DNB Bank DNB Boligkreditt DNBBank... · 57 2010 2015 2016 Transforming our branch network ... CET1...

March 2019

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 (negative)

• S&P: AA- (stable)

• Sustainability Ratings:

• Sustainalytics ESG Rating: Ranked #3 of 344 financial institutions (Rating 87/100, 96/100 on Environment)

5

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)

6

The Norwegian Economy

7

A Solid Norwegian Economy

Source: 1) OECD Economic Outlook No. 103, May 2018

2) Ministry of Finance (National Budget 2019)

3) DNB Markets, Jan. 2019

2017 2018 2019E

Budget surplus 1) 4.4 % 4.9 % 5.1 %

Oil fund 2) EUR 809bn EUR 917bn EUR 969bn

Unemployment 3) 4.2 % 3.9 % 3.8 %

GDP growth 3) + 2.0 % + 2.3 % + 2.0 %

Central Bank Rate 3) 0.5 % 0.75 % 1.00 %

8

Government Finances are Rock-Solid

Annual budget deficit/surplus forecast for 20181) General government net financial liabilities1)

As per cent of nominal GDP 2019

1) Source: OECD Economic Outlook No. 103, May 2018

-300,00

-250,00

-200,00

-150,00

-100,00

-50,00

0,00

50,00

100,00

150,00

200,00

9

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

10

Forecasted unemployment Per cent

3,9 3,8 3,7

0

2

4

6

8

10

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F

DNB Markets (Jan 19)

Among the lowest unemployment in Europe Per cent

Source: OECD Economic Outlook No. 103, May 2018

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

Denmark Finland Norway Sweden United Kingdom Euro area (16 countries)

11

Economic Growth in Norway is Picking up Again

1,9 % 1,9 %

3,7 %

2,3 % 2,2 %

1,4 % 1,0 %

2,0 % 2,3 %

2,0 % 2,1 %

2,4 % 2,3 % 2,3 %

-1%

0%

1%

2%

3%

4%

5%

6%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e 2020e

DNB Markets (Jan 19) Statistics Norway (Nov 18)

GDP growth Year on year, per cent

GDP growth Per cent

Source: DNB Markets, Economic Outlook August 2018

-2%

-1%

0%

1%

2%

3%

4%

5%

2013 2014 2015 2016 2017 2018 2019 2020

Norway

Sweden

Denmark

Finland

Euro Area

12

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, Statoil, 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

25

April 2017

13

Financial Targets, Performance and Capital

14

Financial Ambitions Towards Year-End 2019

~ 16.8 per cent CET1 ratio 1)

Key performance indicator As capital level

ROE > 12 per cent

Overriding target

< 40 per cent C/I ratio

Dividend policy

Payout ratio > 50 per cent

1) DNB will hold a management buffer of about 1 per cent on top of regulatory requirements, which at year-end 2019 will be

around 15.8 per cent including increased counter cyclical buffer requirements. The anticipated removal of the transitional

floor in 2019 is expected to absorb the increase in the requirement.

15

Strengthening our position as 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

Share of new savings agreements sold

through digital solutions

Digital applications make us more

efficient

Share of total inquires1) answered by

chatbot Aino since launch

1) Inquiries by

phone, chat and

email

• Fully automated secured lending

• Boosting efficiency with automation

16

DNB Delivers Solid Profit

18,7

28,7

34,1

30,8

28,5 28,3

7,7

1,6 2,3

7,4

2,4

(0,1)

(5)

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Pre-tax operating profit before impairment Impairment of loans

Pre-tax operating profit before impairment NOK billion

17

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.

18

Key Financial Ratios

2018 2017 2016 2015 2014

Return on equity (%) 11.7 10.8 10.1 14.5 13.8

Cost income (%) 43.8 44.2 40.9 36.9 41.9

Comb. weighted total average spread (%) 1.30 1.30 1.32 1.33 1.31

Write down ratio (%) -0.01 0.15 0.48 0.15 0.12

Common equity tier 1 ratio (%) 16.4 16.4 16.0 14.4 12.7

Total capital ratio (%) 19.9 20.0 19.5 17.8 15.2

19

DNB – A Very Strong Capital Position

CET1 capital ratio – transitional rules

Per cent

8,5 9,2 9,4

10,7

11,8 12,7

14,4

16,0 16,4 16,4

2009 10 11 12 13 14 15 16 17 18

CET1 capital ratios and leverage ratio Per cent, as of 31 December 2018

* When CRR/CRD IV is incorporated in the EEA-agreement and in Norwegian legislation, the Norwegian FSA has proposed to remove the

transitional floor. Implementation is expected in 2019.

16,4 % 17,2 %

7,5 %

CET1 transitional rules CET1 without

transitional rules *

Leverage Ratio

20


7.5

5.1 5.1 5.1

4.4 4.6

DNB Nordea SEB Swedbank SHB Danske Bank

Leverage ratio versus Nordic Peers Per cent, as of 31 December 2018

DNB’s leverage ratio requirement 1) 6.0

1) The Norwegian leverage ratio requirement for banks is 5 per cent effective as from 30 June 2017. For systemically important banks, such as DNB,

the minimum requirement is 6 per cent. A potential breach of the leverage ratio requirement will not trigger automatic restrictions on AT1 coupon

payments.

21


S&P RAC Ratio versus Nordic Peers Per Cent, 31 Dec 2017

13,5

12,6

11,9 11,4

10,3 9,8

DNB Swedbank Nordea Danske Bank SEB SHB

S&P RAC Ratios for the Top 50 Rated Western European Banks Per Cent, 31 Dec 2017

22

101 92

175 160

44 -3

40 55

55 89

144

160

141 147

240 249

188

157

2013 2014 2015 2016 2017 2018

Dividends and Buy-backs

CET1 build up

4,5 % 4,5 % 4,5 %

2,5 % 2,5 % 2,5 %

3,0 % 3,0 % 3,0 %

2,0 % 2,0 % 2,0 %

1,6 % 1,6 % 2,0 %

1,6 % 1,8 % 1,8 %

16,4 % 16,4 %

YE 2017 31.12.2018

Pillar 1 Min Requirement Systemic risk Buffer

SIFI Buffer Countercyclical Buffer

Pillar 2 Requirement SREP Requirement

Conservation Buffer Management Buffer

DNB CET1 - trans. rules DNB CET1 - without trans. rules

Target 31.12.2019

15.8 % SREP

SREP – CET1 Capital Requirements and Generation

1) On 27 April 2018 the Norwegian FSA published a consultation paper with its proposal for final implementation of CRR/CRD IV. The FSA suggests to

include the Pillar 2 requirements in the calculation of the MDA trigger level when the CRR/CRD IV is to be fully implemented in Norway. The

Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted.

2) In accordance with CRD IV, the institution-specific CCyB rate will be a weighted average of the rates in the jurisdictions in which the institution

operates. In Norway the countercyclical buffer is currently 2.0 % and DNB Bank’s effective CCyB rate is approximately 1.6 %. The CCvB will be 2.5 %

as from 31.12.2019, corresponding to an effective CCvB rate for DNB Bank of approximately 2.0 %.

~ 16.8 %

• 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

• We expect the Basel I transitional rules to be removed in 2019

Capital generation Basispoints (bps) – transitional rules 15.4 %

16,7 %

17,2 % (CET 1 capital ratio – without trans rules (Basel III)

CET1 ratio target ~ 16.8 per cent from year-end 2019 due to the increased counter-cyclical buffer in Norway and Sweden

The CET1 ratio according to Basel III is at a comfortable 17.2 per cent (80 bps higher than CET1 with transitional rules)

The anticipated removal of the transitional floor in 2019 is expected to absorb the increase in the requirement

CET1 ratio effects expected in 2019

CET1 ratio effects expected in 2019

Effects in 1Q19 - IFRS 16 - 8 bps

- Strategic investments:

• Non-life insurance

merger (Fremtind) - 30 bps

Effects in 2Q19 - Dividend life insurance +15 bps

- Strategic investments:

• Luminor +30 bps

• Personal risk products

(Fremtind) - 10 bps

16,4 % 17,2 %

7,5 %

CET1 transitional rules CET1 without

transitional rules *

Leverage Ratio

CET1 capital ratios and leverage ratio as of 31 December 2018

23

24

MREL–regulation entered into force 1 January 2019

• Final regulation in line with FSA’s proposal dated 2 November 2018

• Loss absorption requirement to be covered by existing own funds requirement

• Recapitalization requirement to be covered by a any excess capital and non-preferred senior debt,

contractually subordinated to conventional senior debt.

• Possibility for the resolution authority to allow that the requirement is partly fulfilled with preferred senior

debt.

• Timeframe

• The resolution authority will set specific MREL requirements for each bank in the near future (H1 2019).

• Subordination requirement must be fulfilled before 31 December 2022.

• Expected requirement

• DNB’s preliminary calculations indicate a MREL requirement of approximately NOK 150 billion

(~EUR 16 billion).

• Current outstanding senior debt corresponds approximately to the expected MREL requirement.

• Senior preferred debt with remaining maturity of more than one year, will count as eligible in the

transitional period.

• To be clarified whether the requirement may be partly fulfilled with senior preferred debt after 2022.

• Preliminary conclusion

• During the transitional period until 31 December 2022, DNB will gradually replace maturing senior debt with

non-preferred senior debt.

25

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 its resolution plan for

DNB and set specific MREL-requirements, probably in 2019.

26

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 minimal effects for DNB.

• Risk Weighted Density

40,9 %

27,9 % 28,3 %

20,9 %

28,4 % 23,8 %

DNB SEB Nordea Danske Swedbank SHB

Risk Weighted Assets Per cent of total assets, 31 December 2018

27

MDA – DNB above CET 1 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

13,6 % 13,6 % 14,0 %

16,4 % 16,4 %

YE 2017 31.12.2018 "31.12.2019"

MDA Trigger Level DNB CET 1 trans. rules

DNB CET1 without trans. rules (B III)

101 92

175 160

44 -3

40 55

55 89

144

160

141 147

240 249

188

157

2013 2014 2015 2016 2017 2018

Dividends and Buy-backs

CET1 build up

Capital generation Basispoints (bps) – transitional rules

1) On 27 April 2018 the Norwegian FSA published a consultation paper with its proposal for final implementation of CRR/CRD IV. The FSA suggests to

include the Pillar 2 requirements in the calculation of the MDA trigger level when the CRR/CRD IV is to be fully implemented in Norway. The

Ministry of Finance has not yet expressed its view on the proposal, therefore, it is uncertain whether the proposal will be adopted.

2) In accordance with CRD IV, the institution-specific CCyB rate will be a weighted average of the rates in the jurisdictions in which the institution

operates. In Norway the countercyclical buffer is currently 2.0 % and DNB Bank’s effective CCyB rate is approximately 1.6 %. The CCvB will be 2.5 %

as from 31.12.2019, corresponding to an effective CCvB rate for DNB Bank of approximately 2.0 %.

16,7 % 17,2 % CET 1 capital ratio – without trans. rules (Basel III)

28

Loan Book and Asset Quality

29

Loan Book EAD by Segments as of 31 December 2018

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.

30

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

8

2012 2018

Shipping

20

12

2014 2018

Oil, gas and offshore

46% 54%

Mortgages and other exposures, personal customers

Corporate loans

51% 49%

2Q 2015 4Q 2018

31

2%

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.

32

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 2000-2018

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

10 000

2006 2008 2010 2012 2014 2016 2018

33

• Prices are now 3,3 % higher than at the start of 2019 and 3,0 % higher than 12 months ago.

• DNB expects relative flat development in house prices going forward.

House Price Development in Norway and Oslo 1)

House Price Growth As of February 2019 All-time-high = April -17/Mai -18 for Norway,

Feb 2017 for Oslo



75

100

125

150

175

200

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Norway Oslo



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.

-0,3 %

-4,5 %

3,0%

5,1 %

Since all-time-high Last 12 months

Norway Oslo

34

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

Norway Oslo

House Price Growth 1 Jan 2007 = Index 100

35

A Very Robust Cover Pool

House Price Decline Current 10 % 20 % 30 %

WA Indexed LTV 54.6 % 60,7 % 68,3 % 78,0 %

Eligible OC 44,0 % 39,7 % 34,3 % 25,9 %

41%

50% 50% 44%

0%

20%

40%

60%

2015 2016 2017 2018

OC close to 45 %

LTV around 55 % (Weighted average)

Stresstest

55% 54% 54% 55%

40%

50%

60%

70%

2015 2016 2017 2018

36

A Very Robust Residential Loan Portfolio

16%

33%

29%

16%

7%

0-40 40-60 60-75 75-85 >85

Loan-to-Value (LTV) Per Cent of Residential Mortgage Book, 31 December 2018

- Includes mortgages in DNB Bank and DNB Boligkreditt

37

Oil-Related Portfolio represents 5.4 % of Total Customer EaD

6 %

8 %

7 %

11 %

Total loan portfolio* – EaD NOK 1 890 billion Per cent, as at 31 December 2018

Oil-related portfolio – EAD NOK 102 billion 5.4 per cent of DNB’s total EaD as at 31 December 2018

3,2 %

1,8 %

2,0 %

1,2 %

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 34 billion

38

43

31

16

11

Low risk Medium risk High risk Net non-performingand net doubtful

commitments

2

12 11 10


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

32

10 3

1


commitments

10 9 7

3 1


commitments

31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017

31.03.2018 30.06.2018 30.09.2018 31.12.2018

Probability of default (per cent)

Low risk 0.01 – 0.75

Medium risk 0.75 – 3.00

High risk 3.00 - impaired

39

Shipping Exposure is 3.7 % of DNB’s Total Loan Portfolio The Shipping Portfolio is Well Diversified

6 %

8 %

7 %

11 %

Total loan portfolio* – EaD NOK 1 890 billion Per cent, as at 31 December 2018

Shipping portfolio** – EaD NOK 71 billion Per cent of DNB’s total EAD, as at 31 December 2018

3.7 %

0,9 %

0,7 %

0,5 %

0,7 %

0,4 %

0,5 % 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

40

Risk Classification and Migration DNB’s Shipping Book - Excluding Offshore

Shipping* – EaD distribution by PD bracket NOK billion

13

43

12

3

Low risk Medium risk High risk Net non-performing and net doubtful

commitments

31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017 31.03.2018 30.06.2018 30.09.2018 31.12.2018

* Numbers for the Shipping Offshore and Logistics Division excluding offshore

portfolio. Offshore is included in oil-related portfolio.

41

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.

42

DNB in the Baltics

Strong focus on anti-money laundering

• 43.5 per cent ownership in Luminor, Nordea is the other shareholder

• Luminor operates in Estonia, Latvia and Lithuania

• Blackstone is to acquire 80 per cent of Luminor, while DNB retains the

remaining 20 per cent. The deal is expected to close 1H2019

• The strategy has been to serve retail and SME customers in the Baltic

countries. Non-residents have been out of scope

• Between 0.2 and 1.4 per cent of the deposit volumes in the different

countries are from customers from Russia, Ukraine and Cyprus

• Two major due diligence processes completed in the last 18 months, in

connection with: 1. The merger between Nordea’s and DNB’s units in the Baltics

2. The sale to Blackstone

• Luminor has not been subject to AML sanctions or regulatory fines, nor

are we aware of any ongoing investigations

• Investing to fulfil regulatory control requirements

43

Funding

44

DNB Funding Structure

79%

104%

2012 2013 2014 2015 2016 2017 2018

Net Stable Funding Ratio (NSFR)

2,4

4.1

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

59

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

45

DNB is a Well Established International Borrower With a Strong Focus on Diversification of Funding Sources

• DNB Bank

• EMTN program of EUR 45 billion

• Samurai Shelf (JPY) JPY 500 billion

• USD 144A program USD 10 billion

• USCP program of USD 18 billion

• Yankee CD program of USD 15 billion

• ECP/CD program of EUR 15 billion

• DNB Boligkreditt (Covered Bonds)

• Covered Bond program of EUR 60 billion

• Covered Bond program of USD 12 billion

46

Issuance of Long Term Debt

2019 EURO bill Tenor

Covered Bonds 3,4 5,5

Senior Bonds 1,4 3,9

Sum 4,7 5,1

Tier 1 / Tier 2 0,0

Total 4,7




Sum 9,2 7,0

Tier 1 / Tier 2 1,0

Total 10,1




Sum 9,1 7,1

Tier 1 / Tier 2 1,1

Total 10,2

47

A Well Established International Covered Bond Issuer

Volume Tenor Maturity EUR 1,500 mn 7 years 2019 – Jun

EUR 1,250 mn 5 years 2019 – Oct

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 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 1,500 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 8,500,000.000 5 years 2024 Fixed

49

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 60 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

50

DNB Senior Curve

Volume

Tenor

Maturity

EUR 1,000 mn 10 years 2020 – Jun

EUR 2,000 mn 10 years 2021 – Feb


EUR 750 mn 7 years 2023 – Mar

EUR 750 mn 5 years 2023 - Sep

EUR 1,000 mn (FRN) 5 years 2020 – Jan

EUR 650 mn (FRN) 5 years 2020 – Aug

EUR 600 mn (FRN) 3,5 years 2022 - Jul

USD 1,250 mn 3 years 2020 – Oct

USD 1,250 mn 5 years 2021 – Jun

USD 500 mn (FRN) 3 years 2020 – Oct

USD 250 mn (FRN) 5 years 2021 – Jun

51

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


• Roar Sørensen

Senior Vice President, Long Term Funding

Phone direct: + 47 24 16 91 41

Mobile: + 47 934 79 616


• Åsmund Midttun

Senior Dealer, Rates, FICC

Phone direct: +47 24 16 90 28

Mobile: +47 901 13 559

E-mail: [email protected] / [email protected]

• Erik Brække

Senior Vice President, Rates, FICC

Phone direct: +47 24 16 90 31

Mobile: +47 930 47 504


• Stephen Danna

First Vice President, FX/Rates/Commodities, New York

Phone direct: +1 212 681 2550

Mobile: +1 646 824 0072


https://www.ir.dnb.no/funding-and-rating

mailto:[email protected]
















52

Appendix

Appendix A:

Cover Pool Portfolio Information and LCR

Eligibility

53

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











54

Cover Pool

Data

DNB Boligkreditt Covered Bonds – Cover Pool Data

Rating (Moody’s/S&P) Aaa/AAA

Cover Pool Size (million) 627,522

No. of Mortgages in the Cover Pool 394,389

Average Loan Balance (thousands) 1,591

Regulatory Overcollateralisation Requirement 2.0 %

Overcollateralisation 44,0 %

Weighted Average LTV (Indexed) 54,6%

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 54.6 % 60,7 % 68,3 % 78,0 %

Eligible

Overcollateralisation 44,0 % 39,7 % 34,3 % 25,9 %

Cover Pool Sensitivity Analysis

55

Well diversified residential mortgage book within Norway

DNB Boligkreditt cover pool as of 31 December 2018

Eastern Norway 67 %

Western Norway 16 %

Northern Norway 8 %

Southern Norway 5 %

Mid- Norway 5 %

1.3 %

2.7%

3.6 %

5,2%

1.5 %

0.2 %

7.8 %

6.2 %

1.5 % 1.3 %

1.9 %

6.0 %

6.4 %

2,9 %

1.8 %

5.7 %

19.5 %

24.4 %

56

Portfolio Characteristics

Report date: 31.12.2018

Report currency: NOK

Key Characteristics

Total cover pool, nominal balance* (mill.) 627 522

Number of mortgages 394 389

Number of borrowers 339 594

Average loan balance (thousands) 1 591

Outstanding covered bonds, nominal balance (mill.) 435 710

Substitute assets (% of total cover pool) 0

WA indexed LTV (%) 54,6

WAL of cover pool (contractual maturity in years) 12,8

WAL of outstanding covered bonds (extended maturity in years) 4,5

* 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 21 379 3,4 %

1 ≤ 2 22 817 3,6 %

2 ≤ 3 24 543 3,9 %

3 ≤ 5 52 540 8,4 %

5 ≤ 10 138 749 22,1 %

> 10 367 495 58,6 %

Total 627 522 100,0 %

Overcollateralisation

Cover pool size:

Residential mortgages, loan balance (mill.) 627 522

Covered bonds outstanding (mill.) 435 710

Overcollateralisation 44,0 %

Maturity Structure Covered Bonds

Extended maturity (years) Loan balance (mill.) %

≥ 0 ≤ 1 3 054 0,7 %

1 ≤ 2 57 465 13,2 %

2 ≤ 3 53 244 12,2 %

3 ≤ 5 159 867 36,7 %

5 ≤ 10 127 560 29,3 %

> 10 34 521 7,9 %

Total 435 710 100,0 %

Expected maturity (years) Loan balance (mill.) %

≥ 0 ≤ 1 54 971 12,6 %

1 ≤ 2 54 180 12,4 %

2 ≤ 3 73 861 17,0 %

3 ≤ 5 145 734 33,4 %

5 ≤ 10 72 998 16,8 %

> 10 33 967 7,8 %

Total 435 710 100,0 %

57

Portfolio Characteristics cont.

Loan Size

Private individuals Loan balance (mill.) Number of loans

≤ 1,000,000 71 013 161 454

> 1,000,000 ≤ 2,000,000 175 794 118 226

> 2,000,000 ≤ 3,000,000 158 262 64 813

> 3,000,000 ≤ 4,000,000 92 244 26 805

> 4,000,000 ≤ 5,000,000 49 395 11 108

> 5,000,000 61 813 9 324

Total 608 521 391 730

Housing Cooperatives Loan balance (mill.) Number of loans

≤ 5,000,000 2 981 1 682

> 5,000,000 ≤ 10,000,000 3 104 433

> 10,000,000 ≤ 20,000,000 4 645 336

> 20,000,000 ≤ 50,000,000 5 108 167

> 50,000,000 ≤ 100,000,000 2 181 34

> 100,000,000 983 7

Total 19 001 2 659

LTV buckets

Indexed LTV Loan balance (mill.) %

≥ 0 ≤ 40 130 019 20,7 %

40 ≤ 50 89 816 14,3 %

50 ≤ 60 136 662 21,8 %

60 ≤ 70 135 539 21,6 %

70 ≤ 80 117 824 18,8 %

80 ≤ 90 11 439 1,8 %

90 ≤ 100 3 383 0,5 %

>100 2 840 0,5 %

Total 627 522 100,0 %

Concentration Risk

%

10 largest exposures 0,2 %

10 largest exposures excl. housing cooperatives 0,1 %

Property Types

Loan balance (mill.) %

Residential 627 522 100,0 %

Commercial 0 0,0 %

Other 0 0,0 %

Total 627 522 100,0 %

o/w Housing Cooperatives / Multi-family assets 19 001 3,0 %

o/w Forest & Agriculture 0 0,0 %

Occupancy Type

%

Owner occupied 74,0%

Second homes / Holiday houses 0,3%

Buy to let / Non owner occupied houses 0,1%

Other 25,6%

Total 100,0%

Repayment Type

%

Amortization 77,3 %

Interest only* 22,7 %

Total 100,0 %

*No principal payments for a limited period of time.

58

Portfolio Characteristics cont.

Seasoning

%

Up to 12months 17,0 %

≥ 12 - ≤ 24 months 14,6 %

≥ 24 - ≤ 36 months 13,6 %

≥ 36 - ≤ 60 months 18,1 %

≥ 60 months 36,7 %

Total 100,0 %

Interest Rate Type

Fixed Rate 6,5 %

Floating Rate 93,5 %

Geographical Distribution

Loan balance (mill.) %

Østfold 35 842 5,7 %

Akershus 122 138 19,5 %

Oslo 153 392 24,4 %

Hedmark 11 229 1,8 %

Oppland 17 919 2,9 %

Buskerud 37 768 6,0 %

Vestfold 40 289 6,4 %

Telemark 12 232 1,9 %

Aust-Agder 7 966 1,3 %

Vest-Agder 9 550 1,5 %

Rogaland 39 103 6,2 %

Hordaland 48 767 7,8 %

Sogn og Fjordane 1 541 0,2 %

Møre og Romsdal 9 604 1,5 %

Trøndelag 32 592 5,2 %

Nordland 22 514 3,6 %

Troms 17 201 2,7 %

Finmark 7 867 1,3 %

Svalbard 9 0,0 %

Total 627 522 100,0 %

Non Performing

Non performing loans 0,12 %

Arrears

≥ 30 - < 60 days 0,12 %

≥ 60 - < 90 days 0,03 %

≥ 90 - < 180 days 0,04 %

≥ 180 days 0,08 %

Eastern Norway: 67 %

Western Norway: 16 %

Northern Norway: 8 %

Southern Norway: 5 %

Mid-Norway: 5 %

59

Cover Pool Sensitivity Analysis and Overcollateralisation History

Cover Pool Overcollateralisation History

Latest over-collateralisation requirement for AAA/Aaa rating:

• S&P: 15.3 %

• Moody’s: 0 %

60

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

61

Green Bond Allocation Report December 2018

62

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

http://ec.europa.eu/finance/investment/legal_texts/index_en.htm

63

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

64

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).

65

Appendix

Appendix B:

The Norwegian Mortgage Market

66

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

67

Appendix

Appendix C:

Capital and Tier 1

68

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 Transitional rules, per 31.12.2018

16,4 % 16,5 %

18,1 %

19,9 % 20,9 %

23,5 %

DNB DNB Bank Group DNB Bank ASA

CET1 Total Capital Ratio

69

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 requirement under SREP will not cause

automatic restrictions:

• 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

70

Pillar 2 requirements in Norway are currently not included

in the MDA Trigger Level 1)

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 do not influence the MDA

trigger level

• Stated in a letter from the Ministry of Finance dated 15 January 2016

• Confirmed by the NFSA in a response letter dated 15 February 2016, and stated in a

circular from the NFSA dated 27 June 2016

1) On 27 April 2018 the Norwegian FSA published a consultation paper with its proposal for final implementation of

CRR/CRD IV. The FSA suggests to include the Pillar 2 requirements in the calculation of the MDA trigger level when

the CRR/CRD IV is to be fully implemented in Norway. The Ministry of Finance has not yet expressed its view on the

proposal, therefore, it is uncertain whether the proposal will be adopted.

71

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

* Statement given at the DNB Capital Markets Day (27 November 2014)

31,9

23,4

26,9 29,0

0,1 0,5 1,0 1.0 2,9

7,3 9,3

15,2 17,3

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Profit Before Tax AT1 Coupon Payments Dividend and share buy-back

DNB will give due consideration to

the capital hierarchy and look to

preserve the seniority of claims

going forward*

72

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 2018, DNB Group reported a leverage ratio of 7.5 %

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.

73

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

74

Appendix

Appendix D:

Additional Slides

- Financial performance and Other information

Impairment of financial instruments

per customer segment, P&L Amounts in NOK million

Maximum exposure (on- and off-balance sheet items),

net of accumulated impairment

Stable credit quality and macro outlook for the total portfolio

4Q18 3Q18

Personal customers (89) (75)

Small and medium-sized

enterprises (101) (217)

Large corporates and

international customers (45) 281

Total (235) (11)

NOK 2 062 billion

(+21)

Stage 1 Stage 2 Stage 3

NOK 110 billion

(+8)

NOK 23 billion

(-3)

94.0% 5.0%

1.1%

74

1) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability

Profit for the year NOK million

Earnings per share NOK

Return on equity 1) Per cent

Strong development in annual key figures

23 387

26 858

28 979

2016 2017 2018

11.46

12.84

14.56

2016 2017 2018

10.1

10.8

11.7

2016 2017 2018

75

77

Disclaimer

• This material has been prepared on the basis of the information provided by DNB Bank ASA (referred to as "DNB Bank") and public available sources. DNB ASA – the holding company of the DNB group is referred to as "DNB " in this presentation.

• This material is presented solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this material are subject to change without notice and DNB Bank is not under any obligation to update or keep current the information contained herein. In addition, institutions mentioned in this material, their affiliates, agents, directors, partners and employees may make purchases and/or sales of the Notes as principal or agent or may act as market maker or provide investment banking or other services in respect of the Program or the Notes which may be issued from time to time thereunder. DNB, the Arranger and the Dealers and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material.

• The Notes are not to be offered or sold in any jurisdiction in circumstances in which the distribution of this document or the Notes would be prohibited in such jurisdiction. This document must not be acted on or relied on by persons who are not eligible to invest in the Notes. Any investment or investment activity to which this communication relates is available only to persons eligible to invest in the Notes and will be engaged in only with such persons.

• Furthermore, you should consult with your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that you deem it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of an investment in the Notes which may be offered from time to time) based upon your own judgment and advice from such advisers as you deem necessary and not upon any view expressed in this presentation.

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