Net profit of DKK 920 million and ROE of 10.8 %

Presentation of Spar Nord’s financial results for 2018

Headlines from the income statement

2

● Net interest income stabilized amidst 6 % loan growth

● Net fee income reaches new record level

● Large positive one-offs on strategic shareholdings

● Negative value adjustments on bond and share portfolio

● Costs down 1 % despite pressure on payroll cost and IT

● Challenges in agriculture and two large single losses

visible in impairments

Comments DKKm 2018 2017 Index Q4 2018 Q3 2018 Index

Net interest income 1,548 1,546 100 390 386 101

Net fees, charges and commissions 1,127 1,116 101 271 293 92

Market-value adjustments 268 404 66 8 77 11

Other income 247 83 297 27 16 173

Core income 3,190 3,150 101 695 771 90

Staff costs 1,152 1,165 99 311 252 123

Operating expenses etc. 771 771 100 195 181 108

Costs 1,924 1,936 99 506 433 117

Core earnings before impairment 1,267 1,213 104 189 338 56

Impairments of loans and advances, etc. 173 -38 - 106 50 212

Profit before tax 1,094 1,251 87 83 288 29

Tax 174 262 66 12 69 18

Profit 920 989 93 71 219 32

Net interest income stabilized amidst 6 % loan growth

3

Net interest income and lending volume● Net interest income came to DKK 1,548 million versus DKK

1,546 million last year

● Bank and leasing lending grew by DKK 2.3 billion (6 %)

● Lending to household customers was up DKK 0.7 billion (5 %)

● Lending to corporates, excluding leasing, was up DKK 0.5 billion (3 %)

● Leasing business grew by DKK 1.1 billion (37 %)

● Q4 net interest income came to DKK 390 million versus

DKK 386 million in Q3

● Continued efforts to improve both deposit and lending

margins

37.3 37.6 38.3 39.2 39.6

0

250

500

750

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Net interest income Lending, banking and leasing activities (DKKb)

DKKm

Continued downward pressure on interest margin in competitive market

● Total interest margin declined by 21 bps from Q4 2017 to Q4 2018

● Continued price competition on customer lending led to 30 bps decline in lending margin

● Active measures on the deposit side resulted in 9 bps reduction of deposit margin

4

Interest margin

0.10 0.10 0.09 0.07 0.05 0.01

-0.02 -0.02

4.67 4.53 4.41 4.29 4.25 4.16 4.07 3.99

4.57 4.43 4.32 4.22 4.20 4.15 4.09 4.01

Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Interest rate (Deposits) Interest rate (Loans) Interest margin

Net fee income reaches new record level

● Net income from fees, charges and commissions came to DKK

1.127 million – DKK 11 million up from last year’s record level

● Income from mortgage distribution grew by 4 % driven by

continued volume growth

● Fees related to on-balance sheet loans grew by 4 %

● MiFID II effect and lower activity put pressure on income from

securities trading and asset management

● Continued growth in fee income from “daily banking”

(insurance, payments etc.)

5

Net fee income

0

200

400

600

800

1,000

1,200

2017 2018

DKKm2017/2018: 1 %

6

Other feesSecurities trading

and asset managementMortgage Other loans

Net fee income reaches new record level

0

50

100

150

200

250

300

350

400

450

Q417

Q118

Q218

Q318

Q418

17 18

Y/Y: 4 %DKKm

Q417

Q118

Q218

Q318

Q418

17 18

Y/Y: 4 %

Q4

17

Q1

18

Q2

18

Q3

18

Q4

18

17 18

Y/Y: -5 %

Q4

17

Q1

18

Q2

18

Q3

18

Q4

18

17 18

Y/Y: 5 %

7

Market value adjustments and dividends● Market value adjustments and dividends amounted to DKK

268 million versus DKK 404 million in 2017

● Market value adjustments and dividends on share holdings

in sector companies grew by DKK 86 million (y/y) –

especially driven by BankInvest

● Sharp drop in market value adjustments on bonds and

listed shares due to less favourable market conditions –

especially Q4 was difficult with negative market value

adjustments of DKK 39 million

Large gains from strategic shares secure market value adjustments at acceptable level

0

50

100

150

200

Q42017

Q12018

Q22018

Q32018

Q42018

DKKm

DKKm 2018 2017 Change

Market-valued adjustments in

Trading, Financial Markets & The

International Division

-25 217 -242

Tangible assets incl. dividends 237 151 86

Currency trade and -agio 57 37 20

Total 268 404 -136

Costs down 1 % despite structural pressure on payroll cost and IT

8

Costs and Cost/Income Ratio

Breakdown on cost types

0.61 0.60

0.0

2017 2018

0

500

1,000

1,500

2,000

2,500

2017 2018

DKKm

Costs

(DKKm) 2018 2017 Change

Staff costs 1,152 1,165 -13

Operating expenses 716 710 6

Depreciation 55 61 -6

Costs 1,924 1,936 -13

Operating expenses

(DKKm) 2018 2017 Change

Staff-related expenses 42 38 4

Travel expenses 18 18 0

Marketing costs 91 111 -19

IT expenses 405 354 50

Cost of premises 86 99 -13

Other administrative expenses 74 91 -16

Operating expenses 716 710 6

● The Group’s total costs and expenses amounted to DKK 1,924 million in 2018, against DKK 1,936 million in 2017

● Payroll costs were 1% lower than in 2017

● Collective wage increases partly offset by small reduction in headcount

● Other items with positive impact (overtime pay, holiday pay)

● Other operating expenses kept a zero-growth level

● Higher costs associated with strategic and compliance related IT projects …

● …offset by lower costs on most other lines

● At the end of 2018, Spar Nord employed 20 people (FTE) fewer than 12 months earlier

● Cost/Income Ratio came to 0.60 – in line with strategic target

Loan impairments of DKK 173 million corresponding to impairment percentage of 0.30

● Loan impairment charges etc. were an expense of DKK 173

million, which compares to an income of DKK 38 million last year

● Broken down by segment impairment charges came to:

● Retail: DKK 54 million (hereof SparXpres: DKK 46 million)

● Business excl. agriculture: DKK 13 million

● Agriculture: DKK 106 million

● Implementation of IFRS9

● Additional impairments of DKK 250 million

● Individual impairments (stage 3): DKK 1,531 m (DKK 1,494 m at beginning of year)

● Stage 1 and Stage 2 impairments: DKK 414 m (DKK 387 m at beginning of year)

9

Loan impairments and impairment percentage

0.1 0.00.3 0.3 0.7

-3.0

-2.0

-1.0

0.0

1.0

2.0

-50

0

50

100

150

200

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

DKKmPct.

Business volume grows to DKK 244 billion

10

Bank- and leasing lending Mortgage distribution Guarantees Bank deposits Pension pools Investments

● Positive trend in lending to both retail and business customers

● Bank lending has grown by 2.3 billion (6 %) and distribution of mortgage loans has grown by DKK 3.7 billion (5 %)

● Continued growth in deposits

● Bank deposits are up by DKK 2.1 billion (4 %)

● Deposits in pooled schemes reduced by 0.6 billion (4 %)

● Custodianship accounts declined by DKK 4.8 billion (9%)

0

10

20

30

40

50

60

70

80

90

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Q4 17/Q4 18: 6 %DKKb

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Q4 17/Q4 18: 1 %

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Q4 17/Q4 18: -4 %

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Q4 17/Q4 18: 5 %

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Q4 17/Q4 18: 4 %

Q4 17 Q1 18 Q2 18 Q3 18 Q4 18

Q4 17/Q4 18: -9 %

11

64,7

58,1

57,9

46,4

51,0

Pricing

56,4

59,2

64,5

51,8

59,9

61,8

65,0

56,5

Innovation

67,1

60,1

62,6

62,1

62,0

57,8

58,4

70,8

Quality advice

7,9

7,3

7,7

8.1

8.5

SME rating

(Score 0-10)

8.2

8,0

70,9

60,4

64,9

62,9

64,0

56,3

Great service

58,1

Spar Nord leads the pack among larger banks in Denmark

Wilke Finansimage 2018 – score 0-100 (2018)

11

Aalund Business 2018

#1 #1 #1 #1 #3

I a comparison among the

seven large banks in

Denmark, Spar Nord

achieves the best rating from

both SMEs and private

customers – overall as well as

on service, advice og pricing

#1

Positive image – positioned for further growth

● In September 2018, we acquired 27 % of Danske Andelskassers Bank

● At present, our stake amounts to 30.7 % of capital and voting rights

● An interesting strategic investment

● Many similarities in strategy, customer focus, products and IT

● Strong geographic match

● We believe that a merger would be value enhancing for all stakeholders

● An attractive financial investment

● Low capital consumption allocation after divestment of other large holdings

● Even if DAB performs relatively modestly, return of invested capital will be satisfactory

12

Strategic acquisition of 30 % stake in DAB

Sønderborg

Ribe

Varde

Skjern

Grenaa

Esbjerg

Ikast

Viborg

Hobro

Randers

Aarhus

Svendborg

Koldby

Ringe

DAB (8)

DAB/Spar Nord (6)

DAB HQ

Spar Nord HQ

Hammershøj

Aalborg

Solid capital position

● Capital targets

● CET1 Ratio: 13.5 (up from 13.0 when we become SIFI)

● Total capital ratio: 17.5 (up from 16.5)

● CET1 ratio of 14.1 and own funds ratio of 18.1

● Slight decline attributable to volume growth and acquisition of shares in

Danske Andelskassers Bank

● Individual solvency requirement of 9.4 and combined buffer

requirement of 1.9

● Excess capital coverage of 6.7 percentage points or DKK 3.6 billion

● For 2018 dividend is proposed at DKK 3.50 per share

● Pay-out ratio: 45 %

● Dividend yield: 7 %

13

Capital percentage and subordinated capital

Capital base

Pct. 2018 2017 2016 2015

Common equity Tier 1 capital ratio 14.1 14.4 14.0 14.4

Additional Tier 1 1.6 1.7 1.8 0.8

Deductions in additional Tier 1 0.0 -0.1 -0.2 -0.3

Tier 1 capital ratio 15.6 16.0 15.6 14.9

Tier 2 capital 2.4 2.3 2.3 2.3

Deductions in own funds 0.0 -0.1 -0.2 -0.3

Own funds ratio 18.1 18.2 17.7 17.0

0

5

10

15

20

2014 2015 2016 2017 2018

Own funds ratio

Pct.

426 400

500

400450

0

200

400

600

800

2019 2020 2021 2022 2023 2024

->Additional Tier 1

DKKm

SIFI appointment and roadmap to IRB

● MREL demand to be phased in over 4 years

● Two times solvency requirement plus two times combined buffer

requirement excluding countercyclical buffer

● IRB-project underway

● Preparations expected to take 3 years – plus FSA processing

● Effect on REA expected to be substantial

● Expected need for MREL capital of around DKK 7 billion

● First issue expected to take place in H2 2019

14

Capital requirement as SIFI bank*As of 2 January, Spar Nord is SIFI in Denmark

*All numbers express expectation beginning of year

8.0 8.0 8.0 8.0 8.0

1.0 1.5 1.5 1.5 1.51.9

2.5 2.5 2.5 2.5

0.5 1.0 1.0 1.01.0 1.03.0

6.0

9.8

13.0

15.5

19.0

23.8

27.0

2018 2019 2020 2021 2022

MREL buffer SIFI buffer Countercyclical buffer Conservation buffer Pillar II Pillar I

15

Strategic liquidity Loan to deposit ratio

Comfortable strategic liquidity of DKK 21.8 bn

8476 76 77 78

2014 2015 2016 2017 2018

DKKb 2018 2017 2016

Deposits, banking activities 50.8 48.7 46.5

Seniorfunding 0.0 0.0 0.0

Core capital and sub. capital 10.6 10.1 9.7

Stable long term funding 61.3 58.8 56.2

Loans, banking and leasing activities 39.6 37.3 35.1

Maturity < 1 year 0.0 0.7 0.4

Liquidity target 21.8 20.8 20.7

Guidance for 2019

● Modest but positive growth in Danish economy

● Positive loan growth driven by continued growth in market share

● Pressure on core income

● Intense competition expected to impact lending margin adversely

● Fee and commission expected to remain high

● No positive one-offs known at this time

● Pressure on the cost side

● Underlying growth on payroll costs due to collective agreements and increasing payroll tax – 2.5 % total effect

● Expenses related to strategic initiatives and compliance

● Core earnings before impairments expected in the DKK 1.0-1.1 billion range

● Loan impairments expected to be slightly lower than in 2018

● Net profit expected in the DKK 700-800 million range

16