Danske Bank A/S : Q2-22 Conference call presentation

Financial results - first half 2022

Presentation for Q2 conference call

Carsten Egeriis	Stephan Engels
Chief Executive Officer	Chief Financial Officer

Financial results - first half 2022

H1 highlights - business momentum continues, despite turbulent conditions for rates business. Credit quality remains strong with limited impairments and healthy provisions

Highlights

• Despite the uncertain operating environment, we have

continued to execute on our strategy and support customers,

resulting in continued commercial momentum and underlying

efficiency gains

• Core banking income supported by commercial momentum, and

our resilient business model mitigated the impact from

turbulent financial markets in certain areas of our business

• Fixed income business and certain investment products in

Danica significantly impacted by rapid increase in interest rates

• Macro outlook and geopolitical uncertainty did not affect our

Profit development H1-22 vs H1-21 (DKK m)
7,783	475	58		Danica NO
			2,116
				450				5,854
						23	311
				1,470	502
				-1,020
H1-21	NII	Fee	Trading	Insurance	Other	Expenses	Impairments	H1-22
PBT, core				business				PBT, core

Financial metrics

customers significantly in H1, and loan impairment charges

continued to be low, underpinning the strong credit quality with

limited risky CRE exposures and PMAs in place across sectors

• The outlook for FY 2022 was revised on 10 July on account of

the lower than expected financial markets related income in H1

and based on a modest recovery in H2, subject to financial

markets conditions

7.0

5.2

ROE (%)

1,880

61

1,800

1,810

1,819

-10

Lending (DKK bn)

RD fair value

67.1

60.0

C/I (%)

H1-21	H1-22
18.0
	17.1
CET1 (%)

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Financial results - first half 2022

Business unit progress: Continued progress on our journey towards 2023 ambitions (1/2)

Key financial metrics
YoY	QoQ	Lending*

		100				95	DK	101
					100
DK	99				99
Personal	104				90	SE	103
Customers									101
105				100			103
DK & Nordic				NO
						100
99				101
Nordics
		116		98		FI	100
				100
		Total Income**		NII		Fee + Trading		Lending YoY		Lending QoQ

Key commercial highlights

• PC DK: Momentum in terms of regaining our fair share of the market for bank loans and customer flow continue to improve (15-25% less outflow over the last year)
• PC Nordic: Continued traction on lending in SE and NO, as well as enhanced profitability outlook for NO after extension of partnership agreement
• Despite financial market volatility, investment advisory meetings increased ~10% in Q2 and there is continually inflow into investment agreements
• Continued traction on increasing share of customers onboarded digtally to free up advisory time by digitalising day-to-day banking meetings

Business Customers

YoY

QoQ

			110			105
BC		106				107
		115		95

Total Income

NII

Fee + Trading

Lending*

DK102 100

SE104

	103
NO	97
103
FI	114
114

Lending YoY Lending QoQ

• Solid income uplift driven by both NII and fee
• Good momentum on lending volumes in DK and SE, both in which we captured market share on bank lending during 2022
• Expanded green product offering with the launch of new green loans, available for all business customers, within electric transportation, energy (solar and wind) as well as energy efficient buildings
• Activity through digital channels and self-service continues to increase and new third party solution for expense management implemented

*In local currency and excluding fair-value effects in DK

** Total income adjusted for effects from the sale of DB Luxembourg

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Financial results - first half 2022

Business unit progress: Continued progress on our journey towards 2023 ambitions (2/2)

Keyf inancial metrics (index)

Business highlights

LC&I

Income breakdown (DKKbn)

-1

0

1

2

3

4

5

6

7

8

H1-22

H1-21

Q2-22

Q1-22

NII Fee Trading ex. xVA xVA

Lending General Banking

124

111

Lending YoY

Lending QoQ

• Significant lending growth as we supported customers with credit since access to capital markets funding was limited as well as a successful strategic focus on institutional lending
• Tier 1 LC&I franchise underpinned by number one position in Merger Market M&A league table and number one in Bloomberg league table for arrangers of both sustainability-linked loans and sustainable bonds
• Slowdown in ECM activity and extraordinarily challenging financial markets conditions within fixed income
• Solid investment fee despite lower AuM from financial market turmoil

Danica Pension

H1 22/ H1 21 (DKKbn)

Q2-22/Q1-22 (DKKbn)

Premiums and AuM

•

Underlying business develops positively as more customers choose Danica

H1-22H1-21

Q2-22Q1-22

Pension, yet the financial performance of Danica Pension was negatively

1.3

Premiums,

105

affected by the turbulence in the financial markets in the first half of 2022

0.5

insurance

0.4

contracts

86

•

Negative investment results for life insurance products where Danica Pension

has the investment risk primarily driven by valuation effects

-0.3

-0.1

•

In the health and accident business, the underlying result was positively affected

-0.3

86

-0.8

-0.4

AuM

by a fall in claims of 25% over the last three years and improved recovery rates,

93

driven by preventive efforts. However, the investment result decreased

Result, life

H&A

Result, life

H&A

considerably from the level in the first half of 2021, which included a provision

insurance

insurance

YoY

QoQ

for pension yield tax of DKK 200 million

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Financial results - first half 2022

Income from core banking activities up 2% y-o-y driven by improved NII trend; trading and insurance income significantly impacted by rates; credit quality remain robust

Key points, H122 vs H121

• Net interest income uplift from deposit repricing initiatives implemented during 2021 and contribution from continually improving trend in lending volumes as well as recent rate hikes in Norway, Sweden and N. Ireland
• Fee income remained activity offset lower ECM activity and investment related fees
• Trading & insurance income significantly impacted by the rapidly rising interest rates, e.g. through valuation adjustments
• Stable cost development despite legal costs associated with the Estonia matter and a continually elevated level of remediation costs
• Strong credit quality continue to lead to single-name reversals while macro models and additional PMAs mitigate tail risk

Key points, Q222 vs Q122

• NII up q-o-q benefitting from recent rate hikes, as well as continued lending growth particular for corporate clients
• Fee income lower, driven mainly by seasonality effects (high refinancing in Q1) as well as reduced capital markets and investmentrelated fees
• LC&I trading income and Danica impacted by adverse financial markets with significant impact from our rates business and in the investment result in Danica, as well as valuation adjustments
• Total expenses on par with Q1 despite additional remediation and legal costs, underpinning the progress improving underlying efficiency
• Strong credit quality led to continually low impairments despite added PMAs and additional adjustment of macro models as lending book, including potentially exposed industries, shows negligible impact of current uncertainties

Income statement and key figures (DKK m)

	H1 22	H1 21	Index	Q2 22	Q122	Index
Net interest income	11,440	10,965	104	5,810	5,630	103
Net fee income	6,537	6,595	99	3,157	3,379	93
Net trading income	175	2,291	8	-390	565	-
Net income from insurance business	-38	982	-	-122	84	-
Other income	959	457	210	291	669	43
Total income	19,073	21,291	90	8,746	10,327	85
Expenses	12,793	12,770	100	6,421	6,371	101
Profit before loan impairment charges	6,280	8,521	74	2,325	3,955	59
Loan impairment charges	426	737	58	192	234	82
Profit before tax, core	5,854	7,783	75	2,133	3,721	57
Profit before tax, Non-core	17	17	100	31	-14	-
Profit before tax	5,871	7,801	75	2,164	3,707	58
Tax	1,320	1,869	71	458	862	53
Net profit	4,551	5,932	77	1,705	2,845	60

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