Investor Presentation A milestone year for BankNordik 27 February 2017 Árni Ellefsen, CEO
Disclaimer � This presentation contains statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the � fairness, accuracy or completeness of the information contained herein. Accordingly, none of BankNordik, or any of its principal shareholders or subsidiary undertakings or any of such person’s officers or employees or advisers accept any liability whatsoever arising directly or indirectly from the use of this document. Annual Report 2016 Page 2
Overview Highlights � � Update on strategic initiatives Financials � Banking � � Insurance Expenditures � � Impairment charges Capital ratios � � Long-term financial objectives � Outlook 2016 Appendices � �������������� ��������������� ����������������� ��������� Annual Report 2016 Page 3
Highlights – Satisfactory 2016 financial results 2016 financial highlights � Operating income down 13% YoY to DKK 640m (DKK 734m) � Operating costs down 8% to DKK 459m (DKK 499m) � Net loan impairment charges were a reversal of DKK 12m (net charge of DKK 20m) Operating profit amounted to DKK 191m (DKK 194m) � � Profit before tax increased to DKK 277m* (DKK 332m loss) � CET1 capital ratio of 16.0% and solvency ratio of 18.3% at 31 December 2016 *Includes capital gain related to the sale of Vørður 2016 operational highlights � Vørður deal completed for a capital gain of DKK 84m � Run-off of corporate loan book in Denmark nearing completion – remaining book value of approx. DKK 230m Annual Report 2016 Page 4
Vørður deal closed and run-off of corporate activities in Denmark nearing completion Update on strategic initiatives Sale of Vørður completed in September 2016 Winding up of corporate activities in Denmark Settled 15% Remaining 85% Proceeds amounted to DKK 300m, with transactions Danish corporate loan book reduced by close to DKK � � costs amounting to DKK 45m (primarily due to 70m in Q4 2016 currency restrictions imposed by the Icelandic � Approx. DKK 230m remain on the books government) � The rate of settlement reduced as run-off nears � Capital gain of DKK 84m recognised under completion discontinued operations related to Vørður in the income statement Capital gain included DKK 23m from favourable � currency fluctuations, previously recognised under the foreign currency translation reserve Annual Report 2016 Page 5
Solid 2016 financial results – Figures in DKKm 2016 2015 Index Q4 2016 Q3 2016 Index Net interest income 413 469 88 100 103 97 Net fee and commission income 192 226 85 51 46 111 Net insurance income 27 28 96 -7 12 Other operating income 9 11 79 2 2 92 Operating income 640 734 87 146 163 89 Operating costs -459 -499 92 -114 -113 101 Sector costs -2 -21 9 1 -1 Profit & Loss Profit before impairment charges 179 214 84 33 49 68 Impairment charges, net 12 -20 4 4 121 Operating profit 191 194 99 38 53 72 Non-recurring items -12 -522 0 0 Market value adjustments 8 -41 -10 12 Profit before tax, continued 187 -369 28 64 43 Profit before tax, discontinued (Vørður) 90 37 0 99 Profit before tax, total 277 -332 28 164 17 2016 2015 Index Q4 2016 Q3 2016 Index Loans and advances 9,141 10,675 88 9.141 9,372 98 Deposits and other debt 12,669 12,680 100 12.669 12.805 99 Key Metrics Operating cost / income, % 72 68 78 69 Solvency ratio, % 18.3 16.8 109 18.3 19.0 96 CET1 capital ratio, % 16.0 13.9 115 16.0 17.0 94 Annual Report 2016 Page 6
Interest income affected by controlled run-off and further margin pressure Comments QoQ changes in NII DKKm � Net interest income (NII) down DKK 3m from Q3 2016 0,0 105 to Q4 2016 and down by DKK 55m from 2015 to 2016 103.1 0,6 103 0,0 � YoY drop in NII mainly owing to the winding up of 1.2 corporate activities in Denmark and continued margin 101 100.0 2.9 0.9 pressure 0.5 0.1 0.2 1.2 99 0,0 QoQ fall in NII due to further pressure on interest � 97 margins 0,0 0,0 95 � Lending volumes down DKK 1.5bn YoY and DKK Q3 Lending Lending Deposit Deposit Liquidity Sub. Other Q4 231m QoQ. 2016 volume interest volume interest mgmt. debt 2016 Loans and deposits YoY changes in NII Loans Deposits DKKbn DKKm 14 468.7 12.9 12.8 12.8 470 12.7 12.7 12.5 13 450 12 52.1 10.7 10.7 430 11 11.7 413.2 10.0 410 8.4 10 9.4 6.6 9.4 9.1 36.3 390 0.2 19.4 9 0,0 370 8 350 7 6 330 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 2015 Lending Lending Deposit Deposit Liquidity Sub. Other 2016 volume interest volume interest mgmt. debt Annual Report 2016 Page 7
Fee and commission income down YTD Comments QoQ changes in fee and commission income DKKm � Net fee and commission up by DKK 5m QoQ: 52 51.1 0 Insurance commission increased due to prevision income − 0 50 0.7 2.4 0.1 from NordikLív 48 0,0 3.9 46.0 0.5 Other fee and commission income increased, supported − 46 by seasonal variations 44 � Net fee and commission income fell DKK 34m YoY: 42 Gradual reduction in fee and commission income from − 40 corporate operations in Denmark consistent with the Q3 2016 Investment Loan, Mortgage Dividends Other fee Q4 2016 and trading guarantee, broking and comm. controlled run-off comm. insurance services income comm. Less investment activity in 2016 − YoY changes in fee and commission income Pull-back of mortgage broking activity to normal levels − DKKm after a period of high remortgaging activity in 2015 226.1 4.2 230 0.8 11.3 0.2 0,0 210 19.9 0,0 191.7 190 0,0 170 150 2015 Investment Loan, Mortgage Dividends Other fee 2016 and trading guarantee, broking and comm. comm. insurance services income comm. Annual Report 2016 Page 8
Trygd: Q4 weather conditions causing high insurance claims Comments Premium and claims DKKm Premium income, net Claims, net � Net premium income up by DKK 3m in 2016 100 compared to 2015 and up DKK 1m from Q4 2015 to Q4 2016 80 Net claims up DKK 10m from 2015 to 2016 and up � 60 DKK 18m from Q4 2015 to Q4 2016 due to an extraordinarily high level of claims in December 85 82 40 64 54 � Profit before tax of DKK 0m in 2016 relative to DKK 20 30 8m in 2015 and a loss of DKK 15m in Q4 2016 21 20 12 compared to a profit of DKK 3m in Q4 2015 0 Q4 2015 Q4 2016 2015 2016 � Trygd is expected to continue attracting new Profit before tax customers and growing premium income in 2017 DKKm 14 6 8 0 3 -2 -15 -10 -18 2015 2016 Q4 2015 Q4 2016 Annual Report 2016 Page 9
Operating costs down DKK 40m in 2016 Comments QoQ changes in operating costs DKKm � Operating costs were close to flat from Q3 2016 to 120 Q4 2016 and down by DKK 40m from 2015 to 2016 3.2 1.6 � Decline in staff costs YoY mainly due to the winding- 1.3 115 up of corporate activities in Denmark 113.7 113.3 � DKK 12m in amortisation of intangible assets related to customer relations discontinued – fully written off in 110 Q4 2015 � Reduction in advisory services expenditures related 105 to previous year’s strategic initiatives Q3 2016 Staff IT Other Q4 2016 expenses Average number of employees (FTE) YoY changes in operating costs DKKm Group excl. Vørður and Trygd Trygd Vørður 520 499.2 16.9 500 66 8.7 61 65 3.3 63 64 68 12.3 67 480 66 66 0 0 5.5 25 25 25 25 65 25 459.1 25 25 25 26 400 24 24 24 440 426 425 424 423 418 410 404 396 390 387 381 375 300 400 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 Staff IT Advisory Amort. int. Other 2016 services assets expenses 2014 2015 2016 Annual Report 2016 Page 10
Net reversal of impairment charges in 2016 Conservative portfolio structure Net impairment charges DKKm � Net impairment charges were a 148 reversal of DKK 4m in Q4 2016 � The private sector accounts for 85 66% of the loan portfolio, excluding the Danish corporate portfolio 20 � No individual sector accounts for more than 6% of the loan -1 -3 -4 -4 -12 portfolio, excluding the Danish 2013 2014 2015 2016 Q116 Q216 Q316 Q416 corporate portfolio Loans by sector - excl. Danish corporate sector � BankNordik provides 1 st lien mortgage loans to the private 3% 6% 7% sector in the Faroe Islands, obtaining a high degree of security 31% DKK 8.9bn DKK 2.75bn 3% 66% 6% � A large part of the real estate exposure (6%) relates to 5% 5% financing of state-owned real estate in Greenland Public sector Real estate HoReCa Corporate sector Agri. & fishing Trade Manufacturing & mining Other Private sector Annual Report 2016 Page 11
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