Adapting to a new

banking reality

1

Morgan Stanley

Financials Conference March 21, 2013

Bjørn Erik Næss

CFO of DNB

Profit figures last five years

2

Pre-tax operating profit before

impairment (NOK million)

Pre-tax operating profit before

impairment excl. basis swaps (NOK million)

Profit for the period (NOK million)

Profit for the period excl. basis swaps (NOK million)

15 627

18 717

21 081 21 83320 769

2008 2009 2010 2011 2012

14 569

19 07420 514

18 802

22 456

2008 2009 2010 2011 2012

8 918

7 026

14 062 12 979 13 657

2008 2009 2010 2011 2012

8 156 7 283

13 653

10 796

14 871

2008 2009 2010 2011 2012

Return on equity and cost/income ratio

3

Return on equity excl. basis swaps (Per cent)

Return on equity (Per cent)

Cost/income ratio (Per cent)

Cost/income ratio excl. basis swaps (Per cent)

12.4

10.6

13.6

11.4 11.2

2008 2009 2010 2011 2012

11.4

9.0

13.2

9.5

12.2

2008 2009 2010 2011 2012

51.4

48.3 47.6 47.1

49.5

2008 2009 2010 2011 2012

53.0

47.9 48.3

50.8

47.6

2008 2009 2010 2011 2012

Solid development in equity Tier 1 capital ratio* (CET1)

4

6.3 5.8

8.59.2 9.4

10.7

2007 2008 2009 2010 2011 2012

* CET1 ratio requirement of minimum 9% according to EBA transitional rules

Capital adequacy figures as at 31 December 2012 – comparison with Nordic peers

5

5.1

3.6 4.4

3.8 3.1

8.9

7.2

6.5 5.4 6.3

10.7 10.1

10.5

9.0 9.8

12.1

13.1

15.4

16.4

12.2

Equity tier 1/total assets "leverage ratio" Equity tier 1/total lending

Equity tier 1 ratio transitional rules Equity tier 1 ratio Basel III/Full IRB

Per cent

DNB SEB Swedbank Handelsbanken Nordea

1) DNB's risk weights are conservatively estimated based on the Norwegian FSA's requirements. The adjusted capital adequacy figure is estimated based on average observed risk weights for corresponding portfolios in Nordic Banks

15.9 1)

A new banking reality is inevitable

6

Debt crisis in Europe

and the US

A wave of new

regulations

Changes in

consumer behaviour

230

6 580

Branch Mobile banking

Customer visits per month

(1 000)

Drivers for a new banking reality:

Capital

requirements

Stable long-

term funding

requirements

Liquidity

requirements

Taxes

New banking

structure in

Europe

New regulatory requirements

7

Better quality

of capital

Higher capital

requirements

for banks and

insurance

companies

Liquid asset

requirements

Distinctively

Norwegian

bank taxation?

Plans for

crisis

management

and recovery

Bail-in –

creditors are

forced to

take losses

New structure of

banks in Europe is

on the drawing

board

Demand for

financial

stability

Tax on financial

transactions?

Regulation of

bonuses and

salaries

New requirements for

sales and advisory

processes

Macroeconomic

surveillance

Deposit

guarantee

levy

Higher

longevity

provisions

New demands

for risk

management

(risk appetite)

Restrictions

on covered

bond

issues?

Can we hope for a level playing field?

Pensions

Basel I, II, III

Large differences in Nordic regulations – Average risk weights, advanced IRB

8 Risk weights in per cent at year-end 2012

8.8 12.1

14.2

5.4

10.4

6.6

51.7 54.6

35.9

30.5

40.7

57.9

0 %

10 %

20 %

30 %

40 %

50 %

60 %

Mortgages

Corporate

?

Advanced IRB

* Approx. 80% of portfolio reported according to the advanced IRB approach

The bill for “a new banking reality” is a Dutch treat - It’s changing times – for owners, the bank and customers

9

11.2%

22.0%

2007 2012

DNB’s ROE

2.18%

1.46%

2007 2012

DNB’s lending spread

50%

cut in

dividend

Owners

2007 2012

47.5%

50.6%

DNB’s C/I

Bank Customers

Wider

lending

spreads

10%

reduction

in FTE

«The new banking reality»

New longevity assumptions for group pension insurance

10

• More stringent than expected

• Requires higher premiums and higher technical

provisions

• Provisions to be covered by surplus investment

returns

• Owner’s contribution is expected to be 20 per cent

• Will not affect the Group’s long-term financial

targets

NOK 14.4 bn

NOK 3.8bn

allocated

at year-end

2012

Longevity

reserves

Mitigating steps to cope with a new banking reality – estimated effects

11

Repricing of deposits: Annual effect of up to NOK 0.55bn

Repricing of loans: Annual effect of NOK 1.6bn

Temporary reduced dividend

RWA efficiency

Rebalancing of the portfolio

2013 outlook – soft Q1, stronger Q2/2H due to repricing

12

Deposit guarantee levy reintroduced from 2013: NOK165m/quarter

Two interest days less in Q1 than in Q4 with NOK150m effect

Low interest accumulation at the start of the year

General seasonal variations; volume expected to gradually improve

Expected negative mark-to-market effects from fixed-rate

mortgages and basis swaps

Margin repricing effects partly realised in Q2, full effect from 2H

Future outlook – financial ambitions remain unchanged

13

Well positioned to meet expected regulatory requirements

Continued increase in interest rate spreads

Moderate growth in lending volumes

Flat operating expenses

Low impairment losses on loans; on level with last year

Further strengthening of Tier 1 capital

Financial targets towards 2015

14

CET1 ratio (Basel III) at 12.0-12.5 per cent in 2015 Capitalisation

Cost

Maximum 2 per cent average annual growth

in nominal costs including restructuring costs

Cost/income ratio below 45 per cent in 2015

Dividend Unchanged long-term dividend policy at 50 per cent

Temporary payout ratio 25-50 per cent 2012-2014

RoE

RoE above 12 per cent in 2015

NII Annual NII growth above 6 per cent

Vi er i Norden

15