exited; sale of Lithuanian and Latvian portfolios expected to finalise in the first half of 2020

Non-core loan portfolio, Q4 2019 (DKK bn)

Non-core REA* (DKK bn)

Allowance account				Non-core conduits etc.
Non-performing credit exposure			Non-core banking
Performing credit exposure		11
					12	12
					3	3	10
					2	9
	4		4					2	8
								2
		2			9	9	9	7
1									5
Retail	Commercial	Public	Conduits etc.	Total	Q4 2018	Q1 2019	Q2 2019	28	27
Q3 2019	Q4 2019
customers	customers	institutions

* At 1 February 2019, the Russian exposure and the remaining part of the Baltic exposure were transferred to Non-core.

23

Financial results 2019

Credit quality: NPLs increased 16% y/y driven by single names at Corporates & Institutions

Breakdown of core allowance account under IFRS 9 (DKK bn)

Core allowance account by business unit (DKK bn)

Stage 1

Stage 2

Stage 3

20.4	20.4	19.8	20.0	20.5
13.4	13.3	12.8	13.1	13.2
5.4	5.4	5.7	5.6	5.9
1.6	1.7	1.3	1.3	1.3
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

Banking DK

Corporates & Institutions

Other

Banking Nordic Northern Ireland

20.4	20.4	19.8	0.7	20.0	0.7	20.5	0.7
		2.8	3.3	3.7
		3.9		3.9		4.3
		12.4		12.1		11.7
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

Breakdown of stage 2 allowance account and exposure (DKK bn)

	End-Q4 2019	Allowance	Gross credit	Allowance as
	account	exposure	% of exposure
	Retail customers	2.1	964.9
	0.22%
	Agriculture	1.1	74.0	1.49%
	Commercial property	0.7	317.8	0.21%
	Shipping, oil & gas	0.2	60.1	0.36%
	Services	0.2	59.9	0.26%
	Other	1.6	987.6	0.16%
	Total	5.9	2,464.3	0.24%

Gross non-performing loans* (DKK bn)

Individual allowance account	Net exposure in default
Net exposure not in default

	31.2	31.1	32.2	34.7
29.9
	13.0	12.4	12.9	13.4
13.0
9.6	11.2	11.7	12.2	12.0
7.3	7.0	6.9	7.2	9.4
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

* Non-performing loans are loans in stage 3 against which significant impairments have been made.	24

Financial results 2019

Credit exposure: Limited agriculture and directly oil-related exposure

Agriculture exposure (3.0% of Group exposure)

• Pork prices continued their upturn and rose 12% q/q and reached DKK 13.3 per kg at the end of Q4, while milk prices remained stable. We have reduced management overlays due to the improved outlook
• We reversed impairments of DKK 139 m. Total accumulated impairments amounted to DKK 2.9 bn, of which DKK 1.2 bn in stages 1 and 2
• Realkredit Danmark represented 53% of total gross exposure and 23% of expected creditlosses
• • LTV limit at origination of 60% at RealkreditDanmark

Agriculture by segment, Q4 2019 (DKK millions)

Oil-relatedexposure (0.9% of Group exposure)

• Net exposure increase to DKK 22.2 bn from DKK 18.8 bn* in Q3 2019 driven by a reclassification of exposures which resulted in a DKK 5.0 bn increase in net exposure and a DKK 0.5 bn increase in ECL against highly collateralised customers in the offshore segment; collateral increased DKK 4.8 bn
• Oil-relatedcustomers accounted for a significant share of the impairment expense of DKK 0.5 bn at Corporates & Institutions in Q4. This was largely driven by two customers in the offshore rigs segment
• Most of the oil-related exposure is managed by specialist teams for customer relationship and credit management at Corporates & Institutions
• Accumulated impairments increased to DKK 2.2 bn, of which DKK 0.1 bn in stages 1 and 2

Oil-related exposure, Q4 2019 (DKK millions)

* The credit exposure is reported as part of the Shipping, Oil & Gas industry in our Financial Report.	25

Financial results 2019

Nordic macroeconomics

Real GDP, constant prices (index 2005 = 100)

2005

2007

2009

2011

2013

2015

2017

2019

Interest rates, leading (%)

2005	2007	2009	2011	2013	2015	2017	2019

Denmark		Sweden		Norway		Finland		EU

Inflation (%)

2005	2007	2009	2011	2013	2015	2017	2019

Unemployment (%)

2005

2007

2009

2011

2013

2015

2017

2019

26

Financial results 2019

Nordic housing markets

Property prices (index 2005 = 100)

2005

2007

2009

2011

2013

2015

2017

2019

Apartment prices (index 2005 = 100)

2005

2007

2009

2011

2013

2015

2017

2019

Denmark	Sweden	Norway	Finland
House prices/nom. GDP (index 2005 = 100)
2005	2007	2009	2011	2013	2015	2017	2019
Apartment prices/nom. GDP (index 2005 = 100)

2005

2007

2009

2011

2013

2015

2017

2019

27

Financial results 2019

Realkredit Danmark: Portfolio overview

78% of new retail lending in Q4 was fixed-rate vs 43% of stock

Portfolio facts, Realkredit Danmark, Q4 2019

• Approx. 351,000 loans (residential and commercial)
•	1,314 loans in 3- and 6-month arrears (+2% since Q3)
•	16 repossessed properties (lowest in recent times)

Retail loans, Realkredit Danmark, Q4 2019 (%)

Fixed rate (10 yrs-30 yrs)		Interest-only (up to 10 yrs)
Variable rate (6m-10 yrs)		Repayment

• DKK 9 bn in loans with LTV ratio >100%, including
	DKK 6 bn covered by a public guarantee
•	Average LTV ratio of 60%
•	We comply with all five requirements of the supervisory
	diamond for Danish mortgage credit institutions

LTV ratio limit at origination (legal requirement)

• Residential: 80%
• Commercial: 60%

43%	47%
57%	53%

Stock of loans (DKK 447 bn)

45%

78%

55%

22%

New lending (DKK 35 bn)

Total RD loan portfolio of FlexLån® F1-F4(DKK bn)

Retail mortgage margins, LTV of 80%, owner-occupied (bp)

Adjustable rate1

-50%

208	201	192	188
			165	153	144	142
				124
							104

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

111	106	86
		68
1-2 yrs 3-4 yrs	5 yrs+	Fixed
			rate

143	138	118
		101
1-2 yrs 3-4 yrs 5 yrs+ Fixed
			rate

2015	2016	2017	2018	2019	With amortisation

Interest-only

1 In addition, we charge 30 bp of the bond price for refinancing of 1- and 2-year floaters and 20 bp for floaters of 3 or more years (booked as net trading income).

28

Financial results 2019

Funding and liquidity: DKK 100 bn of long-term funding and capital instruments issued in 2019; LCR compliant at 140%

Changes in funding,* 2019-2020(DKK bn and bp)

Cov. bonds Senior Non-preferred senior

167bp

Long-term funding excl. RD (DKK bn)**

Funding plan
Completed	100
85	70-90
67	69

27bp
	41bp
37	29

58bp
	28bp	9bp	60
35	22	26
	42bp
			2

Redemptions 2020:	Redeemed 2019:	New 2019:
DKK 66 bn	DKK 57 bn	DKK 88 bn

2016

2017

2018

2019

2020E

Maturing funding,* 2021-2023(DKK bn and bp)

Liquidity coverage ratio (%)

Cov. bonds Senior Non-preferred senior

29bp		26bp								134	140
								130	129
64bp				14bp			121
		184bp			66bp
42		41
	28bp
			28	68bp						100
24	104bp		22	21
	7		14		9
2021: DKK 73 bn	2022: DKK 77 bn	2023: DKK 58 bn	Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019

* Spread over 3M EURIBOR.
** Includes covered bonds excl. RD, senior, non-preferred senior and capital instruments.	29

Financial results 2019

Funding structure and sources: Danish mortgage system is fully pass-through

Loan portfolio and long-term funding, Q4 2019 (DKK bn)

		2,107
		162	Senior &
		NPS bonds
	1,821
Bank loans	638	963	Deposits
Bank mortgages	378
		177	Covered bonds
RD mortgages	805	805	Issued RD bonds
	Loans	Funding

Funding sources (%)

Q3 2019

Q4 2019

61 63

			15 15
8		10 10		10 11
6
	1	1	1	2
		-7-7

Deposits	CD &	Repos, Deposits Senior Covered Subord. Equity
credit	CP	net	& NPS bonds debt
inst.
Short-term funding	Long-term funding

30

Financial results 2019

Three distinct methods for rating banks

Rating methodology

Danske Bank's rating

Anchor

Extra-

Additional

Issuer

+

1

+

2

+

3

+

4

=

SACP

=

ordinary

+

ALAC

+

=

SACP1

support

factors

rating

bbb+

+1

+1

-1

0

a-

0

+2

-1

A

(Stable)

1=Business Position, 2=Capital & Earnings, 3=Risk Position, 4=Funding & Liquidity

Macro

Quali-

Affiliate

Gov.

Issuer

+

1

+

2

+

3

+

4

+

5

+

tative

=

BCA2

+

+

LGF3

+

=

profile

support

support

rating

factors

Strong

baa1

a1

b1

ba1

baa2

0

baa2

0

+1

+1

A3

Plus

(Stable)

1=Asset Risk, 2=Capital, 3=Profitability, 4=Funding Structure, 5=Liquid resources

Operating

Viability

Support

Issuer

+

1

+

2

+

3

+

4

+

5

+

6

+

7

=

Rating

=

environment

Rating

rating4

Floor

aa-	a+	a	a+	a	a	a	a+	a	No Floor	A
(Negative)
1=Company Profile, 2=Management/Strategy, 3=Risk Appetite, 4=Asset Quality, 5=Profitability, 6=Capitalisation, 7=Funding/Liquidity

1 Stand-Alone Credit Profile. 2 Baseline Credit Assessment. 3 Loss Given Failure. 4 Issuer rating is the higher of the Viability Rating and Support Rating Floor.

31

Financial results 2019

Tax

Actual and adjusted tax rates (DKK millions)

		2019 Q4 2019 Q3 2019 Q2 2019 Q1 2019
	Profit before tax	13,822	1,261	3,793	4,757	4,012
	Permanent non-taxable difference	-856	1,089	-255	-1,853	164
	Adjusted pre-tax profit, Group	12,966	2,349	3,538	2,904	4,176
	Tax according to P&L	-1,249	-3,780	782	725	1,024
	One-offs:
	Taxable income from leaving IJT-scheme	-576	-576
	Release of provision for recapture of tax
	losses under IJT	5,806	5,806
	Provision for deferred tax adjustments on
	assets and liabilities measured at amortised
	cost	-1,096	-1,096
	Taxes from previous years	96	232	6	-65	-77
	Adjusted tax	2,980	585	787	661	947
	Tax P&L excl. one-offs	2,884	353
	Adjusted tax rate	23.0%	24.9%	22.3%	22.7%	22.7%
	Actual-/Effective tax rate	-9.0%	-299.9%	20.6%	15.2%	25.5%
	Actual/-effective tax rate exclusive one-offs
	& prior year regulations	21.6%	46.4%

Tax drivers, Q4 2019

• The actual tax rate of 21.6% (excl. one-offs and prior-year regulations) is lower than the Danish rate of 22%, due primarily to the permanent non-taxable difference
• The permanent non-taxable difference derives mainly from the tax exempt sales of Danica Pension Sweden and LR Realkredit A/S more than outweighing the non-deductible goodwill impairment charges
• The adjusted tax rate of 23.0% is higher than the Danish tax rate of 22% due to income in countries with a higher tax rate
  - primarily Norway

32

Financial results 2019

Significant net positive extraordinary items in 2019

One-off items in 2019 (DKK millions)

Q	Item	Impact	P&L line affected
(DKKm)
Q1	Change in VA add-on to discount curve at Danica	-140	Net trading income
Non-core value adjustment	-300	Profit before tax, Non-core
	Sale of Danica Pension Sweden	1,300	Other income
Q2	Flexinvest Fri compensation (fees)	-180	Net fee income
Flexinvest Fri compensation (costs)	-220	Operating expenses
	Non-core VAT adjustment	200	Profit before tax, Non-core
	Sale of LR Realkredit A/S	767	Net trading income
	Goodwill impairment charges, Corporates & Institutions	-803	Goodwill impairment charges
	Goodwill impairment charges, Danica Pension	-800	Goodwill impairment charges
	Depreciation of intangible assets	-355	Operating expenses
	Operational risk-related losses	-419	Operating expenses
Q4	Transformation costs	-279	Operating expenses
	Portfolio adjustments	-214	Operating expenses
	Extraordinary loan impairment charges	-450	Loan impairment charges
	Non-core value adjustment	-110	Profit before tax, Non-core
	Exit from International Joint Taxation scheme	5,230	Tax
	Provision for deferred tax	-1,096	Tax

33

Financial results 2019

ROE ambition of 9-10% in 2023** with unchanged rates and FX following significant investments expected to peak in 2020

Change in ROE (%, after tax, subject to roundings)

Gross cost take out of
approximately DKK ~5bn
compared to 2019 plus ~2.5bn	1-1.5%
non-recurring costs in 2020
~2%	9-10%

			Investments of DKK 1.5-		0.5-1%
~7.5%			2 bn in 2020 driving our
			2023 ambition
	~0.5%
	0-0.5%				2.5-3%
		~0.5%
				0.5-1%	5-6%
9M 2019*	Operational	Impairments	AML/	Investments	2020E	Cost	AML/	Income	Macro &	2023
	effects		Estonia			initiatives	Estonia	growth	regulatory	ambition

Dividend policy unchanged at 40-60%

CET1 target above 16% in the short term

* Based on actual first 9M 2019E ROE adjusted for one-off items.	34
** For assumptions, please see appendix page 35

Financial results 2019

Underlying assumptions behind 19'-23' RoE development

Comments 9M 2019 to 2020

• Operational effects in 2020 include
• • Lending growth which is more than offset by overhang from funding issued in 2019 and new funding issued in 2020 at unchanged spreads
  • No improvement in financial market conditions
  • Increase in nominal equity
• Impairments in 2020 include a step towards normalisation
• AML costs expected to rise and peak in 2020, principally driven by FTE increase (see separate slide)
• Investments into IT and business capabilities and continued cost efficiencies to achieve 2023 ambition

Comments 2020 to 2023

• Cost initiatives to reduce current gross cost level, driven mainly by significant cost efficiency measures (see separate slide)
• Steady state AML-related costs of DKK 1.1-1.3 bn in 2023E, following significant investment programme expected to peak in 2020E (see separate slide)
• Income initiatives driven by both NII and non-NII (see separate slide): unchanged interest rates and FX rates assumed
• • Loan growth with unchanged dynamics in all markets
  • Increased AuM and improved cross-selling

Comments 2020 to 2023 (continued)

• • Balance sheet optimisation Group-wide driven by Treasury
  • Improved financial markets conditions
  • Increased lending gives higher funding need at unchanged spread
• Macro and regulatory effects include:
• • Normalisation of impairment level to around 10 basis points in 2023 and wind-down of Non-core business
  • Cost increase due to wages etc. of 2.5% annually
  • Capital and funding impact driven mainly by regulatory effects (MREL, Basel IV) and higher equity in 2023
  • • Continued refinancing into MREL-eligible instruments at unchanged spread
    • Capital impact driven mainly by higher nominal equity in 2023 due to regulatory effects (incl. Basel IV)
    • Dividend policy unchanged at 40-60%
    • CET1 target above 16% in the short term
    • We assume higher REA driven by growth and new regulatory requirements

35

Financial results 2019

Contacts

Claus Ingar Jensen	Direct - [phone]
Mobile - [phone]
Head of IR
[e-mail]
John Bäckman	Direct - [phone]
Mobile - [phone]
Chief IR Officer
[e-mail]
Heidi Birgitte Nielsen	Direct - [phone]
Mobile - [phone]
Chief IR Officer
[e-mail]

Robin Hjelgaard Løfgren	Direct - [phone]
Mobile - [phone]
Chief IR Officer	[e-mail]

36

Financial results 2019

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 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.

37