Nordea Bank : Year-end Report Nordea Kredit Realkreditaktieselskab 2021

Copenhagen, 3 February 2022

Nordea Kredit Realkreditaktieselskab - Year-end Report January-December 2021 Company announcement no 12, 2022

Nordea Kredit Realkreditaktieselskab today presented the attached Year-end Report January-December 2021 with the following key points:

• 2021 was a busy year in the housing market, resulting in very high activity level at Nordea Kredit. Thanks to the great effort by colleagues in Nordea Kredit and in the customer units of Nordea more than 40.000 customers have been served with mortgage financing.
• Through the past seven quarters Nordea Kredit's retail market share has continuously increased from 16.2% to 17.1% driven by many new homeowners at Nordea Kredit and growing demand for top-up lending.
• Lending at nominal value grew by 7% in 2021 compared to 3% in 2020. Total lending measured at nominal value increased to DKK 436bn (DKK 409bn) by end of 2021 driven by strong trends within both households and corporate customers.
• Nordea Kredit´s lending increased in all regions in Denmark, and approximately 16% of all loans are issued in areas with average prices per square metre of less than DKK 8,000.
• Nordea's focus on green transition was clearly reflected in Nordea Kredit's lending portfolio. The green mortgage loan offering to corporate customers reached DKK 11bn (DKK 4bn) at end-2021.
• Net interest income and commission income improved by 4% and 8%, respectively following the high lending activity.
• The transfer pricing method applied for sales and distribution fees provided by Nordea Bank has been updated to be in line with the development of OECD guidelines, leading to increased intragroup fees. This is the main explanation for the decrease in Profit before impairment losses of 37% to DKK 1,338m (DKK 2,131m).
• Impairment losses on loans significantly improved and amounted to a net reversal of DKK 82m (loss of DKK 491m) due to a low level of realised loan losses combined with a reversal of model-calculated provisions, reflecting the strong credit quality of the loan portfolio.
• Profit before tax amounted to DKK 1,419m (DKK 1,640m).

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For further information:

Javier Alberto Lopez Garrido, External Communication DK, [phone]

Nordea Kredit Realkreditaktieselskab

Grønjordsvej 10

PO Box 850

DK-2300 København S

nordeakredit.dk

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Year-end Report 2021

Nordea Kredit Realkreditaktieselskab

Financial summary

Key financial figures (DKKm)	2021	2020	Change %	2019
Income statement
Total operating income	2,704	2,739	-1	2,685
Total operating expenses	-1,367	-608	125	-306
Profit before impairment losses on loans and receivables	1,338	2,131	-37	2,379
Impairment losses on loans and receivables	82	-491	-	-6
Profit before tax	1,419	1,640	-13	2,373
Net profit for the year	1,107	1,279	-13	1,850
Balance sheet
Receivables from credit institutions and central banks	48,523	49,948	-3	67,462
Loans and receivables at fair value	432,280	417,553	4	404,998
Loans and receivables at nominal value1	436,116	409,222	7	398,497
Debt to credit institutions and central banks	14,260	4,998	185	5,597
Bonds in issue at fair value	441,234	435,055	1	440,929
Equity	22,311	22,481	-1	22,590
Total assets	481,015	467,936	3	473,277
Ratios and key figures
Return on equity, %	4.9	5.7		8.2
Cost/income ratio	50.5	22.2		11.4
Write-down ratio, basis points	-1.9	11.7		0.1
Common equity tier 1 capital ratio, %	24.7	25.0		24.4
Tier 1 capital ratio, %	24.7	25.0		24.4
Total capital ratio, %	26.6	29.6		27.0
Own funds, DKKm	22,076	24,432		22,803
Tier 1 capital, DKKm	20,526	20,682		20,603
Risk exposure amount, DKKm	83,099	82,626		84,322
Number of employees (full-time equivalents)2	118	116		119

1 After adjustment for provisions for loan losses.

2 End of year.

High business momentum

2021 was a busy year in the housing market, resulting in very high activity level at Nordea Kredit. Thanks to the great effort by colleagues in Nordea Kredit and in the customer units of Nordea more than 40.000 customers have been served with mortgage financing.

Through the past seven quarters Nordea Kredit's retail market share continuously increased from 16.2% to 17.1% driven by many new homeowners at Nordea Kredit and growing demand for top-up lending. Nordea Kredit has the same lending policy for all customers regardless of geography. Nordea Kredit's lending increased in all regions in Denmark, and approximately 16% of all loans are issued in areas with average prices per square metre of less than DKK 8,000.

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Green mortgage loans

Nordea are committed to sustainable business and development by combining financial performance with environmental and social responsibility as well as sound governance practices.

Nordea's focus on the green transition was clearly reflected in Nordea Kredit's lending portfolio. The green mortgage loan offering to corporate customers reached DKK 11bn at end-2021(end-2020 DKK 4bn) - equivalent to a market share of approximately 29% for bonds denominated in Danish kroner.

The green mortgage loans are based on the criteria in the Nordea Green Bond Framework and are offered for the funding of:

• Energy efficiency - DKK 6.0bn
• Buildings with energy performance certificate (EPC) ratings A or B - DKK 4.5bn
• Renewable public utilities - DKK 0.6bn
• Organic farms - DKK 0.3bn

Customer and investor feedback has been positive, and the green bonds are priced slightly better than the ordinary Cibor6 bonds. The bonds funding the green mortgage loans have been classified as most liquid assets.

Nordea is also contributing to the green transition by offering green loans for green corporate projects where mortgage loans are not an option, but where the criteria of the Nordea Green Bond Framework are met. For personal customers, an attractive low-interest loan (Energisparelån) earmarked for energy improvements in homes is available. These bank loans supplement Nordea Kredit's portfolio of mortgage products.

Increased digitalisation

During 2021 the number of customers in scope for automated loan promises increased. The digital solution now caters for first-time buyers, potential customers and customers who need bridge financing as part of their purchase. This, combined with skilled advisers available in both online and physical channels, ensured a high number of home purchases at Nordea Kredit.

Comments on the year-end result

(The figures in brackets refer to 2020).

Financial review 2021

Lending at nominal value grew by 7% in 2021 compared to 3% in 2020. Gross new lending increased by 11% compared to 2020 and amounted to DKK 105bn (DKK95bn). Total lending measured at nominal value increased to DKK 436bn (DKK 409bn) driven by strong trends within both households and corporate customers. The growth in lending was mainly driven by new lending for change of ownership and top-up lending for household customers and by new lending to public utilities and for private rental properties for corporate customers. Net interest income and commission income improved by 4% and 8%, respectively, following the high lending activity.

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Despite the positive trend in net interest income and commission income, profit before impairment losses decreased by 37% to DKK 1,338m (DKK 2,131m) due to significant increases in intragroup fees from price adjustments to the first loss guarantee from 1 July 2020 and sales and distribution services from 1 January 2021. The price adjustment to the first loss guarantee in 2020 had full-year effect in 2021. The transfer pricing method applied by Nordea to group internal sales and distribution services delivered to Nordea Kredit was updated to be in line with the development of OECD guidelines on transfer pricing.

Impairment losses on loans and receivables significantly improved and amounted to a net reversal of DKK 82m (loss of DKK 491m) due to a low level of realised loan losses combined with a reversal of model- calculated provisions, reflecting the strong credit quality of the loan portfolio.

Profit before tax amounted to DKK 1,419m (DKK 1,640m).

Operating income

Net interest income increased by 4% to DKK 3,324m (DKK 3,211m) driven by the growth in lending volumes. Average margins were as expected slightly down driven by customers who remortgaged and refinanced F1-F3 loans by either fixed-rate loans or adjustable-rate loans with a longer fixing period. The decline in average margins was to some extent offset by more customers choosing interest-only loans. Furthermore, net interest income was positively affected by a slight decrease in negative interest rates on the investment of capital.

Fee and commission income was up by 8% to DKK 629m (DKK 584m), driven by the growth in lending volumes. Furthermore, refinancing fees increased as expected following higher refinancing volumes in 2021 compared to 2020.

Fee and commission expenses increased by 17% to DKK 1,259m (DKK 1,073m) mainly due to

higher fees for the first loss guarantee from Nordea Bank following new pricing effective from 1 July 2020. The price adjustment to the first loss guarantee in 2020 had full-year effect in 2021. Property valuation fee expenses increased following the growth in lending volumes.

Staff and administrative expenses

Total staff and administrative expenses increased by DKK 759m to DKK 1,367m (DKK 608m) mainly due to an increase in sales and distribution services fees provided by Nordea Bank. From 1 January 2021 the transfer pricing method applied by Nordea to group internal sales and distribution services delivered to Nordea Kredit was updated.

Staff costs increased by 8% to DKK 116m (DKK 108m) mainly reflecting the high activity level, increased profit sharing and non-recurring items. Furthermore, the average number of full-time equivalent employees increased slightly to 118 (116). A number of temporary assignments were changed to permanent employees during 2021.

Impairment losses on loans and receivables

Impairment losses on loans and receivables significantly improved and amounted to a net reversal of DKK 82m (loss of DKK 491m) due to a low level of realised loan losses combined with a reversal of

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