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Annual Report
2015
Danske Bank Group
Contents
Management’s report
4
6
7
8
13
14
Letter to our shareholders
Financial highlights – Danske Bank Group
Executive summary
Strategy execution
Outlook
Financial review
Business units
19
23
26
29
32
35
37
38
41
42
42
Personal Banking
Business Banking
Corporates & Institutions
Danske Capital
Danica Pension
Non-core
Other Activities
Capital and liquidity management
Investor Relations
Corporate responsibility
Organisation and management
Financial statements
45
46
47
48
49
53
54
Contents
Income statement
Statement of comprehensive income
Balance sheet
Statement of capital
Cash flow statement
Notes
Statements and reports
184 Statement by the management
185
Independent Auditors’ report
Management and directorships
186 Board of Directors
190 Executive Board
193 Supplementary information
04
Danske Bank / Annual Report 2015
Letter to our shareholders
2015 was another year of
significant progress for Danske
Bank. We are well on track to
becoming a more customer-
centric, simple and efficient
bank to the benefit of all our
stakeholders.
Net profit before goodwill
impairments was DKK 17.7
billion for 2015 and the return
on shareholders’ equity before
goodwill impairments was 11.6%,
and we have thus delivered on the
financial targets we have pursued
since 2013. We maintained a
strong capital position, and our
credit ratings were improved.
At the same time, we made
progress towards meeting our
long-term ambition of becoming
number one in customer
experience. We are pursuing
this objective by combining
the financial expertise we have
developed over more than 140
years of banking with our ability
to turn technological advances
into leading solutions for our
customers.
Our increased focus on customer
centricity has translated into
positive developments in
customer satisfaction at all of
our business units, even though
we have not yet reached all of our
targets. Personal Banking is on
target in one of five countries and
made significant progress in our
largest market, Denmark. Private
Banking kept its leading position
in Denmark. Business Banking is
on target in three of five countries,
while Corporates & Institutions
is fully on target, maintaining its
leading position as clients rank us
number one in many key areas.
Moreover, in 2015 we continued
to review and fine-tune our
business model to maximise
the value we create for both
customers and shareholders:
To further strengthen our position
in the attractive growth market
for private banking, pension
savings and asset management,
we have decided to establish a
new unit that will encompass our
extensive expertise in this area.
The objective of the new Wealth
Management unit is to enable
us to more rapidly respond to
customer demand for investment
solutions and high-quality
proactive advisory services.
We also refocused our efforts
in the Baltic region on business
customers, divesting the personal
customer business in Lithuania
and Latvia. Pending approval
by the Lithuanian competition
authorities, the transaction is
expected to be completed in the
first half of 2016. In addition, we
decided to run and report on our
operations in Northern Ireland
as a separate business unit to
increase customer focus and to
simplify operations.
In recent years, we have
strengthened Danske Bank’s
leadership, in particular the
leadership of support and staff
functions. This work continued
during 2015 with the overall
objective of increasing our
customer focus and becoming
a more simple and efficient
business. We have increased our
focus on leadership development,
succession planning and talent
development. We have also
initiated a cultural transformation
process, which on the basis of
value-based leadership promotes
customer-centricity, performance
management and empowerment
of staff.
The journey ahead
Our 2015 results bring us
a significant step closer to
delivering on our target of a return
on shareholders’ equity above
12.5% by 2018 at the latest.
Although the interest rate
environment remains challenging,
our ambitions are intact. We have
a solid platform to build on, with a
strong position in the marketplace
and a clear strategic direction for
the next leg of our journey. We
are confident that this will enable
us to seize the opportunities and
mitigate the risks arising from
changes in the marketplace and
macroeconomic conditions.
Our key priorities going
forward include the continual
Danske Bank / Annual Report 2015
05
development and optimisation of
our customer offerings, seizing
digital opportunities to provide
innovative solutions, and our
ongoing efforts to reap the full
benefits of our Nordic platform.
We will also continue our
strong focus on becoming more
efficient and reducing costs, while
maintaining a prudent risk profile.
In short, we will continue to adjust
our business model in order to
ensure that we reach our targets.
The progress we made in 2015,
the value we created for our
customers, and the financial
results we delivered would not
have been possible without the
dedication and hard work of our
more than 19,000 employees,
and we would like to express our
gratitude to all of them for their
efforts.
Finally, on the basis of our solid
capital position, the Board of
Directors is pleased to propose
a dividend of DKK 8.0 per share,
or 46% of net profit for the year
before goodwill impairments.
Moreover, we have decided
to conduct a share buy-back
programme that will total DKK
9 billion and run for no more
than 12 months, beginning on 4
February 2016.
Ole Andersen
Chairman of the Board of
Directors
Thomas F. Borgen
Chief Executive Officer
06
Danske Bank / Annual Report 2015
Financial highlights – Danske Bank Group
Income statement
(DKK millions)
Net interest income**
Net fee income**
Net trading income**
Other income
Net income from insurance business**
Total income**
Operating expenses
Goodwill impairment charges
Profit before loan impairment charges**
Loan impairment charges
Profit before tax, core**
Profit before tax, Non-core
Profit before tax**
Tax**
Net profit for the year**
Net profit for the year before goodwill
impairment charges**
Attributable to additional tier 1 etc.
Balance sheet (end of year)
(DKK millions)
Due from credit institutions and central banks
Repo loans
Loans
Trading portfolio assets
Investment securities
Assets under insurance contracts
Total assets in Non-core
Other assets
Total assets
Due to credit institutions and central banks
Repo deposits
Deposits
Bonds issued by Realkredit Danmark
Other issued bonds
Trading portfolio liabilities
Liabilities under insurance contracts
Total liabilities in Non-core
Other liabilities
Subordinated debt
Additional tier 1 etc.
Shareholders' equity
Total liabilities and equity
Ratios and key figures
Dividends per share (DKK)
Earnings per share (DKK)***
Return on avg. shareholders' equity (%)***
Return before goodwill impairment charges on
avg. shareholders' equity (%)***
Return on avg. tangible equity (%)***
Net interest income as % of loans and deposits
Cost/income ratio (%)
Cost/income ratio before goodwill impairment
charges (%)
Total capital ratio (%)
Common equity tier 1 capital ratio (%)
Share price (end of year) (DKK)
Book value per share (DKK)***
Full-time-equivalent staff (end of year)
2015
2014
Index
15/14
2013
2012
2011
21,476
12,122
6,933
1,778
1,892
44,201
21,827
4,601
17,773
57
17,716
46
17,762
4,639
13,123
17,724
607
75,221
216,303
1,609,384
547,019
343,304
265,572
24,236
211,840
3,292,878
137,068
177,456
816,762
694,519
363,931
471,131
285,030
5,520
140,640
39,991
11,317
149,513
3,292,878
8.0
12.8
8.5
11.6
12.9
0.89
59.8
49.4
21.0
16.1
185.2
153.2
19,049
22,313
11,154
6,693
1,344
2,496
44,000
22,641
9,099
12,260
2,788
9,472
-1,503
7,969
4,020
3,948
13,047
261
63,786
290,095
1,563,729
742,512
330,994
268,450
32,329
161,120
3,453,015
126,800
400,618
763,441
655,965
330,207
550,629
288,352
4,950
138,642
41,028
5,675
146,708
3,453,015
5.5
3.8
2.5
8.6
10.5
0.96
72.1
51.5
19.3
15.1
167.4
146.8
18,603
96
109
104
132
76
100
96
51
145
2
187
-
223
115
-
136
-
118
75
103
74
104
99
75
131
95
108
44
107
106
110
86
99
112
101
97
199
102
95
22,077
9,468
5,799
1,308
1,088
39,740
23,794
-
15,947
4,111
11,836
-1,777
10,059
2,944
7,115
7,115
0
53,714
316,079
1,536,773
695,722
161,917
246,484
41,837
174,531
3,227,057
132,253
331,091
776,412
614,196
310,178
435,183
262,468
17,476
135,924
66,219
-
145,657
3,227,057
2.0
7.1
5.0
5.0
6.4
0.95
59.9
59.9
21.4
14.7
124.4
145.6
19,122
22,778
8,866
10,562
1,285
2,171
45,662
24,642
-
21,020
7,680
13,340
-4,801
8,539
3,814
4,725
4,725
4
113,657
307,177
1,640,656
812,966
107,724
241,343
33,100
228,326
3,484,949
241,238
359,276
783,759
614,325
340,005
531,860
266,938
4,831
136,928
67,785
4
138,000
3,484,949
-
5.0
3.6
3.6
5.3
0.94
54.0
54.0
21.3
14.5
95.7
138.0
20,126
23,537
8,298
7,325
3,648
569
43,377
25,826
161
17,390
13,185
-
-
4,205
2,482
1,723
1,884
11
74,041
256,027
1,698,025
909,755
109,264
230,668
-
146,623
3,424,403
177,592
269,515
795,275
557,699
366,920
697,913
248,966
-
117,340
67,328
60
125,795
3,424,403
-
1.9
1.4
2.1
2.6
0.94
59.9
59.5
17.9
11.8
73.0
135.7
21,320
* See note 1 (c) to the financial statement for an explanation of differences in the presentation between IFRS and the financial highlights.
** Changes have been made to the highlights for 2014, as presented in note 2. Apart from 2011, the effect on the highlights for 2011-13 is not significant, and
comparative figures for 2011-13 therefore have not been restated. A restatement of comparative figures for 2011 would have reduced net profit by DKK 387 million.
*** Ratios are calculated as if the additional tier 1 capital were classified as a liability. Average shareholders’ equity is calculated as a quarterly average.
Danske Bank / Annual Report 2015
07
Executive summary
“In 2015, Danske Bank continued to progress and delivered strong results despite a challenging environment. The results are
testament to the strength of our diversified business model as a Nordic universal bank and reflect our firm focus on executing
our strategy of becoming a more customer-centric, simple and efficient bank,” says Thomas F. Borgen, Chief Executive Officer.
“We continued to strengthen relations with our customers and launched a number of initiatives aimed at making daily banking
and important financial decisions easier for our customers. We have a sound platform and a strong position in the marketplace
as well as a clear strategic direction for the next part of our journey towards realising the full potential of Danske Bank.”
• Danske Bank Group’s net profit for 2015 was
relate to the expected short-term developments at
DKK 13.1 billion. The result was affected by goodwill
impairments of DKK 4.6 billion. Net profit before
goodwill impairments rose 36% to DKK 17.7 billion,
against DKK 13.0 billion in 2014.
• The return on shareholders’ equity after tax was
8.5%. The return before goodwill impairments was
11.6%, against 8.6% for 2014.
the units.
• Loan impairments in core activities amounted to
DKK 57 million, or 0.00% of lending and guarantees,
against 0.15% in 2014. The decline reflects our
ongoing work to improve credit quality as well as
improved macroeconomic conditions. This positive
development took place at all business units.
• Net interest income was down 4%. The negative
• Non-core activities posted a profit before tax of
short-term interest rates continued to put pressure
on deposit margins and net interest income. Lending
volume growth and lower funding costs partly offset
this pressure.
DKK 46 million, against a loss of DKK 1.5 billion in
2014. The winding-up of our Irish Non-core portfolio
continued, and most of the commercial property
portfolio has now been sold.
• Net fee income totalled DKK 12.1 billion, which was
9% higher than the year-earlier level, mainly because
of extensive mortgage refinancing in the first half of
the year, stronger customer activity at the banking
units and positive developments at Danske Capital.
• Net trading income increased 4% from the level in
2014, even though 2014 benefited from a one-off
gain from the sale of shares in Nets. In the first half
of 2015, trading income benefited from high client
activity owing to volatility in the financial markets,
whereas activity in the second half was somewhat
lower.
• Net income from insurance business amounted to
DKK 1.9 billion, against DKK 2.5 billion in 2014. It
was possible to book the full risk allowance for all
four interest rate groups and to book DKK 0.2 billion
from the shadow account, against DKK 0.6 billion in
2014.
• Operating expenses fell 4% to DKK 21.8 billion, and
the cost/income ratio before goodwill impairments
improved 2.1 percentage points to 49.4%. We
achieved this by continuing to implement efficiency
initiatives.
• The goodwill impairments of DKK 4.6 billion were
the result of assumptions about lower interest rates
long-term than previously assumed and increased
capital allocated to our activities in Finland and
Northern Ireland. The goodwill impairments do not
• We reached our rating targets when Moody’s
upgraded our long-term rating to A2 and our
short-term rating to P-1 in June, and S&P changed
its outlook for our long-term A rating to stable in
July. This was a very important milestone that is
testament to the sustained effect of our strategic
initiatives. The improvement in our ratings means
that we are able to do more business with specific
customer groups and that we can further optimise
our funding.
• The common equity tier 1 capital ratio and the total
capital ratio were 16.1% and 21.0%, respectively,
at 31 December 2015, against 15.1% and 19.3%
at 31 December 2014. Our capital base remained
strong, also after deduction of the proposed
dividends. With a liquidity coverage ratio (LCR) of
125% at 31 December 2015, our liquidity position
also remained robust.
• The Board of Directors is proposing a dividend of
DKK 8.0 per share, corresponding to 46% of net
profit before goodwill impairments. In addition, the
Board of Directors has decided to initiate a share
buy-back programme of DKK 9 billion that will start
on 4 February 2016 and run for no more than 12
months.
• For 2016, we expect the net profit to be in line with
the net profit before goodwill impairments in 2015.
We remain committed to our target of a return on
equity above 12.5% in 2018 at the latest. See page
13 for our full outlook.
08
Danske Bank / Annual Report 2015
Strategy execution
In 2015, we made further progress on our journey to
become a more customer-centric, simple and efficient
bank for the benefit of customers and shareholders
alike. The year also represented another step towards
our goal of being recognised as the most trusted
financial partner by consistently delivering long-term
value for customers, investors and the societies where
we operate.
Our underlying business remained robust, with
good customer activity throughout the year. Lending
volumes rose 3% from the end of 2014. Increased
customer activity led, among other things, to an
increase in net fee income of 9%. Personal Banking
and Business Banking in particular benefited from good
customer inflow in many markets.
Despite a challenging environment of negative short-
term interest rates, our diversified business model
enabled us to deliver satisfactory financial results:
net profit before goodwill impairments of DKK 17.7
billion and a return before goodwill impairments on
shareholders’ equity of 11.6%. We thus achieved our
ambition for 2015 by delivering a return on equity of
above 9.5%.
In doing so, we also reached an important milestone by
reaching each of our financial targets for 2015.
Financial targets
2015 ambition
Return on sharehol-
ders’ equity
9.5%
Ratings
S&P rating outlook
improved to stable
Status at the end
of 2015
11.6% before
goodwill
impairments
S&P/Moody’s/
Fitch
A (stable)/A2
(stable)/A (stable)
Common equity tier
1 capital ratio
Around 14%
16.1%
Total capital ratio
Well above 17%
21.0%
Dividend payments
Payout of 40-50%
of net profit
46% payout
ratio for 2015
(proposed)
The solid improvement in return on equity was driven
by a combination of factors. Higher customer activity,
particularly in the beginning of the year, and our
improved customer offerings increased both net fee
income and net trading income, which more than offset
the pressure on net interest income from the lower-
than-expected short-term interest rates. Our tight cost
control and a significant reduction in impairments,
resulting both from our efforts to improve credit
quality and from the general improvement in the
economy, also contributed significantly.
We saw continued improvements in customer
satisfaction across markets and customer segments,
not least among our personal customers in our biggest
market, Denmark. But we still have a way to go to
reach our ambition of being ranked as number one or
two in our focus segments in all our markets. This area
still takes priority for us.
Effects of negative short-term interest rates
Short-term interest rates declined throughout 2015,
falling much lower than we had expected at the
beginning of the year. In Denmark, Sweden and the
eurozone, monetary policy rates were negative, and
higher rates appear to be a more distant prospect than
previously expected.
Net interest income was challenging, but we managed
to meet our expectations for total income for 2015
despite the negative short-term interest rates and
pressure on margins. We held interest rates on
personal customer current accounts at or above 0%
and advised customers how to take advantage of the
low rate environment. The low rates also led us to
develop new loan products and investment solutions
that will benefit customers.
Business reviews
Throughout the year, we continued to review and
fine-tune our business to increase the value we create
for customers and shareholders within our defined
strategic core:
To be a modern bank for people and businesses across
the Nordics with deep financial competence and
leading, innovative solutions.
We completed two reviews: Wealth Management
and Northern Ireland, and we executed on a previous
business review by divesting part of the Non-core
Baltic exposure.
Wealth Management
In order to strengthen our position further and
expand our development capabilities within pensions
and wealth management, we are establishing a new
business unit, which organisationally will be in place
from 1 April 2016. Financial reporting will take place
from the first quarter of 2016. The new unit will
encompass customers and expertise from Danica
Pension, Danske Capital and Private Banking.
The objective is to ensure that we are well placed
to capture the expected growth in the wealth
management area. By combining three strong units
in one, we will be able to ensure an even more rapid
response to customer demand. We will continue to
Danske Bank / Annual Report 2015
09
develop investment solutions and deliver high-quality,
proactive advisory services. Danica Pension’s new
investment strategy supports this objective, and with
the new Wealth Management unit, we will continue to
advise and provide services to our various customer
types.
Northern Ireland
Since 1 January 2016, our business in Northern
Ireland has operated and reported as a separate
unit. This organisational simplification enables us to
develop our market position further, to increase the
focus on creating value for customers, and to improve
profitability.
Non-core
As part of our strategy, we refocused our efforts in the
Baltics on our existing Business Banking operations.
On 1 January 2015, we moved our Baltic Personal
Banking activities to the Non-core unit because of the
lack of scale to generate an acceptable return.
In the third quarter of 2015, we reached an agreement
to sell our Non-core personal customer business
in Lithuania and Latvia. Pending approval by the
Lithuanian competition authorities, the transaction is
expected to be completed in the first half of 2016.
The winding-up of our Irish Non-core portfolio
continued throughout 2015, and the commercial
exposure has now been almost run down.
The Danske Bank Group now has five business units:
Personal Banking
Serves personal and private banking customers. The unit
focuses on providing proactive advice to customers and
making day-to-day banking simple and efficient through
innovative digital solutions.
Business Banking
Serves small and medium-sized businesses through a large
network of national finance centres, branches, contact centres
and online channels. The unit offers leading solutions within
financing, investing, cash management and risk management.
Corporates & Institutions
Serves large Nordic corporate and institutional customers
in the Nordic countries and beyond. This wholesale division
of the bank provides strategic advice, financial solutions and
products within Capital Markets, Fixed Income, Currencies and
Commodities, and Transaction Banking.
Wealth Management
Serves the Group’s entire customer base and encompasses
expertise within pension savings, private banking, and wealth
and asset management. The unit includes Danica Pension,
Danske Capital and Private Banking customers with complex
finances and will begin operating from 1 April 2016.
Northern Ireland
Serves personal and business customers through a network
of branches in Northern Ireland and leading digital channels.
Since 1 January 2016, Northern Ireland has operated as a
separate business unit.
In addition to our five business units, we also have Non-
core and Other Activities.
Our Non-core unit includes certain customer segments
that are no longer considered part of the core
business. The Non-core unit is responsible for the
controlled winding-up and divestment of this part of the
loan portfolio.
Other Activities encompasses Group Treasury, Group
support functions and eliminations, including the
elimination of returns on own shares. Group Treasury
is responsible for the Group’s liquidity management
and funding.
Status of strategic initiatives
In 2015, we made progress in a number of
strategically important focus areas:
Nordic ambitions
We strengthened our position in Norway and Sweden.
A number of initiatives ensured strong customer
momentum resulting in a continued inflow of
customers and profitable and healthy growth.
In Finland, we continued to develop our solid market
position, building on our well-known brand, customer-
centric organisation and strong product offerings. This
is particularly appreciated by corporate customers,
and customer satisfaction is high.
Digitalisation
Digitalisation remains a key part of our strategy
because it allows us to continue to deliver superior
customer experience while improving efficiency and
agility.
We address digitalisation in a number of ways: We use
it to make process improvements that make us more
customer-centric; we digitalise existing processes to
10
make our routine operations as efficient as possible;
and we explore opportunities to use new technology
to disrupt existing service models. Together, these
efforts enable us to develop and protect our franchise,
to solidify our position as a leading innovator in the
Nordics, and to ensure our competitiveness against
existing and new market players.
MobilePay became even more deeply ingrained in
Danish consumers’ banking and shopping habits,
and we now offer the solution in Finland and Norway
as well. All MobilePay business solutions showed
significant growth in transactions and volume in 2015.
We plan to continue the roll-out in Finland and Norway
in 2016.
In September, we launched the first version of
Sunday.dk, an online solution for Danish consumers
that offers an entirely new way of searching the
housing market and making a home purchase. At
Sunday.dk, users can find homes that match their
needs and financial capabilities and get an instant loan
commitment, giving them the financial confidence to
make a purchase offer. We will continue to develop
new functionality in collaboration with our customers.
We also launched Danske In-house Bank as a pilot
project for selected corporate clients. The solution
enhances companies’ treasury efficiency by optimising
internal FX trades, payments and account structures
across countries, currencies and subsidiaries. We
expect to offer the solution to a wider range of clients
in 2016.
Since having highly talented IT staff is essential
for delivering innovation at a competitive cost, we
continued to expand our global IT development
capabilities.
Compliance and risk management
The conventional banking model is undergoing
tremendous changes because of new regulation,
advanced analytics and game-changing digitalisation.
Consequently, we are adjusting and fine-tuning the way
we are running the bank.
As part of our ongoing work to ensure simplicity,
efficiency and effectiveness in the operational risk
management and compliance areas, we continue to
invest in anti–money laundering measures, cyber
security and fraud prevention. The supervisory
authorities conduct ongoing inspections of Danske
Bank’s compliance with anti-money laundering
legislation that could lead to supervisory actions.
During 2015, we increased our resources within the
antimoney-laundering area as part of our continuous
effort to promote and ensure compliance with
regulation and industry standards.
Our credit risk management policies and practices
ensure regulatory compliance and alignment between
our risk profile and risk appetite while supporting our
strategy. Our focus on underwriting for profitability
and targeting low-risk segments supports sustainable
growth.
35% of smartphone users in Denmark use MobilePay at least once a week
% of smartphone users*
61
40
35
30
25
23
21
20
19
15
Facebook
Facebook
Messenger
MobilePay
Gmail
e-Boks
Google
Maps
Snapchat
Instagram
YouTube
Rejseplanen
* Men and women aged 15-75 who use the service/app at least once a week.
Source: Mobile Device 2015 - TNS-Gallup, Danish Media and Creativity & Communication. Survey conducted from 27 April to 10 May 2015.
Danske Bank / Annual Report 2015 11
The approval of foundation IRB models for the
corporate segment in Finland improved our capital
ratios.
number one in many key areas such as corporate
banking, fixed income, cash management, trade finance
and institutional banking in the Nordics.
In September, we sent our Recovery Plan 2015, which
SIFIs must have in place, to the Danish FSA.
The winding-up of Non-core activities contributed
to a DKK 16 billion reduction in the risk exposure
amount (REA), while lower risk positions at Corporates
& Institutions, combined with a high degree of
diversification and lower market volatility, led to a
reduced REA for market risk.
The positive development in our ratings, improved
asset quality, lower impairments as well as improved
and stable earnings also contributed to our improved
risk profile. With capital and liquidity ratios well above
our 2015 targets, our risk resilience is strong.
Customer satisfaction
Improving customer satisfaction remains a key
priority. We have not yet reached our overall target
for Personal Banking and Business Banking of being
ranked number one or two in our focus segments
in all our markets. However, we did see a positive
development in many areas as we continued to focus
on improving customer relations. At Corporates &
Institutions, our target remains to be in the top three of
two thirds of all relevant surveys, and we remained on
target in 2015.
The charts show our current ranking among peers in
our focus segments in each country.
Customer satisfaction at Corporates & Institutions
remained high and on target. Customers ranked us
T5
T4
T3
T1
T2
C1
Business Banking customer satisfaction by
ranking in top 2 or out of top 2
B1
B2
B3
Below target
On target
5
4
3
2
1
Source: BD Sales & Customer Engagement, Customer Insights
T5
T4
T3
T2
T1
C1
Personal Banking customer satisfaction by
ranking in top 2 or out of top 2
B2
B1
B3
Below target
On target
5
4
3
2
1
T3
T5
T4
T2
T1
Corporates & Institutions
Number of Prospera surveys by ranking
in top 3 or out of top 3
B2
B1
C1
B3
2015
Out of top 3
3
2
1
30
17
18
17
38
34
Source: PB Strategy & Insights, Customer Insights
Danske Bank / Annual Report 2015 12
Danske Bank / Annual Report 2015
Business Banking saw good progress for customer
satisfaction in all countries in 2015. We are on target
in three of the five countries, as we are number two
in Finland, and number one in Sweden and Northern
Ireland. In Denmark, customer satisfaction improved
throughout 2015, although we were ranked just below
our peers towards the end of the year. In Norway,
we were ranked between first and third position
throughout the year.
At Personal Banking, customer satisfaction is on
target in Sweden, where we were also named bank
of the year by Privata Affärer, the largest Nordic
personal finances magazine. In Finland, Northern
Ireland, Denmark and Norway, we recorded solid
improvements from the level a year ago and narrowed
the gap to our peers significantly, but we remain below
target. In Denmark, it was particularly encouraging that
we improved our ranking to fourth place.
The upward trend reflects our commitment and hard
work to constantly improve our services and solutions
and to give our customers the best experience every
time they are in touch with us. We are confident that
we are moving in the right direction.
Satisfaction remained high among private banking
customers. For the third consecutive year, we were
named best private banking bank in Denmark by The
Banker, and Euromoney named us best private banking
bank in Denmark for the tenth time. Furthermore,
Prospera’s annual survey ranked Danske Bank first
among private banking banks in Denmark and Norway.
Danske Capital ranks second in customer satisfaction
in the Nordic institutional segment among bank peers
across all client segments. Client surveys showed
improvement in 2015, especially in Sweden. In
Norway, we maintained our strong position, whereas
we saw minor declines in average rankings in Denmark
and Finland, albeit from strong levels.
The Aalund Business Research survey ranked Danica
Pension third overall in Denmark. We saw positive
development, especially among large customers, and
enhancing customer satisfaction will remain a focus
area for 2016 and the coming years.
Danske Bank / Annual Report 2015
13
We expect income improvements to be achieved
through moderate growth in lending volumes, as well
as an increase in income from wealth management.
Moreover, we will continue to optimise our pricing and
product mix.
We will continue to pursue structural cost efficiencies
through digitalisation, process improvements and
organisational optimisation.
Loan impairments are expected to be at a low level.
Moreover, we will continue our strong focus on efficient
capital use and will grow income in less capital-
intensive areas.
To ensure continued access to competitive funding,
we aim to maintain strong A ratings. With regard to
funding costs, we assume that maturing funding will be
refinanced at current market prices.
We intend to continue to return excess capital to our
shareholders after we have paid out ordinary dividends
of 40-50% of net profit. Our capital targets will be
confirmed annually.
Outlook
Outlook for 2016
For net interest income, we expect continued pressure
on margins in 2016, while we will benefit from volume
growth and lower funding costs.
We expect the underlying trend in net fee income that
we saw in 2015 to continue, but we do not expect to
repeat the high level of remortgaging activity.
Net trading income remains subject to customer
activity and volatility in the financial markets.
Net income from insurance business is expected to be
around the 2015 level.
Expenses are expected to decline from the level in
2015. We will continue our strong focus on costs
to fuel investments in digitalisation and customer
solutions. Costs will benefit from a lower net
contribution to the resolution fund and the deposit
guarantee fund, and from lower depreciation on
intangible assets.
Loan impairments are expected to be at a low level
because of our ongoing efforts to improve credit
quality and expectations of a generally unchanged
macroeconomic climate.
Profit before tax at Non-core is expected to be close to
zero.
Net profit for 2016 is thus expected to be in line with
net profit before goodwill impairments in 2015.
Outlook towards end-2018
Danske Bank is aiming for a return on shareholders’
equity of at least 12.5% in 2018 at the latest. In 2015,
the return on shareholders’ equity, excluding goodwill
impairments, was 11.6%.
Our outlook towards end-2018 is based on an
assumption of largely unchanged macroeconomic
conditions and persistently low interest rate levels.
Consequently, we expect overall moderate credit
demand, with low demand in Denmark. We expect the
savings market to show healthy growth rates, however.
The key elements of our medium-term financial plan
are income initiatives coupled with diligent cost and
capital optimisation measures.
14
Financial review
Income statement
(DKK millions)
2015
2014
Index
15/14
Net interest income
21,476
22,313
Net fee income
12,122
11,154
Net trading income
Other income
Net income from insurance
business
6,933
1,778
6,693
1,344
1,892
2,496
Total income
44,201
44,000
Operating expenses
21,827
22,641
Goodwill impairment charges
4,601
9,099
Profit before loan impairment
charges
Loan impairment charges
Profit before tax, core
17,773
12,260
57
17,716
2,788
9,472
Profit before tax, Non-core
46
-1,503
17,762
4,639
13,123
7,969
4,020
3,948
Profit before tax
Tax
Net profit for the period
Net profit for the period before
goodwill impairment charges
Attributable to additional tier
1 etc.
Q4
2015
5,307
3,159
Q3
2015
5,340
2,829
1,660
1,033
616
447
11,189
5,874
4,601
714
-139
853
13
866
831
35
296
335
9,833
5,203
-
4,630
-86
4,716
3
4,719
1,051
3,668
Index
Q4/Q3
99
112
161
208
133
114
113
-
15
-
18
-
18
79
-
Q2
2015
5,516
3,088
Q1
2015
5,313
3,046
1,525
2,715
506
360
333
777
10,968
12,211
5,313
5,437
-
-
5,655
6,774
-219
502
5,874
6,272
-60
90
5,814
6,362
1,346
1,411
4,468
4,951
96
109
104
132
76
100
96
51
145
2
187
-
223
115
-
17,724
13,047
136
4,636
3,668
126
4,468
4,951
607
261
233
164
164
100
161
118
In 2015, Danske Bank Group posted a net profit before
goodwill impairments of DKK 17.7 billion, up DKK 36%
from the level in 2014. Net profit was DKK 13.1 billion.
Income
Total income amounted to DKK 44.2 billion, the same
level as in 2014.
Net interest income totalled DKK 21.5 billion, a
decrease of 4%. The negative short-term interest rates
continued to put pressure on deposit margins and net
interest income. Lending volume growth and lower
funding costs partly offset this pressure.
the first half of 2015, as many of our customers took
advantage of the historically low interest rates.
Net trading income totalled DKK 6.9 billion, which
represented an increase of 4% from the year-earlier
level.
The insurance business posted income of DKK 1.9
billion, a decrease of 24% from the level in 2014 that
was caused partly by higher special allotments. It was
possible to book the full risk allowance for all four
interest rate groups and to book DKK 0.2 billion from
the shadow account, against DKK 0.6 billion in 2014.
Net fee income amounted to DKK 12.1 billion and
was up 9%. Net fee income benefited from increased
customer activity at all banking units and positive
developments at Danske Capital. Net fee income also
benefited from a high level of mortgage refinancing in
Expenses
Operating expenses amounted to DKK 21.8 billion and
were down 4% from the level in 2014. Despite the
higher customer activity, the cost/income ratio before
goodwill impairment charges improved 2.1 percentage
Danske Bank / Annual Report 2015
points to 49.4% as we continued to implement
efficiency initiatives.
The goodwill impairments are the result of
assumptions about lower interest rates long-term
and increased capital allocation to Finland and
Northern Ireland.
Our contribution to the new Danish resolution fund
amounted to DKK 194 million for 2015.
Expenses for VAT and payroll tax for 2015 amounted
to DKK 1.9 billion, against DKK 2.2 billion in 2014.
Loan impairments
Loan impairments declined from the level in 2014 at
all business units. The lower impairment level reflected
general improvements in credit quality and collateral
values. In the agricultural and oil sectors, impairments
increased, reflecting weakened market conditions.
Loan impairment charges
(DKK millions)
2015
2014
Charges
332
-343
65
3
57
% of
lending
and gua-
rantees
0.04
-0.05
0.01
0.03
Charges
1,412
1,007
372
-2
0.00
2,788
% of
lending
and gua-
rantees
0.17
0.17
0.07
0.00
0.15
Personal Banking
Business Banking
C&I
Other
Total
Tax
Tax on the profit for the year amounted to DKK 4.6
billion, or 20.7% of profit before goodwill impairments
and tax. Tax was affected by net adjustments of
DKK 0.3 billion regarding prior years.
15
Q4 2015 vs Q3 2015
In the fourth quarter of 2015, Danske Bank posted
a net profit before goodwill impairments of DKK 4.6
billion.
Net interest income amounted to DKK 5.3 billion,
and was thus unchanged from the level in the third
quarter. Increased lending volumes and lower
customer rates on deposits offset the pressure on
lending margins.
Net fee income showed an increase of DKK 0.3 billion
over the third quarter. The increase was driven by
higher performance fees at Danske Capital.
Net trading income amounted to DKK 1.7 billion,
against DKK 1.0 billion in the third quarter. The
increase was due to increased client activity in the
financial markets.
The insurance business generated net income of
DKK 0.4 billion and was up 33% from the third
quarter. The increase was due to the transfer of
DKK 0.2 billion from the shadow account and a higher
return on investments, although the payment of
special allotments had an adverse effect.
In the fourth quarter, we recognised a DKK 4.6
billion goodwill impairment charge as a result of
assumptions about lower interest rates long-term and
increased capital allocation to Finland and Northern
Ireland.
Loan impairments showed a net reversal of DKK 0.1
billion, matching the level in the third quarter. The
level of reversals reflected increases in collateral
values driven by improved economic conditions. In the
agricultural and oil sectors, impairments increased
owing to concerns about weaker market conditions.
Danske Bank / Annual Report 2015
16
Balance sheet
Lending (end of period)
(DKK billions)
Personal Banking
Business Banking
C&I
Other Activities incl.
eliminations
Allowance account, lending
2015
2014
808.5
662.9
172.2
-7.3
26.9
794.1
633.7
172.4
-4.1
32.4
Index
15/14
102
105
100
-
83
Q4
2015
808.5
662.9
172.2
-7.3
26.9
Q3
2015
801.0
647.3
174.3
-4.5
28.3
Index
Q4/Q3
101
102
99
-
95
Q2
2015
805.7
651.6
179.2
-4.8
30.6
Q1
2015
807.5
644.0
189.7
-3.7
32.5
Total lending
1,609.4
1,563.7
103
1,609.4
1,589.8
101
1,601.1
1,605.0
Deposits (end of period)
(DKK billions)
Personal Banking
Business Banking
C&I
Other Activities incl.
eliminations
2015
2014
346.9
256.3
213.5
329.5
259.8
174.2
0.1
-0.1
Index
15/14
105
99
123
-
Q4
2015
346.9
256.3
213.5
Q3
2015
344.4
250.3
226.5
0.1
2.4
Total deposits
816.8
763.4
107
816.8
823.6
Bonds issued by Realkredit Danmark (end of period)
(DKK billions)
2015
2014
694.5
56.6
751.1
188.9
656.0
88.5
744.5
211.7
Index
15/14
106
64
101
89
Q4
2015
694.5
56.6
751.1
188.9
Q3
2015
687.6
55.2
742.8
224.8
Bonds issued
Own holdings of bonds
Total Realkredit Danmark
bonds
Other covered bonds
Total deposits and issued
mortgage bonds etc.
Lending as % of deposits and
issued mortgage bonds etc.
Index
Q4/Q3
101
102
94
-
99
Index
Q4/Q3
101
103
101
84
Q2
2015
353.2
258.5
229.5
Q1
2015
334.8
262.2
230.0
-1.5
-0.2
839.7
826.8
Q2
2015
691.5
48.6
740.2
219.5
Q1
2015
678.9
69.8
748.7
218.1
1,756.8
1,719.6
102
1,756.8
1,791.2
98
1,799.4
1,793.6
91.6
90.9
91.6
88.8
89.0
89.5
Lending
At the end of 2015, total lending was up 3% from the
level at the end of 2014. Lending increased at almost all
banking units.
In Denmark, new gross lending, excluding repo loans,
amounted to DKK 78.6 billion. Lending to personal
customers accounted for DKK 36.6 billion of this amount.
In Denmark, our market share of total lending, including
repo loans, fell from 26.5% at the end of 2014 to
26.1%. In Finland, our market share of lending also fell.
In Norway, our market share rose, and in Sweden, we
maintained our market share of lending.
Danske Bank / Annual Report 2015 17
Market shares of lending
(%)
31 December
2015
31December
2014
Denmark (excluding mortgage
loans)
Finland*
Sweden*
Norway*
26.1
9.6
4.9
5.6
26.5
9.8
4.9
4.6
Source: Market shares are based on data from the central banks. Market shares
include repo loans, with the exception of the market shares for Sweden.
* The market shares for Finland, Sweden and Norway are based on data from the
central banks at 30 November 2015.
Lending equalled 91.6% of the total amount of
deposits, mortgage bonds and other covered bonds,
against 90.9% at the end of 2014.
Deposits
At the end of 2015, total deposits were up 7% from
the level at the end of 2014, with an increase recorded
in particular at Corporates & Institutions.
Market shares of deposits
(%)
Denmark
Finland*
Sweden*
Norway*
31 December
2015
31 December
2014
27.8
12.9
3.9
5.5
27.1
11.9
4.2
5.1
Source: Market shares are based on data from the central banks. Market shares
include repo deposits, with the exception of the market shares for Sweden.
* The market shares for Finland, Sweden and Norway are based on data from the
central banks at 30 November 2015.
Credit exposure
Net credit exposure totalled DKK 3,600 billion, against
DKK 3,722 billion at the end of 2014.
Risk Management 2015, chapter 4, which is available
at danskebank.com/ir, provides details on Danske
Bank’s credit risks.
Credit quality
The general improvement in the economy, the low
interest rate level and managerial efforts enabled us to
improve credit quality during the year. Total gross non-
performing loans (NPL) decreased, and the coverage
ratio remained high.
The risk management notes on pp. 141-142 provide
more information about non-performing loans.
Non performance loans (NPL)
(DKK millions)
31 December
2015
31 December
2014
Gross NPL
Individual allowance account
Net NPL
Collateral (after haircut)
NPL coverage ratio (%)
NPL coverage ratio of which is
in default (%)
NPL as percentage of total
gross exposure
47,820
23,151
24,670
19,848
82.8
92.8
2.0
58,439
29,049
29,390
24,722
86.2
95.5
2.5
The NPL coverage ratio is calculated as individual impairment (allowance account)
amounts relative to gross NPL net of collateral (after haircuts).
Accumulated individual impairments amounted to
DKK 23.2 billion, or 1.2% of lending and guarantees.
Accumulated collective impairments amounted to
DKK 4.3 billion, or 0.2% of lending and guarantees. The
corresponding figures at 31 December 2014 were
DKK 29.0 billion and DKK 4.0 billion, respectively.
Allowance account by business units
(DKK millions)
2015
2014
Accum.
Impairm.
charges*
% of
lending
and gua-
rantees
Accum.
Impairm.
charges*
% of
lending
and gua-
rantees
Personal Banking
7,601
Business Banking
17,524
C&I
2,369
0.93
2.56
0.59
8,382
21,493
3,157
Other Activities
incl. eliminations
2
0.05
2
Total
27,496
1.45
33,034
1.03
3.28
0.54
0.00
1.73
Recognised losses amounted to DKK 6.8 billion. Of
these losses, DKK 0.6 billion was attributable to
facilities not already subject to impairment.
Trading and investment activities
Credit exposure from trading and investment
activities amounted to DKK 891 billion at the end of
2015, against DKK 1,074 billion at the end of 2014.
Danske Bank / Annual Report 2015
billion at the end of 2014 to net assets of DKK 76
billion at the end of 2015.
Total assets at Non-core fell DKK 8 billion from the end
of 2014 because of the sale of the SME portfolio in
Ireland and the continued winding-up of the Non-core
conduits portfolio. However, the reduction was partly
offset by the transfer of personal banking customers
in the Baltics to Non-core from 1 January 2015.
This transfer also caused the increase in Non-core
liabilities from DKK 5 billion at the end of 2014 to
DKK 6 billion at the end of 2015.
Other assets is the sum of several small line items,
including cash in hand and demand deposits with
central banks, intangible assets and tax assets. The
increase of DKK 51 billion from the end of 2014 to
the end of 2015 was caused by higher on-demand
deposits with central banks.
Additional tier capital 1 doubled from the level at
the end of 2014, as Danske Bank issued DKK 5.6
billion (EUR 750 million) in additional tier 1 capital in
February 2015.
18
The decrease in credit exposure from trading and
investment activities was owing to a reduction of the
bond portfolio.
Danske Bank has made netting agreements with many
of its counterparties concerning positive and negative
market values of derivatives. The net exposure was
DKK 94 billion, against DKK 109 billion at the end of
2014, and it was mostly secured through collateral
management agreements.
The value of the bond portfolio was DKK 537 billion.
Of the total bond portfolio, 78% was recognised at fair
value and 22% at amortised cost.
Bond portfolio
(%)
Government bonds and
bonds guaranteed by central
or local governments
Bonds issued by
quasi-government institutions
Danish mortgage bonds
Swedish covered bonds
Other covered bonds
Corporate bonds
31 December
2015
31 December
2014
38
1
46
9
3
3
35
1
45
11
3
5
Total holdings
100
100
Hold-to-maturity bonds includ-
ed in total holdings
Available-for-sale bonds includ-
ed in total holdings
22
9
16
9
Other balance sheet items
The financial highlights on page 6 provide information
about our balance sheet.
The net position towards central banks, credit
institutions and repo counterparties was reduced
from a liability of DKK 174 billion at the end of 2014
to a liability of DKK 23 billion at the end of 2015,
primarily because of a reduction in the bond portfolio,
mainly at Corporates & Institutions, to improve the
return on allocated capital. The reduction in the bond
portfolio also included the holding of own bonds issued
by Realkredit Danmark.
The reduction in the bond portfolio was also the main
driver of the reduction in trading portfolio assets and
trading portfolio liabilities from net assets of DKK 192
Danske Bank / Annual Report 2015 19
Personal Banking
Mortgage refinancing and investment activities were especially strong in the first half of the year and partly offset
the adverse effect of the negative short-term interest rates in 2015. Along with tight cost control and lower
impairments, this resulted in an increase in profit before tax and goodwill impairments of 11% and an improvement
in the return on allocated capital.
Personal Banking
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
2015
2014
Index
15/14
9,416
5,108
724
610
15,858
10,389
10,764
87
4,567
112
723
100
632
97
16,686
95
10,626
98
Goodwill impairment charges
3,305
5,539
60
Q4
2015
2,359
1,152
169
131
3,811
2,741
3,305
Q3
2015
2,329
1,222
139
139
3,829
2,424
-
Profit before loan impairment
charges
Loan impairment charges
2,164
332
521
-
-2,235
1,405
1,412
24
-56
13
Profit before tax
1,832
-891
-
-2,179
1,392
Index
Q4/Q3
Q2
2015
Q1
2015
101
2,330
2,398
94
1,383
1,351
122
94
100
113
148
268
187
153
4,048
4,170
2,597
2,627
-
-
-
-
-
-
1,451
1,543
131
245
1,322
1,298
Profit before tax and goodwill
impairment charges
Loans, excluding reverse
trans. before impairments
5,137
4,648
111
1,126
1,392
81
1,322
1,298
808,453
794,063
102
808,453
801,003
101
805,726
807,549
Allowance account, loans
6,991
7,668
91
6,991
7,171
97
7,527
7,616
346,920
329,463
105
346,920
344,429
101
353,175
334,783
424,255
426,203
100
424,255
420,264
101
420,259
425,741
Allocated capital (average)
24,471
31,722
77
22,620
24,361
610
714
610
636
96
93
696
701
25,060
25,881
0.82
0.96
0.82
0.82
0.81
0.85
22.1
18.8
18.0
23.1
23.2
23.8
20.8
14.4
19.0
22.9
21.1
20.1
Deposits, excluding repo
deposits
Bonds issued by Realkredit
Danmark
Allowance account,
guarantees
Net interest income as % p.a.
of loans and deposits
Profit before goodwill and loan
impairment charges as % p.a.
of allocated capital
Profit before tax and goodwill
impairment charges as % p.a.
of allocated capital (ROAC)
Cost/income ratio before
goodwill impairment charges
(%)
Full-time-equivalent staff
6,491
6,673
97
65.5
63.7
71.9
6,491
63.3
6,527
64.2
63.0
99
6,695
6,713
Note 3 and Fact Book Q4 2015 provide financial highlights at the country level for Personal Banking. Fact Book Q4 2015 is available at danskebank.com/ir.
Danske Bank / Annual Report 2015
20
Danske Bank / Annual Report 2015
At Personal Banking, we aim to make daily banking
and financial decisions easier and to create the best
experience for our customers every time they are in
touch with us.
In 2015, we continued to pursue these goals through
innovative digital solutions, simplification of processes,
freeing up more time for serving our customers, and
further empowerment of the organisation. The aim is to
create the best customer experience.
In Norway and Sweden, we strengthened our market
positions, and we continued to expand our offerings in
Denmark and Finland.
A strong Danish value proposition
In Denmark, the customer programme is an important
part of our value proposition. In 2015, more customers
gathered their banking business with us.
Over the years, digitalisation has transformed our
intereaction with customers. Today, mobile solutions
are the preferred way of banking for most customers,
and e-meetings provide a convenient alternative to
visiting a branch for advisory meetings.
Our ambition is to advise customers proactively on
all life events and to be an agile partner that responds
quickly to customer requests. We seek to put our
customers at the centre of everything we do, for
example by maximising the time advisers spend with
them and by delegating decision-making.
In 2015, we continued to introduce new products
and services in response to the low interest rate
environment. For example, we introduced a new type of
loan with a fixed interest rate option for home and auto
financing.
Growing our business in Sweden and Norway
In Sweden, we introduced a transparent, competitive
benefit programme and launched a flexible mortgage
loan to fit the individual needs of our customers. Nearly
140,000 customers have registered for the customer
programme, and the demand for mortgage loans grew.
At the end of the year, Privata Affärer, the largest
Nordic personal finances magazine, named us bank
of the year, with reference, among other things, to the
transparency and clarity of our benefit programme.
In Norway, the strong inflow of new customers from
the Akademikerne agreement continued throughout
the year. We saw satisfactory increases in business
volume and cross-selling, while maintaining a strong
credit quality and increasing our market share of
lending. The initial investments and costs of welcoming
the new customers impacted our profitability.
In 2015, we reached an agreement with Saco (a
Swedish confederation of professional organisations)
to offer our services to its more than 650,000
members. This agreement is expected to increase
customer inflow from 2016.
Consolidating our position in Finland
Customers in Finland appreciate our benefit
programme, and more than 280,000 have joined.
We continued to add new benefits, most recently
purchase and cash withdrawal protection insurance
linked to Danske Bank MasterCard. We also developed
new savings accounts to meet customer needs in
collaboration with customers.
Private Banking maintained its strong position
We saw a net inflow of private banking customers
during the year, and satisfaction among customers
remained high. For the third consecutive year, we
were named best private banking bank in Denmark
by The Banker, owing to our customer-centric growth
strategy and business model, which give us as a strong
foundation for advising customers with complex
finances. Euromoney named us best private banking
bank in Denmark for the tenth time, and Prospera’s
annual survey ranked Danske Bank first among private
banking banks in Denmark and Norway.
Banking made easy
MobilePay and Sunday.dk both exemplify our efforts
to develop strong digital offerings that can form an
integral part of people’s lives.
With around 2.8 million regular users in Denmark and
high business growth rates, MobilePay can now be
used in more than 19,000 online and physical stores.
To make MobilePay the logical choice in all payment
situations, we continued to raise amount limits. And
with value-adding services, such as MobilePay Bonus
and electronic receipts, we not only meet user needs
but also open the door to merchants and thus a large
number of potential customers.
Danske Bank / Annual Report 2015
21
activity supported both net fee income and net trading
income, in particular in the first half of the year.
We succeeded in bringing down back-office production
costs, and this reduction more than offset the upward
drift in costs resulting from the increase in customer
activity. Overall, operating expenses fell 2%.
Loan impairments fell 76% to DKK 0.3 billion. The
decline was driven by our continued efforts to improve
credit quality, as well as lower LTV ratios in most
markets, though particularly in Denmark and Sweden,
where higher property prices acted as the main driver
of this development.
Loan-to-value ratio, home loans
31 December 2015
31 December 2014
Credit
exposure
(DKK bn)
LTV (%)
Credit
exposure
(DKK bn)
LTV (%)
66.8
62.0
62.2
64.0
66.2
65.5
489
86
67
84
18
72.9
61.3
65.8
63.5
71.3
70.1
500
84
61
65
17
Denmark
Finland
Sweden
Norway
Northern Ireland
Average
Credit exposure
Credit exposure consists of mortgages, loans secured
on other assets, consumer loans and fully or partially
secured credits.
We launched MobilePay successfully in Norway, where
it was rated the best payment app by kortogkontant.
no. Together with REMA 1000, a large Norwegian
supermarket chain, we are now implementing our
MobilePay point-of-sale solution in more than 500
shops.
With Sunday.dk in Denmark, we launched a unique
way for people to find a new home and get an instant
loan commitment. We will continue to develop new
functionality in collaboration with our customers.
We know that convenient access to banking services
and advice is crucial for customers. By introducing
chat, webinars, access to our apps with touch ID and
through devices such as Apple Watch and a website
based on major life events, we continued to expand
and enhance the way in which customers can reach us
when they need us.
With the launch of contactless cards, payment in
shops has become even faster. And with MasterCard,
customers can choose between debit and credit
payment and even split up payments with the new
instalment payment feature. In addition, the GeoControl
feature enhances protection against international
fraud.
2015 vs 2014
Profit before tax and goodwill impairments increased
11% to DKK 5.1 billion, and the return on allocated
capital improved 6.4 percentage points to 20.8%.
Negative short-term interest rates in Denmark, Finland
and Sweden and a decline in rates in other markets
continued to put pressure on net interest income. This
negative impact was partially offset by a combination
of higher net fee income and lower loan impairment
charges.
Total income amounted to DKK 15.9 billion. The decline
in short-term interest rates put considerable pressure
on deposit margins, causing net interest income to fall
13% from the level in 2014.
Net fee income rose 12% while net trading income
remained at the 2014 level. Keen customer interest
in investment solutions, driven by the historically low
deposit rates in all markets, had a positive effect on
net trading income. We also saw very strong customer
remortgaging activity in Denmark, and the high level of
22
Total net credit exposure rose 2% in 2015 to
DKK 828 billion, driven mainly by an increase in
activity in Norway generated by the agreement with
the Norwegian Akademikerne federation, as well as
by the competitive benefit programme in Sweden.
In Denmark, net credit exposure decreased, mainly
because of fair value adjustments.
Net credit exposure
Impairments
(%)
(DKK millions)
31 December
2015
31 December
2014
31 December
2015
Denmark
Finland
Sweden
Norway
526,105
538,980
93,680
77,259
92,234
71,552
105,455
85,461
Northern Ireland
19,413
18,499
Other
Total
6,275
5,631
828,186
812,357
0.06
0.05
0.01
-0.01
-0.16
-0.24
0.04
Credit quality
Credit quality improved in most markets as a result of
more favourable macroeconomic conditions.
The delinquency rate at Realkredit Danmark remained
low and stable throughout the year.
Q4 2015 vs Q3 2015
Profit before tax and goodwill impairments fell 19% to
DKK 1.1 billion in the fourth quarter of 2015.
Total income remained stable quarter–on-quarter. Net
interest income increased 1%, however, primarily
because of an increase in deposit margins.
Net fee income fell 6% because of lower remortgaging
activity than in the third quarter.
Net trading income increased 22% as a consequence
of higher refinancing income in Realkredit Danmark.
Operating expenses increased 13% quarter-on–
quarter, reflecting the seasonality of expenses, and
matched the level in the fourth quarter of 2014.
Loan impairments showed a net reversal and
reflected the ongoing improvement in credit quality.
Danske Bank / Annual Report 2015
23
Business Banking
Profit before tax and goodwill impairments rose 32% as a result of strong business momentum in all markets and
lower impairments. Business activity rose and, combined with tight cost control, this more than offset the effect
of negative short-term interest rates. Impairments fell owing to our continued efforts to improve credit quality and
because of more favourable market conditions.
Operating expenses
5,211
Goodwill impairment charges
1,296
Business Banking
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income*
Total income
Profit before loan impairment
charges
Loan impairment charges
Profit before tax
Profit before tax and goodwill
impairment charges
Loans, excluding reverse
trans. before impairments
Deposits, excluding repo
deposits
Bonds issued by Realkredit
Danmark
Allowance account,
guarantees
2015
2014
Index
15/14
Q4
2015
Q3
2015
Index
Q4/Q3
Q2
2015
Q1
2015
9,091
2,109
665
594
8,978
2,082
637
516
12,459
12,213
5,473
3,559
3,181
1,007
2,174
5,953
-343
6,296
7,592
5,733
662,924
633,746
101
101
104
115
102
95
36
187
-
290
132
105
81
2,309
2,245
480
150
113
3,052
1,362
1,296
395
-150
545
490
73
142
2,950
1,239
-
1,711
-90
1,801
103
98
205
80
103
110
-
23
-
30
2,313
2,224
567
230
165
3,275
1,288
-
1,988
-194
572
212
174
3,182
1,322
-
1,860
91
2,182
1,769
1,841
1,801
102
2,182
1,769
662,924
647,279
17,166
18,493
102
93
651,572
644,031
19,668
20,909
256,279
259,770
99
256,279
250,300
102
258,517
262,206
301,799
294,661
102
301,799
299,852
101
297,092
300,035
Allocated capital (average)
36,980
42,084
357
281
127
88
357
326
35,857
37,128
110
97
300
291
37,162
37,791
Net interest income as % p.a.
of loans and deposits
Profit before goodwill and loan
impairment charges as % p.a.
of allocated capital
Profit before tax and goodwill
impairment charges as % p.a.
of allocated capital (ROAC)
Cost/income ratio before
goodwill impairment charges
(%)
Full-time-equivalent staff
1.01
1.03
1.02
1.02
1.04
1.00
19.5
15.9
18.6
18.4
21.4
19.7
20.5
13.5
20.3
19.4
23.5
18.7
41.8
2,943
44.8
3,663
80
44.6
2,943
42.0
2,955
100
39.3
3,065
41.5
3,115
*Operational leasing, excluding property leasing, is presented on a net basis under Other income.
Note 3 and Fact Book Q4 2015 provide financial highlights at the country level for Business Banking. Fact Book Q4 2015 is available at danskebank.com/ir.
Allowance account, loans
17,166
21,211
Danske Bank / Annual Report 2015 24
Danske Bank / Annual Report 2015
At Business Banking, we strive to deliver the best
possible customer experience and to make banking as
easy and efficient as possible. In 2015, we continued to
strengthen our Nordic set-up and to optimise the value
propositions for all segments in the Nordic countries.
The rise in profitability was driven to a large extent
by a decline in costs because of more efficient
processes and the continued effect of our strong value
propositions. The latter brought an increase in fee
income owing to higher activity and increased cross-
selling. Net reversals of impairments also contributed
to profitability.
Increased business momentum
Our customer-centric approach increased our
business momentum, with positive trends in volume
and cross-sales in all markets.
In Denmark, the combination of easy-to-use packaged
solutions for small business customers and MobilePay
Business caused a strong increase in customer
inflow, and we saw positive trends in volumes in most
segments in 2015.
In Norway and Sweden, we have strong value
propositions for all segments but relatively low
market shares. We continued to attract customers
with complex needs, and our focus on cross-sales for
these customers showed good progress. Our position
enabled us to reach profitable growth above the market
average.
In Finland, we continued to develop our offering and
saw good progress in both fee income and business
volume. This enabled us to grow with the market and
consolidate our position as a leading bank for the SME
segment.
New initiatives well received by customers
To further enhance the customer experience, we
launched a wide range of new offerings while taking
actions to become more efficient.
The tailor-made solutions we have offered since
2013 have proven very effective in attracting larger
customers. With our new packages for smaller
businesses, we now also have an efficient, simple and
attractive offering for this segment in all of the Nordic
countries. As a consequence, we saw a turnaround to
a net inflow of customers in this segment.
In Norway and Denmark, we introduced a new digital
portal that enables customers to sign agreements
online. Digital signing makes it possible, for example,
to sign an agreement to become a customer or buy
and use our products and systems almost instantly. In
addition, the digital portal will make us more efficient
throughout the value chain. In 2016, we will implement
the digital portal in Sweden and Finland.
MobilePay Business is now available in Denmark,
Norway and Finland. The full range of solutions
available in Denmark, which makes it easier for all
types of business customers to receive payments and
pay bills, is the market-leading offer in the area.
In Denmark, we co-created an online community with
external partners and customers that is intended to
help SMEs with good growth potential. The objective
is to build relations with this important segment in the
start-up phase.
2015 vs 2014
Profit before tax and goodwill impairments increased
32% to DKK 7.6 billion, and the return on allocated
capital improved 7.0 percentage points to 20.5%. The
improvement was driven by a positive development
in income based on good business momentum, a
5% reduction in costs from the level in 2014 and
significantly lower loan impairments.
All income lines increased. Strong lending growth and
income initiatives more than offset the adverse effect
on deposit margins of the negative short-term interest
rates, resulting in an increase of 1% in net interest
income.
A 1% rise in net fee income was the result of an
increase in mortgage refinancing activity driven by the
low interest rates in the first half of 2015, stronger
demand from existing customers and a general
increase in activity.
The increase in net trading income reflected higher
mortgage refinancing activity, in particular in the first
half of 2015.
Operating expenses fell 5% owing to increased
efficiency and tight cost control in general.
Credit exposure
Net credit exposure amounted to DKK 766 billion at
the end of 2015, against DKK 711 billion at the end of
2014.
Net credit exposure
Impairments
(%)
(DKK millions)
31 December
2015
31 December
2014
31 December
2015
Denmark
423,842
402,035
Finland
Sweden
Norway
67,766
63,422
147,796
123,229
70,418
64,779
Northern Ireland
37,033
30,946
Baltics
Other
Total
18,687
26,802
8
5
765,551
711,219
-0.08
0.26
0.10
0.51
-1.88
-0.24
12.55
-0.05
Credit quality improving
Our continual efforts to improve credit quality,
combined with more stable macroeconomic conditions,
led to better customer ratings and reductions in
impairments.
Impairments thus showed a net reversal of
DKK 0.3 billion in 2015, against charges of DKK 1.0
billion in 2014. The reversals occurred mainly in
the commercial property segments in Denmark and
Northern Ireland, while a decrease in oil prices led to
an increase of collective loan impairment charges in
Norway.
The outlook for the Danish agricultural sector
remained weak in 2015, and we have provided for this
in our allowance account.
Danske Bank / Annual Report 2015
25
Q4 2015 vs Q3 2015
Profit before tax and goodwill impairments amounted
to DKK 1.8 billion in the fourth quarter of 2015,
and the return on allocated capital increased from
19.4% to 20.3%, primarily because of the positive
development in the top line and increased net
impairment reversals in the fourth quarter.
Total income rose as the business momentum
remained strong and because of seasonality in
mortgage trading income.
Net interest income increased 3% as income
initiatives compensated for the general price
pressure in Denmark.
Net fee income was relatively flat while net trading
income reflected the increase in mortgage income in
the fourth quarter because of seasonality.
Operating expenses increased 10% quarter-on–
quarter, reflecting the seasonality of expenses.
Expenses were down 12% from the level in the fourth
quarter of 2014, however.
Loan impairments showed a net reversal for the third
consecutive quarter.
26
Danske Bank / Annual Report 2015
Corporates & Institutions
Corporates & Institutions saw increased client activity in most business areas and total income increased
8% from 2014 to 2015. Operating expenses continued to decrease, and impairments were significantly
lower than in 2014, which resulted in an increase in profit before tax of 30%. The return on allocated capital
rose 3.9 percentage points to 14.8%.
Q3
2015
Index
Q4/Q3
Corporates & Institutions
(DKK millions)
2015
2014
Index
15/14
Net interest income
Net fee income
Net trading income*
Other income
Total income
Operating expenses
Profit before loan impairment
charges
Loan impairment charges
Profit before tax
Loans, excluding reverse
trans. before impairments
2,660
2,298
4,909
7
9,873
4,412
5,461
65
5,396
2,717
2,205
4,192
7
9,121
4,614
4,507
372
4,135
172,176
172,393
Allowance account, loans
2,155
2,782
98
104
117
100
108
96
121
17
130
100
77
Q4
2015
630
571
1,139
3
2,343
1,078
1,265
65
1,200
667
570
798
1
2,036
1,050
986
-11
997
172,176
174,346
2,155
2,066
Allowance account, credit
institutions
Deposits, excluding repo
deposits
Bonds issued by Realkredit
Danmark
Allowance account,
guarantees
6
91
7
6
67
213,532
174,221
123
213,532
226,505
22,030
23,636
208
285
93
68
96
22,030
22,649
208
241
33,554
35,710
Allocated capital (average)
36,466
37,789
Q2
2015
703
580
Q1
2015
660
577
1,240
1,732
-
2,523
1,126
1,398
-153
2
2,971
1,158
1,813
164
1,551
1,649
179,160
189,735
2,758
3,193
67
91
229,522
229,998
22,818
22,933
239
270
38,455
38,061
94
100
143
231
115
103
128
-
120
99
104
9
94
97
86
94
Net interest income as % p.a.
of loans and deposits
Profit before loan impairment
charges as % p.a. of allocated
capital
Profit before tax as % p.a. of
allocated capital (ROAC)
Cost/income ratio (%)
0.69
0.79
0.66
0.67
0.69
0.63
15.0
14.8
44.7
11.9
10.9
50.6
15.1
11.0
14.5
19.1
14.3
46.0
11.2
51.6
16.1
44.6
17.3
39.0
Full-time-equivalent staff
1,832
1,646
111
1,832
1,811
101
1,832
1,826
Total income
(DKK millions)
FICC
Capital Markets
General Banking
Total income
4,049
1,535
4,289
3,196
1,650
4,275
9,873
9,121
127
93
100
108
896
381
720
260
1,066
1,056
2,343
2,036
124
147
101
115
1,014
391
1,118
1,419
503
1,049
2,523
2,971
* Net trading income comprises all income from FICC and trading income at Capital Markets.
27
At Corporates & Institutions, we continued to
strengthen our advisory services across business
areas, to develop new, innovative client solutions,
and to adapt our internal set-up to better cater for
client needs. We also continued to allocate resources
to less capital-intensive areas of the business while
maintaining a strong focus on cost and capital
consumption.
High client satisfaction
Our efforts to generate additional client value through
customised solutions and a more strategic and
holistic approach to advisory services paid off. Clients
rewarded us with good results in a number of client
satisfaction surveys (Prospera). Our clients thus
ranked Danske Bank number one in Corporate Banking
Nordic, in Institutional Banking Nordic, in Trade
Finance and in Cash Management in the Nordics.
Euromoney also once again named Danske Bank “Best
Regional Cash Manager” in the Nordic and Baltic
regions.
Transforming the business model
During 2015, we continued to adapt our business
model to changes in the regulatory enviroment and
the financial markets. This entailed a focus on capital
optimisation, including increased attention to less
capital-intensive activities and on lowering risks.
We continued to develop stronger capital markets and
transaction banking operations on the basis of our
good client relations and to offer additional services
and opportunities in these areas. The aim is to develop
a more balanced income distribution between areas
with differing return dynamics.
New innovative solutions
In the autumn of 2015, we launched Danske In-house
Bank for a few pilot clients. Danske In-house Bank
helps clients increase treasury efficiency by combining
a flexible real-time cash pool solution with automated
internal FX trades.
We continued to develop our full-scale post-trade
services solution, offering a customised, bundled
service for individual clients.
Danske OneTrader, the electronic foreign exchange
trading and market information platform, also
continued to attract new clients in 2015.
improved holistic set-up around clients led to a
satisfactory increase in client activity during the year,
including within IPOs, M&A transactions, bond issues
and transaction banking mandates.
Corporate Finance won several key mandates,
including the sale of Fortum’s Swedish energy
distribution business, the IPOs of NNIT and Nobina
and the acquisition of Mols-Linien by Polaris.
Equities further developed its franchise with higher
activity in secondary and equity capital markets. This
included a significant share placing for DSV.
Debt Capital Markets saw a high level of activity
from core clients and a rise in new issue fees. This
increased the market share and further consolidated
our position as a leading Debt Capital Markets house.
There was high activity within corporate issues,
including transactions for Volvo, Vattenfall, Finnair, and
KLP.
2015 vs 2014
At DKK 5.4 billion, profit before tax was up 30% from
the level in 2014. The main reasons were higher
client activity and lower impairments. The return on
allocated capital rose 3.9 percentage points to 14.8%.
Operating expenses were down 4% as cost efficiency
gains more than offset an increase in performance-
based compensation resulting from the strong
performance in 2015.
In 2015, total loan impairments for Corporates &
Institutions amounted to DKK 65 million and included
both new impairments and reversals.
Accumulated impairments totalled DKK 2.4 billion
and related to a small number of corporate clients.
Impairments have fluctuated over the past quarters
and are expected to continue to do so, given the nature
of Corporates & Institutions’ activities.
General Banking
General Banking income was on a par with 2014
despite the negative short-term interest rates. This
was mainly because of increased volumes as well as
increased client activity within transaction banking
services.
Increased client activity
Strengthened strategic advisory services, closer
cooperation between business areas and a generally
Capital Markets
Client activity at Capital Markets increased
satisfactorily throughout 2015. At DKK 1.5 billion,
Danske Bank / Annual Report 2015 28
Capital Markets income declined 7% from the level
in 2014, however. This was because of a decline in
trading income from Debt Capital Markets that was
caused primarily by low liquidity in secondary markets.
Fee income from Corporate Finance and Debt Capital
Markets activities and income from equity activities
rose owing to strong growth in client activity. The
increase in fee income from Debt Capital Markets was
particularly satisfactory, driven by a high number of
new issues.
Fixed Income, Currencies and Commodities
Fixed Income, Currencies and Commodities (FICC)
benefited from increased client activity in 2015, which
meant that income rose 27% from the level in 2014.
Activity was especially high in the first quarter,
when the markets experienced significant volatility.
This volatility was caused by a number of events,
including the Swiss National Bank’s abandoning its
minimum target for EUR/CHF, the launch of a large
QE programme by the European Central Bank, and
a reduction of leading interest rates by the Danish
central bank.
During 2015, income was adversely affected by credit
value adjustments (CVA).
Credit quality
The loan portfolio quality at Corporates & Institutions
is considered to be satisfactory. At the end of 2015,
total credit exposure from lending activities, including
repo transactions, amounted to DKK 667 billion. The
total portfolio fell 6% from the level at year-end 2014.
The fall was caused mainly by a decrease in exposure
to financial institutions, whereas exposure to the
corporate and sovereign segments increased during
the year.
Net credit exposure
Impairments
(%)
(DKK millions)
31 December
2015
31 December
2014
31 December
2015
Sovereign
Financial
institutions
Corporate
Other
Total
77,722
54,130
256,758
342,672
332,771
315,336
31
98
667,283
712,236
0.00
0.00
0.00
0.00
0.00
The sovereign portfolio consists primarily of exposures
to the stable, highly-rated Nordic sovereigns and
to central banks. Most of the exposure to financial
institutions consists of repo lending facilities. The
corporate portfolio is diverse, consisting mainly of
large companies based in the Nordic countries and
large international clients with activities in the Nordic
region.
Q4 2015 vs Q3 2015
Profit before tax increased to DKK 1.2 billion, up 20%
from the level in the third quarter, mainly because net
trading income rose.
General Banking income increased 1%. The decrease
in deposits from the level in the third quarter of 2015
had limited impact on income.
At Capital Markets, activity increased within Equities,
Corporate Finance and Debt Capital Markets in the
fourth quarter. Income from Debt Capital Markets was
adversely influenced by low trading income in the third
quarter.
At FICC, income rose because of increased client
activity owing to uncertainty in the financial markets.
Operating expenses increased 3% from the level in
the previous quarter.
Danske Bank / Annual Report 2015 29
Danske Capital
Driven by higher margins and performance fees, Danske Capital’s profit before tax rose 17% from the level in 2014.
Danske Capital benefited from an increased focus on alternative investments, with assets under management of
DKK 67 billion, up 27% from the level at year-end 2014.
Danske Capital
(DKK millions)
Net interest income
Net fee income
Other income
Total income
Operating expenses
Profit before tax
Loans, excluding reverse
trans. before impairments
Deposits, excluding repo
deposits
Allocated capital (average)
Cost/income ratio (%)
Assets under management
(DKK billions)
Total income
(DKK millions)
Performance fees
Other fee income
Total net fee income
2015
2014
Index
15/14
Q4
2015
Q3
2015
Index
Q4/Q3
Q2
2015
Q1
2015
-7
2,682
-12
2,663
1,014
1,649
2
2,402
1
2,405
999
1,406
258
340
228
2,628
38.1
132
2,567
41.5
-
112
-
111
102
117
76
173
102
-3
974
-3
968
307
661
-1
558
-10
547
230
317
258
255
228
2,628
31.7
291
2,629
42.0
-
175
-
177
133
209
101
78
100
-1
583
-1
581
233
349
-2
567
2
567
244
323
124
101
263
2,631
40.1
196
2,625
43.0
714
795
90
714
759
94
803
813
440
2,241
2,682
328
2,074
2,402
134
108
112
404
570
974
2
556
558
-
103
175
19
564
583
14
553
567
Danske Bank / Annual Report 2015 30
Danske Capital’s strategy builds on our ambition to
deliver substantial value to clients. We offer two types
of asset management products: alpha investment
components for investors in individual assets and full
investment solutions for retail and institutional clients,
who seek a more comprehensive offering.
In 2015, we put special focus on expanding our
offering within alternative investments and on
strengthening our market position outside Denmark.
Above-benchmark returns
Our priority remains to generate satisfactory
investment returns for clients. The table below shows
the percentage of our investment products with above-
benchmark returns in various asset classes for 2015
and the 2013-2015 period.
% of investment products (GIPS composites) with
above-benchmark returns (pre-costs)
2015
2013-2015
We were proud to receive various awards in 2015, the
most important ones being the following:
•
•
Morningstar: Danske Invest was named best in
equities in Denmark for the seventh year running
Nordic Hedge Award: Danske Invest Hedge Fixed
Income Strategies ranked second
Growth in managed accounts
In recent years, we have introduced managed account
products for retail clients. Personal Banking and
Danske Capital have worked closely together to
promote the products and ensure a good customer
experience. Managed accounts offer a choice of risk
profile and are a relevant alternative to ordinary
savings products, especially in a low interest rate
environment. The solution is now available in all
Nordic countries and for private banking clients
in Luxembourg. At the end of 2015, assets under
management in managed account products amounted
to DKK 145 billion, an increase of 14% from the end of
2014.
All funds
Equity funds
Fixed-income funds
Balanced funds etc.
71
78
63
67
76
71
81
80
Alternative investment products
In early 2015, we successfully launched Danske
Private Equity PEP VI, which contributed DKK 5.1
billion to the increase in assets under management.
The fund is one of the largest private equity fund of
funds raised in the world in 2015.
In 2015, 71% of Danske Capital’s investment products
generated above-benchmark returns. We were
especially pleased that most equity and hedge fund
products generated satisfactory returns.
On a three-year horizon, 76% of all Danske Capital
investment products generated above-benchmark
returns.
Morningstar rating
Danske Invest, avg. all funds
European average
2015
3.29
3.00
2014
3.38
3.00
The average Morningstar rating of all Danske Invest
funds for 2015 was 3.29, compared with the European
average of 3.0. The rating is based on a comparison
with similar European funds according to risk- and
cost-adjusted returns achieved over the past three, five
and ten years.
Our hedge fund offerings performed very well in 2015,
particularly the Danske Invest Long Short Dynamic
fund, which, besides posting an annual return of
13.5%, also demonstrated robust positive returns
during the market turmoil in the third quarter. Another
well-performing hedge fund in 2015 was Danske
Invest European Equities Absolute, which posted an
annual return of 17.6%.
Total assets under management in alternative
investments amounted to DKK 67 billion at 31
December 2015, an increase of 27% from 31
December 2014.
Higher retail and institutional sales
Net sales totalled DKK 38 billion: DKK 10 billion to
retail clients and DKK 28 billion to institutional clients.
Sales to retail clients through Personal Banking
and Business Banking consisted mainly of balanced
products within the managed accounts concept. Total
net sales rose DKK 4 billion from the level in 2014.
Danske Bank / Annual Report 2015
31
Assets under management
(DKK billions)
Share of total (%)
31 Dec.
2015
31 Dec.
2014
31 Dec.
2015
31 Dec.
2014
283
67
344
20
714
268
53
450
24
795
40
9
48
3
34
7
56
3
100
100
Equities
Alternatives
Bonds
Cash
Total
Q4 2015 vs Q3 2015
Total income excluding performance fees were
up 4%. Income from performance fees amounted to
DKK 404 million.
Total costs were up 33% primarily due to higher
performance-based compensation driven by the
higher performance fees and earnings in the fourth
quarter of 2015.
Net sales
(DKK billions)
Retail customers
Third-party clients
Alpha clients incl. life insurance
Solution clients
Total
2015
2014
9.8
1.6
20.0
6.1
37.6
15.6
1.0
7.0
10.1
33.7
International activities
We continue to focus on raising our share of
international clients, and in 2015, clients outside
Denmark accounted for 20% of total net sales.
Danske Capital had a market share of 22.8% of total
net sales in the Nordic fund market. We improved our
position especially in Sweden and Norway, with net
sales of DKK 6 billion in Sweden and DKK 3 billion in
Norway. These gains resulted in a market share of net
sales in Sweden of 8.7%, up from 6.7% in 2014, and in
Norway of 35.7%, up from 9.7% in 2014.
Wealth Management
Danske Capital will be part of the new Wealth
Management business unit, which organisationally will
be in place from 1 April 2016, while financial reporting
will take place from 1 January 2016. The new unit will
also encompass customers and expertise from Danica
Pension and Private Banking.
2015 vs 2014
Income rose 11%, from DKK 2.4 billion to DKK 2.7
billion. The increase came from higher assets under
management (up 2% on average) and a rise in margins
(excluding performance fees) from 0.27% to 0.28%
that were driven by improvements in product mix.
Total operating expenses were up 2%.
Assets under management amounted to DKK 714
billion at the end of 2015, down DKK 81 billion
from the level at the end of 2014 because of a new
investment strategy at Danica Pension that entailed
a transfer of DKK 130 billion in assets to Danica
Pension. Moreover, developments on both the equity
and fixed income markets led to a further increase of
DKK 12 billion.
Danske Bank / Annual Report 2015
32
Danica Pension
Net income from insurance business amounted to DKK 1.9 billion, against DKK 2.5 billion in 2014. It was possible
to book the full risk allowance for all four interest rate groups and to book DKK 0.2 billion from the shadow account,
against DKK 0.6 billion in 2014.
Danica Pension
(DKK millions)
Danica Traditionel
Unit-linked business
Health and accident busi-
ness
Result from insurance
business
Return on investments
Financing result
Special allotment
Change in shadow account
Net income from insurance
business
Premiums, insurance
contracts
Premiums, investment
contracts
Provisions, insurance
contracts
Provisions, investment
contracts
Customer funds, investment
assets
2015
2014
Index
15/14
Q4
2015
Q3
2015
Index
Q4/Q3
Q2
2015
Q1
2015
1,329
572
1,353
573
-182
-302
1,719
1,624
283
-61
-270
221
459
-116
-82
611
1,892
2,496
21,454
20,693
8,119
6,129
98
100
-
106
62
-
-
36
76
104
132
327
116
-65
378
44
-16
-207
248
330
156
-36
450
-51
-16
-21
-27
99
74
-
84
-
-
-
-
339
147
-45
441
-70
-17
-21
-
333
153
-36
450
360
-12
-21
-
447
335
133
333
777
5,673
5,110
1,881
1,434
111
131
5,031
5,640
2,091
2,713
275,026
277,807
99
275,026
274,155
100
279,761
292,610
45,811
38,027
120
45,811
41,637
110
43,656
43,515
Danica Traditionel
160,542
176,505
84,563
75,311
12,012
70,711
66,417
11,974
91
120
113
100
160,542
163,950
84,563
75,311
12,067
77,758
69,613
11,883
98
109
108
102
166,774
181,220
78,865
74,115
12,147
77,599
74,717
11,954
Danica Balance
Danica Link
Allocated capital (average)
Net income as % p.a. of
allocated capital
15.8
20.8
14.8
11.3
-
11.0
26.0
At Danica Pension, our ambition is to become the most
trusted pension provider. We pursue this ambition
by providing financial security for our customers.
We make it easy for customers to make pension
scheme decisions, and we focus on accessibility, clear
recommendations and sound returns on customers’
pension savings.
Collaboration with Personal Banking and
Business Banking
We strengthened our collaboration across the bank
in 2015 by working more closely together with both
Personal Banking and Business Banking in particular,
where Danica Pension advisers have joined the
customer teams. With this setup, we have improved
our ability to advise customers proactively, and we will
benefit from synergies.
Danske Bank / Annual Report 2015
33
Digitalisation
In 2015, we introduced several new digital solutions
for customers, including an app for tablets that enables
customers to adjust their pension cover online and
get an immediate overview of the effect. We also
introduced Pension Start to give our customers a
simple and easy solution for setting up new pension
schemes and getting advice on the most appropriate
cover.
Stronger health concept
In 2015, we strengthened our health offerings by
introducing a new health package that includes a
stress hotline, annual blood pressure and cholesterol
checks, assistance in finding the right public health
services and a second opinion from Best Doctors.
Our work with Best Doctors is unique in Denmark,
and only Danica Pension customers are covered.
Moreover, in response to changes in the Danish public
disability pension and sickness benefit systems, we
changed our cover for loss of earning capacity for the
benefit of customers who go through a work capability
assessment.
Investments
In 2015, Danica Pension implemented a new
investment strategy with the purpose of generating
competitive long-term returns.
Important elements of that strategy are to build
stronger and broader competencies in the investment
department and to improve risk management
across all asset classes through narrow and precise
mandates for our investment partners. Our investment
setup was also made more flexible, allowing us to use
a larger variety of financial instruments to ensure
that we have the right portfolio mix and can manage
portfolio risk more effectively.
The new investment strategy also focuses on
increasing the use of alternative investments, such as
direct investments in sound companies in the Nordic
countries. So far, we have invested more than DKK 2
billion in such companies.
In 2015, Danica Balance customers with 30 years to
retirement and a medium risk profile typically saw a
return of 3.2% to 9.9%.
Norway and Sweden
In Sweden, we strengthened our position, and
premiums increased 41% as a result, among other
things, of a wider collaboration with Danske Bank in
Sweden. Other areas, such as brokerage and labour
market pensions, also increased in 2015.
The positive development continued in Norway,
with a sound increase in contributions. In 2015, we
implemented a new strategy, which entails closer
collaboration with Danske Bank on personal and
business customers to increase our advisory focus.
Tier II bond issue
To strengthen our capital structure and adjust it to
reflect the capital structure in the European pension
industry in general, Danica Pension issued Solvency
II-compliant tier 2 capital in the form of a bond loan in
the amount of EUR 500 million (DKK 3.73 billion). The
issue was heavily oversubscribed, which is testament
to investors’ satisfaction with our results and
confidence in our strategy.
Wealth Management
Danica Pension will be part of the new Wealth
Management business unit, which organisationally will
be in place from 1 April 2016, while financial reporting
will take place from 1 January 2016. The new unit will
also encompass customers and expertise from Danske
Capital and Private Banking.
2015 vs 2014
Total premiums rose 11% to DKK 29.6 billion, driven
by a 16% increase in premiums for the unit-linked
products while premiums for Danica Traditionel, as
expected, were 16% lower.
At the end of 2015, the collective bonus potential
for the contribution groups was DKK 3.6 billion, up
DKK 1.1 billion from the level at the end of 2014.
As part of the new investment strategy, we have
improved Danica Balance by introducing a fund that
invests across asset classes and in attractive property
developments. The fund’s investment mix is flexible and
varies over time depending on our expectations for
market trends, which enables us to adjust customers’
investment mix in response to market developments.
Income
Net income from insurance business amounted to
DKK 1.9 billion, against DKK 2.5 billion in 2014. It
was possible to book the full risk allowance for all four
interest rate groups and to book DKK 0.2 billion from
the shadow account, against DKK 0.6 billion in 2014.
In addition, the result for 2015 was influenced
Danske Bank / Annual Report 2015 34
by payment of DKK 0.3 billion in special allotments
triggered in particular by dividends of DKK 3.9 billion
from Danica Pension to Danske Bank.
The technical result of Danica Traditionel was
DKK 1,329 million, against DKK 1,353 million in
2014. The fall was caused partly by the transfer of
business from Danica Traditionel to the unit-linked
business. In addition, the result for 2014 increased
DKK 116 million as a result of a correction made,
in agreement with the Danish FSA, regarding the
treatment of a pension scheme.
The technical result of the unit-linked business
amounted to DKK 572 million, which is the same level
as in 2014. Unit-linked business accounted for
DKK 49 million in Sweden and DKK 73 million in
Norway. The Swedish result was adversely affected by
higher pension costs because of a lower discount yield
curve.
The health and accident business posted a technical
result of a negative DKK 182 million, against a
negative DKK 302 million in 2014. The improvement
was due to an additional provision made in 2014.
The return on investments fell to DKK 283 million,
against DKK 459 million in 2014. The fall was the
result of less positive financial markets in 2015 than
in 2014.
Investment return on customer funds
The return on investments for customers with the
Danica Balance, Danica Link and Danica Select unit-
linked products was DKK 4.5 billion, or 4.8%, while the
return on investments of Danica Traditionel customer
funds was DKK 2.0 billion, or 1.0%. Including changes
in technical provisions, the return on customer funds
was 5.1%.
Q4 2015 vs Q3 2015
In the fourth quarter of 2015, net income from
insurance business amounted to DKK 0.4 billion,
which was DKK 0.1 billion more than in the third
quarter. The increase was due to the booking of
DKK 0.2 billion from the shadow account and a higher
return on investments, although the payment of
special allotments had an adverse effect of DKK 0.2
billion, mainly because a provision for dividends was
made at the end of 2015.
The return on investments of Danica Traditionel
customer funds was 0.4%, against 1.0% in the third
quarter. Including changes in technical provisions, the
return on customer funds was a negative 0.1%.
The return on investments for customers with Danica
Balance, Danica Link and Danica Select totalled
DKK 4.5 billion, or an average rate of return of 4.1%,
against a negative 4.7% in the third quarter.
In Denmark, total premiums rose 13% to DKK 5.2
billion. Total premiums for all markets rose 15% and
amounted to DKK 7.6 billion. The rise was owing
mainly to higher unit-link premiums in all three
countries in the fourth quarter of 2015.
Danske Bank / Annual Report 2015 Danske Bank / Annual Report 2015
35
Non-core
Profit before tax for 2015 was DKK 46 million, an increase of DKK 1.6 billion from the level in 2014. The
improvement was driven by a combination of higher income, lower expenses and reversals of impairments
as the Irish property portfolio continued to unwind satisfactorily.
Non-core
(DKK millions)
Total income
Operating expenses
Profit before loan
impairment charges
Loan impairment charges
2015
2014
334
405
-71
-118
209
782
-573
930
Profit before tax
46
-1,503
Loans, excluding reverse
trans. before impairments
27,714
37,462
Allowance account, loans
3,870
7,853
Deposits, excluding repo
deposits
Allowance account,
guarantees
Allocated capital (average)
Net interest income as %
p.a. of loans and deposits
Profit before loan
impairment charges as %
p.a. of allocated capital
Profit before tax as % p.a. of
allocated capital (ROE)
Cost/income ratio (%)
Full-time-equivalent staff
3,735
4,331
46
6,224
59
8,420
0.7
121.6
277
-17.9
374.2
75
Loan impairment charges
(DKK millions)
Non-core banking*
Non-core conduits etc.
Total
-118
-
-118
733
197
930
Index
15/14
160
52
-
-
-
74
49
86
77
74
Q4
2015
71
94
-23
-37
13
Q3
2015
157
98
59
56
3
27,714
28,776
3,870
4,018
3,735
6,975
46
39
4,797
5,270
Index
Q4/Q3
45
96
-
-
-
96
96
54
118
91
Q2
2015
52
113
-61
-1
-60
Q1
2015
54
100
-46
-136
90
35,187
44,559
5,040
7,705
5,525
6,719
39
74
5,864
9,167
1.06
0.55
0.94
1.70
0.48
0.44
-1.2
-6.8
-2.0
4.5
-4.2
-2.0
32
-
-
-
-
1.1
133.8
277
0.2
62.4
325
-40
2
-38
53
3
56
214
85
-
92
-
-4.1
217.3
393
3.9
185.2
428
-2
1
-1
-130
-6
-136
*Non-core banking encompasses Non-core Baltics (personal customers in the Baltics) and Non-core Ireland. Non-core Baltics is included in Non-core banking from 1 January
2015. Comparative figures for 2014 have not been restated.
36
In 2015, we continued to focus on the controlled
winding-up of the loan portfolio that is no longer
considered part of Danske Bank’s core activities. The
reduction of loan volume progressed as expected over
the year.
Total lending, which amounted to DKK 27.7 billion,
consisted mainly of exposure to personal mortgages
and conduits. Personal mortgages in the Baltics (after
the third quarter of 2015, only Estonia) and Ireland will
mature according to contractual terms.
On 1 January 2015, all personal banking customers in
the Baltics were transferred to the Non-core banking
portfolio.
The winding-up of the Non-core Ireland portfolio is
proceeding according to plan.
Reduced exposure and property sales
In the second quarter of 2015, the Group sold a
portfolio of Irish SME loans with a nominal value of
DKK 3.9 billion.
In the third quarter of 2015, the Group entered into an
agreement to sell a residential mortgage loan portfolio
relating to the Group’s Non-core mass personal
customer business in Lithuania and Latvia with a
nominal value of DKK 4.8 billion. Pending approval by
the Lithuanian competition authorities, the transaction
is expected to be completed in the first half of 2016.
For accounting purposes, both portfolios were
recognised under Assets held for sale and therefore
were not included in the credit exposure since the
end of 2014 and since the third quarter of 2015,
respectively.
At the end of 2015, the Non-core Ireland portfolio
consisted of a personal mortgage portfolio of DKK 15.9
billion and a small residual commercial portfolio. In
2015, we reduced the net exposure of the commercial
portfolio from DKK 2.9 billion to DKK 0.5 billion,
primarily through property sales.
2015 vs 2014
Profit before tax was DKK 46 million, against a loss
of DKK 1.5 billion in 2014, with the increase coming
mainly from a decline in impairments. Total income
rose 60%, while operating expenses fell 48%.
Total income benefited from a rating upgrade in 2015
that allowed the release of interest accrued over
several years on a number of collateralised liquidity
facilities.
Operating expenses declined because 2014 included
expenses for the settlement of an agreement on life
insurance products in the Baltics.
(DKK millions)
Net credit exposure
Accumulated
impairment charges
Non-core
banking*
- portion relating
to personal
customers
Non-core conduits
etc.
31 Dec.
2015
31 Dec.
2014
31 Dec.
2015
31 Dec.
2014
20,571
20,222
3,673
7,643
20,035
17,351
2,560
3,024
7,992
11,104
243
269
Total
28,563
31,326
3,916
7,912
*Non-core Baltics is included in Non-core banking from 1 January 2015 (from
the end of the third quarter of 2015, only Estonia). Comparative figures for 2014
have not been restated
The Non-core conduits portfolio amounted to DKK 8.0
billion, against DKK 11.1 billion in 2014. The portfolio
consists mainly of liquidity facilities for conduits. The
credit quality of the portfolio remained stable.
Total impairments improved to a net reversal of
DKK 0.1 billion, against charges of DKK 0.9 billion
for 2014. This development was driven by reversals
of previously made impairments in Ireland as the
property market continued to improve and collateral
values rose.
Q4 2015 vs Q3 2015
Profit before tax amounted to DKK 13 million, up from
DKK 3 million in the third quarter.
The third quarter result reflected the release of
interest accrued over several years on a number
of collateralised liquidity facilities after the rating
upgrade earlier in 2015.
Loan impairment charges improved from
DKK 56 million in the third quarter to a net
reversal of DKK 38 million in the fourth quarter.
Danske Bank / Annual Report 2015 37
Other Activities
Profit before tax increased DKK 500 million because of gains on property sales and a refund of payroll
tax paid in previous years.
Other Activites
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Profit before loan
impairment charges
Loan impairment charges
Profit before tax
Profit before tax
(DKK millions)
Group Treasury
Own shares
Group support functions
Total Other Activities
2015
2014
Index
15/14
Q4
2015
Q3
2015
316
-75
648
569
1,457
803
654
3
651
486
-154
319
651
-148
-102
1,140
189
1,079
930
149
-2
151
1,010
-196
-663
151
-
-
57
-
135
86
-
-
-
48
-
-
-
11
-17
206
369
569
388
181
-
181
25
56
100
181
103
-12
32
13
136
259
-123
2
-125
14
-33
-106
-125
Index
Q4/Q3
11
-
-
-
-
150
-
-
-
179
-
-
-
Q2
2015
Q1
2015
170
-25
-90
152
207
71
136
-
136
-41
-78
255
136
32
-21
499
35
545
85
460
1
459
488
-99
70
459
Other Activities includes Group Treasury and Group
support functions as well as eliminations, including the
elimination of returns on own shares. Group Treasury
is responsible for the Group’s liquidity management
and funding.
2015 vs 2014
Other Activities posted a profit before tax of DKK 651
million, against DKK 151 million in 2014.
The decline in interest rates caused an increase in
the return on the liquidity portfolio because of positive
mark-to-market effects, and this increased net trading
income at Other Activities. In 2014, net trading
income benefited from a one-off gain on the sale of the
shares in Nets.
Other income amounted to DKK 569 million, against
DKK 189 million in 2014. The increase was owing to
a refund of payroll tax paid in previous years and gains
on property sales.
Operating expenses were lower because of property
write-downs in 2014.
Q4 2015 vs Q3 2015
In the fourth quarter of 2015, profit before tax was
DKK 181 million, against a negative DKK 125 million
in the third quarter.
Net interest income amounted to DKK 11 million,
against DKK 103 million in the third quarter. The
decline was driven by a widening of deposit spreads
owing to market uncertainty in the fourth quarter.
Net trading income amounted to DKK 206 million,
against DKK 32 million in the third quarter, mainly
because of elimination of returns on own shares.
Other income amounted to DKK 369 million, against
DKK 13 million in the third quarter. The increase was
caused primarily by gains on property sales.
Operating expenses were DKK 129 million higher in
the fourth quarter, partly because of our contribution
to the new Danish resolution fund.
Danske Bank / Annual Report 2015 38
Danske Bank / Annual Report 2015
Capital and liquidity
management
Capital and solvency
Our capital management policies and practices
support our business strategy and ensure that
we are sufficiently capitalised to withstand severe
macroeconomic downturns.
We have set the following capital targets: a total capital
ratio of at least 17% and a common equity tier 1
(CET1) capital ratio of at least 13%. The targets have
been met since the end of 2012. In the current low-
growth environment, which entails macroeconomic
and regulatory uncertainty, we consider a CET1 capital
ratio of around 14% and a total capital ratio well above
17% to be appropriate levels. The capital structure
may be adjusted through distributions if excess capital
is available after dividends have been paid and our
capital targets have been met.
At the end of December 2015, the total capital ratio
was 21.0%, and the CET1 capital ratio was strong at
16.1%. The improvement from the level at the end of
2014 was driven by earnings and a decline in the total
risk exposure amount (REA). The issuance of capital
out of Danica also contributed to the improvement.
The total risk exposure amount (REA) decreased
DKK 32 billion from the level at the end of December
2014. The REA for credit risk decreased DKK 11
billion, mainly because of F-IRB approval for the
corporate segment in Finland and continued de-risking,
while portfolio changes counteracted these effects.
Market risk and counterparty risk REAs fell DKK 20
billion, mainly because of the implementation of an
Internal Model Method (IMM) for counterparty risk
and an extended Value-at-Risk model (VaR model)
for market risk as well as lower positions and lower
average market volatility.
In January 2016, the FSA approved our revised IRB
models addressing the FSA orders from June 2013.
The models will be implemented by the end of the first
quarter of 2016.
In September 2015, Danica Pension issued Solvency
II-compliant tier 2 capital in the form of a bond loan in
the amount of EUR 500 million (DKK 3.7 billion). At the
end of 2015, the effect on the CET1 capital ratio and
the total capital ratio of Danske Bank Group was 0.07
and 0.24 of a percentage point, respectively. In 2018,
following the implementation of Solvency II and CRD IV,
the fully phased-in effect from the issue on the CET1
capital ratio is estimated to be approximately 0.38 of a
percentage point.
At the end of December 2015, Danske Bank’s solvency
need amounted to DKK 89 billion, or 10.7% of the total
REA. At the end of December 2015, total capital was
thus DKK 86 billion in excess of the solvency need.
Total capital and risk exposure amount
(DKK billions)
2015
2014
CET 1 capital
AT1 capital
T2 capital
Total capital
Solvency need
Risk exposure amount
CET 1 capital ratio (%)
Total capital ratio (%)
134
20
21
175
89
834
16.1
21.0
130
14
23
167
92
865
15.1
19.3
Capital distribution policy
Danske Bank’s longer-term ambition is to provide
shareholders with a competitive return through share
price appreciation and ordinary dividend payments of
40-50% of net profit.
We intend to return excess capital to our shareholders
if capital is available after we have met our capital
targets and paid out ordinary dividends.
For 2014, Danske Bank paid a dividend of DKK 5.5
per share, representing a payout ratio of 43%, and
we initiated a share buy-back programme of DKK 5
billion. The share buy-back programme was initiated
on 30 March 2015 and ended on 2 November 2015
with a total buy-back of 24.9 million shares for a total
purchase amount of DKK 5.0 billion. The Board of
Directors is proposing to the annual general meeting in
2016 that the 24.9 million shares should be cancelled.
The Board of Directors is recommending that a
dividend of DKK 8.0 per share be paid for 2015,
representing a payout ratio of 46%.
Beginning on 4 February 2016, Danske Bank will
initiate a new share buy-back programme that will total
DKK 9 billion and run for no more than 12 months. We
estimate that the planned share buy-back will reduce
the CET1 capital ratio and the total capital ratio by
1.1percentage points.
Danske Bank / Annual Report 2015
39
Ratings
In June, Moody’s raised Danske Bank’s long-term rating
to A2 from A3 and its short-term rating to P-1 from
P-2. Moody’s affirmed its stable outlook for the long-
term rating.
In July, S&P changed its outlook for our long-term
rating to stable.
Danske Bank’s long- and short-term ratings from Fitch
were unchanged.
Danske Bank’s ratings
Long-term
Short-term
Outlook
Moody’s
A2
P-1
S&P
A
A-1
Fitch
A
F1
Stable
Stable
Stable
Danske Bank Plc’s A2 long-term rating and its P-1
short-term rating were affirmed by Moody’s despite
expectations of reduced government support to banks.
Both ratings have a stable outlook. S&P also affirmed
its A long-term rating and its A-1 short-term rating but
raised its outlook to stable.
Mortgage bonds and mortgage-covered bonds issued
by Realkredit Danmark are rated AAA by S&P (stable
outlook). In addition, bonds issued from capital centre
S are rated AAA by Fitch, while bonds issued from
capital centre T are rated AA+. Both ratings have a
stable outlook.
ICAAP
Danske Bank’s capital management policies and
practices are based on an internal capital adequacy
assessment process (ICAAP). In this process, Danske
Bank identifies its risks and determines its solvency
need.
The calculation of the solvency need for the Group and
the parent company, Danske Bank A/S, is described
in more detail in Risk Management 2015, chapter 3,
which is available at danskebank.com/ir.
Funding and liquidity
In order to further support our growth ambitions
in Sweden and Norway, we have decided to divide
our international covered bond pool (I-Pool) into
geographically separate cover pools and establish a
local Swedish covered bond programme to ensure
competitive funding. Further details are available on
danskebank.com/ir.
With a liquidity buffer of DKK 452 billion at the end
of December 2015, Danske Bank’s liquidity position
remains robust.
With effect from 1 October 2015, Danske Bank has
had to comply with an LCR requirement as defined
by the new EU standards under CRR/CRD IV. For
Danish SIFI banks, Danish Bank Package 6 sets this
LCR requirement at 100%. Danske Bank fully meets
the requirement. Danske Bank’s LCR as calculated
according to the new EU standards was 125% at the
end of December 2015.
Prior to October 2015, Danske Bank had to comply
with an LCR requirement as defined by the Danish FSA.
Danske Bank complied with this requirement and also
complied with all other liquidity requirements.
Stress tests show that we have a sufficient liquidity
buffer well beyond 12 months.
In 2015, Danske Bank issued senior debt for
DKK 38.0 billion, covered bonds for DKK 25.9 billion,
and additional tier 1 capital for DKK 5.6 billion, totaling
DKK 69.5 billion. We also redeemed long-term debt of
DKK 61.9 billion.
Danske Bank further diversified its funding sources
through USD domestic debt issues. In the second
half of 2015, we increased our presence on the
US commercial paper market and re-entered the
professional investor market for long-term funding
after a three-year absence.
At the end of 2015, the total amount of outstanding
long-term funding, excluding additional tier 1 capital
and debt issued by Realkredit Danmark, was DKK 342
billion, against DKK 330 billion at the end of 2014.
Danske Bank excluding Realkredit Danmark
(DKK billions)
Covered bonds
Senior unsecured debt
Subordinated debt
Total
31 December
2015
31 December
2014
190
112
40
342
186
103
41
330
40
Danske Bank / Annual Report 2015
The Supervisory Diamond
The Danish FSA has identified a number of specific risk
indicators for banks and has set threshold values that
all Danish banks must comply with. The requirements
are known as the Supervisory Diamond.
Supervisory Diamond
(%)
Sum of large
exposures
Lending growth
Real property
exposure
Funding ratio
Surplus liquidity in
relation to statutory
liquidity requirements
Threshold
value
2015
2014
<125
<20
<25
<100
-
5
12
64
-
-
10
63
>50
193
161
At 31 December 2015, Danske Bank was in
compliance with all threshold values. A separate report
is available at danskebank.com/ir.
The supervisory diamond for mortgage credit
institutions will be implemented gradually in the period
until 2020. Realkredit Danmark already complies
with the threshold values for lending growth, borrower
interest rate exposure, large exposures and interest-
only lending. Realkredit Danmark expects to comply
with the threshold value concerning short-term funding
well ahead of 2020.
Capital regulation
We estimate that the remaining phase-in effect of
CRR/CRD IV on our fully-loaded CET1 capital ratio in
2018 will be a reduction of about 0.7 of a percentage
point.
The Danish FSA has approved Danske Bank’s
continued use of the financial conglomerate deduction
method for equity holdings in Danica Pension. The
deduction method is based on Danica Pension’s
solvency need less the difference between Danica
Pension’s capital base and Danske Bank’s holdings. The
non-deductible part of the holdings is risk-weighted at
100%.
CRR/CRD IV requires credit institutions to calculate,
report, monitor and disclose their leverage ratios,
defined as tier 1 capital as a percentage of total
exposure. The Group’s leverage ratio was 4.7% at 31
December 2015 when transitional rules are taken
into account. Assuming fully phased-in tier 1 capital
under CRR/CRD IV without taking into account any
refinancing of non-eligible additional tier 1 instruments,
the leverage ratio would be 4.2%.
Danske Bank is designated a SIFI in Denmark and is
required to comply with an additional CET1 capital
buffer requirement of 0.6%. The additional CET1
capital buffer requirement will increase gradually to
3% in 2019. Danske Bank’s countercyclical buffer
requirement was 0.3% at 31 December 2015 and
related to its exposures in Sweden and Norway. The
Group’s combined buffer requirement was thus 0.9%
or DKK 7.3 billion at 31 December 2015.
Bank Recovery and Resolution Directive
The Bank Recovery and Resolution Directive (including
bail-in provisions) was implemented in Danish law with
effect from 1 June 2015.
By law, every credit institution must have a minimum
amount of “bail-in-able” liabilities. The Danish FSA is
authorised to set the minimum amount for Danske
Bank and is expected to do so during 2016.
Furthermore, a Danish resolution fund has been
established. All Danish credit institutions must
make contributions to the fund on the basis of their
size and risks relative to other credit institutions in
Denmark. The assets of the resolution fund must
equal at least 1% of the covered deposits of all Danish
credit institutions by 31 December 2024. The first
contributions to the Danish fund were paid in the
fourth quarter of 2015, with Danske Bank’s and
Realkredit Danmark’s payment totalling DKK 194
million. Our contribution constituted 55% of the total
sector contributions.
Solvency II
The Solvency II rules for insurance companies were
implemented in Danish law with effect from 1 January
2016. This implies that Danica Pension includes
expected future profit in its calculation of its capital
base and solvency need. In total, the increase in the
capital base will be partially offset by the increase in
the solvency need.
New capital allocation framework
In the first quarter of 2016, a new, simplified and
more transparent capital allocation framework will
be implemented. The new framework will be based
on a regulatory approach and will be in accordance
with our CET1 capital target. This means that the
capital consumption of the Group’s individual business
units will be aligned with the Group’s total capital
consumption.
Investor Relations
Investor Relations at Danske Bank contributes to the
Group’s pursuit of its strategic goals by ensuring that
stakeholders receive correct and adequate information
according to the best practices in proactive investor
communications and consultation, including innovative
digital solutions.
To maintain and build stakeholder relations, we hold
roadshows after the release of our financial reports
as well as roadshows on major transactions and other
topics for debt investors.
Together with executive management, Investor
Relations builds relations with analysts, shareholders
and prospective investors by presenting and
discussing current topics relevant to Danske Bank at
seminars and conferences.
In 2015, investor events were held in the Nordic
countries, other European countries and the US, with
more than 537 investors attending.
Danske Bank shares
Danske Bank shares are listed on NASDAQ OMX
Copenhagen and are included in a number of Danish
and international equity indices, such as the OMX
Copenhagen 20 CAP Index (OMXC20CAP). At the end
of 2015, Danske Bank shares had an index weighting
of about 12.7%.
Danske Bank’s share price rose from DKK 167.4 at
31 December 2014 to DKK 185.2 at 31 December
2015, an increase of 10.6%. In comparison, the
OMXC20CAP Index gained 29%, while the MSCI
Europe Banks Index fell 6.7%.
Danske Bank shares
(DKK)
Share capital (millions)
Share price (end of year)
Total market capitalisation
(end of year) (billions)
Earnings per share
Dividend per share
Book value per share
Share price/book value per share
2015
2014
10,086
185.2
10,086
167.4
180.8
12.8
8.0
153.2
1.2
167.3
3.8
5.5
146.8
1.1
At the end of 2015, 32 equity analysts covered
Danske Bank.
Danske Bank / Annual Report 2015
41
The average daily trading volume of Danske Bank
shares was 2.4 million. Danske Bank shares were the
third most actively traded shares on NASDAQ OMX
Copenhagen.
Danske Bank shares
Index 2011 = 100
Danske Bank MSCI Europe Banks
200
150
100
50
0
2011
2012
2013
2014
2015
Shareholders
At the end of 2015, Danske Bank had about 279,000
shareholders. The 10 largest shareholders together
owned about 41% of the share capital.
We estimate that shareholders outside Denmark,
mainly in the UK and the US, hold almost 53% of the
share capital.
Danske Bank shareholders 2015
Other
0.6%
Rest of Europe
10.8%
UK
16.3%
USA & Canada
18.1%
Cevian Capital
7.4%
A. P. Møller
Holding Group
21.6%
Rest of Denmark
25.3%
k
r
a
m
n
e
D
According to the Danish Companies Act, shareholders
must notify the company if the voting rights of their
shares exceed 5% of the voting rights of the company’s
share capital or if the nominal value of their shares
exceeds 5% of the share capital. Shareholders must
42
Danske Bank / Annual Report 2015
also disclose changes in shareholdings if they exceed
or fall below specified percentage thresholds. Two
shareholder groups have notified Danske Bank that
they hold more than 5% of the share capital:
•
•
The A.P. Møller and Chastine Mc-Kinney Møller
Foundation and companies of the A.P. Moller
Holding Group, Copenhagen, hold 21.6% of the
share capital.
Cevian Capital II GP Limited, Jersey, holds 7.4% of
the share capital.
Each share entitles the holder to one vote, and all
shares carry the same rights.
At the end of 2015, Danske Bank held about 3.2%
of its own share capital. These shares are held to
compensate employees in the form of conditional
shares granted under share programmes in previous
years and for investments on behalf of Danica Pension
policyholders and under pooled investment schemes.
The portfolio also contains shares that have been
bought back but have not yet been cancelled.
Corporate
responsibility
Corporate responsibility
Corporate responsibility is an important part of Danske
Bank’s strategy. We want to create long-term value for
all our stakeholders, and we want them to feel confident
that we manage our business with proper attention to
environmental, social, ethical and governance issues.
This applies to credit granting, investing, responsible
sourcing, and our contribution to financial stability and
economic growth. We consider responsible business
conduct a precondition for long-term value creation.
Reporting on corporate responsibility
We report on our corporate responsibility activities
and performance in the independently assured
Corporate Responsibility Report 2015. The report
serves as our Communication on Progress as required
by the UN Global Compact and ensures compliance
with the requirements of the Danish FSA’s Executive
Order on Financial Reports for Credit Institutions
and Investment Firms etc. (sections 135 and 135a)
on corporate responsibility reporting. The report is
available at danskebank.com/crreport.
The report is supplemented by our Corporate
Responsibility Fact Book 2015. Our combined
reporting offers a comprehensive and balanced view
of material corporate responsibility matters relating
to our business activities. These reports and further
information about our CR initiatives and projects are
available at danskebank.com /responsibility.
Organisation
and management
General meeting
The general meeting is Danske Bank’s highest decision-
making authority.
In 2015, the annual general meeting was held on 18
March.
Danske Bank’s Articles of Association, available at
danskebank.com/aoa, contain information about the
notice of the general meeting, shareholders’ rights to
table proposals and to have special items added to the
agenda, admission and voting rights.
All shareholders have equal voting rights (one share
equals one vote), and there are no limitations on holdings
or voting rights.
Only the general meeting can amend the Articles of
Association. Amendments require a two-thirds majority
of the votes cast and a two-thirds majority of the share
capital represented at the general meeting and entitled
to vote.
A resolution to wind up Danske Bank by merger or
voluntary liquidation can be passed only if adopted by
at least three-quarters of the votes cast and by at least
three-quarters of the share capital represented at the
general meeting and entitled to vote.
43
Board of Directors
The Board currently consists of 12 members, eight
elected by the general meeting and four elected by and
among the employees.
Officer and Head of Group Risk Management; Lars Mørch,
Head of Business Banking; Henrik Ramlau-Hansen,
Chief Financial Officer and Head of CFO area; and Glenn
Söderholm, Head of Corporates & Institutions.
CFO Henrik Ramlau-Hansen, who turns 60 in 2016, will
vacate his position at the end of March 2016. He will be
replaced as CFO and on the Executive Board by Jacob
Aarup-Andersen, who has served as deputy CFO since 1
January.
Corporate governance recommendations
Corporate governance recommendations issued by the
Danish Committee on Corporate Governance can be
found at corporategovernance.dk. The recommendations
are best practice guidelines that all companies with
shares traded on NASDAQ OMX Copenhagen should
generally follow. If a company fails to comply with a
recommendation, it must explain why it deviates from the
recommendation and what it has done differently. Danske
Bank complies with all the recommendations.
The statutory corporate governance report issued in
accordance with section 107b of the Danish Financial
Statements Act is available at danskebank.com/cgreport.
The report includes an explanation of Danske Bank’s
status on all recommendations.
The Corporate Governance Code of the Danish Bankers
Association, which applies to all member institutions,
can be found at danskebank.com/dba. All member
institutions must comply with the recommendations or
explain why they do not comply. Danske Bank complies
with all recommendations set out in the code. Danske
Bank’s explanation of the status on all recommendations
is included in section E of its Corporate Governance
Report 2015.
Board members elected by the general meeting stand
for election every year. As prescribed by Danish law,
members elected by the employees serve on the Board of
Directors for a four-year term.
The Nomination Committee identifies and recommends
candidates for the Board of Directors. Board candidates
are nominated by the Board of Directors or the
shareholders and are elected by the general meeting. The
retirement age for board members is 70, which means
that board members must retire at the first annual
general meeting after they have reached the age of 70.
At the annual general meeting held on 18 March 2015,
the incumbent members of the Board of Directors were
re-elected.
Work of the Board of Directors in 2015
In the fourth quarter, the Board of Directors carried
out its annual evaluation of the performance and
achievements of its members, both individually and
collectively. To ensure anonymity, the evaluation was
facilitated by an external consulting firm. All members
of the Board of Directors and the Executive Board
answered a comprehensive questionnaire and were
offered an interview with the consulting firm. The
findings and conclusions were subsequently presented
to and discussed by the full Board of Directors, and the
chairman gave individual feedback to all board members.
Overall, the results of the 2015 evaluation were
positive. The areas for improvement identified in the
2014 evaluation – particularly an adjustment of the
balance between regulatory and strategic matters –
were addressed in 2015, and the Board of Directors
will continue to work on its performance in these areas.
The 2015 evaluation identified only minor new areas in
need of improvement, the most important one being the
Board of Directors’ visibility in succession planning and
talent management, which the Board will address going
forward.
Executive Board
The Executive Board consists of Thomas F. Borgen,
Chief Executive Officer; Tonny Thierry Andersen, Head of
Personal Banking; James Ditmore, Chief Operating Officer
and Head of COO area; Gilbert Kohnke, Group Chief Risk
Danske Bank / Annual Report 2015 44
Danske Bank / Annual Report 2015
Danske Bank / Annual Report 2015
4545
Financial statements
111 28. Assets provided or received as collateral
112 29. Offsetting of financial assets and liabilities
113 30. Fair value information for financial
instruments
119 31. Non-financial assets recognised at fair
value
120 32. Related parties
121 33. Remuneration of management and material
risk takers
127 34. Danske Bank shares held by the Board of
Directors and the Executive Board
128 35. Group holdings and undertakings
130 36. Interests in associates and joint
arrangements
130 37. Interests in unconsolidated structured
entities
131 38. Transfer of Personal Banking and Business
Banking customers in Northern Ireland to
the new Northern Ireland segment
132 Risk management
132 Risk exposure
132 Total capital
133 Credit risk
149 Market risk
154 Liquidity risk
157
161 Highlights, ratios and key figures
162 Definitions of ratios and key figures
163
Insurance risk
Financial statements of the parent company,
Danske Bank A/S
Income statement
46
47 Statement of comprehensive income
48 Balance sheet
49 Statement of capital
53 Cash flow statement
54 Notes
54 1. Basis of preparation
60 2. Changes and forthcoming changes to
accounting policies and presentation
63 3. Business model and busines segmentation
69 4. Acticities by country
71 5. Net interest and net trading income
73 6. Fee income and expenses
74 7. Other income
75 8. Insurance contracts
75 9. Operating expenses
78 10. Audit fees
78 11. Loan impairment charges
79 12. Trading portfolio assets and liabilities
82 13. Investment securities
14. Due from credit institutions and central
banks and Loans at amortised cost
86 15. Loans at fair value and bonds issued by
Realkredit Danmark
87 16. Assets and deposits under pooled schemes
and unit-linked investment contracts
88 17. Assets and liabilities under insurance
contracts
90 18. Intangible assets
95 19. Due to credit institutions and central banks
and Deposits
95 20. Tax
99 21. Issued bonds
102 22. Other assets and other liabilities
104 23. Equity
106 24. Contingent liabilities
108 25. Balance sheet items broken down by
expected due date
109 26. Contractual due dates of financial liabilities
110 27. Transferred financial assets that are not
derecognised
Danske Bank / Annual Report 2015
46 Danske Bank / Annual Report 2015
Income statement – Danske Bank Group
Note
(DKK millions)
2015
2014
5
5
6
6
5
7
8
8
9
18
11
20
Interest income
Interest expense
Net interest income
Fee income
Fee expenses
Net trading income
Other income
Net premiums
Net insurance benefits
Operating expenses
Impairment charges on goodwill and customers relations
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Tax
Net profit for the year
Portion attributable to
shareholders of Danske Bank A/S (the Parent Company)
additional tier 1 capital holders
non-controlling interests
Net profit for the year
Earnings per share (DKK)
Diluted earnings per share (DKK)
Proposed dividend per share (DKK)
59,666
26,333
33,333
15,566
4,887
6,908
5,275
21,359
30,468
24,785
4,601
17,701
-61
17,762
4,639
13,123
12,516
607
-
13,123
12.8
12.8
8.0
66,951
32,344
34,607
14,585
4,771
9,854
4,546
20,631
33,024
25,642
9,099
11,687
3,718
7,969
4,020
3,948
3,687
259
2
3,948
3.8
3.8
5.5
Statement of comprehensive income – Danske Bank Group
Danske Bank / Annual Report 2015 47
Note
(DKK millions)
20
20
Net profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit plans
Tax
Items that will not be reclassified to profit or loss
Items that are or may be reclassified subsequently to profit or loss
Translation of units outside Denmark
Hedging of units outside Denmark
Unrealised value adjustments of available-for-sale financial assets
Realised value adjustments of available-for-sale financial assets
Tax
Items that are or may be reclassified subsequently to profit or loss
Total other comprehensive income
Total comprehensive income for the year
Portion attributable to
shareholders of Danske Bank A/S (the Parent Company)
additional tier 1 capital holders
non-controlling interests
Total comprehensive income for the year
2015
13,123
2014
3,948
568
-70
498
681
-797
-17
-68
176
-25
473
157
-9
148
527
-549
283
-37
43
267
415
13,596
4,364
12,989
607
-
13,596
4,103
259
2
4,364
48 Danske Bank / Annual Report 2015
Balance sheet – Danske Bank Group
Note
(DKK millions)
2015
2014
14
12
13
14
15
16
17
18
20
22
19
12
19
15
16
17
21
20
22
21
ASSETS
Cash in hand and demand deposits with central banks
Due from credit institutions and central banks
Trading portfolio assets
Investment securities
Loans at amortised cost
Loans at fair value
Assets under pooled schemes and unit-linked investment contracts
Assets under insurance contracts
Intangible assets
Tax assets
Other assets
Total assets
LIABILITIES
Due to credit institutions and central banks
Trading portfolio liabilities
Deposits
Bonds issued by Realkredit Danmark
Deposits under pooled schemes and unit-linked investment contracts
Liabilities under insurance contracts
Other issued bonds
Tax liabilities
Other liabilities
Subordinated debt
Total liabilities
EQUITY
Share capital
Foreign currency translation reserve
Reserve for available-for-sale financial assets
Retained earnings
Proposed dividends
Shareholders of Danske Bank A/S (the Parent Company)
Additional tier 1 capital holders
Non-controlling interests
23
Total equity
Total liabilities and equity
76,837
103,859
547,019
343,304
1,079,257
741,660
91,893
265,572
6,505
1,550
35,422
3,292,878
271,588
471,131
863,474
694,519
96,958
285,030
363,931
8,333
37,093
39,991
3,132,048
10,086
-593
-401
132,352
8,069
149,513
11,317
-
160,830
33,876
112,760
742,513
330,994
1,092,902
741,609
80,148
268,450
11,253
1,543
36,966
3,453,015
329,048
550,629
966,197
655,965
86,433
288,352
330,207
8,647
44,126
41,028
3,300,632
10,086
-477
-316
131,868
5,547
146,708
5,673
2
152,384
3,292,878
3,453,015
Danske Bank / Annual Report 2015 49
Statement of capital – Danske Bank Group
Changes in equity
Shareholders of Danske Bank A/S (the Parent Company)
Foreign Reserve for
available-
for-sale
assets
currency
translation
reserve
Retained Proposed
dividends
earnings
Total
Additional
Non-
tier 1 controlling
interests
capital
(DKK millions)
Total equity at 1 January 2015
Changed recognition of pension scheme
Restated total equity at 1 January 2015
Net profit for the year
Other comprehensive income
Remeasurement of defined benefit plans*
Translation of units outside Denmark
Hedging of units outside Denmark
Unrealised value adjustments
Realised value adjustments
Tax
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners
Issuance of additional tier 1 capital,
net of transaction costs
Paid interest on additional tier 1 capital
Dividends paid
Dividends proposed
Acquisition of own shares and
additional tier 1 capital
Sale of own shares and
additional tier 1 capital
Share-based payments
Tax
Share
capital
10,086
-
10,086
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-477
-
-477
-
-
681
-797
-
-
-
-116
-116
-
-
-
-
-
-
-
-
-316
-
-316
-
132,605
-736
131,869
12,516
5,547
-
147,445
-736
5,547
-
146,709
12,516
5,673
-
5,673
607
-
-
-
-17
-68
-
-85
-85
-
-
-
-
-
-
-
-
568
-
-
-
-
106
674
13,190
-56
-
53
-8,069
-35,087
30,119
195
138
-
-
-
-
-
-
-
-
568
681
-797
-17
-68
106
473
-
-
-
-
-
-
-
12,989
607
-
-
-5,547
8,069
-56
-
-5,494
-
5,583
-529
-
-
-
-
-
-
-35,087
-41
30,119
195
138
24
-
-
Total equity at 31 December 2015
10,086
-593
-401
132,352
8,069 149,513
11,317
*Remeasurement of defined benefit plans includes changes between expected trends in pension assets and benefits and actual trends in, for example, interest rates
Total
153,120
-736
152,384
13,123
568
681
-797
-17
-68
106
473
13,596
5,527
-529
-5,496
-
-35,128
30,143
195
138
160,830
2
-
2
-
-
-
-
-
-
-
-
-
-
-
-2
-
-
-
-
-
-
50 Danske Bank / Annual Report 2015
Statement of capital – Danske Bank Group
Changes in equity
Shareholders of Danske Bank A/S (the Parent Company)
(DKK millions)
Total equity at 1 January 2014
Changed recognition of pension scheme
Restated total equity at 1 January 2014
Net profit for the year
Other comprehensive income
Remeasurement of defined benefit plans*
Translation of units outside Denmark
Hedging of units outside Denmark
Unrealised value adjustments
Realised value adjustments
Tax
Other changes
Total other comprehensive income
Total comprehensive income for the year
Transactions with owners
Issuance of additional tier 1 capital,
net of transaction costs
Paid interest on additional tier 1 capital
Dividends paid
Dividends proposed
Acquisition of own shares and
additional tier 1 capital
Sale of own shares and
additional tier 1 capital
Share-based payments
Tax
10,086
-
10,086
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Foreign Reserve for
available-
currency
Share translation
reserve
capital
for-sale Retained Proposed
earnings dividends
assets
Total
-277
-
-277
-
-
527
-549
-
-
-
-178
-200
-562
-
-562
-
-
-
-
283
-37
-
-
246
134,393
-839
133,554
3,688
2,017
-
145,657
-839
2,017
-
144,818
3,688
157
-
-
-
-
34
178
369
157
527
-549
283
-37
34
-
415
-
-
-
-
-
-
-
-
-
Additional
Non-
tier 1 controlling
interests
capital
-
-
-
259
-
-
-
-
-
-
-
-
-
-
-
2
-
-
-
-
-
-
-
-
Total
145,657
-839
144,818
3,948
157
527
-549
283
-37
34
-
415
-200
246
4,057
4,103
259
2
4,364
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-59
-
17
-5,547
-25,702
25,377
123
49
-
-
-2,017
5,547
-
-
-
-
-59
-
-2,000
-
-25,702
25,377
123
49
5,597
-183
-
-
-53
53
-
-
-
-
-
-
-
-
-
-
5,538
-183
-2,000
-
-25,755
25,430
123
49
Total equity at 31 December 2014
10,086
-477
-316 131,869
5,547 146,709
5,673
2
152,384
*Remeasurement of defined benefit plans includes changes between expected trends in pension assets and benefits and actual trends in, for example, interest rates
Danske Bank / Annual Report 2015 51
Statement of capital – Danske Bank Group
Dividend
The Board of Directors is proposing a dividend of DKK 8.00 per share of DKK 10 each (2014: DKK 5.50), or a total of DKK 8,069 million (2014: DKK 5,547
million) of which DKK 199 million relates to shares acquired under the share buy-back programme 2015, to be paid out of the net profit for the Parent
Company of DKK 12,933 million (2014: DKK 4,034 million).
Earnings per share (DKK millions)
Net profit for the year attributable to the shareholders of the parent company
Number of shares issued at 1 January
Average number of own shares held by the Group
Average number of shares outstanding
Number of dilutive shares issued for share-based payments
Adjusted average number of shares outstanding after capital increase, including dilutive shares
Earnings per share (DKK)
Diluted earnings per share (DKK)
2015
12,516
2014
3,948
1,008,620,000 1,008,620,000
9,105,699
20,632,950
987,987,050
1,304,948
999,514,301
1,058,008
989,291,999 1,000,572,309
12.8
12.8
3.8
3.8
The share capital consists of shares of a nominal value of DKK 10 each. All shares carry the same rights; there is thus only one class of shares.
Number of shares outstanding (DKK millions)
Issued at 31 December
Holding of own shares
Shares outstanding at 31 December
Holding of own shares
Share buy-back programme
Trading portfolio
Investment on behalf of customers
Total
(DKK millions)
Holding at 1 January
Acquisition of own shares
Sale of own shares
Value adjustment
Holding at 31 December
2015
2014
1,008,620,000 1,008,620,000
9,229,434
32,590,194
976,029,806
Number
2015
24,907,165
3,529,947
4,153,082
Number
2014
-
4,385,823
4,843,611
32,590,194
9,229,434
Share buy-back
programme
-
5,000
-
-387
4,613
Trading
portfolio
734
29,703
29,579
-204
654
Investment
on behalf
of customers
811
384
541
116
770
Value
2015
4,613
654
770
6,037
Total
2015
1,545
35,087
30,119
-476
6,037
999,390,566
Value
2014
-
734
811
1,545
Total
2014
1,020
25,702
25,377
199
1,545
The Board of Directors is authorised to let Danske Bank acquire own shares up to a total nominal amount of 10% of the share capital. The shares may be
held for ownership or provided as collateral. If shares are acquired for ownership, the acquisition price may not deviate by more than 10% from the price
quoted at the time of acquisition. Danske Bank A/S has obtained permission from the Danish Financial Supervisory Authority to acquire own shares for
market making purposes etc. and this amount is deducted from common equity tier 1 capital.
On 30 March 2015, the Group initiated a share buy-back programme of DKK 5 billion. Scheduled to end no later than 31 December 2015, the programme
was completed on 2 November 2015.
52 Danske Bank / Annual Report 2015
Statement of capital – Danske Bank Group
(DKK millions)
Total capital and total capital ratio
Total equity
Revaluation of domicile property at fair value
Tax effect of revaluation of domicile property at fair value
Reserves in undertakings consolidated on a pro rata basis
Total equity calculated in accordance with the rules of the Danish FSA
Additional tier 1 capital instruments included in total equity
Accrued interest on additional tier 1 capital instruments
Tax on accrued interest on additional tier 1 capital instruments
Common equity tier 1 capital instruments
Adjustment to eligible capital instruments
Prudential filters
Proposed dividends
Intangible assets of banking operations
Deferred tax on intangible assets
Deferred tax assets that rely on future profitability excluding temporary differences
Defined benefit pension fund assets
Statutory deduction for insurance subsidiaries
Other statutory deductions
Common equity tier 1 capital
Additional tier 1 capital instruments
Statutory deduction for insurance subsidiaries
Other statutory deductions
Tier 1 capital
Tier 2 capital instruments
Statutory deduction for insurance subsidiaries
Other statutory deductions
Total capital
Total risk exposure amount
Common equity tier 1 capital ratio (%)
Tier 1 capital ratio (%)
Total capital ratio (%)
2015
2014
160,830
884
-172
3,002
164,544
-11,177
-155
36
153,248
-154
-507
-8,069
-6,426
337
-343
-808
-2,885
-35
152,384
1,013
-209
3,002
156,190
-5,597
-77
17
150,533
-117
-315
-5,547
-11,169
372
-465
-317
-1,850
-722
134,358
130,403
22,338
-2,164
-7
17,434
-3,701
-10
154,525
144,126
22,782
-2,164
-7
26,310
-3,701
-10
175,136
166,725
833,594
865,086
16.1
18.5
21.0
15.1
16.7
19.3
Total capital and the total risk exposure amount are calculated in accordance with the rules applicable under CRR, taking transitional rules into account
as stipulated by the Danish Financial Supervisory Authority. A new filter has been introduced for deduction from common equit y tier 1 capital of addi-
tional value adjustments of assets and liabilities measured at fair value (prudent valuation). The European Commission has adopted a Delegated Regu-
lation on regulatory technical standards for prudent valuation that will be effective from February 2016, at the latest. Implementation is expected to
lead to a further reduction in common equity tier 1 capital of around DKK 1.2 billion.
The risk exposure amount calculated under the Basel I rules amounted to DKK 1,422,024 million at 31 December 2015 (31 December 2014: DKK
1,398,421 million). The capital need under the transitional rules was DKK 91,010 million, equal to 10.9% of the risk exposure amount under the Basel
I rules (31 December 2014: DKK 89,499 million).
Risk Management 2015 provides more details about the Group’s total capital and total risk exposure amount. Risk Management 2015 is not covered
by the statutory audit.
Cash flow statement – Danske Bank Group
Danske Bank / Annual Report 2015 53
(DKK millions)
Cash flow from operations
Profit before tax
Tax paid
Adjustment for non-cash operating items
Total
Changes in operating capital
Amounts due to/from credit institutions and central banks
Trading portfolio
Acquisition / sale of own shares and additional tier 1 capital
Other financial instruments
Loans at amortised cost
Loans at fair value
Deposits
Bonds issued by Realkredit Danmark
Assets/liabilities under insurance contracts
Other assets/liabilities
Cash flow from operations
Cash flow from investing activities
Acquisition/sale of businesses
Acquisition of intangible assets
Acquisition of tangible assets
Sale of tangible assets
Cash flow from investing activities
Cash flow from financing activities
Issues of subordinated debt
Redemption of subordinated debt
Dividends
Share buy-back programme
Issued additional tier 1 capital
Paid interest on additional tier 1 capital
Change in non-controlling interests
Cash flow from financing activities
Cash and cash equivalents at 1 January
Foreign currency translation
Change in cash and cash equivalents
Cash and cash equivalents, end of period
Cash and cash equivalents end of period
Cash in hand
Demand deposits with central banks
Amounts due from credit institutions and central banks within three months
Total
2015
2014
17,762
-4,770
6,858
7,969
-4,095
15,027
19,850
18,901
-56,229
115,996
15
-24,083
13,706
-51
-102,722
38,553
593
34,704
14,960
68,656
-325
-172,309
-7,879
-13,528
22,294
41,769
2,964
17,273
40,332
-7,224
11
-626
-378
661
-332
3,725
-5,212
-5,494
-5,000
5,527
-529
-2
-
-418
-316
415
-319
3,732
-29,110
-2,000
-
5,539
-183
2
-6,985
-22,020
143,543
2,277
33,015
173,500
-394
-29,563
178,835
143,543
10,638
66,199
101,998
10,582
23,294
109,667
178,835
143,543
The list of Group holdings and undertakings in note 35 provides information about restrictions on the use of cash flows from Group undertakings.
The cash flow statement is prepared according to the indirect method. The statement is based on the pre-tax profit for the year and shows the cash flows
from operating, investing and financing activities and the increase or decrease in cash and cash equivalents during the year. Cash and cash equivalents
consists of cash in hand and demand deposits with central banks as well as amounts due from credit institutions and central banks with an original matur-
ity shorter than three months.
54 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
1. Basis of preparation
Danske Bank Group prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRSs) and with
applicable interpretations (IFRIC), issued by the International Accounting Standards Board (IASB), as adopted by the EU . Furthermore, the consolidated
financial statements comply with the Danish FSA’s executive order No. 1306 dated 16 December 2008 on the use of IFRSs by undertakings subject to
the Danish Financial Business Act.
Financial statement figures are stated in Danish kroner and whole millions, unless otherwise stated. As a result, rounding discrepancies may occur be-
cause sum totals have been rounded off and the underlying decimals are not presented to financial statement users.
Monetary assets and liabilities in foreign currency are translated at the exchange rates at the balance sheet date. Exchange rate adjustments of mone-
tary assets and liabilities arising as a result of differences in the exchange rates at the transaction date and at the balan ce sheet date are recognised in
the income statement. Non-monetary assets and liabilities in foreign currency that are subsequently revalued at fair value are translated at the e x-
change rates at the date of revaluation. Exchange rate adjustments are included in the fair value adjustment of an asset or l iability. Other non-monetary
items in foreign currency are translated at the exchange rates at the transaction date. The accounting treatment of foreign currency translation of
units outside Denmark is described in note 23.
For the purpose of clarity, the primary financial statements and the notes to the financial statements are prepared using the concepts of materiality
and relevance. This means that line items not considered material in terms of quantitative and qualitative measures or relevant to financial statement
users are aggregated and presented together with other items in the primary financial statements. Similarly, information not considered material is not
presented in the notes.
The significant accounting policies are incorporated into the notes to which they relate. Except for the changes implemented during the year and ex-
plained in note 2, Danske Bank has not changed its significant accounting policies from those applied in Annual Report 201 4.
(a) Significant accounting estimates
Management’s estimates and assumptions of future events that will significantly affect the carrying amounts of assets and liabilities underlie the pre p-
aration of the consolidated financial statements. Those estimates and assumptions are presented in the following sections.
The estimates and assumptions are based on premises that management finds reasonable but which are inherently uncertain and unpredictable. The
premises may be incomplete, unexpected future events or situations may occur, and other parties may arrive at other estimated values.
Fair value measurement of financial instruments
Measurements of financial instruments that are only to a limited extent based on observable market data, such as the measurem ent of unlisted shares
and certain bonds for which there is no active market, are subject to significant estimates. The estimated fair value of illiquid bonds significantly de-
pends on the credit spread estimate. A credit spread widening of 50bp at the end of 2015 would have caused the fair value of the bonds to decrease
DKK 65 million (2014: DKK 36 million). The Group makes fair value adjustments to cover changes in counterparty risk (CVA and DVA) on derivatives,
bid-offer spreads on the net open position of the portfolio of assets and liabilities with offsetting market risk recognised at mid -market prices, and model
risk on level 3 derivatives. During 2015, the CVA and DVA model was enhanced in a number of areas. Most importantly, the mapping of the probability
of default to proxies was changed to a more advanced model. Further, a fair value adjustment to cover expect ed funding costs (FVA) was included at the
end of 2015. At 31 December 2015, the adjustments totaled DKK 1.3 billion (31 December 2014: DKK 1.0 billion), including the adjustment for credit
risk on derivatives with customers subject to objective evidence of impairment. Note 30 provides more details.
Measurement of loans
The Group makes impairment charges to account for any impairment of loans that occurs after initial recognition. Impairment c harges consist of indi-
vidual and collective charges and rely on a number of estimates, including identification of loans or portfolios of loans with objective evidence of i m-
pairment, expected future cash flows and the value of collateral. The Group determines the need for impairment charges on the basis of the customer’s
expected ability to repay debt. This ability depends on a number of factors, including the customer’s earnings capacity and t rends in general economic
environment and unemployment. Expectations of deteriorating repayment ability reduce credit quality and lead to downgrading of the customer.
The losses incurred under non-performing loan agreements depend, among other factors, on the value of collateral received. If the value of collateral
decreased 10%, individual impairment charges would increase by about DKK 2.8 billion (2014: DKK 2.9 billion). The collective impairment charges are
sensitive to the credit rating of customers. If all customers were downgraded one rating category, collective impairment charges would increase by
about DKK 3.0 billion (2014: DKK 3.9 billion). Further, a collective impairment charge of DKK 3.8 billion (2014: DKK 3.5 billion) has been recognised as
a management judgement to reflect market conditions at the balance sheet date that are not fully reflected in the Group’s models. Note 14 and the sec-
tion on credit risk in the risk management notes provide more details on impairment charges for loans. At end-2015, loans accounted for about 55% of
total assets (31 December 2014: 53%).
Danske Bank / Annual Report 2015 55
Notes – Danske Bank Group
(a) Significant accounting estimates continued
Measurement of goodwill
Goodwill on acquisition is tested for impairment once a year or more frequently if indications of impairment exist. Impairmen t testing requires man-
agement to estimate the future cash flows. A number of factors affect the value of such cash flows, including discount rates, changes in the econom ic
outlook, customer behaviour and competition. The impairment test conducted in 2015 resulted in impairment charges on goodwill of DKK 4.1 billion
(2014: DKK 9.1 billion) and on customer relations of DKK 0.5 billion (2014: DKK 0 billion) in the Group’s banking units, mainly due to a further worsen-
ing of the long-term economic outlook and an increase in capital allocated to the banking units under the new capital allocation framework that will be
implemented in the first quarter of 2016. At 31 December 2015, goodwill amounted to DKK 5.4 billion (31 December 2014: DKK 9.5 billion). Following
the impairment charges made in 2015, no goodwill at the banking units remains. For Danske Capital, the carrying amount of goodwill is DKK 1.8 billion.
The excess value (the amount by which the cash-generating unit’s recoverable amount exceeds the carrying amount) in the impairment test 2015 for
Danske Capital amounted to DKK 0.1 billion. If growth in the terminal period were lowered by 0.5 percentage points to 1.2%, or the discount rate were
increased by 0.4 percentage points to 9.4%, the excess value would be zero. In 2014, as goodwill impairment charges were recognised against the
Group’s banking units, no excess value remained, and changes to the key assumptions applied in the test could cause further impairment, although the
assumptions applied in the impairment test for 2014 included management judgements that, among others, reduced expectations for the interest lev-
el. Note 18 provides more information about impairment testing and sensitivity to changes in impairment test assumptions.
Measurement of liabilities under insurance contracts
Measurement of liabilities under insurance contracts is based on a number of actuarial com putations that rely on assumptions about a number of vari-
ables, including mortality and disability rates. Assumptions of future mortality rates are based on the Danish FSA’s benchmark, while other assum p-
tions are based on data from the Group’s own portfolio of insurance contracts. The liabilities also depend on the discount yield curve, which is fixed on
the basis of a zero-coupon yield curve estimated on the basis of euro swap market rates to which is added the yield spread between Danish and Ge r-
man government bonds and a mortgage yield curve spread. Note 17 provides more information. The risk management notes contain a sensitivity analy-
sis for life insurance. The Danish FSA’s executive order on financial reports for insurance companies etc. has been changed. The changes must be im-
plemented at 1 January 2016.Note 2(b) provides more information.
Recognition of deferred tax assets and liabilities
Recognition of deferred tax requires management to assess the probability and amount of future profit. Deferred tax assets ar ising from unused tax
losses are recognised to the extent that such losses can be offset against tax on future profit. At end -2015 deferred tax assets from recognised tax
loss carry-forwards amounted to DKK 0.3 billion (31 December 2014: DKK 0.5 billion). The tax base of unrecognised tax loss carry-forwards, relating
primarily to the Group’s banking operations in Ireland, amounted to DKK 3.2 billion (31 December 2014: DKK 3.5 billion). The full deferred tax liability
arising from international joint taxation was recognised and amounted to DKK 5.9 billion (31 December 2014: DKK 6.4 billion). Note 20 provides more
information about deferred tax.
56 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
(b) Significant accounting selections – financial instruments and insurance contracts
Financial instruments account for more than 94% of total assets and liabilities. A portion of financial assets relates to investments made under insu r-
ance contracts. The following sections provide a general description of the classification and measurement principles for financial instruments and ob-
ligations under insurance contracts.
Financial instruments – general
Purchases and sales of financial instruments are measured at fair value at the settlement date. Fair value adjustments of unsettled financial instru-
ments are recognised from the trade date to the settlement date.
The following section describes the general classification and measurement of financial instruments. The classification is shown in the table below.
Financial instruments and obligations under insurance contracts, classification and measurement
(DKK billions)
ASSETS
Cash in hand and demand deposits with
central banks
Due from credit institutions
and central banks
Derivatives
Bonds
Shares
Loans at amortised cost
Loans at fair value
Assets under pooled schemes and
unit-linked investment contracts
Assets under insurance contracts
Total financial assets, 2015
Total financial assets, 2014
LIABILITIES
Due to credit institutions and central
banks
Trading portfolio liabilities
Deposits
Bonds issued by Realkredit Danmark
Deposits under pooled schemes and
unit-linked investment contracts
Liabilities under insurance contracts**
Other issued bonds
Subordinated debt
Loan commitments and guarantees
Total financial liabilities, 2015
Total financial liabilities, 2014
Fair value
Directly through profit or loss
Amortised cost
Held-for-
trading
Designated
Interest rate
hedge*
Available-
for-sale
Hold-to-
maturity
Loans
Liabilities
Total
-
-
-
-
-
77
-
77
-
314
195
20
-
-
-
-
529
723
-
468
-
-
-
-
-
-
-
468
548
-
-
176
2
-
742
92
240
1,252
1,227
-
-
-
695
97
285
-
-
-
1,077
1,029
-
17
-
-
2
-
-
-
19
21
-
3
-
-
-
-
11
2
-
16
19
-
-
47
-
-
-
-
-
47
59
-
-
-
-
-
-
-
-
-
-
-
-
-
119
-
-
-
-
-
119
105
-
-
-
-
-
-
-
-
-
-
-
104
-
-
-
1,077
-
-
-
1,258
1,237
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
104
331
537
22
1,079
742
92
240
-
3,224
-
3,372
272
-
863
-
-
-
353
38
1
272
471
863
695
97
285
364
40
1
-
-
1,527
3,088
1,650
3,246
*The interest rate risk on fixed-rate financial assets and liabilities is hedged by derivatives (fair value hedging). The interest rate risk on fixed -rate bonds available for sale is also
hedged by derivatives.
**Liabilities under insurance contracts are recognised at the present value of expected insurance benefits.
Danske Bank / Annual Report 2015 57
Notes – Danske Bank Group
(b) Significant accounting selections – financial instruments and insurance contracts continued
Loans and financial liabilities
Loans and non-derivative financial liabilities are generally measured at amortised cost. Loans granted under Danish mortgage finance law and the is-
sued mortgage bonds funding these loans are measured using the fair value option, however.
Loans granted under Danish mortgage finance law are funded by issuing listed mortgage bonds with matching terms. Borrowers may repa y such loans
by delivering the underlying bonds. Such loans and bonds are granted and issued by the Realkredit Danmark subsidiary only.
The Group buys and sells own bonds issued by Realkredit Danmark on an ongoing basis because the bonds play an important role in the Danish money
market. If the loans and bonds were measured at amortised cost, the purchase and sale of own mortgage bonds would create timing differences in the
recognition of gains and losses.
Consequently, the Group measures loans and issued bonds at fair value in accordance with the fair value option offered by IAS 39 to ensure that nei-
ther gain nor loss will occur on the purchase of own bonds. The fair value of bonds issued by Realkredit Danmark is normally equal to their market value.
A small number of the issued bonds are illiquid, however, and the fair value of these bonds is calculated on the basis of a d iscounted cash flow valuation
technique.
The fair value of the loans is based on the fair value of the underlying bonds adjusted for changes in the fair value of the credit risk on borrowers.
Changes in the fair value of issued bonds cause corresponding changes to be made to the fair value of the loans. Consequently, changes to the fair value
of issued bonds, including as a result of changes to own credit risk, do not affect net profit or loss. Changes to the fair v alue of loans as a result of
changes to the credit risk on borrowers are reflected in Loan impairment charges in the income statement.
Securities
Securities are generally measured at fair value through profit or loss and are classified as either trading portfolio assets or securities designated at fair
value, using the fair value option. Certain bond portfolios are held for the purpose of generating a return until maturity. These portfolios are measured at
amortised cost and are classified as hold-to-maturity financial assets. Owing to significant distortion of the pricing of bonds, in 2008, the Group reclas-
sified bonds in the held-for-trading category to available-for-sale financial assets. This is the only time the Group has used the available-for-sale valua-
tion method. These bonds are measured at fair value. Unrealised fair value adjustments are recognised in Other comprehensive income, whereas i m-
pairment charges are recognised in the income statement.
Trading portfolio assets and liabilities
The trading portfolio includes financial assets acquired for sale in the near term. The trading portfolio also contains collectively managed financial
assets for which a pattern of short-term profit taking exists. Trading portfolio liabilities consist of derivatives and obligations to r epurchase securities.
All derivatives, including bifurcated embedded derivatives and derivatives used for hedging, are measured at fair value and r ecognised under the trad-
ing portfolio.
Securities designated at fair value
Other financial assets designated at fair value include securities that are managed on a fair value basis with no short -term profit taking. This category
consists mainly of securities purchased as part of the investment of insurance customer funds and recognised in the balance s heet under Assets un-
der insurance contracts as well as the liquidity portfolio managed by Group Treasury. Other securities portfolios managed on a fair value basis are rec-
ognised in the balance sheet under Investment securities.
For both trading portfolio assets and securities designated at fair value, realised and unrealised capital gains and losses and dividends are recognised
in the income statement under Net trading income.
Hold-to-maturity financial assets
This category consists of bonds not managed on a fair value basis and held for the purpose of generating a return until maturity. The bonds are mea s-
ured at amortised cost. The Group has increased its use of this category since 2013.
Hedge accounting
The Group uses derivatives to hedge the interest rate risk on most fixed-rate assets and fixed-rate liabilities measured at amortised cost and available-
for-sale financial assets. Hedged risks that meet the criteria for fair value hedge accounting are treated accordingly. The inter est rate risk on the
hedged assets and liabilities is measured at fair value through profit or loss. At end-2015, hedging derivatives measured at fair value accounted for
about 0.1% of total assets and about 0.5% of total liabilities (31 December 2014: 0.6% and 0.2%, respectively).
58 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
(b) Significant accounting selections – financial instruments and insurance contracts continued
Insurance activities – general
The Group issues life insurance policies, which are divided into insurance and investment contracts. Insurance contracts are contracts that entail si g-
nificant insurance risk or entitle policyholders to bonuses. Investment contracts are contracts that entail no significant in surance risk and comprise
unit-linked contracts under which the investment risk lies with the policyholder.
Insurance contracts
Insurance contracts comprise both an investment element and an insurance element, which are recognised as aggregate figures.
IFRS 4, Insurance Contracts, includes an option to continue the accounting treatment of insurance contracts under local GAAP. The Group’s life insur-
ance provisions are therefore recognised at their present value in accordance with the Danish FSA’s executive order on financial reports for insurance
companies etc. The life insurance provisions are presented under Liabilities under insurance contracts.
Assets earmarked for insurance contracts are recognised under Assets under insurance contracts if most of the return on the assets accrues to the
policyholders. Most of these assets are measured at fair value.
Investment contracts
Investment contracts are recognised as financial liabilities, and, consequently, contributions and benefits under such contracts are recognised directly
in the balance sheet as adjustments of liabilities. Deposits are measured at the value of the savings under Deposits under po oled schemes and unit-
linked investment contracts.
Savings under unit-linked investment contracts are measured at fair value under Assets under pooled schemes and unit -linked investment contracts.
The return on the assets and the crediting of the amounts to policyholders’ accounts are recognised under Net trading income.
Assets funded by shareholders’ equity
The separate pool of assets equal to shareholders’ equity is recognised at fair value and consolidated with other similar ass ets.
Income from insurance business
Insurance activities are consolidated in the various income statement items. Insurance premiums are recognised under Net premiums. Net insurance
benefits in the income statement consists of benefits disbursed under insurance contracts and the annual change in insurance oblig ations not deriving
from additional provisions for benefit guarantees. The return on earmarked assets is allocated to the relevant items in the i ncome statement. The re-
turn to policyholders is recognised under Net trading income as are changes to additional prov isions for benefit guarantees. Note 5 provides more in-
formation.
The sources of the Group’s net income from insurance business comprise the return on assets funded by Danica Pension’s shareholders’ equity, in-
come from unit-linked business and health and accident business, and a risk allowance for conventional life insurance.
The risk allowance is determined in accordance with the Danish FSA’s executive order on the contribution principle. If the te chnical basis for the con-
ventional life insurance business for a given period is insufficient to allow booking of the risk allowance, the amount may b e booked in later periods when
the technical basis permits. Insurance contracts guarantee a certain long-term return on policyholders’ funds. If the technical basis exceeds the inter-
est accrual to policyholders and the risk allowance, the difference is allocated to the bonus potential. The bonus potential serves as a risk buffer. If the
technical basis is insufficient to cover the interest accrual to policyholders, the shortfall is covered by the bonus potential. If the bonus potential is insu f-
ficient to cover the shortfall, the difference is paid by the Group. Similarly to the risk allowance, amounts paid by the Gro up are booked to the shadow
account and may be recovered at a later date when the technical basis permits. However, as of 1 January 2016, a change of the executive order on the
contribution principle implies that if the technical basis in a given year is insufficient to allow the booking of the risk allowance, the amount can no longer
be recovered in later years. Under the transitional provisions, any unrecognised risk allowance amount at 31 December 2015 may be recovered over
the next five years.
Danske Bank / Annual Report 2015 59
Notes – Danske Bank Group
(c) Financial highlights
The financial highlights shown in note 3 are used in the Management’s report and represent the financial information regularly provided to manage-
ment. The presentation in the financial highlights deviates from the presentation in the consolidated financial statements prepared under IFRS as fol-
lows:
Income contributed by Fixed Income, Currencies and Commodities (FICC) and trading income at Capital Markets (both part of C&I) is recognised as net
interest income, net fee income, net trading income and other income in the consolidated income statement. Similarly, income at Group Treasury (part
of Other Activities) is presented as net interest income, net trading income etc. in the consolidated income statement. As the distribution of income be-
tween the various income line items can vary considerably from year to year, depending on the underlying transactions and market conditions, income
contributed by FICC, trading income at Capital Markets and income at Group Treasury (except income from the internal bank and the hold-to-maturity
portfolio) are presented net in the financial highlights as net trading income.
Income and expenses from Danica Pension are consolidated on a line-by-line basis in the consolidated income statement. The return on conventional
insurance activities accruing to the Group is determined by the contribution princip le. Since the Group’s return cannot be derived directly from the indi-
vidual income statement items, earnings contributed by Danica Pension is presented on a single line in the financial highlights as net income from in-
surance business.
The Non-core segment includes certain customer segments that are no longer considered part of the Group’s core business. The profit or loss is there-
fore presented as a separate line item in the financial highlights Profit before tax, Non-core, whereas the individual income and expense items are in-
cluded in the various line items in the consolidated income statements.
For operating leases, the gains or losses on the sale of lease assets at the end of the lease agreement are presented on a net basis under Other income
in the financial highlights to better reflect the development in the cost base. In the consolidated income statement, gains or losses on the sale of operat-
ing lease assets, excluding properties, are recognised on a gross basis, i.e. the revenue on the sale of the assets are recognised under Other income
and the carrying amount of the lease assets is recognised under Expenses.
60 Danske Bank / Annual Report 2015
Notes Danske Bank Group
2. Changes and forthcoming changes to accounting policies and presentation
(a) Changes to significant accounting policies and presentation during the year
No new standards were applied during 2015. The Group applied the amendments to standards effective in the EU at 1 January 2015, i.e.
the amendments to various standards included in the Annual Improvements to IFRS cycle 2011-2013. The application of these
amendments had an insignificant effect on the financial statements.
Changes to the method of accounting for a pension scheme
The Group has a pension scheme for around 200 current and 1,100 former employees of Danske Bank held with Danica Pension. Danske
Bank has guaranteed a real return on policyholders savings. In continuation of a dialogue with the Danish FSA, Danica Pension changed
the accounting treatment in the annual report 2014 from net presentation of the scheme and the financial guarantee to gross
presentation with the financial guarantee recognised as an asset at an amount representing the expected payments. This change has
reduced shareholders equity at 1 January 2014 by DKK 839 million for Danske Bank Group. The end-2014 effect is an increase in
insurance liabilities of DKK 1,037 million, a reduction of other liabilities of DKK 73 million, a reduction in tax liabilities of DKK 228 million
and a reduction of shareholders equity of DKK 736 million. The net profit for 2014 has been increased by DKK 103 million, comprising an
increase in net trading income of DKK 134 million and a decrease in tax of DKK 31 million. The change increased earnings per share from
DKK 3.6 to DKK 3.8 in 2014. The financial guarantee from Danske Bank to Danica Pension was settled in the third quarter of 2015.
Danica Pension is thus now the only entity in the Group that is exposed to the risks related to the pension scheme. Further information on
the changes to the method of the accounting for the pension scheme is available at danicapension.dk.
Changes to financial highlights and segment reporting
The liquidity portfolio was transferred from FICC at C&I to Group Treasury during the third quarter of 2014. At FICC, the cost of holding
the liquidity portfolio was booked under net trading income. At Group Treasury, the cost has been borne by the internal bank and booked
under net interest income from 1 January 2015 with restatement of the highlights for 2014. Further, the restatement covers a change in
the disclosure of the internal bank result.
Brokerage and debt capital markets fees have so far been disclosed as net trading income. Income from these services is rightly net fee
income and is disclosed as such from 1 January 2015.
We have decided to exit our personal banking operations in the Baltics. Consequently, Baltic personal banking customers have been
transferred to the Non-core unit from 1 January 2015.
Comparative figures for 2014 have been restated, except for the transfer of the Baltic personal banking customers as the effect is
immaterial.
The table below shows the effect on the highlights for 2014 from changes to the accounting for a pension scheme and from other changes
to the financial highlights and segment reporting presented on the previous page.
Income statement
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net income from insurance business
Total income
Operating expenses
Goodwill impairments
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Profit before tax
Tax
Net profit for the period
Highlights
2014
Pension
scheme
Internal
Bank
23,107
10,491
6,562
1,344
2,362
43,866
22,641
9,099
12,126
2,788
9,338
-1,503
7,835
3,989
3,846
-
-
-
-
134
134
-
-
134
-
134
-
134
31
103
-794
-
794
-
-
-
-
-
-
-
-
-
-
-
-
Net fee
income
-
663
-663
-
-
-
-
-
-
-
-
-
-
-
-
Adjusted
highlights
2014
22,313
11,154
6,693
1,344
2,496
44,000
22,641
9,099
12,260
2,788
9,472
-1,503
7,969
4,020
3,949
Danske Bank / Annual Report 2015 61
Notes – Danske Bank Group
2. Changes and forthcoming changes to accounting policies and presentation continued
(b) Standards and interpretations not yet in force
The IASB has issued a number of amendments to IFRSs that have not yet come into force. Similarly, the IFRIC has issued a new interpretation that has
not yet come into force. The sections below explain the changes that are likely to affect the Group’s future financial report ing.
IFRS 9, Financial Instruments
In July 2014, the IASB issued IFRS 9 Financial Instruments that will replace IAS 39. The standard provides principles for classification and measure-
ment of financial instruments, provisioning for expected credit losses and the new general hedge accounting model. The general hedge accounting
model will later be supplemented by a new macro hedge accounting model, which the IASB is working on.
IFRS 9, which has not yet been adopted by the EU, is effective from 1 January 2018. The Group does not plan to adopt IFRS 9 before the effective date.
Classification and measurement
Under IFRS 9, financial assets are classified on the basis of the business model adopted for managing the assets and on their contractual cash flow
characteristics, including any embedded derivatives (unlike IAS 39, IFRS 9 no longer requires bi furcation). Assets held with the objective of collecting
contractual cash flows that are solely payments of principal and interest on the principal amount outstanding are measured at amortised cost. Assets
held with the objective of both collecting contractual cash flows and to sell and at the same time have contractual cash flows that are solely payments
of principal and interest are measured at fair value through Other comprehensive income. Fair value through Other comprehensive income results in
the assets being recognised at fair value in the balance sheet and at amortised cost in the income statement. All other financial assets are measured at
fair value through profit or loss. As in IAS 39, IFRS 9 includes an option to designate at fair value through profit or loss if doing so eliminates or signifi-
cantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains or
losses on them on different bases. Further, IFRS 9 includes an option to irrevocably elect to present fair value changes on equity instruments that are
not held for trading in Other comprehensive income. Such fair value changes will not subsequently be reclassified to the income statement. Dividends
from such investments are recognised in the income statement.
The principles applicable to financial liabilities are largely unchanged from IAS 39. Generally, financial liabilities are st ill measured at amortised cost
with bifurcation of embedded derivatives not closely related to the host contract. Financial liabilities measured at fair value comprise derivatives, the
trading portfolio and liabilities designated at fair value through profit or loss under the fair value option. Value adjustments relating to the inherent cred-
it risk of financial liabilities designated at fair value are, however, recognised in Other comprehensive income unless this leads to an accounting mis-
match.
Provisioning for expected credit losses
Provisioning for expected credit losses on financial assets recognised at amortised cost in the income statement depends on whether the credit risk
has increased significantly since initial recognition. If the credit risk has not increased significantly, the provision equals 12-month expected credit
losses. If the credit risk has increased significantly, the provision equals the lifetime expected credit losses. Under IAS 39, only incurred credit losses
are recognised.
Hedge accounting
The general hedge accounting model does not fundamentally change the types of hedging relationships or the requirements to recognise ineffectiv e-
ness through profit or loss. IFRS 9 includes an option to continue to use the IAS 39 principles for hedge accounting until the IASB has finalised its pro-
ject on the new macro hedge accounting.
Impact on the Group’s financial statements
The Group is currently assessing the impact from IFRS 9 on the Group’s financial statements. The implementation of the principles for classification
and measurement in IFRS 9 is not expected to lead to significant reclassifications between fair value and amortised cost. The allowance account is ex-
pected to increase when provisions for expected credit losses on loans at amortised cost are to be recognised instead of provisions for incurred losses
only. No firm decision has yet been taken on whether the Group should continue to apply the hedge accounting under IAS 39 (until the IASB’s macro
hedge accounting project is finalised) or not.
IFRS 9 introduces several new concepts etc., especially on the provisioning for expected credit losses. While it is the Group’s ambition to leverage
models from the IRB framework, these concepts require interpretation and internal model development. Further, it is expected that EBA will issue
guidelines during 2016, and these guidelines may influence the Group’s final choice of the definitions to be applied. During 2015, the Group started to
analyse the changes that will have to be implemented to the Group’s modelling framework and IT systems to co pe with the provisioning for expected
credit losses. The design of and changes to the Group’s modelling framework and IT systems are expected to start in the first quarter of 201 6 and
stretch into 2017. It is not yet possible to give an estimate of the quantitative impact from the implementation of IFRS 9.
62 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
2. Changes and forthcoming changes to accounting policies and presentation continued
IFRS 15, Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. IFRS 15 replaces IAS 18, Revenue, and other existing IFRSs on reve-
nue recognition. Under IFRS 15, revenue is recognised when the performance obligations inherent in the contract with a customer are satisfied. The
new standard also includes additional disclosure requirements.
IFRS 15, which has not yet been adopted by the EU, is effective from 1 January 2018. Danske Bank is assessing the potential impact of the new stand-
ard on revenue recognition in the Group and the financial statements. It is not yet possible to give an estimate of the effect on the financial statements.
IFRS 16, Leases
In January 2016, the IASB issued IFRS 16, Leases. IFRS 16, that replaces IAS 17, Leases, will only imply insignificant changes t o the accounting for
lessors. For lessees, the accounting will change significantly, as all leases (except short-term leases and small asset leases) will be recognised in the
balance as a right-of-use asset. Initially, the lease liability and the right-of-use asset are measured at the present value of future lease payments (de-
fined as economically unavoidable payments). The right-of-use asset is subsequently depreciated in a way similar to depreciation of other assets, such
as tangible assets, i.e. typically on a straight-line basis over the lease term.
IFRS 16, which has not yet been adopted by the EU, is effective from 1 January 2019. It is not yet possible to give an estima te of the effect on the finan-
cial statements from the changes in the accounting treatment when the Group acts as a lessee.
Changes to the accounting for insurance activities
In July 2015, the Danish FSA issued changes to the executive order on financial reports for insurance companies etc. The changes were made to re-
flect the measurement of insurance liabilities under the Solvency II framework. The changes must be implemented at 1 January 2016. The implementa-
tion is expected to reduce shareholders’ equity by around DKK 0.2 billion, and 2015 is expected to be restated in the interim report for the first quarter
of 2016.
Forthcoming changes to financial highlights and segment reporting
As of 1 January 2016, Danske Bank in Northern Ireland will be disclosed as a separate business unit. In addition, a new wealth management business
unit will be established and will be presented as a separate business unit in the financial reporting effective from the inte rim report for the first quarter
of 2016. The Wealth Management unit will include Danica Pension, Danske Capital and parts of the private banking operations. Note 38 provides more
information.
Danske Bank / Annual Report 2015 63
Notes – Danske Bank Group
3. Business model and business segmentation
Danske Bank is a Nordic universal bank with bridges to the rest of the world. The Group offers customers a wide range of services in the fields of bank-
ing, mortgage finance, insurance, pension, real-estate brokerage, asset management and trading in fixed income products, foreign exchange and equ i-
ties.
The Group consists of a number of business units and support functions. The business units are segmented according to customers, legislation and
products and services characteristics:
Personal Banking serves personal and private banking customers. The unit focuses on providing proactive advice to customers and making day-to-day
banking simple and efficient through innovative digital solutions.
Business Banking serves small and medium-sized businesses through a large network of national finance centres, branches, contact centres and online
channels. The unit offers leading solutions within financing, investing, cash management and risk management.
Corporates & Institutions serves large Nordic corporate and institutional customers in the Nordic countries and beyond. This wholesale division of the bank
provides strategic advice, financial solutions and products within Capital Markets, Fixed Income, Currencies and Commodities, and Transaction Banking.
Danske Capital develops and sells asset and wealth management products and services that are marketed through Personal Banking and directly to busi-
nesses, institutional clients and third-party distributors. Danske Capital also supports the advisory and asset management activities of Personal Banking.
Danica Pension carries out the Group’s activities in the life insurance and pensions market. Danica Pension serves both personal and business customers.
Its products are marketed through a range of channels in the Group, primarily Personal Banking and Danica Pension’s own insurance brokers and advisers.
Danica Pension offers unit-linked products that allow customers to select their own investment profiles and the return on savings depends on market
trends. Danica Pension also offers Danica Traditionel. This product does not offer individual investment profiles, and Danica Pension sets the rate of inter-
est on policyholders’ savings.
Non-core includes certain customer segments that are no longer considered part of the core business. The Non-core unit is responsible for the con-
trolled winding-up and divestment of this part of the loan portfolio. The portfolio consists of loans to customers in Ireland and liquidity back-up facilities
for Special Purpose Vehicles (SPVs) and conduit structures. On 1 January 2015, all personal banking customers in the Baltics were transferred to the
Non-core unit.
Other Activities encompasses Group Treasury, Group support functions and eliminations, including the elimination of returns on own shares. Group
Treasury is responsible for the Group’s liquidity management and funding.
Accounting policy
Segment reporting complies with the significant accounting policies. The ‘Reclassification’ column shows adjustments made to the IFRS statements
in the calculation of the financial highlights.
Internal income and expenses are allocated to the individual segments on an arm’s -length basis. Expenses incurred centrally, including expenses in-
curred by support, administrative and back-office functions, are charged to the business units according to consumption and activity. Funding costs
for lending and deposit activities (FTP) are allocated on the basis of a maturity analysis of loans and deposits, interbank rates and funding spreads,
and depend on market trends.
Segment assets and liabilities are assets and liabilities that are used for maintaining the operating activities of a segment or have come into existence
as a result of such activities and that are either directly attributable or may be reasonably allocated to a segment. A calculated share of shareholders’
equity is allocated to each segment. Other assets and liabilities are recognised in the Other activities segment.
Capital (shareholders’ equity) is allocated to the business units based on the relative share of the risks with goodwill allocated directly to the r elevant
business segments and capital allocated to the insurance business in accordance with regulatory requirements for insurance business.
A calculated interest income equal to the risk-free return on its allocated capital is apportioned to each business unit and offset by a corresponding
interest expense at Other Activities. This income is calculated on the basis of the short-term money market rate. The interest expense on equity ac-
counted additional tier 1 capital is charged to the business units on the basis of the capital allocated to each unit and off set at Other Activities.
64 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
3. Business model and business segmentation continued
(a) Business segments 2015
Danske
Other
Danica
Capital Pension Activities
Non-
core
Elimina-
tions
Reclassi-
Total
fication Highlights
Personal Business
Banking Banking
9,416
5,108
724
610
-
-
9,091
2,109
665
2,201
-
-
C&I
6,580
1,928
1,360
5
-
-
-7
2,682
-14
2
-
-
4,422
-1,114
7,078
1,561
21,359
30,468
3,506
-59
-2,682
1,033
-
-
-
-
-
-
-
-
15,858
10,389
14,066
6,817
9,873
4,412
2,663
1,014
2,839
947
1,797
990
291
29
12
2
-
-
-
334
406
35
-4
-234
-138
-
-
33,333
10,679
6,908
5,275
21,359
30,468
-11,857
1,443
25
-3,497
-21,359
-30,468
21,476
12,122
6,933
1,778
-
-
-
-
1,892
1,892
-343
-189
47,086
24,785
-2,885
-2,958
44,201
21,827
3,305
1,296
-
-
-
-
-
-
4,601
-
4,601
2,164
5,953
5,461
1,649
1,892
807
-72
-154
17,701
72
17,773
332
-343
65
-
-
4
-118
-
-61
118
57
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net premiums
Net insurance benefits
Net income from
insurance business
Total income
Operating expenses
Goodwill impairment
charges
Profit before loan
impairment charges
Loan impairment
charges
Profit before tax, core
Profit before tax,
Non-core
1,832
6,296
5,396
1,649
1,892
802
-
-
-
-
-
-
Profit before tax
1,832
6,296
5,396
1,649
1,892
802
46
-
46
-154
17,762
-46
17,716
-
-
46
46
-154
17,762
-
17,762
-
Loans, excluding reverse
transactions
Other assets
Total assets in Non-core
170,021
801,462 645,758
222,438 179,889 3,029,737
-
-
-
258
-
11,847 375,110 2,026,661
-
-
-
22,224 23,844
-10,318
-
-30,339 1,633,228
-4,175,713 1,659,651
-
-
-23,844 1,609,384
-392 1,659,259
24,236
24,236
Total assets
1,023,900 825,647 3,199,758
12,105 375,110 2,048,885 13,526 -4,206,052 3,292,878
- 3,292,878
Deposits, excluding
repo deposits
Other liabilities
Allocated capital
Total liabilities in
Non-core
Total liabilities
and equity
Profit before tax as % of
allocated capital (avg.)
Cost/income ratio before
goodwill impairment
charges (%)
Full-time-equivalent staff,
end of year
346,920 256,279
213,532
656,467 534,723 2,952,564
33,661
34,645
20,513
-
228
9,684
9,250 362,495 1,998,299
40,902
2,628
12,615
3,735
5,242
4,549
-9,881
820,497
-4,196,171 2,322,869
149,513
-
-3,735
816,762
-1,785 2,321,084
149,513
-
-
-
-
-
-
-
-
-
-
5,520
5,520
1,023,900 825,647 3,199,758
12,105 375,110 2,048,885 13,526 -4,206,052 3,292,878
- 3,292,878
7.5
17.0
14.8
62.7
15.8
2.7
0.8
65.5
48.5
44.7
38.1
33.3
55.1
121.3
6,491
2,943
1,832
518
742
6,246
277
-
-
-
11.9
52.6
19,049
Personal Banking customers in the Baltics were transferred to Non-core from 1 January 2015.
In the financial highlights, income contributed by FICC and trading income at Capital Markets (both part of C&I) is presented as Net trading income.
Similarly, income at Group Treasury (part of Other Activities) is presented as Net trading income except for income at the internal bank and income on
the hold-to-maturity portfolio. Income and expenses at Danica Pension are recognised as Net income from insurance business, and earnings from Non -
core activities as Profit before tax, Non-core. For operating leases, the gains or losses on the sale of lease assets are presented on a net basis under
Other income. The Reclassification column shows the adjustments made to the figures presented in the IFRS statements in the calculation of the High-
lights.
Danske Bank / Annual Report 2015 65
Notes – Danske Bank Group
3. Business model and business segmentation continued
(a) Business segments 2014
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net premiums
Net insurance benefits
Net income from
insurance business
Total income
Operating expenses
Goodwill impairment
charges
Profit before loan
impairment charges
Loan impairment
charges
Profit before tax, core
Profit before tax,
Non-core
Profit before tax
Loans, excluding reverse
transactions
Other assets
Total assets in Non-core
Total assets
Deposits, excluding
repo deposits
Other liabilities
Allocated capital
Total liabilities in
Non-core
Total liabilities
and equity
Profit before tax as % of
allocated capital (avg.)
Cost/income ratio be-
fore goodwill impairment
charges (%)
Full-time-equivalent
staff, end of year
Personal
Banking
Business
Banking
10,764
4,567
723
632
-
-
-
8,978
2,082
637
1,884
-
-
-
C&I
7,966
1,927
-780
8
-
-
2
2,402
1
-
-
-
-
-
16,686
10,626
13,581
6,841
9,121
4,614
2,405
999
Danske
Danica
Capital Pension
Other
Activities
Non-
core
Elimina-
tions
Reclassi-
Total
fication Highlights
4,824
-1,091
10,219
1,787
20,631
33,024
-
3,347
851
1,756
-66
-623
369
-
-
-
1,435
1,088
187
18
3
1
-
-
-
209
782
130
-25
-326
-134
-
-
-
-355
-159
34,607
9,814
9,854
4,547
20,631
33,024
-
46,429
25,642
-12,294
1,340
-3,162
-3,203
-20,631
-33,024
2,496
-2,429
-3,001
22,313
11,154
6,693
1,344
-
-
2,496
44,000
22,641
5,539
3,559
-
-
-
-
-
-
9,099
-
9,099
521
1,412
-891
-
-891
786,395
208,610
-
995,005
329,463
639,680
25,862
3,181
1,007
2,174
4,507
1,406
2,496
345
-573
-196
11,688
572
12,260
372
-
-
-
930
4,135
1,406
2,496
345
-1,503
-
-
-
-
-
-
2,174
4,135
1,406
2,496
345
-1,503
340
169,611
612,479
192,059 4,230,977 18,467 365,247 1,835,957
-
24,633 29,609
-4,881
-
-
804,538 4,400,588 18,807 365,247 1,860,591 24,728
-
-
-
-
-
-196
-
-196
3,718
7,969
-
7,969
-930
1,503
-1,503
-
2,788
9,472
-1,503
7,969
-29,730 1,593,338
-4,986,759 1,859,677
-
-
-5,016,489 3,453,015
-29,609 1,563,729
-2,720 1,856,957
32,329
32,329
- 3,453,015
174,221
259,770
4,331
507,457 4,188,719 16,137 353,024 1,827,319 12,766
7,631
37,311
37,648
23,494
12,223
9,778
2,538
132
-
-9,923
767,772
-5,006,566 2,538,535
146,708
-
-4,331
763,441
-619 2,537,916
146,708
-
-
-
-
-
-
-
-
-
-
4,950
4,950
995,005
804,538 4,400,588
18,807 365,247 1,860,591 24,728
-5,016,489 3,453,015
- 3,453,015
-2.8
5.2
10.9
54.8
20.8
2.9
-17.9
63.7
50.4
50.6
41.5
6,673
3,663
1,646
506
25.4
772
75.6
5,267
-
75
-
-
5.4
55.2
18,603
Personal Banking and Business Banking customers in Ireland were transferred to Non-core with effect from 1 January 2014.
66 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
3. Business model and business segmentation continued
Personal Banking by country, 2015
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Goodwill impairment charges
Profit before loan impairment charges
Loan impairment charges
Denmark
Finland
Sweden
Norway
Northern
Ireland
Other*
5,968
3,271
598
145
9,982
5,677
-
4,305
328
877
921
39
50
1,887
1,329
3,155
-2,597
43
640
349
22
1
1,012
716
-
296
8
288
1,173
165
-18
414
1,734
1,198
-
536
-4
540
714
243
59
1
1,017
801
150
66
-29
95
Profit before tax
3,977
-2,640
Loans, excluding reverse transactions
Deposits, excluding repo deposits
Net interest income as % p.a. of loans
and deposits
Cost/income ratio before goodwill
impairment charges (%)
519,329
203,883
94,098
48,024
73,113
28,132
89,921
26,481
18,879
33,300
0.83
56.9
0.62
70.4
0.63
70.8
1.01
69.1
1.37
78.8
*Other includes staff functions and other non-country-specific costs.
Personal Banking by country, 2014
Total
9,416
5,108
724
610
15,858
10,389
3,305
2,164
332
1,832
801,462
346,920
0.82
65.5
44
159
24
-1
226
668
-
-442
-14
-428
6,122
7,100
0.33
-
Denmark
Finland
Sweden
Norway
Northern
Ireland
Other*
Total
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Goodwill impairment charges
Profit before loan impairment charges
Loan impairment charges
7,197
2,827
608
139
10,771
6,067
-
4,704
1,329
1,123
917
26
52
2,118
1,411
3,493
-2,786
58
581
313
19
1
914
708
-
206
51
155
1,118
149
-12
438
1,693
1,164
-
529
14
515
Profit before tax
3,375
-2,844
Loans, excluding reverse transactions
Deposits, excluding repo deposits
Net interest income as % p.a. of loans
and deposits
Cost/income ratio before goodwill
impairment charges (%)
532,446
194,708
92,754
46,450
67,090
26,672
70,758
25,545
0.99
56.3
0.81
66.6
0.62
77.5
1.16
68.8
*Other includes staff functions and other non-country-specific costs.
680
210
54
-
944
762
2,046
-1,864
-41
-1,823
17,850
30,321
1.41
80.7
65
151
28
2
246
514
-
-268
1
-269
5,497
5,767
0.58
-
10,764
4,567
723
632
16,686
10,626
5,539
521
1,412
-891
786,395
329,463
0.96
63.7
Danske Bank / Annual Report 2015 67
Notes – Danske Bank Group
3. Business model and business segmentation continued
Business Banking by country, 2015
Denmark
Finland
Sweden
Norway
Northern
Ireland
Baltics
Other*
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Goodwill impairment charges
Profit before loan impairment charges
Loan impairment charges
Profit before tax
4,708
784
336
2,055
7,883
3,754
-
4,129
-300
4,429
789
435
44
24
1,292
679
1,296
-683
135
-818
1,683
336
111
14
2,144
867
-
1,277
112
1,165
962
199
68
93
1,322
608
-
714
292
422
782
245
59
14
1,100
507
-
593
-534
1,127
292
111
48
1
452
268
-
184
-49
233
Loans, excluding reverse transactions
Deposits, excluding repo deposits
371,489
84,569
50,820
44,434
122,230
42,298
58,580
39,566
30,600
30,316
12,026
15,096
Net interest income as % p.a. of loans
and deposits
Cost/income ratio before goodwill
impairment charges (%)
1.03
47.6
0.83
52.6
1.02
40.4
0.98
46.0
1.28
46.1
1.08
59.3
*Other includes staff functions and other non-country-specific costs.
Business Banking by country, 2014
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Goodwill impairment charges
Profit before loan impairment charges
Loan impairment charges
4,811
733
285
1,726
7,555
3,486
-
4,069
1,148
797
421
37
33
1,288
730
1,501
-943
87
1,505
318
106
5
1,934
875
-
1,059
-3
846
194
55
99
1,194
617
-
577
99
478
698
223
59
11
991
544
-
447
-312
759
414
194
94
12
714
465
2,058
-1,809
-12
-1,797
Profit before tax
2,921
-1,030
1,062
Loans, excluding reverse transactions
Deposits, excluding repo deposits
360,690
82,769
47,017
45,726
106,367
40,454
52,035
39,519
27,603
26,242
18,823
25,060
Net interest income as % p.a. of loans
and deposits
Cost/income ratio before goodwill
impairment charges (%)
1.08
0.86
1.03
0.92
1.30
0.94
46.1
56.7
45.3
51.7
54.9
65.1
*Other includes staff functions and other non-country-specific costs.
Total
9,091
2,109
665
2,201
14,066
6,817
1,296
5,953
-343
6,296
645,758
256,279
1.01
48.5
-125
-1
-1
-
-127
134
-
-261
1
-262
13
-
-
-
-93
-1
1
-3
-96
123
-
-219
-
-219
-
-
-
-
8,978
2,082
637
1,884
13,581
6,841
3,559
3,181
1,007
2,174
612,535
259,770
1.03
50.4
Denmark
Finland
Sweden
Norway
Northern
Ireland
Baltics
Other*
Total
68 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
3. Business model and business segmentation continued
(b) Total income broken down by type of product (DKK millions)
Business banking
Home finance and savings
Trading
Day-to-day banking
Wealth management
Leasing
Insurance
Other
Total
2015
12,188
11,385
7,366
4,279
4,742
2,805
2,865
1,457
47,087
2014
12,224
10,464
6,426
5,745
4,078
3,041
3,369
1,081
46,428
Business banking comprises interest and fee income from transactions with business customers. Home finance and savings comprises interest and
fee income from financing and savings products. Trading comprises income from fixed -income and foreign exchange products, including brokerage. Day-
to-day banking comprises income from personal banking products in the form of personal loans, cards and deposits. Wealth managem ent comprises
income from the management of assets, including pooled assets and assets in unit trusts. Leasing e ncompasses income from both finance and operat-
ing leases sold by the Group’s leasing operations. Insurance comprises income from Danica Pension and insurance services sold to customers through
the banking units.
Danske Bank Group does not have any single customer that generates 10% or more of the Group’s total income.
(c) Geographical segmentation
The geographical segmentation of income from external customers is shown in compliance with IFRSs and does not reflect the Group’s management
structure. The geographical segmentation below reflects the customer’s country of residence, except trading income, which is broken down by the
country in which the activities are carried out. Management believes that the business segmentation provides a more informative description of the
Group’s activities.
Total income from external customers (DKK millions)
Denmark
Finland
Sweden
Norway
Ireland
UK
Other
Total
2015
26,094
4,681
6,392
5,127
572
2,831
1,390
47,087
2014
25,767
4,805
6,132
4,935
646
2,629
1,514
46,428
Danske Bank / Annual Report 2015 69
Notes – Danske Bank Group
4. Activities by country
Under CRD IV, a financial institution must disclose, by country in which it operates through a subsidiary or a branch, information about income, number
of employees, profit before tax, tax and public subsidies received. This information is not comparable to the geographical segmentation presented in
note 3(c), in which segmentation is based on the customer’s country of residence. The Group has not received any public subsidies that relate to the
Group’s activities as a financial institution. The goodwill impairment charge of DKK 4.1 billion is included in profit before tax in Denmark (2014: DKK9.1
billion).
2015
Denmark
Finland
Sweden
Norway
United Kingdom
Ireland
Estonia
Latvia
Lithuania
Luxembourg
Russia
Germany
Poland
USA
India
Total
Income*
(DKK millions)
Full-time-
equivalent staff
Profit before tax
(DKK millions)
Tax on profit
(DKK millions)
55,259
6,226
6,180
7,522
2,826
528
352
74
212
705
144
198
93
189
-
10,098
2,021
1,327
1,379
1,384
56
406
80
1,423
92
47
34
41
24
637
11,868
-2,801
3,521
2,138
1,553
930
126
25
85
164
49
33
49
23
-
80,507
19,049
17,762
-2,508
-199
-731
-600
-321
37
-226
3
-18
-48
-10
-5
-11
5
-8
-4,639
*Income is defined as interest income, fee and commission income and other operating income.
2014
Denmark
Finland
Sweden
Norway
United Kingdom
Ireland
Estonia
Latvia
Lithuania
Luxembourg
Russia
Germany
Poland
USA
India
Total
*Income is defined as interest income, fee and commission income and other operating income.
Income*
(DKK millions)
Full-time-
equivalent staff
Profit before tax
(DKK millions)
Tax on profit
(DKK millions)
54,872
6,557
9,651
9,607
2,659
703
400
78
247
746
113
256
99
96
-
10,567
2,092
1,277
1,281
1,420
101
489
85
994
92
46
32
45
23
59
86,082
18,603
8,296
-3,236
3,490
2,511
-914
-742
-1,841
-18
66
128
39
110
48
32
-
7,969
-1,925
-294
-749
-637
-265
0
-61
14
-7
-36
-8
-31
-9
-9
-2
-4,020
70 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
4. Activities by country continued
Danske Bank carries out its activities in the countries listed below under a variety of names, of which the main ones are: Danske Bank (banking, trading and
wealth management activities carried out in all countries, except for mortgage finance activities in Denmark, which are carried out under the Realkredit
Danmark A/S name, Danica Pension (life insurance), and Danske Leasing A/S (leasing). Note 35 discloses the company names of the Group’s significant
subsidiaries.
Activities in the individual countries
Activities in Denmark include: Banking, trading, wealth management, life insurance, leasing and other activities.
Activities in Finland include: Banking, trading, wealth management and leasing.
Activities in Sweden include: Banking, trading, wealth management, life insurance and leasing.
Activities in Norway include: Banking, trading, wealth management, leasing, life insurance and other activities.
Activities in the United Kingdom include: Banking, trading and leasing.
Activities in Ireland include: Banking.
Activities in Estonia include: Banking, wealth management and leasing.
Activities in Latvia include: Banking.
Activities in Lithuania include: Banking, wealth management, leasing, life insurance and other activities.
Activities in Luxembourg include: Banking and wealth management.
Activities in Russia include: Banking.
Activities in Germany include: Banking.
Activities in Poland include: Banking.
Activities in the USA include: Trading.
Activities in India include: Other activities.
Other activities include: Group support functions, real-estate brokerage and activities taken over by the Group under non-performing-loan agreements.
Danske Bank / Annual Report 2015 71
Notes – Danske Bank Group
5. Net interest and net trading income
This note shows interest income, interest expense and net trading income broken down by balance sheet item and by portfolios of financial instruments
measured at amortised cost or fair value.
Accounting policy
Interest income and expenses
Interest income and expenses arising from interest-bearing financial instruments measured at amortised cost are recognised according to the effec-
tive interest rate method on the basis of the cost of the individual financial instrument. Interest includes amortised amounts of fees that are an inte-
gral part of the effective yield on a financial instrument, such as origination fees, and amortised differences between cost and redemption price, if any.
Interest on loans subject to individual impairment is recognised on the basis of the impaired value. The interest rate risk on most financial portfolios
recognised at amortised cost is hedged by derivatives using fair value hedge accounting. Note 13 provides more information on hedge accounting.
Interest income and expenses arising from financial instruments measured at fair value also include origination fees on those instruments, except in-
terest on assets and deposits under pooled schemes and unit-linked investment contracts which is recognised under Net trading income.
Net trading income
Net trading income includes realised and unrealised capital gains and losses on trading portfolio assets and other securities recognised at fair value
as well as exchange rate adjustments and dividends. Further, the fair value adjustments of Loans at fair value and bonds issued by Realkredit Dan-
mark are recognised in net trading income except for the fair value adjustments of the credit risk on loans that are recognised under Loan impairment
charges. Moreover, the item includes the change in insurance obligations during the year due to additional provisions for benefit guarantees and the
tax on pension returns.
Returns (interest income and fair value changes) on assets under pooled schemes and unit-linked investment contracts and the crediting of these re-
turns to customer accounts are recognised under Net trading income.
72 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
5. Net interest and net trading income continued
2015 (DKK millions)
Financial portfolios at amortised cost
Due from/to credit institutions and central banks
Repo and reverse transactions
Loans and deposits
Hold-to-maturity investments
Other issued bonds
Subordinated debt
Other financial instruments
Interest
income
Interest
expense
Net interest
income
Net trading
income
-121
-508
22,183
1,745
-
-
301
706
-392
2,592
-
6,078
1,714
1,395
-827
-116
19,591
1,745
-6,078
-1,714
-1,094
-8
-
-500
-
3,192
526
-
Total
-835
-116
19,091
1,745
-2,886
-1,188
-1,094
Total
23,600
12,093
11,507
3,210
14,717
Financial portfolios at fair value
Loans at fair value and bonds issued by Realkredit Danmark
Trading portfolio and investment securities
Assets and deposits under pooled schemes and
unit-linked investment contracts
Assets and liabilities under insurance contracts
Total
20,653
11,923
-
3,490
14,240
-
-
-
6,413
11,923
-
3,490
36,066
14,240
21,826
Total net interest and net trading income
59,666
26,333
33,333
2014 (DKK millions)
Financial portfolios at amortised cost
Due from/to credit institutions and central banks
Repo and reverse transactions
Loans and deposits
Hold-to-maturity investments
Other issued bonds
Subordinated debt
Other financial instruments
179
1,271
25,654
1,266
-
-
156
412
1,331
5,009
-
6,856
2,512
620
-233
-60
20,645
1,266
-6,856
-2,512
-464
-
-6,353
-146
10,196
3,697
6,908
1
-
1,098
-
-4,620
-1
-
6,413
5,570
-146
13,686
25,523
40,240
-232
-60
21,743
1,266
-11,476
-2,513
-464
Total
28,526
16,740
11,786
-3,522
8,264
Financial portfolios at fair value
Loans at fair value and bonds issued by Realkredit Danmark
Trading portfolio and investment securities
Assets and deposits under pooled schemes and
unit-linked investment contracts
Assets and liabilities under insurance contracts
22,584
11,944
-
3,897
15,604
-
-
-
6,980
11,944
-
3,897
-
3,386
-210
10,199
6,980
15,330
-210
14,096
Total
38,425
15,604
22,821
13,375
36,196
Total net interest and net trading income
66,951
32,344
34,607
9,854
44,460
For 2015, negative interest income amounted to DKK 774 million (of which DKK 488 million relates to due from credit institutions and central banks
and DKK 286 million relates to loans) and negative interest expenses to DKK 388 million (of which DKK 97 million relates to due to credit institutions
and central banks and DKK 291 million relates to deposits). For 2014, negative interest income and expenses were negligible. The amounts are offset
against interest income and interest expenses, respectively.
Changes to the hedged interest rate risk are recognised under net trading income and shown under the hedged balance sheet items in the table above,
whereas value adjustments of hedging derivatives are recognised under net trading income under the trading portfolio. Net trading income includes
dividends from shares of DKK 3,124 million (2014: DKK 3,423 million) and foreign exchange adjustments of DKK 1,487 million (2014: DKK 1,802 mil-
lion).
Net trading income from insurance contracts includes the return on assets of DKK 8,498 million (2014: DKK 29,064 million), adjustment of additional
provisions of DKK 3,942 million (2014: DKK -13,117 million), adjustment of the collective bonus potential of DKK -1,627 million (2014: DKK 1,487
million) and tax on pension returns of DKK -617 million (2014: DKK -4,261 million).
Interest on financial assets subject to individual impairment is recognised on the basis of the impaired value and amounted t o DKK 1,291 million
(2014: DKK 1,714 million).
Danske Bank / Annual Report 2015 73
Notes – Danske Bank Group
6. Fee income and expenses
Fee income and expenses are broken down into fees generated by activities and fees generated by portfolios. Fees generated by activities comprises
fees for the execution of one-off transactions. Fees generated by portfolios comprises recurring fees from the product portfolio.
Accounting policy
Income from and expenses for services provided over a period of time, such as guarantee commissions and investment management fees, are ac-
crued over the period. Transaction fees, such as brokerage and custody fees, are recognised on settlement of the individual transaction. Fees that
form an integral part of the effective rates of interest on loans and deposits are carried under Interest income and Interest expense. Fees for Loans at
fair value are carried under Fee income, except for origination fees, which are carried under Net interest income.
(a) Fee income (DKK millions)
Financing (loans and guarantees)
Investment (securities trading and advisory services)
Services (insurance and foreign exchange trading)
Fees generated by activities
Financing (guarantees)
Investment (asset management and custody services)
Services (payment services and cards)
Fees generated by portfolios
Total
(b) Fee expenses (DKK millions)
Financing (property valuation)
Investment (securities trading and advisory services)
Services (referrals)
Fees generated by activities
Financing (guarantees)
Investment (asset management and custody services)
Services (payment services and cards)
Fees generated by portfolios
Total
2015
2,363
2,551
65
4,979
659
6,280
3,648
10,587
15,566
2015
243
833
68
1,144
15
1,364
2,364
3,743
4,887
2014
2,025
2,549
59
4,633
639
5,282
4,032
9,953
14,585
2014
69
1,275
69
1,413
14
1,246
2,098
3,358
4,771
Fees for financial instruments not recognised at fair value, such as loans and issued bonds, are recognised as financing fee income or expenses. Such
income amounted to DKK 2,520 million (2014: DKK 2,208 million), whereas expenses amounted to DKK 15 million (2014: DKK 14 million).
74 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
7. Other income
Other income includes rental income and lease payments under operating leases, fair value adjustments of investment property, amounts received on
the sale of lease assets and gains and losses on the sale of other tangible assets, such as domicile and investment properties. Income from associates
includes the Group’s proportionate share of the net profit or loss.
Accounting policy
Income from lease assets and investment property
Income from lease assets and investment property includes income from assets let under operating lease contracts. Income is r ecognised on a
straight line basis over the period of the lease term. The accounting policy for lease assets and investment propert y is further described in note 22.
Income from real-estate brokerage
Income from real-estate brokerage consists of real estate agent fees, that are recognised as income when the real estate is sold, and franchis e fees
received from real-estate brokers, that are recognised on a straight line basis over the term of the franchise agreement.
Income from associates
Income from associates is described under the relevant balance sheet line item and no tes 22 and 36 provide more information. The gain or loss on
the sale of associates is the difference between the selling price and the carrying amount, including goodwill, if any, of such s ale.
Other income (DKK millions)
Income from lease assets and investment property
Income from real-estate brokerage
Income from associates
Other income
Total
2015
2,876
587
491
1,321
5,275
2014
2,540
596
107
1,303
4,546
Fair value adjustment of associates held by the Group’s insurance business (which is treated as a venture capital organisation) is recognised under Net
trading income.
Other income includes a gain of DKK 0.3 billion on the sale of domicile properties.
Danske Bank / Annual Report 2015 75
Notes – Danske Bank Group
8. Insurance contracts
Insurance contracts are contracts entered into by Danica Pension that entail significant insurance risks or entitle policyholders to bonus (discretionary par-
ticipation features). The deposit component in those contracts is not unbundled but recognised together with the insurance component. Hence, premiums
and insurance benefits related to the deposit component are recognised in the income statement rather than directly in the balance sheet.
Contracts that do not entail significant insurance risk are recognised as investment contracts with premiums recognised directly in the balance sheet. Note
16 provides more information on the accounting for investment contracts.
Accounting policy
Net premiums
Net premiums includes regular and single premiums on insurance contracts and are recognised in the income statement at their due dates. Reinsur-
ance premiums paid are deducted from premiums received.
Net insurance benefits
Net insurance benefits includes benefits disbursed to policyholders. The item also includes adjustments to outstanding claims provisions and life in-
surance provisions, including the attribution of regular and single premiums to the individual insurance contracts. Additional provisions for benefit
guarantees are recognised under Net trading income, however. The benefits are recognised net of reinsurance.
(a) Net premiums (DKK millions)
Regular premiums, life insurance
Single premiums, life insurance
Regular premiums, unit-linked products
Single premiums, unit-linked products
Premiums, health and accident insurance
Reinsurance premiums paid
Change in unearned premiums provisions
Total
(b) Net insurance benefits (DKK millions)
Benefits paid
Reinsurers' share received
Claims and bonuses paid
Change in outstanding claims provisions
Change in life insurance provisions
Change in provisions for unit-linked contracts
Total
2015
1,382
232
8,962
9,611
1,266
-108
14
2014
3,866
416
8,452
6,696
1,263
-102
41
21,359
20,631
2015
24,691
-114
1,483
-35
-9,438
13,881
2014
23,989
-191
1,441
140
-8,930
16,576
30,468
33,024
(c) Further explanation
Insurance premiums received are carried under Net premiums, whereas benefits paid and changes to insurance obligations, including an increase in provi-
sions due to premiums received during the year, are carried under Net insurance benefits. Net premiums and insurance benefits do not include the entire
income stream related to insurance contracts. Changes to provisions caused by fair value adjustment of expected payments are carried under Net trading
income. The return on assets earmarked for insurance contracts is carried under Net interest income and Net trading income. The net interest income and
trading income disclosed in note 5 contains DKK 13,689 million relating to insurance contracts (2014: DKK 13,962 million). DKK 2,294 million (2014:
DKK -717 million) relate to net interest income on deposits and own issued bonds and fair value adjustments that are eliminated in the consolidated finan-
cial statements. Note 3 shows the effect on profit or loss of insurance activities (including from investment contracts) at Danica Pension.
76 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
9. Operating expenses
Operating expenses includes staff costs, administrative expenses, depreciation, amortisation and impairment charges on tangible and intangible a s-
sets. However the impairment charge on goodwill and customer relations of DKK 4,601 million recognised in the fourth quarter of 2015 is, presented
as a separate line item in the income statement. Note 18 provides more information about the impairment on goodwill and customer relations.
Accounting policy
Staff costs
This item includes salaries, performance-based pay, expenses for share-based payments, holiday allowances, anniversary bonuses, pension costs and
other remuneration. Salaries and other remuneration that the Group expects to pay are expensed when the employees render the services. Perform-
ance-based remuneration is expensed as it is earned.
Share-based payment
Part of the performance-based remuneration for the year is paid in the form of conditional shares. Rights to conditional shares vest up to f our years
after the grant date, provided that the employee, with the exception of retirement, has not res igned from the Group. In addition to this requirement, the
vesting of rights is conditional on certain targets being met. Until 2008, part of the performance-based remuneration was paid in equity-settled op-
tions. The share options could be exercised within three to seven years after the grant date and were conditional on the employee’s not having r e-
signed. By the end of 2015, no share options were outstanding. The fair value of share-based payments at the grant date is expensed over the vesting
period with the intrinsic value expensed in the year in which the share-based payments are earned, and the time value (if any) accrued over the re-
maining service period. Expenses are set off against shareholders’ equity. Subsequent fair value adjustments are not recognised in the income state-
ment.
Pension obligations
The Group’s contributions to defined contribution pension plans are recognised in the income statement as they are earned by the employees. For de-
fined benefit pension plans, the Group expenses the standard cost. Actuarial gains or losses as a result of the difference between expected trends in
pension assets and benefits and actual trends are recognised in Other comprehensive income.
Amortisation, depreciation and impairment charges
In addition to amortisation, depreciation and impairment charges for intangible and tangible assets, the Group expenses the carrying amount of lease
assets sold at the expiry of a lease agreement.
(a) Staff costs, administrative expenses, depreciations and impairment charges (DKK millions)
Staff costs
Administrative expenses
Amortisation/depreciation of intangible and tangible assets
Impairment charges for intangible and tangible assets before goodwill impairment charges
Total
Administrative expenses includes a preliminary contribution for 2015 to the new Danish resolution fund of DKK 194 million.
Staff costs
Salaries
Share-based payments
Pension, defined contribution plans
Pension, defined benefit plans
Severance payments
Financial services employer tax and social security costs
Total
2015
2014
13,938
8,177
2,782
-112
14,192
8,839
2,542
70
24,785
25,642
2015
2014
10,222
190
1,218
198
589
1,520
10,448
123
1,279
174
640
1,529
13,938
14,192
Remuneration Report 2015, which is available at www.danskebank.com/remuneration, provides a detailed description of remuneration paid.
Total salary costs amounted to DKK 12.4 billion (2014: DKK 12.6 billion), with variable remuneration accounting for 6.3% of this amount (2014:
6.5%).
Note 33 provides more information on share-based payments.
Danske Bank / Annual Report 2015 77
Notes – Danske Bank Group
9. Operating expenses continued
(b) Pension plans
Most of the Group’s pension plans are defined contribution plans under which the Group pays contributions to insurance companies, including Danica Pen-
sion. Such payments are expensed regularly. The Group has to a minor extent entered into defined benefit pension plans. Under defined benefit pension
plans, the Group is under an obligation to pay defined future benefits from the time of retirement. Defined benefit plans are typically funded by ordinary con-
tributions made by employers and employees to separate pension funds investing the contributions on behalf of the members to fund future pension obliga-
tions. Defined benefit plans in Northern Ireland and Ireland account for most of the Group’s obligations under such plans, but the Group also has a small
number of defined benefit plans in Denmark and Sweden. The plans in these countries do not accept new members and for most of the plans, contributions
payable by existing members have been discontinued.
The present value of obligations under defined benefit plans less the fair value of pension assets is recognised for each plan under Other assets and Other
liabilities. At 31 December 2015, the net present value of pension obligations was DKK 16,934 million (31 December 2014: DKK 18,121 million), and the
fair value of plan assets was DKK 19,040 million (31 December 2014: DKK 19,533 million). The Group recognises the standard cost in the income state-
ment, whereas actuarial gains or losses are recognised in Other comprehensive income.
The calculation of the net obligation is based on valuations made by external actuaries. These valuations rely on assumptions about a number of variables,
including discount and mortality rates and salary increases. Pension asset ceiling constraints also apply when recognising the ultimate cost for the pension
plans. Following a review of such constraints, the recognised net pension asset for the Group has been reduced by DKK 0.9 billion in 2014, based on man-
agement’s best estimate of future economic benefits available. The measurement of the net obligation is particularly sensitive to changes in the discount
rate. The discount rate is determined by reference to yields on high-quality corporate bonds with terms matching the terms of the pension obligations. If the
discount rate were lowered half a percentage point, the gross pension obligation would increase DKK 1.5 billion (2014: DKK 1.6 billion). The amount would
be recognised in Other comprehensive income.
78 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
10. Audit fees
Audit fees (DKK millions)
Audit firms appointed by the general meeting
Fees for statutory audit of the consolidated and parent company financial statements
Fees for other assurance engagements
Fees for tax advisory services
Fees for other services
Total
Other audit firms
Fees for statutory audit of the consolidated and parent company financial statements
Fees for other assurance engagements
Fees for tax advisory services
Fees for other services
Total
Total audit fees
2015
2014
16
4
1
14
35
1
-
-
-
1
36
4
1
3
1
9
6
1
1
1
9
18
At the general meeting in 2015, Deloitte Statsautoriseret Revisionspartnerskab was appointed as external auditors and replaced Ernst & Young P/S. From
2015, the external auditors conduct the financial audit that was previously conducted by the internal audit department. Costs for the internal audit depart-
ment are recognised under Operating expenses.
11. Loan impairment charges
Loan impairment charges include losses on and impairment charges against loans, provisions for loan commitments and guarantees, as well as fair
value adjustments of the credit risk on loans measured at fair value.
The item also includes impairment charges and realised gains and losses on tangible assets and group undertakings taken over by the Group under
non-performing loan agreements if the assets qualify as held-for-sale assets. Similarly, subsequent value adjustments of assets that the Group has
taken over and does not expect to sell within 12 months are recognised under loan impairment charges, provided that the Group has a right of recourse
against the borrower.
Accounting policy
The accounting policy for when a loan impairment charge is recognised and how the charge is determined is described under the relevant balance
sheet line items. Notes 14, 15 and 22 provide more information.
Loan impairment charges (DKK millions)
Due from credit institutions and central banks
Loans at amortised cost
Loans at fair value
Loan commitments and guarantees etc.
Total
New and increased impairment charges
Reversals of impairment charges
Write-offs charged directly to income statement
Received on claims previously written off
Interest income, effective interest method
Total
2015
-13
-435
432
-47
-61
7,601
7,224
835
980
-294
-61
2014
5
2,516
1,262
-65
3,718
12,226
9,300
2,198
966
-439
3,718
Danske Bank / Annual Report 2015 79
Notes – Danske Bank Group
12. Trading portfolio assets and liabilities
Trading portfolio assets comprise the equities and bonds held by the Group’s trading departments at C&I and all derivatives with positive fair value.
Trading portfolio liabilities consist of derivatives with negative fair value and obligations to deliver securities (obligati ons to repurchase securities).
Accounting policy
The trading portfolio is recognised at fair value through profit or loss. Realised and unrealised capital gains and losses and dividends are recognised in
the income statement under Net trading income. Fair value is the amount for which a financial asset can be sold or a financial liability be transferred
to a knowledgeable, willing third party. Note 30 provides information about fair value measurement and fair value adjustments.
The Group uses fair value hedge accounting when the criteria in IAS 39 are fulfilled. The derivatives used as hedging instruments are presented in the
balance sheet together with other derivatives.
(a) Trading portfolio assets (DKK millions)
Derivatives with positive fair value
Listed bonds
Unlisted bonds
Listed shares
Unlisted shares
Total
(b )Trading portfolio liabilities (DKK millions)
Derivatives with negative fair value
Obligations to repurchase securities
Total
2015
2014
331,015
193,421
1,776
19,955
852
409,442
324,573
524
7,442
532
547,019
742,513
2015
2014
320,270
150,861
389,746
160,883
471,131
550,629
80 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
12. Trading portfolio assets and liabilities continued
(c) Explanation of derivatives
The Group’s activities in the financial markets include trading in derivatives. Derivatives are financial instruments whose value depends on the value of
an underlying instrument or index, etc. Derivatives can be used to manage market risk exposure, for example. The Group trades a considerable volume
of the most commonly used interest rate, currency and equity derivatives, including
swaps
forwards and futures
options
Furthermore, the Group trades a limited number of swaps whose value depends on developments in specific credit or commodity r isks, or inflation indi-
ces.
The Group trades derivatives as part of servicing customers needs as individual transactions or as integral parts of other services, such as the issu-
ance of bonds with yields that depend on developments in equity or currency indice s. The Group also uses derivatives to manage the Group’s own expo-
sure to foreign exchange, interest rate, equity market and credit risks. The risk management notes provide additional informa tion about the Group’s risk
management policy. C&I is responsible for the day-to-day management and hedging of the Group’s market risks.
Derivatives are recognised and measured at fair value. Some of the Group’s bank loans, deposits, issued bonds, etc. carry fixed rates. Generally, such
fixed-rate items are recognised at amortised cost. Further, the Group classifies certain bonds as available-for-sale financial assets. Unrealised value
adjustments of such bonds are recognised in Other comprehensive income. The Group uses fair value hedge accounting , if the interest rate risk on
fixed-rate financial assets and liabilities or bonds available for sale is hedged by derivatives.
Derivatives
(DKK millions)
Currency contracts
Forwards and swaps
Options
Interest rate contracts
Forwards/swaps/FRAs
Options
Equity contracts
Forwards
Options
Other contracts
Commodity contracts
Credit derivatives bought
Credit derivatives sold
2015
2014
Notional
amount
Positive
fair value
Negative
fair value
Notional
amount
Positive
fair value
Negative
fair value
6,253,003
118,115
95,703
732
108,353
629
5,635,024
185,794
122,751
1,890
131,298
1,883
11,620,672
2,085,985
175,946
33,336
168,885
29,845
12,938,852
1,997,406
218,279
42,277
209,161
37,472
126,037
177,889
23,897
20,948
9,087
1,295
3,769
3,211
195
239
1,476
3,980
3,230
584
152
92,692
103,178
27,556
9,889
7,707
1,262
2,026
2,545
95
353
1,303
2,204
2,661
542
83
Total derivatives held for trading purposes
314,425
317,134
391,478
386,607
Hedging derivatives
Currency contracts
Interest rate contracts
Total derivatives
72,589
441,698
390
16,198
63
3,074
106,459
497,087
867
17,099
10
3,128
331,013
320,270
409,442
389,746
Notional amounts and positive and negative fair values of derivatives are offset if certain criteria are fulfilled. Note 29 provides more information. The
increase in credit derivatives bought reflects the hedging of the counterparty credit risk (CVA) on derivatives.
Danske Bank / Annual Report 2015 81
Notes – Danske Bank Group
12. Trading portfolio assets and liabilities continued
(d) Explanation of hedge accounting
Hedge of interest rate risk
The interest rate risk on fixed-rate assets and liabilities with terms longer than six months is generally hedged by derivatives. The interest rate risk on
fixed-rate loans extended by the Group’s operations in Finland, Northern Ireland and Irela nd is, however, hedged by hedging the interest rate risk on
core free funds. Any interest rate risk not hedged by core free funds is hedged by derivatives. The interest rate risk on bonds classified as hold-to-
maturity is not hedged.
For hedged assets and liabilities to which a fixed rate of interest applies for a specified period of time starting at the commencement date of the agree-
ment, future interest payments are divided into basic interest and a profit margin and into periods of time. By entering int o swaps or forwards with
matching payment profiles in the same currencies and for the same periods, the Group hedges the risk at a portfolio level from the commencement
date of the hedged items. The fair values of the hedged interest rate risk and the hedging derivatives are measured at frequent intervals to ensure that
changes in the fair value of the hedged interest rate risk lie within a band of 80-125% of the changes in the fair value of the hedging derivatives. Portfo-
lios of hedging derivatives are adjusted if necessary.
With effective hedging, the hedged interest rate risk on hedged assets and liabilities is measured at fair value and recognis ed as a value adjustment of
the hedged items. Value adjustments are carried in the income statement under Net trading income. Any ineffective portion of a hedge that lies within
the range for effective hedging is therefore also included under Net trading income.
At the end of 2015, the carrying amounts of effectively hedged fixed-rate financial assets and liabilities were DKK 60,744 million (31 December 2014:
DKK 60,260 million) and DKK 428,900 million (31 December 2014: DKK 502,402 million), respectively. The table below shows the value adjustments
of these assets and liabilities and the hedging derivatives. The value adjustments have been recognised in the income statement as Net trading income.
Effect of interest rate hedging on profit (DKK millions)
2015
2014
Effect of fixed-rate asset hedging on profit
Hedged amounts due from credit institutions
Hedged loans
Hedged bonds available for sale
Hedging derivatives
Total
Effect of fixed-rate liability hedging on profit
Hedged amounts due to credit institutions
Hedged deposits
Hedged issued bonds
Hedged subordinated debt
Hedging derivatives
Total
2
-529
-23
556
6
-10
29
3,192
526
-3,735
2
5
1,163
460
-1,624
4
-4
-65
-4,620
-1
4,700
10
Hedge of foreign exchange risk of net investments in foreign entities
The Group hedges the foreign exchange risk of net investments in branches and subsidiaries outside Denmark by establishing fin ancing arrangements
in the matching currencies. The Group does not hedge the expected financial results of units outside Denmark or other future transactions. The foreign
exchange adjustments of the investments are recognised in Other comprehensive income together with the foreign exchange adjus tments of the fi-
nancing arrangements designated as hedging of exchange rate fluctuations. The statement of comprehensive income shows the tra nslation amounts.
At the end of 2015, the carrying amount of financing arrangements in foreign currency used to hedge net inves tments in units outside Denmark
amounted to DKK 40,344 million (31 December 2014: DKK 42,884 million).
82 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
13. Investment securities
Investment securities consists of financial assets which, under the fair value option, are designated at fair value through p rofit or loss, available-for-sale
financial assets and hold-to-maturity financial assets.
Investment securities includes the liquidity portfolio managed by Group Treasury. The liquidity portfolio is recognised at fair value through the use of the
fair value option or is part of the hold-to-maturity portfolio. The Group has an available-for-sale bond portfolio. This portfolio was reclassified from the
held-for-trading category in 2008 when the IASB changed the reclassification provisions of IAS 39 in response to the significant distortion of the pric-
ing of bonds at the time.
Accounting policy
Financial assets designated at fair value
Financial assets designated at fair value include securities that are managed on a fair value basis with no short -term profit taking. Realised and unre-
alised capital gains and losses and dividends are carried in the income statement under Net trading income.
Available-for-sale financial assets
This category comprises bonds only. The bonds are measured at fair value through Other comprehensive income. Unrealised value adjustments of
hedged interest rate risks that qualify for fair value hedge accounting and impairment charges are, however, recognised under Net trading income.
The impairment charge equals the difference between the fair value at the time of calculation and amortised cost. If the fair value subsequently rises,
and the increase is attributable to one or more events that have occurred after the impairment charge was recognised, the Gro up reverses the
charge in the income statement. The Group recognises interest income according to the effective interest method, including amortisation of the dif-
ference between cost and the redemption value over the term to maturity of the bonds. When bonds are sold, the Group reclassifies unrealised value
adjustments recognised in Other comprehensive income under Net trading income in the income statement.
Hold-to-maturity financial assets
Hold-to-maturity financial assets consists of bonds with quoted prices in an active market held for the purpose of gene rating a return until maturity.
The bonds are measured at amortised cost. Interest income is recognised according to the effective interest method, including amortisation of the dif-
ference between cost and the redemption value over the term to maturity of the bonds. Fixed-rate bonds are not hedged.
(a) Investment securities (DKK millions)
Financial assets at fair value through profit or loss
Listed bonds
Unlisted bonds
Listed shares
Unlisted shares
Total financial assets designated at fair value through profit or loss
Available-for-sale financial assets
Listed bonds
Total available-for-sale financial assets
Total at fair value
Hold-to-maturity financial assets
Listed bonds
Unlisted bonds
Total investment securities
2015
2014
175,660
25
105
1,542
165,746
25
53
1,772
177,332
167,596
46,770
58,543
46,770
58,543
224,102
226,139
119,202
-
104,855
-
343,304
330,994
Danske Bank / Annual Report 2015 83
Notes – Danske Bank Group
13. Investment securities continued
(b) Further explanation
Financial assets designated at fair value through profit or loss
During 2014, the Group transferred the responsibility for the liquidity portfolio from FICC at C&I to Group Treasury. The liquidity portfolio is incorpo-
rated in the balance sheet management to optimise the balance sheet composition. The portfolio comprises primarily Danish mortgage bonds.
Available-for-sale financial assets
Part of the bond portfolio that was reclassified in 2008 from the trading portfolio to the available-for-sale portfolio due to significant distortion of the
pricing of bonds has subsequently matured or been sold. For the part of the portfolio sold in 2015, the Group realised value adjustments of DKK 68 mil-
lion (2014: DKK 37 million) that were reclassified from Other comprehensive income to the income statement. The portfolio comprises primarily Da n-
ish mortgage bonds and foreign covered bonds. Some 99% of the portfolio is rated AA or higher (2014: 97%), while the remaining portfolio has invest-
ment grade ratings.
In 2015, the Group recognised unrealised value adjustments of the reclassified bonds in the amount of DKK -72 million in the income statement, cor-
responding to the part of the interest rate risk that is hedged by derivatives (2014: DKK 460 million). The Group also recognised unrealised value ad-
justments of DKK -17 million (2014: DKK 283 million) in Other comprehensive income that would have been recognised in the income statement if r e-
classification had not taken place. The Group recognised interest income of DKK 368 million (2014: DKK 695 million) on the reclassified bonds.
Hold-to-maturity financial assets
Hold-to-maturity financial assets consists of bonds with quoted prices in an active market held for the purpose of generating a retur n until maturity.
The bonds are primarily Danish mortgage bonds, government bonds and government-guaranteed bonds. Some 92% of the portfolio is rated AA or
higher, while the remaining portfolio has investment grade ratings.
84 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
14. Due from credit institutions and central banks and Loans at amortised cost
Most of the Group’s loans are recognised at amortised cost, the only exception being loans granted by Realkredit Danmark (see note 15) that are rec-
ognised at fair value.
Accounting policy
At initial recognition, loans are measured at fair value plus transaction costs less origination fees and other charges. This us ually corresponds to the
amount disbursed to the customer. Subsequently, they are measured at amortised cost, using the effective interest method, less any impairment
charges. The difference between the value at initial recognition and the redemption value is amortised over the term to matur ity and recognised under
Interest income. If fixed-rate loans are hedged effectively by derivatives, the fair value of the hedged interest rate risk is added to the of the assets.
Impairment
For significant loans for which default or other objective evidence of impairment exists, the Group determines the impairment charge individually. The
impairment charge equals the difference between the carrying amount of the loan and the present value of the most likely futu re cash flows from the
loan and is assessed by credit officers.
For non-significant loans for which default or other objective evidence of impairment is identified, the Group calculates the individual impairment
charge statistically. Loans for which objective evidence of impairment has not been identified are included in an assessment of collective impairment
at portfolio level. For individual impairment charges calculated statistically and for collectively assessed loans , the impairment charges are calculated
as the difference between the carrying amount of the loans in a portfolio and the present value of expected future cash flows.
(a) Due from credit institutions and central banks (DKK millions)
Reverse transactions
Other amounts due
Allowance account
Total
2015
2014
28,614
75,251
7
103,859
48,922
63,929
91
112,760
Due from credit institutions and central banks includes amounts due within three months totalled DKK 101,998 million at the end of 2015 (31 De-
cember 2014: DKK 109,667 million). This amount is included as Cash and cash equivalents in the Cash flow statement.
(b) Loans at amortised cost (DKK millions)
Reverse transactions
Other loans
Allowance account
Total
2015
2014
187,689
917,929
26,361
241,173
887,370
35,641
1,079,257
1,092,902
Loans included payments due under finance leases of DKK 24,877 million at the end of 2015 (31 December 2014: DKK 24,960 million). The section
on credit risk in the risk management notes provides information about the allowance account, including the reconciliation of changes in the allowance
account during the year.
(c) Further explanation
Objective evidence of impairment of loans exists if at least one of the following events has occurred:
1) The borrower is experiencing significant financial difficulty.
2) The borrower’s actions, such as default or delinquency in interest or principal payments, lead to a breach of contract.
3) The Group, for reasons relating to the borrower’s financial difficulty, grants to the borrower a concession that the Group would not otherwise have
granted.
It becomes probable that the borrower will enter bankruptcy or other financial restructuring.
4)
If a customer facility is past due 90 days or more, the customer is considered in default and an the impairment charge is recognis ed for the customer’s
total exposure.
Significant loans and amounts due are tested individually for impairment quarterly and the impairment charge is calculated individually. This is the case
for around 50% of the exposure subject to objective evidence of impairment.
Danske Bank / Annual Report 2015 85
Notes – Danske Bank Group
14. Due from credit institutions and central banks and Loans at amortised cost continued
The impairment charge equals the difference between the carrying amount of the loan and the present value of the most likely future cash flows from
the loan and is assessed by credit officers. The present value of fixed-rate loans is calculated at the original effective interest rate, whereas the present
value of loans with a variable rate of interest is calculated at the current effective interest rate.
The customer’s debt is written down to the amount that the borrower is expected to be able to repay after financial restructuring. If financial restructur-
ing is not possible, the debt is written down to the estimated recoverable amount in the event of bankruptcy, which depends, among other factors, on
the value of the collateral received by the Group. If the borrower’s ability to repay depends significantly on the assets that have been provided as colla t-
eral (asset financing), the customer’s debt is written down to the fair value of the collateral. The impairment charges are therefore sensitive to changes
to the estimated value of collateral received. If the value of collateral decrease d 10%, individual impairment charges would increase by about DKK 2.5
billion (2014: DKK 2.4 billion).
Loans without objective evidence of impairment are included in a collective assessment of the need for impairment charges. The collective assessment
also includes customers with objective evidence of impairment, but without need for impairment.
Collective impairment charges are calculated for loans with similar credit risk characteristics to recognise the losses that occur when the expected
cash flow from a group of customers deteriorates, i.e. when an increase in credit risk is not accompanied by adjustments to t he interest rate charged to
the customer to reflect the increase in credit risk. A charge is therefore recognised for customers that have been downgraded without changes being
made to the credit margin. Charges are based on expectations of future changes in customers’ rating classifications (which is called “migration”) over
time, represented by the emergence period. If all customers were downgraded one rating category, the collective impairment ch arge would increase
about DKK 2.7 billion (2014: DKK 3.2 billion). The emergence period is assumed to be two years. If the emergence period is increased to three years,
the collective impairment charge would increase DKK 0.3 billion.
When external market information indicates that an impairment event has occurred, even though it has not yet caused a change in rating, the Group
registers an “early event” impairment charge. Early events represent an expected rating change because of deteriorating marke t conditions in an indus-
try. If a rating downgrade does not occur as expected, the charge is reversed. A management judgement is therefore applied to adjust the collective im-
pairment charge if the Group becomes aware of market conditions at the balance sheet date that are not fully reflected in the Group’s models. By the
end of 2015, such collective impairment charges amounted to DKK 3.8 billion (2014: DKK 3.5 billion).
Collective impairment charges are calculated as the difference between the carrying amount of the loans in the portfolio and the present value of ex-
pected future cash flows. The cash flows used to determine the present value of future cash flows are specified by means of parameters used for sol-
vency calculations and historical loss data adjusted for use in the financial statements, for example. The adjustm ent reflects the loss identification pe-
riod shown by the Group’s empirical data. This period is the period from the first significant downgrade to the determination of a loss at customer level.
Impairment charges for loans and guarantees are booked in an allowance account and set off against loans or recognised as provisions for guarantees.
Impairment charges for loans are recorded under Loan impairment charges in the income statement. If subsequent events show th at impairment is not
permanent, charges are reversed.
Loans that are considered uncollectible are written off. Write-offs are debited to the allowance account. Loans are written off once the usual collection
procedure has been completed and the loss on the individual loan can be calculated. If the full loss is not expected to be realised until after a number of
years, for example in the event of administration of complex estates, a partial write -off is recognised, reflecting the Group’s claim less collateral, esti-
mated dividend and other cash flows.
In accordance with the effective interest method, interest is recognised on the basis of the value of the loans less impairme nt charges. Consequently,
part of the allowance account balance is set aside for future interest income.
d) Reconciliation of total allowance account
The total allowance account below relates to the Due from credit institutions and central banks, Loans at amortised cost, Loans at fair value, and Loan
commitments and guarantees balance sheet items.
(DKK millions)
Balance at 1 January
New and increased impairment charges
Reversals of impairment charges
Write-offs debited to the allowance account
Foreign currency translation
Other items*
Balance at 31 December
2015
2014
40,947
7,601
7,224
9,716
580
-775
46,900
12,226
9,300
7,322
514
-2,070
31,412
40,947
*Other items include changes from the presentation of some loan portfolios as held for sale in 2014 and 2015 . Note 22, Other assets, provides more information.
86 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
15. Loans at fair value and bonds issued by Realkredit Danmark
Loans at fair value consists of loans granted by Realkredit Danmark under Danish mortgage finance law. The loans are funded by issuing listed mortgage
bonds with matching terms. Borrowers may repay such loans by delivering the underlying bonds to Realkredit Danmark. The Group buys and sells bonds is-
sued by Realkredit Danmark on an ongoing basis because such securities play a role in the Danish money market. If these loans and issued mortgage bonds
were measured at amortised cost, the purchase and sale of own mortgage bonds would result in timing differences in the recognition of gains and losses,
leading to an accounting mismatch. This is avoided by measuring both loans granted by Realkredit Danmark and bonds issued by Realkredit Danmark at fair
value using the fair value option. Significant accounting choices in note 1(b) provide additional information.
Accounting policy
Loans granted and bonds issued are initially recognised at fair value and subsequently at fair value through profit or loss.
The fair value of the bonds issued by Realkredit Danmark is normally defined as their quoted market value. A small number of the issued bonds are il-
liquid, however, and the fair value of these bonds is calculated on the basis of a discounted cash flow valuation technique. The fair value of the loans is
based on the fair value of the underlying bonds adjusted for changes in the fair value of the credit risk on borrowers.
Changes in fair value of credit risk
For loans granted to customers with objective evidence of impairment, such adjustment is made in accordance with principles similar to the princi-
ples for calculating individual impairment charges for loans at amortised cost. Note 14 provides more information. However, for discounting pur-
poses, the current effective interest rate is used instead of the original effective interest rate.
A collective assessment also determines the need for adjustments to reflect changes in the fair value of the credit risk on the remaining portion of the
portfolio of loans at fair value. No changes are made if it is possible to raise the administration margin on loans (credit margin) sufficiently to compen-
sate for the higher credit risk and market risk premium on mortgage loans. If it is not possible to raise the administration margin sufficiently or at all, a
collective adjustment is made, reflecting trends in expected losses, unexpected losses (volatility) and the possibility of raising administration margins
in the future. The expected future cash flows are discounted at the current market rate with the addition of a risk premium.
(a) Loans at fair value (DKK millions)
Nominal value
Fair value adjustment of underlying bonds
Adjustment for credit risk
Total
(b) Bonds issued by Realkredit Danmark (DKK millions)
Nominal value
Fair value adjustment of funding of current loans
Holding of own mortgage bonds
Total
(c) Further explanation
2015
2014
737,027
9,013
4,380
723,273
22,984
4,648
741,660
741,609
2015
2014
841,264
10,140
156,885
852,614
25,274
221,923
694,519
655,965
Measurement of loans at fair value is based on the quoted price of the underlying Realkredit Danmark bonds that borrowers use to repay the loans. Changes
in the market value of the bonds will therefore result in a corresponding change in the value of loans, and profit or loss will therefore not be affected by cur-
rent market value changes in respect of the interest rate and the credit risk on the issued bonds. The value of the loans is affected by changes in the credit
risk on the loans. In 2015, the Group reversed DKK 172 million regarding changes in the credit risk on loans at fair value (2014: expensed DKK 656 mil-
lion). At the end of 2015, the accumulated changes in the credit risk amounted to DKK 4,380 million (31 December 2014: DKK 4,648 million).
The holding of own mortgage bonds includes pre-issued bonds of DKK 68 billion (2014: DKK 73 billion) used for FlexLån® refinancing in January 2016 and
bonds of DKK 31 billion (2014: DKK 26 billion) that relates to investments under insurance contracts, pooled schemes and unit-linked investment con-
tracts where most of the risk is assumed by customers and most of the return on the assets accrues to customers.
The nominal value of bonds issued by Realkredit Danmark equals the amount to be redeemed on maturity.
Fair value adjustment for the credit risk on issued mortgage bonds is calculated on the basis of the option-adjusted spread (OAS) to government bond yields
or, for variable-rate loans, the swap rate. The calculation incorporates maturity, nominal holdings and OAS sensitivity. As a number of estimates are made,
the calculation is subject to uncertainty.
Danske Bank / Annual Report 2015 87
Notes – Danske Bank Group
15. Loans at fair value and bonds issued by Realkredit Danmark continued
In 2015, the Danish mortgage bond yield spread widened, and the fair value of issued mortgage bonds thus decreased about DKK 3.9 billion. In 2014, a
spread narrowing caused a fair value increase of about DKK 2.5 billion. In comparison with the fair value measured at the time of issue of the bonds, the fair
value had decreased about DKK 5 billion at the end of 2015 (31 December 2014: increase of about DKK 5 billion). Net profit and equity remain unaffected
because the spread widening decreased the fair value of mortgage loans correspondingly.
Fair value adjustment for the credit risk on issued mortgage bonds may also be calculated on the basis of changes in similar AAA-rated mortgage bonds of-
fered by other Danish issuers. The market for such bonds is characterised by an absence of measurable price differences between bonds with similar char-
acteristics from different issuers. Using this method, no fair value adjustment for credit risk in 2015 or the period since issuance has been required.
16. Assets and deposits under pooled schemes and unit-linked investment contracts
Assets and deposits under pooled schemes and unit-linked investment contracts comprise contributions to pooled schemes and unit-linked contracts de-
fined as investment contracts. Assets include shares and bonds issued by the Group. Holdings of those assets are deducted from equity or eliminated. Con-
sequently, the value of Deposits under pooled schemes and unit-linked investment contracts exceeds that of Assets under pooled schemes and unit-linked
investment contracts.
Accounting policy
Assets earmarked for customer savings are measured at fair value and recognised under Assets under pooled schemes and unit-linked investment con-
tracts. Deposits made by customers are recognised under Deposits under pooled schemes and unit-linked investment contracts. These deposits are
measured at the value of savings, corresponding to the fair value of the assets.
(DKK millions)
(a) Assets
Bonds
Shares
Unit trust certificates
Cash deposits
Total
including
own bonds
own shares
other intra-group balances
Pooled schemes
Unit-linked contracts
2015
2014
2015
2014
Total
2015
18,352
10,612
22,165
18
18,130
12,287
17,245
745
-
-
45,811
-
-
-
38,027
-
18,352
10,612
67,976
18
2014
18,130
12,287
55,272
745
51,147
48,407
45,811
38,027
96,958
86,434
3,852
458
31
4,500
364
723
219
20
485
316
38
345
4,071
478
516
4,816
402
1,068
Total assets recognised in balance sheet
46,806
42,820
45,087
37,328
91,893
80,148
(b) Deposits
51,147
48,407
45,811
38,026
96,958
86,433
88 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
17. Assets and liabilities under insurance contracts
Assets under insurance contracts comprise assets earmarked for policyholders because most of the return accrues to policyholders. As the assets
can be used only for payment of insurance liabilities, they are presented as a single line in the balance sheet. Liabilities under insurance contracts com-
prise primarily life insurance provisions and obligations for guaranteed benefits under unit-linked insurance contracts. Assets include shares and
bonds issued by the Group. The holding of those assets are deducted from equity or eliminated. Consequently, the value of Liabilities under insurance
contracts exceeds Assets under insurance contracts.
Accounting policy
Assets include financial assets, investment property, tangible assets and associates. The valuation technique used matches the Group’s accounting
policy for similar assets with the exception of holdings in associates. Such holdings are treated as held by a venture capital organisation and meas-
ured at fair value.
Recognition of life insurance provisions is based on actuarial computations of the present value of expected benefits for each insurance contract. Ob-
ligations for guaranteed benefits are calculated as the present value of the current guaranteed benefits plus the present value of expected future ad-
ministrative expenses less the present value of future premiums. The actuarial computations rely on assumptions about a number of variables, in-
cluding mortality and disability rates, and include an allowance for risk. Provisions for unit-linked insurance contracts are measured at fair value on
the basis of each contract’s share of the earmarked assets and of the benefits guaranteed in the contract.
Policyholders’ share of the technical basis for insurance policies with a bonus entitlement not yet allocated to the individual policyholder is recognised
in the collective bonus potential.
Liabilities also depend on the discount yield curve, which is determined by Danish rules on insurance accounting.
(a) Assets under insurance contracts (DKK millions)
Due from credit institutions
Investment securities
Holdings in associates
Investment property
Tangible assets
Reinsurers' share of provisions
Other assets
Total
including
own bonds
own shares
other intra-group balances
Total assets
Investment securities under insurance contracts (DKK millions)
Listed bonds
Listed shares
Unlisted shares
Unit trust certificates
Other securities
Total
2015
2014
1,635
268,042
1,059
23,895
415
145
3,377
8,100
263,726
870
20,386
410
2,283
3,555
298,568
299,330
21,608
287
11,101
21,174
408
9,298
265,572
268,450
2015
2014
109,448
11,644
16,140
114,062
16,748
121,284
11,515
12,429
99,102
19,396
268,042
263,726
Notes – Danske Bank Group
17. Assets and liabilities under insurance contracts continued
(b) Liabilities under insurance contracts (DKK millions)
Life insurance provisions
Provisions for unit-linked insurance contracts
Collective bonus potential
Other technical provisions
Total provisions for insurance contracts
Other liabilities
Intra-group balances
Total
Provisions for insurance contracts (DKK millions)
Balance at 1 January
Premiums paid
Benefits paid
Interest added to policyholders' savings
Fair value adjustment
Foreign currency translation
Change in collective bonus potential
Other changes
Balance at 31 December
(c) Further explanation
Life insurance provisions
Life insurance provisions comprise obligations towards policyholders to
pay guaranteed benefits
pay bonuses over time on agreed premiums not yet due
pay bonuses on premiums and other payments due
Danske Bank / Annual Report 2015 89
2015
2014
146,752
114,817
3,583
9,874
275,026
22,383
-12,379
166,047
99,370
2,450
9,940
277,807
21,153
-10,608
285,030
288,352
2015
2014
277,807
20,192
-24,691
5,313
-5,094
-288
1,627
160
258,745
19,429
-23,989
9,926
13,591
-1,167
1,487
-215
275,026
277,807
Recognition of life insurance provisions is based on actuarial computations of the present value of expected future benefits for each insurance contract
using the discount rate at the balance sheet date. These computations rely on assumptions about a number of variables, including mortality and disabil-
ity rates. Estimates of future mortality rates are based on Danish FSA benchmarks, while other estimates are based on empirical data from Danica
Pension’s portfolio of insurance contracts. Estimates are updated regularly. The insurance liability also includes an allowance for risk. Obligations for
guaranteed benefits are calculated as the present value of the current guaranteed benefits plus the present value of expected future administrative ex-
penses less the present value of future premiums.
Danish rules on insurance accounting determine the discount yield curve, which is fixed on the basis of a zero-coupon yield curve estimated on the ba-
sis of Euro swap market rates to which is added a country spread between Danish and German government bonds, calculated as a 12-month moving
average. A mortgage yield spread is also added as stipulated by the agreement on financial stability in the pension and insurance industry signed by the
Danish Ministry of Business and Growth and the Danish Insurance Association. For maturities beyond 20 years, the forward rate between 20 and 30
years is extrapolated, the forward rate at the 30–year mark being fixed at 4.2%. A sensitivity analysis showing the effect of changes in the assumptions
used is provided in the section on insurance risk in the risk management notes.
Provisions for unit-linked insurance contracts
Provisions are measured at fair value on the basis of each contract’s share of the earmarked assets and of the benefits guaranteed in the contract.
Collective bonus potential
Provisions for the collective bonus potential comprise policyholders’ share of the technical basis for insurance policies with a bonus entitlement not yet
allocated to the individual policyholder.
Other technical provisions
Other technical provisions includes outstanding claims provisions, unearned premiums provisions, and provisions for bonuses and premium discounts.
Other liabilities
Other liabilities includes the portion of Danica Pension’s other liabilities assumed by customers. Other types of liabilities are measured in accordance
with the Group’s accounting policies for such liability types.
90 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
18. Intangible assets
Intangible assets consist of goodwill and customer relations taken over on the acquisition of undertakings. Further, acquired and internally developed
software is recognised as an asset if certain criteria are fulfilled.
The Group did not make any acquisitions of undertakings in 2014 and 2015. In 2015, the Group recognised impairment charges of DKK 4.1 billion
(2014: DKK 9.1 billion) on goodwill and DKK 0.5 billion (2014: DKK 0 billion) on customer relations in the banking units in Finland, see further below.
Accounting policy
Goodwill
Goodwill arises on the acquisition of an undertaking and is calculated as the difference between the cost (until 1 January 2010 including direct
transaction costs) of the undertaking and the fair value of its net assets, including contingent liabilities, at the time of acquisition. Goodwill is allocated
to cash-generating units at the level at which management monitors the investment.
Goodwill is not amortised; instead, each cash-generating unit is tested for impairment once a year, or more frequently if indications of impairment
exist. Goodwill is written down to its recoverable amount through profit and loss if the carrying amount of the net assets of the cash-generating unit
exceeds the higher of the assets’ fair value less costs to sell and their value in use, which equals the present value of the future cash flows expected
from the unit.
Goodwill on associates is recognised under Holdings in associates.
Other intangible assets
Identifiable intangible assets taken over on the acquisition of undertakings, such as customer relations, are measured at their fair value at the time of
acquisition and amortised over their expected useful lives, usually five to ten years, according to the straight-line method and tested for impairment if
indications of impairment exist. Intangible assets with indefinite useful lives are not amortised, but the assets are tested for impairment at least once
a year according to principles similar to the principles applicable to goodwill.
Software acquired is measured at cost, including expenses incurred to make a software application ready for use. Software acquired is amortised
over its expected useful life, usually three years, according to the straight-line method.
Software developed by the Group is recognised as an asset if the cost of development is reliably measurable and analyses show that future earnings
from using the individual software applications exceed the cost. Cost includes expenses incurred to make a software application ready for use. Once a
software application has been developed, the cost is amortised over its expected useful life, usually three years, according to the straight-line method.
The cost of development consists primarily of direct remuneration and other directly attributable development costs. Costs incurred in the planning
phase are not included but are expensed when incurred.
Software is tested for impairment if indications of impairment exist and is written down to its value in use.
(a) Intangible assets (DKK millions)
Goodwill
Customer relations
Software, acquired or internaly developed
Total
2015
5,363
25
1,116
6,505
2014
9,453
909
891
11,253
In 2015, the Group recognised software development costs of DKK 611 million as an asset (2014: DKK 397 million) and expensed DKK 2,056 million
(2014: DKK 2,080 million).
(b) Further explanation of impairment testing of goodwill and customer relations
The Group’s goodwill is tested for impairment at least once a year by testing at the level of identifiable cash-generating units to which goodwill have
been allocated. Further, if goodwill in a cash-generating unit is fully impaired a further impairment loss is recognised as an impairment loss on cus-
tomer relations, if any.
The impairment test conducted in 2015 resulted in impairment charges of DKK 4,117 million on goodwill in the banking units in Finland and Northern
Ireland and DKK 484 million on customer relations in the banking units in Finland. The reasons were a further worsening of the macroeconomic out-
look, with expectations of even lower interest levels than those applied in the impairment test 2014, and an increase in the capital allocated to the
banking units under the Group’s new capital allocation framework that will be implemented in 2016. In 2014, goodwill impairment charges of DKK
9,099 million were recognised following a worsening of the long-term economic outlook and from Danske Bank’s strategy of being a Nordic universal
bank.
Danske Bank / Annual Report 2015 91
Notes – Danske Bank Group
18. Intangible assets continued
1 Jan. 2014
31 Dec. 2014
31 Dec. 2015
(DKK millions)
Goodwill Reallocation
Impairment
charges
Foreign
currency
translation
Goodwill
Impairment
charges
Foreign
currency
translation
Retail Banking, Finland
Personal Banking, Finland
Business Banking, Finland
Business Banking, Estonia
Personal Banking, Northern ireland
C&I, General Banking
C&I, FICC and Capital Markets
Danske Capital
Others
Total
-
6,317
2,656
2,062
2,048
507
2,905
1,836
130
18,461
-
-
-
-
-
-
-
-
-
-
-
3,493
1,501
2,058
2,046
-
-
-
-
9,099
-
-17
-4
-4
137
-2
-7
-4
-9
90
-
2,807
1,151
-
139
505
2,898
1,832
121
9,453
-
2,814
1,153
-
150
-
-
-
-
4,117
-
7
2
-
11
2
7
4
-6
27
Goodwill
-
-
-
-
-
507
2,905
1,836
115
5,363
The development in the economic environment during 2015
The difficult macro economic conditions for the Group’s banking units worsened further during 2015. Short-term interest rates decreased, with three-
month EURIBOR becoming negative during 2015, especially in the fourth quarter of 2015. Economists continue to express concerns about deflationary
pressures that translate into significantly lower interest levels in especially the eurozone for a longer period. Normalisation of interest levels and earn-
ings is expected to take longer time in especially Finland. This has led to the use of a normalisation period of five years beyond the budget period for the
banking units in Finland before interest levels are expected to have normalised in the impairment tests for 2015 and 2014. The Group expects a period
of modest growth and low short-term rates before economies will normalise. When interest rate levels normalise, net profit is expected to have in-
creased primarily from increasing deposit margins. Due to the continuing and even increased uncertainty about the macroeconomic development dur-
ing 2015, the assumptions applied in estimating the expected future cash flows in the impairment test 2015 were lowered further than those used in
the impairment test 2014 to reflect the increased uncertainty about the long-term cash flows projections for the individual cash-generating units.
Model applied in the goodwill impairment tests for 2015 and 2014
The impairment test compares the recoverable amount and the carrying amount for each cash-generating unit. The recoverable amount is represented
by the present value of expected future cash flows (value in use). The special debt structure of financial institutions requires the use of a discounted
dividend (equity) model to calculate the present value of expected future cash flows, as the interest on lending and borrowings are included as part of
the cash flows.
The carrying amount for each cash-generating unit is the aggregate of the cash-generating unit’s goodwill and allocated capital. The cash-generating
unit’s allocated capital is derived using the Group’s capital allocation framework. The Group’s total capital excluding goodwill (as the goodwill is allo-
cated to the relevant cash-generating units directly) is allocated to individual cash-generating units based on its share of the capital consumption. In the
impairment test for 2015, the Group’s new capital allocation framework that will be implemented in first quarter 2016 was used. The new framework
is based on a regulatory approach to identifying the individual business unit’s capital consumption and will be in accordance the Group’s capital targets.
The use of the framework led to an increase in the capital allocated to the cash-generating units covered by the impairment test 2015. In the impair-
ment test for 2014, the capital allocated reflected the individual business unit’s share of the risk combined with a management add-on to the banking
units outside the Nordic region due to the bank’s strategy of being a Nordic universal bank.
The expected future cash flows for each cash-generating unit are based on approved strategies and earnings estimates for the budget period repre-
senting the first five years. For Personal and Business Banking Finland, it is not expected that the interest level will have reached the normalised level
within the first five years, and a normalisation period of further five years has been used in the impairment tests for 2015 and 2014. In the normalisa-
tion period, the estimated cash flows at the end of the budget period are projected on the basis of the expected development in a number of macroeco-
nomic variables, including the interest level, until earnings reach the steady state normalised level. The normalisation period reflects the gradual trans-
formation to this steady state normalised earnings level instead of assuming that this level is reached instantly in year six. For the terminal period, the
steady state normalised level of earnings (expected dividend) is expected to grow at a constant growth rate equal to the expected real GDP growth.
Cash flow estimates are post-tax, and the risks of the individual cash-generating units are reflected in the estimated earnings. Hence, the risk-adjusted
cash flows carry a similar risk profile. The estimated cash flows are discounted at the Group’s risk-adjusted required rates of return post-tax.
For goodwill allocated to Danske Capital Finland, the impairment test is based on a model similar to the model used for the Group’s banking units.
For goodwill allocated to C&I, General Banking, and C&I, FICC and Capital Markets, the impairment tests were performed by using less detailed compu-
tations, as a few years of earnings exceed the carrying amount.
92 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
18. Intangible assets continued
Key assumptions for goodwill impairment tests in 2015 and 2014
Cash flows until the terminal period
For the period until the terminal period, earnings in the Group’s banking units are affected by expectations of the interest level through the resulting ef-
fect on lending margins and on deposit margins in the banking units in Finland and Northern Ireland in particular, expectations of growth in lending and
deposits, and on expectations of credit losses.
The interest levels used in the impairment test are based on Danske Research’s expectations of developments in overnight money market interest
rates. The expectations are based on expected future growth and inflation. Due to the severe uncertainty, a management judgement was applied, result-
ing in the interest rate estimates mainly in the terminal period being revised downwards in the impairment test 2015 combined with a further sensitiv-
ity analysis to consider the effect of using reasonably possible alternative assumptions for interest rates. Similarly, in the impairment test 2014 a
management judgement was applied, and economists’ expectations of the interest rate development were revised downwards.
The lending margin reflects the excess earnings on lending over the Group’s central funding costs. Lending margins are estimated based on actual lend-
ing margins and management’s expectations of the future competition. The lending margin is assumed to be relatively stable irrespective of interest
level movements.
The deposit margin reflects the excess earnings achieved by the fact that the customer rates are lower than alternative funding. Deposit margins are
estimated based on actual deposit margins. Deposit margins are highly sensitive to changes in the interest level. How much of an increase in the inter-
est rate that is transferred to the deposit margin depends on the type of deposit. In the impairment test for 2015 and 2014, it has been assumed that
the majority of the core free funds (non-maturing deposits carrying a zero interest rate) will be substituted by other interest-bearing deposits when the
interest level increases.
Expectations of growth in lending and deposits reflect the bank’s estimates/budgets for the first two years and thereafter Danske Research’s forecasts
of real GDP growth for the relevant markets. Expectations of long-term GDP growth are unchanged from the impairment test in 2014.
The expectations of credit losses are for the budget period based on the bank’s estimates/budgets for each year, reflecting historical data adjusted to
reflect the current situation. Thereafter, expected credit losses are kept constant and reflect historical data for long-term annual credit losses. In the
impairment test for 2015, the expected impairment levels have been adjusted upwards for Northern Ireland compared to the impairment test for
2014 following the merger of all units in Northern Ireland to a separate unit.
Earnings at Danske Capital depend primarily on the management fee on assets under management.Expected cash flows therefore depend on expecta-
tions of changes in assets under management and of the average margin on those assets. For the period until the terminal period, changes in assets
under management depend on net sales and on the accumulation of market returns on the assets. In the impairment test 2015, net sales and market
return are expected to be 2.7% and 3.2%, respectively (2014: 4.3% and 1.5%). The average margin on asset under management is expected to be
0.3% (2014: 0.4%). All assumptions reflect Management’s expectations.
Cash flows in the terminal period
Cash flows in the terminal period reflect net earnings (dividend) in the preceding year growing at a constant rate. The growth estimates are determined
on the basis of Danske Research’s forecasts of real GDP growth for the relevant markets, which are unchanged from the impairment test for 2014 as
described above. Around 71% of the net present value of future cash flows is expected to be generated in the terminal period (2014: 68%).
Discount rate
The discount rate used to calculate the present value of expected future cash flows is unchanged from the test in 2014 and is 9% after tax, represent-
ing 12% pre tax. The discount rate has been determined based on the Capital Asset Pricing Model and comprise a risk-free interest rate, the market
risk premium and a factor covering the systematic market risk (beta factor). The values for the risk-free interest rate, the market risk premium and the
beta factor are determined using external sources of information. The Group applies the same discount rate for all cash-generating units as the risks of
the individual cash-generating units are reflected in their estimated cash flows.
Danske Bank / Annual Report 2015 93
Notes – Danske Bank Group
18. Intangible assets continued
Impairment test assumptions
2015
(%)
Personal Banking, Finland
Business Banking, Finland
Personal Banking, Northern Ireland
Danske Capital
2014
(%)
Personal Banking, Finland
Business Banking, Finland
Personal Banking, Northern Ireland
Danske Capital
Annual growth
Money market rate
until terminal
period
in terminal
period Discount rate
until terminal
period
in terminal
period
0.8-2.0
0.8-2.0
2.0-2.3
-
1.7
1.7
2.0
1.7
9.0
9.0
9.0
9.0
-0.1-2.1
-0.1-2.1
0.9-2.7
-
2.1
2.1
2.7
-
Annual growth
Money market rate
until terminal
period
in terminal
period Discount rate
until terminal
period
in terminal
period
0.8-1.7
0.8-1.7
2.0-2.3
-
1.7
1.7
2.0
1.7
9.0
9.0
9.0
9.0
-0.1-3.0
-0.1-3.0
0.9-3.25
-
3.0
3.0
3.25
-
The expected cash flows in the impairment test for Danske Capital are not sensitive to changes in the overnight money market rate.
As mentioned above, significant uncertainty in the forecast of the future interest rate development exists. It is the Management’s assessment that a
scenario of lower interest rates over a longer time horizon is not unlikely. For Personal Banking and Business Banking Finland and Personal Banking
Northern Ireland, the impairment test 2015 has therefore been combined with a sensitivity analysis to assess the impact of using reasonably possible
alternative assumptions for interest rates. These interest rates are disclosed in the table above and are used in the goodwill impairment. Management
assess that these assumptions are reasonably possible alternative assumptions and has concluded that goodwill and customer relations in these
cash-generating units are fully impaired in 2015.
Sensitivity analysis, Danske Capital
For Danske Capital, the excess value (the amount by which the recoverable amount exceeds the carrying amount of goodwill) amounts to DKK 98 mil-
lion. If growth in asset under management until the terminal period were lowered by 0.5 percentage points to 1.2%, or the discount rate were increased
by 0.4 percentage points to 9.4%, the excess value would be zero.
Sensitivity analysis, impairment test 2014
If the expectation of the money market rate used in the impairment test 2014 were further decreased by 1 percentage point, representing a money
market interest rate of 2.0% in the terminal period, a further impairment loss of DKK 2.0 billion relating to the banking units in Finland would have been
recognised. If the discount rate were increased by 1 percentage point to 10%, the impairment loss would increase by DKK 1.3 billion. If the growth rate
in the terminal period were reduced by 1 percentage point to 0.7%, a further impairment loss of DKK 0.7 billion would have been recognised. No other
cash-generated units with significant goodwill recognised at the end of 2014 would be impaired if reasonable alternative key assumptions were used.
The sensitivity analysis presented above does not include the effect that a change in one of the three key assumptions would have on the other two key
assumptions, for example the effect that a change in the money market rate would have on the discount rate and the annual growth rate.
94 Danske Bank / Annual Report 2015
Notes – Danske Bank Group
18. Intangible assets continued
Personal Banking and Business Banking, Finland
In 2007, Danske Bank acquired the shares of the Sampo Bank group. The activities of the Sampo Bank group were incorporated into the business
structure of Danske Bank Group at the beginning of 2007. With the acquisition, the Group strengthened its competitive position in the entire northern
European market. In 2008, Banking Activities Finland migrated to the Group’s platform. At the beginning of 2011, Corporate & Institutional Banking
was separated from Banking Activities Finland, resulting in a reallocation of goodwill. At the same time, the name was changed to Retail Banking
Finland. In 2012, rights to names were written down to zero when the Group decided to rebrand the banking units to Danske Bank. In 2013, goodwill at
Retail Banking Finland was reallocated to Personal Banking Finland and Business Banking Finland as a result of the new organisational structure. In
2014, the Group recognised goodwill impairment charges of DKK 4,994 million against the Personal Banking and Business Banking units in Finland
owing to a worsening of the long-term economic outlook in Finland. In 2015, an impairment charge on the remaining goodwill and the customer rela-
tions in these units of DKK 4,441 million was recognised. The impairment charge was recognised due to a further increase in the uncertainty about the
long-term economic outlook and due to the increase in the allocated capital under the Group’s new capital allocation framework that will be imple-
mented in the first quarter of 2016.
Personal Banking, Northern Ireland
In 2005, Danske Bank acquired Northern Bank. The acquisition followed the Group’s strategy of strengthening its competitive position in the northern
European market. The launch of new product packages and other services supports Northern Bank’s position as a leading retail bank in the highly com-
petitive Northern Ireland market. In 2013, the goodwill in Banking Activities Northern Ireland was allocated to Personal Banking Northern Ireland as a
result of the new organisational structure. In 2014, the Group recognised a goodwill impairment charge of DKK 2,046 million owing to a worsening of
the economic situation in Northern Ireland and the positioning of the Group as a Nordic universal bank. In the impairment test 2015, the cash-
generating unit includes both Personal and Business Banking as Northern Ireland is operated and reported as a separate business unit from 2016. An
impairment charge on the remaining goodwill of DKK 139 million was recognised. The impairment reflects the further increase in the uncertainty about
the long-term economic outlook and due to the increase in the allocated capital under the Group’s new capital allocation framework that will be imple-
mented in the first quarter of 2016.
Corporates & Institutions, General Banking
General Banking (formerly Corporate & Institutional Banking (CIB)) was established as a separate unit at the beginning of 2011, resulting in realloca-
tion of goodwill to the unit. As a result of the new organisational structure in 2012, General Banking became part of Corporates & Institutions.
Corporates & Institutions, FICC and Capital Markets
The trading activities of Sampo Bank were incorporated into the business structure of Danske Bank Markets. With the acquisition, the Group strength-
ened its competitive position within trading activities. The integration process and the budgets and business plans confirmed the financial assumptions
on which the Group based its acquisition. As a result of the new organisational structure in 2012, Danske Bank Markets became part of Corporates &
Institutions.
Danske Capital
The wealth management activities of Sampo Bank were incorporated into the business structure of Danske Capital in 2007. In addition to the acquisi-
tion of Sampo Bank, goodwill recognised by Danske Capital is attributable to a number of minor acquisitions. With the acquisition of Sampo Bank, the
Group strengthened its competitive position within asset management in Finland.
Danske Bank / Annual Report 2015 95
Notes – Danske Bank Group
19. Due to credit institutions and central banks and Deposits
Amounts due to credit institutions and central banks and Deposits also include amounts received under repo transactions (sales of securities which the
Group agrees to repurchase at a later date). Such transactions are presented as collateralised borrowings.
Accounting policy
Amounts due to credit institutions and central banks and Deposits are measured at amortised cost. If fixed-rate deposits are hedged effectively by de-
rivatives, the fair value of the hedged interest rate risk is added to the amortised cost of the liabilities.
(a) Due to credit institutions and central banks (DKK millions)
Repo transactions
Other amounts due
Total
(b) Deposits (DKK m