Post on 20-Aug-2020
Q4 CMD FINANCE
NORWAY CMD
LONDON, 10. MARCH 2016
CFO BJØRN ERIK NÆSS
03.03.2016
DNB has delivered strong profit growth
Net interest income NOK million
Pre-tax operating profit before impairment NOK million
Cost/income ratio Per cent
Profit for the period NOK million
2
25 252 27 216
30 192 32 487
35 358
2011 2012 2013 2014 2015
12 979 13 792
17 511 20 617
24 762
2011 2012 2013 2014 2015
47.1 49.1 45.7
41.9 36.9
2011 2012 2013 2014 2015
21 833 20 957 24 744
28 689
34 083
2011 2012 2013 2014 2015
Strong earnings and dividend development
Dividend per share NOK
Earnings per share NOK
3
7.98 8.48
10.75
12.67
14.98
2011 2012 2013 2014 2015
2.00 2.10
2.70
3.80
4.50
2011 2012 2013 2014 2015
1) Proposed by the Board of Directors
1)
Financial strength and ahead of schedule to deliver
above CET 1 requirement of 15% by end of 2016 Equity
NOK billion
Return on equity 1)
Per cent
Leverage ratio 2) Per cent
1) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability
2) Regulations for the calculation of Leverage Ratio changed during 2015 4
11.4 11.7 13.1
13.8 14.5
2011 2012 2013 2014 2015
117.8 127.2
141.9 158.7
190.1
2011 2012 2013 2014 2015
4.9 4.6 5.3
6.0 6.7
2011 2012 2013 2014 2015
CET 1 capital adequacy Per cent
9.4 10.7
11.8 12.7
14.4
2011 2012 2013 2014 2015
~15.5% CET1 2) in 2017
Requirement including
management buffer
>50% dividend
When the capital level is reached
5
> 12%
ROE
Overriding target
< 40%
C/I ratio 1)
Key performance indicator
Lending growth 2-3%
Stable volume-weighted spreads
Stable risk-weighted assets
2016-2018: Normalised impairment level,
uncertain timing
Minimum 3% annual growth in commissions
and fees
Financial ambitions 2016-2018 Guiding
Tax rate 24% in 2016-2017, and 21% in 2018
1) Towards 2018
2) Based on transitional rules 5
Slower speed ahead Increased unemployment but still growth in GDP
6 Source: Statistics Norway, DNB Markets forecasts
1.3
2.2
4.4
5.7
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
2004 2005 2006 2007 2008 2010 2011 2012 2013 2014 2015 2016e 2017e 2018e 2019e
Mainland GDP growth Unemployment rate
2009
GDP growth and unemployment Year on year, per cent
7
Development in Loan to Value, Residential Mortgages
15%
28%
35%
15%
7%
0%
5%
10%
15%
20%
25%
30%
35%
0-40 40-60 60-75 75-85 >85
30 June 2015
30 Sept. 2015
31 Dec. 2015
Per cent
Collateral categories
8
Loan Book EAD by segments as at 31 December 2015 1)
Commercial real
estate
11%
Shipping
7% Logistics
1%
Oil, gas and offshore
7%
Energy
3%
Other corporate
customers
6%
Public sector
2%
Fishing and fish
farming
2% Trade
3% Manufacturing
5%
Telecom and media
2%
Services
2%
Residential
mortgages
42%
Private individuals
7%
1) Exposure at default by customer segments as defined in DNB’s management reporting including net non-performing and net
doubtful loans and guarantees.
1,7
2,1
Large-caps, IG companies
Sub-investment grade
Seismic
LBOs challenged
LBOs less challenged
Other
26
21
OSV
Rig
FPSO/FSO
Subsea construction
Other
13,0
1,5
E&P large-caps and NOCs (IG)
E&P mid-caps (sub IG)
Reserve Based Lending
Exploration Financing Facilities
Midstream incl. LNG
Refining & petchem
Offshore EAD NOK 62.5 billion
Oilfield Services EAD NOK 36 billion
Oil & Gas EAD NOK 74 billion
DNB’s direct exposure to oil is manageable OSV and rig (2.4% of group EAD) are where we see the main challenges
9
IG: Investment grade, E&P: Exploration & Production, LBO: Leveraged Buyout, RBL: Reserve Based Lending, OSV: Offshore
Support Vessels,
NOCs: National Oil Companies, F(P)SO: Floating (Production,) Storage and Offloading vessels
Appendix
• DNB results cont.
• The Norwegian Economy
• Loan book and asset quality
Full year 2015
Pre-tax operating profit before impairment in NOK billion
34.1 (28.7)
Cost/income ratio in per cent
36.9 (41.9)
Return on equity in per cent
14.5 (13.8)
Common equity Tier 1 capital ratio in per cent (transitional rules)
14.4 (12.7)
Figures in parentheses refer to 2014
Earnings per share in NOK
14.98 (12.67)
Proposed dividend in NOK
4.50 (3.80)
12
Development in loans and risk weighted assets
NOK billion
13
1 341
1 439
1 543
1 341
1 391
1 438
1 089
1 121 1 129
31 Dec. 13 31 March 14 30 June 14 30 Sept. 14 31 Dec. 14 31 March 15 30 June 15 30 Sept. 15 31 Dec. 15
Loans at end of period Loans adjusted for exchange rate movements RWA
Development in average interest rate spreads –
customer segments Per cent
14
2.42 2.40 2.37 2.29 2.28 2.28
2.17 2.13 2.11
(0.33) (0.33) (0.31) (0.19) (0.17) (0.13)
(0.02) 0.08 0.12
1.35 1.31 1.31 1.31 1.31 1.34 1.32 1.32 1.32
4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Lending spread
Deposit spread
Combined spread
- weighted average
Impairment of loans and guarantees
15
1) Excluding the sale of non-performing loan portfolios, the ratio was (0.22) for 2015
Full year Full year
Amounts in NOK million 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014
Personal customers 24 942 (58) 34 67 942 (118)
- Mortgage loans 116 10 17 81 141 223 129
- Consumer finance (92) 932 (75) (46) (74) 719 (247)
Small and medium-sized enterprises (341) (129) (284) (308) (450) (1 062) (838)
Large corporates and international customers (686) (527) (425) (256) (496) (1 895) (1 024)
- Nordic Corporates Division 12 (6) 5 15 (333) 25 (370)
- International Corporates Division (72) (22) (93) 39 (166) (149) (291)
- Shipping, Offshore and Logistics Division (382) (379) (302) (242) 21 (1 305) (166)
- Energy Division (173) (88) (43) (12) (5) (317) (31)
- Baltics and Poland (58) (12) (47) (50) (1) (168) (124)
- Other units (12) (19) 56 (7) (13) 18 (42)
Total individual impairment (1 002) 285 (767) (530) (879) (2 015) (1 980)
Total collective impairment of loans (418) 106 101 (44) 58 (255) 341
Impairment of loans and guarantees (1 420) 392 (667) (575) (821) (2 270) (1 639)
Total impairment in relation to average volumes
(annualised) 1) (0.37 ) 0.10 (0.18) (0.16) (0.23) (0.15) (0.12)
Customer segments
Pre-tax operating profit after impairment NOK million
16
10 655
3 715
11 105
9 608
3 401
11 252
Full year 2015
Full year 2014
Personal customers Large corporates and
international customers
Small and medium-
sized enterprises
7 901 7 891 8 096
8 445 8 730 1) 8 815 1)
2010 2011 2012 2013 2014 2015
Sale of insurance products Money transfer and banking services
Asset management and custodial services Investment banking services
Real estate broking Net commissions and fees
1.1% growth
Development in commissions and fees
NOK million
1) The figures for 2014 and 2015 are adjusted for income from public sector activities
within life insurance that are in the process of being wound up 17
Profit development per quarter
Return on equity 1)
Per cent
Pre-tax operating profit before impairment NOK million
Cost/income ratio Per cent
Profit for the period NOK million
18
12.6
16.1
12.1
14.7 15.0
4Q14 1Q15 2Q15 3Q15 4Q15
6 964
9 273
7 396 8 125
9 290
4Q14 1Q15 2Q15 3Q15 4Q15
42.2 37.0
42.8 39.6
28.1
4Q14 1Q15 2Q15 3Q15 4Q15
4 965
6 533
5 062
6 363 6 804
4Q14 1Q15 2Q15 3Q15 4Q15
1) Return on equity is calculated on the assumption that additional Tier 1 capital is classified as a liability
Full year Full year
Amounts in NOK million 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014
Net interest income 9 062 8 981 8 728 8 587 8 700 35 358 32 487
Net commissions and fees 2 082 2 080 2 489 2 212 2 313 8 862 8 969
Net gains on financial instruments at fair value 2 164 1 945 1 174 3 400 279 8 683 5 317
Net financial and risk result, DNB Livsforsikring (662) 64 158 52 185 (390) 609
Net insurance result, DNB Forsikring 141 128 153 99 129 521 491
Other operating income 129 247 221 361 446 959 1 490
Net other operating income, total 3 853 4 463 4 194 6 124 3 352 18 635 16 877
Total income 12 915 13 444 12 923 14 711 12 052 53 993 49 363
Operating expenses (5 437) (5 103) (5 312) (5 215) (5 045) (21 068) (20 452)
Restructuring costs and non-recurring effects 1 811 (216) (215) (223) (42) 1 157 (223)
Pre-tax operating profit before impairment 9 290 8 125 7 396 9 273 6 964 34 083 28 689
Net gains on fixed and intangible assets (9) (3) 45 12 42 45 52
Impairment of loans and guarantees (1 420) 392 (667) (575) (821) (2 270) (1 639)
Pre-tax operating profit 7 860 8 514 6 774 8 710 6 184 31 858 27 102
Tax expense (1 084) (2 136) (1 695) (2 130) (1 236) (7 045) (6 463)
Profit from operations held for sale, after taxes 28 (14) (17) (47) 16 (51) (22)
Profit for the period 6 804 6 363 5 062 6 533 4 965 24 762 20 617
Profit attributable to shareholders 6 679 6 238 4 952 6 519 4 965 24 388 20 617
Income statement
19
1) Transfer from risk equalisation fund: (980)
2) Transition from defined-benefit to defined-contribution pension scheme: 1 969
3) Sale under the exemption model and lower tax rates
1)
2)
3)
Net gains on financial instruments
20
3Q15 - 4Q14 -
Amounts in NOK million 4Q15 3Q15 4Q14 4Q15 4Q15
Customer revenues in DNB Markets 628 508 549 121 80
Trading revenues in DNB Markets (excl. CVA/DVA) 782 474 94 308 688
Credit spread effects on bonds in DNB Markets (235) (582) (196) 347 (39)
Financial guarantees 187 228 232 (41) (45)
Basis swaps (4) 933 508 (937) (512)
CVA/DVA 367 (414) (489) 781 855
Other mark-to-market adjustments 439 798 (419) (359) 858
Net gains on financial instruments at fair value 2 164 1 945 279 219 1 885
Change
Changes in net interest income
21
From 4th quarter 2014 to 4th quarter 2015 NOK million
8 700
(88)
9 062 451
230 (41) (76)
(114)
4Q14 Exchange
rate
effects
Lending and
deposit
volumes
Other net
interest
income
Equity and
non-interest
bearing
items
Long-term
funding
Lending and
deposit
spreads
4Q15
From 4th quarter 2014 to 4th quarter 2015
Changes in net other operating income
22
NOK million
3 352
3 853
2 397 133 (84) (221) (232)
(980)
( 512)
4Q14 Net gains
on other
financial
instruments
Net financial and
risk result from
DNB Livsforsikring
Other
operating
income
Net realised
gains from
the sale of
loan portfolios
Net
commissions
and fees
Basis
swaps
Transfer of risk
equalisation fund
4Q15
DNB Livsforsikring – profit development and Solvency II
Solvency II margin
Per cent
86
113
171
192
3Q15 4Q15
Without transitional rules
With transitional rules
1)
1) At year-end 2015, provisions amounted to NOK 9.5 billion of the estimated total requried increase in
reserves of NOK 11.6 billion. Of the remaining required increase in reserves of NOK 2.1 billion, NOK 0.8
billion must be covered by the owner
Full year Full year
Amounts in NOK million 4Q15 4Q14 2015 2014
Upfront pricing of risk and guaranteed
rate of return 169 202 658 751
Return on corporate portfolio 117 99 548 707
Owner's share of administration result 133 84 347 224
Owner's share of risk result 147 215 518 520
Transferred from/(to) security reserve 19 3 (0) (18)
Owner's share of interest result 456 43 572 511
Pre-tax operating profit before provisions for
higher life expectancy 1 041 646 2 643 2 696
Provisions for higher life expectancy (440) (124) (820) (852)
Transfer of risk equalisation fund (980) - (980) -
Pre-tax operating profit (379) 522 843 1 844
Tax expense 730 65 692 (252)
Profit for the period 351 587 1 535 1 592
23
Full year Full year Change in
Amounts in NOK million 2015 Change 2014 per cent
Total adjusted operating expenses (21 068) (616) (20 452) (3.0)
Of which:
Exchange rate effects for units outside Norway (507)
Currency-adjusted operating expenses (20 560) (109) (20 452) (0.5)
Total adjusted operating expenses (21 068) (616) (20 452)
Income-related costs
Ordinary depreciation on operational leasing (81)
Expenses directly related to operations
Other costs 251
Properties and premises 177
Fees (77)
Pension expenses (187)
Salaries and other personnel expenses (191)
Exchange rate effects for units outside Norway (507)
Non-recurring effects 1 157 1 380 (223)
Restructuring costs, employees (390) (150) (239)
Other restructuring costs and non-recurring effects 1 781 1 695 86
IT restructuring (234) (164) (70)
Operating expenses (19 910) 764 (20 675) 3.7
Changes in operating expenses – full year
24
1) Primarily due to the transition from a defined-benefit pension scheme to a
defined-contribution pension scheme
1)
Net non-performing and net doubtful loans and
guarantees 1)
25
18.4 19.5 19.7
20.7
16.4 16.1 14.9
17.3
13.9 13.1 13.6 14.0
1.55 1.50 1.50
1.38
1.19
1.05 1.01 0.96
0.83 0.77 0.78 0.76
31 Dec 31 Dec 31 Dec 31 Dec 31 March 30 June 30 Sept. 31 Dec 31 March 30 June 30 Sept. 31 Dec
2010 2011 2012 2013 2014 2015
DNB Group As a percentage of net loans
Per cent
NOK billion
1) Includes non-performing commitments and commitments subject to individual impairment. Accumulated
individual impairment is deducted.
Balance sheets
26
1) Excluding short-term money market deposits
31 Dec. 31 Dec. 31 Dec. 31 Dec.
Amounts in NOK billion 2015 2014 2015 2014
Deposits with central banks 19 59 16 54
Due from credit institutions 301 373 631 608
Loans to customers 1 543 1 439 706 723
Other assets 735 779 613 613
Total assets 2 599 2 649 1 965 1 998
Due to credit institutions 162 214 262 269
Deposits from customers 944 942 896 903
Short-term debt securities issued 160 207 160 207
Long-term debt securities issued 645 605 180 160
Other liabilities and provisions 498 523 315 332
Additional Tier 1 capital 8 8
Other equity 182 159 143 128
Total liabilities and equity 2 599 2 649 1 965 1 998
Ratio of deposits to net loans (%) 61.2 65.4 127.1 124.8
Adjusted ratio of deposits to net loans (%) 1) 60.5 63.5 125.5 121.0
Total combined assets 2 901 2 936 1 965 1 998
Currency-adjusted loans to customers 1 486 671
Currency-adjusted deposits from customers 904 859
DNB Group DNB Bank ASA
1) Common equity Tier 1 capital includes 50 per cent of interim profits in all quarters, apart from the leverage ratio figures. Annual figures
are exclusive of dividend payments.
2) The calculations from end-June 2015 have been altered in accordance with the proposed new rules
3) Average weights used by Swedish banks on corporate loans and loans secured by real estate
Common equity Tier 1 capital ratio 1)
27
Leverage ratio 2)
Per cent
Estimate applying average weights
used by Swedish banks 2) 3) Per cent
Transitional rules Per cent
Future Basel III estimate 2) Per cent
12.7 12.7 13.0 13.1 14.4
31 Dec.
2014
31 March
2015
30 June
2015
30 Sept.
2015
31 Dec.
2015
15.1 14.6 15.2 15.4
16.2
31 Dec.
2014
31 March
2015
30 June
2015
30 Sept.
2015
31 Dec.
2015
6.0 5.7 5.8 5.7 6.7
31 Dec.
2014
31 March
2015
30 June
2015
30 Sept.
2015
31 Dec.
2015
18.3 18.8 19.8
20.3 21.7
31 Dec.
2014
31 March
2015
30 June
2015
30 Sept.
2015
31 Dec.
2015
Changes in the common equity Tier 1 capital ratio
28
Per cent
12.7
14.4
2.2
0.6
0.4 0.2 (0.3)
(0.7)
(0.7)
31 Dec. 2014 Profits for the
year prior
to dividend
Increased capital
efficiency
Other changes
in CET1
capital
Other effects Currency-
adjusted growth
Currency effect
on existing
portfolio
Dividend 31 Dec. 2015
From 31 Dec. 2014 to 31 Dec. 2015
Appendix
• DNB results cont.
• The Norwegian Economy
• Loan book and asset quality
Oil investments will stay high from a historical perspective Such fluctuations are not new
Source: Thomson Datastream, DNB Markets
Petroleum investments in Norway NOK billion, share of GDP in per cent
0
1
2
3
4
5
6
7
8
9
10
0
50
100
150
200
250
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Constant 2013 prices (lha) Share of Mainland-GDP (rha)
30
The sovereign wealth fund adds flexibility
31 Source: Ministry of Finance (National Budget 2016), DNB Markets, NBIM
Government Pension Fund Global Beginning of the year, NOK billion
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
2001 2004 2007 2010 2013 2016 2019
Oil income versus spending 2005 – 2016, NOK billion
0
100
200
300
400
500
600
2006 2008 2010 2012 2014 2016
Annual net petro cash flow
Annual return, GPFG
Annual actual "spending of oil-money"
Appendix
• DNB results cont.
• The Norwegian Economy
• Loan book and asset quality
33
Loan Book EAD by segments as at 31 December 2015 1)
Commercial real
estate
11%
Shipping
7% Logistics
1%
Oil, gas and offshore
7%
Energy
3%
Other corporate
customers
6%
Public sector
2%
Fishing and fish
farming
2% Trade
3% Manufacturing
5%
Telecom and media
2%
Services
2%
Residential
mortgages
42%
Private individuals
7%
1) Exposure at default by customer segments as defined in DNB’s management reporting including net non-performing and net
doubtful loans and guarantees.
Fragmented shipping market Dry bulk and container at cyclical lows, other segments higher in cycle
34
Dry bulk and container markets are
challenging – other earnings are satisfactory Clarkson index; rebased, average earnings
Dry bulk recovery postponed, at least to 2017
• Dry bulk outlook adjusted down again as
uncertainty increases. • Chinese demand is slowing down more than
expected while fleet growth will exceed
demand growth.
• Scrapping and lay-ups will increase. 14% of
cape fleet older than 15 years.
• Rates below operating cost and values have
fallen 20-30% since end October.
• Many bulk clients have diversified fleets.
• Container: Overcapacity gives record low freight
rates. Fleet growth slowing in 2016. Portfolio
focus on leading operators.
0
50
100
150
200
250
2008-jan 2009-jan 2010-jan 2011-jan 2012-jan 2013-jan 2014-jan 2015-jan
Tankers Bulkers
LPG Container
1,7
2,1
Large-caps, IG companies
Sub-investment grade
Seismic
LBOs challenged
LBOs less challenged
Other
26
21
OSV
Rig
FPSO/FSO
Subsea construction
Other
13,0
1,5
E&P large-caps and NOCs (IG)
E&P mid-caps (sub IG)
Reserve Based Lending
Exploration Financing Facilities
Midstream incl. LNG
Refining & petchem
Offshore EAD NOK 62.5 billion
Oilfield Services EAD NOK 36 billion
Oil & Gas EAD NOK 74 billion
DNB’s direct exposure to oil is manageable OSV and rig (2.4% of group EAD) are where we see the main challenges
35
IG: Investment grade, E&P: Exploration & Production, LBO: Leveraged Buyout, RBL: Reserve Based Lending, OSV: Offshore
Support Vessels,
NOCs: National Oil Companies, F(P)SO: Floating (Production,) Storage and Offloading vessels
Rigged for the downturn DNB’s clients relatively strong; preparing for challenging 2017
36
Day rates have fallen Average for deepwater rigs around USD 200k per day
• Deepwater rig utilization below 80%, expected
to fall below 70% in 2016.
• Many newbuilding cancellations/postponements
are positive to the balance.
• No improvement in overall market balance
expected until 2018. Need to see
• Oil price at higher level
• Results from oil co’s cost cutting
• Capacity (rigs) taken out
• 53 floaters older than 30 years
• DNB’s clients well equipped for 2016; a number
of restructurings required in 2017
E&P spending is falling; rig fleet is growing
OSV needs to restructure from 2016 Ongoing discussions to find balanced solutions
AHTS: Anchor Handling Tug Supply, PSV: Platform Supply Vessel
Source: Companies, DNB Markets, IHS Petrodata
OSV demand is falling towards 2010 level Historical and expected demand; number of ships 2000-2018e
• Reduced rig activity leads to reduced OSV
demand.
• Estimated utilisation 2016-18 around 60% for
AHTSs and below 50% for PSVs. Around 9-10%
of the fleet is lay-up.
• Weaker balance sheets and shorter contracts.
• Primarily leading operators with a long history
with DNB and a modern and flexible fleet.
• Most of our clients will encounter covenant
issues over next two years. Advanced discussions
and negotiations ongoing with clients facing
cash flow and financing issues in 2016.
• Individual differences with regard to war chests
and equity reserves.
Downturn hits earlier for OSV than for rigs
37
0
250
500
750
1 000
1 250
1 500
1 750
2000 2006 2012 2018e
AHTS PSV
38
DNB’s oil-related portfolio split by sub-segment By exposure (EaD) and risk grade
EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see backup slide for details.
DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. Figures from Fact book as at 31 Dec 2015.
Oil and Gas
Offshore Oilfield services
Total oil related segments
Oil-related portfolio 51 % is low risk, 38 % is medium risk and 9% is high risk
58
16
1 1
0
10
20
30
40
50
60
70
80
90
100 30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
30 Sept. 2015
31 Dec. 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
11
39
12
1
0
10
20
30
40
50
60
70
80
90
100 30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
30 Sept. 2015
31 Dec. 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
14
6 1 1
0
10
20
30
40
50
60
70
80
90
100 30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
30 Sept. 2015
31 Dec. 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
82
61
14
3
0
10
20
30
40
50
60
70
80
90
100 30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
30 Sept. 2015
31 Dec. 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
39
Q4 HERE FOR YOU.
EVERY DAY.
WHEN IT MATTERS
THE MOST.