dnb bank dnb boligkreditt · 101 98 7.9 10.00 6.1 5.2 4.9 5.00 15.00 20.00 50.00 100.00 150.00...
TRANSCRIPT
February 2020
DNB Bank
DNB Boligkreditt
Best Euro Deal 2018
2
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
3
DNB – A Brief Overview
4
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:
ESG as part of strategy
Anchored in corporate governance and top management
Sustainability/ESG disclosures in accordance with standards (GRI,
SASB, TCFD) assured by EY
Signatory to global sustainability initatives
Strong ESG rating by Sustainalytics, ISS and MSCI
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
ESG is an integrated part of DNBs strategy
Examples
Steering the loan book towards sustainable activities
Green product framework
All loans above 8 MNOK includes an ESG evaluation
Integrating ESG in equity research
Responsible ship-recycling clauses
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
5
6
The DNB Group
100% owned by DNB Bank and functionally an integrated part of the parent
Mortgages originated within DNB Bank’s distribution network in accordance with the bank's credit policy
DNB Bank ASA
Aa2/AA-
DNB Life and
Asset Management
DNB ASA
DNB
Boligkreditt AS
(Covered Bonds: AAA/Aaa)
7
The Norwegian Economy
8
A Solid Norwegian Economy
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
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%
9
Government Finances are Rock-Solid
Annual budget deficit/surplus forecast for 20201) General government net financial liabilities2)
As per cent of nominal GDP 2019
1) Source: OECD Economic Outlook no. 106, November 2019
-300.00
-250.00
-200.00
-150.00
-100.00
-50.00
0.00
50.00
100.00
150.00
200.00
10
0
100
200
300
400
500
600
2006 2008 2010 2012 2014 2016 2018
Annual return, GPFG
Annual net petro cash flow
Annual actual "spending of oil-money"
Government Pension Fund Global 2001-2019, NOK billion
Oil income versus spending 2006-2019, NOK billion
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Source: Ministry of Finance (National Budget 2019), DNB Markets, NBIM
The Growth of the Sovereign Wealth Fund Adds Flexibility
11
Forecasted unemployment Per cent
3.9 3.7 3.8 3.9 3.9
0
2
4
6
8
10
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
Source: OECD Economic Outlook No. 106 November 2019/DNB Markets (Jan 20)
Unemployment - Among the Lowest in Europe
0
2
4
6
8
10
12
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)
12
Solid Economic Growth in Norway
1.9% 1.9%
3.7%
2.3% 2.2%
1.4% 1.0%
2.0% 2.2% 2.5% 1.9%
1.5% 1.6 %
2.4 % 2.2%
1.5% 1.6 %
-1%
0%
1%
2%
3%
4%
5%
6%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e
DNB Markets (Jan 20) Statistics Norway (Nov 19)
GDP growth Year on year, per cent
GDP growth Per cent
-2%
-1%
0%
1%
2%
3%
4%
5%
2013 2014 2015 2016 2017 2018 2019 2020 2021
Norway
Sweden
Denmark
Finland
Euro Area
Source: OECD Economic Outlook No. 106, November 2019
13
0
1
2
3
4
5
6
7
8
9
10
0
50
100
150
200
250
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Constant 2017 prices (lha) Share of GDP (rha)
Oil Investments are Stabilising at a High Level – Lower break-even price ensures a competitive continental shelf
Source: Thomson Datastream, DNB Markets Source: Rystad Energy, Equinor, Wall Street Journal
Break-even price: Sanctioned vs April 2017 USD per barrel, Brent Blend
Petroleum investments in Norway NOK billion, share of GDP in per cent
March 2016 September 2016 Sanctioned
Johan Sverdrup Johan Castberg
80
38
52
35
45
3035
20
February 2019
14
Financial Targets, Performance and Capital
15
Financial Ambitions 2019-2022
1) CET1 capital ratio without transitional rules
2) Proposed requirement including management buffer of about 1 per cent at 31 December 2019
>12% Return on equity
Overriding target
Payout ratio
>50% Dividend policy
CET1 ratio1)
~17.9%²⁾ Capital level
C/I ratio
<40% Key performance indicator
16
DNB is a digital front runner
220
116
57
2010 2015 2016
Transforming our branch network
Number of branch offices
• 91% of Norwegians use online banking services
• 6% of payments are made in cash
Annual visits to our digital platforms (millions)
• Fully automated secured lending
• Boosting efficiency with automation
Jan. 2019 Oct. 2019 Jan. 2019 Oct. 2019
73 83 85 86 83 92 83 80 76
1 2 9
49 113
156 200 243 281
467
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e
Online bank Mobile bank
17
DNB Delivers Solid Profit
18.7
28.7
34.1
30.8
28.5 28.3
31.7
7.7
1.6 2.3
7.4
2.4
(0.1)
2.2
(5)
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Pre-tax operating profit before impairment Impairment of loans
Pre-tax operating profit before impairment NOK billion Net interest
income
71%
Net
commission
and fees
18%
Net gains on
financial
instruments
at fair value
6%
Other
income
5%
Total income split for the year 2019
18
DNB Earnings in the Context of Nordic Peers
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
Balance Sheet Size (Q4 2019, EUR bn eqv) Pre-Tax Operating Profit (EUR bn eqv)1
555
276
317
249
Bank1 DNB Bank 2 Bank 3
4.0 4.0
2.1
2.8
3.0 3.1
2.2 2.1 2.2
2.5 2.6 2.5
2017 2018 2019
Bank1 DNB Bank 2 Bank 3
19
Stage 3 Net Loans and Financial Commitments (IFRS 9) ( Former net Non-Performing and Doubtful Loans IAS39 )
1) As a result of the transition to IFRS 9 from 1 January 2018, unutilised credit lines and other financial commitments have
been included.
23.1 23.6
19.217.3
22.8
26.4 25.7
23.221.6 20.8
21.6
18.2
1.46 1.47
1.211.12
1.49
1.691.64
1.451.33
1.27 1.29
1.091.03
1.18 1.151.03
0.94 0.90 0.92
0.79
31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept. 31 Dec.
2017 2018 2019
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)
Per cent
NOK billion
IAS 39 IFRS 9
1) 1)
20
Healthy asset quality reduces cost of risk
• Strong Norwegian macro
• Solid and diversified portfolio
• Reduced exposure to cyclical industries
• Quarterly fluctuations, but expecting lower
impairment losses than 1997-2019 average
Development in high-risk and stage 3 exposures¹⁾
Impairment losses 1997-2019
Reduced risk
1) “High-risk” is defined as probability of default (PD) ≥3 per cent. “Stage 3” is defined as non-performing and doubtful portfolio.
152
115 101 98
7.9 6.1
5.2 4.9
0.00
5.00
10.00
15.00
20.00
0.00
50.00
100.00
150.00
200.00
31 Dec 2016 31 Dec 2017 31 Dec 2018 30 Dec 2019
Exposure (EAD) in NOK bn Per cent of total exposure
0,18 %
Impairment in % of net loans Average impairment in %
21
Key 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
22
Amendments 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.
23
DNB – A Very Strong Capital Position
CET1 capital ratio and leverage ratio1) Per cent, as of 31 December 2019
18.6%
7.4%
16.1%
(SREP)
1.0%
CET1 Ratio* Leverage Ratio CET1 Requirement
17.1 %
Mgt buffer
7.4
5.3 5.1
5.4
4.9 4.6
DNB Nordea SEB Swedbank SHB Danske
Bank
Leverage ratio versus Nordic Peers Per cent, as of 31 December 2019
DNB’s leverage ratio requirement2)
6.0
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.
24
DNB – A Very Strong Capital Position
CET1 capital ratio
Per cent
14.4
16.0 16.4 16.4
16.9
16.0
17.6
16.7 17.2
18.3 18.6
2015 2016 2017 2018 3Q19 2019
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.
Binding CET1 requirements:
transitional rules
CET1 capital build up
NOK bn
95 104
116
128
142
163 168 171
177 178
2010 11 12 13 14 15 16 17 18 19
25
DNB – A Very Strong Capital Position
S&P RAC Ratio versus Nordic Peers Per Cent, 31 Dec 2018
13.8
12.4 11.9
10.4 10.6
9.7
DNB Swedbank Nordea Danske Bank SEB SHB
S&P RAC Ratios for Top 50 Rated Western European Banks Per Cent, 31 Dec 2018
26
101 92
175 160
44 -3
40 55
55 89
144
160
202
141 147
240 249
188 157
341
2013 2014 2015 2016 2017 2018 2019
Dividends and Buy-backs
CET1 build up
4.5% 4.5% 4.5 %
2.5% 2.5% 2.5 %
3.0% 3.0% 3.1 %
2.0% 2.0% 2.0 %
1.7% 2.1% 2.1 %
1.8% 1.9% 1,9 %
YE 2018 YE 2019 Target K 31.12.2020
Pillar 1 Min Requirement Systemic risk Buffer
SIFI Buffer Countercyclical Buffer
Pillar 2 Requirement SREP Requirement
Conservation Buffer Management Buffer
DNB CET1 - without trans. rules
~16.2 % SREP
15.5 %
~17.9% TARGET
1.0% 1.0%
~17.9% TARGET
~16.1 %
CET1 Capital Requirements - and Capital generation
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.
• 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.
Capital generation3) Basispoints (bps) – transitional rules
17.2%
18.6%
139
27
MDA – 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
YE 2018 YE 2019 YE 2020
MDA Trigger Level DNB CET1 ratio
13.7 %
15.1 %
101 92
175 160
44 -3
139
40 55
55 89
144
160
202
141 147
240 249
188 157
341
2013 2014 2015 2016 2017 2018 2019
Dividends and Buy-backs
CET1 build up
139
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
SME discount. The change in methodology had a significant positive impact on the CET1 build up.
18.6 %
Capital generation2) Basispoints (bps) – transitional rules
15.2 %
17.2 %
28
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.
29
Implementation 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.
30
IFRS 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
34.4%
26.1% 27.1%
20.4%
27.0% 23.3%
DNB SEB Nordea Danske Swedbank SHB
Risk Weighted Assets Per cent of total assets, 31 December 2019
Regulatory Headwind
Composition of buffers and
Pillar 2 Requirements.
New considerations: Climate Risk.
Stricter requirements on IRB models
Pressure on Pillar 2
New Standard methods
New floor
CRDV/CRR2
2021+
CRR Compensation
2020
Basel 4 – CRR3
2022+
Future Changes in Regulatory Framework - Capital
• EU Directives and Regulations do not have direct effect
in Norway
• First step: Implementation in the EEC agreement
• Second step: Relevant rules to be implemented in
Norwegian law
• Time lag might vary from months to years
• 5 February 2020: Ministry of Finance requested the
Norwegian FSA to propose relevant changes in
Norwegian law as a result of CRDV/CRR2/BRRD2. The
NFSA has until 1 October 2020 to present the proposals,
suggesting possible implementation in Norwegian law
some time in 2021.
32
Loan Book and Asset Quality
33
Loan Book EAD by Segments as of 31 December 2019
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.
Commercial real estate 10 %
Shipping 3 % Oil, gas and
offshore 5 %
Power and renewables
2 %
Healthcare 2 %
Public sector 1 %
Fishing, fish farming and
farming 2 %
Retail industries 3 %
Manufacturing 4 %
Technology, media and
telecom 2 % Services
3 %
Residential property
5 %
Personal customers **)
54 %
Other corporate customers
4 %
34
Aiming to Reduce Volatility and Increase Profitability Through Rebalancing of the Portfolio
Reducing Exposure in Cyclical Industries USD billion
Rebalancing Between Large Corporates
and Personal Customers
21
7
2012 Q4 2019
Shipping
20
11
2014 Q4 2019
Oil, gas and offshore
46% 54%
Mortgages and other exposures, personal customers
Corporate loans
51% 49%
3Q 2015 4Q 2019
35
2.7%
7.7%
Currentmortgage rate
Mortgage rateincluding stress
test
Mortgage Lending in DNB is Based on Cash Flow
5
%
Willingness to repay the loan
Credit history
Capability of repaying the loan Including 5 per cent interest rate stress
Amortization requirement above 60% LTV
Max 5x gross income
Collateral LTV max 85%
Monthly behavior scoring of
borrowers
1.
2.
3.
4.
36
House Prices Fundamental Factors Explaining the Past House Price Increase
Norwegian House Prices
Source: Real Estate Norway, Statistics Norway
Completed housings less
growth in households
Source: Norges Bank, Statistics Norway
Nominal House Prices 2000-2019
Source: Eiendomsverdi AS
(member of the European AVM Alliance)
0
100
200
300
400
500
600
700
800
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
Nominal prices
CPI-deflated prices
Income per capita-deflated prices
50.00
100.00
150.00
200.00
250.00
300.00
350.00
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Norway UK Sweden
Denmark USA
-20 000
-15 000
-10 000
-5 000
0
5 000
2006200820102012201420162018
37
• Prices are now 3.2 % higher than 12 months ago.
• DNB expects relative flat development in house prices going forward.
House Price Development in Norway and Oslo1)
House Price Growth As of January 2020 All-time-High = Aug -19 for Norway,
Feb -17 for Oslo
Source: Eiendomsverdi AS
(member of the European AVM Alliance)
75
100
125
150
175
200
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Norway Oslo
Source: Eiendomsverdi AS
(member of the European AVM Alliance)
House Price Growth 1 Jan 2007 = Index 100
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.
-0.2% -0.3%
3.2%
5.5%
Since all-time-high Last 12 months
Norway Oslo
38
Mortgage Lending Regulation Tightened Regulation from January 2017 has Impacted House Price Growth
• Max 5x gross income
• Max 85% LTV
• 60% for secondary home in Oslo
• Debt servicing capacity
• 5 percentage points interest rate increase
• Amortization requirement above 60% LTV
• 2.5% of approved loan or principal payment as for 30 year annuity
• Banks have some flexibility
• Banks can deviate in 10% of mortgage applications each quarter
• In Oslo this flexibility is limited to 8%
75
100
125
150
175
200
2014
2015
2016
2017
2018
2019
2020
Norway Oslo
House Price Growth 1 Jan 2007 = Index 100
39
A Very Robust Cover Pool
House Price Decline Current 10% 20% 30%
WA Indexed LTV 54.5% 59.6% 67.0% 76.6%
Eligible OC 48.6% 45.4% 40.1% 31.6%
50% 50% 44%
49%
20%
30%
40%
50%
60%
2016 2017 2018 2019
High OC
LTV around 55% (Weighted average)
Stress test -house price decline
54% 54% 55% 55%
40%
50%
60%
70%
2016 2017 2018 2019
40
A Very Robust Residential Loan Portfolio
16%
34%
27%
17%
6%
0-40 40-60 60-75 75-85 >85
Loan-to-Value (LTV) Per Cent of Residential Mortgage Book, 31 December 2019
- Includes mortgages in DNB Bank and DNB Boligkreditt
41
Oil-Related Portfolio represents 4.9% of Total Customer EaD
6 %
8 %
7 %
11 %
Total loan portfolio* – EaD NOK 1 977 billion Per cent, as at 31 December 2019
Oil-related portfolio – EAD NOK 96 billion 4.9 per cent of DNB’s total EaD as at 31 December 2019
3,1 %
1.8 %
2.4% 0.7%
1.8%
• The oil-related portfolio has been reduced significantly
• Down from NOK 167.1bn (8.4% of total EaD) in September 2015
Oil & Gas
Oilfield services
Offshore
* Excluding Credit institutions
Offshore – EAD NOK 35 billion
42
40
29
18
9
Low risk Medium risk High risk Net non-performingand net doubtful
commitments
4
13 11 8
Low risk Medium risk High risk Net non-performingand net doubtful
commitments
Oil-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 EaD in NOK billion
Offshore EaD in NOK billion
Oil and Gas EaD in NOK billion
Oilfield Service EaD in NOK billion
29
12 5
0.2
Low risk Medium risk High risk Net non-performingand net doubtful
commitments
7 5
2 0.3
Low risk Medium risk High risk Net non-performingand net doubtful
commitments
31.12.2016 31.12.2017 31.03.2018 30.06.201830.09.2018 31.12.2018 31.03.2019 30.06.201930.09.2019 31.12.2019
Probability of default (per cent)
Low risk 0.01 – 0.75
Medium risk 0.75 – 3.00
High risk 3.00 - impaired
43
Shipping Exposure is 3.0 % of DNB’s Total Loan Portfolio The Shipping Portfolio is Well Diversified
6 %
8 %
7 %
11 %
Total loan portfolio* – EaD NOK 1 977 billion Per cent, as at 31 December 2019
Shipping portfolio** – EaD NOK 59 billion Per cent of DNB’s total EAD, as at 31 December 2019
3.0%
0.7%
0.7%
0.4%
0.3%
0.6%
0.2% Crude oil tankers
Dry bulk
Gas
Container
Other shipping
Chemical and product tankers
** Excluding offshore portfolio. Offshore is included in oil-related portfolio.
• The shipping portfolio has been reduced significantly
• Down from NOK 138.1bn (6.9% of total EAD) in September 2015
*Excluding Credit institutions
44
Risk Classification and Migration DNB’s Shipping Book (Excluding Offshore)
Shipping* – EaD distribution by PD bracket NOK billion
14
38
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.
45
Previous Shipping Experience Provides Comfort
Accumulated shipping impairments, 2010-2014 Per cent of lending book
2.4
5.1
8.6
21.5
DNB (shipping) Nordic peer (shipping and offshore) Norwegian banks (shipping and pipe
transportation)*
European peer (Shipping)
*Aggregate numbers for Norwegian banks are from the 2009-2013 period (including DNB)
Source: DNB Markets, company reports. Presented at DNB CMD 2015.
• 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
Commitment to compliance excellence
46
Helping authorities combat financial crime is at the top of the management’s agenda
47
• 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.”
Samherji case/Iceland
1) Press release from Økokrim (in Norwegian only): https://www.okokrim.no/etterforsker-dnb-bank-asa.6266753-411472.html
• 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
48 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
Luminor – a joint venture with Nordea and Blackstone
49
Funding
50
DNB Funding Structure
79%
112%
2012 2013 2014 2015 2016 2017 2018 2019
Net Stable Funding Ratio (NSFR)
2.4
3.7
2008 2010 2012 2014 2016 2018
Average Life of Long-term Funding
Senior debt and covered bonds, years
Ratio of Deposits to Net Loans
Per Cent
50 53
55 58
63 65 65
61 62 63
58 58
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
51
Issuance 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
52
A 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
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
Best Euro Deal 2018
DNB Boligkreditt - Green Covered Bonds
• EUR 1,500,000,000 7 years 2025 Fixed
• SEK 9,700,000,000 5 years 2024 Fixed
52
54
DNB Green Covered Bonds
• An aggregated portfolio approach has been used to manage the green assets
• Eligible green assets at all times exceeds all outstanding green liabilities
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)
For further information, see
https://ir.dnb.no/funding-and-rating/green-covered-bonds
55
DNB 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
GBP 500 mn
4,7 years
3,5 years
2023 – Dec
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
56
Funding Contacts
Long Term Funding: Short Term Funding:
• Thor Tellefsen
Senior Vice President, Head of Long Term Funding
Phone direct: + 47 24 16 91 22
Mobile: + 47 915 44 385
E-mail: [email protected]
• Magnus Midtgård
Senior Vice President, Long Term Funding
Phone direct: + 47 24 16 91 25
Mobile: + 47 402 22 087
E-mail: [email protected]
• Roar Sørensen
Senior Vice President, Long Term Funding
Phone direct: + 47 24 16 91 39
Mobile: + 47 934 79 616
E-mail: [email protected]
• Åsmund Midttun
Senior Dealer, Rates, FICC
Phone direct: +47 24 16 90 28
Mobile: +47 901 13 559
E-mail: [email protected]
• Erik Brække
Senior Vice President, Rates, FICC
Phone direct: +47 24 16 90 31
Mobile: +47 930 47 504
E-mail: [email protected]
• Stephen Danna
First Vice President, FX/Rates/Commodities, New York
Phone direct: +1 212 681 2550
Mobile: +1 646 824 0072
E-mail: [email protected]
https://www.ir.dnb.no/funding-and-rating
57
Appendix
Appendix A:
Cover Pool Portfolio Information and LCR
Eligibility
58
Future 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: [email protected] +47 906 61 159
Portfolio information is updated when DNB quarterly results are released
59
Cover Pool
Data
DNB 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
Average Loan Balance (thousands) 1,676
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.
Stresstest
House Price Decline Current 10% 20% 30%
WA Indexed LTV 54.5% 59.6% 67.0% 76.6%
Eligible
Overcollateralisation 48.6% 45.4% 40.1% 31.6%
Cover Pool Sensitivity Analysis
60
Well diversified residential mortgage book within Norway
DNB Boligkreditt cover pool as of 31 December 2019
Eastern Norway 67%
Western Norway 15%
Northern Norway 8%
Southern Norway 5%
Mid-Norway 5%
1.2%
2.8%
3.6%
5.2%
1.5%
0.2 %
7.6 %
6.1 %
1.5 % 1.2 %
1.9 %
5.9%
6.4 %
2.8%
1.8 %
5.7 %
19.7 %
24.8 %
61
Portfolio Characteristics
Report date: 31.12.2019
Report currency: NOK
Key Characteristics
Total cover pool, nominal balance* (mill.) 635 541
Number of mortgages 379 111
Number of borrowers 331 868
Average loan balance (thousands) 1 676
Outstanding covered bonds, nominal balance (mill.) 427 158
Substitute assets (% of total cover pool) 0
WA indexed LTV (%) 54,5
WAL of cover pool (contractual maturity in years) 13,1
WAL of outstanding covered bonds (extended maturity in years) 4,2
* All cover pool assets are denominated in NOK.
** Seasoning indicates the number of months since collateral for the loan was established.
Maturity Structure Cover Pool
Contractual maturity (years) Loan balance (mill.) %
≥ 0 ≤ 1 20 824 3,3 %
1 ≤ 2 22 116 3,5 %
2 ≤ 3 24 084 3,8 %
3 ≤ 5 50 577 8,0 %
5 ≤ 10 137 152 21,6 %
> 10 380 787 59,9 %
Total 635 541 100,0 %
Overcollateralisation
Cover pool size:
Residential mortgages, loan balance (mill.) 635 541
Covered bonds outstanding (mill.) 427 158
Overcollateralisation 48,8 %
Maturity Structure Covered Bonds
Extended maturity (years) Loan balance (mill.) %
≥ 0 ≤ 1 5 547 1,3 %
1 ≤ 2 53 244 12,5 %
2 ≤ 3 72 113 16,9 %
3 ≤ 5 160 277 37,5 %
5 ≤ 10 100 261 23,5 %
> 10 35 716 8,4 %
Total 427 158 100,0 %
Expected maturity (years) Loan balance (mill.) %
≥ 0 ≤ 1 54 180 12,7 %
1 ≤ 2 73 861 17,3 %
2 ≤ 3 93 177 21,8 %
3 ≤ 5 102 291 23,9 %
5 ≤ 10 68 235 16,0 %
> 10 35 414 8,3 %
Total 427 158 100,0 %
62
Portfolio Characteristics cont.
Loan Size
Private individuals Loan balance (mill.) Number of loans
≤ 1,000,000 65 775 148 255
> 1,000,000 ≤ 2,000,000 166 567 111 819
> 2,000,000 ≤ 3,000,000 158 911 64 969
> 3,000,000 ≤ 4,000,000 96 553 28 041
> 4,000,000 ≤ 5,000,000 54 516 12 255
> 5,000,000 74 729 11 159
Total 617 050 376 498
Housing Cooperatives Loan balance (mill.) Number of loans
≤ 5,000,000 2 877 1 657
> 5,000,000 ≤ 10,000,000 3 132 440
> 10,000,000 ≤ 20,000,000 4 381 317
> 20,000,000 ≤ 50,000,000 4 974 160
> 50,000,000 ≤ 100,000,000 2 020 31
> 100,000,000 1 105 8
Total 18 490 2 613
LTV buckets
Indexed LTV Loan balance (mill.) %
≥ 0 ≤ 40 130 517 20,5 %
40 ≤ 50 89 665 14,1 %
50 ≤ 60 146 787 23,1 %
60 ≤ 70 134 240 21,1 %
70 ≤ 80 119 753 18,8 %
80 ≤ 90 9 020 1,4 %
90 ≤ 100 2 811 0,4 %
>100 2 747 0,4 %
Total 635 541 100,0 %
Concentration Risk
%
10 largest exposures 0,2 %
10 largest exposures excl. housing cooperatives 0,1 %
Property Types
Loan balance (mill.) %
Residential 635 541 100,0 %
Commercial 0 0,0 %
Other 0 0,0 %
Total 635 541 100,0 %
o/w Housing Cooperatives / Multi-family assets 18 490 2,9 %
o/w Forest & Agriculture 0 0,0 %
Occupancy Type
%
Owner occupied 70,0%
Second homes / Holiday houses 0,2%
Buy to let / Non owner occupied houses 0,1%
Other 29,7%
Total 100,0%
Repayment Type
%
Amortization 78,9 %
Interest only* 21,1 %
Total 100,0 %
*No principal payments for a limited period of time.
63
Portfolio Characteristics cont.
Seasoning
%
Up to 12months 17,9 %
≥ 12 - ≤ 24 months 13,3 %
≥ 24 - ≤ 36 months 12,0 %
≥ 36 - ≤ 60 months 19,5 %
≥ 60 months 37,3 %
Total 100,0 %
Interest Rate Type
Fixed Rate 6,4 %
Floating Rate 93,6 %
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 %
Aust-Agder 7 586 1,2 %
Vest-Agder 9 609 1,5 %
Rogaland 38 606 6,1 %
Hordaland 48 227 7,6 %
Sogn og Fjordane 1 394 0,2 %
Møre og Romsdal 9 567 1,5 %
Trøndelag 33 294 5,2 %
Nordland 23 096 3,6 %
Troms 17 782 2,8 %
Finmark 7 786 1,2 %
Svalbard 8 0,0 %
Total 635 541 100,0 %
Non Performing
Non performing loans 0,12 %
Arrears
≥ 30 - < 60 days 0,14 %
≥ 60 - < 90 days 0,03 %
≥ 90 - < 180 days 0,03 %
≥ 180 days 0,08 %
Eastern Norway: 67 %
Western Norway: 15 %
Northern Norway: 8 %
Southern Norway: 5 %
Mid-Norway: 5 %
64
Cover Pool Sensitivity Analysis and Overcollateralisation History
Cover Pool Overcollateralisation History
Latest over-collateralisation requirement for AAA/Aaa rating (as per 31 December 2019):
• S&P: 4.16 %
• Moody’s: 0 %
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 %
148.8 %
115.3 %
104.2 %
100%
105%
110%
115%
120%
125%
130%
135%
140%
145%
150%
155%
160%
OC Cover Pool OC Rating requirement
65
Non Performing Loans in DNB Boligkreditt AS 90+ days in arrears
0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
0.35%
0.40%
90+ days arrears
12 bp
66
Green Bond Allocation Report December 2019
67
Green Bond Impact Report August 2019
68
Covered 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
69
Covered 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
70
ECB 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).
71
Appendix
Appendix B:
The Norwegian Mortgage Market
72
The 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
73
Appendix
Appendix C:
Capital and Tier 1
74
Capital 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
18.6% 18.3% 19.3%
22.9% 24.4%
26.3%
DNB DNB Bank Group DNB Bank ASA
CET1 Total Capital Ratio
75
Overall 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.
76
Pillar 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.
77
DNB’s Solid Profitability Should Ensure AT1 Coupon Payments
Dividend payments on ordinary shares and coupon
payments on Additional Tier 1 (AT1) instruments are at the
discretion of the issuer
* Share buy-back in 2019
Dividend for 2019, to be paid in 2020
DNB will give due consideration to
the capital hierarchy and look to
preserve the seniority of claims
going forward**
** Statement given at the DNB Capital Markets Day 27 November 2014
31.9
23.4
26.9
29.0 31.2
2.9
7.3
9.3
11.4 13.2
14,1
3.8
3.9
5.2
0.1 0.5 1.0 1.0 1.1
0
5
10
15
20
25
30
35
40
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Profit Before Tax Dividend Share buy-back AT1 Coupon Payments
15,2
17,1
19,3
78
Leverage 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.
79
ADI – 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
80
Appendix
Appendix D:
Additional Slides
- Financial performance and Other information
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
Solid performance in all customer segments
81
9 662 9 995 9 914 9 660
4 762
5 899
6 905
7 847
5 240
9 043
11 422
10 186
2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019
Large corporates and
international customers
Small and medium-sized
enterprises
Personal customers
Before impairment
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
per customer segment Amounts in NOK million
Maximum exposure (on and off-balance sheet items),
net of accumulated impairment losses
Healthy asset quality – positive development in risk numbers
82
Full year Full year
4Q19 3Q19 2019 2018
Personal customers (103) (73) (353) (318)
Small and medium-sized
enterprises (143) (16) (595) (566)
Large corporates and
international customers 68 (1 159) (1 240) 1 022
Total (178) (1 247) (2 191) 139
NOK 2 125 billion
(-18)
Stage 1 Stage 2 Stage 3
NOK 110 billion
(-2)
NOK 18 billion
(-3)
0.8%
94.3%
4.9%
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
10.1
10.8
11.7 11.7
2016 2017 2018 2019
5.70
7.10
8.25
9.00
2016 2017 2018 2019
40.9
44.2 43.8
42.2
2016 2017 2018 2019
Return on equity Per cent
Cost/income ratio Per cent
Dividend per share NOK
11.46
12.84
14.56
15.54
2016 2017 2018 2019
Earnings per share NOK
Profitable growth and solid asset quality
83
84
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85
Disclaimer (2/2)
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