DNB Bank DNB Boligkreditt - February 2020 Best Euro Deal 2018 - Investor relations
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DNB Bank
DNB Boligkreditt
February 2020
Best Euro Deal 2018
Content
• DNB – A Brief Overview
• The Norwegian Economy
• Financial Targets, Performance and Capital
• Loan Book and Asset quality
• Funding
• Appendix:
• Cover Pool Portfolio Information and LCR eligibility
• The Norwegian Mortgage Market
• Capital and Tier 1
• Additional slides – Financial Performance and Other information
2
DNB – A Brief Overview
3
DNB - Norway’s Leading Financial Services Group
• Approximately 30% market share in Norway
• 34% owned by the Norwegian Government
• Credit Ratings:
• Moody's: Aa2 (stable)
• S&P: AA- (stable)
• Sustainability Ratings:
4
ESG is an integrated part of DNBs strategy
ESG as part of strategy Examples
Anchored in corporate governance and top management Steering the loan book towards sustainable activities
Sustainability/ESG disclosures in accordance with standards (GRI, Green product framework
SASB, TCFD) assured by EY
All loans above 8 MNOK includes an ESG evaluation
Signatory to global sustainability initatives
Integrating ESG in equity research
Strong ESG rating by Sustainalytics, ISS and MSCI
Responsible ship-recycling clauses
Four themes to prioritise ESG measures
DNB fights financial crime and promotes a safe, digital economy
DNB finances sustainable growth through loans and investments
DNB is a driving force for equality and diversity
DNB helps its customers manage and understand their own economy
Sustainability in DNB is about all the three letters of E, S and G. Even though climate risk is a central
part of our sustainability strategy, we have defined ambitions within all aspects of sustainability
5The DNB Group
DNB ASA
DNB Life and
DNB Bank ASA Asset Management
Aa2/AA-
100% owned by DNB Bank and
DNB functionally an integrated part of the
parent
Boligkreditt AS
(Covered Bonds: AAA/Aaa) Mortgages originated within DNB Bank’s
distribution network in accordance with
the bank's credit policy
6The Norwegian Economy
7A Solid Norwegian Economy
2018 2019 2020E 2021E
Budget surplus 1) 8.1% 8.8 % 9.1% 9.0%
Oil fund 2) EUR 809bn EUR 970bn EUR 995bn
Unemployment 3) 3.9% 3.7% 3.8% 3.9%
GDP growth 3) +2.2% +2.5% +1.9% +1.5%
Central Bank Rate 3) 0.75% 1.50% 1.50% 1,5%
Source: 1) General Government net lending as percentage of GDP, OECD Economic Outlook No. 106, November 2019
2) Ministry of Finance (National Budget 2020)
3) DNB Markets, January 2020 8Government Finances are Rock-Solid
Annual budget deficit/surplus forecast for 20201) General government net financial liabilities2)
As per cent of nominal GDP 2019
-300,00
-250,00
-200,00
-150,00
-100,00
-50,00
0,00
50,00
100,00
150,00
200,00
1) Source: OECD Economic Outlook no. 106, November 2019
9The Growth of the Sovereign Wealth Fund Adds Flexibility
Government Pension Fund Global Oil income versus spending
2001-2019, NOK billion 2006-2019, NOK billion
Annual return, GPFG
10000 Annual net petro cash flow
Annual actual "spending of oil-money"
9000
8000
600
7000
500
6000
5000 400
4000
300
3000
200
2000
100
1000
0 0
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2006 2008 2010 2012 2014 2016 2018
Source: Ministry of Finance (National Budget 2019), DNB Markets, NBIM
10Unemployment - Among the Lowest in Europe
Forecasted unemployment
Per cent
10
8
6
3,9 3,7 3,8 3,9 3,9
4
2
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020F 2021F 2022F
DNB Markets (Jan 20)
Among the lowest unemployment in Europe
Per cent
12
10
8
6
4
2
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Denmark Finland Norway Sweden United Kingdom Euro area (17 countries)
Source: OECD Economic Outlook No. 106 November 2019/DNB Markets (Jan 20)
11Solid Economic Growth in Norway
GDP growth
Year on year, per cent
6%
5%
4% 3.7%
3% 2.3% 2.5% 2.4 %
2.2% 2.0% 2.2% 2.2%
1.9% 1.9% 1.9%
2% 1.4% 1.5% 1.5% 1,6 % 1,6 %
1.0%
1%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
-1%
DNB Markets (Jan 20) Statistics Norway (Nov 19)
GDP growth
Per cent
5%
4%
Norway
3%
Sweden
2%
Denmark
1%
Finland
0%
Euro Area
2013 2014 2015 2016 2017 2018 2019 2020 2021
-1%
-2%
Source: OECD Economic Outlook No. 106, November 2019
12Oil Investments are Stabilising at a High Level
– Lower break-even price ensures a competitive continental shelf
Petroleum investments in Norway Break-even price: Sanctioned vs April 2017
NOK billion, share of GDP in per cent USD per barrel, Brent Blend
250 10
9
200 8 80
7
150 6
52
5 45
38
35 35
100 4 30
3 20
50 2
1
Johan Sverdrup Johan Castberg
0 0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Sanctioned March 2016 September 2016 February 2019
Constant 2017 prices (lha) Share of GDP (rha)
Source: Thomson Datastream, DNB Markets Source: Rystad Energy, Equinor, Wall Street Journal
13Financial Targets, Performance and Capital
14Financial Ambitions 2019-2022
Return on equity
>12%
Overriding target
CET1 ratio1) C/I ratio Payout ratio
~17.9%²⁾ 50%
Capital level Key performance indicator Dividend policy
1) CET1 capital ratio without transitional rules
2) Proposed requirement including management buffer of about 1 per cent at 31 December 2019
15DNB is a digital front runner
• 91% of Norwegians use online banking services • Fully automated secured lending
• 6% of payments are made in cash • Boosting efficiency with automation
Transforming our branch network
Annual visits to our digital platforms (millions)
Number of branch offices
220
467
116 281
200 243
156
2 9 113
57 1 49
73 83 85 86 83 92 83 80 76
2010 2015 2016 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e
Online bank Mobile bank
16Total income split for the year 2019
DNB Delivers Solid Profit Net gains on
financial
Other
income
instruments 5%
at fair value
6%
Net
commission
and fees
18%
Pre-tax operating profit before impairment
NOK billion Net interest
income
71%
35 34,1
30,8 31,7
30 28,7 28,5 28,3
25
20 18,7
15
10 7,7 7,4
5 2,4
1,6 2,3 2,2
(0,1)
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
(5)
Pre-tax operating profit before impairment Impairment of loans
17DNB Earnings in the Context of Nordic Peers
Balance Sheet Size (Q4 2019, EUR bn eqv) Pre-Tax Operating Profit (EUR bn eqv)1
Bank1 DNB Bank 2 Bank 3
555
4,0 4,0
3,1
3,0
317 2,8
2,5 2,6 2,5
276
249 2,2 2,1 2,2
2,1
Bank1 DNB Bank 2 Bank 3 2017 2018 2019
Source: Company Websites, Factbooks, Annual Reports. End of Period Exchange Rates used for Balance Sheet Size and Average Exchange Rate used for Operating Profit.
Source of Exchange Rates: Bloomberg
1) Pre-Tax Operating Profit Post Impairments
18Stage 3 Net Loans and Financial Commitments (IFRS 9)
( Former net Non-Performing and Doubtful Loans IAS39 )
IAS 39 IFRS 9
Per cent 1.69 1.64
1.46 1.47 1.49 1.45
1.33 1.29
1.27
1.21 1.18
1.12 1.15
1.09
1.03 1.03
26.4 0.94 0.90 0.92
NOK billion 25.7 0.79
23.1 23.6 22.8 23.2
21.6 20.8 21.6
19.2
18.2
17.3
31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept. 31 Dec.
1)
2017 2018 2019
1)
Net non-performing and doubtful loans and guarantees (IAS 39)
Stage 3 - Net loans (IFRS 9)
Stage 3 - Net financial commitmens (IFRS 9)
Net non-performing and doubtful loans and guarantees as a percentage of net loans (IAS 39)
Stage 3 - Net loans and financial commitments as a percentage of net loans (IFRS 9)
Stage 3 - Net loans and financial commitments as a percentage of net loans and financial commitments (IFRS 9)
1) As a result of the transition to IFRS 9 from 1 January 2018, unutilised credit lines and other financial commitments have
been included.
19Healthy asset quality reduces cost of risk
Development in high-risk and stage 3 exposures¹⁾ Reduced risk
200,00 20,00 • Strong Norwegian macro
152
150,00 15,00
115
101 98 • Solid and diversified portfolio
100,00 7,9 10,00
6,1
5,2 4,9
50,00 5,00
• Reduced exposure to cyclical industries
0,00 0,00
31 Dec 2016 31 Dec 2017 31 Dec 2018 30 Dec 2019
• Quarterly fluctuations, but expecting lower
Exposure (EAD) in NOK bn Per cent of total exposure impairment losses than 1997-2019 average
Impairment losses 1997-2019
0,18 %
Impairment in % of net loans Average impairment in %
1) “High-risk” is defined as probability of default (PD) ≥3 per cent. “Stage 3” is defined as non-performing and doubtful portfolio.
20Key Financial Ratios
2019 2018 2017 2016 2015
Return on equity (%) 11.7 11.7 10.8 10.1 14.5
Cost income (%) 42.2 43.8 44.2 40.9 36.9
Comb. weighted total average spread (%) 1.33 1.30 1.30 1.32 1.33
Write down ratio (%) 0.13 -0.01 0.15 0.48 0.15
Common equity tier 1 ratio (%) 18.6 17.2 16.7 17.6 16.0
Total capital ratio (%) 22.9 20.8 20.3 21.4 19.8
21Amendments to Norwegian capital requirements
Core Tier 1
(Ministry of Finance, 11 December 2019)
• With the final implementation of CRR/CRD IV in Norway from 31 December 2019, the Basel I floor was removed and
the capital requirements for exposures to Small and Medium sized enterprises were reduced (SME discount).
• The systemic risk buffer was increased from 3.0% to 4.5% for Norwegian exposures from 31 December 2020,
increasing the CET requirement for DNB by approximately 0.1%.
• DNB’s management buffer will be kept at approx. 100 bp.
• DNB will for now not make any changes to the capital target of 17.9% (CET1).
MREL
(Norwegian FSA, announced 23 December 2019)
• DNB ASA (holding company) shall hold total MREL capital equal to 36.7% of adjusted (for DNB Boligkreditt) risk
weighted assets based on the balance per 31 December 2018, which leads to a need for eligible debt of NOK 157
billion.
• The MREL requirement will vary over time based on changes in RWA and capital requirements.
• The minimum MREL requirement shall be met per 30 June 2020. Senior preferred debt issued by DNB Bank per 31
December 2019, with a minimum remaining tenor of one year, will qualify as MREL capital until 31 December 2022.
• As of 31 December 2019, qualifying debt with a minimum tenor of one year amounts to NOK 178 billion.
• MREL eligible debt shall be issued by DNB (holding) to third party investors. Relevant group units, including DNB
Bank, shall issue internal MREL debt to DNB (holding) in order to establish an adequate loss absorbing mechanism
in the group.
• DNB has initiated a process to merge DNB ASA and DNB Bank ASA, making DNB Bank ASA the ultimate parent
company of the DNB Group. The intention of the merger, which requires permission from the Norwegian Ministry of
Finance, is to enable DNB to issue non-preferred senior debt from DNB Bank ASA.
22DNB – A Very Strong Capital Position
CET1 capital ratio and leverage ratio1) Leverage ratio versus Nordic Peers
Per cent, as of 31 December 2019 Per cent, as of 31 December 2019
7.4
DNB’s leverage ratio requirement2)
17.1 %
6.0
1.0% Mgt buffer
5.3 5.4
5.1
4.9
4.6
18.6% 16.1%
(SREP)
7.4%
CET1 Ratio* Leverage Ratio CET1 Requirement DNB Nordea SEB Swedbank SHB Danske
Bank
1) As per the implementation of CRR/CRD IV in Norwegian legislation, the Basel I transitional floor was removed with effect from 31 December 2019.
2) The Norwegian leverage ratio requirement for banks is 5% effective as from 30 June 2017. For systemically important banks, such as DNB, the
minimum requirement is 6%. A potential breach of the leverage ratio requirement will not trigger automatic restrictions on AT1 coupon payments.
23DNB – A Very Strong Capital Position
Binding CET1 requirements:
transitional rules
CET1 capital ratio CET1 capital build up
Per cent 18,3 18,6 NOK bn 178
17,6 177
17,2 16,9 168 171
16,4 16,7 16,4 163
16,0 16,0
14,4 142
128
116
104
95
2015 2016 2017 2018 3Q19 2019 2010 11 12 13 14 15 16 17 18 19
CET1 ratio (trans rules Basel I Floor) CET1 ratio SREP Requirement
*) As per the implementation of CRR/CRD IV in Norwegian legislation, the Basel I transitional floor was removed with effect from 31 December 2019.
24DNB – A Very Strong Capital Position
S&P RAC Ratios for Top 50 Rated Western European Banks
Per Cent, 31 Dec 2018
13,8
12,4
11,9
S&P RAC Ratio versus Nordic Peers
10,4 10,6
Per Cent, 31 Dec 2018
9,7
DNB Swedbank Nordea Danske Bank SEB SHB
25CET1 Capital Requirements
- and Capital generation
• SREP includes Pillar 2 requirements, but they are not included in the MDA trigger level1)
• Management buffer must be seen in connection with DNB’s capital generation abilities
• A systemic risk buffer of 4.5% was imposed on Norwegian exposures from 31 December 2020.
For DNB this corresponds to approx. 3.1% on the total RWA.
18.6%
17.2%
~17.9% TARGET ~17.9% TARGET Capital generation3)
SREP 1.0% 1.0% Basispoints (bps) – transitional rules
~16.1 % ~16.2 %
15.5 % 1.9% 1,9 %
1.8%
341
1.7% 2.1% 2.1 %
2.0% 2.0% 2,0 %
240 249
3.0% 3.0% 3,1 % 188 202
89 157
141 147
55
2.5% 2.5% 2,5 % 175
40 55 160
144
160 139
4.5% 4.5% 4,5 % 101 92
44 -3
YE 2018 YE 2019 Target K 31.12.2020 2013 2014 2015 2016 2017 2018 2019
Pillar 1 Min Requirement Systemic risk Buffer
Dividends and Buy-backs
SIFI Buffer Countercyclical Buffer
Pillar 2 Requirement SREP Requirement CET1 build up
Conservation Buffer Management Buffer
DNB CET1 - without trans. rules
1) In a consultation paper dated 27 April 2018, the Norwegian FSA suggested to include the Pillar 2 requirements in the calculation of the MDA trigger
level. The Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted.
2) Based on an increase in the countercyclical buffer (CCyB) rate from 2.0% to 2.5%, leading to an increase in DNB’s effective CCyB to approximately 2.1%.
3) The 2019 figures are calculated on the basis of the implementation of CRR/CRD IV in Norway, which removed the Basel I floor and introduced the SME
discount. The change in methodology had a significant positive impact on the CET1 build up.
26MDA – DNB well above CET1 MDA Trigger Level
• Pillar 2 requirements in Norway are currently not included in the MDA trigger level
• FSA has proposed to include Pillar 2 in MDA trigger level, but no final decision is taken1)
• MDA buffer must be seen in connection with DNB’s capital generation abilities
18.6 %
17.2 %
15.1 % 15.2 %
13.7 %
Capital generation2)
Basispoints (bps) – transitional rules
139
341
240 249
188 202
55 89 157
141 147
175
40 55 160
144
139
101 160
92
44 -3
YE 2018 YE 2019 YE 2020 2013 2014 2015 2016 2017 2018 2019
Dividends and Buy-backs
MDA Trigger Level DNB CET1 ratio
CET1 build up
1) In a consultation paper dated 27 April 2018, the Norwegian FSA suggested to include the Pillar 2 requirements in the calculation of the MDA trigger
level. The Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted.
2) The 2019 figures are calculated on the basis of the implementation of CRR/CRD IV in Norway, which removed the Basel I floor and introduced the
27
SME discount. The change in methodology had a significant positive impact on the CET1 build up.MREL Regulation entered into force 1 January 2019
• Loss absorption requirement to be covered by existing own funds requirement
• Recapitalisation requirement to be covered by any excess capital and non-preferred senior debt,
contractually subordinated to conventional senior debt.
• DNB’s MREL requirements announced by the Financial Supervisory Authority 23 December 2019:
• DNB ASA (holding company) shall hold total MREL capital equal to 36.7% of adjusted (for DNB Boligkreditt)
risk weighted assets based on the balance per 31 December 2018, which leads to a need for eligible debt of
NOK 157 billion.
• The MREL requirement will vary over time based on changes in RWA and capital requirements.
• The minimum MREL requirement shall be met per 30 June 2020. Senior preferred debt issued by DNB Bank
per 31 December 2019, with a minimum remaining tenor of one year, will qualify as MREL capital until 31
December 2022.
• As of 31 December 2019, qualifying debt with a minimum tenor of one year amounts to NOK 178 billion.
• MREL eligible debt shall be issued by DNB (holding) to third party investors. Relevant group units, including
DNB Bank, shall issue internal MREL debt to DNB (holding) in order to establish an adequate loss absorbing
mechanism in the group.
• DNB has initiated a process to merge DNB ASA and DNB Bank ASA, making DNB Bank ASA the ultimate
parent company of the DNB Group. The intention of the merger, which requires permission from the
Norwegian Ministry of Finance, is to enable DNB to issue non-preferred senior debt from DNB Bank ASA.
• During the transitional period DNB will gradually replace maturing senior debt with the required volume of
non-preferred senior debt.
28Implementation of BRRD and change in creditor hierarchy
• The legislation implementing BRRD in Norway, entered into force 1 January 2019.
• The legislation sets forth that the resolution authorities shall establish a resolution plan for each institution
with specific description of the tools available in a crisis situation. The resolution plan for DNB is not yet in
place.
• In line with the BRRD, the creditor hierarchy is now changed so that deposits that are guaranteed by the
Norwegian deposit guarantee scheme, as well as deposits from private individuals and small and medium
sized enterprises, have priority before deposits from large corporates and unsecured senior debt, which
again has priority before senior non-preferred debt and own funds instruments.
• One of the tools contemplated under the BRRD is the bail-in tool. According to the Norwegian legislation,
any unsecured debt, except guaranteed deposits, may in principle be bailed in. The resolution authorities
will however respect the hierarchy of claims.
• The introduction of the MREL requirement, including the subordination requirement, shall make sure, that
no creditor will be worse off than it would have been in liquidation.
• DNB expects more clarity when the resolution authorities present the resolution plan for DNB some time in
2020.
29IFRS 9 / Basel IV / Risk Weighted Density
- DNB is well positioned for future regulatory requirements
• IFRS 9
• IFRS 9 was implemented from 1 January 2018 and reduced the common equity Tier 1 capital ratio by
approximately 28 basis points in Q12018 as a one off effect.
• IFRS 9 is now fully implemented, hence, DNB will not apply for transitional rules.
• Basel IV
• DNB is well positioned due to already high risk weights.
• The implementation of Basel IV is expected to have limited effects for DNB.
• Risk Weighted Density
Risk Weighted Assets
34.4% Per cent of total assets, 31 December 2019
26.1% 27.1% 27.0%
23.3%
20.4%
DNB SEB Nordea Danske Swedbank SHB
30Loan Book and Asset Quality
31Loan Book
EAD by Segments as of 31 December 2019
Commercial real
estate Shipping
Other corporate 10 % 3% Oil, gas and
customers offshore
4% 5%
Power and
renewables
2%
Healthcare
2%
Public sector
1%
Fishing, fish
farming and
Personal farming
customers **) 2%
54 %
Retail industries
3%
Manufacturing
4%
Technology,
media and
Residential telecom
property Services 2%
5% 3%
Including net non-performing and net doubtful loans and guarantees.
Exposures at default are based on full implementation of IRB.
**) Of which mortgages 46 per cent of total exposure at default.
32Aiming to Reduce Volatility and Increase Profitability
Through Rebalancing of the Portfolio
Reducing Exposure in Cyclical Industries Rebalancing Between Large Corporates
USD billion
and Personal Customers
21
20
11
54% 51% 49%
7 46%
3Q 2015 4Q 2019
2012 Q4 2019 2014 Q4 2019
Mortgages and other exposures, personal customers
Shipping Oil, gas and offshore Corporate loans
33Mortgage Lending in DNB is Based on Cash Flow
Willingness to repay the loan
1.
Credit history
7.7%
Capability of repaying the loan 2.7%
5
%
2. Including 5 per cent interest rate stress
Amortization requirement above 60% LTV
Current Mortgage rate
Max 5x gross income mortgage rate including stress
test
3. Collateral
LTV max 85%
Monthly behavior scoring of
4.
borrowers
34House Prices
Fundamental Factors Explaining the Past House Price Increase
Nominal House Prices 2000-2019 Norwegian House Prices Completed housings less
growth in households
800 5 000
350,00
700
300,00 0
600
250,00 500
-5 000
400
200,00
300 -10 000
150,00
200
-15 000
100,00
100
50,00 0 -20 000
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2006200820102012201420162018
Norway UK Sweden Nominal prices
Denmark USA CPI-deflated prices
Income per capita-deflated prices
Source: Eiendomsverdi AS Source: Real Estate Norway, Statistics Norway Source: Norges Bank, Statistics Norway
(member of the European AVM Alliance)
35House Price Development in Norway and Oslo1)
• Prices are now 3.2 % higher than 12 months ago.
• DNB expects relative flat development in house prices going forward.
House Price Growth House Price Growth
As of January 2020 1 Jan 2007 = Index 100
All-time-High = Aug -19 for Norway,
Feb -17 for Oslo
200
Norway Oslo
5.5% 175
3.2%
150
125
-0.2% -0.3%
100
Since all-time-high Last 12 months
75
2019
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
Norway Oslo
Source: Eiendomsverdi AS Source: Eiendomsverdi AS
(member of the European AVM Alliance) (member of the European AVM Alliance)
1) The methodology for house price data was revised in January 2018, hence there are some differences in data points from previous versions of this presentation.
36Mortgage Lending Regulation
Tightened Regulation from January 2017 has Impacted House Price Growth
• Max 5x gross income House Price Growth
1 Jan 2007 = Index 100
• Max 85% LTV
• 60% for secondary home in Oslo 200
• Debt servicing capacity
175
• 5 percentage points interest rate increase
• Amortization requirement above 60% LTV 150
• 2.5% of approved loan or principal payment as for 30 year annuity
• Banks have some flexibility 125
• Banks can deviate in 10% of mortgage applications each quarter
100
• In Oslo this flexibility is limited to 8%
75
2017
2014
2015
2016
2018
2019
2020
Norway Oslo
37A Very Robust Cover Pool
60%
50% 50% 49%
50% 44%
40%
High OC
30%
20%
2016 2017 2018 2019
70%
60% 55%
LTV around 55% 54% 54% 55%
(Weighted average)
50%
40%
2016 2017 2018 2019
House Price Decline Current 10% 20% 30%
WA Indexed LTV 54.5% 59.6% 67.0% 76.6%
Stress test
-house price decline
Eligible OC 48.6% 45.4% 40.1% 31.6%
38A Very Robust Residential Loan Portfolio
Loan-to-Value (LTV)
Per Cent of Residential Mortgage Book, 31 December 2019
34%
27%
16% 17%
6%
0-40 40-60 60-75 75-85 >85
- Includes mortgages in DNB Bank and DNB Boligkreditt
39Oil-Related Portfolio represents 4.9% of Total Customer EaD
Total loan portfolio* – EaD NOK 1 977 billion Oil-related portfolio – EAD NOK 96 billion
Per cent, as at 31 December 2019 4.9 per cent of DNB’s total EaD as at 31 December 2019
Oilfield services
0.7%
Oil & Gas 2.4%
8% 3,1 %
1,8 %
6%
11 %
7% 1.8%
Offshore
• The oil-related portfolio has been reduced significantly Offshore – EAD NOK 35 billion
• Down from NOK 167.1bn (8.4% of total EaD) in September 2015
* Excluding Credit institutions
40Oil-Related Portfolio
Offshore the Most Challenging Sector
DNB’s oil-related portfolio split by sub-segment in terms of exposure (EaD) and by risk grade
Total Oil related segments Offshore
EaD in NOK billion EaD in NOK billion
40
29
18
9 13 11
8
4
Low risk Medium risk High risk Net non-performing Low risk Medium risk High risk Net non-performing
and net doubtful and net doubtful
commitments commitments
Oil and Gas Oilfield Service
EaD in NOK billion EaD in NOK billion
29
12 7
5 5
0.2 2 0.3
Low risk Medium risk High risk Net non-performing Low risk Medium risk High risk Net non-performing
and net doubtful and net doubtful
Probability of default (per cent) commitments commitments
31.12.2016 31.12.2017 31.03.2018 30.06.2018
Low risk 0.01 – 0.75 30.09.2018 31.12.2018 31.03.2019 30.06.2019
Medium risk 0.75 – 3.00 30.09.2019 31.12.2019
High risk 3.00 - impaired 41Shipping Exposure is 3.0 % of DNB’s Total Loan Portfolio
The Shipping Portfolio is Well Diversified
Total loan portfolio* – EaD NOK 1 977 billion Shipping portfolio** – EaD NOK 59 billion
Per cent, as at 31 December 2019 Per cent of DNB’s total EAD, as at 31 December 2019
Other shipping
0.2% Crude oil tankers
0.7%
Gas
0.6%
8%
3.0%
Chemical and product tankers
6% 0.3% 0.7%
Dry bulk
11 % 0.4%
7%
Container
• The shipping portfolio has been reduced significantly
• Down from NOK 138.1bn (6.9% of total EAD) in September 2015
*Excluding Credit institutions
** Excluding offshore portfolio. Offshore is included in oil-related portfolio.
42Risk Classification and Migration DNB’s Shipping Book
(Excluding Offshore)
Shipping* – EaD distribution by PD bracket
NOK billion
38
14
6
1
Low risk Medium risk High risk Net non-performing and net doubtful
commitments
31.12.2016 31.12.2017 31.03.2018 30.06.2018 30.09.2018 31.12.2018 31.03.2019 30.06.2019 30.09.2019 31.12.2019
* Numbers for the Shipping Offshore and Logistics Division excluding offshore
portfolio. Offshore is included in oil-related portfolio.
43Previous Shipping Experience Provides Comfort
Accumulated shipping impairments, 2010-2014
Per cent of lending book
21.5
8.6
5.1
2.4
DNB (shipping) Nordic peer (shipping and offshore) Norwegian banks (shipping and pipe European peer (Shipping)
transportation)*
*Aggregate numbers for Norwegian banks are from the 2009-2013 period (including DNB)
Source: DNB Markets, company reports. Presented at DNB CMD 2015.
44Helping authorities combat financial crime is at the top of the
management’s agenda
Commitment to compliance excellence
• DNB uses a considerable amount of resources on supporting authorities in the fight against financial crime
• Anti-money laundering is high on the agenda at all levels of our organisation, and a regular topic in management
meetings and board meetings
• DNB has over the last years made organisational changes to further strengthen the AML routines in the first and second
lines of defence
• The fight against money laundering is a fight against criminal networks constantly developing new methods
• Combatting financial crime is complex, and the regulatory frameworks have changed over time – no bank can ever
guarantee that suspicious transactions that should have been examined more carefully do not exist
• Our systems and procedures detect a large number of cases that are further investigated and reported to the authorities
each year, and DNB is working continuously to develop and improve our systems and analyses
• All information gathered from regulators and other institutions strengthens the ability to detect suspicious transactions
and subsequently report these to authorities
45Samherji case/Iceland
• 12 November 2019, allegations were published in the Icelandic media that funds from Samherji (Icelandic
fisheries company) were used for illegal payments.
• 28 November 2019, the Norwegian National Authority for Investigation and Prosecution of Economic and
Environmental Crime (Økokrim) announced that they had opened investigation of DNB related to the
matter1). The same day, DNB released the following statement:
"We have had a good dialogue with Økokrim all the way and the fact that they are now opening an
investigation means that we have the opportunity to share with them everything we know in the Samherji
case, including confidential client information. We have been prevented from doing so thus far due to a duty
of confidentiality.”
“In a case like this, as one of the banks of the company in question, we play an important role in contributing
to establishing all the facts of the case.”
“We are committed to getting to the bottom of this, for own learning as well. Therefore, this does not change
anything with regard to our ongoing efforts to investigate all aspects of this matter.”
“We cannot rule out that our own assessment of this case will identify potential improvements of our efforts in
this area. At the same time, it is important to remember that the one accused of corruption or money
laundering in this matter is not a Norwegian bank, but an Icelandic fisheries company.”
1) Press release from Økokrim (in Norwegian only): https://www.okokrim.no/etterforsker-dnb-bank-asa.6266753-411472.html
46Luminor – a joint venture with Nordea and Blackstone
• 20 per cent ownership in Luminor, a joint venture with Blackstone
and Nordea1)
• Blackstone acquired 60 per cent of Luminor in September 2019
• DNB’s strategy in the Baltics has been to serve the local personal
customers and SME segments – non-resident customers (outside
EEA) have been out of scope
• Two due diligence processes completed the last few years, in
connection with:
1. The merger between Nordea’s and DNB’s Baltic units (completed 2017)
2. The sale to Blackstone (completed 2019)
• Luminor has not been subject to AML sanctions or regulatory fines
1) Nordea and Blackstone have entered into a forward sale agreement for the sale of Nordea’s remaining 20 per cent stake. The forward sale is subject to certain conditions but
is expected to complete over the next three financial years 47Funding
48DNB Funding Structure
Net Stable Funding Ratio (NSFR) Average Life of Long-term Funding Ratio of Deposits to Net Loans
Senior debt and covered bonds, years Per Cent
65 65
63 63
61 62
58 58 58
55
112% 53
50
3.7
79%
2,4
2016
2017
2008
2009
2010
2011
2012
2013
2014
2015
2018
2019
2012 2013 2014 2015 2016 2017 2018 2019 2008 2010 2012 2014 2016 2018
49Issuance of Long Term Debt
2020 EURO bill Tenor
Covered Bonds 0,0 0,0
Senior Bonds 0,0 0,0
Sum 0,0 0,0
Tier 1 / Tier 2 0,0
Total 0,0
2019 EURO bill Tenor
Covered Bonds 4,7 6,7
Senior Bonds 8,6 3,7
Sum 13,2 4,8
Tier 1 / Tier 2 1,0
Total 14,2
2018 EURO bill Tenor
Covered Bonds 8,0 7,3
Senior Bonds 1,1 4,9
Sum 9,2 7,0
Tier 1 / Tier 2 1,0
Total 10,2
50A Well Established International Covered Bond Issuer
Volume Tenor Maturity
EUR 1,250 mn 5 years 2020 – Oct
EUR 1,500 mn 5 years 2021 – Jan
EUR 1,500 mn 10 years 2021 – Jun
EUR 2,000 mn 5 years 2022 – Jan
EUR 2,000 mn 10 years 2022 – Mar
EUR 1,000 mn 10 years 2022 – Nov
EUR 1,500 mn 5 years 2023 - Jan
EUR 1,500 mn 7 years 2023 – Apr
EUR 1,750 mn 5 years 2023 – Nov
EUR 1,500 mn 7 years 2024 – Nov Best Euro Deal 2018
EUR 1,500 mn (Green ) 7 years 2025 – Jun
EUR 1,500 mn 7 years 2026 - Jan
EUR 1,500 mn 10 years 2026 – Sep
EUR 1,000 mn (FRN) 7 years 2021 – Nov
USD 1,250 mn 5 years 2020 - May
USD 1,500 mn 5 years 2022 - Mar
USD 1,000 mn 5 years 2023 – Jun
51DNB Boligkreditt - Green Covered Bonds
• EUR 1,500,000,000 7 years 2025 Fixed
• SEK 9,700,000,000 5 years 2024 Fixed
52DNB Green Covered Bonds
Eligibility criterion for DNB’s green covered bonds:
• Residential buildings completed in 2012 or later
• (derived from the implementation of the TEK10 and TEK17 building codes)
~NOK 78 bn eligible green assets
(within 15% of the most energy efficient residential buildings in Norway)
• An aggregated portfolio approach has been used to manage the green assets
• Eligible green assets at all times exceeds all outstanding green liabilities
For further information, see
https://ir.dnb.no/funding-and-rating/green-covered-bonds
53DNB Senior Curve
Volume Tenor Maturity
EUR 1,000 mn 10 years 2020 – Jun
EUR 2,000 mn 10 years 2021 – Feb
EUR 1,000 mn 10 years 2022 – Jan
EUR 750 mn 7 years 2023 – Mar
EUR 750 mn 5 years 2023 - Sep
EUR 2,000 mn 4 years 2023 - Nov
EUR 750 mn 5 years 2024 - Mar
EUR 650 mn (FRN) 5 years 2020 – Aug
EUR 1,000 mn (FRN) 3,5 years 2022 - Jul
GBP 300 mn 4,7 years 2023 – Dec
GBP 500 mn 3,5 years 2023 - Jun
USD 1,250 mn 3 years 2020 – Oct
USD 1,250 mn 5 years 2021 – Jun
USD 1,400 mn 3 years 2022 – Nov
USD 500 mn (FRN) 3 years 2020 – Oct
USD 250 mn (FRN) 5 years 2021 – Jun
USD 600 mn (FRN) 3 years 2022 – Nov
54Funding Contacts
Long Term Funding: Short Term Funding:
• Thor Tellefsen • Åsmund Midttun
Senior Vice President, Head of Long Term Funding Senior Dealer, Rates, FICC
Phone direct: + 47 24 16 91 22 Phone direct: +47 24 16 90 28
Mobile: + 47 915 44 385 Mobile: +47 901 13 559
E-mail: thor.tellefsen@dnb.no E-mail: asmund.midttun@dnb.no
amidttun@bloomberg.net
• Magnus Midtgård • Erik Brække
Senior Vice President, Long Term Funding Senior Vice President, Rates, FICC
Phone direct: + 47 24 16 91 25 Phone direct: +47 24 16 90 31
Mobile: + 47 402 22 087 Mobile: +47 930 47 504
E-mail: magnus.midtgard@dnb.no E-mail: erik.brakke@dnb.no
ebraekke@bloomberg.net
• Roar Sørensen • Stephen Danna
Senior Vice President, Long Term Funding First Vice President, FX/Rates/Commodities, New York
Phone direct: + 47 24 16 91 39 Phone direct: +1 212 681 2550
Mobile: + 47 934 79 616 Mobile: +1 646 824 0072
E-mail: roar.sorensen@dnb.no E-mail: stephen.danna@dnb.no
sdanna@bloomberg.net
https://www.ir.dnb.no/funding-and-rating
55Appendix
Appendix A:
Cover Pool Portfolio Information and LCR
Eligibility
56Future Updates On Cover Pool Developments
DNB has implemented the common Harmonised Transparency Template of
the European Covered Bond Council which is available on the DNB website.
Information about the cover pool of DNB Boligkreditt may be accessed via
DNB’s web page:
https://www.ir.dnb.no/funding-and-rating/cover-pool-data
Contacts DNB Boligkreditt AS:
- Per Sagbakken, CEO: per.sagbakken@dnb.no +47 906 61 159
Portfolio information is updated when DNB quarterly results are released
57DNB Boligkreditt Covered Bonds – Cover Pool Data
Rating (Moody’s/S&P) Aaa/AAA
Cover Pool Size (million) 635,541
No. of Mortgages in the Cover Pool 379,111
Cover Pool
Average Loan Balance (thousands) 1,676
Data
Regulatory Overcollateralisation Requirement 2.0%
Overcollateralisation 48.8%
Weighted Average LTV (Indexed) 54.5%
Pool statistics as of 31 December 2019. Cover pool reporting coincides with DNB quarterly financial reporting.
Cover Pool Sensitivity Analysis
House Price Decline Current 10% 20% 30%
Stresstest
WA Indexed LTV 54.5% 59.6% 67.0% 76.6%
Eligible
48.6% 45.4% 40.1% 31.6%
Overcollateralisation
58Well diversified residential mortgage book within Norway
1.2%
2.8%
Eastern Norway 67%
3.6%
Western Norway 15%
Northern Norway 8%
Southern Norway 5%
5.2%
Mid-Norway 5% 1.5%
1.8 %
0.2 %
2.8%
7.6 %
5.9% 24.8 %
1.9 % 19.7 %
6.1 % 1.2 % 5.7 %
1.5 % 6.4 %
DNB Boligkreditt cover pool as of 31 December 2019
59Portfolio Characteristics
Report date: 31.12.2019
Report currency: NOK
Key Characteristics Overcollateralisation
Total cover pool, nominal balance* (mill.) 635 541 Cover pool size:
Number of mortgages 379 111 Residential mortgages, loan balance (mill.) 635 541
Number of borrowers 331 868 Covered bonds outstanding (mill.) 427 158
Average loan balance (thousands) 1 676 Overcollateralisation 48,8 %
Outstanding covered bonds, nominal balance (mill.) 427 158
Substitute assets (% of total cover pool) 0
Maturity Structure Covered Bonds
WA indexed LTV (%) 54,5
Extended maturity (years) Loan balance (mill.) %
WAL of cover pool (contractual maturity in years) 13,1
≥0≤1 5 547 1,3 %
WAL of outstanding covered bonds (extended maturity in years) 4,2 1≤2 53 244 12,5 %
* All cover pool assets are denominated in NOK. 2≤3 72 113 16,9 %
** Seasoning indicates the number of months since collateral for the loan was established. 3≤5 160 277 37,5 %
5 ≤ 10 100 261 23,5 %
> 10 35 716 8,4 %
Maturity Structure Cover Pool Total 427 158 100,0 %
Contractual maturity (years) Loan balance (mill.) %
Expected maturity (years) Loan balance (mill.) %
≥0≤1 20 824 3,3 %
≥0≤1 54 180 12,7 %
1≤2 22 116 3,5 %
1≤2 73 861 17,3 %
2≤3 24 084 3,8 % 2≤3 93 177 21,8 %
3≤5 50 577 8,0 % 3≤5 102 291 23,9 %
5 ≤ 10 137 152 21,6 % 5 ≤ 10 68 235 16,0 %
> 10 380 787 59,9 % > 10 35 414 8,3 %
Total 635 541 100,0 % Total 427 158 100,0 %
60Portfolio Characteristics cont.
Loan Size Concentration Risk
Private individuals Loan balance (mill.) Number of loans %
≤ 1,000,000 65 775 148 255 10 largest exposures 0,2 %
> 1,000,000 ≤ 2,000,000 166 567 111 819 10 largest exposures excl. housing cooperatives 0,1 %
> 2,000,000 ≤ 3,000,000 158 911 64 969
> 3,000,000 ≤ 4,000,000 96 553 28 041 Property Types
> 4,000,000 ≤ 5,000,000 54 516 12 255 Loan balance (mill.) %
> 5,000,000 74 729 11 159
Residential 635 541 100,0 %
Total 617 050 376 498
Commercial 0 0,0 %
Other 0 0,0 %
Housing Cooperatives Loan balance (mill.) Number of loans
Total 635 541 100,0 %
≤ 5,000,000 2 877 1 657
> 5,000,000 ≤ 10,000,000 3 132 440
o/w Housing Cooperatives / Multi-family assets 18 490 2,9 %
> 10,000,000 ≤ 20,000,000 4 381 317
o/w Forest & Agriculture 0 0,0 %
> 20,000,000 ≤ 50,000,000 4 974 160
> 50,000,000 ≤ 100,000,000 2 020 31
Occupancy Type
> 100,000,000 1 105 8
Total 18 490 2 613 %
Owner occupied 70,0%
LTV buckets Second homes / Holiday houses 0,2%
Indexed LTV Loan balance (mill.) % Buy to let / Non owner occupied houses 0,1%
≥ 0 ≤ 40 130 517 20,5 % Other 29,7%
40 ≤ 50 89 665 14,1 % Total 100,0%
50 ≤ 60 146 787 23,1 %
60 ≤ 70 134 240 21,1 % Repayment Type
70 ≤ 80 119 753 18,8 % %
80 ≤ 90 9 020 1,4 % Amortization 78,9 %
90 ≤ 100 2 811 0,4 % Interest only* 21,1 %
>100 2 747 0,4 % Total 100,0 %
Total 635 541 100,0 % *No principal payments for a limited period of time.
61Portfolio Characteristics cont.
Seasoning
% Non Performing
Up to 12months 17,9 %
≥ 12 - ≤ 24 months 13,3 %
Non performing loans 0,12 %
≥ 24 - ≤ 36 months 12,0 %
≥ 36 - ≤ 60 months 19,5 %
≥ 60 months 37,3 % Arrears
Total 100,0 % ≥ 30 - < 60 days 0,14 %
Interest Rate Type ≥ 60 - < 90 days 0,03 %
Fixed Rate 6,4 % ≥ 90 - < 180 days 0,03 %
Floating Rate 93,6 %
≥ 180 days 0,08 %
Geographical Distribution
Loan balance (mill.) %
Østfold 36 276 5,7 %
Akershus 124 998 19,7 %
Oslo 157 665 24,8 %
Hedmark 11 294 1,8 %
Oppland 17 922 2,8 %
Buskerud 37 693 5,9 %
Vestfold 40 822 6,4 %
Telemark 11 913 1,9 % Eastern Norway: 67 %
Aust-Agder 7 586 1,2 %
Vest-Agder 9 609 1,5 % Western Norway: 15 %
Rogaland 38 606 6,1 %
Northern Norway: 8%
Hordaland 48 227 7,6 %
Sogn og Fjordane 1 394 0,2 % Southern Norway: 5%
Møre og Romsdal 9 567 1,5 %
Trøndelag 33 294 5,2 %
Mid-Norway: 5%
Nordland 23 096 3,6 %
Troms 17 782 2,8 %
Finmark 7 786 1,2 %
Svalbard 8 0,0 %
Total 635 541 100,0 %
62Cover Pool Sensitivity Analysis and Overcollateralisation
History
Stresstest - House price decline
House price decline Current 10 % 20 % 30 %
Total cover pool balance (nominal, NOKbn) 635 541 635 541 635 541 635 541
WA indexed LTV (%) 54,5 59,6 67,0 76,6
Eligible cover pool balance (nominal, NOKbn) 634 878 621 257 598 335 562 197
Total outstanding covered bonds (nominal, NOKbn) 427 158 427 158 427 158 427 158
Eligible overcollateralization 48,6 % 45,4 % 40,1 % 31,6 %
Cover Pool Overcollateralisation History
160%
155% 148,8 %
150%
145%
140%
135%
130%
125%
120% 115,3 %
115%
110%
104,2 %
105%
100%
OC Cover Pool OC Rating requirement
Latest over-collateralisation requirement for AAA/Aaa rating (as per 31 December 2019):
• S&P: 4.16 %
• Moody’s: 0%
63Non Performing Loans in DNB Boligkreditt AS
90+ days in arrears
0,40%
0,35%
0,30%
0,25%
0,20%
0,15%
12 bp
0,10%
0,05%
0,00%
90+ days arrears
64Green Bond Allocation Report December 2019
65Green Bond Impact Report August 2019
66Covered Bonds Issued by DNB Boligkreditt AS Qualifies
for Level 1-Assets Pursuant to LCR-regulation (Slide 1 of 2)
Covered bonds issued by DNB Boligkreditt AS fulfil the requirements to qualify as
Level 1-assets pursuant to Commission Delegated Regulation (EU) 2015/61
regarding liquidity coverage requirement for credit institutions (“LCR-regulation”).
With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS
confirms the following:
• Covered bonds issued by DNB Boligkreditt AS meet the requirements to be
eligible for the treatment set out in Article 129(4) of Regulation (EU) No
575/2013 (“CRR”) and the requirements referred to in Article 52(4) of Directive
2009/65/EC, cf. the European Commission’s website:
http://ec.europa.eu/finance/investment/legal_texts/index_en.htm
• The exposures to institutions in the cover pool meet the conditions laid down
in Article 129(1)(c) and in Article 129(1) last subparagraph of CRR
67Covered Bonds Issued by DNB Boligkreditt AS Qualifies as
Level 1-Assets Pursuant to LCR-regulation (Slide 2 of 2)
With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS
confirms the following (cont.):
• DNB Boligkreditt AS gives the information required in Article 129(7) of CRR
to its investors
• Covered bonds issued by DNB Boligkreditt AS are assigned a credit
assessment by a nominated ECAI which is at least credit quality step 1 in
accordance with Article 129(4) of CRR, and the equivalent credit quality step
in the event of short term credit assessment
• The cover pool does at all times meet an asset coverage requirement of at
least 2% in excess of the amount required to meet the claims attaching to
the covered bonds issued by DNB Boligkreditt AS
68ECB Eligibility and CRD-Compliance of Covered Bonds
Issued by DNB Boligkreditt AS
• All covered bonds issued by DNB Boligkreditt AS fulfil the eligibility criteria for
marketable assets set by the Eurosystem and are thus eligible for Eurosystem monetary
policy operations.
• The Eurosystem set additional criteria for own use of eligible instruments in the
Eurosystem monetary policy operations. In the case of covered bonds, the instruments
must be issued in accordance with the criteria set out in Part 1, points 68 to 70 of Annex
VI to Directive 2006/48/EC. The covered bonds issued by DNB Boligkreditt AS fulfil these
criteria, but the Eurosystem has not checked the fulfilment of these conditions for
Norway, since Norway is not part of the EU. Therefore, covered bonds issued by DNB
Boligkreditt AS are marked with a "N/A" what regards ‘own-use covered bonds’ in ECB's
eligible asset database.
• DNB Boligkreditt AS confirms that the covered bonds it issues are compliant with
the CRD-requirement set forth in the Eurosystem guidelines. In addition, DNB
Boligkreditt AS confirms that it gives the information required in Regulation (EU) No
575/2013 ("CRR") article 129 (7) to its investors, so that the covered bonds issued by DNB
Boligkreditt AS are eligible for the preferential treatment set out in CRR article 129 (4).
69Appendix
Appendix B:
The Norwegian Mortgage Market
70The Norwegian Residential Mortgage Market
• Nearly 80% of Norwegians own their home:
• Few mortgages are buy-to-let.
• Norway is primarily a floating interest rate market:
• The large majority of mortgages originated by DNB are floating rate.
• Rates on floating rate mortgages can be reset at any time and at the bank’s own
discretion, by giving debtors six weeks notice.
• Loans are normally underwritten with a term of 15-25 years:
• Average size for new mortgages originated by DNB is approximately NOK 1,000,000
(EUR 110,000).
• In Norway, all borrowing costs are deductible from taxable income at
the current rate of 23%:
• Households are therefore better able to withstand an increase in interest rates.
Source: Finance Norway - FNO
71Appendix
Appendix C:
Capital and Tier 1
72Capital Adequacy Across the Key Relevant Entities
DNB has to meet all capital requirements on DNB ASA group level (“DNB”), DNB Bank Group level
(“DNB Bank Group”) and DNB Bank ASA solo level (“DNB Bank”)
CET1 and Total Capital Ratio
Per 31.12.2019
26.3%
24.4%
22.9%
18.6% 19.3%
18.3%
DNB DNB Bank Group DNB Bank ASA
CET1 Total Capital Ratio
73Overall Capital Requirements under SREP
• Pillar 1 capital requirements in Norway consist of minimum requirements and
combined buffer requirements.
• As a result of the SREP, the supervisors may decide on additional capital add-on (Pillar
2), which together with the Pillar 1 requirements form the Overall capital
requirement.
• If there is a breach of the combined buffer requirements under Pillar 1, there will be
automatic restrictions on dividends etc. (ref. CRD IV article 141).
• However a breach of the overall capital requirements under SREP will not cause
automatic restrictions1):
• The Bank will have to present a plan to the NFSA how to restore the capital ratios
• If the plan is not sufficient, the NFSA will consider other measures.
• The measures will depend on the reasons behind the breach
1) In a consultation paper dated 27 April 2018, the Norwegian FSA suggested to include the Pillar 2 requirements in the calculation of the MDA
trigger level. The Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted.
74Pillar 2 requirements in Norway not included in the MDA
Trigger Level
• MDA restrictions will only apply if there is a breach of the Pillar 1 requirements
(Minimum capital requirements + Combined buffer requirements)
• Pillar 2 requirements in Norway currently do not influence the MDA trigger level
• Stated in a letter from the Ministry of Finance dated 15 January 2016
• Confirmed by the Norwegian Financial Supervisory Authority (NFSA) in a response letter dated
15 February 2016, and stated in a circular from the NFSA dated 27 June 2016
• In a consultation paper dated 27 April 2018, the NFSA suggested to include the Pillar 2
requirements in the calculation of the MDA trigger level. The Ministry of Finance has
not yet expressed its view on the proposal, therefore, it is uncertain whether the
proposal will be adopted.
75DNB’s Solid Profitability Should Ensure AT1 Coupon
Payments
Profit Before Tax Dividend Share buy-back AT1 Coupon Payments
40
35
31,9
31,2
29,0
30 26,9
25 23,4
19,3
20 17,1
15,2 5,2
15 3,9
3,8
10 9,3
14,1
7,3 13,2
11,4
5 2,9
0,5 1,0 1,0 1,1
0,1
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
DNB will give due consideration to
Dividend payments on ordinary shares and coupon
the capital hierarchy and look to
payments on Additional Tier 1 (AT1) instruments are at the
discretion of the issuer preserve the seniority of claims
going forward**
* Share buy-back in 2019
Dividend for 2019, to be paid in 2020 ** Statement given at the DNB Capital Markets Day 27 November 2014
76Leverage Ratio Requirement
• Norwegian leverage ratio requirement effective as from 30 June 2017:
• Minimum leverage ratio 3% 1)
• Bank requirement 2%
• SIFI requirement 1%
Total SIFI/DNB requirement 6%
• As at 31 December 2019, DNB Group reported a leverage ratio of 7.4 %
Well above regulatory requirement
• A breach of the leverage ratio requirements will not trigger automatic
restrictions on AT1 coupon payments.
• If there is a breach of the leverage ratio requirement, the financial
institution will have to present to the NFSA a plan how to restore the
leverage ratio.
Regulation dated 20 December 2016
1) Requirement for credit institutions such as DNB Boligkreditt AS.
77ADI – Available Distributable Items
• Items available for distribution is defined in the Norwegian Public Limited
Company Act:*
Following this definition, the ADI level is calculated as follows:
ADI = total equity – share capital – fund for unrealized gains
• For 2018 DNB has decided also to deduct additional tier 1 capital
from the ADI.
DNB Bank ASA (31 December 2018):
ADI = NOK 177bn – 18bn – 2bn – 16bn (AT1) = NOK 141bn
=> Due to the significant amount available for distribution, we don’t assess the
ADI as a potential restriction for coupon payments.
* The Norwegian CRD IV Regulation does not include any definition of ADI
78Appendix
Appendix D:
Additional Slides
- Financial performance and Other information
79Solid performance in all customer segments
Personal customers – stable profits driven by interest rate hikes and continued investments in digital distribution channels
Small and medium-sized enterprises – profitable growth reflected in high net interest income and other income
Large corporates and international customers – solid development in income and reduced non-core portfolio
Pre-tax operating profit
NOK million
11 422
9 995 9 914 10 186
9 662 9 660
9 043
7 847
6 905
5 899
5 240
4 762
2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019
Personal customers Small and medium-sized Large corporates and
enterprises international customers
Before impairment
80Healthy asset quality – positive development in risk numbers
94.3 per cent of the exposure is low risk (stage 1), improved from 94.0 per cent in 4Q18
Net impairment losses of NOK 2 191 million for the year, 0.13 per cent of average lending
Stable macroeconomic drivers in the quarter
Impairment of financial instruments Maximum exposure (on and off-balance sheet items),
per customer segment net of accumulated impairment losses
Amounts in NOK million
Stage 1 Stage 2 Stage 3
Full year Full year
NOK 2 125 billion NOK 110 billion NOK 18 billion
4Q19 3Q19 2019 2018 (-18) (-2) (-3)
Personal customers (103) (73) (353) (318)
Small and medium-sized
enterprises (143) (16) (595) (566)
94.3%
Large corporates and
4.9%
international customers 68 (1 159) (1 240) 1 022
0.8%
Total (178) (1 247) (2 191) 139
81Profitable growth and solid asset quality
Improved cost/income ratio due to healthy growth in income – positive jaws
Earnings per share up 6.7 per cent from 2018 – increase in net profit combined with share buy-backs
Dividend per share up 9.1 per cent from 2018
Return on equity Cost/income ratio Earnings per share Dividend per share
Per cent Per cent NOK NOK
15.54 9.00
11.7 11.7 44.2 43.8 8.25
14.56
42.2
10.8 40.9 7.10
12.84
10.1 5.70
11.46
2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019
82Disclaimer (1/2)
NOT FOR DISTRIBUTION IN THE UNITED STATES, EXCEPT PURSUANT TO APPLICABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
OF THE U.S. SECURITIES ACT OF 1933.
This presentation (hereinafter referred to as the “Presentation”) has been prepared by DNB Bank ASA (the “Company” or the “Issuer” and together with its
consolidated subsidiaries the “Group”) solely for the purpose of providing introductory information in connection with the contemplated offering of bonds by the Issuer
(the “Transaction”).
This Presentation is strictly confidential and may not (in whole or in part) be reproduced, distributed, passed on, or the contents otherwise divulged, directly or
indirectly, to any other person (excluding an investment professional’s advisers) without the prior written consent of the Issuer. This Presentation is for information
purposes only and is not meant to be complete or exhaustive. This Presentation does not in itself constitute an offer to sell or a solicitation of an offer to buy any of
the securities described herein. This Presentation has not been reviewed or approved by any regulatory authority or stock exchange. The distribution of this
Presentation into jurisdictions other than Norway may be restricted by law. This Presentation does not constitute or form part of any offer or invitation to sell or issue,
or any solicitation of any offer to acquire any securities offered by any person in any jurisdiction in which such an offer or solicitation is unlawful. Neither this
Presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. Persons into whose possession this Presentation comes
should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any
such jurisdiction.
This Presentation contains information obtained from third parties. As far as the Issuer is aware and able to ascertain from the information published by that third
party, no facts have been omitted that would render the reproduced information to be materially inaccurate or misleading. This Presentation contains certain forward-
looking statements relating to the business, financial performance and results of the Group and/or the industry in which it operates. Forward-looking statements
concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words “believes”, “expects”, “predicts”,
“intends”, “projects”, “plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-looking statements contained in this
Presentation, including assumptions, opinions and views of the Issuer or cited from third party sources are solely opinions and forecasts which are subject to risks,
uncertainties and other factors that may cause actual events to differ materially from any anticipated development. Neither the Issuer nor any of its advisors, parent
or subsidiary undertakings or any such person’s officers or employees provides any assurance that the assumptions underlying such forward-looking statements are
free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the
forecasted developments. The Issuer does not assume any obligation, except as required by law, to update any forward-looking statements or to confirm these
forward-looking statements to the Issuer’s actual results.
AN INVESTMENT IN THE ISSUER INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE ISSUER TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE
EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES
ASSOCIATED WITH THE ISSUER’S BUSINESS, SEGMENTS, DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND
RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND
FOREIGN LAWS AND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS, FLUCTUATIONS IN CURRENCY EXCHANGE
RATES AND INTEREST RATES AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION.
83Disclaimer (2/2)
To the best of the knowledge of the Issuer, the information contained in this Presentation is in all material respect in accordance with the facts as of the date hereof.
However, no independent verifications have been made. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any
information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or
misstatements contained herein, and, accordingly, none of the Issuer, any of its parent or subsidiary undertakings or any such person’s advisors, officers or
employees accepts any liability whatsoever arising directly or indirectly from the use of this Presentation. By attending or receiving this Presentation you
acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Issuer and that you will conduct your own
analysis and be solely responsible for forming your own view of the potential future performance of the Group’s business.
In the event this Presentation is distributed in the United Kingdom, it shall only be communicated to persons who have professional experience, knowledge and
expertise in matters relating to investments and are "investment professionals" for the purposes of article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 and only in circumstances where, in accordance with section 86(1) of the Financial and Services Markets Act 2000 ("FSMA") the
requirement to provide an approved prospectus in accordance with the requirement under section 85 FSMA does not apply. Consequently, the Investor understands
that the offering of bonds may only be made to "qualified investors" for the purposes of sections 86(1) and 86(7) FSMA, or to limited numbers of UK investors, or only
where minima are placed on the consideration or denomination of securities that can be made available (all such persons being referred to as "relevant persons").
This Presentation is only directed at qualified investors and investment professionals and other persons should not rely on or act upon this Presentation or any of its
contents. Any investment or investment activity to which this communication relates is only available to and will only be engaged in with investment professionals.
IN RELATION TO THE UNITED STATES AND U.S. PERSONS, THIS PRESENTATION IS STRICTLY CONFIDENTIAL AND IS BEING FURNISHED SOLELY IN
RELIANCE ON APPLICABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED. THE
BONDS HAVE NOT AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES, OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS, UNLESS AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT IS AVAILABLE. ACCORDINGLY, ANY OFFER OR SALE OF BONDS WILL ONLY BE
OFFERED OR SOLD (I) WITHIN THE UNITED STATES, OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS, ONLY TO QUALIFIED
INSTITUTIONAL BUYERS (“QIBs”) IN OFFERING TRANSACTIONS NOT INVOLVING A PUBLIC OFFERING AND (II) OUTSIDE THE UNITED STATES IN
OFFSHORE TRANSACTIONS IN ACCORDANCE WITH REGULATION S. ANY PURCHASER OF BONDS IN THE UNITED STATES, OR TO OR FOR THE
ACCOUNT OF U.S. PERSONS, WILL BE DEEMED TO HAVE MADE CERTAIN REPRESENTATIONS AND ACKNOWLEDGEMENTS, INCLUDING WITHOUT
LIMITATION THAT THE PURCHASER IS A QIB.
There may have been changes in matters which affect the Issuer subsequent to the date of this Presentation. Neither the delivery of this Presentation nor any further
discussions of the Issuer with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer
since such date. This Presentation is subject to Norwegian law, and any dispute arising in respect of this Presentation is subject to the exclusive jurisdiction of
Norwegian courts with Oslo city court (Nw: Oslo tingrett) as exclusive venue.
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