DNB : Presentation 3Q20

Results DNB Group	Q3
Third quarter 2020
Kjerstin R. Braathen (CEO)
Ottar Ertzeid (CFO)

22 October 2020

Positive development with higher activity than expected

Profit for the period

NOK billion, trailing 12-month figures

32.0 31.7 34.2 34.5 33.3

26.6 25.7

22.1 21.0 20.5

3Q19 4Q19 1Q20 2Q20 3Q20

Pre-tax operating profit before impairment provisions Profit for the period

Return on equity of 9.5 per cent in 3Q20

Healthy loan growth in the personal customers and SME1) segments, strong other operating income and reduced impairment provisions

Net interest income down 1.6 and 6.9 per cent from 2Q20 and 3Q19, respectively

The reduction from 2Q20 is mainly driven by currency effects

Net commissions and fees down 1.0 per cent compared with 2Q20, up 2.1 per cent from 3Q19

Solid growth in all areas except money transfer and banking services

Net impairment provisions of NOK 0.8 billion

Impairment provisions mainly in the oil, gas and offshore segment - partly offset by reversals in the personal customers segment

CET1 capital ratio2) up 70 basis points to 18.9 per cent from 2Q20 Allocated DPS3) of NOK 9 for 2019 and 50 per cent of profit for 2020 are not included in the CET1 capital ratio

1)	SME: Small and medium-sized enterprises.
2)	CET1: Common equity Tier 1.	2
3)	DPS: Dividend per share.

The Norwegian economy continues to recover

• The immediate recovery of the Norwegian economy progressed at a rapid pace, but the pace is expected to slow down going forward
• A key policy rate at zero per cent has led to a strong boost in liquidity for most households, further boosting the recovery
• Housing prices rose 0.3 per cent in August and 1.3 per cent in September, adjusted for seasonal effects, and are 5.8 per cent higher than in 3Q19
• Registered unemployment has come down by close to two thirds since peaking in April, and is now at 3.7 per cent

		Mainland real GDP growth									Key policy rate			Registered unemployment
				YoY, per cent													Per cent			Full-time unemployment, per cent
										3.5	3.2	1.50		10.4
						2.4
						(3.9)											4.8
																0.57
																				3.7	3.3
																				3.7
																				2.3
2013	2014	2015	2016	2017	2018	2019	2020e	2021e	2022e		2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e		10 Mar. 24 Mar. 21 Apr. 5 May 19 May 2 June 16 June 30 June 18 Aug. 1 Sep. 15 Sep. 29 Sep. 2021e 2022e 2023e
Sources: DNB Markets, Norges Bank, NAV (the Norwegian Labour and Welfare Administration).				3

The spread of the virus remains well contained in Norway, and there is ample fiscal room to manoeuvre if necessary

• In line with other Western countries, Norway has experienced an increase in new COVID-19 cases
• • Most outbreaks have been limited to local areas and have been successfully contained and managed
• Expected use of the Norwegian oil fund in the national budget for 2020 is 3.9 per cent and 3.0 per cent for 20211), leaving room for further measures
• • Current cost impact related to the pandemic in the Government budget for 2020 is estimated to be approximately NOK 192 billion2)

						COVID-19 cases									Flexible fiscal room to manoeuvre
		14-day cumulative number of cases per 100 000 persons								Norway's oil fund, NOK billion
										318	329	415		10 000												5 000
								312			8 000												4 000
														6 000												3 000
						98	147					4 000												2 000
		79	85								2 000												1 000
37
														0													0
Norway	Germany	Sweden			Denmark	Italy		Spain	Iceland	UK	France			2015	2016	2017	2018		2019	2020e		2021e
					As of 1 August			As of 19 October							Market value of the fund (lhs)			Transfer from the fund (rhs)
1) The fiscal rule states that transfers over time from the Norwegian Government Pension Fund Global (the oil fund) to the annual national budget should not be higher than the
expected real return of the fund, estimated to 3 per cent p.a. (reduced from 4 per cent in 2017).
2) Unadjusted deficit in the Government budget for 2020 is estimated to be NOK 433 billion, compared with NOK 241 billion in the revised budget.				4
Sources: The Norwegian Institute of Public Health (FHI), DNB Markets, Norwegian Ministry of Finance, European Centre for Disease Prevention and Control.

Personal customers - strong growth in loans and savings

Pre-tax operating profit

NOK million

2 537	2 347
2 242

3Q19

2Q20

3Q20

Before impairment provisions

1) Source: Norwegian Fund and Asset Management Association.

Highlights in the quarter

• Loans to customers up 1.4 per cent from 30 June 2020
• Reversals of impairment provisions reflecting the robust portfolio
• Increased sales of mutual funds and assets under management - relaunched the campaign #huninvesterer (#girlsinvest) with focus on pension savings

Strong development in savings

				461
435
32.5				34.8
30 Sept. 2019	31 Dec. 2019	31 March 2020	30 June 2020	30 Sept. 2020
Deposits from customers (NOK billion)	Market shares in mutual funds (per cent)1)

5

Corporate customers - stable revenues despite COVID-19 effects

Pre-tax operating profit

NOK million

3 842

3 760

2 587

3Q19

2Q20

3Q20

Before impairment provisions

Highlights in the quarter

• High capital markets activity
• Sound asset quality and lower impairment provisions in the portfolio except for offshore
• Increase in profitable lending to small and medium-sized enterprises (SME)

Lending growth combined with increased spreads in SME

				351
327
2.44				2.59
3Q19	4Q19	1Q20	2Q20	3Q20
	Average loans (NOK billion)	Lending spreads (per cent)

6

Increased loans to personal and SME customers and growth in deposits

• Loan growth in the quarter was 0.6 per cent (0.7 per cent currency adjusted)
• • Personal customers: 1.4 per cent, small and medium-sized enterprises: 1.8 per cent, large corporates: -1.8 per cent
• Deposit growth in the quarter was 2.6 per cent (2.7 per cent currency adjusted)
• Loan and deposit volumes at quarter-end were 2.0 and 1.7 per cent above average volumes, respectively

Loans per customer segment		Average loans and deposits in the customer segments
NOK billion		NOK billion

793	795	800	811	802	800
768
			764
Personal customers	Corporate customers

	1 500	1 524	1 536	1 554	1 570	1 591	1 571
1 476

					1 065	1 081
927	927	941	956	974	994

4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20

30 Sept. 2019

31 Dec. 2019

30 June 2020

30 Sept. 2020

Performing loans

Deposits

Of which growth from year-end 2019 due to currency effects1)

7

1) Currency effects from year-end 2019: NOK 34 billion as at 30 June and NOK 32 billion as at 30 September.

Net interest margin affected by lower interest rates

• Norges Bank reduced the key policy rate from 1.50 to 0.25 per cent in March and to 0 per cent in May
• A small decrease in weighted spreads from 2Q20 due to portfolio mix effects:
• • Increased deposits to loan ratio
  • Personal customers segment becoming a larger part of the total

		Net interest margin1)						Spreads in customer segments
			Per cent									Per cent
									1.92	1.90	1.85			1.94	2.14	2.08
									1.80	1.80
				1.61	1.62
1.57	1.54	1.55	1.58				1.31	1.32	1.32	1.32	1.34	1.38
					1.25	1.23
						1.42	1.38							0.62
												0.55	0.49
									0.36	0.39	0.46
																(0.07)	(0.00)
4Q18	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20	3Q20	4Q18	1Q19	2Q19	3Q19	4Q19	1Q20	2Q20	3Q20
												Lending spreads
												Deposit spreads
1) Total net interest income relative to average loans and deposits in the customer segments.				Combined spreads - weighted average		8

Net interest income affected by exchange rate movements

• Average volumes negatively affected by exchange rate movements - reduced net interest income
• Overall stable spreads from 2Q20 - full effect of customer repricing reflected

Net interest income from 2Q20 to 3Q20

NOK million

9

Income from commissions and fees - strong performance despite COVID-19

Commissions and fees

NOK million

2 323	2 396	2 372
295	347	347
408	547	436
372	398	424
193
233	222
474	355
277
581	594	588
3Q19	2Q20	3Q20

Real estate broking

High activity in seasonally slow quarter, income up 18 per cent from 3Q19

Investment banking services

High activity in the capital markets, income up 7 per cent from 3Q19 - strong pipeline

Asset management and custodial services

Increased asset values and net inflow, gaining market shares in mutual funds - income up 14 per cent from 3Q19

Guarantee commissions

Up 15 per cent from 3Q19

Money transfer and banking services

Still affected by low international travel activity, down 25 per cent from 3Q19 - positive development from 2Q20, up 28 per cent

Sale of insurance products

1 per cent increase from 3Q19

10

Stable nominal expenses

• The banking services agreement with Posten Norge (the Norwegian postal service) terminated
• Level of activity in the quarter affected by COVID-19

Operating expenses from 2Q20 to 3Q20

NOK million

1)

1) The scheme is partly hedged, a reduced gain of NOK 74 million recognised in mark-to-market adjustments in net gains on financial instruments.

11

Impairment provisions mainly within the oil, gas and offshore segment

• Reversals of impairment provisions in the personal customers segment reflected the robust portfolio and a more positive development than expected
• Individual impairment provisions in the oil, gas and offshore segment, partly offset by reversals in stages 1 and 2

Impairment of financial instruments

per industry segment

NOK million

	3Q20	2Q20	1Q20
Total	(776)	(2 120)	(5 771)
Of which:
Personal customers
- Stages 1 and 2	380	24	(405)
- Stage 3	(20)	(67)	(117)
Corporate customers*)
- Stages 1 and 2	636	558	(2 403)
- Stage 3	(1 773)	(2 636)	(2 847)
*) Of which oil, gas and offshore:
- Stages 1 and 2	294	861	(1 050)
- Stage 3	(1 331)	(2 724)	(1 555)

Maximum exposure (on- and off-balance sheet items),

net of accumulated impairment provisions

Stage 1	Stage 2	Stage 3
NOK 2 109 billion	NOK 220 billion	NOK 30 billion
(+6)	(+15)	(0)

89.4%9.3%

1.3%

12

Increased CET1 capital ratio and leverage ratio

• All-timehigh CET1 capital ratio and comfortable headroom to regulatory expectations
• Allocated dividend per share of NOK 9 for 2019 and 50 per cent of profit for 2020 are not included in the CET1 capital ratio

	CET1 capital ratio				Leverage ratio
	Per cent				Per cent
18.3	18.9
18.2					7.1	6.9
						6.8
	15.7	1)			6.0	2)
			14.7
				2)

30 Sept. 2019

30 June 2020

30 Sept. 2020

30 Sept. 2019

30 June 2020

30 Sept. 2020

1)	Supervisory authorities' expectation.	13
2)	Requirement.

Strong development in CET1 capital ratio

• Retained profit contributing with approximately 30 basis points in the quarter
• Positive counterparty risk and other foreign exchange effects from stronger NOK

Development in CET1 capital ratio from 30 June 2020 to 30 September 2020

Per cent

14

Strong underlying operating performance

• Return on equity of 9.5 per cent despite an all-time high equity
• Earnings per share of NOK 8.76 year-to-date
• Tax rate for the full year expected to be 20 per cent in 2020 and 23 per cent in 2021 and 2022

Return on equity				Cost/income ratio				Earnings per share
Per cent				Per cent				NOK
10.9		38.8	40.4	42.5	3.64	3.41
	9.5					3.06
8.7

3Q19

2Q20

3Q20

3Q19

2Q20

3Q20

3Q19

2Q20

3Q20

15

Extraordinary General Meeting to be held on 30 November 2020

Proposed resolutions for the extraordinary General Meeting

New legal structure		Dividends1)		Repurchase of own shares1)
DNB Bank ASA is to become the parent		Authorisation to the Board of Directors		Authorisation to the Board of Directors
company of the DNB Group, through a		to decide on the distribution of dividends		to repurchase up to 4 per cent3) of the
merger with DNB ASA		up to NOK 9 per share for 2019 in 2021		company's share capital
Exchange ratio for shares to be 1:1		The proposed authorisation to apply		The proposed authorisation to apply
		from 1 January 2021 until the AGM2)		from 1 January 2021 until the AGM
		(no longer than until 30 June 2021)		(no longer than until 30 June 2021)

1)	Cash dividends will, in accordance with the dividend policy, be prioritised over repurchases of own shares.
2)	AGM: Annual General Meeting.	16
3)	0.5 per cent to DNB Markets for hedging purposes.

DISCLAIMER

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this presentation may include forward-looking statements, such as statements of future expectations. These statements are based on the management's current views and assumptions, and involve both known and unknown risks and uncertainties.

Although DNB believes that the expectations reflected in any such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

Actual results, performance or events may differ materially from those set out or implied in the forward-looking statements. Important factors that may cause such a difference include, but are not limited to: (i) general economic conditions,

(ii) performance of financial markets, including market volatility and liquidity, (iii) the extent of credit defaults, (iv) interest rate levels, (v) currency exchange rates, (vi) changes in the competitive climate, (vii) changes in laws and regulations, (viii) changes in the policies of central banks and/or foreign governments, or supranational entities.

DNB assumes no obligation to update any forward-looking statement.

This presentation contains alternative performance measures, or non-IFRS financial measures. Definitions and calculations are presented in our quarterly reports.

17

Results DNB Group

Third quarter 2020

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