DNB Bank DNB Boligkreditt · The DNB Group 100% owned by DNB Bank and functionally an integrated...
77
June 2018 DNB Bank DNB Boligkreditt
Transcript of DNB Bank DNB Boligkreditt · The DNB Group 100% owned by DNB Bank and functionally an integrated...
June 2018
DNB Bank DNB Boligkreditt
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 • Digitalization / Vipps • The Norwegian Mortgage Market • Capital and Tier 1 • Additional slides – Financial Performance and Other information • CRO Presentation Capital Markets Day 2017
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: A+ (positive)
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 / A+
(Senior/ short term issuance)
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. 102, November 2017 2) Ministry of Finance (National Budget 2018) 3) Statistics Norway, March 2018
2016 2017 2018
Budget surplus 1) 4.0 % 5.4 % 5.8 %
Oil fund 2) ~ EUR 769 bn ~ EUR 809 bn ~ EUR 843 bn
Unemployment 3) 4.7 % 4.2 % 3.9 %
GDP growth 3) + 1.0 % + 1.9 % + 2.4 %
Central Bank Rate 3) 0.5 % 0.5 % 0.5 %
8
Government Finances are Rock-Solid
Annual budget deficit/surplus forecast for 20181) General government net financial liabilities1)
As per cent of nominal GDP 2018
1) Source: OECD Economic Outlook No. 102, November 2017
-300
-250
-200
-150
-100
-50
0
50
100
150
200
9
0
100
200
300
400
500
600
2006 2008 2010 2012 2014 2016
Annual return, GPFG
Annual net petro cash flow
Annual actual "spending of oil-money"
Government Pension Fund Global 2001 – 3Q 2017, NOK billion
Oil income versus spending 2006 – 2017, NOK billion
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2001 2004 2007 2010 2013 2016
Source: Ministry of Finance (National Budget 2017), DNB Markets, NBIM
The Growth of the Sovereign Wealth Fund Adds Flexibility
10
Forecasted unemployment Per cent
4,7 4,2 3,9 3,7 3,7
0
2
4
6
8
10
2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020FStatistics Norway (Mar 18)
Among the lowest unemployment in Europe Per cent
Source: OECD Economic Outlook No. 102, November 2017
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 % 1,8 %
2,3 % 2,4 % 2,2 % 2,4 % 2,3 % 2,3 %
-1%
0%
1%
2%
3%
4%
5%
6%
2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020eDNB Markets (Apr 18) Statistics Norway (Mar 18)
GDP growth Year on year, per cent
GDP growth Per cent
Source: DNB Markets, Economic Outlook January 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 2015 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
~ 16.1 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) Based on transitional rules.
15
Norway is a Digital Front Runner – Enabling Change
73 83 85 86 83 92 83 80
1 2 9 49
113
156 200
244
2010 2011 2012 2013 2014 2015 2016 2017
Desktop Mobile
Mobile platform driving growth in digital banking Annual visits to our digital platforms in millions
220
116
57
2010 2015 2016
Transforming our branch network Number of branch offices
• 96 % of Norwegians use the internet
• 91 % of Norwegians use online banking services
• 61 % of Norwegian population is using Vipps (payment app)
• 6 % of payments are made in cash
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DNB Delivers Solid Profit
18,7
28,7
34,1
30,8 28,5
6,7 7,7
1,6 2,3
7,4
2,4
(0,3)
(5)
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1Q18
Pre-tax operating profit before impairment Impairment of loans
Pre-tax operating profit before impairment NOK billion
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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.
[text]
14.9
20.722.6
25.723.1 23.6
19.217.3
22.8
0.97
1.341.48
1.651.46 1.47
1.21 1.12
1.49
31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March
2016 2017 2018
Stage 3 As a percentage of net loans (stage 3)
Per cent
NOK billion
1)
IFRS 9IAS 39
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Key Financial Ratios
1Q18 2017 2016 2015 2014
Return on equity (%) 11.0 10.8 10.1 14.5 13.8
Cost income (%) 43.4 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 (%) -0.09 0.15 0.48 0.15 0.12
Common equity tier 1 ratio (%) 16.6 16.4 16.0 14.4 12.7
Total capital ratio (%) 20.7 20.0 19.5 17.8 15.2
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DNB CET1 Capital Build-Up
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 16,6
2009 10 11 12 13 14 15 16 2017 1Q18
Equity development NOK bn
118 127
142
159
190 206
217 218
20112012201320142015201620171Q18
20
7.2
5.1
4.6 4.7 4.3 4.2
DNB Nordea SEB Swedbank SHB Danske Bank
Leverage Ratio and RAC-ratios – DNB versus Nordic Peers
Leverage ratio Per cent, 31 March 2018
DNB’s leverage ratio requirement 1)
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.
6.0
S&P Risk Adjusted Capital Ratios (RAC Ratios) Per Cent, 30 June 2017
13,4
12,5
11,2 11,1
10,5 10,2
21
138
101 92
175 160
44
32
40 55
65 89
144
170
141 147
240 249
188
2012 2013 2014 2015 2016 2017
Dividends and Buy-backs
CET1 build up
4,5 % 4,5 %
2,5 % 2,5 %
3,0 % 3,0 %
2,0 % 2,0 %
1,6 % 1,6 %
1,6 % 1,6 %
16,4 % 16,6 %
YE 2017 Q118
Management Buffer SREP RequirementPillar 2 Requirement Countercyclical BufferSIFI Buffer Systemic Risk BufferPillar 1 Minimum Requirement DNB CET 1DNB Bank Group CET 1
Target
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 %.
SREP 15.2 % ~ 16.1 %
• SREP includes Pillar 2 requirements • Pillar 2 requirements in Norway are not included in the MDA trigger level1) • Management buffer must be seen in connection with DNB’s capital generation abilities
Capital generation Basispoints (bps) – transitional rules
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IFRS 9 / Basel IV / MREL - 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 Q1 2018 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.
• MREL • The Norwegian FSA will publish its proposal for MREL-requirements by 1 November 2018.
• DNB is not expecting MREL issuance requirements (“tier 3”) which exceeds the outstanding volume of senior unsecured debt.
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MDA – DNB well above CET 1 MDA Trigger Level • Pillar 2 requirements in Norway are not included in the MDA trigger level1)
• MDA buffer must be seen in connection with DNB’s capital generation abilities
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 %.
13,2 % 13,6 % 13,6 %
16,0 % 16,4 % 16,6 %
YE 2016 YE 2017 Q1-18
MDA Trigger Level DNB CET 1 DNB Bank Group CET1
138
101 92
175 160
44
32
40 55
65 89
144
170
141 147
240 249
188
2012 2013 2014 2015 2016 2017
Dividends and Buy-backs
CET1 build up
Capital generation Basispoints (bps) – transitional rules
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DNB: Significantly Higher RW Density than Nordic Peers Risk Weighted Assets Per cent of total assets, 31 March 2018
Core Equity Tier 1 With and without transitional rules, 31 March 2018 *
16,6
10,6 12,1 11,0 10,5
9,0
19,0 19,8 16,4
24,8 21,6
DNB SEB Nordea Danske Swedbank SHB
CET1 ratio transitional rules CET1 ratio Basel III
38,9 %
21,2 % 21,1 % 21,3 % 16,6 % 18,4 %
DNB SEB Nordea Danske Swedbank SHB
* Transitional rules for other banks as of 31 December 2017
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Loan Book and Asset Quality
26
Commercial real estate 10 %
Shipping 4 %
Oil, gas and offshore
5 %
Power and renewables
2 %
Healthcare 2 %
Public sector 1 %
Fishing, fish farming and
farming 2 %
Trade 3 %
Manufacturing 4 %
Technology, media and
telecom 2 % Services
3 %
Residential property
5 %
Mortgages and other exposures,
personal customers **)
53 %
Other corporate customers
4 %
Loan Book EAD by Segments as of 31 March 2018
Including net non-performing and net doubtful loans and guarantees. Exposures at default are based on full implementation of IRB. The portfolio banks and financial institutions is still subject to final IRB approval from the Norwegian FSA (Finanstilsynet).
**) Of which mortgages 46 per cent.
27
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
10
2012 1Q18
Shipping
20
13
2014 1Q18
Oil, gas and offshore
46% 54%
Mortgages and other exposures, personal customersCorporate loans
53% 47%
2Q 2015 1Q 2018
28
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.
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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
Nominal pricesCPI-deflated pricesIncome 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 UKSweden DenmarkUSA
-18 000
-16 000
-14 000
-12 000
-10 000
-8 000
-6 000
-4 000
-2 000
0
2 000
4 000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
30
• Prices has grown by 6,5 % since start of 2018. • House prices are now at the same level as 12 months ago.
House Price Development in Norway and Oslo 1)
House Price Growth As of May 2018 All-time-high = April -17/Mai -18 for Norway, February 2017 for Oslo
0,0 %
-4,5 %
1,0 %
-0,7 %
Norway Oslo
Since all-time-high
Last 12 months (Apr 18)
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
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.
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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
Norway Oslo
House Price Growth 1 Jan 2007 = Index 100
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The Cover Pool is Robust Against House Price Declines
House Price Decline Current 10 % 20 % 30 %
WA Indexed LTV 55.1 % 61,2 % 68,8% 78,6 %
Eligible OC 55,2 % 52,0 % 45,8 % 36,4 %
41% 50% 50% 57%
0%
20%
40%
60%
2015 2016 2017 1Q18
OC around 50 %
LTV around 55 % (Weighted average)
Stresstest
55% 54% 54% 55%
40%
50%
60%
70%
2015 2016 2017 1Q18
33
A Very Robust Residential Loan Portfolio
15%
31% 31%
15%
8%
0-40 40-60 60-75 75-85 >85
Loan-to-Value (LTV) Per Cent of Residential Mortgage Book, 31 March 2018
- Includes mortgages in DNB Bank and DNB Boligkreditt
34
Oil-Related Portfolio Represents 5.3 % of Total EaD
6 %
8 %
7 % 11 %
Total loan portfolio – EaD NOK 1 868 billion Per cent, as at 31 March
Oil-related portfolio – EAD NOK 100 billion 5.3 per cent of DNB’s total EaD as at 31 March 2018
3,5 % 1,9 %
2,6 % 0,9 %
1,9 %
• 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
35
42
22 26
10
Low risk Medium risk High risk Net non-performingand net doubtful
commitments
2 8
16
9
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
34
8 6 1
Low risk Medium risk High risk Net non-performingand net doubtful
commitments
7 7 3
1
Low risk Medium risk High risk Net non-performingand net doubtful
commitments
30.09.2016 31.12.2016 31.03.2017 30.06.2017
30.09.2017 31.12.2017 31.03.2018
Probability of default (per cent)
Low risk 0.01 – 0.75
Medium risk 0.75 – 3.00
High risk 3.00 - impaired
36
Offshore Exposure is 1,9 % of DNB’s Total Loan Portfolio
Total loan portfolio – EaD NOK 1 868 billion Per cent, as at 31 March 2018
1,9 %
1,0 %
0,7 %
0,2 %
Offshore exposure – EaD NOK 35 billion Per cent of DNB’s portfolio, as at 31 March 2018
Offshore Supply Vessels (OSV)
Other offshore Rig
37
Shipping Exposure is 4.1 % of DNB’s Total Loan Portfolio The Shipping Portfolio is Well Diversified
6 %
8 %
7 % 11 %
Total loan portfolio – EaD NOK 1 868 billion Per cent, as at 31 March 2018
Shipping portfolio* – EaD NOK 77 billion Per cent of DNB’s total EAD, as at 31 March 2018
4,1 %
0,9 %
0,7 %
0,6 %
0,7 %
0,6 %
0,6 % 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
38
Risk Classification and Migration DNB’s Shipping Book - Excluding Offshore
Shipping* – EaD distribution by PD bracket NOK billion
15
48
12
2
Low risk Medium risk High risk Net non-performing and net doubtfulcommitments
30.09.2016 31.12.2016 31.03.2017 30.06.2017 30.09.2017 31.12.2017 31.03.2018
* Numbers for the Shipping Offshore and Logistics Division excluding offshore portfolio. Offshore is included in oil-related portfolio.
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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 pipetransportation)*
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.
40
Funding
41
DNB Funding Structure
79%
106%
2012 2013 2014 2015 2016 2017 2018
Net Stable Funding Ratio (NSFR)
2,4
4.3
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 62
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
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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
43
2018 EURO bill TenorCovered Bonds 5,2 7,9Senior Bonds 0,0 0,0Sum 5,2 7,9
Tier 1 / Tier 2 1,0Total 6,2
2017 EURO bill TenorCovered Bonds 7,5 8,0Senior Bonds 1,6 3,0Sum 9,1 7,1
Tier 1 / Tier 2 1,1Total 10,2
2016 EURO bill TenorCovered Bonds 7,0 7,7Senior Bonds 2,8 5,7Sum 9,8 7,1
Tier 1 / Tier 2 0,9Total 10,7
Issuance of Long Term Debt
44
A Well Established International Covered Bond Issuer
Volume
Tenor
Maturity
EUR 1,500 mn 5 years 2018 – Nov
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 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 1,500 mn 7 years 2024 - Nov
EUR 1,500 mn (Green CB) 7 years 2025 – Jun
EUR 1,500 mn 10 years 2026 – Sep
EUR 1,000 mn (FRN) 5 years 2019 – Jan
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
GBP 500 mn (FRN) 5 years 2020 - Feb
45
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 53 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
46
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 – Feb
EUR 1,000 mn (FRN) 5 years 2019 – Jan EUR 1,000 mn (FRN) 5 years 2020 – Jan EUR 650 mn (FRN) 5 years 2020 – Aug
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
47
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]
• Lars Ekeland Senior Vice President, Long Term Funding Phone direct: + 47 24 16 91 25 Mobile: + 47 916 07 053 E-mail: [email protected]
• Lene Bergwitz-Larsen
Senior Vice President, Long Term Funding Phone direct: + 47 24 16 91 27 Mobile: + 47 402 20 140 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
48
Appendix
Appendix A: Cover Pool Portfolio Information and LCR Eligibility
49
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
50
Cover Pool Data
DNB Boligkreditt Covered Bonds – Cover Pool Data
Rating (Moody’s/S&P) Aaa/AAA
Cover Pool Size (million) 620,075
No. of Mortgages in the Cover Pool 407,615
Average Loan Balance (thousands) 1,521
Regulatory Overcollateralisation Requirement 2.0 %
Overcollateralisation 56,5 %
Weighted Average LTV (Indexed) 55,1% Pool statistics as of 31 March 2018. Cover pool reporting coincides with DNB quarterly financial reporting.
Stresstest House Price Decline Current 10 % 20 % 30 %
WA Indexed LTV 55.1 % 61,2 % 68,8% 78,6 %
Eligible Overcollateralisation 55,2 % 52,0 % 45,8 % 36,4 %
Cover Pool Sensitivity Analysis
51
Well diversified residential mortgage book within Norway
DNB Boligkreditt cover pool as of 31 December 2017
Eastern Norway 66 %
Western Norway 16 %
Northern Norway 8 %
Southern Norway 5 %
Mid- Norway 5 %
1.3 %
2.7 %
3.6 %
5,3% 1.6 %
0.3 %
7.8 %
6.3 %
1.6 % 1.3 %
2.0 %
6.0 %
6.4 %
2,9 %
1.8 %
5.7 %
19.1 %
24.1 %
52
Portfolio Characteristics Report date: 31.03.2018Report currency: NOK
Key Characteristics OvercollateralisationTotal cover pool, nominal balance* (mill.) 620 075 Cover pool size:Number of mortgages 407 615 Residential mortgages, loan balance (mill.) 620 075Number of borrowers 346 088 Covered bonds outstanding (mill.) 396 096Average loan balance (thousands) 1 521 Overcollateralisation 56,5 %Outstanding covered bonds, nominal balance (mill.) 396 096Substitute assets (% of total cover pool) 0,0WA indexed LTV (%) 55,1WAL of cover pool (contractual maturity in years) 12,7WAL of outstanding covered bonds (extended maturity in years) 5,6* 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 Maturity Structure Covered BondsContractual maturity (years) Loan balance (mill.) % Extended maturity (years) Loan balance (mill.) %≥ 0 ≤ 1 21 243 3,4 % ≥ 0 ≤ 1 3 904 1,0 %1 ≤ 2 22 487 3,6 % 1 ≤ 2 38 143 9,6 %2 ≤ 3 24 032 3,9 % 2 ≤ 3 56 105 14,2 %3 ≤ 5 52 260 8,4 % 3 ≤ 5 154 747 39,1 %5 ≤ 10 138 810 22,4 % 5 ≤ 10 109 933 27,8 %> 10 361 805 58,3 % > 10 33 263 8,4 %Total 620 637 100,0 % Total 396 096 100,0 %
Expected maturity (years) Loan balance (mill.) %≥ 0 ≤ 1 37 917 9,6 %1 ≤ 2 52 588 13,3 %2 ≤ 3 63 443 16,0 %3 ≤ 5 133 673 33,7 %5 ≤ 10 75 584 19,1 %> 10 32 891 8,3 %Total 396 096 100,0 %
53
Portfolio Characteristics cont.
Loan Size Concentration RiskPrivate individuals Loan balance (mill.) Number of loans % ≤ 1,000,000 75 912 173 959 10 largest exposures 0,2 % > 1,000,000 ≤ 2,000,000 182 780 123 185 10 largest exposures excl. housing cooperatives 0,1 % > 2,000,000 ≤ 3,000,000 156 218 64 045 > 3,000,000 ≤ 4,000,000 87 413 25 410 Property Types > 4,000,000 ≤ 5,000,000 45 482 10 227 Loan balance (mill.) % > 5,000,000 53 884 8 164 Residential 620 075 100,0 % Total 601 689 404 990 Commercial 0 0,0 %
Other 0 0,0 %Housing Cooperatives Loan balance (mill.) Number of loans Total 620 075 100,0 % ≤ 5,000,000 2 945 1 680 > 5,000,000 ≤ 10,000,000 3 091 432 o/w Housing Cooperatives / Multi-family 18 386 3,0 % > 10,000,000 ≤ 20,000,000 4 409 316 o/w Forest & Agriculture 0 0,0 % > 20,000,000 ≤ 50,000,000 5 156 163 > 50,000,000 ≤ 100,000,000 1 893 28 Occupancy Type > 100,000,000 893 6 % Total 18 386 2 625 Owner occupied 82,2%
Second homes / Holiday houses 0,3%LTV buckets Buy to let / Non owner occupied houses 0,1%Indexed LTV Loan balance (mill.) % Other 17,3%≥ 0 ≤ 40 125 775 20,3 % Total 100,0%40 ≤ 50 86 770 14,0 %50 ≤ 60 128 970 20,8 % Repayment Type60 ≤ 70 143 712 23,2 % %70 ≤ 80 113 426 18,3 % Amortization 75,1 %80 ≤ 90 14 902 2,4 % Interest only* 24,9 %90 ≤ 100 3 409 0,5 % Total 100,0 %>100 3 112 0,5 % *No principal payments for a limited period of time.Total 620 075 100,0 %
54
Portfolio Characteristics cont. Seasoning Non Performing
% Non performing loans 0,11 %Up to 12months 17,2 %≥ 12 - ≤ 24 months 16,9 % Arrears≥ 24 - ≤ 36 months 12,5 % ≥ 30 - < 60 days 0,13 %≥ 36 - ≤ 60 months 16,8 % ≥ 60 - < 90 days 0,03 %≥ 60 months 36,5 % ≥ 90 - < 180 days 0,04 %Total 100,0 % ≥ 180 days 0,07 %
Interest Rate TypeFixed Rate 6,2 %Floating Rate 93,8 %
Geographical DistributionLoan balance (mill.) % Eastern Norway: 66 %
Østfold 35 650 5,7 % Western Norway: 16 %Akershus 118 551 19,1 % Northern Norway: 8 %Oslo 149 675 24,1 % Southern Norway: 5 %Hedmark 11 205 1,8 % Mid-Norway: 5 %Oppland 18 088 2,9 %Buskerud 37 504 6,0 %Vestfold 39 887 6,4 %Telemark 12 451 2,0 %Aust-Agder 8 348 1,3 %Vest-Agder 9 771 1,6 %Rogaland 39 336 6,3 %Hordaland 48 415 7,8 %Sogn og Fjordane 1 610 0,3 %Møre og Romsdal 9 638 1,6 %Trøndelag 32 628 5,3 %Nordland 22 558 3,6 %Troms 16 761 2,7 %Finmark 7 988 1,3 %Svalbard 9 0,0 %Total 620 075 100,0 %
55
Cover Pool Sensitivity Analysis and Overcollateralisation History
Cover Pool Overcollateralisation History
Latest overcollateralisation requirement for AAA/Aaa rating: • S&P: 15.3 % • Moody’s: 0 %
Stresstest - House price declineHouse price decline Current 10 % 20 % 30 %Total cover pool balance (nominal, NOKbn) 620 075 620 075 620 075 620 075WA indexed LTV (%) 55,1 61,2 68,8 78,6Eligible cover pool balance (nominal, NOKbn) 614 609 602 194 577 700 540 096Total outstanding covered bonds (nominal, NOKbn) 396 096 396 096 396 096 396 096Eligible overcollateralization 55,2 % 52,0 % 45,8 % 36,4 %
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Net Non Performing Loans in DNB Boligkreditt AS
0,00%
0,10%
0,20%
0,30%
90+ days Arrears
11 bp
57
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
58
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
59
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).
60
Appendix
Appendix B: Digitalization/Vipps
61
Strategic Partnership to Fend Off International Competition
105 Norwegian banks rally around the Vipps payment platform, while an additional four banks have a distribution agreement
109 out of 128 Norwegian banks are distributing
Vipps
Vipps – a single, strong and distinct payment service provider
Two main bank-backed competitors in the mobile payment market have terminated their operations
Norwegian banks stand united behind the Vipps platform; ensures strong distribution
Vipps spun off as an autonomous joint venture
105 banks as owners
Four banks with distribution agreements
DNB as the majority shareholder
62
Norway Loves Vipps
95%
The fastest growing brand in Norway
Brand recognition
Growth in user base by age group
Source: Statistics Norway
60+
15-29
40-49
50-59
30-39
Per cent of population Age group
2017 2016
79%
62%
76%
57%
50%
71%
41%
14%
63%
29%
63
Expanding from a P2P service to a leading payment platform
Strong link between P2P customer base and P2B attractiveness
61 per cent of the Norwegian population (above the age of 15) is using Vipps P2P
>45 000 businesses, associations and sports clubs accept payments via Vipps P2B
InStore solution in pilot with McDonalds
22 per cent of transactions are generating fees Expanding to the Nordics
Ambition to make Vipps the preferred payment partner for companies operating across the Nordics
Will make our technological platform available across the Nordics
1.8
1.4
0.6
0.2
2.2
2.6
1.0
P2P users (lhs)
Fee-based transactions, per cent (P2B share of total transactions)
5%
15%
25%
35%
45%
May15 Sept.15 Jan.16 May16 Sept.16 Jan.17 May17 Sept.17
Vipps roadmap
P2P eCom Invoice Spinoff
Leveraging on a strong P2P customer base to increase the number of fee-based transactions
22%
2.6
P2B InStore
Active users, million
Highlights Settle
64
Appendix
Appendix C: The Norwegian Mortgage Market
65
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
66
Appendix
Appendix D: Capital and Tier 1
67
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 31.03.18
16,6 % 16,3 % 17,8 %
20,7 % 21,6 %
24,2 %
DNB DNB Bank Group DNB Bank ASA
CET1 Total Capital Ratio
68
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
69
Pillar 2 not Included in the MDA Trigger Level in Norway
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
70
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
7,1
0,1 0,5 1,0 1.0 1) 2,9
7,3 9,3
15,2
0
5
10
15
20
25
30
35
40
2009 2010 2011 2012 2013 2014 2015 2016 2017 1Q18
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*
1) Estimated AT1 coupon payments for 2018.
71
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 March 2018, DNB Group reported a leverage ratio of 7.2 %
⇒ 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.
72
The DNB Bank Group will need to record a significant net loss in order to reach the MDA trigger level Updated 31 December 2017
Average profit before loan losses 2016 – 2017: NOK 29.7 bn
+ Buffer to MDA: (16.2 % - 13.6 %): NOK 26.3 bn
= “Loan loss capacity” 12 month horizon NOK 56.0 bn
Note:
“Loan loss capacity” in per cent of net loans: 3.2 per cent.
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 2017 DNB has decided also to deduct additional tier 1 capital from the ADI.
DNB Bank ASA (31 December 2017):
ADI = NOK 170bn – 18bn – 2bn – 16bn (AT1) = NOK 133bn
=> 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 E: Additional Slides - Financial performance and Other information
9.6 9.7
10.4
10.8
11.2
1Q17 2Q17 3Q17 4Q17 1Q18
Return on equity Per cent, 12-month trailing average
75 1) Total customer segments – currency adjusted
First quarter – financial highlights
Return on equity 11.0 per cent in 1Q18 On track to target
Earnings per share NOK 3.36 Negatively affected by basis swaps and exchange rate effects on hedging of AT1 capital of NOK 899 million
Annualised underlying growth in loans to customers of 4.6 per cent in 1Q18 1)
Particularly strong growth in the SME segment
Strong contribution from increased NII, reduced costs and lower impairment Good performance in all segments
Revised tax guiding Tax guiding reduced from 23 to 20 per cent in 2018 and 2019
Net impairment losses had a positive impact on the income statement of NOK 330 million in the period Overall, the most significant macroeconomic drivers (Norway and oil industry) were stable in the quarter
Impairment of financial instruments per customer segment Amounts in NOK million
76
Asset quality continued to improve
IFRS 91Q18 4Q17 1Q17
Personal customers (53) (137) 110Small and medium-sized enterprises (215) (150) 10Large corporates and international customers 598 (99) (697)Other 0 (16) 15Total 330 (402) (562)
IAS 39
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.
