Investor Presentation - First nine months 2022 - Danske Bank
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Investor Presentation First nine months 2022
Investor Presentation – First nine months 2022
Agenda
01. Danske Bank – brief overview 2–6
02. Financial highlights – first nine months 2022 7 – 13
03. Business & Product Units 14 – 17
04. ESG, Sustainability, Financial Crime Prevention 18 – 26
05. Credit Quality & Impairments 27 – 32
06. Capital 33 – 36
07. Funding & Liquidity 37 – 41
08. Credit & ESG Ratings 42 – 45
09. Tax & Material extraordinary items 46 – 48
10. Contact info 49
1
Investor Presentation – First nine months 2022
We are a Nordic universal bank with strong regional roots
Finland (AA+)
3.3 m 2,100+ 21,000+ 3rd largest
personal and business customers large corporate and institutional employees in Market share: 10%
customers 10 countries Share of Group lending: 8%
GDP growth 2022E: 2.0%
Assets under Management Deposits Loans Unemployment 2022E: 6.8%
DKK 660bn* >DKK 1,100 bn >DKK 1,800 bn Leading central bank rate: 0.75%
Norway (AAA)
Denmark (AAA) Challenger position
Market leader Market share: 6%
Sound funding structure (DKK bn) Market share: 25% Share of Group lending: 11%
Share of Group lending: 44%
2,317 GDP growth 2022E: 2.8%
168 Senior & Unemployment 2022E: 1.8%
NPS bonds GDP growth 2022E: 3.0%
Unemployment 2022E: 2.7% Leading central bank rate: 2.25%
1,819 Leading central bank rate: 0.65%
Sweden (AAA)
1,187 Deposits
Challenger position
Bank loans 714 Market share: 6%
Share of Group lending: 12%
GDP growth 2022E: 2.4%
Bank mortgages 395 Unemployment 2022E: 7.4%
252 Covered bonds
Leading central bank rate: 1.75%
RD mortgages 710 710 Issued RD bonds
Northern Ireland (AA)
Market leader
Market share Personal: 19%,
Business: 26%
Loans Funding
Share of Group lending: 3%
Note: Share of Group lending is before loan impairment charges and excludes Large Corporates & Institutions (19%) and Asset Finance (3%)
* Asset Management in LC&I 2
Investor Presentation – First nine months 2022
Update on the Estonia matter: Additional provision of DKK 14bn in Q3; Net Profit
revised to a net loss better than DKK 5.5 bn, incl. goodwill impairment of DKK 1.6 bn
Following discussions with the US and Danish authorities, DanskeBank is now able to make a reliable estimate of a potential
resolution, which amounts to DKK 15.5bn and includes the provision of DKK 1.5bn recognized in 2018 . While there is still
uncertainty around timing and whether a resolution will be reached, Danske Bank is working towards a resolution before the end
of this year.
The Board has decided to cancelthe remaining dividend from 2021 and will not propose to the AGM in 2023 to pay out dividend
for 2022.
Out of the capital charge in the form of a Pillar 2 add-on of DKK 10bn related to the Estonia matter, DKK 7.5bn related to
reputational risks has been released on the basis of dialogue with the Danish FSA.
CET1 ratio stand at 16.9% and our capital target for CET1 of above 16% in the short-term and total capital target of above 20% is
maintained
Net profit outlook for 2022 is revised down from DKK 10 –12bn to a net loss better than DKK 5.5 bn. The outlook includes a
goodwill impairment charge in our insurance business of DKK 1.6bn.
3
Investor Presentation – First nine months 2022
Traction towards targets remains positive across our sustainability indicators
Sustainable finance Sustainable operations Impact initiatives
Responsible Sustainable Governance & Employee Environmental Entrepreneur- Financial
investing financing integrity well-being & footprint ship confidence
diversity
2023 DKK 150bn in DKK 300bn in Over 95% of More than 35% Reducing our CO2 10,000 start-ups 2m people
Targets funds that have sustainable employees trained women in senior emissions by & scale-ups supported with
sustainability financing – and annually in risk leadership 40% compared to supported with financial literacy
objectives 1) and setting Paris and compliance positions and an 2019, towards growth and impact tools and
DKK 50bn invested Agreement aligned employee 60% by 2030 tools, services expertise (since
in the green climate targets for engagement score and expertise 2018)
transition by Danica our lending portfolio of 77 (since 2016)
Pension
Latest DKK 53.5bn * DKK 264bn * 96% trained 33% women xx%
– 69%
vs. 20XX, X,XXX
7,059* X,X
2.1mm*
status in sust. funds (art. 9) for 2021 2)
+ 2030 emission targets
* indicates DKK 37.0bn * disclosed for shipping, 75
Q3 update by Danica Pension utilities and oil & gas engagement score
1) This is a 2030 target to have at least DKK 150bn in investment funds that have sustainability objectives ( article 9 funds).
2) Over-performance in 2021 was related to COVID-19 and reductions in travel. 4Investor Presentation – First nine months 2022
Our Path to Financial Crime Transformation
2020 - 2022 2023
A comprehensive We automate our
Group-wide Financial We continue our Policies and We refresh due transaction monitoring
Crime Plan is launched ongoing dialogue instructions are diligence data of to ensure all-in scope
covering all initiatives We continue to with regulators further updated to 2.6m customers customer activity is
needed to meet significantly change for transparency and increase clarity and against a new and subject to appropriate
regulatory requirements. leadership and oversight throughout facilitate compliance improved standard automated monitoring
The plan is shared with governance our remediation with regulations covering 99.9% of for potential financial
the DFSA structures process targeted customers crime
We hire International We increase financial An extensive culture We lift and digitalise By increased use of We fully screen We progress All initiatives on
experts into key crime awareness and change is further our KYC and due technology and data against national, EU implementation of the Group
positions and knowledge across the implemented to diligence processes we detect, investigate and global sanctions our Group-wide Financial Crime
functions. Specialised Group through annual integrate compliance and increase data and analyse potential lists to ensure that we Financial Crime Plan to be
units are established to targeted and into our DNA and the coverage and quality, financial crime risks and our customers do Plan and extend it to completed by end
manage financial crime specialised financial way we work which gives us deeper faster and more not conduct business also cover Fraud, of 2023*
risks and strengthen crime trainings understanding of our effectively, increasing that breaches Anti-Bribery and
financial crime customers and ability our response rate to sanctions Corruption and Tax
controls to identify financial potential threats Evasion
crime faster
*Completion means – Fundamental controls in place/Ability to foresee and handle financial crime issues/Meet applicable regulatory requirements
5Investor Presentation – First nine months 2022
Revised net profit outlook for 2022*: Adjusted for additional provision for the Estonia
matter and goodwill write down, we now expect net loss better than DKK 5.5 bn
We continue to expect income from core banking activities to be higher in 2022, as higher net interest income
driven by good economic activity and higher interest rates will more than offset lower capital market and
Revised investment-related fee income.
Income 27 Oct 2022 Net income from insurance business and trading activities are expected below normalised levels based on
significantly lower income in the first nine months of the year and a stabilisation in income in the fourth quarter
subject to market conditions. The degree of uncertainty is higher than usual.
Including the booking of the provision for the Estonia matter, the impact from the solution to the debt collection
case and goodwill write down, total expenses are expected to be around DKK 41.7 billion.
Revised
Expenses
27 Oct 2022 Excluding the provision for the Estonia matter, the impact from the solution to the debt collection case and
goodwill write down, we expect costs in 2022 to reflect our continued focus on cost management and to be
around DKK 25.5 billion, including sustained elevated remediation costs.
Given our overall strong credit quality, loan impairments are expected to be below normalised level, including
Impairments Maintained the solution to the debt collection case.
We have revised the outlook for net profit of DKK 10-12 billion to a net loss better than DKK 5.5 billion due to
booking of additional provision for the Estonia matter and goodwill write down. The outlook includes the gains
Revised
Net profit * 27 Oct 2022
from MobilePay, Danske Bank International and Danica Norway.
For our 2023 financial ambitions, we maintain our ambition of a RoE of 8.5 to 9 percent in 2023.
* Note – The outlook is subject to uncertainty and depends on economic conditions.
6Financial highlights – first nine months 2022
Investor Presentation – First nine months 2022
Highlights – Good activity, stringent execution and positive impact from rates and
strategic pricing initiatives underpin commercial progress
Good commercial progress driving uplift in core banking
income, as volume growth remains robust
Solid capitalisation on the back of prudent capital
management with CET1 ratio at 16.9% Solid lending uplift +7% Y/Y
DKK 27.2 bn (+4% YTD)
Core banking income (NII + fee) LC&I + 33%, and traction on market shares
Strong credit quality despite macroeconomic uncertainty
in Denmark
Underlying cost progress supporting foundation for ’23
targets – FTEs outside AML down 8% since peak
Trading income recovered in Q3 despite another period of
financial market turmoil. Danica impacted by goodwill write
down in Q3
Good traction on underlying DKK 368m in Q3
ESG reporting received “A” rating from Position Green and cost development loan impairments
launch of new ESG investment funds. (down 4% QoQ, excl. debt collection) (6bps YTD, incl. debt collection)
NII (DKK bn) Group lending (DKK bn, nominal)
+9% +2%
6.3 1,921
5.8 1,884
Good progress on solution for legacy
Continued progress on cases, incl. additional provision of
sustainabilitystrategy and targets DKK 14 bn for the Estonia matter
Q2-22 Q3-22 Q2-22 Q3-22
8Investor Presentation – First nine months 2022
Net interest income up by 8% YoY driven by repricing, volumes and higher rates;
trading/insurance impacted by market turmoil; credit quality remains resilient
Key points, 9M 22 vs 9M 21 Income statement and key figures (DKK m)
• NII uplift from repricing initiatives and continually improving trend in lending 9M 22 9M 21 Index Q3 22 Q2 22 Index
volumes as well as recent rate hikes from CBs across our jurisdictions
Net interest income 17,746 16,498 108 6,307 5,810 109
• Fee income from generally high activity offset lower ECM and investment-
related fees Net fee income 9,536 9,700 98 2,999 3,157 95
• Trading income impacted by volatile financial markets and valuation effects,
while Danica was particularly impacted by valuation effects Net trading income 679 3,111 22 503 -390 -
• Writedown of goodwill in Danica due to higher applied discount rate
Net income from insurance business -323 1,576 - -286 -122 -
• Improved underlying cost development, absent debt collection impact and
despite higher remediation and litigation costs Other income 1,203 623 193 244 291 84
• Strong credit quality continues to lead to single-name reversals, while
macro models and additional PMAs mitigate tail risk Total income 28,840 31,509 92 9,767 8,746 112
Operating expenses 19,570 18,874 104 6,777 6,421 106
Key points, Q3 22 vs Q2 22 Profit before loan impairments, GW & provision 9,270 12,635 73 2,990 2,325 129
• NII up QoQ, benefitting from recent rate hikes as well as continued lending Provision for Estonia matter 14,000 - - 14,000 - -
growth for business customers, particularly large corporates
• Fee income lower, as high activity-related fees were countered by a general Impairment charges on goodwill 1,627 - - 1,627 - -
slowdown in the housing market and reduced capital markets-related fees Loan impairment charges 794 587 135 368 192 192
• Trading income in LC&I recovered while Danica remained impacted by
adverse financial markets, as well as valuation effects and a product related Profit before tax, core -7,151 12,048 - - 13,005 2,133 -
one-off.
• Operating expenses improved, when disregarding the DKK 600m debt Profit before tax, Non-core -10 23 - -28 31 -
collection one-off underpinning the progress on underlying efficiency
Profit before tax -7,161 12,071 - - 13,033 2,164 -
• Additional provision of DKK 14bn for the Estonia matter, and write-down of
goodwill in Danica due to higher applied discount rate Tax 2,080 2,805 74 760 458 166
• Strong credit quality led to continually low impairments despite DKK 650m
one-off charge and further macro model impairments. PMAs maintained Net profit -9,241 9,266 - - 13,792 1,705 -
9Investor Presentation – First nine months 2022
NII: Solid credit demand, positive effects from CB rate hikes, and repricing initiatives
continue to support the improving NII trend
Highlights Net interest income, YTD-22 vs YTD-21 (DKK m)
-320
• Net interest income continued the positive trend, as repricing initiatives were -91
17,746
-267
further supported by higher central bank rates, and lending volumes
2,072
contributed positively YoY across all Nordic segments
1,002 -1,199
16,515
• Higher funding costs along with timing effects due to notice period in PC -118 153
impacted lending margin. Avg. lending margin in LC&I affected by volume
growth from higher rated customers coupled with timing effects from floored
credit facilities as rates have turned positive
9M21 Lending Lending Interest Deposit Deposit Internal Other FX + Day 9M22
• Significant improvement in deposit margins in Q3 volume margin related volume margin Bank / FTP effect
fees
Net interest income, Q3 22 vs Q2 22 (DKK m) Margin development (bp)
1.0 Personal Customers Business Customers LC&I
0.88
-149 6,307
-44 29 0.8 0.76
Deposit
0.6 0.48
0.38 0.40
978 0.4 0.23 0.26 0.38
5,810 106 0.2 0.18
-475 0.0
Q321 Q421 Q122 Q222 Q322
16 35
1.2 1.12 1.14
1.10 1.10
1.1
0.96
Lending
1.0
0.86 0.85 0.85
0.9
0.8 0.72
Q2 22 Lending Lending Interest Deposit Deposit Internal Other FX + Day Q3 22
volume margin related volume margin Bank / FTP effect 0.0
fees Q321 Q421 Q122 Q222 Q322
10Investor Presentation – First nine months 2022
Fee: Strong fee performance in core banking activities driven by activity fees, mitigating
impact from lower AuM and lower activity in capital markets
Highlights Net fee income (DKK m)
Activity-driven fees / money transfers, accounts etc. 9,700
Money transfers,
9,536 account fee,
• YoY: Up 22% from continually strong trend for everyday cash management
banking services at LC&I & BC (FX and cash mgmt.) and other fees
combined with continued strong general customer 2,359 Lending &
activity 2,869 guarantees
Capital
Lending and guarantees Markets
Investment fees
• YoY: Up 9%, high level of remortgaging activity on the 1,896
back of higher interest rates
• QoQ: Down 7% due to lower housing market activity, 2,065
while remortgaging activity remains high
1,402
Capital markets 886
• Slowdown in primary ECM/DCM markets has 3,157 2,999
accelerated during the course of the year as customer
951
preferences had shifted towards bank lending in LC&I 989
4,044 3,715 655
606
Investment fees 318 217
• YoY: Negative effect on lower asset under management 1,233 1,187
and reduced investment appetite among our customers
was mitigated by general uplift in AM fees YTD-21 YTD-22 Q2-22 Q3-22
11Investor Presentation – First nine months 2022
Trading: Improvement in Q3 driven by recovery in performance at Rates & Credit;
negative valuation effects in Northern Ireland
Highlights Net trading income (DKK m)
LC&I LC&I ex. xVA xVA PC & BC Other
3,111
• Historically high volatility in Nordic fixed income markets 197
affecting YTD trading income
497
• Improvement in Q3 in conditions for our fixed income 54
marketmaking franchise despite a reduction in risk
appetite and lower capital consumption amid continued
effects of high volatility and lower liquidity
679
• Demand for risk management solutions resulted in good
customer activity in Currencies
2,363 715
503
252
PC & BC
794 669
• Higher customer activity driven by increased foreign 71
250
exchange activity post the pandemic 30
-345
Other -659 -740 -73
• Transitory effects as rate increases drove mark-to- -172
market movements on the deposit hedging portfolio in -390
Northern Ireland which was partly countered by strong YTD-21 YTD-22 Q2-22 Q3-22
uplift in NII
* The first nine months of 2021 benefited from a gain of DKK 227m on the sale of VISA shares in the Group’s private equity portfolio
12Investor Presentation – First nine months 2022
Expenses: Underlying progress on efficiency despite continually high remediation costs;
significant impact from additional provision and goodwill write-down
Highlights Expenses, 9M-22 vs 9M-21 (DKK m)
35,197
• Progress on structural cost take-out with underlying costs down 4% 14,000
QoQ when adjusting for the one-off costs related to debt collection
19,570 1,627
legacy case
328
18,874 204
22 219 6 87 357
140
• Number of FTEs continued to decline. Adjusting for AML/FCP, FTEs
are down 8% from peak in Q3 20, reflecting efficiency gains and
underlying improvement
• Other costs up due to a partly normalisation of travelling, higher
amortisation costs and IT expenses, including a one-off related to re- 9M-21 One-offs Transfor- AML / Staff cost Perf. based Legacy Resolution IT & other 9M-22 (pre Danica Provision 9M-22
contracting and higher energy costs for servers mation Compliance ex. perf. comp. and remediation fee GW and Goodwill (Estonia
comp. sev. provision) matter)
FTEs (#,thousand) Expenses, Q3-22 vs Q2-22 (DKK m)
22,404
FTEs AML/Financial Crime Prevention FTEs debt collection one-off
20 19.5 19.3
18.9 18.8 18.8
19 18.5 18.4 14,000
18.1 17.9
18 6,777 1,627
6,421 600 6 263 89 54 25 13 144 600
17
4 3.5 3.6 3.6
3.1 3.1 3.1 3.1 3.2 3.3
3 6,177
2
1
Q2-22 One-offs Transfor- AML / Staff cost Perf. based Legacy Resolution IT & other Q3-22 (pre Danica Provision Q3-22
0 mation Compliance ex. perf. comp. and remediation fee GW and goodwill (Estonia
Q320 Q420 Q121 Q221 Q321 Q421 Q122 Q222 Q322 comp. sev. provision) related)
13Business & Product Units
Investor Presentation – First nine months 2022
Business units: Continued progress in PC DK and Business Customers
Key financial metrics Highlights
Total Income** NII Fee + Trading Lending*
PC DK: Solid NII uplift of 22% Q/Q as higher rates are
supported by remortgaging activity and improved market
110 102
103 105 102 101 YoY shares in lending (excl. RD). Customer flows continue to
YoY (index)
101
96
99
98 improve and the consideration rate among young customers
has also developed favorably (10% vs. 6% in Dec’21)
Personal
PC Nordic: Continued strategy of further enhancing
Customers 101 profitability through cross-selling and expanding product
122
DK & Nordic 107 103
100 QoQ offerings underpin fee development
98
QoQ (index)
90 95 99 99
Overall, good progress on increasing the share of customers
onboarded digitally to free up advisory time, further enabled
by digitalising day-to-day banking meetings
DK Nordics** DK SE NO FI
Total Income NII Fee + Trading Lending*
Continued momentum in lending volumes with uplift in
119 YoY 113 Denmark and Sweden supporting efforts to capture market
114 108
shares
YoY (index)
111
103 103
Ancillary income supported by cash management and
Business foreign exchange activities. Green product launches further
enable dialogue around costomers transition financing
Customers 109
113 QoQ 103 103 103
103 Activity through digital channels and self-service continues,
QoQ (index)
101
e.g. through increasing usage of our Marketplace module,
where 15% of all SE District customers have visited the
platform
BC DK SE NO FI
*In local currency and excluding fair-value effects in DK
15
** Total income adjusted for effects from the sale of DB LuxembourgInvestor Presentation – First nine months 2022
Business units: Good progress in LC&I driven by high activity; Danica impacted by
volatile financial markets
Key financial metrics Highlights
Asset under Management
Income breakdown (DKK bn) General Banking (index)
(index)
-1 0 1 2 3 4 5 6 7 8 9 10 11
Significant customer activity driven by close dialogue around
133 94
YoY risk management solutions and significant lending growth of
9M-22 QoQ 33% YoY
Continued support to fixed income customers, which means
9M-21 109 83 utilising less capital, despite challenging conditions for
LC&I market making services in Nordic fixed income markets
Solid investment fee despite lower AuM from financial
Q3-22
market turmoil
A leading Nordic market position according to the
Q2-22 Bloomberg League tables for arrangers of sustainable bonds
and sustainability-linked loans
NII Fee Trading ex. xVA xVA
Lending AuM
Asset under Management Premiums (insurance)
9M 22/ 9M 21 (DKKbn) Q3-22/Q2-22 (DKKbn)
(index)
Sound underlying business as premiums remain at a
9m-22 9m-21 Q3-22 Q2-22 YoY 95 98 relatively high level, and claims in H&A remained at a low
QoQ level
2.0
-0.1 -0.1 Negative investment results for life insurance products
-0.15
where Danica Pension has the investment risk primarily
81* 89
Danica 0.2
-0.4
driven by impact from volatile financial markets and
valuation effects
-0.3 Restatement of DKK 600m between H&A and Life
-0.9 insurance
Life insurance further affected by product-related one-off
Result, life H&A Result, life H&A charge of DKK 150m, while goodwill writedown is booked
insurance insurance
under group expenses
* Q3 includes restatement of ~600m between Life and H&A. * Includes the removal of DKK 22bn AuM from DA Norway sale 16Investor Presentation – First nine months 2022
Realkredit Danmark portfolio overview: Continued strong credit quality with
decreasing LTVs
Highlights Retail loans, Realkredit Danmark, Q3 22 (%)
Fixed rate (10 yrs-30 yrs) Interest-only ( ) = Q2-22
Portfolio facts, Realkredit Danmark, Q3 22
Variable rate (6m-10 yrs) Repayment
• Approx. 318,918 loans (residential and commercial)
• Average LTV ratio of 46% (44% for retail, 48% for commercial)
• We comply with all five requirements of the supervisory diamond for Danish 45% 49% 52%
53%
mortgage credit institutions (48%) (52%) (50%) (57%)
• 675 loans in 3- and 6-month arrears (-12% since Q2-22)
• 6 repossessed properties (Q2-22: 7)
• DKK 4 bn in loans with an LTV ratio >100%, including 55% 47% 51% 48%
DKK 3 bn covered by a public guarantee (52%) (48%) (50%) (43%)
LTV ratio limit at origination (legal requirement)
• Residential: 80% Stock of loans: New lending:
• Commercial: 60% DKK 444 bn (448bn) DKK 26 bn (26bn)
Total RD loan portfolio of FlexLån® F1-F4 (DKK bn) Retail mortgage margins, LTV of 80%, owner-occupied (bp)
153 148 Adjustable rate 1
144 146 142
134
124
113 110
104
95 92 89 84
75 72 69 69 71
67 64
143 138
111 106 118
86 101
68
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
1-2 yrs 3-4 yrs 5 yrs+ Fixed 1-2 yrs 3-4 yrs 5 yrs+ Fixed rate
2017 2018 2019 2020 2021 2022
rate
Repayment 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 fee income). 17Sustainability
Investor Presentation – First nine months 2022
Sustainability is an integrated element of our corporate strategy and our corporate
targets
Sustainability critical in Better Danske Bank’s 2023 sustainability strategy aim to drive Selected highlights
Bank plan to improve bank for all change by utilising the power of finance
stakeholders by 2023
Customers On average among top two
banks for customer • Focus areas reflect
satisfaction in everything
we do
material
sustainability issues
• Calibrated against
Society stakeholder
Operate sustainably,
ethically and expectations
transparently
• Supports our Better
Bank agenda and
transformation KPIs
Employees Women in leadership pos. • Embedding
An employee engagement sustainability in core
score of 77
business processes
• Leadership ambition
Investors on sustainable finance
RoE of 8.5-9% and a
cost/income ratio in the
mid-50s
19Investor Presentation – First nine months 2022
Continued progress on sustainability agenda in Q3 contributing to strong performance
New sustainable investment funds with diversification Successful campaign towards personal customers
• Five new Danske Invest funds for investors who want • Increased focus on our favourable products for energy
good diversification and a strong focus on sustainability renovation through the targeted campaign 'Flot & Godt‘
• Each fund has its own particular risk profile – but all • Results have included increased level of customer
must have at least 75% in sustainable investments meetings and increasing lending volumes
Increased focus on sustainability for investments #1 among Nordic Arrangers in Bloomberg’s Global League
• In line with the MiFID II regulations, we now evaluate our table
customers’ sustainability preferences when it comes to • Danske Bank continues to rank number one among
investments, making sure everyone takes a stand Nordic arrangers in the Bloomberg’s Global League Table
Financing for the world’s biggest offshore wind farm
Recognition of “outstanding” sustainability reporting
• Danske Bank recognised by Position Green for having • Danske Bank provided project financing for the
“outstanding” sustainability reporting (score of “A”), consortium behind the Hornsea 2 wind farm, which
together with just seven other listed companies in currently is the world’s largest offshore wind farm
Denmark comprising 165 turbines of 8MW each – able to provide
power to more than 1.4 million homes.
20Investor Presentation – First nine months 2022
On sustainable finance, Danske Bank aspires to Nordic leadership – our sustainable
finance framework has been developed to drive and integrate that ambition
Group ambition for
Be a leading bank in the Nordics on sustainable finance and the leading bank in Denmark
Sustainable finance
Sustainable financing: Sustainable investing:
• Business and
• DKK 300bn in sustainable financing by • Danica Pension: DKK 50bn invested in the
2023 green transition by 2023 and 100bn by 2030 commercial
KPIs and targets Group KPIs KPIs
• Paris-aligned corporate lending book; • Asset mgmt.: DKK 150bn in art. 9 by 2030
setting climate targets by 2023 • Net-Zero Asset Owner & Manager by 2050 1)
• Net-Zero Bank by 2050 1)
Guiding Align societal and business Enable our customers’ Measure and improve Engage and partner with
principles goals sustainability journey impact stakeholders
Key execution Products &
Advisory Distribution Brand & marketing Risk Management
levers solutions
Training & IT enablement & Communication &
Critical enablers Governance Data & insights
competencies BWOW disclosures
Regulatory
implementation Commercial integration Portfolio management and financial steering
1) As defined by commitments to Net-Zero Banking Alliance, Net-Zero Asset Owner Alliance and Net-Zero Asset Managers Initiative 21Investor Presentation – First nine months 2022
Deep dive: Overview of ESG integration in Danske Bank’s lending operations
• Multiple types of approaches are implemented to consider ESG factors both at company and portfolio levels
1. Position statements 2. Single-name ESG analysis 3. Portfolio-level ESG analysis
Our position statements are a key tool for aligning ESG analysis is conducted for all large corporate First decarbonisation targets covering high-emitting
with societal goals and communicating our approach clients using an internally prepared ESG risk tool sectors published – based on first carbon emission
to selected themes and sectors with elevated ESG Tool is developed around the concept of financial analysis of the loan book
risks materiality i.e. how the financial performance of the Carbon disclosures for key sectors published in
company might be affected by environmental and “Climate and TCFD progress update” report in June
social trends, legislation and factors 2021
External sources for the tool include:
Climate Human Arms & Agriculture
change rights defence
Financially material ESG ESG risk exposure and
factors management
Climate-related financial
Fossil Mining & Forestry ESG controversies risks and opportunities
fuels metals
22Investor Presentation – First nine months 2022
Danske Bank supports a range of international agreements, goals, partnerships
and standards relating to sustainability – some of these are listed below
Principles for Responsible Net-Zero Banking Alliance Net-Zero Asset Managers Net-Zero Asset Owner Principles for Responsible
Banking A worldwide initiative for banks Initiative Alliance Investment
Provide the framework for a that are committed to aligning An international group of asset Danica Pension joined the global An international investor
sustainable banking system. their lending and investment managers committed to UN-convened investor alliance network that supports the
They embed sustainability at the (treasury) portfolios with net- supporting the goal of net zero in 2020, thus committing to implementation of ESG factors
strategic, portfolio and zero emissions by 2050 or greenhouse gas emissions by transitioning its investment into investment and ownership
transactional levels, and across sooner – and setting 2050 or sooner, in line with portfolio to net-zero greenhouse decisions
all business areas. intermediate targets using global efforts to limit warming to gas emissions by 2050
science-based guidelines 1.5 degrees Celsius
Task force on Climate-related UN Global Compact Partnership for Carbon UN Environment Programme - The Paris Pledge
Financial Disclosures Accounting Financials Finance Initiative
A multi-stakeholder initiative A pledge to support and act
Has developed focusing on aligning business Provides carbon accounting A partnership between UN and accordingly in regards to
recommendations for more operations with ten principles in instructions for financial the global financial sector with the objectives of the Paris
effective climate-related the areas of human rights, labor, institutions. Danske Bank joined the aim of understanding Agreement to limit global
disclosures to promote more environment and anti-corruption in 2020 as the first major societal challenges, why they temperature rise to less than 2
informed investment, credit, and Nordic bank. matter to finance, and how to degrees Celsius
insurance underwriting address them
decisions
More information available at https://danskebank.com/sustainability/our-approach 23Investor Presentation – First nine months 2022
Financial Crime prevention - increase in number of full-time employees
Group headcount
~3,600
Full-time employees dedicated to the
financial crime prevention agenda*
2015 2016 2017 2018 2019 2020 2021 2022
7
Second Line
headcount
Employees working in
Financial Crime Compliance
127
Employees working in Group
Compliance**
Change in Culture
Tone from the top Revamped Code of Conduct New performance metrics New training programs
Enhanced
Whistleblowing Bonuses and
Culture council Programme compensat ions
* The 3,600 employees is the total of full-time employees working with financial crime prevention across Danske Bank Group
** Includes all Group Compliance staff across Financial Crime, Regulatory Compliance etc., excluding Northern Bank 24Investor Presentation – First nine months 2022
Committee governance for Compliance Risks
Financial Crime Remediation Steering Compliance Risk Conduct and Compliance
Committee Committee Committee
• Provides governance structure and • Second Line Committee responsible for • Board level committee that oversees the
delivery oversight of the Group’s Financial providing oversight and challenge of the Bank’s management of conduct and
Crime Plan management of compliance and conduct reputational risk, compliance and
• Supported by a Group FC Project risk on behalf of the ELT financial crime as well as other matters
Management Office to track and challenge • The committee reports to the Group All delegated by the Board
progress across Business Units Risk Committee • Responsible for reviewing all relevant
Board owned policies concerning
• Chaired by the Chief Compliance Officer of • Chaired by the Chief Compliance Officer
compliance, prior to Board approval
Danske Bank of Danske Bank
25Investor Presentation – First nine months 2022
Regulatory Engagements
• We engage in ongoing dialogue with our regulators through regular meetings with the Financial Supervisory
Authority (FSA) and Supervisory College to ensure aligned expectations and transparency between our regulators
and the Bank
Ongoing Dialogue
• We provide regular updates and engage in frequent interactions with the Danish FSA on our financial crime
transformational progress and remediation work and proactively share our remediation status with other Nordic
regulators
• We track closely all regulatory inspections and continue to work through regulatory orders we receive in an open
and transparent way with our regulators. Regulatory deliverables are formally documented and progress is
frequently communicated to relevant regulators
Regulatory • The Bank has completed and closed a number of orders received from inspections following the Estonia case and
Inspections is progressing in addressing orders received in relation to subsequent AML inspections
• All remaining orders and recommendations from regulators are incorporated and prioritised in our Financial Crime
Plan. We carry out targeted actions to rectify these issues and track them closely to completion. The Bank also
addresses topics that are not highlighted in the inspection findings but noted by the Danish FSA
• The Danish FSA, as well as other relevant FSAs, carry out supervisory oversight of the Bank’s remediation work
• Our recalibrated Financial Crime Plan was submitted to the Danish FSA in November 2021 (its completion date of
December 2023 remained unchanged) - the Danish FSA follows its implementation closely. Our other supervisors
Supervisory
receive updates on an ad-hoc basis
Oversight
• The Danish FSA carries out extensive supervisory oversight of the Bank’s financial crime transformation
programme. Implementation of the Bank’s substantial remediation work is overseen by an Independent Expert
assigned by the Danish FSA
26Credit quality & Impairments
Investor Presentation – First nine months 2022
Impairments: Continually strong credit quality and individual reversals, while prudent
buffers remain in place; modest macro-charges to reflect deteriorating outlook
Highlights Impairment charges by category (DKK bn)
• Credit quality remains strong with limited impact from the worsening macro 4.3
Credit quality deterioration: oil & gas Macroeconomic adjustments
backdrop, leading to overall net reversals when disregarding the DKK 0.65bn Credit quality deterioration: outside oil & gas Debt collection one-off
1.4
charge related to the closure of the legacy debt collection Post-model adjustments
0.7
• Macro outlook has been updated to reflect current uncertainties with increased 1.0
0.5 1.1
downside risk from inflation and interest rates, resulting in additional DKK 150m 0.8
booked in Q3 0.4
1.7 0.2
0.5 0.2 0.2 0.7
0.2
• Total allowance of DKK 19bn includes PMAs of DKK 6bn, as additional overlays of
DKK +2bn established since Covid-19 have been repurposed for macro -0.3 -0.1
-0.2
uncertainties. The PMA of DKK 250m established to account for potential lower -0.2
recovery in debt collection legacy cases has been reallocated in Q3 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022
PMAs Allowance account by stages (DKK bn)
6.4 Stage 1 ECL Stage 2 ECL Stage 3 ECL Stage 3 net exposure, % of total (rhs)
6.3
6.0 6.0 DKK bn
0.9 %
5.4 0.8 Agriculture
1.0 30 1.36
1.2 CRE 1.34
1.5 1.3 25
4.0 1.4 22.6 21.9
Construction & 20.4 1.32
0.2 0.4 2.3 19.8 19.8 18.8
1.3 0.0 Building materials 20 1.3 2.7
1.30
0.6 3.1 3.1
0.0 7.4 3.0
1.7
0.3
0.1 1.4 Oil & Gas 15
5.9 6.8
1.5 6.7 6.8
1.2 Personal Customers 7.1
10 1.04
1.1 Others
2.1 13.2 12.9 12.4 1.02
1.3 1.5 5 9.9 9.9
0.9 Model changes 8.7 1.00
0.0 0.0 0.0
0 0.00
2019 2020 2021 Q1 22 Q2 22 Q3 22 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022
28Investor Presentation – First nine months 2022
Strong footprint within retail lending
Lending by segment 1 Q3 22 (%) Credit exposure by industry Q3 22 (%)
Personal Customers DK Personal customers 35.4
Personal Customer Nordic Commercial property 11.3
Business Customers Public institutions 10.3
Asset Finance Co-ops & Non-profit 7.3
LC&I General Banking Financials 6.0
LC&I Other Capital goods 3.5
3% 0% Utilities and infrastructure 3.6
Northern Ireland
3% Consumer goods 2.9
Group Functions 25%
16% Agriculture 2.4
Services 2.5
Construction and building 2.0
3% Pulp, paper and chemicals 2.4
Pharma and medical devices 1.8
Shipping, oil and gas 1.5
Retailing 1.3
18% Automotive 1.1
Social services 1.1
31% Telecom and media 1.0
Other commercials 0.7
Transportation 0.7
Hotels and leisure 0.5
Total lending Metals and mining 0.6 Total credit exposure
of DKK 1,824 bn of DKK 2,587 bn
1. Total lending before loan impairment charges. 29Investor Presentation – First nine months 2022
Overall strong credit quality in portfolios exposed to current macro developments
CRE: Generally low exposure to property development Retail customers: Strong household finances and
Agriculture: Well-provisioned agriculture book
activities mortgage back-book mainly fixed rates for +5 years
DKK 65 bn in gross exposure of which 50% RD and 45% of RD back-book are 30yr fixed-rate mortgages,
DKK 296 bn in gross exposure and ECL ~1%
average stage 3 coverage ratio of 81% in Nordics and of the variable rates ~70% are fixed for 5 years
Segment gross exposure Segment gross exposure RD back-book Avg. LTV RD-retail
Non-residential Residential Property dev. Crops Dairy Pig breeding Mixed operations
56%
55% 41% 4% 33% 17% 15% 35% 45% 38%
Country gross exposure Country gross exposure 44%
0%
47% 27% 13% 7% 6% 58% 15% 25% 0% 50% 100%
1%
DK SE NO FI LC&I / Other DK SE NO FI LC&I / Other Fixed F5s Other LTV Home equity
• Historical lending growth modest (-4% 3Y-CAGR in • The credit quality of the portfolio has improved over • Average LTVs have been decreasing over the past
non-resi. since Q1-19, +3% in resi.) given caps and the past few years, recovering from legacy year supported by increasing house prices and call
concentration limits within sub-segments and exposures from the financial crisis feature of DK mortgages
markets, as well as for single-names, limiting • The current credit risk appetite takes into account • Affordability measures in our approval process
downside risks the volatility of the sector and remains in place. has been tightened, and debt-to-income (DTI) levels
• Due to our conservative approach, our SE exposure Furthermore, the group maintains strong remain stable overall
has remained stable, despite market growth, and underwriting standards on LTV, interest-only loans • Portfolio uncertainty risks are being mitigated by
book is well-diversified with lower concentration risk and interest rate sensitivity continuous monitoring and review of underwriting
over the past years • Post-model adjustments of DKK 0.8 bn have been standards covering interest rate-related stress of
• The group’s credit underwriting standards maintain made for potential future portfolio deterioration due affordability and other measures
strong focus on cash flows, interest rate sensitivity, to uncertainties such as African Swine Fewer (ASF), • Low near-term refinancing risk on RD flex loans.
LTV and the ability to withstand significant stress. Chinese imports and the RU/UA war • Post-model adjustments related to personal
• PMAs of DKK 1.3 bn made to cover uncertainties customers total DKK 1.4 bn
regarding the affect of rapid interest rate increases
and macroeconomic situation
30Investor Presentation – First nine months 2022
Fossil fuels (coal and oil) exposure
Key points, Q3 22
• This exposure to fossil fuels and includes customers involved in production, refining, and distribution (including shipping) of oil as well as utilities producing heat or power with coal.
• The exposure to oil majors will decrease by 50% by 2030 against 2020 levels. Customers’ transition plans are being assessed, and our customers in the distribution and refining
segments are generally progressing well on the transition, for instance by refineries switching to biofuels in refining or by gas stations investing in infrastructure for charging of electric
vehicles. Within oil-related exposures, the main risk lies with exposures other than oil majors. Since the end of 2019, these ne t exposures have been actively brought down 54% and are
down by 7% from Q3 last year.
• Power & heating utilities should reduce emissions per unit of electricity or heating by 30% by 2030 against 2020 levels. This entai ls an accelerated phase-out of coal.
• The exposure shown to utility customers is with any coal-based power production (DKK 35.3 bn.) and hereof more than 5% of revenues from coal fired power production (1.6 bn.).
Exposures have increased somewhat from the beginning of the year due to short-term financing needs driven by volatile energy markets and is likely to persist.
• For most customers, the use of coal is limited to a few remaining production facilities which are expected to phase -out over time.
Group gross credit exposure
Fossil Fuels Exposure (Coal and Oil) Oil-related net credit exposure, DKK bn: Development (excl. majors)
(DKK 2,609 bn)
Segment Net exposure -54%
(DKK m)
Crude and Product Tankers 3,115
-7%
Distribution and refining 8,043
33%exposure
Oil-related 9,916
2.2%
Oil majors 2,945
Offshore and services 6,971 15.1
2.2
28%
Power and heating utilities 35,302
with any coal-based production 7.6 7.5 6.9 6.8 6.8
4.8
Hereof customers with more 1,620
Fossil fuels exposure Other than 5% revenue from coal Q4 2019 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22
Total fossil fuel exposure 56,376
Of which covered by collateral
31Investor Presentation – First nine months 2022
Credit quality: Low level of actual credit deterioration
Stage 2 and 3 as % of net exposure Allowance account by business unit (DKK bn)
11 Stage 2 net exposure (% of Total, lhs) 4
PC BC LC&I N.I. Other (Non-core)
10
Stage 3 net exposure (% of Total, rhs)
22.8 23.3 23.3 23.0 22.7
9
3 20.6 19.8
8 18.8
7 6.08 5.8 5.5 5.5 5.4 5.2
3.6 3.4
6 5.20 3.6
2
5
4 1.20 10.0 10.1 10.3 10.4 10.2 9.8 9.8
0.95 9.6
3 1
2
1 5.1 5.9 5.7 5.6 5.7 5.5 5.8 4.8
0 0
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022
2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022
Breakdown of stage 2 allowance account and exposure (DKK bn) Gross stage 3 loans (DKK bn)
Allowance Gross credit Allowance as % of Individual allowance account Net exposure
account exposure gross exposure 54.3 52.6
48.8 47.4
Personal customers 1.8 920 0.19% 13.3 46.0
13.3
Agriculture 0.8 65 1.28% 12.9 13.4 12.4 35.8 34.9 33.4
Commercial property 1.6 296 0.53% 9.9 9.9 8.7
Shipping, oil and gas 0.0 41 0.05%
Services 0.2 65 0.35% 35.9 41.0 39.3
33.9 33.6
Other 2.7 1,219 0.22% 25.9 25.0 24.7
Total 7.1 2,606 0.27%
Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022
32Capital
Investor Presentation – First nine months 2022
Capital: Strong capital base; CET1 capital ratio of 16.9% (buffer of 4.4%)
Capital ratios, under Basel III/CRR (%) Current capital buffer structure (%)
23.0 22.4 Tier 2 Hybrid T1/AT1 Pillar II component (total 2.6%) CET1
Countercyclical capital buffer
2.4 21.3 21.1
2.4 Capital conservation buffer
2.2 2.5 2.5
2.3 18.1 SIFI buffer (O-SII)
2.0 2.0 2.6 12.4
2.0 CET1 Pillar II requirement
0.9
1.9 1.5 CET1 minimum requirement
2.5
CET1 target (above 16%)
18.3 CET1 Q3 2022 (16.9%) 3.0
17.7 16.9 16.6
13.6
12.0 1.6
At the end of June 2022, the
trigger point for MDA 4.5
restrictions was 12.4%
2020 reported 2021 reported Q3 2022 reported Q3 2022 Fully phased-
fully loaded* in regulatory
requirement** Q3 2022
CET1 development incl. all effects from Estonia related provision (%) Total REA (DKK bn)
CET1 cap. req. CET1 buffer Change in P2 861.7
17.1 17.6 0.5 1.1
0.4 0.2 16.9 16.9
0.3 1.7 0.9
4.5 4.3 3.5 4.4 17.2
0.9
845.1
12.6 13.3 13.3 12.4
Q2-22 REA Deduction FX & Other Q3-22 pre Provision Reversal Q3-22 incl. P2 relief Q3-22 incl.
for Danica provision (Estonia ’21and ’22 P2 add-on related to all Estonia Q2 2022 Credit risk Counterparty risk Market risk Q3 2022
(incl. GW) related) dividend (risk of fines) risk of fines effects
* Based on fully phased-in rules including fully phased-in impact of IFRS 9.
34
** Pro forma fully phased-in min. CET1 req. in June 2023 of 4.5%, capital conservation buffer of 2.5%, SIFI buffer requirement of 3%, countercyclical buffer of 2.0% and CET1 component of Pillar II requirement.Investor Presentation – First nine months 2022
Strong CET1 capital build-up since 2008; Available Distributable Items (ADI) well in
excess of DKK 100 bn
Common Equity Tier 1, 2008 – 2022 9M (DKK bn)
+ DKK 66 bn
144 152
143
126 130 134 133 133 127 133
119
107
77 79 85
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20181 2019 2020 2021 2022 9M
REA, CET1, profit and distribution (DKK bn; %)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 9M
REA 960 834 844 906 819 852 865 834 815 753 748 767 784 860 845
CET1 ratio 8.1% 9.5% 10.1% 11.8% 14.5% 14.7% 15.1% 16.1% 16.3% 17.6% 17.0% 17.3% 18.3% 17.7% 16.9%
Net profit 1.0 1.7 3.7 1.7 4.7 7.1 13.02 17.72 19.9 20.9 15.0 15.1 4.6 12.9 -9.2
Distribution to shareholders 3 0 0 0 0 0 2.0 10.5 17.1 18.9 16.3 7.6 0 1.7 1.7 0
Total assets 3,544 3,098 3,214 3,424 3,485 3,227 3,453 3,293 3,484 3,540 3,578 3,761 4,109 3,936 4,312
1. The decline in CET1 capital in 2018 is due mainly to Danica Pension’s acquisition of SEB Pension Danmark which led to a higher deduction in Group regulatory capital. 2. Before goodwill impairment charges 3. Based on year-end communicated
distributions. 2017 is adjusted for cancelled buy-back. 2019 is adjusted for cancelled dividend.
35Investor Presentation – First nine months 2022
Fully compliant with MREL and subordination requirement; expect to cover MREL
need with both preferred and non-preferred senior
MREL and subordination requirement* and eligible funds; Q3 2022;
Comments
DKK bn (% of Group REA)
+19 PS > 1y NPS > 1y CET1, AT1, T2 • The Group has to meet a MREL requirement and a subordination
(+2.3%) requirement, both adjusted for Realkredit Danmark (RD)
317 +28 • The subordination requirement is the higher of 2x(P1 + P2) + CBR or
298 (37.5%) (+3.3%) 8% TLOF
(35.2%) 46 271 • The Group’s MREL requirement (total resolution requirement) is DKK
(5.5%) (32.0%) 298bn incl. RD’s capital and debt buffer requirement (DKK 39bn) and
243
(28.7%) the combined buffer requirement (DKK 47bn). Excess MREL funds are
91 91 DKK 19bn.
(10.7%) (10.7%) • The Group’s subordination requirement is DKK 243bn incl. RD’s
capital requirement (DKK 25bn). Excess subordinated MREL funds are
DKK 28bn
• This figure shows the Group’s MREL and subordination requirement,
which constitutes the fully-phased in requirements, i.e. no interim
180 180 target.
(21.3%) (21.3%)
• Requirements will, however, be impacted by any changes to the CCyB.
• Danske Bank will initiate a dialogue with the Danish FSA to recalibrate
the backward-looking MREL and subordination requirement to reflect
MREL MREL funds Subordination Subordinated the removal of the DKK 7.5 billion Pillar II add-on in order to decrease
requirement requirement MREL funds the difference between the point-in-time and backward-looking
incl. CBR requirements.
*Including Realkredit Danmark’s (RD) capital and debt buffer requirements
36Funding & Liquidity
Investor Presentation – First nine months 2022
Funding structure and sources: Danish mortgage system is fully pass-through
Loan port folio and long-term funding, Q3 22 (DKK bn) Funding sources* (%)
59% 60%
2,317
Q2-22
168 Senior &
Q3-22
NPS bonds
1,819
1,187 Deposits
Bank loans 714
13% 14%
Bank mortgages 395 10% 9% 10% 10%
252 Covered bonds 8% 8%
2% 2%
0% 0%
-2% -3%
RD mortgages 710 710 Issued RD bonds
Deposits CD & CP Repos, Deposits Senior Covered Subord. Equity
credit net & NPS bonds debt
inst.
Loans Funding
Short-term funding Long-term funding
* Figures are rounded 38Investor Presentation – First nine months 2022
Funding programmes and currencies
Covered bonds by currency, end-Q3 2022 Largest funding programmes, end-Q3 2022
Utilisation
EMTN Programme 42%
24% 28% Limit – EUR 35bn
EUR
SEK
NOK Global Covered Bond 68%
Limit – EUR 30bn
48% ECP Programme
Total DKK 164 bn 0%
Limit – EUR 13bn
US MTN (144A) 56%
Senior debt 1 by currency, end-Q3 2022 Limit – USD 20 bn
4%
USD US Commercial Paper
7% 4% 0%
EUR Limit – USD 6bn
1%
NOK
47%
SEK
UK Certificate of Deposit 0%
GBP Limit – USD 15bn
Other
37%
NEU Commercial Paper
Total DKK 182 bn 0%
Limit – EUR 10bn
1. Including senior preferred and non-preferred debt 39Investor Presentation – First nine months 2022
Funding and liquidity: LCR compliant at 159%
Changes in funding,* 2022 (DKK bn and bp) Long-term funding excl. RD (DKK bn)***
Cov. bonds Senior Non-Preferred Senior
Funding plan Completed
30bp 100
156bp 13bp
79 75
69 60-80
40bp 190bp 114bp
35 26bp 31 31
22 31bp 21 20** 52
14
8 46bp
1
Redemptions 2022: Redeemed 2022: New 2022: 2018 2019 2020 2021 2022E
DKK 80 bn DKK 51 bn DKK 52 bn *** Includes covered bonds, senior, non-preferred senior and capital instruments, excl. RD .
Maturing funding,* 2023–2025 (DKK bn and bp) Liquidit y coverage rat io (%)
Cov. bonds Senior Non-Preferred Senior
160 161 164
13bp 173bp 159 159
154 151 155 155
56bp
69bp 13bp
10bp
32 29 32
25 24 39bp 26 99bp
110bp
100
10 11 8
2023: DKK 86 bn 2024: DKK 66 bn 2025: DKK 45 bn Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022
* Spread over 3M EURIBOR. 40Investor Presentation – First nine months 2022
Danske Bank covered bond universe, a transparent pool structure1
Danske Bank A/S C-pool
S&P AAA
Fitch AAA
Residential mortgages
• Denmark, D-pool
• Norway, I-pool
• Sweden, Danske Hypotek AB
Danske Bank A/S I-pool Finland
• Finland, Danske Mortgage Bank Plc S&P AAA
Fitch AAA Danske Mortgage Bank Plc
Commercial mortgages Moody’s Aaa
• Sweden and Norway, C-pool
Norway
Sweden
Danske Hypotek AB
S&P AAA
Nordic Credit Rating AAA
Realkredit Danmark A/S
S&P AAA
Residential and commercial mortgages Fitch AAA
Scope AAA
• Capital Centre T (adjustable-rate mortgages) Danske Bank A/S D-pool Denmark
S&P AAA
• Capital Centre S (fixed-rate callable mortgages) Fitch AAA
1The migration of Swedish residential loans from Danske Bank’s I-pool and Swedish residential-like loans from Danske Bank’s C-pool to Danske Hypotek AB, is ongoing.
Details of the composition of individual cover pools can be found on the respective issuers’ website.
41Credit & ESG Ratings
Investor Presentation – First nine months 2022
Danske Bank’s credit ratings
Long-term instrument ratings Credit rat ings remain unchanged in Q3 2022
Fitch Moody’s Scope S&P Credit ratings remain unchanged in Q3 2022, but the fast evolving direct and
AAA Aaa AAA AAA indirect repercussions from the Russia/Ukraine war creates uncertainty on the
direction of rating trajectory.
AA+ Aa1 AA+ AA+
AA Aa2 AA AA S&P’s Negative outlook on Danske Bank, and Fitch and Moody’s Stable outlooks
AA- Aa3 AA- AA- on Danske Bank, incorporate the financial uncertainty relating to the fallout
A+ A1 A+ A+ from Estonia case.
Speculative grade Investment grade
A A2 A A
A- A3 A- A-
BBB+ Baa1 BBB+ BBB+
BBB Baa2 BBB BBB
BBB- Baa3 BBB- BBB-
BB+ Ba1 BB+ BB+
Fitch rated covered bonds – RD, Danske Bank
Moody’s rated covered bonds – Danske Mortgage Bank
Scope rated covered bonds – RD
S&P rated covered bonds – RD, Danske Bank, Danske Hypotek
Counterparty rating
Senior unsecured debt
Non-preferred senior debt
Tier 2 subordinated debt
Additional Tier 1 capital instruments
43Investor Presentation – First nine months 2022
Danske Bank’s ESG ratings
We have chosen to focus on five providers based on their importance to our investors
Q3 2022 Q2 2022 Q1 2022 End 2021 End 2020 Range
CDP1 B 200 companies, out of the 13,126 B B B B A to F (A highest rating)
analysed, made the climate change A List in
2021
ISS ESG C+ Prime Decile rank: 1 (299 banks rated) C+ Prime C Prime C Prime C+ Prime A+ to D- (A+ highest rating)
C+ is the highest rating assigned Decile rank of 1 indicates a higher ESG
performance, while decile rank of 10
indicates a lower ESG performance
Moody’s ESG Solutions 61 Rank in Sector 10/31 61 61 61 64 100 to 0 (100 highest rating)
Rank n Region 175/1600
Rank in Universe 191/4876
MSCI BBB MSCI rates 190 banks: BBB BBB BBB BB AAA to CCC (AAA highest rating)
AAA 5%
AA 33%
A 25%
BBB 22%
BB 11%
B 5%
CCC 0%
Sustainalytics Medium Risk Rank in Diversified Banks 122/416 Medium Risk Medium Risk Medium Risk High Risk Negligible to Severe risk
1 (22.5)
CDP: Carbon Disclosure Project – primary Rank
focus is on climate in /Banks
change 341/1003
management, also linked to TCF (1 = lowest risk)
1 CDP: Carbon Disclosure Project – primary focus is on climate change / management, also linked to TCF
Q3 2022: Sustainalytics reduces Danske Bank’s ESG Risk Rating Score to 22.5 from 24.3 (the lower the score the lower ESG risk)
On 19 August 2022, Sustainalytics reduced Danske Bank’s ESG Risk Rating Score primarily due to improved ESG Risk Management of “Data Privacy and Security” and
“Product Governance”. Sustainalytics comment, “Danske Bank has best-in-class policies and programmes vis-à-vis Business Ethics.”
44Investor Presentation – First nine months 2022
Three distinct methods for rating banks
Danske Bank’s rating
Rating methodology
Potential Extraordinary
Anchor
+ 1 + 2 + 3 + 4 = CRA2 = SACP1 + external + ALAC = Issuer rating
SACP1
adjustment support
A+
bbb+ +1 +1 -1 0 0 a- 0 +2
(Negative)
1=Business Position, 2=Capital & Earnings, 3=Risk Position, 4=Funding & Liquidity
Quali-
Macro Affiliate Gov. Issuer
+ 1 + 2 + 3 + 4 + 5 + tative = BCA3 + + LGF4 + =
profile support support rating
factors
Strong A3
a3 a1 ba2 baa3 baa2 -1 baa2 0 +1 +1
Plus (Stable)
1=Asset Risk, 2=Capital, 3=Profitability, 4=Funding Structure, 5=Liquid resources
Operating Business Risk Asset Earnings & Capitalisation Funding & Viability Government Issuer
+ + + + + + = + =
environment Profile Profile Quality Profitability & Leverage Liquidity Rating Support rating
A
aa- a+ a+ a a- a a+ a ns5
(Stable)
ns = No support
1 Stand-Alone Credit Profile. 2 Comparable ratings analysis. 3 Baseline Credit Assessment. 4 Loss Given Failure. 5 No support. 45Tax & Material one-offs
Investor Presentation – First nine months 2022
Tax
Actual and adjusted tax rates (DKK m) Tax drivers, Q3 2022
• The actual tax rate of 81.1% (excluding prior-year's
adjustments) is higher than the Danish rate of 22% -
Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 due primarily to the tax effect from tax exempt
income/expenses
Profit before tax 968 2,164 3,707 4,500 4,270
Permanent non-taxable difference 2,559 408 435 994 22
Adjusted pre-tax profit, Group 3,527 2,572 4,142 5,494 4,293 • Adjusted tax rate of 22.3% is higher than to the Danish
rate of 22% due to the differences in statuary tax rates
in the various countries in which we operate
Tax according to P&L 760 458 862 846 936
Taxes from previous years 25 106 57 367 10
Adjusted tax 785 565 919 1,213 924
• The permanent non-taxable difference derives from
tax-exempt income/expenses, such as value
adjustments on shares - mainly due to non-deductible
Adjusted tax rate 22.3% 22.0% 22.1% 21.5% 22.2%
goodwill write-down in Danica
Actual-/Effective tax rate 78.5% 21.2% 18.8% 21.9% 25.5%
Actual/-Effective tax rate exclusive one- offs & 81.1% 26.1% 27.0% 21.6% 22.9%
prior year reg.
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