DNB Group: Robust oil-related portfolio 19 December 2014 1 - PowerPoint PPT Presentation

DNB Group: Robust oil-related portfolio 19 December 2014 1

Agenda for 19 Dec 2014: Oil & Gas, Offshore and Oilfields Service Kjersti Haugland Senior macro analyst Norwegian economy Torbjørn Kjus Senior oil analyst Oil price forecast Trygve Young Chief Risk Officer Robust portfolio in oil-related exposure Berit Henriksen Global Head of Energy Portfolio overview Espen Kvilekval Head of Oil & Gas Section Oil & Gas - details Magnus Piene Head of Offshore Section Offshore - details Morten Kreutz Head of Oilfield Services Section Oilfield Services - details Trygve Young & Chief Risk Officer Concluding remarks Bjørn Erik Næss Chief Financial Officer Q&A 2

Norway: Soft landing Norway: Demand components Norway: Key indicators 2008Q1=100. 3 quarter moving average Per cent 160 7 150 6 140 5 130 4 120 3 110 2 100 1 90 0 80 -1 70 -2 Q1 2008 Q3 2010 Q1 2013 Q3 2015 Q1 2018 1990 1995 2000 2005 2010 Private cons. Public cons. Oil inv. Mainl.-GDP y/y CPI, y/y Unemploym. Business inv. Housing inv. Trad. exports Source: Statistics Norway/DNB Markets Source: Thomson Datastream/DNB Markets 3 Forecast by DNB Markets as of 16 Dec 2014

Norway: A robust economy Oil investments 7% of GDP. Ample fiscal leeway. Public Net Assets Norway: Shares of GDP Percent of GDP 1995-2013, per cent 250 100 200 80 150 60 100 40 50 20 0 0 -50 1995 1998 2001 2004 2007 2010 2013 -100 Private consumption Public consumption Non-oil investments Oil investments 1985 1990 1995 2000 2005 2010 2015 Trade surplus Norway GPFG EMU OECD Source: Statistics Norway/DNB Markets Source: Ministry of Finance, NB2015/DNB Markets 4 Forecast by DNB Markets as of 16 Dec 2014

Updated oil price estimate – short term volatility - stabilising at 65-75$/brl for 2015 and 75-85$/brl for 2016 Global Crude & Product Stocks - JODI-data Global Oil Demand Growth vs Non-OPEC Growth JODI-data are adjusted for countries with irregular reporting - and China is added with Xinhua News Agency Data (12-months mavg) 5800 4.0 5750 3.0 5700 2.0 5650 Million b/d 1.0 5600 Million barrels 0.0 5550 5500 -1.0 5450 -2.0 5400 -3.0 5350 -4.0 5300 2004 2006 2008 2010 2012 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IEA 2011 2012 2013 2014 Source: JODI, DNB Markets 5

We are now positive to the future oil price - the oil market is now overshooting to the downside Historical Historical Spot Brent History & FWD looking Nominal $/b Real (2015) $/b 2001 24.4 32.2 160 2002 25.0 32.4 2003 28.8 36.5 2004 38.3 47.2 140 2005 54.5 65.0 2006 65.1 75.3 120 72.4 81.3 2007 2008 97.3 105.2 2009 61.7 67.0 100 2010 79.5 84.9 $/b 2011 111.3 115.2 80 2012 111.7 113.3 2013 108.7 108.7 60 2014 100.0 100.0 Forecast Forecast Nominal $/b Real (2015) $/b 40 Q1-15 65 65 Q2-15 66 66 20 Q3-15 72 72 Q4-15 76 76 2015 70 70 0 2016 80 79 1995 1998 2001 2004 2007 2010 2013 2016 2019 2017 85 82 Possible range FWD (nominal) 2018 88 84 Forecast nominal Historical 2019 91 85 6 Forecast real (2014 USD) 2020 95 86 Source: Reuters, DNB Markets

Credit strategy for the DNB Group • We are a long term relationship oriented bank • Focus on quality of management • We have a low-risk portfolio strategy • We finance corporate risk based on debt service ability (cash flow), not assets alone • Exposure to non-investment grade companies is secured and followed up by covenants • We finance industry sectors where we have institutional industry sector competence, and we have been in the oil related industries since oil was discovered on the Norwegian Continental Shelf 7

DNB has a well diversified oil-related portfolio - 8% of total Group EaD to oil related portfolios Total DNB Group Total oil-related portfolios EaD of NOK 1834bn as of 30 Sep 14 EaD of NOK 144bn as of 30 Sep 14 In per cent of total In per cent of NOK 144bn Other Oilfield Seismic services 1% 2% LBO-portfolio Large-caps, IG 5% Downstream & companies Other petchem 11% 6% corporate Midstream 43% Other Offshore 10% 1% Subsea construction Oil & Gas Upstream / 3% integrated large- FPSO/FSO 3.7% caps and NOCs (IG) 3% Rig 17% Offshore 11% 2.6% OSV Upstream mid-caps 16% Oilfield (sub IG) 4% Services Exploration RBL and other 1.5% Financing Facilities Households structured E&P 2% 6% Other Oil & Gas 49% 2% EaD: Exposure at Default, IG: Investment Grade, NOCs: National Oil Companies, RBL: Reserved Based Lending, E&P: Exploration & 8 Production, F(P)SO: Floating (Production) Storage Offloading, LBO: Leverage Buyout, OSV: Offshore Supply Vessel

Oil & Gas, Offshore and Oilfield Services – An overview Oilfield DNB Group as of 30 Sept 2014 Oil & Gas Offshore Services Total portfolio, EaD, NOK billion 68 48 28 Total portfolio, drawn amount, NOK billion 25 26 11 Average grade* 3.8 4.9 4.8 Expected loss 0.08% 0.19% 0.16% Number of client groups 85 55 75 Number of employees in sector 24 23 17 No. of clients in grade 8-10 (PD > 3%) 2 4 3 EaD of clients in grade 8-10, NOK billion 0.2 1.5 0.6 10 largest client groups in % of total segment 31% 44% 43% 20 largest client groups in % of total segment 47% 65% 64% 9 * DNB’s risk grade system: 1 represents the lowest risk and 10 the highest risk. EaD: Exposure at default, PD: Probability of default

Proactively handling the uncertainty & market turbulence • Monitoring of our portfolio is given top priority in the current situation with oil price turbulence • We have reviewed our oil, gas, offshore and oilfield service portfolios • We actively manage our credits/clients • Those who are performing, but not in accordance with their business plans require additional attention, and are placed on (the so-called) «Watch-list», it’s our early warning tool! • Watch-listed companies are reviewed quarterly, as a minimum • We allocate additional expertise and resources to clients and sub-portfolios with higher risk • We are continuously evaluating which clients to put on “Watch - list”, and what actions to be taken 10

63% of our portfolio is low-risk and 35% is medium risk DNB’s oil -related portfolio split by sub-segment in exposure (EaD) NOK 144bn as of 30 Sep 2014 NOK billion 100 90 Oilfield Services (Avg.grade 4.8) 19 80 Offshore (Avg.grade 4.9) 70 Oil & Gas (Avg.grade 3.9) 17 60 50 8 40 30 29 54 20 0.61 0.20 10 14 1.47 0.00 0 0.20 0.00 Grade 1-4 "Low risk" Grade 5-7 "Medium" Grade 8-10 "High" Grade 11-12 "Doubtful & NPL" EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see back up slide for details. 11 DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. All figures as of 30 Sept 2014.

Outstanding loans to oil, offshore and oil service are 43% of EaD - Large part of remaining exposure is guarantees and back-stops to investment grade Drawn loans NOK 62bn, Exposure (EaD) NOK 144bn as of 30 Sep 2014 by sub-segments NOK billion 100 90 Oilfield Services (38% drawn loans) Offshore (56% drawn loans) 80 Oil & Gas (37% drawn loans) 70 Exposure (EaD) 60 50 40 30 6 4 6 20 19 0.47 0.19 10 19 1.45 0.00 6 0 0.14 0.00 Grade 1-4 "Low risk" Grade 5-7 "Medium" Grade 8-10 "High" Grade 11-12 "Doubtful & NPL" EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see back up slide for details. 12 DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. All figures as of 30 Sept 2014.

Highly profitable portfolio - within DNB’s Oil & Gas, Offshore and Oilfield Service sectors DNB’s oil -related portfolios - profit before tax and impairments from 2011 till 30 Sep 2014 NOK billion 2.00 1.86 1.52 1.31 2011 2012 2013 9M 2014 13 * Oil, offshore and oilfield services units are all part of the business unit Large Corporate & International

Historical low impairments in absolute levels - Oil & Gas, Offshore and Oilfield Services sectors NOK million 2000 1800 1600 1400 1200 1000 800 600 400 200 159 126 155 132 108 18 6 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 9M14 14