Strong customer activity driving income growth in Q3 2019 Investor presentation 29 October 2019 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 dir ectly or indirectly from the use of this document. Page 2
Retail banking Private banking Overview Corporate banking Insurance • Highlights • Financials • Operating income • Insurance • Business volumes • Expenditures • Impairment charges • Capital ratios • Long-term financial objectives • Outlook 2019 • Appendices Page 3
Highlights in 9M 2019 Q3 2019 operating highlights Negative interest rate brackets on corporate deposits introduced in September and October with an • estimated contribution to pre-tax profit in the amount of DKK 8-10 on an annual basis As part of the ongoing efforts to optimise the Group’s capital structure, BankNordik issued additional tier 1 • capital in the amount of DKK 150m with a fixed coupon of 4.5% 9M 2019 financial highlights Net interest income down 4% to DKK 272m in 9M 2019 from DKK 282m 9M 2018 • Net fee and commission income up 8% to DKK 140m from DKK 130m in 9M 2018 • Operating income amounted to DKK 486m vs. DKK 479m in 9M 2018 • Operating costs up 4% to DKK 355m (DKK 342m) • Net impairment charges were a reversal of DKK 80m (reversal of DKK 93m) • Market value adjustments amounted to a loss of DKK 10m (loss of DKK 26m) • Profit before tax was DKK 201m (DKK 286m) • Bank lending volumes flat at DKK 10.0bn • Mortgage lending volumes up by 7% to DKK 12.9bn (DKK 12.1bn) • CET1 capital ratio of 17.5% and total capital ratio of 21.0% at 30 September 2019 • Page 4
9M 2019 financial results ─ Figures in DKKm 9M 2019 9M 2018 Index Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Net interest income 272 282 90 90 91 92 94 96 Net fee and commission income 140 130 47 45 48 42 43 108 Net insurance income 39 31 15 15 9 13 13 124 Other operating income 35 36 13 11 11 9 10 97 Operating income 486 479 102 165 163 158 156 160 Operating costs -355 -342 -116 -119 -120 -115 -111 104 Profit & loss Sector costs -1 -1 0 0 0 0 0 100 Profit before impairment charges 130 137 95 49 43 38 42 49 Net impairment charges on loans 80 93 9 53 19 18 39 87 Operating profit 211 230 92 58 96 57 60 88 Non-recurring items 0 82 0 0 0 -10 -6 Market value adjustments -10 -26 -8 -10 8 -12 -3 39 Profit before tax 70 201 286 50 86 65 38 78 9M 2019 9M 2018 Index Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Loans and advances 10.0 10.0 10.0 10,1 10.0 10.0 10.0 100 Deposits and other debt 13.5 13.2 13.5 14.1 14.0 13.4 13.2 106 Mortgage credit 12.9 12.1 12.9 12.6 12.5 12.2 12.1 Key metrics 107 Operating cost / income, % 73 71 70 73 76 73 69 Total capital ratio, % 21.0 17.6 21.0 19.6 19.2 19.8 17.6 CET1 capital ratio, % 17.5 15.5 17.5 17.5 17.2 17.7 15.5 Page 5
Margin pressure eased by introduction of negative interest rates brackets Comments QoQ changes in net interest income DKKm Net interest income flat QoQ and down by DKK 10m YoY, • 91 mainly due to margin pressure 0.0 0.0 0.0 0.1 0.0 90.5 0.0 90.4 Negative interest rate brackets introduced on corporate • 90 deposits in September and October (estimated contribution to pre-tax profit of DKK 8-10m on an annual basis) 89 Lending volumes down by DKK 70m QoQ and down by • DKK 25m YoY 88 Q2 2019 Lending Lending Deposit Deposit Liquidity Other Q3 2019 volume interest volume interest mgmt. Loans Deposits Loans and deposits YoY changes in net interest income DKKbn DKKm 15 14.1 14.0 290 13.5 13.4 14 13.1 13.2 285 5.0 281.8 13 11.3 280 12 1.1 0.0 0.3 11 275 271.9 4.4 10.1 10.0 10.0 10.0 10.0 9.7 10 270 9 265 8 260 7 9M 2018 Lending Lending Deposit Deposit Liquidity Other 9M 2019 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 volume interest volume interest mgmt. Page 6
Strong demand for mortgage services in Q3 2019 Comments QoQ changes in fee and commission income DKKm Net fee and commission income up by DKK 2m QoQ and 50 • 47.1 0.3 up by DKK 11m YoY 2.4 45.5 1.7 0.6 Strong customer activity in the nine months of 2019, 45 • particularly related to mortgage broking services, drove fee and commission income higher 40 Mortgage-lending volumes up DKK 680m YTD • 35 Q2 2019 Investment Loan, Mortgage Other fee and Q3 2019 and trading guarantee, broking comm. comm. insurance services income comm. Mortgage lending YoY changes in fee and commission income DKKbn DKKm 150 13 140.5 5.1 140 4.8 3.4 2.6 129.7 130 12 120 12.9 12.6 12.5 12.2 110 11 12.1 11.9 100 9M 2018 Investment Loan, Mortgage Other fee and 9M 2019 10 and trading guarantee, broking comm. comm. insurance services income Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 comm. Page 7
Developments in business volume Business volumes as measured by the sum of lending, guarantees and AUM DKKbn 35 30.4 29.4 28.2 30 27.1 4.6 4.4 4.3 3.6 25 3.0 2.8 2.6 2.5 20 12.9 12.2 11.8 15 11.9 10 5 10.0 10.0 9.5 9.1 0 2016 2017 2018 9M 2019 Page 8
Growth in Trygd’s premiums and fewer claims in 9M 2019 Comments Premium and claims DKKm Premium income, net Claims, net Combined ratio of 83% in 9M 2019 compared to 94% in 9M 90 2018 75 Net premium income up by DKK 6m YoY and by DKK 1m 60 QoQ 45 Net claims down by DKK 3m YoY and up by DKK 2m QoQ 84.3 78.2 30 55.1 Profit before tax of DKK 14m in 9M 2019 relative to DKK 52.0 4m in 9M 2018 and DKK 6m in Q3 2019, flat compared to 15 29.1 28.2 17.3 15.2 Q2 2019 0 9M 2018 9M 2019 Q2 2019 Q3 2019 Trygd expects to continue attracting new customers and growing premium income in 2019 Profit before tax DKKm 15 10 13.7 5 6.2 5.6 4.4 0 9M 2018 9M 2019 Q2 2019 Q3 2019 Page 9
Pressure on operating costs YTD Comments QoQ changes in operating costs DKKm Operating costs up by DKK 14m YoY and down by DKK 4m • QoQ 119.4 120 YoY increase in staff costs due to non-recurring items, • 0.9 1.2 severance payments as well as general wage increases 4.8 115.8 1.6 YoY increase in marketing expenditures mainly related to 115 • the Group’s Volapyk-marketing campaign 110 Q2 2019 Staff IT Marketing Other Q3 2019 expenses Average number of employees (FTE) YoY changes in operating costs DKKm 450 6 6 7 370 6 6 400 25 4.5 2.0 26 26 6 6 6 7 26 7 7 355.4 360 24 26 26 25 26 4.6 25 25 350 6.8 350 341.6 300 384 380 378 340 374 364 361 360 359 360 357 356 250 330 200 320 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 310 2017 2018 2019 300 9M 2018 Staff IT Marketing Other 9M 2019 Group excl. Trygd and Skyn Trygd Skyn expenses Page 10
Reversal of impairment charges continues Comments Net impairment charges DKKm Net impairment charges were a reversal of DKK 80m in 9M 2019 148 85 Well-diversified loan portfolio with no individual sector accounting for more 20 than 5% -12 Strong LTV ratios for housing loans -60 -80 -111 2013 2014 2015 2016 2017 2018 9M 2019 LTV for housing loans 1 Gross loans by sector DKKm 5% 5% 9% 21% < 40% DKK 10.3 bn DKK 3.2bn 5% 31% 64% 46% < 80% 3% > 80% 4% 4% 34% Private sector Trade Transport & HoReCa Corporate sector Manufacturing & mining Real estate Public sector Agri. & fishing Other 1) Lending for housing accounts for DKK 5.8bn of total for retail lending of DKK 6.4bn Page 11
AT1 issuance strengthens capital position Comments YoY changes in CET1 ratio % CET1 remains at 17.5% and total capital ratio • 19.0%* up by 1.4 pp QoQ 19 1.5 0.1 18 0.1 0.1 AT1 capital in the amount of DKK 150m issued • in September 2019 contributes 1.4pp to the 17 Group’s total capital ratio 16 17.5 17.5 If net income from 9M 2019 were recognised, 15 • the CET1 ratio would be 19.0* and the total 14 capital ratio would be 22.5%* 13 Q2 2019 Significant REA Other Q3 2019 investments Capital ratio development CET1 ratio Solvency ratio YoY changes in total capital ratio % 21.0 19.8 19.7 18.3 23 22.5%* 17.7 17.5 17.5 16.8 16.0 22 14.8 1.4 1.5 0.1 13.9 21 11.8 0.1 0.1 20 19 21,0 21.0 18 19.6 17 16 2014 2015 2016 2017 2018 9M 2019 Q2 2019 Significant REA AT1 Other Q3 2019 investments *Capital ratios include 9M 2019 net profit before the effect of any dividends Page 12
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