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The full data:
Interim report
– first half 2020
Danske Bank Group
Management's report
Financial statements
Financial highlights - Danske Bank Group
Executive summary
Financial review
Banking DK
Banking Nordic
Corporates & Institutions
Wealth Management
Northern Ireland
Non-core
Other Activities
3
4
7
14
16
18
21
23
24
26
Income statement
Statement of comprehensive income
Balance sheet
Statement of capital
Cash flow statement
Notes
Statements
Statement by the management
Independent auditor's review report
Supplementary information
30
31
32
33
36
37
85
86
87
Financial highlights – Danske Bank Group
Income statement
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Impairment charges on goodwill
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Profit before tax
Tax*
Net profit
First half
2020
First half
2019
Index
20/19
10,989
7,311
2,300
280
20,880
13,717
-
7,163
5,269
1,894
-446
1,449
413
10,890
7,058
2,602
1,783
22,333
12,824
-
9,509
470
9,039
-270
8,769
1,749
1,036
7,020
101
104
88
16
93
107
-
75
-
21
-
17
24
15
81
Q2
2020
5,510
3,638
2,009
117
11,274
6,953
-
4,321
1,018
3,304
-192
3,112
787
Danske Bank / Interim report – first half 2020 3/87
Q1
2020
Index
Q2/Q1
Q2
2019
Index
20/19
Full year
2019
5,479
3,673
291
163
9,606
6,764
-
2,842
4,251
-1,409
-254
-1,663
-374
101
99
-
72
117
103
-
152
24
-
-
-
-
-
5,371
3,488
1,016
1,657
11,532
6,679
-
4,852
113
4,739
18
4,757
725
4,031
103
104
198
7
98
104
-
89
-
70
-
65
109
58
61
21,877
15,201
5,441
2,463
44,982
27,548
1,603
15,831
1,516
14,315
-493
13,822
-1,249
15,072
786
2,325
-1,289
Attributable to additional tier 1 etc.
316
390
121
195
62
197
*Q4 2019 includes net income of DKK 4.1billion from reversal of a deferred tax liability for International Joint Taxation and increased provisions for deferred tax on assets and liabilities measured at amortised cost.
Balance sheet (end of period)
(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
42,550
336,669
97,773
314,609
1,822,545 1,808,656
534,030
265,507
459,406
13,155
285,274
655,578
298,758
523,427
4,815
377,261
42,550
336,669
99,277
44
107
336,609
101 1,822,545 1,781,846
706,541
123
292,797
113
496,792
114
6,168
37
287,661
132
655,578
298,758
523,427
4,815
377,261
97,773
43
100
314,609
102 1,808,656
534,030
265,507
459,406
13,155
285,274
93
102
105
78
131
81,941
44
107
346,708
101 1,821,309
495,313
123
284,873
113
463,816
114
7,519
37
259,571
132
Total assets
4,061,603 3,778,409
107 4,061,603 4,007,691
101 3,778,409
107 3,761,050
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
Shareholders' equity
94,876
297,949
1,092,735
749,168
373,196
541,912
560,512
2,712
152,253
31,790
8,573
155,927
127,528
276,071
931,646
779,074
367,244
450,930
503,148
5,145
149,220
25,415
14,240
148,748
94,876
74
108
297,949
117 1,092,735
749,168
373,196
541,912
560,512
2,712
152,253
31,790
8,573
155,927
96
102
120
111
53
102
125
60
105
96,839
307,804
995,249
762,026
351,612
603,008
534,025
2,492
155,653
31,968
14,428
152,587
98
97
110
98
106
90
105
109
98
99
59
102
127,528
276,071
931,646
779,074
367,244
450,930
503,148
5,145
149,220
25,415
14,240
148,748
74
108
117
96
102
120
111
53
102
125
60
105
98,828
232,271
962,865
795,721
350,190
452,190
504,714
2,501
159,529
31,733
14,237
156,271
Total liabilities and equity
4,061,603 3,778,409
107 4,061,603 4,007,691
101 3,778,409
107 3,761,050
Ratios and key figures
Dividend per share (DKK)
Earnings per share (DKK)
Return on avg. shareholders' equity (% p.a.)
Net interest income as % p.a. of loans and
deposits
Cost/income ratio (%)
Total capital ratio (%)
Common equity tier 1 capital ratio (%)
Share price (end of period) (DKK)
Book value per share (DKK)
Full-time-equivalent staff (end of period)
-
0.8
0.9
0.78
65.7
22.1
17.6
88.3
182.9
22,191
-
7.8
9.0
0.81
57.4
21.2
16.6
103.8
174.2
21,462
-
2.6
5.7
0.76
61.7
22.1
17.6
88.3
182.9
22,191
-
-1.7
-3.8
0.79
70.4
22.3
17.6
76.9
178.8
22,032
103
-
4.5
10.5
0.79
57.9
21.2
16.6
103.8
174.2
21,462
-
16.7
9.6
0.80
64.8
22.7
17.3
107.8
183.1
22,006
103
101
The financial highlights represent alternative performance measures that are non-IFRS measures. Note G3 provides an explanation of differences in the presentation between IFRS and the financial highlights. For a
description of the alternative performance measures used and definition of ratios, see Definition of Alternative Performance Measures on page 27.
Danske Bank / Interim report – first half 2020 4/87
Executive summary
“In the second quarter of 2020, we saw a rebound in lending activity, which had a positive impact on net interest income. Furthermore, a
normalisation of the financial markets led to a recovery in net trading income. Impairments were significantly lower than in the first quarter, and we
expect to have booked most of the impairments needed for the full year. Expenses increased, due mainly to transformation costs and costs related
to the continued strengthening and remediation of our compliance setup. However, we are seeing the first effects of our focus on bringing down
underlying costs, and this remains a priority. To ensure adequate progress, we will take additional cost reduction measures, which unfortunately
will have to include further staff reductions,” says Chris Vogelzang, Chief Executive Officer, and he continues:
“We continued to make progress on our 2023 plan to become a better bank. We took important steps towards working in a fundamentally different
and more agile way in key areas, optimising our customer journeys and industrialising our IT landscape. We also further streamlined our
organisation and product portfolio across Banking Nordic. Our improvements in the compliance area are progressing well. In the quarters to come,
we will continue to deliver across the initiatives that will help us become an even better bank for all our stakeholders.”
The first half of 2020 was characterised by the lockdown of
many societies from March to May that was caused by the
outbreak of the coronavirus pandemic.
Danske Bank retains strong capital and liquidity positions,
and we continue to be well placed to help our customers
through the downturn.
Towards the end of the period, we saw a gradual reopening of
societies and steps towards normality, but in terms of real
macroeconomic impact, visibility is still limited due to the
large-scale government support still in place.
Macroeconomic indicators are mixed across the Nordic
countries. Housing markets are stable, Danish consumer
spending increased in May but dipped again in June, and
unemployment levels are lower than previously expected but
still significantly higher than at the beginning of the year. For
now, the number of bankruptcies remains low, and we also
saw financial markets return to a more normal activity level,
with credit spreads narrowing and share indices rising. The
vast majority of our commercial customers entered the
crisis with solid capital and liquidity positions, and we also
continue to see the significant government support helping
businesses and their employees. As a result, the increase in
demand for commercial and retail
lending, which we
anticipated at the end of the first quarter, has not
materialised to the extent expected. Our business however,
has proved resilient in this time of stress, and we will
continue to offer a range of supportive measures to our
customers to help them navigate the transition when the
government support programmes are phased out.
Danske Bank posted a net profit of DKK 1.0 billion for the first
half of 2020, against a net profit of DKK 7.0 billion for the
same period in the year before, which, however, included a
DKK 1.3 billion one-off gain from the sale of Danica Pension
Sweden in the second quarter of 2019. For the second
quarter of 2020, profit was DKK 2.3 billion, against 4.0 billion
the year before. Half-year net profit was impacted by
significant impairments, which were due primarily to our
timely approach and adaptation to the macroeconomic and
sector effects of the coronavirus pandemic as well as to the
decline in oil prices. The turbulent financial markets also led
to significantly lower net trading income, but towards the end
of the period, we saw markets recover. The return on
shareholders’ equity was 0.9%, against 9.0% in the first half
of 2019. For the second quarter of 2020 alone, the return on
shareholders’ equity was 5.7%, against 10.5% in the second
quarter of 2019.
Better Bank update
Our journey towards becoming a better bank for all our
stakeholders is moving forward. In the first half of 2020, we
started an agile transformation project to change the way in
which we work at Danske Bank, enabling us to respond better
and faster to customers' changing expectations, ensuring a
better and more digital customer experience as well as
bringing down costs. The project will directly affect more than
4,000 employees across Danske Bank. We have also
initiated significant investments in Banking Nordic to simplify
our Nordic product offering, streamlining and aligning our
portfolio across Norway, Sweden and Finland. This will make
it even easier to become a customer at Danske Bank and for
customers to do their everyday banking with us. We also
continue to have high costs for regulatory compliance and
financial crime prevention, as, among other things, we are
digitalising our know-your-customer and ongoing-due-
diligence processes.
However, despite our progress on the transformation, it is
clear that we need to expedite our efforts, especially in terms
of reducing costs. Underlying expenses reflect the efforts of
our ongoing cost programme, but costs for compliance and
the Estonia case remain elevated. We are committed to
meeting our cost targets to make sure that we can continue
to be competitive in a low-rate and low-margin environment.
Hence, we will be introducing a number of cost reduction
initiatives in the coming quarters.
Customer satisfaction among personal customers increased
in all countries from the satisfaction levels at the end of
2019, except in Sweden where we saw a small nominal
decrease but remained
in third place. Among small
businesses, customer satisfaction increased in Denmark
and Sweden. Among medium-sized businesses, we rank
number two in Finland, Norway and Sweden. Northern Ireland
retains its first place among all types of customers. Among
corporate customers, our commitment to our customers
through the corona crisis resulted in our Corporates &
Institutions unit being able to maintain its number one
position in customer satisfaction, well ahead of peers. Our
fixed income platform was awarded various top rankings,
Danske Bank / Interim report – first half 2020 5/87
Net fee income was up 4% from the level in the first half of
2019. Excluding the negative one-off effect of the Flexinvest
Fri compensation in 2019, net fee income was up 1%. This
was driven by good customer activity at Corporates &
Institutions and Banking Nordic as well as by a positive
development at Danica Pension.
Net trading income in the first half stood at DKK 2.3 billion, a
decline of 12% from the level in the first half of 2019. The
decrease was, among other things, due to negative value
adjustments of interest rate hedges at Other Activities. The
turbulent financial markets in the first quarter of 2020
affected both our rates business at Corporates & Institutions
and Danica Pension, but in the second quarter of 2020, the
financial markets recovered, and trading income returned to
a level significantly above the level in the second quarter of
2019.
Expenses were 7% higher in the first half of 2020 than in the
same period in 2019. This was due mainly to costs related to
our efforts to improve our compliance and anti-money
laundering setup as well as costs relating to the Estonia case,
but also to the planned costs for our transformation to
become a better bank. We are beginning to see the first
effects of our cost focus, as underlying costs have flattened
somewhat. It is clear, however, that we need to do even more.
We have to expedite our efforts in a situation where the
uncertainty about macroeconomic developments makes it
more difficult to grow our income.
We saw impairment charges of DKK 5.3 billion in the first
half of 2020, of which DKK 4.3 billon were recognised in the
first quarter. The impairments related mainly to model
adjustments caused by the change
in macroeconomic
forecasts and to the significant decline in oil prices. In the
second quarter of 2020, we saw impairments mainly against
our oil-related exposures. Updated macroeconomic
scenarios, however, caused a minor reversal, mainly at
Banking DK, in the second quarter. Our credit quality remains
strong, and we expect to have taken most of the impairments
needed for the full year.
rewarding both our products and our advisory capabilities. At
Wealth Management, Danske Bank Asset Management
improved its Nordic ranking from number two to number one
among providers present in all Nordic markets, according to
the latest Prospera survey.
We have not yet reached our target of being among the top
two on customer satisfaction in all the markets we operate
in, but we continue to work on meeting this ambition by
improving our customer offerings and products.
Estonia
Our internal investigation into the non-resident portfolio at
the now-closed Estonian branch is progressing as planned,
and we still expect to finish our investigation in the fourth
quarter of 2020. We continue to be in close dialogue with
authorities in Denmark, the US, Estonia and France, however,
we remain unable to estimate any potential outcome of these
dialogues. This, as well as timing, remains uncertain.
Financials
In the first half of 2020, lending was flat from the level at the
end of 2019. This was a combination of a decrease at
Banking DK and increases at Banking Nordic and Corporates
& Institutions as well as adverse currency effects. We saw a
strong increase in requests for liquidity facilities from our
commercial customers due to the economic uncertainty
caused by the outbreak of the coronavirus pandemic but
because the recovery and reopening of societies started in
May and government support has remained in place, for the
most part this did not translate into actual lending.
At Banking DK, lending was down 2% from the year-end
2019 level due to declining demand for credit among
commercial customers and negative market value
adjustments. From the first to the second quarter, lending in
Denmark was flat, and we saw an
loan
applications
for holiday homes. Remortgaging activity
continued in the first quarter of 2020 but came to a halt as
interest rates started to rise towards the end of the first
quarter.
increase
in
At Banking Nordic, lending was flat from the level at the end
of 2019 due to adverse currency effects. In local currency,
we saw lending growth in all market areas. In the second
quarter, lending at Banking Nordic increased 5%, driven
primarily by lending at Banking Norway.
At Corporates & Institutions, lending increased 9% from the
2019 year-end level as we saw a significant increase in
corporate customer demand for credit, especially short-term
facilities.
In the first half of 2020, net interest income was up 1% from
the level in 2019, driven by increased lending at Banking
Nordic and Corporates & Institutions. We continue to see
margin pressure across all markets and a shift in mortgage
lending
longer-term mortgages as well as
continually high funding costs.
towards
Danske Bank / Interim report – first half 2020 6/87
Outlook for 2020
The outlook has been updated. However, net profit guidance
is unchanged.
As uncertainty as a result of the impact of the corona crisis
prevails, the uncertainty related to our guidance is also
higher than usual, reflecting the limited visibility for the
macroeconomic situation and developments in the financial
markets.
We aim for a net profit of at least DKK 3 billion. This
represents our best estimate based on a timely assessment
of the current situation and the likely impact on our business
for the rest of the year.
We expect net interest income to be at around the same level
as in 2019, as margin pressure and higher funding costs will
offset continued volume growth.
Net fee income is expected to be lower than in 2019 due to
lower remortgaging activity and is subject to significant
uncertainty regarding assets under management, customer
activity and market developments.
Expenses are expected to be in the range of DKK 28-29
billion, driven by transformation costs and costs
for
continued compliance remediation.
Loan impairment charges are expected to be significantly
higher due to the impact of the coronavirus pandemic on the
economic outlook, with most
impairments recognised
already in the first half of the year.
We maintain our ambition for a return on shareholders’
equity of 9-10% in 2023.
The outlook is subject to uncertainty and depends on
economic conditions, including developments in monetary
policy at central banks.
Financial review
First half 2020 vs first half 2019
The Group delivered a profit before tax from core activities of
DKK 1.9 billion (H1 2019: DKK 9.0 billion). The result was
affected by the lockdown of societies following the outbreak
of the coronavirus pandemic and the subsequent reopening
of societies in the first half of 2020. The decrease in profit
was due primarily to a significant increase in loan impairment
charges to DKK 5.3 billion (H1 2019: DKK 0.5 billion), of
which DKK 3.4 billion related to single-name exposures. Also
affecting profit before tax was an increase in operating
expenses of DKK 0.9 billion.
Total income decreased DKK 1.5 billion. In the first half of
2020, total income was affected by a decline in net trading
income, which was partly offset by increases in net fee
income and net interest income. In the first half of 2019, total
income benefited from the DKK 1.3 billion gain from the sale
of Danica Pension Sweden.
Income
Net interest income amounted to DKK 11.0 billion (H1 2019:
DKK 10.9 billion), an increase of 1%. Net interest income
increased due to higher lending and deposit volumes as well
as higher deposit margins. Net interest income further
benefited from the structural FX hedge position. The positive
development was partly offset by adverse exchange rate
developments, higher funding costs and
lending
margins.
lower
fee
income amounted to DKK 7.3 billion
Net
(H1
2019: DKK 7.1 billion). The increase of 4% was due primarily
to increases in net fee income at Banking DK and Corporates
& Institutions. At Corporates & Institutions, net fee income
increased due to higher activity, mainly in Equities and Debt
Capital Markets. At Banking DK, net fee income benefited
from
additional
performance fees in the first quarter of 2020. Further, net
fee income in the first half of 2019 was affected by the
compensation in relation to the Flexinvest Fri product.
remortgaging
activity
strong
and
Net trading income amounted to DKK 2.3 billion (H1 2019:
DKK 2.6 billion). The decrease of 12% was due primarily to
developments relating to Other Activities, mainly negative
value adjustments of hedges. Corporates & Institutions had
a partly offsetting effect due to an increase in net trading
income in FIC.
Other income amounted to DKK 0.3 billion (H1 2019:
DKK 1.8 billion). Other income in first half of 2019 benefited
from the DKK 1.3 billion gain from the sale of Danica Pension
Sweden.
Expenses
Operating expenses amounted to DKK 13.7 billion (H1 2019:
DKK 12.8 billion). The increase of 7% was due primarily to
transformation costs, costs for financial crime prevention,
costs for the Estonia case and costs for the strengthening of
our compliance and regulatory setup.
Danske Bank / Interim report – first half 2020 7/87
Loan impairments
Loan impairments amounted to DKK 5.3 billion (H1 2019:
DKK 0.5 billion). Loan impairments are based on the use of
timely estimates of the effect of the corona crisis in the
impairment model, affecting both individual customers and
the macroeconomic outlook for the coming years. The
impairments include charges made to reflect significant
credit deterioration in the oil and gas industry. Despite a
more negative macroeconomic outlook in the first half of
2020, overall, credit quality remains strong.
In the first half of 2020, macroeconomic scenarios were
updated, both in the first and second quarters of 2020. In
total, the update led to an additional impairment charge of
DKK 1.2 billion, which is expected to take into account the
macroeconomic effects of the corona crisis. In addition,
specific adjustments for industries highly affected by the
corona crisis amounted to DKK 0.7 billion in the first half of
2020.
Impairments due to a deterioration of the creditworthiness of
specific customers amounted to DKK 3.4 billion. This related
mainly to the oil and gas
industry at Corporates &
Institutions, mostly in Norway, due to continued uncertainty
about the offshore segment. Some credit deterioration is also
seen in the retailing industry. Additional impairments against
exposures to highly affected industries remain limited.
Due to timely updates to forward-looking estimates in the
first half of 2020, the allowance account continues to include
significant
reflect upcoming credit
to
deterioration. Impairments are therefore expected to be
significantly lower in the second half of 2020, assuming no
further deterioration in macroeconomic assumptions.
impairments
Impact of the corona crisis
The corona crisis and the related uncertainty have resulted
in an increase in loan impairment charges.
Impairment charges have increased due to an update of the
macroeconomic scenarios in the IFRS 9 impairment model.
Overall, the scenarios take
into account the current
uncertainty
in the markets as well as the effects of
government support packages. The IFRS 9 impairment model
uses the macroeconomic outlook as disclosed in the Group’s
Nordic Outlook reports as the base scenario, reflecting a
contraction in the economy with low consumer and business
confidence as well as a drop in GDP in 2020 with a recovery
already in 2021. A downside scenario is introduced with a
likelihood of 20% to reflect a decline in economic activity that
is steeper than during the most recent global financial crisis,
with unemployment peaking and property prices dropping
significantly in 2021, followed by a recovery. The changes
made to the outlook during the first half of 2020 therefore
result in more exposures being classified as exposures with
a significant increase in credit risk since initial recognition
(stage 2). Furthermore, post-model adjustments have been
made against sectors severely affected by the corona crisis.
Danske Bank / Interim report – first half 2020 8/87
Overall, loan impairments for the first half of 2020 were thus
driven by charges against single-name exposures, mainly in
the oil and gas industry, updates of the macroeconomic
scenarios and post-model adjustments. All in all, this led to
an increase in the allowance account of DKK 4.4 billion in the
first half of 2020. Further details are given in the credit
exposure disclosures in the financial statements.
Q2 2020 vs Q1 2020
The Group delivered a profit before tax of DKK 3.1 billion (Q1
2020: a loss of DKK 1.7 billion). The increase was due to a
decline in the level of loan impairment charges and an
increase in net trading income due to the stabilisation in the
financial markets.
In the first half of 2020, extensive changes to forward-looking
estimates were made and are expected to capture most of
the downside from macroeconomic deterioration of the
affected portfolios in the remainder of 2020.
Net interest income amounted to DKK 5.5 billion. The
increase of 1% was due to higher deposit margins and higher
deposit and lending volumes. The positive effects were partly
offset by lower lending margins.
Corporates & Institutions saw loan impairments primarily
against single-name exposures, mainly in the oil and gas
industry and the retailing industry. This reflects the decline in
led to a deteriorating outlook for non-
oil prices and
performing loans with ongoing restructuring. Banking Nordic
saw
the changed
macroeconomic scenarios, with impairments made against
single-name exposures. Banking DK was impacted primarily
by the changed macroeconomic scenarios in the IFRS 9
impairment model, however limited credit deterioration has
been observed.
impairments
increased
following
Loan impairment charges
First half 2020
First half 2019
(DKK millions)
Charges
% of net
credit
exposure*
% of net
credit
exposure*
Charges
Banking DK
Banking Nordic
C&I
Northern Ireland
Other Activities
Total
609
1,107
3,270
252
30
5,269
0.13
0.35
2.74
0.93
1.07
0.56
27
-87
520
14
-5
470
0.01
-0.03
0.44
0.06
-0.14
0.05
* Relating to lending activities in core segments.
Net fee income amounted to DKK 3.6 billion, a decrease of
1%. The decrease in net fee income was due to decreases in
the banking units, which were partly offset by an increase in
net fee income at Wealth Management, Danica Pension, due
primarily to income related to products with investment
guarantees.
Net trading income amounted to DKK 2.0 billion (Q1 2020:
DKK 0.3 billion). The increase was due to higher income from
the rates business and an increase in value adjustment of the
derivatives portfolio at Corporates & Institutions. Net trading
income also increased at Wealth Management, primarily at
Danica Pension, due to a better investment result in the
health and accident business.
Operating expenses amounted to DKK 7.0 billion, an increase
of 3%. The increase was driven by costs for financial crime
prevention, costs for the Estonia case and costs for the
strengthening of our compliance and regulatory setup.
Loan impairments amounted to DKK 1.0 billion (Q1 2020:
DKK 4.3 billion). Impairments due to a deterioration of the
to
creditworthiness of specific customers amounted
DKK 1.3 billion. This was driven primarily by the oil and gas
industry at Corporates & Institutions, mostly in Norway.
Overall, credit quality remains strong. An update of the
macroeconomic scenarios led to a reversal of DKK 0.5 billion.
In addition, post-model adjustments against sectors severely
affected by the corona crisis led to an impairment charge of
DKK 0.2 billion in the second quarter.
Danske Bank / Interim report – first half 2020 9/87
Balance sheet
Lending (end of period)
(DKK billions)
Banking DK
Banking Nordic
Corporates & Institutions
Wealth Management
Northern Ireland
Other Activities incl. eliminations
Allowance account, lending
First half
2020
First half
2019
Index
20/19
926.0
637.2
227.5
0.1
51.1
3.2
22.5
945.5
630.9
203.0
0.2
50.2
-3.8
17.3
98
101
112
50
102
-
130
Q2
2020
926.0
637.2
227.5
0.1
51.1
3.2
22.5
Q1
2020
927.0
606.8
216.5
0.1
51.2
2.2
22.1
Index
Q2/Q1
Full year
Index
2019 20/FY19
100
105
105
100
100
145
102
943.7
635.0
209.1
0.1
54.3
-3.0
18.0
Total lending
1,822.5
1,808.7
101
1,822.5
1,781.8
102
1,821.3
Deposits (end of period)
(DKK billions)
Banking DK
Banking Nordic
Corporates & Institutions
Wealth Management
Northern Ireland
Other Activities incl. eliminations
Total deposits
Covered bonds
(DKK billions)
386.0
298.1
341.2
-
75.5
-8.1
346.5
263.0
270.5
0.2
64.1
-12.6
111
113
126
-
118
-
386.0
298.1
341.2
-
75.5
-8.1
363.5
269.8
301.4
0.2
70.1
-9.7
106
110
113
-
108
-
358.0
270.5
270.7
0.2
70.9
-7.4
1,092.7
931.6
117
1,092.7
995.2
110
962.9
Bonds issued by Realkredit Danmark
Own holdings of bonds
749.2
53.9
779.1
27.8
96
194
749.2
53.9
762.0
33.2
98
162
795.7
9.7
Total Realkredit Danmark bonds
803.1
806.9
100
803.1
795.2
101
805.4
Other covered bonds issued
Own holdings of bonds
Total other covered bonds
181.6
85.2
196.3
58.6
93
145
181.6
85.2
173.8
89.3
104
95
176.5
61.9
266.8
254.9
105
266.8
263.1
101
238.4
Total deposits and issued mortgage bonds etc.
2,162.7
1,993.4
108
2,162.7
2,053.5
105
2,006.7
98
100
109
100
94
-
125
100
108
110
126
-
106
-
113
94
-
100
103
138
112
108
Lending as % of deposits and issued mortgage
bonds etc.
84.3
90.7
84.3
86.8
105
90.8
-
End of June 2020 vs end of December 2019
in
Lending
Total lending was maintained at the same level in spite of the
movements
level and the
lending at business unit
increasing allowance account. The increases in lending at
Corporates & Institutions more than offset the decrease in
lending at Banking DK. At Corporates & Institutions, lending
increased due to an increase in demand for credit from
corporate customers. At Banking DK, lending decreased due
to a decline in the demand for credit from commercial
customers and for mortgage credit finance.
In Denmark, new gross
loans,
amounted to DKK 43.2 billion. Lending to retail customers
accounted for DKK 11.3 billion of this amount.
lending, excluding repo
Our market share of total lending in Denmark, excluding repo
loans, decreased 0.4 percentage points due to a decreasing
market share in the mortgage credit market. In Norway,
Sweden and Finland, our market shares increased.
Market shares of lending
(%)
Denmark incl. RD (excl. repo)
Finland
Sweden (excl. repo)
Norway
31 May 31 December
2019
2020
25.8
10.0
5.8
6.5
26.2
9.6
5.5
6.1
Source: Market shares are based on data from central banks at the time
of reporting.
Deposits
The increase in total deposits of 13% was due to an increase
at Corporates &
Institutions, General Banking, due to
customers bolstering their liquidity in the wake of the
outbreak of the coronavirus pandemic.
Our market share of deposits generally increased. In Norway,
the increase of 1.2 percentage points related primarily to
deposits from corporates and the public sector. The Group
maintained its strong funding position.
Market shares of deposits
(%)
31 May 31 December
2019
2020
Denmark (excl. repo)
Finland
Sweden (excl. repo)
Norway
29.7
11.6
4.9
7.6
28.9
10.7
4.3
6.4
Source: Market shares are based on data from central banks at the time
of reporting.
Credit exposure
Credit exposure from lending activities in core segments
increased to DKK 2,596 billion (end 2019: DKK 2,444
billion), driven by an increase in loan commitments at
Corporates & Institutions. Demand deposits with central
banks and due from credit institutions and central banks
increased DKK 83 billion from the level at the end of 2019.
Risk Management 2019, section 3, which is available at
danskebank.com/ir, provides details on Danske Bank’s credit
risks.
Credit quality
Credit quality remained strong in most segments in the first
half of 2020. The effects of the corona crisis are expected to
materialise in the coming quarters, and apart from existing
portfolios that are challenged, the rate of new non-performing
loans was therefore limited in the first half of 2020. Total net
non-performing loans (NPL) decreased DKK 1.5 billion from
the end of 2019. The decrease was due to a single-name
exposure in the capital goods industry at Corporates &
Institutions, with the effect being partly offset by an increase
the
in NPL
transportation, retailing and consumer goods industries.
to single-name exposures
related
in
Given the current economic conditions, the increase in gross
NPL of 3% during the first half of 2020 was very limited. At
the same time, the NPL coverage ratio increased signifcantly
to 89% from 78% at the end of 2019. The increase in the
coverage ratio was driven primarily by the recognition of
higher expected credit losses (ECL) on customers in the oil
and gas industry.
The risk management notes on pp. 61-76 provide more
information about non-performing loans.
Non-performing loans (NPL) in core segments
(DKK millions)
30 June
2020
31 Dec.
2019
Gross NPL
NPL allowance account
Net NPL
Collateral (after haircut)
35,698
15,859
34,713
13,367
19,838
21,346
17,845
17,479
NPL coverage ratio (%)
NPL coverage ratio of which is in default (%)
NPL as a percentage of total gross exposure (%)
88.8
99.8
1.4
77.6
73.6
1.4
The NPL coverage ratio is calculated as allowance account NPL
exposures relative to gross NPL net of collateral (after haircuts).
Danske Bank / Interim report – first half 2020 10/87
Accumulated impairments increased to 1.3% (end 2019:
1.1%) of lending and guarantees due to impairment charges
against single-name exposures, mainly in the oil and gas
industry, updates of the macroeconomic scenarios and post-
model adjustments.
Allowance
account by
business units
(DKK millions)
Banking DK
Banking Nordic
C&I
Northern Ireland
Other
30 June 2020
Accum.
impairm.
charges
% of net
credit
exposure1
31 Dec. 2019
Accum.
impairm.
charges
% of net
credit
exposure1
11,749
5,301
6,862
915
38
1.22
0.83
2.93
1.71
0.06
11,662
4,333
3,718
730
8
1.21
0.68
1.61
1.37
0.01
1.08
Total
24,866
1.31
20,451
1 Relating to lending activities in core segments.
Trading and investment activities
Credit exposure from trading and investment activities
increased to DKK 1,289 billion (end 2019: DKK 1,124
billion) due to an increase in bond holdings and in the positive
market values of derivatives.
The Group has made netting agreements with many of its
counterparties concerning positive and negative market
values of derivatives. The net exposure was DKK 100.0
billion (end 2019: DKK 76.4 billion). The increase was due to
pressure on market rates in relation to the corona crisis and
a weeker Norwegian krone.
The value of the bond portfolio was DKK 557 billion. Of the
total bond portfolio, 77% was recognised at fair value and
23% at amortised cost.
Bond portfolio
(%)
30 June 31 December
2019
2020
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
38
1
43
14
2
2
32
1
53
10
2
2
Total holdings
100
100
Bonds at amortised cost included in total
holdings
23
26
The financial highlights on page 3 provide information about
the balance sheet.
Trading portfolio assets and trading portfolio liabilities
increased to net assets of DKK 113.7 billion (end 2019: net
assets of DKK 43.1 billion). The increase was due to an
increase in bond holdings.
Other balance sheet items
Assets under insurance contracts and Liabilities under
insurance contracts
increased DKK 59.6 billion and
DKK 55.8 billion, respectively, from the end of 2019,
primarily as a result of an increase in the market value of
derivatives.
Implications of the corona crisis for capital
The corona crisis had significant implications for the Group’s
capital position at the end of June 2020. In order to support
the
the economic
consequences of the coronavirus pandemic, no dividends
were paid for 2019 – effectively increasing regulatory capital
by DKK 7.3 billion at the end of June 2020.
initiatives aimed at minimising
The Group’s excess capital level was further supported by the
release of the national countercyclical buffer rates in core
markets during March 2020, leading to a 1.1% percentage
point decrease in the Group’s combined buffer requirement.
Capital ratios
The 0.3 percentage point increase in the CET1 capital ratio
during the first half of 2020 was largely driven by the
cancellation of dividends for 2019 and further supported by
the realised net profit and changes to the IFRS9 transitional
arrangements. A higher level of REA, however, slightly
dampened the effect of the increase in CET1 capital. The total
capital ratio was further affected by the redemption of
additional tier 1 (AT1) capital instruments in April 2020,
resulting in a 0.6 percentage point decrease in the total
capital ratio.
During the
first half of 2020, the total REA rose
approximately DKK 18 billion, due mainly to increased REAs
for counterparty credit and market risks. Counterparty credit
risk was driven mainly by exposure increases, while high
volatility in the financial markets led to the increase in market
risk. Despite increased exposure, credit risk REA decreased
slighty due mainly to the effect of the legislative package
adopted by EU co-legislators in June 2020.
At the end of June 2020, the Group’s leverage ratio was
4.4% under both the transitional rules and the fully phased-
in rules.
Capital requirements
Danske Bank’s capital management policies are based on the
Internal Capital Adequacy Assessment Process (ICAAP). In
this process, Danske Bank determines its solvency need
ratio. The solvency need ratio consists of the 8% minimum
capital requirement under Pillar I and an individual capital
add-on under Pillar II.
At the end of June 2020, the Group’s solvency need ratio was
12.5%. The solvency need still includes the DKK 10 billion
CET1 requirement as a consequence of the orders issued by
the Danish FSA in 2018 in relation to the Estonia case.
A combined buffer requirement applies in addition to the
solvency need ratio. At the end of June 2020, the Group’s
combined capital buffer requirement was 5.6%.
Danske Bank / Interim report – first half 2020 11/87
In March 2020, the Danish government decided to release
the countercyclical buffer requirement and cancel the
planned increases intended to take effect later this year as a
result of the corona crisis. The Swedish FSA also released
the Swedish buffer requirement, while the Norwegian
Ministry of Finance decreased the Norwegian buffer
requirement from 2.5% to 1% with immediate effect.
Consequently,
countercyclical
percentage points to 0.1%.
the
buffer
Group’s
requirement
Capital ratios and requirements
(% of the total REA)
Capital ratios
CET 1 capital ratio
Total capital ratio
Capital requirements (incl. buffers)**
CET 1 requirement
- portion from countercyclical buffer
- portion from capital conservation buffer
- portion from SIFI buffer
Total capital requirement
Excess capital
CET 1 capital
Total capital
institution-specific
decreased 1.1
30 June
2020
Fully
phased-in*
17.6
22.1
13.2
0.1
2.5
3.0
18.1
4.3
4.0
17.3
21.9
13.2
0.1
2.5
3.0
18.1
4.1
3.7
* Based on fully phased-in rules and requirements including the fully
phased-in impact of IFRS 9.
** The total capital requirement consists of the solvency need ratio and
the combined buffer requirement. The fully phased-in countercyclical
capital buffer is based on the buffer rates announced at the end of March
2020.
The calculation of the solvency need ratio and the combined
capital buffer requirement is described in more detail in
section 5 of Risk Management 2019, which is available at
danskebank.com/ir.
but
includes
Minimum requirement for own funds and eligible liabilities
The requirement is set as two times the total capital
requirement,
institution-specific
countercyclical buffer only once. At the end of June 2020, the
requirement was equivalent to DKK 258 billion. Taking the
deduction of capital and debt buffer requirements
in
Realkredit Danmark into account, the MREL-eligible liabilities
amounted to DKK 272 billion.
the
The transition to the full MREL has been relatively shorter for
the Group than for its peers. In combination with a relatively
high Danish MREL, the Group has issued a significant amount
of non-preferred senior debt over the past couple of years.
On 1 May 2020, the Danish FSA announced a reduction in
the minimum amount of subordinated debt required to meet
the MREL requirement. By doing so, the subordination
requirement for Danish SIFIs is effectively equivalent to the
maximum subordination cap according to the revised Bank
Recovery and Resolution Directive (BRRD2) without applying
the gradual transition to 2024.
Danske Bank / Interim report – first half 2020 12/87
At the end of June 2020, the subordination requirement was
equivalent to DKK 202 billion. The subordinated MREL-
eligible liabilities stood at DKK 226 billion.
Capital targets
The Group’s capital targets are unchanged from the
increased levels set by the Board of Directors in 2019. The
CET1 capital ratio target is kept at above 16% in the short
term to ensure a sufficiently prudent buffer in relation to the
capital requirement. The total capital target is kept at above
20%. Danske Bank fully meets these capital targets.
Danske Bank’s credit ratings 30 June 2020
Moody’s
S&P
Fitch
Counterparty rating
A1/P-1
A+/A-1
A+
Deposits
Senior debt
A2/Negative/
P-1
-
A+/F1
A3/P-2
A/A-1
A+/F1
Issuer rating
A3/P-2
A/A-1
A/F1
Outlook
Stable
Stable
Negative
The Board of Directors reassesses the capital targets on an
ongoing basis.
Non-preferred
senior debt
Capital distribution policy
In order to support the initiatives aimed at minimising the
economic consequences of the coronavirus pandemic, on 20
April 2020, the Board of Directors proposed to the general
meeting that no dividends be paid for 2019. The proposal
was adopted at the annual general meeting on 9 June 2020.
The decision for no dividend payments in 2020 does not
change the Group’s general dividend ambition, which is still to
pay out 40-60% of its net profit.
Danske Bank has strong capital and liquidity positions, and
the Board of Directors monitors the situation closely and
remains committed
to
shareholders when the economic impact of the corona crisis
is clear.
to returning excess capital
Credit ratings
Moody’s and S&P both affirmed their ratings and outlook for
Danske Bank on 19 June and 2 July, respectively,
incorporating their assessments of the impact of the corona
crisis.
On 19 June, Fitch removed its ratings from Rating Watch
Negative and affirmed its ratings of Danske Bank. At the
same time, Fitch assigned a Negative outlook to Danske
Bank’s ‘A’ issuer rating. The Negative outlook reflects the
economic uncertainties relating to the fallout from the
corona crisis and the financial uncertainties relating to the
Estonia case.
With regard to Realkredit Danmark, Fitch affirmed its rating
and revised its outlook to Stable from Negative. The change
in outlook reflects the view of the agency that the strength of
the capital position more than offsets medium-term
concerns about asset quality and earnings.
Tier 2
AT1
Baa3
BBB+
A
-
-
BBB
BB+
BBB+
BBB-
Mortgage bonds and covered bonds (RO and SDRO) issued
by Realkredit Danmark are rated ‘AAA’ (Stable outlook) by
S&P and Scope Ratings. Fitch gives bonds issued from
Realkredit Danmark’s capital centre S a rating of ‘AAA’
(Stable outlook) and bonds issued from capital centre T a
rating of ‘AA+’ (Stable outlook).
Covered bonds (SDO) issued by Danske Bank A/S are rated
‘AAA’ (Stable outlook) by both S&P and Fitch, while covered
bonds issued by Danske Mortgage Bank Plc are rated ‘Aaa’
by Moody’s and covered bonds issued by Danske Hypotek AB
are rated ‘AAA’ (Stable outlook) by S&P and, as of 30 April,
‘AAA’ by Nordic Credit Rating.
ESG ratings
ESG (Environmental, Social and Governance) ratings cover a
range of analytical activities that address a business’s
societal impact. Each concept may include a broad range of
sub-assessments, and definitions vary considerably among
research providers.
ESG rating agency
CDP Worldwide, UK
Score at
30 June 2020
Score at
31 Dec 2019
C
C
ISS ESG, USA
C Prime
C Prime
MSCI ESG Ratings, USA
B
B
Sustainalytics, USA
Medium Risk
Medium Risk
Vigeo Eiris, France
Not public
to Danske Bank
Not public
to Danske Bank
Unlike credit ratings, ESG ratings are unsolicited and in
principle based on public information. Disclosure of ESG
ratings is discretionary and does not take place on a public
basis.
Danske Bank / Interim report – first half 2020 13/87
The Supervisory Diamond
The Danish FSA has identified a number of specific risk
indicators for banks and mortgage institutions and has set
threshold values with which all Danish banks must comply.
The requirements are known as the Supervisory Diamond.
At the end of June 2020, Danske Bank was in compliance
with all threshold values. A separate report is available at
danskebank.com/ir.
Realkredit Danmark also complies with all threshold values.
New regulation
In December 2017, the Basel Committee on Banking
Supervision (BCBS) published the final and revised standards
for REA calculations (Basel IV). Due to the corona crisis, the
BCBS has delayed the implementation of the Basel IV
standards from 2022 to 2023. This will also delay the
process for implementation of the standards in the EU, and
the EU Commission is now expected to publish a legislative
proposal in the fourth quarter of 2020.
In response to the corona crisis, a legislative package with
targeted
legislative changes and selected changes to
application timing was agreed and adopted by the EU co-
legislators in June 2020. The most significant changes were
to prolong the IFRS 9 transitional arrangement, increasing
the Group’s CET1 capital by around DKK 0.4 billion, and to
move forward the application date of the CRR2 SME discount
factor, which will reduce the Group’s REA by around DKK 17
billion at 30 June 2020.
In accordance with the European Banking Authority’s (EBA)
roadmap to enhance internal models used to calculate credit
risk, Danske Bank has started to implement the revised set
of EBA guidelines and technical standards, and this will
impact the Group REA from the second half of 2020. We
expect the implementation to increase the REA by around 3%
in 2020, with further increases in 2021.
Changes to the Board of Directors and the Executive
Leadership Team
On 18 May 2020, Jacob Aarup-Andersen, member of the
Executive Leadership Team and Head of Banking DK,
resigned and left his position at Danske Bank.
Danske Bank’s Annual General Meeting was held on 9 June
2020. Martin Blessing and Raija-Leena Hankonen were
elected to the Board of Directors. Lars-Erik Brenøe, Karsten
Dybvad, Bente Avnung Landsnes, Jan Thorsgaard Nielsen,
Christian Sagild, Carol Sergeant and Gerrit Zalm were re-
elected.
Funding and liquidity
The corona crisis continued to impact the market for credit
in the second quarter of 2020. The monetary easing of
central banks and the fiscal responses by governments
improved market sentiment, but market conditions remained
volatile.
Changes to the MREL framework in May implemented a new
subordination cap and meant that a part of the MREL need
can be covered by preferred senior debt. Going forward, the
Group expects to cover the MREL need with new issues of
both preferred senior debt and non-preferred senior debt.
During the first half of 2020, the Group issued non-preferred
senior bonds of DKK 10.1 billion, senior debt of DKK 18.5
billion and covered bonds of DKK 26.9 billion, bringing total
long-term wholesale funding to DKK 55.5 billion.
In addition, we exchanged part of two non-preferred notes
issued in 2019 with new notes, a USD 419 million note and
a EUR 379 million note, respectively, with a call-date on the
original maturity date in 2022. We expect the new notes to
be eligible for the MREL until the call date in 2022.
in meeting our 2020
Issuance during the first half of 2020 implies that we are
already well advanced
funding
requirement of DKK 70-90 billion. We remain dedicated to
our strategy of securing more funding directly in our main
lending currencies, including in NOK and SEK, but we will also
utilise central bank facilities to obtain funding in the most
cost-efficient manner.
Danske Bank’s liquidity position remained robust. Stress
tests show that we have a sufficient liquidity buffer well
beyond 12 months. At the end of the first half of 2020, our
liquidity coverage ratio stood at 156%, (31 December 2019:
140%) with an LCR reserve of DKK 596 billion (31
December 2019: DKK 432 billion).
The requirement for the net stable funding ratio forms an
integral part of our funding planning, and we are already
comfortably adhering to the requirement.
At 30 June 2020, the total nominal value of outstanding long-
term funding, excluding equity-accounted additional tier 1
capital and debt
issued by Realkredit Danmark, was
DKK 384 billion (31 December 2019: DKK 370 billion).
Danske Bank excluding Realkredit Danmark
(DKK billions)
30 June 31 December
2019
2020
Covered bonds
Preferred senior bonds
Non-preferred senior bonds
Subordinated debt
Total
181.6
75.4
95.5
31.5
176.5
75.3
86.9
31.6
384.1
370.2
Danske Bank / Interim report – first half 2020 14/87
Banking DK
Banking DK posted a profit before tax of DKK 2.0 billion, a decrease of 36% from the first half of 2019. The result reflects a
combination of increased loan impairment charges on the back of the coronavirus pandemic, continued margin pressure, and
increasing costs for compliance and financial crime prevention. Despite margin pressure, income ended almost on par with income
in the first half of 2019 due to strong retail customer remortgaging activity and higher investment fee income from private wealth
management at the beginning of the year.
First half
2020
First half
Index
2019 20/19
Q1
Index
2020 Q2/Q1
Q2
Index
2019 20/19
Full year
2019
Banking DK
(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
4,481
2,116
542
86
7,224
4,645
2,579
609
4,629
1,952
570
115
7,266
4,144
3,123
27
Profit before tax
1,971
3,095
Loans, excluding reverse transactions before
impairments
Allowance account, loans
Deposits, excluding repo deposits
Covered bonds issued*
Allowance account, guarantees
Allocated capital (average)
925,992
10,313
385,981
800,478
1,426
38,394
945,519
10,806
346,474
802,185
1,588
36,488
Net interest income as % p.a. of loans and deposits
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
0.70
10.3
64.3
4,798
0.73
17.0
57.0
4,374
Q2
2020
2,277
937
213
40
3,468
2,457
1,010
-337
2,203
1,179
329
45
3,756
2,187
1,569
945
103
79
65
89
92
112
64
-
2,283
941
257
60
3,542
2,120
1,421
-177
1,347
624
216
1,598
925,992
10,313
385,981
800,478
1,426
38,417
927,025
11,011
363,514
793,044
1,452
38,370
0.71
14.0
70.8
4,798
0.69
6.5
58.2
4,792
100
94
106
101
98
100
100
945,519
10,806
346,474
802,185
1,588
36,544
0.72
17.5
59.9
4,374
97
108
95
75
99
112
83
-
64
98
95
111
100
90
105
110
100
100
83
67
98
116
71
-
84
98
95
111
100
90
105
110
9,111
4,397
1,176
227
14,912
8,736
6,176
-342
6,518
943,723
10,235
357,967
804,130
1,425
36,430
0.72
17.9
58.6
4,588
*Covered bonds issued is before the elimination of the Group’s holding of own covered bonds.
Fact Book Q2 2020 provides financial highlights at customer type level for Banking DK. Fact Book Q2 2020 is available at danskebank.com/ir.
First half 2020 vs first half 2019
Since mid-March, the corona crisis has heavily affected the
Danish society, households and businesses. Banking DK
launched a range of initiatives to assist our customers in the
best possible way and mitigate the effects of this
extraordinary situation. The lockdown also meant that the
dialogue with customers switched exclusively to digital
channels. The transition ran smoothly, and the vast majority
the advantages of digital
of customers embraced
communication.
the coronavirus pandemic
Customer activity
to
The outbreak of
extraordinarily high business activity at Banking DK,
especially in the commercial segment, and we reached out
proactively to thousands of customers to offer advice on
business planning and on how to protect their businesses.
led
During the period, we made approximately DKK 26 billion
worth of liquidity available to our customers, but as the
recovery and reopening of societies started in May and
government support remained in place, this did not translate
into actual borrowing for most of our customers.
In the weeks following the outbreak, many retail customers
contacted us for help to postpone repayment of debt or to
obtain credit to pay bills because of income loss etc. Most
recently, we have introduced an interest- and fee-free holiday
funds loan secured on the later disbursement by the Danish
government of withheld holiday pay. The loan has been well
received by our customers.
Lending decreased 2% due to declining demand for credit
among commercial customers owing to substantial support
including tax
packages
postponement schemes and salary compensation, as well as
low customer investment appetite related to the uncertainty
in the market.
from the Danish government,
Since mid-March, overall demand for mortgage finance has
declined. However, applications for loans for holiday homes
increased following the decline in international travel. The
decrease in lending also reflected negative market value
adjustments that adversely affected our mortgage portfolio.
During the period, deposit levels increased. To offset the cost
effect of holding deposits on net interest
income, we
introduced negative interest rates for retail customers above
specific thresholds on 1 June 2020.
Financial results
In the first half of 2020, Banking DK posted a profit before tax
of DKK 2.0 billion. The result was due to a combination of a
significant increase in loan impairments related to the
corona crisis and increased costs. Income was almost on par
with the level in the first half of 2019.
Net interest income decreased due to the continuously low
interest rate environment continuing at the beginning of
2020, and we saw customers switching to lower-margin
products. The decrease was partly offset by increasing
CIBOR rates following the Danish central bank’s rate hike on
19 March and adjusted deposit rates for commercial
customers. The effect of the negative deposit rates
introduced for retail customers in June was minimal.
Net fee income benefited from high remortgaging activity in
the first two months of the year and additional investment
fees. On the negative side, we saw remortgaging activity
come to a halt mid-March, and by comparison with the
second quarter of 2019, when remortgaging activity was
very high, this had a negative impact on fees. The corona
crisis also led to lower demand for foreign currency given the
strict travel restrictions, a decline in card use due to limited
retail opening hours, few transactions at our branches and
not least a low number of property sales, which adversely
affected fee income. Excluding the compensation to certain
Flexinvest Fri customers in the second quarter of 2019, the
development in net fee income was flat.
Operating expenses rose 12% from the level in the first half
of 2019. The increase was due mainly to continued costs for
regulatory compliance and
financial crime prevention.
Investments
in the Better Bank transformation and
digitalisation also added to costs. However, a strong focus on
cost savings kept underlying costs flat during the period.
Net loan impairment charges for the period of DKK 609
million reflect the revised outlook for the portfolio caused by
updated model expectations in the wake of the outbreak of
the coronavirus pandemic. In the first quarter, we saw
significant impairments followed by a reversal in the second
quarter as the macroeconomic scenarios were updated to
reflect actual data on, for example, house prices and
unemployment.
Credit quality
Overall credit quality remained strong despite the corona
crisis. The situation had a negative effect on especially the
in negative rating
commercial portfolio, as reflected
migrations. The effects on the retail customer portfolio were
more modest. We have not yet seen an increase in actual
losses, but we expect some of the model-related impairments
that have already been recognised to materialise at individual
customer level once the government support packages
expire.
Danske Bank / Interim report – first half 2020 15/87
Credit quality at Realkredit Danmark remained solid in first
half of 2020 despite a negative effect following the outbreak
of the pandemic.
The average retail loan-to-value (LTV) level decreased 0.5
percentage points over the period.
Loan-to-value ratio,
home loans
Retail
Total
30 June 2020
31 Dec. 2019
Average
LTV (%)
60.1
60.1
Net credit
exposure
(DKK bn)
505
505
Average
LTV (%)
60.6
60.6
Net credit
exposure
(DKK bn)
508
508
Credit exposure
The decrease in credit exposure was driven mainly by the
commercial portfolio and primarily reflects lower exposure to
the Danish central bank.
(DKK millions)
30 June 2020
31 Dec. 2019
Net credit exposure
Retail
Commercial
563,877
448,669
567,125
486,987
Total
1,012,545
1,054,111
Impairments
(ann.) (%)
30 June 2020
0.05%
0.24%
0.13%
Q2 2020 vs Q1 2020
Profit before tax increased 116% to DKK 1.3 billion. This was
due to a reversal of loan impairments in the second quarter.
The reversals more than offset the 8% decline in total
income.
Net interest income increased slightly following rising CIBOR
rates that benefited deposits and adjusted deposit rates for
commercial customers.
Net fee income fell as a result of the corona crisis, resulting
in low demand for foreign currency, a decline in card use and
a low number of property sales.
increased 12% due to costs for
Operating expenses
regulatory compliance and financial crime prevention as well
as investments in the Better Bank transformation and
digitalisation.
The second quarter of 2020 saw net loan impairment
reversals of DKK 337 million, against a charge of DKK 945
million in the first quarter of 2020. The reversal reflects an
update of the macroeconomic scenarios and a more positive
view on future housing prices, the effect of which was partly
offset by an increase in impairments from post-model
adjustments.
Danske Bank / Interim report – first half 2020 16/87
Banking Nordic
In the first half of 2020, Banking Nordic posted a profit before tax of DKK 1.1 billion, a decline of 54% from the first half of 2019.
This was due to the significant increase in loan impairments of DKK 1.2 billion that resulted from the corona crisis. Profit before
loan impairment charges decreased 2% from the level in the first half of 2019. The decrease was the result of increased costs for
compliance and transformation. The underlying business costs declined, not least due to restructuring programmes at the
beginning of the year.
First half
2020
First half
Index
2019 20/19
Q1
Index
2020 Q2/Q1
Q2
Index
2019 20/19
Full year
2019
Banking Nordic
(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
4,047
928
120
277
5,372
3,188
2,184
1,107
3,888
908
147
322
5,266
3,032
2,234
-87
Profit before tax
1,077
2,321
Loans, excluding reverse transactions before
impairments
Allowance account, loans
Deposits, excluding repo deposits
Covered bonds issued*
Allowance account, guarantees
Allocated capital (average)
637,185
4,838
298,108
252,190
463
36,899
630,851
3,502
262,989
242,367
383
34,324
Net interest income as % p.a. of loans and deposits
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
0.90
5.8
59.3
2,467
0.89
13.5
57.6
2,750
Q2
2020
2,048
451
53
128
2,680
1,651
1,029
155
1,999
477
67
149
2,692
1,537
1,155
952
102
95
79
86
100
107
89
16
1,930
445
77
168
2,619
1,513
1,106
-37
874
203
-
1,143
637,185
4,838
298,108
252,190
463
36,729
606,799
4,554
269,789
248,096
476
37,070
0.90
9.5
61.6
2,467
0.90
2.2
57.1
2,509
105
106
110
102
97
99
98
630,851
3,502
262,989
242,367
383
34,521
0.88
13.2
57.8
2,750
104
102
82
86
102
105
98
-
46
101
138
113
104
121
108
90
106
101
69
76
102
109
93
-
76
101
138
113
104
121
106
90
7,839
1,857
280
592
10,567
6,269
4,298
510
3,788
634,974
3,880
270,522
223,604
451
34,371
0.89
11.0
59.3
2,599
*Covered bonds issued is before the elimination of the Group’s holding of own covered bonds.
Fact Book Q2 2020 provides financial highlights at customer level for Banking Nordic. Fact Book Q2 2020 is available at danskebank.com/ir.
First half 2020 vs first half 2019
In the first half of 2020, Banking Nordic’s markets were hit
by the corona crisis, as significant turmoil arose on the global
markets and businesses and societies were impacted by the
lockdown in many countries. However, the income line
remained resilient, and the financial impact on Banking
Nordic was visible mainly in the form of the high impairment
charges for the period, although impairments declined
significantly in the second quarter of 2020 due to a more
positive outlook.
Customer activity
launched several initiatives to support
Banking Nordic
customers through the turmoil resulting from the corona
crisis. In the weeks after the outbreak of the pandemic, many
of our retail customers made use of our initiatives, such as
offers for interest-only periods on mortgage loans and a
range of streaming services and live chats set up specifically
to provide advice in relation to the market situation following
the outbreak.
large number of customers
large-customer
A
segments have been contacted with advice, and we have
focused on the various government support packages as well
in the
as on giving advice on tools to increase liquidity, including
establishment or extension of credit lines.
lockdown
digital
The
transformation, and the majority of our customers interacted
with us via online channels, including phone and eMeetings.
accelerated Danske Bank’s
Despite the global turmoil, Banking Nordic experienced a high
inflow of retail customers, especially in Sweden and Norway
in the first half of 2020. In Norway, the value proposition for
our partnership customers facilitated growth, and in Sweden,
we saw an increase in deposits in particular due to a
successful start to the migration of HSB partnership
customers, with more than 50,000 customers onboarded by
the end of June.
In all market areas, lending grew in local currency from the
levels at the end of 2019. Alongside this growth, we
maintained our focus on expanding business with existing
customers.
Financial results
Banking Nordic posted a profit before tax of DKK 1.1 billion, a
decrease of 54% from the level in the first half of 2019. This
was due to a combination of a significant increase in loan
impairments related to the corona crisis and rising costs for
compliance and transformation.
Loan-to-value ratio,
home loans
Danske Bank / Interim report – first half 2020 17/87
30 June 2020
Net credit
exposure
(DKK bn)
Average
LTV (%)
31 Dec. 2019
Net credit
exposure
(DKK bn)
Average
LTV (%)
Retail Sweden
Retail Norway
Retail Finland
63.7
62.1
62.0
92
118
86
63.6
62.7
61.8
87
125
86
Total
62.5
295
62.7
297
Credit exposure
Credit exposure increased to DKK 774 billion in the second
quarter of 2020. The increase in the Swedish portfolio was
driven by increased loans and loan offers to retail customers.
The decrease in the Norwegian portfolio was due to the
depreciation of the Norwegian krone vis-à-vis the Danish
krone that has occurred since end-2019.
(DKK millions)
Net credit exposure
30 June 2020 31 Dec. 2019
Sweden
Norway
Finland
Other
Total
306,021
236,260
179,137
52,651
289,206
249,001
172,857
53,159
774,068
764,224
Impairments
(ann.) (%)
30 June 2020
0.44%
0.13%
0.52%
0.25%
0.35%
Q2 2020 vs Q1 2020
Profit before tax
increased DKK 671 million due to
impairment charges declining from the level in the first
quarter of 2020.
Total income was on par with income in the preceding
quarter.
Net interest income increased slightly due mainly to reduced
margin pressure in Sweden and an appreciation of the
Swedish krona vis-à-vis the Danish krone.
Net fee income fell as a result of the corona crisis causing low
demand for foreign currency and a decline in card use and
transaction fees.
Operating expenses increased 7% due to costs for regulatory
compliance and financial crime prevention as well as
in the Better Bank transformation and
investments
digitalisation.
Loan impairments amounted to a charge of DKK 155 million
in the second quarter of 2020, against a charge of DKK 952
million in the first quarter of 2020.
Net interest income increased 4%, despite adverse currency
effects, benefiting from the development in the interest rate
environment, especially the several rate cuts made by the
Norwegian central bank. In the second quarter, reduced
margin pressure in Sweden also benefited net interest
income. The increase was also a result of the strategy of
growth via partnerships.
Net fee income increased 2% from the level in the first half of
2019, driven mainly by good investment activity at the
beginning of the year and higher commission fees from
activities in Sweden.
Banking Nordic saw an increase in operating expenses of 5%
from the level in the first half of 2019. The increase was due
to costs for regulatory compliance and financial crime
prevention. Banking Nordic also had increased investments
in the Better Bank transformation and digitalisation. These
investments aim to increase efficiency while keeping a high
customer service level. The underlying business costs at
Banking Nordic decreased due to the strong focus on cost
control as well as a restructuring of the business at the
beginning of 2020, which sparked the implementation of the
new retail service model. The new model will make the retail
business at Banking Nordic more efficient and allow us to be
able to scale our products and solutions to a much larger
extent.
Loan impairments amounted to a net charge of DKK 1.1
billion, driven mainly by the update of the macroeconomic
scenarios and a few single names. However, the charges
were more subdued in the second quarter of 2020 due to a
more positive macroeconomic outlook. The increase was
seen mainly for the commercial portfolio and was driven by
Banking Sweden and Banking Finland.
The overall
percentage points from the level at the end of 2019.
loan-to-value
(LTV) ratio decreased 0.2
Credit quality
Credit quality remained strong in the first half of 2020
following the outbreak of the
despite some effects
coronavirus pandemic. The commercial customer portfolio
was slightly negatively affected due to negative rating
migrations, while the retail customer portfolio was stable
during the period. The effects on the retail customer portfolio
were more modest. We have not yet seen an increase in
actual losses, but we expect some of the model-related
impairments that have already been booked to materialise at
individual customer level once the government support
packages expire. Banking Nordic has implemented initiatives
to support retail and commercial customers, for example by
offering increased limits and interest-only periods.
Danske Bank / Interim report – first half 2020 18/87
Corporates & Institutions
After a difficult first quarter of 2020, income at Corporates & Institutions increased significantly in the second quarter following
high customer activity and a recovery in net trading income as financial markets normalised. Total income was up 11% year on
year. Profit before tax was, however, negative in the first half of 2020 as a result of high loan impairment charges. Operating
expenses increased due to costs for regulatory and compliance-related activities.
First half
2020
First half
2019
Index
20/19
Q1
2020
Index
Q2/Q1
Q2
2019
Index
20/19
Full year
2019
Corporates & Institutions
(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
1,951
1,471
1,619
7
5,048
2,631
-
2,417
3,270
1,787
1,401
1,347
1
4,535
2,388
-
2,147
520
Profit before tax
-854
1,627
Profit before tax and goodwill impairment charges
-854
1,627
Loans, excluding reverse trans. before impairments
hereof loans in General Banking
Allowance account, loans
Allowance account, credit institutions
Deposits, excluding repo deposits
hereof deposits in General Banking
Covered bonds issued*
Allowance account, guarantees
Allocated capital (average)
227,516
182,284
5,951
22
341,249
286,734
16,905
889
37,033
202,984
168,162
2,260
8
270,529
223,795
17,061
21
31,499
Q2
2020
1,058
699
1,777
7
3,541
1,396
-
2,144
1,089
893
772
-158
-
1,507
1,235
-
272
2,181
1,055
-1,909
1,055
-1,909
227,516
182,284
5,951
22
341,249
286,734
16,905
889
39,450
216,524
178,245
5,065
19
301,443
249,621
16,800
662
34,590
109
105
120
-
111
110
-
113
-
-
-
112
108
263
275
126
128
99
-
118
118
91
-
-
235
113
-
-
50
-
-
105
102
117
116
113
115
101
134
114
857
709
432
1
1,999
1,184
-
815
300
123
99
-
-
177
118
-
263
-
3,656
2,909
2,114
8
8,688
4,834
803
3,051
1,348
516
204
1,703
516
204
2,506
202,984
168,162
2,260
8
270,529
223,795
17,061
21
31,412
112
108
263
275
126
128
99
-
126
209,148
171,478
3,156
9
270,685
227,131
15,856
552
32,684
Net interest income as % p.a. of loans and deposits
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
0.76
-4.6
52.1
1,647
0.79
10.3
52.7
1,675
-
-
-
98
0.77
10.7
39.4
1,647
0.74
-22.1
82.0
1,666
-
-
-
99
0.75
6.6
59.2
1,675
-
-
-
98
0.79
5.2
64.9
1,665
Total income
(DKK millions)
FI&C
hereof xVA**
Capital Markets
General Banking
Total income
2,176
-148
446
2,426
1,676
-218
597
2,262
130
68
75
107
1,954
196
294
1,293
222
-344
151
1,134
-
-
195
114
590
-54
301
1,108
-
-
98
117
2,845
-283
1,211
4,631
5,048
4,535
111
3,541
1,507
235
1,999
177
8,688
*Covered bonds issued is before the elimination of the Group’s holding of own covered bonds.
**The xVA acronym covers Credit (CVA), Debit (DVA), Funding (FVA) and Collateral (ColVA) Valuation Adjustments to the fair value of the derivatives
portfolio. Danske Bank has a centralised xVA desk responsible for quantifying, managing and hedging xVA risks. The PnL result of the xVA desk is thus the
combined effect of the net xVA position and funding and collateral costs of the trading book.
First half 2020 vs first half 2019
Following the extraordinary volatility in March, the financial
markets recovered during the second quarter of 2020.
However, even as most societies gradually reopened,
economic activity continued to be negatively impacted by the
corona crisis.
As a result, customer demand for risk hedging, liquidity and
capital raising was high during the first half of 2020, and
income for the first half of 2020 ended 11% higher than
income in the same period in 2019. As a leading wholesale
bank in the Nordic economies, we recognise our obligation to
help minimise the negative impact of the corona crisis on the
societies we are part of, and we will continue to support
customers through these challenging times.
Notwithstanding the positive income development, profit
before tax was negative for the first half of 2020 as a result
of high loan impairment charges. Impairments remain driven
by second-round restructurings on single-name exposures in
the oil and gas industry as the lower oil price is having a
negative impact on capital expenditure.
market conditions, higher customer activity as well as strong
performance in credit markets.
Danske Bank / Interim report – first half 2020 19/87
Net interest income increased from the level in the first half
of 2019, driven by higher average lending and deposit
volumes. The large contraction of economic activity amid the
corona crisis led to a significant increase in corporate
demand for credit, and we extended substantial short-term
facilities. A significant and increasing share of these remains
unutilised and serves as backup
liquidity facilities for
customers. Deposit volumes also increased significantly,
especially from corporate customers, which contributed to
the increase in net interest income, although the uncertainty
about the economic outlook translates into uncertainty about
how long deposit volumes will remain elevated.
Net fee income increased from the level in the first half of
2019, driven by higher customer activity in mainly Equities
and Debt Capital Markets. Despite the standstill in March in
both debt and equity primary markets, income before and
after more than made up for this. Fee income from Equities
sales increased, driven by high customer activity amid the
high market volatility. The increase was partly offset by a
decrease in activity within M&A and Loan Capital Markets.
Net trading income improved significantly in the second
quarter of 2020 after a very challenging first quarter. The
negative performance in the first quarter was driven mainly
by a negative impact in March, with the significantly wider
spreads affecting our trading activities within mortgage and
credit products in FI&C, as well as lower trading income in
Equities. In the second quarter, Rates & Credit recovered
from March headwinds, benefiting from both high activity as
well as the normalisation across financial markets. Customer
activity was high in Currencies & Liquidity throughout the
period.
Operating expenses increased from the level in the first half
of 2019, despite lower direct staff costs as the result of cost
savings in the Markets area and lower provisions for
performance-based compensation. The higher costs reflect
continually high expenses
laundering
activities and regulatory compliance as well as a higher
resolution fund contribution.
for anti-money
Fixed Income & Currencies
Total income in FI&C increased from the first half of 2019.
The increase was driven mainly by higher customer activity
and more favourable market conditions in Currencies and
Liquidity amid higher market volatility.
Primary Credit Markets saw a strong start to the year, with
very high customer activity across all home markets, until
activity came to a standstill in mid-March when primary
markets froze. The markets reopened in April, and we saw
high activity, especially in corporate euro issuance and
government debt issuance throughout the second quarter.
Secondary Rates & Credit income was challenged by the
volatility and spread widening that followed the outbreak of
the coronavirus pandemic in March. However, in the second
quarter, income recovered as a result of the normalisation of
Valuation adjustments of the derivatives portfolio (xVA)
contributed negatively to trading income in the first half of
2020, however, less so than in the same period last year. The
normalisation of credit markets and Danske Bank’s funding
spread in the second quarter led to a reversal of some of the
funding valuation losses seen in the first quarter of 2020.
During the period, most of the FX, interest rate and credit
spread risk on the xVA desk was hedged, thereby limiting the
effect on the result of the volatile market movements.
Capital Markets
Income in Capital Markets decreased in the first half of 2020
from the level in the same period last year as a result of
negative trading income in Equities derivatives and lower
originate-to-distribute activity in Loan Capital Markets. A
negative value adjustment of a bridge loan in Loan Capital
Markets in the first quarter also contributed to the lower
income. Customer activity was high in Equities, and within
ECM we saw good activity with customers looking to
strengthen their balance sheets.
Capital Markets also continued to see increased customer
and investor demand for sustainable financing, a trend we
expect to continue.
General Banking
Income from General Banking activities increased as bank
lending, off-balance-sheet committed facilities and deposits
all increased as customers bolstered their liquidity in the
wake of the outbreak of the coronavirus pandemic.
Fee income from cash management and trade finance was
broadly stable, and we continued to see growth in fees from
Investor Services as new customers were onboarded to our
investor services offering.
Credit quality
The deterioration in credit quality seen during the first six
months was driven by the macroeconomic uncertainty
caused by the corona crisis and the deteriorating outlook for
the oil and gas sector. Customer credit assessments were
made on an ongoing basis and impacted mainly the shipping,
oil and gas, and retailing industries.
Loan impairments in the first six months of 2020 amounted
to a net charge of DKK 3,270 million. The majority of the
impairment charge is attributable to the oil and gas-related
exposures. With the initial impairments driven by the rapid
decline in oil prices, the continued uncertainty in the asset-
heavy offshore service and drilling segments led to additional
impairments during the period, as lower activity makes
restructurings increasingly difficult.
Credit exposure
Net credit exposure from lending activities amounted to
DKK 554 billion at the end of June 2020, an increase of
DKK 110 billion from the level at the end of 2019. The
majority of the increase in exposure was driven by loans and
unutilised committed facilities to corporate customers.
Exposures to central banks and credit institutions also
increased.
(DKK millions)
30 June 2020
31 Dec. 2019
Net credit exposure
Sovereign
Financial Institutions
Corporate
Other
56,967
89,101
407,488
34
23,056
84,347
335,783
36
Impairments
(ann.) (%)
30 June 2020
0.02%
0.32%
3.48%
Total
553,590
443,223
2.74%
The sovereign and financial institutions portfolios consist
primarily of exposures to stable, highly rated Nordic
is diverse and
counterparties. The corporate portfolio
consists mainly of large companies based in the Nordic
countries and large international customers with activities in
the Nordic region.
Danske Bank / Interim report – first half 2020 20/87
Q2 2020 vs Q1 2020
Profit before tax increased significantly from the low level in
the first quarter of 2020, driven by a recovery in net trading
income as well as higher net interest income and lower loan
impairment charges.
FI&C income increased significantly, driven by higher trading
income and positive developments in value adjustments, as
the normalisation of credit markets and Danske Bank’s
funding spread in the second quarter led to a reversal of
some of the funding valuation losses in the first quarter of
2020.
Capital Markets income increased due to the negative one-off
value adjustment in Loan Capital Markets in the first quarter
of 2020 and an improvement in net trading income.
General Banking income increased from the first quarter of
2020, as a result of higher net interest income from bank
lending and deposits.
Operating expenses increased despite lower travel and
representation costs. The increase was due mainly to a
continued increase in costs for regulatory compliance as well
as a higher resolution fund payment and higher provisions for
performance-based compensation.
The second quarter of 2020 saw net loan impairment
charges of DKK 1,089 million, against charges of DKK 2,181
million in the first quarter of 2020. The impairment charges
in the second quarter of 2020 were driven by the asset-
heavy oil and gas portfolio.
Danske Bank / Interim report – first half 2020 21/87
Wealth Management
Profit before tax amounted to DKK 1 billion, a decrease of 53% from the level in the first half of 2019 that was due to the year-
earlier figure benefiting from the DKK 1.3 billion gain from the sale of Danica Pension Sweden. Excluding this gain, profit before tax
was up 17%. This was due mainly to the decrease in operating expenses caused by the integration of SEB Pension as well as the
compensation payable to certain Flexinvest Fri customers in 2019. Net fee and net trading income rebounded during the second
quarter, driven mainly by a better investment result in the health and accident business as well by as improved fee income in Danica
Pension.
Wealth Management
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Goodwill impairment charges
First half
2020
First half
2019
Index
20/19
Q1
2020
Index
Q2/Q1
Q2
2019
Index
20/19
Full year
2019
-143
2,791
44
-29
2,663
1,644
-
-103
2,731
136
1,331
4,095
1,927
-
Q2
2020
-60
1,569
125
-5
1,629
779
-
850
850
-
102
32
-
65
85
-
47
47
-84
1,222
-81
-23
1,034
865
-
169
169
-
128
-
-
158
90
-
-
-
-55
1,371
-
1,368
2,685
1,074
-
1,610
1,610
109
114
-
-
61
73
-
53
53
104
-
-
97
-248
5,902
340
1,405
7,398
3,589
800
3,009
3,809
15,569
19.3
59.3
1,563
Profit before tax
1,019
2,168
Profit before tax and goodwill impairment charges
1,019
2,168
Allocated capital (average)
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
16,114
12.6
61.7
1,515
14,766
29.4
47.1
1,557
109
-
-
97
16,100
21.1
47.8
1,515
16,127
4.2
83.7
1,527
100
-
-
99
15,420
41.8
40.0
1,557
Breakdown of assets under management*
(DKK billions)
Life conventional
Asset management
Assets under advice
187
879
494
198
891
482
94
99
102
187
879
494
184
814
430
102
108
115
198
891
482
94
99
102
194
934
489
Total assets under management
1,560
1,571
99
1,560
1,428
109
1,571
99
1,616
Breakdown of net fee income
(DKK millions)
Management fees
Performance fees
Risk allowance fees
Total net fee income
2,059
11
722
2,088
14
629
99
79
115
1,213
2
355
846
9
367
143
22
97
1,044
11
316
116
18
112
4,236
376
1,290
2,791
2,731
102
1,569
1,222
128
1,371
114
5,902
*Assets under Management consists of our life conventional business (Danica Traditionel), asset management (Danica unit-linked and Asset Management)
and assets under advice (the investment decision is made by the customer) from retail, commercial and private banking customers.
**As described in Annual Report 2019, a restatement has been made between the income lines and an adjustment made to Assets under management.
Comparative figures have been restated accordingly.
First half 2020 vs first half 2019
Profit before tax amounted to DKK 1 billion, a decrease of
53% from the level in the first half of 2019 that was due to
the profit for the first half of 2019 being positively affected by
the gain from the sale of Danica Pension Sweden. Profit
before tax for Danica Pension amounted to DKK 897 million,
against DKK 2,074 million in the first half of 2019, and for
Asset Management, profit before tax amounted to DKK 122
million, against DKK 94 million in the first half of 2019, which
was negatively impacted by the compensation payable to
certain Flexinvest Fri customers.
The first half of 2020 was impacted significantly by the
corona crisis. The financial markets saw low returns on
equities, and an increase in interest rates led to low
in the first quarter, especially for
investment returns
customers with unit-linked products. During the second
quarter, the markets rebounded, and customers with unit-
linked products received positive returns. For Danica
Pension, the market developments in the second quarter also
led to positive returns on the life conventional products
(Danica Traditionel).
Danske Bank / Interim report – first half 2020 22/87
In the first half of 2020, we also saw positive developments
in our sustainable investments, which increased DKK 10
billion to a total of DKK 20 billion in the period.
Premiums in Danica Pension amounted to DKK 15.3 billion,
against DKK 15.0 billion in the first half of 2019. The
increase was driven primarily by higher single premiums.
Investment return on customer funds
In the first half of 2020, the financial markets were
characterised by a significant drop during the first quarter
and a rebound during the second quarter. Looking overall at
our funds, 64% of investment products generated above–
benchmark returns in the first half of 2020 – similar to the
returns in the first half of 2019. On a 3-year horizon, 64% of
all investment products generated above-benchmark results.
% of investment products (GIPS composites) with above-
benchmark returns (pre-costs)*
All funds
Equity funds
Fixed-income funds
Balanced funds etc.
Hedge funds
2020
3-year
64%
60%
66%
69%
67%
64%
54%
80%
10%
100%
*Source:
Investment Performance Standard.
Investment Performance, based on results from Global
Customers with Danica Balance Mix achieved returns on
investments of a negative 1.8% for low-risk profiles with 5
years to retirement and a negative 5.2% for high-risk profiles
with 30 years to retirement. The return for customers with a
Danica Balance medium risk profile with 20 years to
retirement was a negative 4.3%.
Q2 2020 vs Q1 2020
In the second quarter of 2020, profit before tax increased
DKK 0.7 billion to DKK 0.9 billion, driven primarily by Danica
Pension.
Total income increased DKK 0.6 billion to DKK 1.6 billion.
Net fee income increased primarily because of income
related to products with investment guarantees in Danica
Pension, and net trading income increased due to a better
investment result in the health and accident business.
Operating expenses decreased 10% to DKK 779 million,
driven, among other things, by lower staff costs.
During the outbreak of the coronavirus pandemic, we
continued to provide our customers with new solutions
within pensions, savings and investments. However, since
then, our focus has been on assisting and supporting pension
and investment customers affected by the consequences of
the corona crisis.
Financial results
Combined, net fee income and net trading income were on
par with the level in the first half of 2019 due to a positive
second quarter of 2020 that lifted income to a normalised
level.
In the first quarter of 2020, net fee income was negatively
impacted by losses on certain products with investment
guarantees in Danica Pension, while the second quarter of
2020 saw improved income from these products and a
correction of pension tax. Overall, net fee income was up 2%
year on year.
Net trading income mainly reflects the better investment
result in the health and accident business, which also
rebounded in the second quarter as financial markets
rebounded. Net
remains
significantly lower than in the first half of 2019, due primarily
to the negative investment result in the first quarter of 2020.
income, however,
trading
Other income amounted to a negative DKK 29 million, against
a positive DKK 1,331 million in the first half of 2019, which
was positively impacted by the gain from the sale of Danica
Pension Sweden.
Operating expenses were down 15% from the level in the first
half of 2019, which was negatively
impacted by the
integration of SEB Pension and the compensation payable to
certain Flexinvest Fri customers.
An increasing use of digital channels for customers as well
as internally was well received by customers and employees
alike while at the same time lowering costs. Across Asset
Management and Danica Pension, focus was also on
delayering and simplifying the operating model, which has
started to positively impact our underlying operating costs.
However, we continue to see an increase in regulatory and
compliance-related costs.
Assets under Management
Assets under Management consists of our life conventional
business (Danica Traditionel), asset management (Danica
unit-linked and Asset Management) as well as assets under
advice, where the customer makes the investment decision.
Assets under Management amounted to DKK 1,560 billion
by the end of the second quarter of 2020, a decrease of
DKK 56 billion from the end of 2019. The decrease was
driven primarily by negative developments in the financial
markets towards the end of the first quarter 2020 in addition
to a general need for liquidity among customers during the
corona crisis affecting net sales negatively.
Danske Bank / Interim report – first half 2020 23/87
Northern Ireland
Profit before tax amounted to DKK 76 million in the first half of 2020, a decrease of 82%. This was driven by provisions for potential
future loan losses made as a result of the corona crisis. Profit before loan impairment charges also reduced from the profit in the
same period last year, reflecting sharply reduced UK interest rates and low activity levels.
First half
2020
First half
2019
Index
20/19
Q2
2020
Q1
2020
Index
Q2/Q1
Q2
2019
Index
20/19
Full year
2019
Northern Ireland
(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
Loans, excluding reverse transactions before
impairments
Allowance account, loans
Deposits, excluding repo deposits
Allowance account, guarantees
Allocated capital (average)*
703
133
78
8
923
595
327
252
76
765
189
70
7
1,030
595
436
14
421
51,054
842
75,467
73
6,348
50,189
702
64,060
36
6,650
Net interest income as % p.a. of loans and deposits
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
1.09
2.4
64.5
1,365
1.28
12.7
57.8
1,335
* Allocated capital equals the legal entity’s capital.
First half 2020 vs first half 2019
Profit before tax reduced in the first half of 2020, driven by
timely impairment provisions and lower income, while costs
were maintained flat.
Total income was 10% lower, reflecting sharply reduced UK
interest rates and very low activity levels in the second
quarter as a result of the corona crisis. This is evident in both
net interest income and net fee income, whereas trading
income was higher, reflecting interest rate risk hedging.
Operating expenses continued to be very tightly controlled,
with costs maintained flat.
First half 2020 vs first half 2019 in local currency
Profitability also fell in local currency, with the fall driven by
higher impairment charges and lower income, while costs
were maintained at 2019 levels. While income was lower,
lending and deposits increased 1% and 19%, respectively.
Lending balances reflect a combination of residential
mortgage growth, notwithstanding very low activity levels in
the second quarter, and government-backed business
support loans in response to the corona crisis. Offsetting this,
many retail and commercial customers have reduced their
borrowing and are holding additional liquidity, as reflected in
the year-on-year deposit growth.
92
70
111
114
90
100
75
-
18
102
120
118
203
95
102
327
50
26
4
408
295
113
87
26
375
83
52
4
515
300
215
165
49
51,054
842
75,467
73
6,186
51,218
819
70,075
46
6,512
0.99
1.7
72.3
1,365
1.19
3.0
58.3
1,334
87
60
50
100
79
98
53
53
53
100
103
108
159
95
102
379
93
40
4
516
293
223
28
195
50,189
702
64,060
36
6,735
1.26
11.6
56.8
1,335
86
54
65
100
79
101
51
-
13
102
120
118
203
92
102
1,524
363
110
14
2,011
1,216
794
5
789
54,287
696
70,943
34
6,425
1.26
12.3
60.5
1,285
Credit quality
While there has been little material deterioration to date in
credit quality at individual customer level as a result of the
corona crisis, the economic outlook for 2020 remains
challenging. This is reflected in higher loan impairments given
the expectation that some customers and certain sectors
will experience financial difficulties.
(DKK millions)
Net credit exposure
30 June 2020 31 Dec. 2019
Retail customers
Public institutions
Financial customers
Commercial customers
24,933
29,239
504
29,365
26,812
19,934
459
31,332
Total
84,041
78,537
Impairments
(ann.) (%)
30 June 2020
0.29%
0.02%
0.27%
1.71%
0.93%
Q2 2020 vs Q1 2020
The profitability movement in the second quarter was
dominated by lower UK interest rates and the impact of the
corona crisis on income, partially offset by lower impairment
provisions relative to the first quarter.
Danske Bank / Interim report – first half 2020 24/87
Non-core
The winding-up of the Non-core portfolios is proceeding according to plan. Profit before tax for the first half of 2020 was a negative
DKK 446 million, against a negative DKK 270 million in the first half of 2019. Total lending stood at DKK 5.4 billion at the end of
June 2020, against DKK 13.1 billion at the end of June 2019.
Non-Core
(DKK millions)
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
First half
2020
First half
2019
Index
20/19
-106
165
-271
175
109
10
99
369
-
-
-
47
Q2
2020
-71
40
-110
82
-35
126
-161
93
Profit before tax
-446
-270
-192
-254
Loans, excluding reverse transactions before
impairments*
Allowance account, loans
Deposits, excluding repo deposits
Allowance account, guarantees
Allocated capital (average)
Net interest income as % p.a. of loans and deposits
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
5,414
971
1,751
18
1,634
0.92
-54.6
-155.7
64
13,109
769
3,565
23
2,591
1.16
-20.8
9.2
320
Loan impairment charges
(DKK millions)
Non-core banking**
Non-core conduits etc.
Total
87
88
175
274
94
369
41
126
49
78
63
20
32
94
47
5,414
971
1,751
18
1,421
0.99
-54.0
-56.3
64
6,732
954
1,542
19
1,850
0.86
-54.9
-360.0
83
74
8
82
13
80
93
* Loans, excluding reverse transactions before impairments includes loans held for sale in the Baltics.
** Non-core banking encompasses the Group’s activities in Lithuania and Non-core Ireland.
Q1
2020
Index
Q2/Q1
Q2
2019
Index
20/19
Full year
2019
42
-83
126
108
18
13,109
769
3,565
23
2,580
1.01
2.8
-197.6
320
1
107
108
32
88
80
102
114
95
77
77
-
10
88
-
-
-
76
-
41
126
49
78
55
20
-
7
76
-61
219
-280
213
-493
7,456
842
1,668
19
2,379
1.27
-20.7
-359.0
159
19
194
213
First half 2020 vs first half 2019
The Non-core unit posted a loss before tax of DKK 446
million (H1 2019: a loss of DKK 270 million) due mainly to
losses related to the final exit from Estonia. Further,
operating expenses in the first half of 2019 benefited from a
positive adjustment of VAT regarding previous years.
Net credit exposure totalled DKK 6.9 billion, against
DKK 10.4 billion at the end of 2019. The decrease was due
primarily to the settlement of the sale of the personal
customer loan portfolio in Lithuania in the first half of 2020.
Total lending amounted to DKK 5.4 billion (end 2019:
DKK 7.5 billion). Lending consisted of exposure
to
commercial customers and public institutions in the Baltics
as well as conduits.
The Group has exited its banking activities in Estonia, Russia
and Latvia. In January 2020, the Group entered into an
agreement to sell its personal customer loan portfolio in
Lithuania. The sale was settled in the second quarter of
2020.
At the Lithuanian branch, the only portfolio remaining is a
portfolio of commercial loans, which is to mature according
to contractual terms. In June 2020, an agreement to sell part
of the portfolio was entered into, however. The settlement
requires the approval of the competent authorities.
(DKK millions)
Non-core banking
-of which personal
customers
-of which
commercial
customers
-of which public
institutions
Non-core conduits
etc.
Net credit exposure
Expected credit loss
30 June
2020
31 Dec.
2019
30 June
2020
31 Dec.
2019
4,127
6,653
275
222
30
983
-
21
2,808
3,696
274
201
1,290
1,974
-
-
2,768
3,749
724
640
Total
6,896
10,402
999
862
Danske Bank / Interim report – first half 2020 25/87
Total impairments amounted to DKK 175 million (H1 2019:
DKK 369 million). Loan impairments in the first half of 2020
related to the Lithuanian portfolio and to a single-name
exposure in a legacy portfolio. Total impairments in the first
half of 2019 were adversely affected by a negative value
adjustment.
Q2 2020 vs Q1 2020
Profit before tax amounted to a negative DKK 192 million,
against a negative DKK 254 million in the first quarter of
2020. The improved result was due mainly to decreasing
operating expenses. Operating expenses for the first quarter
of 2020 were adversely affected by losses related to the final
exit from Estonia.
Danske Bank / Interim report – first half 2020 26/87
Other Activities
Other Activities includes Group Treasury and Group support functions as well as eliminations. Group Treasury is responsible for
the Group’s Internal Bank, liquidity management and funding. Net interest income primarily reflects differences at the Internal Bank
between actual and allocated funding costs using the Group’s funds transfer pricing model, the elimination of the interest expense
on equity-accounted additional tier 1 capital, reported as an interest expense in the business segments, as well as income related
to the Group’s liquidity portfolio.
First half
2020
First half
2019
Index
20/19
Q2
2020
Q1
2020
Index
Q2/Q1
Q2
2019
Index
20/19
Full year
2019
Other Activities
(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
-49
-129
-103
-69
-350
1,014
-1,364
30
-75
-123
332
6
141
739
-598
-5
Profit before tax
-1,394
-593
Profit before tax
(DKK millions)
Group Treasury
Own shares and issues
Additional tier 1 capital
Group support functions
Total Other Activities
-534
139
317
-1,316
-51
41
391
-975
-1,394
-593
First half 2020 vs first half 2019
Other Activities posted a loss before tax of DKK 1,394 million
(H1 2019: a loss of DKK 593 million) that was driven by
lower net trading income due partly to negative market value
adjustments of interest rate hedges as a result of the spread
widening between DKK and EUR rates.
Net interest income amounted to a negative DKK 49 million
(H1 2019: a negative DKK 75 million). The improved result
was due to income related to the structural FX hedge of
Danske Bank’s CET 1 capital, which was implemented in the
second quarter of 2019. Higher bond portfolio income and
internal
funding optimisation also contributed to the
increase, although the positive development was partly offset
by higher funding costs and lower income from allocated
liquidity costs.
Net trading income amounted to a loss of DKK 103 million
(H1 2019: DKK 332 million). The decrease was due mainly
to negative value adjustments of hedges. In addition, there
was a lower return on investments.
-
-
-
-
-
137
-
-
-
-
-
81
-
-
-142
-69
-184
-57
-451
374
-825
23
93
-60
81
-12
102
640
-538
7
-849
-545
-224
-82
122
-665
-310
221
195
-651
-849
-545
-
-
-
-
-
58
-
-
-
-
-
63
-
-
-23
-70
209
55
172
495
-323
-
-323
-18
55
197
-557
-323
-
-
-
-
-
76
-
-
-
-5
-227
1,421
217
1,407
2,903
-1,497
-5
-1,491
-
-
62
-
825
59
785
-3,160
-
-1,491
The increase in operating expenses of 37% was due primarily
to higher costs for the Estonia case and transformation
costs.
Q2 2020 vs Q1 2020
Other Activities posted a loss before tax of DKK 849 million
(Q1 2020: a loss before tax of DKK 545 million) due primarily
to lower net trading income.
Net interest income decreased to a loss of DKK 142 million
(Q1 2020: DKK 93 million) that was driven by larger
differences between accrued and allocated liquidity costs at
the Internal Bank. This development was partly offset by
internal funding optimisation, however.
Net trading income decreased to a loss of DKK 184 million
(Q1 2020: DKK 81 million) due to negative value
adjustments of hedges. In addition, there was a lower return
on investments.
Danske Bank / Interim report – first half 2020 27/87
Definition of alternative performance measures
Danske Bank’s management believes that the alternative performance measures (APMs) used in the Management’s report provide valuable information to readers of
the financial statements. The APMs provide a more consistent basis for comparing the results of financial periods and for assessing the performance of the Group and
each individual business unit. They are also an important aspect of the way in which Danske Bank’s management defines operating targets and monitors performance.
Throughout the Management’s report, performance is assessed on the basis of the financial highlights and segment reporting, which represent the financial information
regularly provided to management. The differences between the financial highlights and the IFRS financial statements relate to certain changes in the presentation. Net
profit is the same in the financial highlights and in the IFRS income statement. Note G3 to the financial statements describes the differences between the financial
highlights and the IFRS financial statements, and each line item in the financial highlights is reconciled with the consolidated financial statements prepared under IFRS.
Definitions of additional ratios presented on page 3 and in other sections of the Management’s report:
Ratios and key figures
Dividend per share (DKK)
Definition
The dividend per share proposed in the Annual report and paid to shareholders in the subsequent year.
Accordingly, for 2018, it is the dividend paid in 2019. For 2019, no dividend was paid in 2020. Further
information can be found in note G1(a).
Return on average shareholders’ equity (% p.a.)
Net profit as disclosed in the financial highlights divided by the average of the quarterly average
shareholders’ equity (beginning and end of each quarter) within the year. Net profit and shareholders’
equity are stated as if the equity-accounted additional tier 1 capital was classified as a liability. In the
nominator, net profit for first half 2020 is reduced by interest expenses of DKK 316 million (full-year 2019:
DKK 786 million). The denominator represents equity, excluding additional tier 1 capital and other non-
controlling interests equal to a reduction in the average of the quarterly average of equity of DKK 13,161
million (2019: 17,744 million) compared to a simple average of total equity (beginning and the end of the
period).
Net interest income as % p.a. of loans and deposits
Net interest income in the financial highlights divided by the daily average of the sum of loans and deposits.
If the ratio was calculated applying the sum of loans and deposits end of period, the ratio for 2020 would
be 0.78% (full-year 2019: 0.79%) with to the daily average of the sum of loans and deposits being DKK
82.6 billion lower than calculating the ratio by applying the end of period sum of loans and deposits. The
purpose of the ratio is to show if the growth in net interest income follows the growth in loans and deposits.
The daily average is a more faithful representation of the growth in loans and deposits.
Cost/income ratio (%)
Operating expenses divided by total income. All amounts are from the financial highlights.
Book value per share
Shareholders’ equity (that is, excluding equity-accounted additional tier 1 capital) divided by the number of
shares outstanding at the end of the period.
Loan impairment charges as % of net credit exposure
This ratio is calculated on the basis of loan impairment charges and loans and guarantees in core
segments. The nominator is the loan impairment charges of DKK 5,269 million (full-year 2019: DKK 1,516
million) from the financial highlights and annualised. The denominator is the sum of Loans at amortised
cost of DKK 1,025.2 billion, Loans at fair value of DKK 799.6 billion and guarantees of DKK 67.6 billion at
the beginning of the year, as disclosed in the column “Lending activities – core” in the “Breakdown of credit
exposure” table in the notes to the financial statements. The ratio is calculated for each business unit.
Allowance account as % of net credit exposure
This ratio is calculated on the basis of the allowance account and loans and guarantees in core segments.
The nominator is the allowance account of DKK 24.9 billion at the end of the period, as disclosed in the
“Allowance account in core activities broken down by segment” table in the notes to the financial
statements. The denominator is the sum of Loans at amortised cost of DKK 1,025.2 billion, Loans at fair
value of DKK 799.6 billion, and guarantees of DKK 67.6 billion, at the end of the period, as disclosed in the
column “Lending activities –core” in the “Breakdown of credit exposure” table in the notes to the financial
statements. The ratio is calculated for each business unit.
Realkredit Danmark bonds funding loans
On page 10, information is provided on the funding of lending by deposits and covered bonds. The ‘Bonds
issued by Realkredit Danmark’ line item equals the carrying amount in the balance sheet, that is, issued
bonds held by the Group’s external investors. The ‘Total Realkredit Danmark bonds’ line item equals loans
funded by Realkredit Danmark bonds. The ‘Own holdings of bonds’ line item is a residual item that includes
the net amount of the elimination of own holdings less issued bonds backed by collateral other than
mortgage loans, such as securities.
Danske Bank / Interim report – first half 2020 28/87
Market shares
Market shares are based on data from central banks at the time of reporting. Comparative
information is updated on the basis of the latest available data, for example Annual Report 2019
included November 2019 data for Finland, Sweden and Norway as December 2019 data was not
available at the time of publication of Annual Report 2019. Subsequently, in Interim report – first
quarter 2020, the comparative data for market shares in Finland, Sweden and Norway was
updated with December 2019 data.
Danske Bank / Interim report – first quarter 2020 31/87
Income statement
Statement of comprehensive income
Balance sheet
Statement of capital
Cash flow statement
Notes
30
31
32
33
36
37
Note G1: Significant accounting policies and estimates
Note G2: Changes in accounting policies,
41
financial highlights and segment reporting
43
Note G3: Business model and business segmentation
48
Note G4: Income
Note G5: Loan impairment charges and reconciliation of total allowance account 49
50
Note G6: Loans at fair value
50
Note G7: Deposits
50
Note G8: Issued bonds, subordinated debt and additional tier 1 capital
52
Note G9: Assets held for sale and Liabilities in disposal groups held for sale
52
Note G10: Other assets and other liabilities
52
Note G11: Foreign currency translation reserve
53
Note G12: Guarantees, commitments and contingent liabilities
55
Note G13: Assets provided or received as collateral
56
Note G14: Fair value information for financial instruments
61
Risk Management
61
Breakdown of credit exposure
62
Credit exposure from core lending activities
71
Credit exposure from Non-core lending activities
Counterparty credit risk and credit risk from trading and investment securities 73
73
Bond portfolio
76
Market risk
Financial statements – Danske Bank A/S
77
Income statement – Danske Bank Group
Note
(DKK millions)
First half
2020
First half
2019
G4
G4
G4
G4
G4
G4
Interest income calculated using the effective interest method
Other interest income
Interest expense
Net interest income
Fee income
Fee expenses
Net trading income or loss
Gain or loss on sale of disposal groups
Income from holdings in associates
Other income
Net premiums
Net insurance benefits
Operating expenses
Impairment charges on goodwill
Profit before loan impairment charges
Loan impairment charges
G5
Profit before tax
Tax
Net profit
Portion attributable to
Shareholders of Danske Bank A/S (the Parent Company)
Additional Tier 1 capital holders
Net profit
Earnings per share (DKK)
Diluted earnings per share (DKK)
Proposed dividend per share (DKK)*
*For 2019, no dividends were paid in 2020. See note G1(a) for further information.
Danske Bank / Interim report – first half 2020 30/87
Q2
2020
5,717
10,220
8,361
7,577
3,508
1,112
19,891
-
-468
843
6,446
24,412
8,062
-
4,211
1,099
3,112
787
Q2
2019
5,366
10,559
8,944
6,981
3,552
1,293
6,238
-
81
2,432
5,885
11,531
7,368
-
4,978
221
4,757
725
Full year
2019
24,754
45,065
41,927
27,892
16,437
6,079
34,533
1,879
386
4,857
26,316
58,106
30,960
1,603
15,551
1,729
13,822
-1,249
11,976
22,299
20,430
13,844
7,736
2,572
-2,968
-
-493
2,264
14,444
9,506
15,858
-
6,892
5,443
1,449
413
12,286
21,799
20,178
13,907
7,684
3,057
29,823
-
243
3,135
12,453
40,323
14,258
-
9,608
839
8,769
1,749
1,036
7,020
2,325
4,031
15,072
720
316
6,629
390
2,204
121
3,835
197
14,285
786
1,036
7,020
2,325
4,031
15,072
0.8
0.8
-
7.8
7.8
-
2.6
2.6
-
4.5
4.5
-
16.7
16.7
8.5
Danske Bank / Interim report – first half 2020 31/87
Statement of comprehensive income – Danske Bank Group
(DKK millions)
Net profit
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit pension 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
Reclassified to the income statement on disposal of units outside Denmark
Unrealised value adjustments of bonds at fair value (OCI)
Realised value adjustments of bonds at fair value (OCI)
Tax
Items that are or may be reclassified subsequently to profit or loss
Total other comprehensive income
Total comprehensive income
Portion attributable to
Shareholders of Danske Bank A/S (the Parent Company)
Additional Tier 1 capital holders
First half
2020
First half
2019
Q2
2020
Q2
2019
Full year
2019
1,036
7,020
2,325
4,031
15,072
390
-102
287
-3,581
2,077
-
51
-15
146
-1,322
-1,035
130
-15
115
439
-28
-
189
-8
-39
554
669
1
7,689
-315
316
7,298
390
205
-12
193
2,119
-1,236
-
451
-4
-257
1,073
1,266
3,590
3,469
121
134
-32
102
-
13
630
-
82
10
-158
576
678
228
-21
207
-
692
-324
5
9
3
47
432
639
4,709
15,711
4,513
197
14,925
786
Total comprehensive income
1
7,689
3,590
4,709
15,711
Total assets
4,061,603
3,761,050
3,778,409
Balance sheet – Danske Bank Group
Note
(DKK millions)
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
Assets held for sale
Intangible assets
Tax assets
Other assets
Liabilities
Due to credit institutions and central banks
Trading portfolio liabilities
Deposits
Issued bonds at fair value
Issued bonds at amortised cost
Deposits under pooled schemes and unit-linked investment contracts
Liabilities under insurance contracts
Liabilities in disposal groups held for sale
Tax liabilities
Other liabilities
Non-preferred senior bonds
Subordinated debt
Total liabilities
Equity
Share capital
Foreign currency translation reserve
Reserve for bonds at fair value (OCI)
Retained earnings
Proposed dividends*
G6
G9
G10
G7
G7
G8
G8
G9
G10
G8
G8
G11
Shareholders of Danske Bank A/S (the Parent Company)
Additional tier 1 capital holders
G8
Total equity
Total liabilities and equity
*For 2019, no dividends were paid in 2020. See note G1(a) for further information.
Danske Bank / Interim report – first half 2020 32/87
30 June
2020
31 December
2019
30 June
2019
221,198
82,013
655,583
298,758
1,027,472
1,094,540
106,653
523,427
2,655
8,986
4,811
35,508
99,035
105,674
495,321
284,873
1,028,011
1,122,048
111,089
463,816
1,352
9,165
2,987
37,679
137,358
156,627
534,067
265,507
1,014,937
1,058,493
94,818
459,406
3,770
11,119
3,792
38,516
217,117
541,920
1,270,695
756,185
268,104
107,314
560,512
140
2,147
43,103
98,075
31,790
155,246
452,202
1,140,726
802,501
256,355
111,537
504,714
110
2,172
46,191
87,054
31,733
222,229
450,973
1,117,275
792,352
287,751
100,177
503,148
331
7,793
41,765
66,216
25,415
3,897,103
3,590,541
3,615,422
8,622
-1,875
138
149,043
-
155,927
8,573
8,622
-372
102
140,590
7,329
156,271
14,237
8,622
-334
272
140,188
-
148,748
14,239
164,500
170,508
162,988
4,061,603
3,761,050
3,778,409
Danske Bank / Interim report – first half 2020 33/87
Statement of capital – Danske Bank Group
Changes in equity
(DKK millions)
Total equity as at 1 January 2020
Net profit
Other comprehensive income
Remeasurement of defined benefit pension 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
Transactions with owners
Paid interest on additional tier 1 capital
Proposed dividends reversed*
Redemption of additional tier 1 capital
Acquisition of own shares and additional tier 1 capital
Sale of own shares and additional tier 1 capital
Tax
Shareholders of Danske Bank A/S (the Parent Company)
Foreign
currency
translation
reserve
Reserve for
bonds at fair
value (OCI)
Retained
earnings
Proposed
dividends
Total
Additional
tier 1
capital
Total
-372
-
-
-3,581
2,077
-
-
-
-1,503
-1,503
-
-
-
-
-
-
102
-
140,590
720
7,329
-
156,271
720
14,237
316
170,508
1,036
-
-
-
51
-15
-
36
36
-
-
-
-
-
-
390
-
-
-
-
44
433
1,153
-
7,329
-5
-18,851
18,805
22
-
-
-
-
-
-
-
-
390
-3,581
2,077
51
-15
44
-1,035
-
-
-
-
-
-
-
390
-3,581
2,077
51
-15
44
-1,035
-315
316
1
-
-7,329
-
-
-
-
-
-
-5
-18,851
18,805
22
-391
-
-5,596
7
-
-
-391
-
-5,600
-18,844
18,805
22
Share
capital
8,622
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total equity as at 30 June 2020
8,622
-1,875
138 149,043
- 155,927
8,573 164,500
*For 2019, no dividends were paid in 2020. The previously proposed dividends have been reversed to Retained earnings in 2020. See note G1(a) for further information.
Danske Bank / Interim report – first half 2020 34/87
Statement of capital – Danske Bank Group
Changes in equity
Shareholders of Danske Bank A/S (the Parent Company)
(DKK millions)
Total equity as at 1 January 2019
Net profit
Other comprehensive income
Remeasurement of defined benefit pension 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
Transactions with owners
Paid interest on additional tier 1 capital
Dividends paid
Share capital reduction
Acquisition of own shares and additional tier 1 capital
Sale of own shares and additional tier 1 capital
Tax
Share
capital
8,960
-
-
-
-
-
-
-
-
-
-
-
-338
-
-
-
Foreign
currency
translation
reserve
Reserve for
bonds at fair
value (OCI)
Retained
earnings
Proposed
dividends
Total
Additional
tier 1
capital
Total
-745
-
-
439
-28
-
-
-
411
411
-
-
-
-
-
-
90
-
132,768
6,629
7,616
-
148,688
6,629
14,299
390
162,988
7,020
-
-
-
189
-8
-
181
181
-
-
-
-
-
-
130
-
-
-
-
-54
76
6,706
-
383
338
-9,438
9,390
42
-
-
-
-
-
-
-
-
130
439
-28
189
-8
-54
669
-
-
-
-
-
-
-
130
439
-28
189
-8
-54
669
7,298
390
7,689
-
-7,616
-
-
-
-
-
-7,233
-
-9,438
9,390
42
-394
-
-
-57
-
-
-394
-7,233
-
-9,494
9,390
42
Total equity as at 30 June 2019
8,622
-334
272
140,188
-
148,748
14,239 162,988
Statement of capital – Danske Bank Group
(DKK millions)
Share capital (DKK)
Number of shares
Number of shares outstanding
Average number of shares outstanding for the period
Average number of shares outstanding, including dilutive shares, for the period
Total capital and total capital ratio
(DKK millions)
Total equity
Revaluation of domicile property at fair value
Tax effect of revaluation of domicile property at fair value
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
IFRS 9 reversal due to transitional rules
Prudent valuation
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 plan assets
Statutory deduction for insurance subsidiaries
Other statutory deductions
Common equity tier 1 capital
Additional tier 1 capital instruments
Tier 1 capital
Tier 2 capital instruments
Total capital
Total risk exposure amount
Common equity tier 1 capital ratio (%)
Tier 1 capital ratio (%)
Total capital ratio (%)
Danske Bank / Interim report – first half 2020 35/87
30 June 2020 31 December 2019
8,621,846,210
862,184,621
852,597,788
856,494,325
857,554,433
8,621,846,210
862,184,621
853,704,915
854,354,479
854,911,769
30 June 2020 31 December 2019
164,500
264
-31
164,733
-8,481
-91
20
156,180
-121
1,923
-846
-189
-621
-6,235
411
-12
-2,291
-10,378
-
137,821
18,292
156,113
17,554
173,667
784,941
17.6
19.9
22.1
170,508
265
-31
170,741
-14,070
-167
37
156,541
-344
1,325
-926
-178
-7,329
-6,339
487
-12
-1,925
-8,439
-197
132,664
23,944
156,608
17,598
174,206
767,177
17.3
20.4
22.7
*For 2019, no dividends were paid in 2020. The previously proposed dividends have been added back to common equity tier 1 capital in 2020.
Total capital and the total risk exposure amount are calculated in accordance with the rules applicable under the Capital Requirements Regulation (CRR),
taking transitional rules into account as stipulated by the Danish Financial Supervisory Authority.
In terms of the transitional arrangements for the impact of IFRS 9 on regulatory capital, the Group applies the so-called dynamic approach in accordance
with the CRR.
The Internal Capital Adequacy Assessment report provides more details about Danske Bank’s solvency need. The report is available at dans-
kebank.com/investorrelations/reports. The Internal Capital Adequacy Assessment report is not covered by the independent auditors’ review.
Cash flow statement – Danske Bank Group
(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
Investment securities
Loans at amortised cost and fair value
Deposits
Issued bonds at amortised cost and fair value
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
Issue of subordinated debt
Redemption of subordinated debt
Issue of non-preferred senior bonds
Dividends paid
Redemption of equity accounted additional tier 1 capital
Paid interest on equity accounted additional tier 1 capital
Principal portion of lessee lease payments
Cash flow from financing activities
Cash and cash equivalents as 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
Danske Bank / Interim report – first half 2020 36/87
First half
2020
First half
2019
Full year
2019
1,449
-2,577
6,128
5,000
66,339
-70,544
-39
-13,885
22,604
129,969
-33,583
-3,813
387
8,769
-3,427
2,266
13,822
-5,245
10,369
7,608
18,946
-25,957
-57,502
-104
34,425
-30,689
58,155
37,107
2,163
-37,282
-96,693
-17,527
-278
-8,449
-108,208
81,606
14,533
988
-11,690
102,435
-12,076
-126,772
5
-353
-218
7
-559
-
-
10,037
-
-5,600
-391
-373
1,668
-392
-276
5
1,005
5,550
3,455
37,642
-7,233
-
-394
-360
1,683
-878
-666
12
151
11,791
-3,467
59,808
-7,239
-
-787
-729
3,672
38,660
59,377
199,608
-2,574
105,548
264,836
215
27,588
264,836
2,016
-67,244
302,582
292,639
199,608
5,462
215,736
81,384
5,820
131,538
155,281
6,235
92,800
100,574
302,582
292,639
199,608
Danske Bank / Interim report – first half 2020 37/87
Notes – Danske Bank Group
G1. Significant accounting policies and estimates
(a) General
The report has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, and additional Danish disclosure require-
ments for listed financial companies. The report is condensed and should be read in conjunction with the Group’s Annual Report 2019 approved by the
Board of Directors and published the 5 February 2020.
As announced on 20 April 2020 and in light of the economic situation caused by the coronavirus (COVID-19) pandemic, the Board of Directors decided
to propose to the general meeting that no dividends be paid for 2019. The impact from the change to proposed dividends was recognised in Interim report
– first quarter of 2020 as a reversal in the first quarter of 2020. On 15 May 2020, the Group published the document ‘Supplement to Annual Report
2019’ illustrating the impact on the Annual Report 2019 on a condensed basis. The Annual Report 2019 and the changed proposal for allocation of
dividends were approved by the general meeting on 9 June 2020.
On 1 January 2020, the Group implemented the amendments to IAS 1 and IAS 8 (definition of material), IFRS 3, Business Combinations (definition of a
business) and amendments to references to the Conceptual Framework in IFRS Standards. The implementation of the amendments had no impact on the
Group’s financial statements.
Further information on the changes to accounting policies in 2020 can be found in note G2(a). Except for these changes, the Group has not changed its
significant accounting policies from those applied in the Annual Report 2019. Annual Report 2019 provides a full description of the significant accounting
policies.
For changes in the Group’s financial highlights and segment reporting, see note G2(b).
Financial statement figures are stated in Danish kroner and whole millions, unless otherwise stated. As a result, rounding discrepancies may occur
because sum totals have been rounded off and the underlying decimals are not presented to financial statement users.
(b) Significant accounting estimates and judgements
The preparation of financial information requires, in some cases, the use of judgements and estimates by management. This includes judgements made
when applying accounting policies. The most significant judgements made when applying accounting policies relate to the classification of financial assets
and financial liabilities under IFRS 9, especially related to the business model assessment and the SPPI test (further explained in note G15 of the Annual
Report 2019), and the designation of financial liabilities at fair value through profit or loss to eliminate or significantly reduce an accounting mismatch
(further explained in note G16 of the Annual Report 2019). An overview of the classification and measurement basis for financial instruments can be
found in note G1(c) of the Annual report 2019.
Further, the determination of the carrying amounts of some assets and liabilities requires the estimation of effects of uncertain future events on those
assets and liabilities. The estimates 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. In view of the
inherent uncertainties and the high level of subjectivity and judgement involved in the recognition and measurement of the items listed below, it is possible
that the outcomes in the next reporting period could differ from those on which management’s estimates are based.
Measurement of expected credit losses on loans, financial guarantees and loan commitments and debt instruments measured at amortised
The three-stage expected credit loss impairment model in IFRS 9 depends on whether the credit risk has increased significantly since initial recognition.
If the credit risk has not increased significantly, the impairment charge equals the expected credit losses resulting from default events that are possible
within the next 12 months (stage 1). If the credit risk has increased significantly, the loan is more than 30 days past due, or the loan is in default or
otherwise impaired, the impairment charge equals the lifetime expected credit losses (stage 2 and 3). In determining the impairment for expected credit
losses, management exercises judgement and uses estimates and assumptions as explained below.
The expected credit loss is calculated for all individual facilities as a function of probability of default (PD), exposure at default (EAD) and loss given default
(LGD) and incorporates forward-looking information. The estimation of expected credit losses involves forecasting future economic conditions over a
number of years. Such forecasts are subject to management judgement and those judgements may be sources of measurement uncertainty that have
significant risk of resulting in a material adjustment to a carrying amount in future periods. The incorporation of forward-looking elements reflects the
expectations of the Group’s senior management and involves the creation of scenarios (base case, upside and downside), including an assessment of the
probability for each scenario. The purpose of using multiple scenarios is to model the non-linear impact of assumptions about macroeconomic factors on
the expected credit losses. Due to the COVID-19, the macroeconomic scenarios have been revised during 2020, see further in the separate section
below.
Danske Bank / Interim report – first half 2020 38/87
Notes – Danske Bank Group
(b) Significant accounting estimates continued
With the new suite of scenarios, the base case scenario enters with a probability of 70% (31 December 2019: 60%), the upside scenario with a proba-
bility of 10% (31 December 2019: 10%) and the downside scenario with a probability of 20% (31 December 2019: 30%). On the basis of these assess-
ments, the allowance account as at 30 June 2020 amounted to DKK 25.9 billion (31 December 2019: DKK 21.3 billion). If the base case scenario was
assigned a probability of 100%, the allowance account would decrease DKK 1.1 billion (31 December 2019: 0.7 billion). Compared to the base case
scenario, the allowance account would increase DKK 6.1 billion (31 December 2019: DKK 2.4 billion), if the downside scenario was assigned a probability
of 100%. The increase reflects primarily the transfer of exposures from stage 1 to stage 2 and increased expected credit losses within stage 2. If instead
the upside scenario was assigned a probability of 100 %, the allowance account would decrease DKK 0.8 billion (31 December 2019: DKK 0.5 billion)
compared to the base case scenario. However, note that the applied scenarios differ from the scenarios used at 31 December 2019, and the changes in
sensitivities from end of 2019 to end of the second quarter 2020 are therefore not directly comparable. Further, it shall be noted that the expected
credit losses in the individual scenarios does not represent expected credit loss (ECL) forecasts.
In determining the expected credit losses, management is required to exercise judgement in defining what is considered a significant increase in credit
risk. According to the Group’s definition of a significant increase in credit risk, i.e. when a loan is transferred from stage 1 to stage 2, facilities with an
initial PD below 1% are transferred to stage 2 if the facility’s 12-month PD has increased by at least 0.5 of a percentage point and the facility’s lifetime
PD has doubled since origination. The allowance account is relatively stable in terms of changes to the definition of significant increase in credit risk. At
30 June 2020, the allowance account would increase by DKK 0.03 billion (31 December 2019: DKK 0.03 billion), if instead an increase in the facility’s
12-month PD by at least 0.25 of a percentage point combined with a doubling of the lifetime PD was considered a significant increase in credit risk.
Management applies judgement when determining the need for post-model adjustments. As at 30 June 2020, the post-model adjustments amounted to
DKK 4.3 billion (31 December 2019: DKK 4.0 billion). The post-model adjustments cover for instance specific macroeconomic risks in the Agriculture
industry and the Shipping, oil and gas industry not fully captured by the expected credit loss model. For these, supplementary calculations are made in
order to ensure sufficient impairment coverage. The post-model adjustments continue to include the immediate risks arising from the COVID-19 pan-
demic that were introduced in the first quarter of 2020, see further in the separate section below. Remaining adjustments are made to take into account
non-linear downside risks, for instance on the property market in Copenhagen and other high growth areas for which the macroeconomic forecasts used
in the models are based on the property market as a whole. Finally, post-model adjustments are made for portfolios where the credit risk assessment
process has identified underestimation of the expected credit losses. Excluding the post-model adjustment related to the COVID-19 pandemic, the post-
model adjustments decreased from 31 December 2019 to 30 June 2020 as part of the post-model adjustments at 31 December 2019 are now covered
through the scenarios used at 30 June 2020 to reflect the worsening of the macroeconomic outlook in the first half of 2020.
Loan impairment charges for the period ended 30 June 2020 amounted to DKK 5,443 million (30 June 2019: DKK 839 million). While impairments in
the first quarter of 2020 were driven primarily by the update of the macroeconomic scenarios as a result of the COVID-19 pandemic and credit deterio-
ration for the oil and gas exposure (within the Shipping, oil and gas industry), impairments in the second quarter of 2020 related primarily to the oil and
gas exposure. Although the impairments made in the first quarter of 2020 against the oil and gas exposure were driven by the low oil price, the continued
uncertainty in the market led to further impairments in the second quarter of 2020.
Accounting treatment of the impacts on expected credit losses from the COVID-19 pandemic
The effect of the COVID-19 pandemic began to affect the Group’s credit portfolio in the first quarter of 2020. However, we remain to see further credit
deterioration as the effect is currently limited and mitigated by the continued government support packages. Based on the measures taken by govern-
ments across the world and in the Group’s market areas to contain the virus, economies are seeing lower activity in the short-term, although especially
in the Nordic economies, the activity in many sectors was back to a normal activity level already in the second quarter of 2020 after the reopening of
societies. However, the implications of the COVID-19 pandemic are expected to have an impact on the credit quality of the Group’s credit exposure in
future periods. The forward-looking elements of the IFRS 9 impairment model implies that impairments for expected upcoming credit deteriorations are
covered through the estimated worsening of the macroeconomic scenarios used.
For most of the Group’s credit portfolio, the negative impact on individual customers of the COVID-19 pandemic is expected to materialise over the
coming quarters. Customer assessments were made on an ongoing basis throughout the second quarter of 2020, and impairments were revisited in
light of the changed outlook. While customer activity in the first half of 2020 was higher than usual, most customers are still assessing the consequences,
and the financial consequences still remain to be seen when, for instance, government support comes to an end. Therefore, most of the disclosures on
the credit portfolio in the risk management notes do not yet capture the full impact of the COVID-19 pandemic. This applies particularly for the disclosures
on rating categories and PDs and for the assessment of the transfer of exposures from stage 1 to stage 2 and 3.
The Group’s forbearance practices have been updated to pay particular attention to customers affected by the COVID-19 pandemic. This includes addi-
tional guidance to ensure that COVID-19 concessions are considered forbearance only if they relate to customers that are not deemed creditworthy
combined with the customer’s long-term financial position being further weakened by the outbreak. For the majority of the credit portfolio, short-term
concessions to otherwise creditworthy customers are not considered forbearance. In practice, this means that short-term concessions to customers in
rating categories 1 to 5 during the first half of 2020 are not considered a forbearance measure when taking the ongoing customer assessments into
account. For customers in rating categories 6 and 7, an individual assessment of the customer’s financial strength is made, whereas concessions to
lower-rated customers are considered forbearance.
Danske Bank / Interim report – first half 2020 39/87
Notes – Danske Bank Group
(b) Significant accounting estimates continued
A large part of the impact on expected credit losses resulting from the COVID-19 pandemic continues to be related to changes to forward-looking infor-
mation. The macroeconomic scenarios applied have been changed from those applied in 2019. The Group’s base case scenario is based on the Nordic
Outlook and reflects a significant decline in economic activity in 2020 followed by a recovery in 2021. The downside scenario has been updated to a
longer-lasting COVID-19 scenario that includes a steeper decline than during the global financial crisis with a close to double-digit decrease in GDP. The
base case scenario is considered the most likely scenario with a likelihood of 70% while the downside scenario has a likelihood of 20%. Further infor-
mation on the macroeconomic scenarios used in the second quarter of 2020 can be found in the risk management notes. Compared with the scenarios
used in the first quarter of 2020, the scenarios have been updated to more COVID-19 bespoke scenarios that reflect the latest developments in the
market. Most notably, the new downside scenario replaces the downside scenario used in the first quarter of 2020, which was aligned with the severe
recession scenarios applied in the Group’s ICAAP processes and is similar in nature to regulatory stress tests.
For some industries directly affected by the COVID-19 pandemic, management has judged it appropriate to recognise further post-model adjustments.
This relates to industries for which the macroeconomic scenarios themselves do not lead to a sufficient increase in expected credit losses. This includes
retailing, hotels and restaurants (within the Hotels, restaurants and leisure industry) as well as oil and gas (within the Shipping, oil and gas industry. It
also includes expected, but not yet materialised, credit deterioration in relation to the Personal customers and Commercial property industries in Den-
mark as government support ends. A targeted adjustment related to such sectors of DKK 0.7 billion has been introduced in addition to the impact from
the scenario changes, as the negative impact has not yet been materialised at individual customer level.
Except as described above, all other policies and principles remain in place. Staging criteria are unchanged, including the 30 days past due criteria and
PD-based criteria for transfer to stage 2. Staging transfers will largely be reflected in the coming months as specific information on customers becomes
available.
Note G15 of the Annual Report 2019 and the risk management notes provide more details on expected credit losses. As at 30 June 2020, financial
assets covered by the expected credit loss model accounted for approximately 52% of total assets (31 December 2019: 57%).
Fair value measurement of financial instruments
Following the outbreak of the COVID-19 pandemic, the financial markets have been more volatile than usual, but liquidity has returned to the markets.
Therefore, no unusual challenges in obtaining reliable pricing apart from insignificant parts of the portfolio remain. The majority of valuation techniques
continues to employ only observable market data and there have been no significant increase in financial instruments measured on the basis of valuation
techniques that are based on one or more significant unobservable inputs. The latter continues to include only unlisted shares, certain bonds and some
long-dated derivatives for which there is no active market. Further information can be found in note G14. On the derivatives portfolio, the Group makes
fair value adjustments to cover changes in counterparty risk (CVA and DVA) and to cover expected funding costs (FVA) 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. As at 30 June 2020, the adjustments totalled DKK 2.4 billion (31 December 2019: DKK 1.5 billion), including the adjustment for credit risk
on derivatives that are credit impaired. The increase is driven by increased credit spreads and funding spreads. Note G33(a) of the Annual Report 2019
provides more details on the fair value measurement of financial instruments.
The Group uses derivatives to hedge the fixed interest rate on some financial assets and liabilities, thus converting the fixed interest rates on the financial
instruments to variable interest rates by the use of swaps. The ongoing Interest Rate Benchmark Reform will replace existing benchmark interbank
offered rates (IBORs) with alternative risk-free rates. There is currently uncertainty as to the timing and the methods of transition of different IBORs and
whether some existing benchmarks will continue to be supported. As a result of these developments, accounting judgement is involved in determining
whether certain hedge accounting relationships that hedge the interest rate risk due to changes in IBORs continue to qualify for hedge accounting. In
2019, the Group early adopted the amendments to IFRS 9, IAS 39 and IFRS 7 included in IASB’s project ‘Interest Rate Benchmark Reform’ and for the
assessment of effectiveness of such hedges it is assumed that the interest rate benchmark is not altered as a result of the reform. For further information,
see note G12(d) of the Annual Report 2019.
Measurement of goodwill
Goodwill is tested for impairment once a year or more frequently if indications of impairment exist. Impairment testing requires management to estimate
the present value of future cash flows. A number of factors affect the value of such cash flows, including discount rates, changes in the economic outlook,
customer behaviour and competition. In connection with the quarterly reporting, management performs an impairment review to assess whether there
are indications that goodwill might be impaired. This includes a review of declines in income, increase in loan impairment charges, declines in the market
value of assets under management, major restructurings, macroeconomic developments etc.
In the fourth quarter of 2019, a total impairment charge of DKK 1.6 billion was recognised on goodwill in FI&C and Capital Markets at Corporates &
Institutions and in Danica Pension at Wealth Management leaving no excess value for those units. The goodwill in FI&C and Capital Markets of DKK 2.1
billion (31 December 2019: DKK 2.1 billion) is highly sensitive to changes in allocated capital, growth in the terminal period and the discount rate. The
goodwill in Danica Pension of DKK 1.6 billion (31 December 2019: DKK 1.6 billion) is highly sensitive to changes in solvency capital requirements, growth
in the terminal period and the discount rate.
Following the outbreak of the COVID-19 pandemic, the assessment of whether indication of impairment existed at the end of June 2020 was considered
at a more detailed level than usual. This assessment was performed as a high level update of the 2019 test, taking into account the expected decline in
income in 2020 and impact on solvency capital requirements in Danica Pension caused by the COVID-19 pandemic as well as management actions and
other known changes since the test in the fourth quarter of 2019. Based on this assessment, it was concluded that no indications of impairment were
noted.
Danske Bank / Interim report – first half 2020 40/87
Notes – Danske Bank Group
(b) Significant accounting estimates continued
The remaining goodwill mainly consists of DKK 1.8 billion (31 December 2019: DKK 1.8 billion) in Danske Capital at Wealth Management and DKK 0.5
billion (31 December 2019: DKK 0.5 billion) in General Banking at Corporates & Institutions, both showing significant amounts of excess value in the
impairment test in the fourth quarter of 2019. Although the expected future cash flows of Danske Capital are negatively impacted by the expectation of
lower fee income in 2020 triggered by a decline in asset under management and the expected future cash flows of General Banking are negatively im-
pacted by the expectation of lower income and higher loan impairment charges in 2020 caused by the COVID-19 pandemic, no indications of impairment
were noted.
Note G19 of the Annual Report 2019 provides more information about impairment testing and sensitivity to changes in assumptions.
Measurement of liabilities under insurance contracts
Liabilities under insurance contracts are measured at the present value of expected benefits for each insurance contract. The measurement is based on
actuarial computations that rely on estimates of a number of variables, including mortality and disability rates, and on the discount rate. The future
mortality rates are based on the Danish FSA’s benchmark, while other variables are estimated based on data from the Group’s own portfolio of insurance
contracts. For some insurance contracts, the policyholders are guaranteed a certain long-term return on their funds. For such contracts, a collective
bonus potential exists, and it consists of the accumulated excess return on the assets earmarked for policyholders not yet allocated to the individual
contracts. The collective bonus potential is accounted for as an insurance liability and serves as a buffer to absorb future insufficient returns on the
assets. The negative return on assets during the first half of 2020 following the outbreak of the COVID-19 pandemic decreased the collective bonus
potential from DKK 13.9 billion at 31 December 2019 to DKK 9.7 billion at 30 June 2020. Note G18 and the risk management notes of the Annual
Report 2019 provide more information about the accounting for insurance liabilities and sensitivity to changes in assumptions.
Danske Bank / Interim report – first half 2020 41/87
Notes – Danske Bank Group
G2. Changes in accounting policies, financial highlights and segment reporting
(a) Changes in accounting policies
On 1 January 2020, the Group implemented amendments to IAS 1 and IAS 8 (definition of material), IFRS 3, Business Combinations (definition of a
business) and amendments to references to the Conceptual Framework in IFRS Standards.
The amendments to IAS 1 and IAS 8 clarify the definition of material and aligns the definition of material used in the Conceptual Framework with that in
the IFRS standards. The amendments are effective for annual periods beginning on or after 1 January 2020.
The amendments to IFRS 3 clarifies the definition of a business, with the objective of assisting a preparer to determine whether a transaction should be
accounted for as a business combination or as the acquisition of an assets. The clarifications are applicable for business combinations after 1 January
2020.
The implementation of the amendments had no impact on the Group’s financial statements.
(b) Changes in financial highlights and segment reporting
From 1 January 2020, the presentation in the financial highlights and segment reporting has been changed to align the presentation within Wealth Manage-
ment:
•
•
In June 2018, Danica Pension acquired Danica Pensionsforsikring (formerly SEB Pension Danmark). Danica Pensionsforsikring merged into Danica Pen-
sion in 2019. The subsequent integration and conversion revealed some differences between the presentation of Danica Pensionsforsikring and Danica
Pension in the financial highlights and segment reporting for Wealth Management. As of the first quarter of 2020, income from the hedge of assets under
insurance contracts in Danica Pensionsforsikring has been reclassified from net fee income to net trading income in the financial highlights and segment
reporting for Wealth Management to align with the presentation for Danica Pension. At the same time, the method for presentation of the value of hedges
in Danica Pensionsforsikring has been aligned with the method in Danica Pension, which affects assets under management.
In 2019, the business segmentation of Danica Pension was changed. The changes included a bundling of the health and accident insurance business with
the life insurance business. Therefore, the risk result from health and accident insurance has been reclassified from Other income to net fee income in
the financial highlights and segment reporting for Wealth Management as of the first quarter of 2020 to align with the presentation for life insurance,
which is presented as net fee income.
In addition, on 5 September 2019 the Group announced adjustments to its organisation. The adjusted organisation was implemented in the fourth quarter of
2019 with a restatement of comparative information. For further information, see note G3(a) of the Annual Report 2019.
The impact on each affected business unit and financial highlights for first half 2019 is shown in the table below. These changes do not affect the presentation
in the IFRS income statement or balance sheet.
Danske Bank / Interim report – first half 2020 42/87
Notes – Danske Bank Group
G2. Changes in accounting policies, financial highlights and segment reporting continued
Business segments first half 2019
Adjustments to organisation
Banking DK
Banking Nordic
Wealth
Management
Alignment of
presentation,
Wealth
Management
Adjusted
Financial
highlights
(DKK millions)
Net interest income
Net fee income
Net trading income or loss
Other income
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, non-core
Profit before tax
Financial
highlights
10,890
7,570
2,128
1,745
22,333
12,824
9,509
470
9,039
-270
8,769
323
467
60
-
850
490
359
-26
385
-
385
115
132
8
-
254
187
68
-5
72
-
72
-438
-598
-68
-
-1,104
-677
-427
30
-457
-
-457
Loans, excluding reverse transactions
Other assets
1,808,656
1,969,753
63,493
47,150
17,772
12,047
-81,265
-59,197
Total assets
3,778,409
110,643
29,818
-140,462
Deposits, excluding repo transactions
Other liabilities
Allocated capital
931,646
2,698,015
148,748
52,144
55,508
2,992
21,057
7,964
797
-73,201
-63,472
-3,789
Total liabilities and equity
3,778,409
110,643
29,818
-140,462
Profit before tax as % of allocated capital (avg.)
Cost/income ratio (%)
Assets under management (DKK billions)
11.8
57.4
1,587
2.2
0.3
0.2
1.6
-4.3
-4.1
-
-
-
-16
-
-512
474
38
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,890
7,058
2,602
1,783
22,333
12,824
9,509
470
9,039
-270
8,769
1,808,656
1,969,753
3,778,409
931,646
2,698,015
148,748
3,778,409
11.8
57.4
1,571
Danske Bank / Interim report – first half 2020 43/87
Notes – Danske Bank Group
G3. Business model and business segmentation
(a) Business model and business segmentation
Danske Bank is a Nordic bank with bridges to the rest of the world offering customers a wide range of services in the fields of banking, mortgage finance,
insurance, pension, real-estate brokerage, asset management and trading in fixed income products, foreign exchange and equities. The Group consists
of a number of business units and support functions. The business units are segmented according to customers, products and services characteristics.
The Group has five business units, a Non-core unit and an Other Activities unit, and these constitute the Group’s reportable segments under IFRS 8.
Banking DK serves retail and commercial customers in Denmark. The unit offers retail customers’ advice tailored to their financial needs and is a leading
provider of daily banking, home financing, investment and retirement planning solutions. For commercial customers, the unit provides targeted advice and
solutions based on the size and situation of the customers’ business. Services include strategic advice on, for instance, international expansion and acquisi-
tions. The unit offers digital solutions to facilitate daily operations, including cross-border transfers and cash management.
Banking Nordic serves retail and commercial customers in Sweden, Norway and Finland, providing customer offerings similar to those of Banking DK. In
addition, the unit encompasses the Group’s global asset finance activities, such as lease activities.
Corporates & Institutions is the wholesale banking division of the Group. It serves all of the Group’s corporate and institutional customers by offering expertise
within financing, financial markets, general banking, investment services and corporate finance advisory services. In addition, the unit operates globally, sup-
ported by global product areas and local customer coverage, and acts as a bridge to the world for Nordic customers as well as a gateway into the Nordics for
international customers. The unit bridges the financial needs of the institutional and corporate sectors, connecting issuers and investors. The unit is organised
in four areas: a customer unit, named General Banking, and three product areas; named Capital Markets, Fixed Income & Currencies (FI&C) and Transaction
Banking & Investor Services. In the first quarter of 2020, the business segmentation of FI&C and Capital Markets was changed, as Debt Capital Markets
(DCM) was moved from Capital Markets to FI&C and Investment Solutions from FI&C to Capital Markets.
Wealth Management serves companies and institutional investors in the markets in which the Group operates. The unit offers a broad range of products and
services within wealth and asset management, investments, pension savings and insurance. The unit encompasses expertise from Danica Pension, Danske
Invest and Asset Management.
Northern Ireland serves retail and commercial customers through a network of branches and business centres in Northern Ireland alongside digital channels.
Non-core 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 of this part of the loan portfolio. The portfolio consists primarily of loans to customers in the Baltics and liquidity facilities for Special Purpose
Vehicles (SPVs) and conduit structures. In addition to the exit from banking activities in Estonia and Russia at the end of 2019, the Group had also exited
from all banking activities in Latvia by the end of the first quarter of 2020.
Other Activities encompasses Group Treasury, Group support functions and eliminations, including the elimination of returns on own shares and issues,
as well as interest on additional tier 1 capital, which is reported as an interest expense in the business units. Group Treasury is responsible for the
Group’s liquidity management and funding.
Presentation in the financial highlights and in the segment reporting
Segment reporting and the financial highlights are based on the information provided to management.
An explanation of the items making up the Reclassification column, reconciling the financial highlights and segment reporting presentation to the IFRS
financial statements is provided further on in this note.
Notes – Danske Bank Group
G3. Business model and business segmentation continued
Danske Bank / Interim report – first half 2020 44/87
Wealth
Man.
Northern
Ireland
Non-
core
Other
Activities
Elimina-
tions
Financial
highlights
Reclassi-
fication
Business segments first half 2020
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net premiums
Net insurance benefits
Total income
Operating expenses
Profit before loan impair-
ment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Banking
DK
Banking
Nordic
4,481
2,116
542
86
-
-
7,224
4,645
2,579
609
1,971
-
4,047
928
120
277
-
-
5,372
3,188
2,184
1,107
1,077
-
C&I
1,951
1,471
1,619
7
-
-
5,048
2,631
2,417
3,270
-854
-
-143
2,791
44
-29
-
-
2,663
1,644
1,019
-
1,019
-
703
133
78
8
-
-
923
595
327
252
76
-
-
-
-
-
-
-
-
-
-
-
-
-446
-48
-130
-225
202
-
-
-200
1,096
-1,297
30
-1,327
-
IFRS
financial
statements
13,844
5,164
-2,968
1,771
14,444
9,506
22,750
15,858
6,892
5,443
1,449
-
10,989
7,311
2,300
280
2,855
-2,147
-5,268
1,491
- 14,444
9,506
-
20,880
13,717
1,869
2,141
7,163
5,269
1,894
-446
-271
175
-446
446
-1
1
122
-271
-
-
-150
-83
-67
-
-67
-
-67
Profit before tax
1,971
1,077
-854
1,019
76
-446
-1,327
1,449
-
1,449
Loans, excluding reverse
transactions
Other assets
Total assets in Non-core
915,679 632,346
130
389,335 116,131 3,739,612 672,933
-
221,565
-
-
-
50,212
41,799
-
-
35,784
- 3,614,920
-
4,815
-33,172 1,822,545
-6,340,488 2,234,243
4,815
-
2,249 1,824,793
2,566 2,236,810
-
-4,815
Total assets
1,305,014 748,478 3,961,177 673,064
92,011
4,815 3,650,704 -6,373,660 4,061,603
- 4,061,603
Deposits, excluding repo
deposits
Other liabilities
Allocated capital
Total liabilities in Non-core
341,249
385,981 298,108
16
880,385 412,875 3,579,784 656,542
40,144 16,507
-
38,648 37,495
-
-
-
75,467
10,158
6,386
-
-
1,242
- 3,634,817
16,748
-
-
2,712
-9,328 1,092,735
-6,364,332 2,810,229
155,927
2,712
-
-
1,751 1,094,486
961 2,811,190
155,927
-
-
-2,712
Total liabilities and equity 1,305,014 748,478 3,961,177 673,064
92,011
2,712 3,652,807 -6,373,660 4,061,603
- 4,061,603
Profit before tax as % p.a.
of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff,
end of period
10.3
64.3
5.8
59.3
-4.6
52.1
12.6
61.7
2.4
64.5
-
-
-10.2
-548.0
4,798
2,467
1,647
1,515
1,365
64
10,335
-
-
-
1.9
65.7
22,191
-
-
-
1.9
69.7
22,191
Danske Bank / Interim report – first half 2020 45/87
Notes – Danske Bank Group
G3. Business model and business segmentation continued
Business segments first half 2019
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net premiums
Net insurance benefits
Total income
Operating expenses
Profit before loan impair-
ment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Banking
DK1
Banking
Nordic1
4,629
1,952
570
115
-
-
7,266
4,144
3,123
27
3,095
-
3,888
908
147
322
-
-
5,266
3,032
2,234
-87
2,321
-
C&I
1,787
1,401
1,347
1
-
-
4,535
2,388
2,147
520
1,627
-
Wealth
Man.1
Northern
Ireland
Non-
core
Other
Activities
Elimina-
tions
Financial
highlights
Reclassi-
fication1
-103
2,731
136
1,331
-
-
4,095
1,927
2,168
-
2,168
-
765
189
70
7
-
-
1,030
595
436
14
421
-
-
-
-
-
-
-
-
-
-
-
-
-270
-171
-123
189
84
-
-
-20
820
-840
-5
-835
-
96
-
143
-78
-
-
161
-81
242
-
242
-
3,016
10,890
7,058
-2,431
2,602 27,221
1,595
1,783
- 12,453
- 40,323
22,333
12,824
1,532
1,434
9,509
470
9,039
-270
99
369
-270
270
IFRS
financial
statements
13,907
4,627
29,823
3,378
12,453
40,323
23,865
14,258
9,608
839
8,769
-
Profit before tax
3,095
2,321
1,627
2,168
421
-270
-835
242
8,769
-
8,769
Loans, excluding reverse
transactions
Other assets
Total assets in Non-core
169
934,713 627,349
375,818 64,553 3,259,019 602,963
-
200,724
-
-
-
49,487
31,519
28,589
-
- 3,062,463
-
-32,375 1,808,656
-5,439,736 1,956,599
13,155
-
8,986 1,817,642
4,169 1,960,767
-
-13,155
- 13,155
Total assets
1,310,531 691,902 3,459,743 603,132
81,006 13,155 3,091,052 -5,472,112 3,778,409
- 3,778,409
Deposits, excluding repo
deposits
Other liabilities
Allocated capital
Total liabilities in Non-core
270,529
346,474 262,989
202
927,584 394,476 3,157,401 587,083
31,813 15,848
-
36,473 34,436
-
-
-
64,060
10,406
6,540
-
-
2,616
- 3,072,808
23,637
-
-
5,145
-15,225
931,646
-5,456,887 2,692,870
148,748
5,145
-
-
3,565
935,210
1,581 2,694,451
148,748
-
-
-5,145
Total liabilities and equity 1,310,532 691,901 3,459,743 603,132
81,006 5,145 3,099,061 -5,472,112 3,778,409
- 3,778,409
Profit before tax as % p.a.
of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff,
end of period
17.0
57.0
13.5
57.6
10.3
52.7
29.4
47.1
12.7
57.8
-
-
-7.4
-4,100.0
4,374
2,750
1,675
1,557
1,335
320
9,894
-
-
-
11.8
57.4
21,462
-
-
-
11.8
59.7
21,462
1 Comparative information has been restated, as described in the section ‘Changes in financial highlights and segment reporting’ of note G2(b).
Danske Bank / Interim report – first half 2020 46/87
Notes – Danske Bank Group
G3. Business model and business segmentation continued
(b) Reconciliation of the financial highlights and segment reporting to the IFRS financial statements
The ‘Reclassification’ column in the tables above shows the reconciliation between the presentation in the financial highlights and segment reporting and
the presentation in the IFRS financial statements. The policies for the reclassifications between the financial highlights and the IFRS financial statements
are as follow:
Sale of operating lease assets where the Group act as a lessor
In the IFRS income statement, gains or losses on the sale of operating lease assets, excluding properties, at the end of the lease agreement are presented
on a gross basis. This means that the proceeds from the sale of the assets are recognised under Other income, whereas the carrying amount of the lease
assets is recognised under Operating expenses.
In the financial highlights, the gains or losses on the sale of the lease asset are presented on a net basis under Other income to better reflect the devel-
opment in the cost base.
FI&C and Capital Markets (both part of Corporates & Institutions) and Group Treasury (part of Other Activities)
In the IFRS income statement, income from FI&C, Capital Markets and Group Treasury is presented as Net interest income, Net fee income, Net trading
income or loss and Other income, depending on the type of income. The distribution of income between the various income line items can vary consider-
ably from one year to the next, depending on the underlying transactions and market conditions. To better reflect income in those areas, the following
reclassifications are made in the financial highlights:
•
All income contributed by FI&C, except FI&C’s share of margins on customer derivatives, and fee income on primary issuances of corporate bonds
at DCM, is presented as Net trading income
Trading-related income at Capital Markets is presented as Net trading income. However, income contributed by Equity Finance (also part of Corpo-
rates & Institutions, Capital Markets) is presented as Net fee income
All income in Group Treasury, except income at Internal Bank, income on bonds held to collect and bonds held to collect and sell, are presented as
Net trading income
•
•
Danica Pension
In the IFRS income statement, income and expenses in Danica Pension (part of Wealth Management) is consolidated on a line-by-line basis. In the financial
highlights, the following reclassifications are made to better reflect income from the services provided to customers:
•
•
•
•
The risk allowance, the risk result from the health and accident business and income from the unit-link business are presented as Net fee income
The return on assets related to the health and accident business is presented as Net trading income
The risk and guarantee result, and the income from recharge to customers of certain expenses are presented as Other income
All costs, except external investment costs, are presented under Operating expenses
Non-core
In the IFRS income statement, income and expense items from the Non-core segment are included in the various income and expense lines, as the seg-
ment does not fulfil the requirements in IFRS 5 on discontinued operations.
The Non-core segment includes certain customer segments that are no longer considered part of the Group’s core business. To better reflect activities
from the Group’s core and non-core business, the profit or loss of the Non-core segment is presented as one amount in a separate line item ‘Profit before
tax, Non-core’ in the financial highlights.
Each of the reclassifications explained above are presented in the table below.
Danske Bank / Interim report – first half 2020 47/87
Notes – Danske Bank Group
G3. Business model and business segmentation continued
Reclassifications first half 2020
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net premiums
Net insurance benefits
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Profit before tax
Reclassification first half 2019
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net premiums
Net insurance benefits
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Profit before tax
IFRS financial
statements
Sale of operating
lease assets
FI&C, Capital
Markets and
Group Treasury
13,844
5,164
-2,968
1,771
14,444
9,506
22,750
15,858
6,892
5,443
1,449
-
1,449
-
-
-
-2,042
-
-
-2,042
-2,042
-
-
-
-
-
-1,126
-18
1,092
51
-
-
-
-
-
-
-
-
-
IFRS financial
statements
Sale of operating
lease assets
FI&C, Capital
Markets and
Group Treasury
13,907
4,627
29,823
3,378
12,453
40,323
23,865
14,258
9,608
839
8,769
-
8,769
-
-
-
-1,699
-
-
-1,699
-1,699
-
-
-
-
-
-385
75
311
-1
-
-
-
-
-
-
-
-
-
Danica
Pension
-1,700
2,168
4,120
418
-14,444
-9,506
67
67
-
-
-
-
-
Danica
Pension1
-2,536
2,359
-27,524
107
-12,453
-40,323
276
276
-
-
-
-
-
Non-core Reclassification
Financial
highlights
-30
-3
56
83
-
-
106
-165
271
-175
446
-446
-
-2,855
2,147
5,268
-1,491
-14,444
-9,506
-1,869
-2,141
271
-175
446
-446
10,989
7,311
2,300
280
-
-
20,880
13,717
7,163
5,269
1,894
-446
-
1,449
Non-core Reclassification1
Financial
highlights1
-96
-3
-8
-2
-
-
-109
-10
-99
-369
270
-270
-
-3,016
2,431
-27,221
-1,595
-12,453
-40,323
-1,532
-1,434
-99
-369
270
-270
10,890
7,058
2,602
1,783
-
-
22,333
12,824
9,509
470
9,039
-270
-
8,769
1 Comparative information has been restated, as described in the section ‘Changes in financial highlights and segment reporting’ of note G2(b).
Danske Bank / Interim report – first half 2020 48/87
Notes – Danske Bank Group
G4. Income
Interest income and interest expense
Negative interest income during the period ending June 2020 amounted to DKK 1,040 million (30 June 2019: DKK 1,338 million). Negative interest
expenses amounted to DKK 1,324 million (30 June 2019: DKK 1,230 million). In the income statement, negative interest income is recognised as interest
expenses and negative interest expenses are recognised as interest income.
Fee income
Note G6 of the Annual Report 2019 provides additional information on the Group’s accounting policy for fee income, including the description by fee type.
Fee income first half 2020
(DKK millions)
Investment
Pension and Insurance
Money transfers, account fees and cash management
Lending and Guarantees
Capital markets
Total
Fee income first half 2019
(DKK millions)
Investment
Pension and Insurance
Money transfers, account fees and cash management
Lending and Guarantees
Capital markets
Total
Financial
highlights
- net fee income
Reclassifica
tions
2,631
1,810
1,182
1,045
643
7,311
-208
-1,720
25
267
-511
-2,147
Financial
highlights
- net fee income
Reclassifica-
tions1
2,385
1,673
1,317
1,079
603
7,058
-632
-1,601
-17
304
-484
-2,431
IFRS
- net fee
income
2,423
90
1,207
1,312
132
5,164
IFRS
- net fee
income
1,753
72
1,300
1,392
110
4,627
Fee expense
1,842
-
606
124
-
2,572
Fee expense
2,204
-
728
124
-
3,057
IFRS
- gross fee
income
4,265
90
1,813
1,435
132
7,736
IFRS
- gross fee
income
3,957
72
2,028
1,516
110
7,684
1 Comparative information has been restated, as described in the section ‘Changes in financial highlights and segment reporting of note G2(b).
Other income
Other income amounted to DKK 2,264 million for the six months ending 30 June 2020 (30 June 2019: DKK 3,135 million). Other income includes
primarily income from lease assets, investment property and real estate brokerage. For 2019, other income further included the gain of DKK 1.3 billion
on the sale of Danica Försäkringsaktiebolag.
Danske Bank / Interim report – first half 2020 49/87
Notes – Danske Bank Group
G5. Loan impairment charges and reconciliation of total allowance account
Loan impairment charges include impairment charges for expected credit losses on loans, lease receivables, bonds at amortised cost and fair value
through other comprehensive income, certain loan commitments and financial guarantee contracts as well as fair value adjustments of the credit risk on
loans measured at fair value.
Loan impairment charges
(DKK millions)
ECL on new assets
ECL on assets derecognised
Impact of net remeasurement of ECL (incl. changes in models)
Write-offs charged directly to income statement
Received on claims previously written off
Interest income, effective interest method
Total
Reconciliation of total allowance account
(DKK millions)
ECL allowance account as at 1 January 2019
Transferred to stage 1 during the period
Transferred to stage 2 during the period
Transferred to stage 3 during the period
ECL on new assets
ECL on assets derecognised
Impact of net remeasurement of ECL (incl. changes in models)
Write-offs debited to the allowance account
Foreign exchange adjustments
Other changes
30 June 2020
30 June 2019
3,239
-2,631
4,478
747
-246
-143
5,443
2,309
-2,213
621
509
-250
-136
839
Stage 1
Stage 2
Stage 3
Total
1,601
797
-358
-35
266
-328
-613
-
4
-18
5,450
-711
1,073
-553
1,182
-1,187
745
-5
22
-55
14,118
-87
-714
587
2,463
-2,972
1,388
-799
93
-44
21,170
-
-
-
3,911
-4,487
1,520
-804
120
-117
ECL allowance account as at 31 December 2019
1,316
5,963
14,033
21,313
Transferred to stage 1 during the period
Transferred to stage 2 during the period
Transferred to stage 3 during the period
ECL on new assets
ECL on assets derecognised
Impact of net remeasurement of ECL (incl. changes in models)
Write-offs debited to the allowance account
Foreign exchange adjustments
Other changes
ECL allowance account as at 30 June 2020
426
-193
-11
278
-173
-147
-
-13
-6
-403
607
-715
1,185
-805
1,857
-
-38
-89
-23
-414
726
1,776
-1,654
2,768
-197
-202
12
-
-
-
3,239
-2,631
4,478
-197
-254
-83
1,476
7,562
16,826
25,865
The movements on the allowance account are determined by comparing the classification and amount in the balance sheet at the beginning and the end
of the period. For further information on the decomposition of the allowance account on facilities in stages 1-3 under IFRS 9, see the notes on credit risk.
Danske Bank / Interim report – first half 2020 50/87
Notes – Danske Bank Group
G6. Loans at fair value
Loans at fair value consists of loans granted by the subsidiary Realkredit Danmark and loans in the trading units of Corporates & Institutions. The loans in the
trading units consist primarily of reverse transactions and short-term loans. As at 30 June 2020, these loans amounted to DKK 294,924 million (31 De-
cember 2019: DKK 319,469 million).
G7. Deposits
The Group’s deposit base consists of the following deposits:
(DKK millions)
Deposits from other credit institutions
hereof repo transactions
Other deposits
hereof repo transactions
Total deposits excluding repo transactions
30 June
2020
31 December
2019
217,117
121,740
1,270,695
176,209
155,246
56,078
1,140,726
176,193
1,189,863
1,063,701
G8. Issued bonds, subordinated debt and additional tier 1 capital
Issued bonds
In general, issued bonds are measured at amortised cost. However, bonds issued by Realkredit Danmark and commercial papers and certificates of deposits
issued by the trading units of Corporates & Institutions are measured at fair value through profit or loss.
The Group issues perpetual bonds with discretionary interest payments that fulfil the requirements for additional tier 1 capital under the CRR. If a trigger
event occurs, those issued bonds must either be written down temporarily or converted into a variable number of ordinary shares, depending on the terms of
the bond issue. Bonds that will be temporarily written down are accounted for as equity while bonds that convert into a variable number of ordinary shares
are accounted for as liabilities.
Issued bonds at fair value
(DKK millions)
Bonds issued by Realkredit Danmark (covered bonds)
Commercial papers and certificates of deposits
Issued bonds at fair value, total
Issued bonds at amortised cost
(DKK millions)
Commercial papers and certificates of deposits
Preferred senior bonds
Covered bonds
Issued bonds at amortised cost, total
Non-preferred senior bonds
30 June 31 December
2019
2020
749,168
7,017
795,721
6,780
756,185
802,501
30 June 31 December
2019
2020
9,669
74,119
184,316
4,043
70,395
181,918
268,104
256,355
98,075
87,054
Danske Bank / Interim report – first half 2020 51/87
Notes – Danske Bank Group
G8. Issued bonds, subordinated debt and additional tier 1 capital continued
Nominal value
(DKK millions)
Commercial papers and certificate of deposits
Preferred senior bonds
Covered bonds
Non-preferred senior bonds
1 January
2020
10,821
75,280
176,489
86,891
Issued
Redeemed
18,939
18,485
26,871
10,076
12,823
18,210
17,577
-
Foreign
currency
translation
-169
-122
-4,163
-1,430
30 June
2020
16,769
75,434
181,621
95,537
Other issued bonds
349,481
74,372
48,609
-5,883
369,361
Nominal value
(DKK millions)
Commercial papers and certificate of deposits
Preferred senior bonds
Covered bonds
Non-preferred senior bonds
1 January
2019
20,359
93,941
188,568
26,441
Issued
Redeemed
67,987
2,232
25,794
59,911
78,088
21,982
37,740
-
Foreign
currency 31 December
2019
translation
562
1,088
-134
539
10,821
75,280
176,489
86,891
Other issued bonds
329,309
155,925
137,808
2,055
349,481
Subordinated debt and additional tier 1 capital
During the six months ended 30 June 2020, the Group redeemed EUR 750 million (DKK 5,600 million) of additional tier 1 capital accounted for as equity.
During 2019, the Group issued DKK 11,901 million and redeemed DKK 3,467 million of tier 2 capital.
As at 30 June 2020, the total nominal value of issued additional tier 1 capital amounted to DKK 18,574 million (31 December 2019: DKK 24,219 million)
of which DKK 8,589 million (31 December 2019: 14,205 million) is accounted for as equity. Danske Bank A/S may, at its sole discretion, omit interest
payments to bondholders. Any interest payments are paid out of distributable items, which primarily consist of retained earnings in Danske Bank A/S and
Danske Bank Group (see section 5.4.3 of Risk Management 2019 for further information). As at 30 June 2020, distributable items for Danske Bank A/S
amounted to DKK 124.2 billion (31 December 2019: DKK 121.1 billion). The additional tier 1 capital will be temporarily written down or converted into a
variable number of ordinary shares, depending on the terms of each issued bond, if the common equity tier 1 capital ratio falls below 7% for Danske Bank A/S
or Danske Bank Group. As at 30 June 2020 the common equity tier 1 capital ratio was 20.0% (31 December 2019: 20.1%) for Danske Bank A/S. The ratios
for the Danske Bank Group are disclosed in the Statement of capital.
Danske Bank / Interim report – first half 2020 52/87
Notes – Danske Bank Group
G9. Assets held for sale and Liabilities in disposal groups held for sale
Assets held for sale and Liabilities in disposal groups held for sale includes assets and liabilities that falls under IFRS 5.
Assets held for sale
(DKK millions)
Loans held for sale
Other
Total
30 June
2020
31 December
2019
2,195
460
2,655
938
414
1,352
In December 2019 and January 2020, the Group entered into agreements to sell portfolios of loans with and deposits from personal customers in
Lithuania and Latvia. The transactions settled in the first half of 2020. In June 2020, an agreement to sell a portfolio of Estonian corporate loans managed
by the Lithuania branch was entered into. The settlement requires the approval of the competent authorities. Liabilities in disposal groups held for sale
consist of deposits in the same portfolios.
Assets held for sale also includes lease assets (where the Group acts as lessor) put up for sale at the end of the lease and properties taken over by the
Group under non-performing loan agreements. The Group expects to sell the properties through a real estate agent within 12 months from the date of
acquisition. The properties comprise properties in Denmark and in other countries.
G10. Other assets and Other liabilities
Other assets amounted to DKK 35,508 million (31 December 2019: DKK 37,679 million), including holdings in associates of DKK 285 million (31 December
2019: DKK 341 million), investment property of DKK 2,569 million (31 December 2019: DKK 2,644 million), tangible assets of DKK 8,162 million (31
December 2019: DKK 8,450 million) and right-of-use lease assets of DKK 5,217 million (31 December 2019: DKK 5,634 million), consisting of domicile
property of DKK 4,275 million (31 December 2019: DKK 4,650 million) and other tangible assets of DKK 943 million (31 December 2019: DKK 984 million).
Other liabilities amounted to DKK 43,103 million (31 December 2019: DKK 46,191 million), including accrued interest and commissions due of DKK 4,635
million (31 December 2019: DKK 6,833 million), lease liabilities of DKK 5,141 million (31 December 2019: 5,526), other staff commitments of DKK 2,238
million (31 December 2019: DKK 1,993 million) and the provision of DKK 1,500 million (31 December 2019: DKK 1,500 million) relating to the donation of
the estimated gross income from the non-resident portfolio at the Estonian branch. Any confiscated or disgorged gross income will be deducted from the
donation to the foundation.
G11. Foreign currency translation reserve
The Group has granted loans to its branches in Sweden, Norway and Finland in the currency of the foreign unit for a total of DKK 35,682 million (31 December
2019: DKK 33,206 million). The loans represent part of the capital allocated to these units. The settlement of the loans is neither planned nor likely to occur
in the foreseeable future and the loans are part of the net investment in those units. Therefore, the foreign currency gains/losses on these loans are recognised
in Other comprehensive income. Until May 2019, the currency risk on the loans was hedged by establishing funding arrangements with third parties in the
matching currencies and the foreign currency gains/losses on these funding arrangements were also recognised in Other comprehensive income. In May
2019, part of the funding was changed to DKK in order to create so-called structural FX hedge positions in accordance with banking regulations, i.e. to reduce
the impact on capital ratios resulting from changes in the risk exposure amount due to changes in currency rates. This strategy of partly hedging the sensitivity
to capital ratios from volatility in foreign currency rates, increases the volatility in Other comprehensive income and the Foreign currency translation reserve
in equity under IFRS since it decreases the hedge of the currency risk on the net investments in those units. As at 30 June 2020, the structural FX hedge
position totalled DKK 30,877 million (31 December 2019: DKK 29,988 million) and a loss of DKK 1,198 million has been recognised in Other comprehensive
income during the first half of 2020, due to a significant weakening of NOK against DKK throughout the first half of 2020.
Danske Bank / Interim report – first half 2020 53/87
Notes – Danske Bank Group
G12. Guarantees, commitments and contingent liabilities
Contingent liabilities consist of possible liabilities arising from past events. The existence of such liabilities will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the Group’s control. Contingent liabilities that can, but are not likely to, result in
an outflow of economic resources are disclosed.
The Group uses a variety of loan related financial instruments to meet customers’ financial requirements. Instruments include loan offers and other
credit facilities, guarantees and instruments not recognised in the balance sheet. If an instrument is likely to result in a payment obligation, a liability is
recognised under Other liabilities corresponding to the present value of expected payments.
(a) Guarantees
(DKK millions)
Financial guarantees
Other guarantees
Total
(b) Commitments
(DKK millions)
Loan commitments shorter than 1 year
Loan commitments longer than 1 year
Other unutilised loan commitments
Total
30 June 31 December
2019
2020
7,049
60,572
67,621
4,661
64,403
69,064
30 June 31 December
2019
2020
258,904
189,181
183
448,267
204,610
174,211
283
379,104
In addition to credit exposure from lending activities, loan offers made and uncommitted lines of credit granted by the Group amounted to DKK 212 billion
(31 December 2019: DKK 213 billion). These items are included in the calculation of the total risk exposure amount in accordance with the CRR.
(c) Regulatory and legal proceedings
Estonia matter
Danske Bank remains in dialogue with various authorities regarding the terminated non-resident portfolio at the Bank’s Estonian branch, which was active
between 2007 and 2015. This includes criminal and regulatory investigations by authorities in Estonia, Denmark, France and the United States. The Bank
continues to cooperate with all authorities.
In 2018, the Estonian Office of the Prosecutor General opened a criminal investigation into former employees of the Estonian branch.
In November 2018, Danske Bank was preliminary charged by the Danish State Prosecutor for Serious Economic and International Crime (“SØIK”) with vio-
lating the Danish AML Act on four counts all relating to the Estonian branch in the period from 1 February 2007 to the end of January 2016.
In February 2019, Danske Bank was placed under formal investigation by an investigating judge of the Tribunal de Grande Instance de Paris in the context of
an on-going French criminal investigation and on the grounds of money laundering suspicions relating to certain transactions in the terminated portfolio of
non-resident customers of the Bank’s Estonian branch, amounting to around DKK 160 million and performed between 2007 and 2014. The Bank has posted
bail in the amount of DKK 80 million.
The Bank is reporting to, responding to and cooperating with various authorities, including the U.S. Department of Justice (DOJ) and the U.S. Securities and
Exchange Commission (SEC), relating to the Bank’s Estonian branch.
The Bank’s internal investigation into the non-resident portfolio is progressing as planned and expected to be completed during the fourth quarter of 2020.
The overall timing of completion and the outcome of the investigations by, and subsequent discussions with, the authorities are uncertain. It is not yet possible
to reliably estimate the timing, form of resolution, or amount of potential settlement or fines, if any, which could be material.
Based on orders from the Danish FSA, Danske Bank’s solvency need has been increased in 2018 by a Pillar II add-on of in total DKK 10 billion to ensure
adequate capital coverage of the increased compliance and reputational risks in relation to the Estonian AML matter.
On 9 January 2019, an action was filed in the United States District Court for the Southern District of New York by an alleged holder of Danske Bank’s
American Depositary Receipts, representing its ordinary shares, against the Bank and certain of its officers and former officers and/or directors. The
complaint alleges that the defendants violated Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 by, among other things, making
false and misleading statements and/or failing to disclose adverse information regarding the Bank’s business and operations in relation to AML matters
relating to the Bank’s Estonian branch and related matters. The complaint seeks unspecified damages on behalf of a putative class of purchasers of the
Bank’s American Depositary Receipts between 9 January 2014 and 29 April 2019. The Bank intends to defend against these claims. The timing of the
completion of the lawsuit and the outcome are uncertain.
Danske Bank / Interim report – first half 2020 54/87
Notes – Danske Bank Group
G12. Guarantees, commitments and contingent liabilities continued
On 3 March 2019, a court case was initiated against Danske Bank for approval of a class action lead by a newly formed association with the aim to
represent former and current shareholders in a liability action relating to the Estonian AML matter. In March 2019 (165), October 2019 (64), January
2020 (9), and March 2020 (38), in total 276 separate cases were initiated against the Bank with a total claim amount of approximately DKK 6.5 billion.
On 27 December 2019, a separate claim was filed by 63 investors against Danske Bank with a total claim amount of approximately DKK 1.3 billion.
These court actions filed with the Copenhagen City Court relate to alleged violations in the Bank’s branch in Estonia of the rules on prevention of money
laundering and alleged failure to timely inform the market of such violations. 225 of the 276 cases filed in the period from March 2019 to March 2020
have subsequently been referred to the Eastern High Court. The Bank intends to defend itself against these claims. The timing of completion of any such
lawsuits (pending or threatening) and their outcome are uncertain.
On 20 February 2020, Danske Bank received a procedural notification in a case initiated against Thomas F. Borgen by 72 institutional investors, and
funded by the litigation funder Deminor Recovery Services. The total claim amount is approximately DKK 2.7 billion. Under Danish law, the purpose of a
procedural notification is to make a formal reservation of rights to bring a potential claim against the notified party in the future.
Other
Owing to its business volume, Danske Bank is continually a party to various other lawsuits and disputes and has an ongoing dialogue with public authori-
ties, such as the Danish FSA on other matters. On 14 November 2019, Danske Bank was preliminarily charged by SØIK for violating the Danish Executive
Order on Investor Protection in connection with the Flexinvest Fri case. Danske Bank cooperates fully with SØIK. In general, Danske Bank does not expect
the outcomes of any of these other pending lawsuits and disputes or its dialogue with public authorities to have any material effect on its financial position.
Provisions for litigations are included in Other liabilities, see note G10.
(d) Further explanation
A limited number of employees are employed under terms which, if they are dismissed before reaching their normal retirement age, grant them a sever-
ance and/or pension payment in excess of their entitlement under ordinary terms of employment. As the sponsoring employer, the Group is also liable
for the pension obligations of a number of company pension funds.
The Group participates in the Danish Guarantee Fund and the Danish Resolution Fund. The funds’ capital must amount to at least 0.8% and 1%, respec-
tively, of the covered deposits of all Danish credit institutions by 31 December 2024. The Danish Guarantee Fund is currently fully funded, but if the fund
subsequently does not have sufficient means to make the required payments, extraordinary contributions of up to 0.5% of the individual institution’s
covered deposits may be required. Extraordinary contributions above this percentage require the consent of the Danish FSA. The first contribution to the
Danish Resolution Fund was made in December 2015. Danske Bank A/S and Realkredit Danmark A/S make contributions to the Resolution Fund on the
basis of their size and risk relative to other credit institutions in Denmark. The contribution to the Danish Resolution Fund is recognised as operating
expenses.
If the Resolution Fund does not have sufficient means to make the required payments, extraordinary contributions of up to three times the latest annual
contributions may be required. In addition, Danish banks participate in the Danish Restructuring Fund, which reimburses creditors if the final dividend is
lower than the interim dividend in respect of banks that were in distress before 1 June 2015. Similarly, Danish banks have made payment commitments
(totalling DKK 1 billion) to cover losses incurred by the Danish Restructuring Fund for the withdrawal of distressed banks from data centres etc. Payments
to the Danish Restructuring Fund are calculated on the basis of the individual credit institution’s share of covered deposits relative to other credit insti-
tutions in Denmark. However, each institution’s contribution to the Danish Restructuring Fund may not exceed 0.2% of its covered deposits.
The Group is a member of deposit guarantee schemes and other compensation schemes in Norway, the UK and Luxembourg. As in Denmark, the contri-
butions to the schemes in these countries are annual contributions combined with extraordinary contributions if the means of the schemes are not
sufficient to cover the required payments.
Danske Bank A/S is taxed jointly with all Danish entities of Danske Bank Group and is jointly and severally liable with these for payment of Danish corpo-
ration tax and withholding tax, etc.
Danske Bank A/S is registered jointly with all significant Danish entities of Danske Bank Group for financial services employer tax and VAT, for which
Danske Bank A/S and the entities are jointly and severally liable.
Danske Bank / Interim report – first half 2020 55/87
Notes – Danske Bank Group
G13. Assets provided or received as collateral
As at 30 June 2020, the Group had deposited securities worth DKK 33.9 billion as collateral with Danish and international clearing centres and other
institutions (31 December 2019: DKK 8.6 billion). The increase relates to the use of central bank facilities to establish a liquidity buffer to mitigate the
impact from potential increase in lending following the COVID-19 pandemic.
As at 30 June 2020, the Group had provided cash and securities worth DKK 120.7 billion as collateral for derivatives transactions (31 December 2019:
DKK 107.4 billion).
As at 30 June 2020, the Group had registered assets (including bonds and shares issued by the Group) under insurance contracts worth DKK 439.8
billion (31 December 2019: DKK 450.9 billion) as collateral for policyholders’ savings of DKK 428.7 billion (31 December 2019: DKK 437.4 billion).
As at 30 June 2020, the Group had registered loans at fair value and securities (including bonds issued by the Group) worth a total of DKK 811.3 billion
(31 December 2019: DKK 816.8 billion) as collateral for bonds issued by Realkredit Danmark. Similarly, the Group had registered loans and other assets
worth DKK 324.7 billion (31 December 2019: DKK 294.6 billion) as collateral for covered bonds issued under Danish, Finnish and Swedish law.
The table below shows assets provided as collateral for liabilities or contingent liabilities. Assets provided as collateral under repo transactions are
shown separately whereas the types explained above are included in the column ‘Other’.
(DKK millions)
Repo
Other
Total
Repo
Other
Total
30 June 2020
31 December 2019
Due from credit institutions
Trading portfolio securities
Loans at fair value
Loans at amortised cost
Assets under insurance contracts
Other assets
Total
Own issued bonds
-
250,189
-
-
-
-
45,281
150,444
799,616
353,394
341,896
48
45,281
400,633
799,616
353,394
341,896
48
-
186,473
-
-
-
-
43,230
75,876
802,579
277,395
359,246
72
43,230
262,349
802,579
277,395
359,246
72
250,189
41,914
1,690,679
50,898
1,940,868
92,812
186,473
43,322
1,558,398
81,354
1,744,871
124,675
Total, including own issued bonds
292,103
1,741,577
2,033,680
229,795
1,639,752
1,869,547
Securities provided as collateral under agreements that entitle the counterparty to sell the securities or provide them as collateral for other loans
amounted to DKK 250.2 billion as at 30 June 2020 (31 December 2019: DKK 186.5 billion).
As at 30 June 2020, the Group had received securities worth DKK 408.9 billion (31 December 2019: DKK 401.3 billion) as collateral for reverse repo
transactions, securities lending, derivatives transactions and other transactions entered into on the standard terms for such transactions. As the party
receiving the collateral, the Group is entitled in most cases to sell the securities or provide the securities as collateral for other loans in exchange for
returning similar securities to the counterparty at the expiry of the transactions. As at 30 June 2020, the Group had sold securities or provided securities
as collateral worth DKK 152.7 billion (31 December 2019: DKK 152.5 billion).
The Group also receives many other types of assets as collateral in connection with its ordinary lending activities. The Group has not received the own-
ership of these assets. The risk management notes of the Annual Report 2019 provide more details on assets received as collateral in connection with
ordinary lending activities.
Danske Bank / Interim report – first half 2020 56/87
Notes – Danske Bank Group
G14. Fair value information for financial instruments
Financial instruments are recognised in the balance sheet at fair value or amortised cost.
(DKK millions)
Financial 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
Loans held for sale
30 June 2020
Fair value
Amortised cost
31 December 2019
Fair value
Amortised cost
-
39,499
655,583
168,471
-
1,094,540
106,653
496,629
-
221,198
42,514
-
130,287
1,027,472
-
-
-
2,195
-
24,354
495,321
163,782
-
1,122,048
111,089
434,945
-
99,035
81,320
-
121,091
1,028,011
-
-
-
938
Total
2,561,375
1,423,666
2,351,538
1,330,395
Financial liabilities
Due to credit institutions and central banks
Trading portfolio liabilities
Deposits
Issued bonds at fair value
Issued bonds at amortised cost
Deposits under pooled schemes and unit-linked investment contracts
Liabilities in disposal groups held for sale
Non-preferred senior bonds
Subordinated debt
Loan commitments and guarantees
107,203
541,920
194,291
756,185
-
107,314
-
-
-
-
109,914
-
1,076,404
-
268,104
-
140
98,075
31,790
2,306
79,877
452,202
184,755
802,501
-
111,537
-
-
-
-
75,369
-
955,970
-
256,355
-
110
87,054
31,733
2,485
Total
1,706,913
1,586,734
1,630,872
1,409,076
Investment securities at fair value includes bonds measured at fair value through other comprehensive income, see the table on bonds in the Risk ma-
nagement notes. All other financial assets in the column ‘Fair value’ are mandatorily measured at fair value through profit or loss under IFRS 9. Except
for the held for trading portfolio, all other financial liabilities are measured at fair value through profit or loss using the fair value option.
Financial instruments at fair value
Note G33 of the Annual Report 2019 provides more information about fair value calculation methods for financial instruments.
Financial instruments valued on the basis of quoted prices in an active market are recognised in the Quoted prices category. Financial instruments valued
substantially on the basis of other observable input are recognised in the Observable input category. This category covers instruments such as derivatives
valued on the basis of observable yield curves and exchange rates and illiquid mortgage bonds valued by reference to the value of similar, liquid bonds.
Other financial instruments valued substantially on the basis of non-observable input are recognised in the Non-observable input category. This category
covers instruments such as unlisted shares, some unlisted bonds and a very limited portion of the derivatives portfolio.
If, at the balance sheet date, a financial instrument's classification differs from its classification at the beginning of the year, the classification of the
instrument changes. Changes are considered to have taken place at the balance sheet date. Developments in the financial markets have resulted in re-
classification between the categories. Some bonds have become illiquid and have therefore been moved from the Quoted prices to the Observable input
category, while other bonds have become liquid and have been moved from the Observable input to the Quoted prices category. The amounts transferred
are insignificant.
Danske Bank / Interim report – first half 2020 57/87
Notes – Danske Bank Group
G14. Fair value information for financial instruments continued
(DKK millions)
30 June 2020
Financial assets
Due from credit institutions and central banks
Derivatives
Interest rate contracts
Currency contracts etc.
Trading portfolio bonds
Trading portfolio shares
Investment securities, bonds
Investment securities, shares
Loans at fair value
Assets under pooled schemes and unit-linked investment contracts
Assets under insurance contracts, bonds
Danish mortgage bonds
Other covered bonds
Assets under insurance contracts, shares
Assets under insurance contracts, derivatives
Quoted prices
Observable input
Non-observable
input
Total
-
39,499
-
39,499
4,124
20
236,496
6,285
143,894
31
-
106,653
57,176
123,579
87,454
2,814
294,694
85,421
22,893
-
23,454
-
1,094,540
-
8,376
13,492
2,297
158,955
3,419
2,097
-
135
-
1,091
-
-
444
4,465
36,109
1,468
302,237
87,538
259,389
6,420
167,348
1,122
1,094,540
106,653
65,996
141,536
125,860
163,237
Total
768,526
1,743,621
49,228
2,561,375
Financial liabilities
Due to credit institutions and central banks
Derivatives
Interest rate contracts
Currency contracts etc.
Obligations to repurchase securities
Deposits
Issued bonds at fair value
Deposits under pooled schemes and unit-linked investment contracts
-
107,203
-
107,203
4,679
27
152,077
-
756,185
-
269,294
110,005
625
194,291
-
107,314
3,880
1,307
27
-
-
-
277,853
111,339
152,729
194,291
756,185
107,314
Total
912,968
788,732
5,214
1,706,913
Danske Bank / Interim report – first half 2020 58/87
Notes – Danske Bank Group
G14. Fair value information for financial instruments continued
(DKK millions)
31 December 2019
Financial assets
Due from credit institutions and central banks
Derivatives
Interest rate contracts
Currency contracts etc.
Trading portfolio bonds
Trading portfolio shares
Investment securities, bonds
Investment securities, shares
Loans at fair value
Assets under pooled schemes and unit-linked investment contracts
Assets under insurance contracts, bonds
Danish mortgage bonds
Other covered bonds
Assets under insurance contracts, shares
Assets under insurance contracts, derivatives
Quoted prices
Observable input
Non-observable
input
Total
-
24,354
-
24,354
3,636
59
173,852
12,028
133,953
53
-
111,089
67,292
107,686
101,432
2,225
220,829
64,387
15,260
-
28,393
-
1,122,048
-
8,751
9,090
2,304
89,990
3,963
1,107
-
200
-
1,383
-
-
427
3,672
39,813
2,263
228,428
65,553
189,112
12,228
162,346
1,436
1,122,048
111,089
76,470
120,448
143,549
94,478
Total
713,305
1,585,405
52,828
2,351,538
Financial liabilities
Due to credit institutions and central banks
Derivatives
Interest rate contracts
Currency contracts etc.
Obligations to repurchase securities
Deposits
Issued bonds at fair value
Deposits under pooled schemes and unit-linked investment contracts
-
79,877
-
79,877
3,545
64
151,590
-
802,501
-
201,525
89,707
744
184,756
-
111,537
3,634
1,219
173
-
-
-
208,704
90,990
152,507
184,756
802,501
111,537
Total
957,700
668,146
5,026
1,630,872
Danske Bank / Interim report – first half 2020 59/87
Notes – Danske Bank Group
G14. Fair value information for financial instruments continued
Financial instruments valued on the basis of non-observable input
The tables below shows financial instruments valued on the basis of non-observable input.
(DKK millions)
30 June 2020
Unlisted shares
allocated to insurance contract policyholders
other
Illiquid bonds
Derivatives, net fair value
31 December 2019
Unlisted shares
allocated to insurance contract policyholders
other
Illiquid bonds
Derivatives, net fair value
Sensitivity (change in fair value)
Gains/losses for the period
Carrying amount
Increase
Decrease
Realised
Unrealised
36,109
1,199
4,909
1,798
39,813
1,410
4,099
2,480
-
120
76
-
-
141
90
-
-
120
76
-
-
141
90
-
-37
95
-5
-
1,357
208
-25
-
-1,759
34
-327
-468
1,898
345
260
1,690
For unlisted shares allocated to insurance contract policyholders, the policyholders assume most of the risk on the shares. Therefore, changes in the fair
value of those shares will only to a limited extent affect the Group’s net profit. The Group’s remaining portfolio of unlisted shares consists primarily of
banking-related investments and holdings in private equity funds. The sensitivity of the fair value measurement to changes in the unobservable input
disclosed in the table is calculated as a 10% increase or 10 % decrease in fair value. Under current market conditions, a 10 % decrease in the fair value
is considered to be below a possible alternative estimate of the fair value at the end of the period. The unrealised adjustments in the six month period
ended 30 June 2020 were attributable to various unlisted shares.
The estimated fair value of illiquid bonds depends significantly on the estimated credit spread. In the table, the sensitivity of the fair value measurement
to changes in non-observable input is calculated as a 50bps widening or narrowing of the credit spread.
A substantial number of derivatives valued on the basis of non-observable input are hedged by similar derivatives or are used for hedging the credit risk
on bonds also valued on the basis of non-observable input. Changing one or more of the non-observable inputs to reflect reasonable, possible alternative
assumptions would not change the fair value of the derivatives significantly above what is already covered by the reserve related to fair value adjustment
for model risk.
Shares, bonds and derivatives valued on the basis of non-observable input
Reconciliation from beginning to end of period
(DKK millions)
30 June 2020
Bonds
Derivatives
Shares
Bonds
Derivatives
31 December 2019
Shares
Fair value at 1 January
Value adjustment through profit or loss
Acquisitions
Sale and redemption
Transferred from quoted prices and observable input
Transferred to quoted prices and observable input
41,223
-1,667
4,383
-5,096
-
-1,535
4,099
-332
1,694
-552
-
-
2,480
-468
1,682
-902
-
-994
34,730
3,808
20,437
-17,752
-
-
4,131
235
8,512
-8,779
-
-
3,497
1,690
-233
-2,455
-
-19
Fair value end of period
37,308
4,909
1,798
41,223
4,099
2,480
The value adjustment through profit or loss is recognised under Net trading income or loss. The transfer of derivatives to the Observable input category
consists primarily of maturity reductions, implying that the yield curves have become observable.
Danske Bank / Interim report – first half 2020 60/87
Notes – Danske Bank Group
G14. Fair value information for financial instruments continued
Financial instruments at amortised cost
Note G33 of the Annual Report 2019 provides information about the fair value calculation methods for financial instruments measured at amortised cost.
In the table below, fair value is presented for classes of financial instruments for which the carrying amount is not a reasonable approximation of fair value.
30 June 2020 (DKK millions)
Financial assets
Investment securities
Loans at amortised cost
Financial liabilities
Other issued bonds
Subordinated debt
31 December 2019 (DKK millions)
Financial assets
Investment securities
Loans at amortised cost
Financial liabilities
Other issued bonds
Subordinated debt
Carrying
amount
Fair value Quoted prices
Observable
input
Non-observable
input
130,287
1,027,472
132,505
1,027,412
111,931
-
20,574
10,050
-
1,017,362
366,179
31,790
366,006
31,697
302,140
28,546
41,304
3,151
22,563
-
121,091
1,028,011
122,785
1,028,261
100,517
-
22,268
9,837
-
1,018,424
343,409
31,733
346,057
32,486
293,141
29,398
20,430
3,088
32,485
-
Danske Bank / Interim report – first half 2020 61/87
Notes – Danske Bank Group
Risk Management
The consolidated financial statements for 2019 provide a detailed description of the Group’s risk management practices.
Breakdown of credit exposure
Lending activities
(DKK billions)
30 June 2020
Balance sheet items
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
Loans held for sale
Off-balance-sheet items
Guarantees
Loan commitments shorter than 1 year
Loan commitments longer than 1 year
Other unutilised commitments
Total
31 December 2019
Balance sheet items
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
Loans held for sale
Off-balance-sheet items
Guarantees
Loan commitments shorter than 1 year
Loan commitments longer than 1 year
Other unutilised commitments
Total
Core
Non-core
Counterparty
credit risk
Trading and
investment
securities
Customer-
funded
investments
215.7
82.0
655.6
298.8
1,027.5
1,094.5
106.7
523.4
2.2
67.6
258.9
189.2
0.2
215.4
42.5
-
-
1,025.2
799.6
-
-
-
67.6
256.8
189.2
-
4,522.3
2,596.3
92.8
105.7
495.3
284.9
1,028.0
1,122.0
111.1
463.8
0.9
69.1
204.6
174.2
0.3
92.4
81.9
-
-
1,022.3
802.6
-
-
-
68.7
202.2
173.7
-
0.3
-
-
-
2.2
-
-
-
2.2
-
2.1
-
-
6.9
0.4
0.1
-
-
5.7
-
-
-
0.9
0.3
2.5
0.5
-
-
39.5
389.8
-
-
294.9
-
-
-
-
-
-
-
-
-
265.8
298.8
-
-
-
-
-
-
-
-
0.2
-
-
-
-
-
-
106.7
523.4
-
-
-
-
-
724.2
564.7
630.1
-
23.7
294.0
-
-
319.5
-
-
-
-
-
-
-
-
-
201.3
284.9
-
-
-
-
-
-
-
-
0.3
-
-
-
-
-
-
111.1
463.8
-
-
-
-
-
Total
4,152.7
2,443.8
10.4
637.1
486.5
574.9
In addition to credit exposure from lending activities, Danske Bank had made uncommitted loan offers and granted uncommitted lines of credit of DKK
212 billion at 30 June 2020 (31 December 2019: DKK 213 billion). These items are included in the calculation of the total risk exposure amount in
accordance with the Capital Requirements Directive.
Danske Bank / Interim report – first half 2020 62/87
Notes – Danske Bank Group
Credit exposure
Credit exposure from core lending activities
Credit exposure from lending activities in the Group’s core banking business includes loans, amounts due from credit institutions and central banks,
guarantees and irrevocable loan commitments. The exposure is measured net of expected credit losses and includes repo loans at amortised cost. For
reporting purposes, all collateral values are net of haircuts and capped at the exposure amount. The credit exposure from Non-core lending activities is
disclosed further on in these notes.
For details about the Group’s credit risk management and the use of information on expected credit losses for risk management purposes, see Risk
Management 2019.
Classification of customers
The main objectives of risk classification are to rank the Group’s customers according to risk and to estimate each customer’s probability of default (PD). As
part of the credit process, the Group classifies customers according to risk and updates their classifications upon receipt of new information. Risk classifica-
tion comprises rating and credit scoring of customers. While all large customers are rated, the Group uses fully automated and statistically-based scoring
models for small customers such as personal customers and small businesses. Credit scores are updated monthly in a process subject to automated con-
trols.
The Group has developed a number of classification models to assess customer PD and to classify customers in various segments.
In its credit risk management, the Group uses point in time (PIT) PD estimates for risk classification. These PIT PD estimates express a customer’s
probability of default within the next 12 months in the current economic situation. The Group’s classification scale consists of 11 main rating categories
with fixed PD bands. During a downturn, a customer’s PIT PD may increase, and the customer may migrate to a lower rating category. The effect from a
downturn is thus larger when PIT PD is used than if the classification were based on through-the-cycle (TTC) PD, which the Group uses to calculate the
risk exposure amount for credit risk.
The classification of facilities between stage 1 and 2 for the purpose of calculating expected credit losses under IFRS 9 depends on whether the credit
risk has increased significantly since initial recognition. The assessment of whether the credit risk has increased significantly since initial recognition is
performed by considering the change in the risk of default occurring over the remaining life of the individual facility and incorporating forward-looking
information. A facility is transferred from stage 1 to stage 2 on the basis of observed increases in the probability of default:
•
•
For facilities originated below 1% in PD: an increase in the facility’s 12-month PD of at least 0.5 of a percentage point since initial recognition and a
doubling in the facility’s lifetime PD since origination.
For facilities originated above 1% in PD: an increase in the facility’s 12-month PD of 2 percentage points since origination or a doubling of the
facility’s lifetime PD since origination.
In addition, facilities that are more than 30 days past due are moved to stage 2. 30 days past due is considered a backstop. Finally, customers subject to
forbearance measures are placed in stage 2, if the Group, in the most likely outcome, expects no loss or the customers are in the two-year probation
period for performing forborne exposures.
A facility is transferred from stage 2 to stage 3 when it becomes credit-impaired. A facility becomes credit-impaired when one or more events that have
a detrimental impact on the estimated future cash flows have occurred. This includes observable data about (a) significant financial difficulty of the issuer
or the borrower; (b) a breach of contract, such as a default or past due event; (c) the borrower, for financial or contractual reasons relating to the bor-
rower’s financial difficulty, having been granted a concession that would not otherwise have been considered; (d) it is becoming probable that the borrower
will enter into bankruptcy or other financial restructuring; and (e) the purchase or origination of a financial asset at a deep discount that reflects the
incurred credit loss. It may not be possible to identify a single discrete event – instead, the combined effect of several events may cause a financial asset
to become credit-impaired. Credit-impaired facilities are placed in rating category 10 or 11. For customers in rating category 10, the stage 3 classifica-
tion applies only to customers where a loss is expected in the most likely scenario. For rating category 11 (default), all facilities are classified as stage 3
exposures.
Exposures which are considered to be in default for regulatory purposes will always be categorised as stage 3 exposures under IFRS 9. This applies to
90-days-past-due considerations and unlikely-to-pay factors leading to regulatory default.
Danske Bank / Interim report – first half 2020 63/87
Notes – Danske Bank Group
Credit exposure continued
Credit portfolio in core activities broken down by rating category and stages
30 June 2020
(DKK billions)
PD level
Gross exposure
Upper
Lower
Stage 1 Stage 2 Stage 3
Expected credit loss
Stage 1 Stage 2 Stage 3
Net exposure
Net exposure, ex collateral
Stage 1 Stage 2 Stage 3
Stage 1 Stage 2 Stage 3
1
2
3
4
5
6
7
8
9
10
11 (default)
Total
31 December 2019
(DKK billions)
1
2
3
4
5
6
7
8
9
10
11 (default)
Total
0.01
-
0.03
0.01
0.06
0.03
0.14
0.06
0.31
0.14
0.63
0.31
1.90
0.63
1.90
7.98
7.98 25.70
25.70 99.99
100.00 100.00
216.1
230.7
485.9
570.3
472.4
225.1
90.9
6.7
1.0
0.7
-
0.1
0.4
1.7
12.9
46.5
56.3
82.2
35.6
12.6
24.7
0.2
-
-
-
0.6
0.4
0.3
0.3
0.4
0.2
26.2
19.6
-
-
0.1
0.6
0.2
0.2
0.2
0.1
-
-
-
-
-
-
-
0.2
0.4
1.5
2.7
0.9
1.8
-
-
-
-
-
-
-
-
-
-
5.8
10.1
216.1
230.7
485.9
569.7
472.2
224.9
90.6
6.6
1.0
0.7
-
0.1
0.4
1.7
12.8
46.3
55.9
80.7
33.0
11.7
22.9
0.2
-
-
-
0.6
0.4
0.3
0.3
0.4
0.2
20.4
9.6
204.4
117.2
192.0
241.3
151.9
74.7
30.4
1.9
0.2
0.2
-
-
0.2
0.8
9.5
27.0
19.9
24.7
8.8
1.2
9.7
-
-
-
-
0.1
0.1
-
0.1
0.1
-
5.2
-
2,299.9
273.2
48.1
1.5
7.5
15.9
2,298.4
265.7
32.3
1,014.1
101.7
5.6
PD level
Net exposure, ex collateral
Lower Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Expected credit loss
Gross exposure
Net exposure
Upper
-
0.01
0.03
0.06
0.14
0.31
0.63
1.90
7.98
25.70
0.01
0.03
0.06
0.14
0.31
0.63
1.90
7.98
25.70
99.99
100.00 100.00
151.6
199.2
469.7
562.1
479.2
258.8
135.1
10.3
0.9
0.3
0.1
0.2
0.3
1.0
3.6
10.7
23.4
53.4
36.4
10.2
14.7
0.4
-
-
-
0.3
0.1
0.2
0.4
0.2
0.1
19.9
21.4
-
-
-
0.1
0.2
0.3
0.3
0.4
-
-
-
-
-
-
-
0.1
0.2
1.0
2.2
1.2
1.0
-
-
-
-
-
-
-
-
-
-
4.8
8.5
151.6
199.2
469.7
562.0
479.1
258.5
134.8
9.9
0.9
0.3
0.1
0.2
0.3
1.0
3.6
10.6
23.1
52.4
34.2
9.0
13.7
0.4
-
-
-
0.3
0.1
0.2
0.4
0.2
0.1
15.1
13.0
139.8
106.3
180.4
215.7
140.2
87.3
39.7
1.8
0.1
0.1
-
-
-
0.2
1.4
4.5
7.1
15.0
7.8
1.2
5.3
0.1
-
-
-
-
-
-
-
-
-
4.4
3.3
2,267.3
154.2
42.8
1.3
5.8
13.4
2,266.0
148.5
29.4
911.5
42.6
7.8
The breakdown of the credit portfolio by rating category in 2019 has been restated, leading to a reclassification of a gross and net exposure of DKK 9.4
billion in rating categories 10 and 11 to other rating categories. The restatement is only a matter of presentation and has no impact on the expected
credit losses, allocation between stages 1-3 or non-performing loans.
Overall, the change in the macroeconomic scenarios used in the IFRS 9 impairment model as well as post-model adjustments led to an increase in gross
exposure and expected credit losses within stage 2 during the first half of 2020. The post-model adjustments of DKK 4.3 billion (31 December 2019:
4.0 billion) are determined on portfolio level to ensure sufficient impairment coverage for the portfolios covered by the post-model adjustments. The post-
model adjustments are subsequently allocated to the individual customers based on their proportionate share of the expected credit losses prior to post-
model adjustments. As part of the post-model adjustments, an assessment of the impact on the PD levels for the customers covered by the post-model
adjustment is made and triggers the transfer of some customers from stage 1 to stage 2 to reflect the increase in credit risk. This increases gross
exposure within stage 2. Compared to the fourth quarter of 2019, the average exposure-weighted PD within stage 2 decreased during the first half of
2020 as the increase in exposure within stage 2 relates to exposures with a lower PD than the average exposure weighted PD at the end of 2019.
Danske Bank / Interim report – first half 2020 64/87
Notes – Danske Bank Group
Credit exposure continued
Credit portfolio in core activities broken down by industry (NACE) and stages
The table below breaks down credit exposure by industry. The industry segmentation is based on the classification principles of the Statistical Classifi-
cation of Economic Activities in the European Community (NACE) standard that has been adapted to the Group’s business risk approach used for the
active management of the credit portfolio.
Expected credit losses increased throughout the portfolio due to the changes to the macroeconomic outlook following the outbreak of the COVID-19
pandemic. Further, expected credit losses reflect a deterioration of the creditworthiness of specific customers mainly within oil and gas (in the Shipping,
oil and gas industry).
30 June 2020
(DKK billions)
Gross exposure
Expected credit loss
Net exposure
Net exposure, ex collateral
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Public institutions
Financials
Agriculture
Automotive
Capital goods
Commercial property
Construction and building materials
Consumer goods
Hotels, restaurants and leisure
Metals and mining
Other commercials
Pharma and medical devices
Private housing co-ops and non-
profit associations
Pulp, paper and chemicals
Retailing
Services
Shipping, oil and gas
Social services
Telecom and media
Transportation
Utilities and infrastructure
Personal customers
273.2
99.3
47.9
31.8
67.1
269.1
41.9
57.2
9.0
12.4
42.9
46.3
198.4
36.2
20.5
41.3
14.5
29.3
16.6
5.0
63.3
876.4
0.4
9.4
19.4
3.2
10.1
38.3
7.2
12.4
5.4
2.1
4.5
4.8
6.9
1.9
3.1
17.3
29.9
1.2
0.9
10.9
0.3
83.2
0.1
0.7
6.9
0.5
1.3
5.8
1.9
1.5
1.0
0.1
0.9
0.1
2.1
0.5
2.8
1.2
10.1
1.0
0.2
0.8
0.1
8.5
-
0.1
0.1
-
0.1
0.3
-
-
-
-
-
-
0.1
-
-
-
-
-
-
-
-
0.7
-
0.2
1.0
0.1
0.3
1.1
0.4
0.3
0.1
-
-
0.1
0.3
-
0.2
0.3
0.6
-
-
0.2
-
2.2
-
0.3
1.7
0.1
0.5
1.2
0.7
0.5
0.1
-
-
-
0.3
0.2
0.9
0.5
5.0
0.3
0.1
0.1
-
3.3
273.2
99.2
47.9
31.8
67.1
268.8
41.8
57.2
8.9
12.4
42.9
46.3
198.4
36.2
20.5
41.3
14.5
29.3
16.6
5.0
63.3
875.7
0.4
9.3
18.4
3.1
9.8
37.3
6.8
12.0
5.3
2.1
4.5
4.8
6.7
1.9
2.9
17.0
29.3
1.2
0.9
10.8
0.3
81.0
0.1
0.4
5.2
0.4
0.7
4.5
1.2
1.0
0.9
0.1
0.9
-
1.8
0.4
1.9
0.6
5.1
0.7
0.1
0.7
0.1
5.3
270.0
90.4
11.7
23.5
59.0
52.6
30.7
41.3
2.3
11.0
41.5
43.7
35.0
27.5
12.0
32.1
10.8
11.4
15.1
2.2
49.0
141.1
-
6.7
3.0
1.9
8.4
8.4
3.0
8.8
1.8
1.0
3.6
3.4
1.2
0.6
1.9
13.7
10.6
0.6
0.6
5.7
0.1
16.5
-
0.3
0.5
0.1
0.3
0.1
0.6
0.3
0.2
-
0.4
-
0.2
0.1
1.0
0.2
-
0.4
-
0.3
-
0.6
Total
2,299.9
273.2
48.1
1.5
7.5
15.9
2,298.4
265.7
32.3
1,014.1
101.7
5.6
As at 30 June 2020, oil and gas exposures represent a gross exposure of DKK 28 billion (31 December 2019: DKK 29.9 billion) and expected credit
losses of DKK 4.9 billion (31 December 2019: DKK 2.7 billion). Those exposures represent the majority of the exposures in stage 3 within the Shipping,
oil and gas industry at the end of June 2020.
Overall, the change in the macroeconomic scenarios used in the IFRS 9 impairment model as well as post-model adjustments led to an increase in gross
exposure and expected credit losses within stage 2. The post-model adjustments of DKK 4.3 billion (31 December 2019: 4.0 billion) are determined on
portfolio level to ensure sufficient impairment coverage for the portfolios covered by the post-model adjustments. The post-model adjustments are sub-
sequently allocated to the individual customers based on their proportionate share of the expected credit losses prior to post-model adjustments. As
part of the post-model adjustments, an assessment of the impact on the PD levels for the customers covered by the post-model adjustment is made and
triggers the transfer of some customers from stage 1 to stage 2 to reflect the increase in credit risk. This increases gross exposure within stage 2.
Compared to the fourth quarter of 2019, this improves the overall average credit quality of the exposure within stage 2. This effect is primarily visible on
the industries with newly added post-model adjustments in the first half of 2020. That is, hotels, restaurants and leisure, services, consumer goods,
transportation as well as shipping, oil and gas.
Danske Bank / Interim report – first half 2020 65/87
Notes – Danske Bank Group
Credit exposure continued
31 December 2019
(DKK billions)
Public institutions
Financials
Agriculture
Automotive
Capital goods
Commercial property
Construction and building materials
Consumer goods
Hotels, restaurants and leisure
Metals and mining
Other commercials
Pharma and medical devices
Private housing co-ops. and non-profit
associations
Pulp, paper and chemicals
Retailing
Services
Shipping, oil and gas
Social services
Telecom and media
Transportation
Utilities and infrastructure
Personal customers
Gross exposure
Expected credit loss
Net exposure
Net exposure, ex collateral
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
193.6
103.7
52.4
35.9
63.1
293.3
43.3
61.6
15.2
11.2
20.8
38.4
190.4
30.6
21.5
55.4
41.3
29.2
18.2
13.9
46.5
887.6
0.1
2.2
16.0
1.6
3.5
19.3
6.0
3.9
1.7
0.7
0.4
1.2
6.1
1.9
3.3
3.6
9.4
1.1
0.8
2.2
0.6
68.8
-
0.4
5.6
0.3
4.1
5.2
1.9
1.0
0.3
0.1
-
-
2.0
0.4
1.5
0.9
9.4
0.8
0.2
0.2
-
8.5
-
0.1
0.1
-
-
0.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.7
-
-
1.1
-
0.1
0.7
0.3
0.2
0.1
-
-
-
0.2
0.1
0.3
0.2
0.2
-
-
-
-
2.1
0.0
0.3
1.7
0.1
0.5
1.3
0.7
0.4
0.1
-
-
-
0.3
0.1
0.7
0.4
2.9
0.3
0.1
0.1
-
3.2
193.6
103.7
52.3
35.9
63.1
293.1
43.3
61.5
15.2
11.2
20.8
38.4
190.4
30.6
21.5
55.4
41.3
29.2
18.2
13.9
46.5
887.0
0.1
2.1
14.9
1.5
3.4
18.6
5.6
3.7
1.6
0.7
0.4
1.2
5.9
1.8
3.0
3.5
9.2
1.1
0.8
2.1
0.5
66.6
-
0.1
3.9
0.2
3.5
3.9
1.2
0.5
0.2
-
-
-
1.7
0.3
0.8
0.4
6.4
0.6
0.1
0.1
-
5.3
187.1
89.0
11.0
27.0
54.9
63.4
30.7
45.1
5.0
8.7
18.4
35.5
29.5
22.5
12.4
44.2
21.5
10.9
16.6
7.6
32.7
138.0
0.1
1.4
2.5
0.7
2.3
3.6
3.0
2.3
0.6
0.4
0.2
1.0
1.4
0.6
2.0
2.0
4.6
0.5
0.6
0.5
0.1
12.4
-
-
0.5
-
3.2
0.1
0.8
0.2
-
-
-
-
0.2
0.1
0.4
-
1.0
0.3
-
-
-
0.9
Total
2,267.3
154.2
42.8
1.3
5.8
13.4 2,266.0
148.5
29.4
911.5
42.6
7.8
Collateral
The Group uses a number of measures to mitigate credit risk, including collateral, guarantees and covenants. The main method is obtaining collateral. In
the Annual Report 2019, a table showing collateral by type (after haircut) is included. The mitigating effect from collateral at the end of June 2020 can
be found as the difference between the columns ‘Net exposure’ and ‘Net exposure, ex collateral’ and amounted to DKK 1,475.0 billion at 30 June 2020
(31 December 2019: DKK 1,481.9 billion). The decrease relates primarily to declining collateral value within the shipping, oil and gas and Personal
customers industries.
The Group uses guarantee schemes offered by the governments in our markets to mitigate the economic consequences of the COVID-19 pandemic.
During first half 2020, loans of DKK 4.2 billion were originated under such guarantee schemes with the guarantees covering DKK 3.5 billion of the loans.
A large part of the guarantees relates to Northern Ireland.
Danske Bank / Interim report – first half 2020 66/87
Notes – Danske Bank Group
Credit exposure continued
The table below breaks down credit exposure by core business unit and underlying segment.
Credit portfolio in core activities broken down by business unit and stages in IFRS 9
30 June 2020
Gross exposure
Expected credit loss
Net exposure
Net exposure, ex collateral
(DKK billions)
Stage 1 Stage 2 Stage 3
Stage 1 Stage 2 Stage 3
Stage 1
Stage 2 Stage 3
Stage 1
Stage 2
Stage 3
520.0
387.1
42.6
51.5
5.8
17.3
0.6
0.4
1.4
2.3
2.5
4.5
519.4
386.7
41.2
49.2
3.3
12.8
60.7
77.3
9.8
14.0
907.1
94.1
23.1
1.0
3.7
7.1
906.1
90.3
16.0
138.1
23.8
Retail
Commercial
Banking DK
Sweden
Norway
Finland
Other
271.0
210.4
153.4
32.4
34.1
24.3
23.4
20.0
2.6
2.5
4.2
1.1
Banking Nordic
667.2
101.8
10.4
C&I1
485.0
63.6
11.8
Wealth Management
2.6
-
-
Northern Ireland
70.7
11.5
2.8
167.1
2.3
-
Other
Total
0.1
0.1
0.1
0.0
0.3
0.2
-
-
-
0.9
0.4
0.5
0.4
2.3
1.2
0.6
0.4
1.3
0.4
270.9
210.3
153.3
32.4
33.2
23.9
22.8
19.6
1.9
2.1
3.0
0.7
103.0
68.6
43.3
12.5
14.3
8.8
4.7
4.5
2.7
666.9
99.5
7.7
227.3
32.2
5.4
485
62
438.2
40.3
-
-
2.6
-
2.6
0.3
0.6
70.7
11.2
2.2
41.2
-
-
167.1
2.3
-
166.7
-
3.1
2.3
6
-
0.5
1.2
1.7
0.7
0.9
1.0
-
2.6
0.9
-
0.3
-
2,299.9
273.2
48.1
1.5
7.5
15.9
2,298.4
265.7
32.3
1,014.1
101.7
5.6
1The Corporates & Institutions (C&I) segment comprises large corporate customers and financial institutions. As these customers typically have business activities in multiple countries,
a geographical split is not applicable.
Credit portfolio in core activities broken down by business unit and stages
31 December 2019
Gross exposure
Expected credit loss
Net exposure
Net exposure, ex collateral
(DKK billions)
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Retail
Commercial
Banking DK
Sweden
Norway
Finland
Other
528.1
446.6
37.8
31.6
5.9
15.8
0.6
0.3
1.5
1.9
2.6
4.9
527.5
446.3
36.3
29.7
3.3
11.0
64.4
126.5
6.2
7.5
974.7
69.4
21.7
0.9
3.4
7.4
973.8
66.0
14.3
191.0
13.7
265.7
229.7
158.3
41.8
23.2
17.9
13.0
11.5
1.4
2.4
3.1
0.6
0.1
0.1
0.1
-
0.6
0.3
0.4
0.3
0.5
0.5
1.1
0.3
265.6
229.6
158.2
41.7
22.6
17.6
12.6
11.2
1.0
1.8
2.0
0.3
98.8
74.2
40.2
14.9
7.8
6.4
2.2
2.6
Banking Nordic
695.4
65.6
7.5
0.3
1.6
2.4
695.2
64.0
5.1
228.1
18.9
C&I1
422.2
13.0
11.7
0.1
0.6
3.0
422.1
12.4
8.7
356.4
7.8
Wealth Management
4.1
-
-
-
-
-
4.1
-
-
1.1
-
0.7
1.4
2.1
0.4
0.5
0.5
-
1.4
4.0
-
Northern Ireland
71.3
6.2
1.8
0.1
0.2
0.5
71.2
6.1
1.3
36.0
2.1
0.3
Other
Total
99.5
0.1
-
-
-
-
99.5
0.1
-
99.0
-
-
2,267.3
154.2
42.8
1.3
5.8
13.4
2,266.0
148.5
29.4
911.5
42.6
7.8
1 The Corporates & Institutions (C&I) segment comprises large corporate customers and financial institutions. As these customers typically have business activities in multiple countries,
a geographical split is not applicable.
For further information on the increase in exposures within stage 2, see the tables on credit exposure broken down by rating category and by industry.
Danske Bank / Interim report – first half 2020 67/87
Notes – Danske Bank Group
Credit exposure continued
Forbearance practices and repossessed assets
The Group adopts forbearance plans to assist customers in financial difficulty. Concessions granted to customers include interest-reduction schedules,
interest-only schedules, temporary payment holidays, term extensions, cancellation of outstanding fees, waiver of covenant enforcement and settlements.
Forbearance plans must comply with the Group’s Credit Policy. They are used as an instrument to retain long-term business relationships during eco-
nomic downturns if there is a realistic possibility that the customer will be able to meet its obligations again, or are used for minimising losses in the
event of default.
If it proves impossible to improve the customer’s financial situation by forbearance measures, the Group will consider whether to subject the customer’s
assets to a forced sale or whether the assets could be realised later at higher net proceeds. As at 30 June 2020, the Group had recognised properties
taken over in Denmark at a carrying amount of DKK 27 million (31 December 2019: DKK 15 million), and there were no properties taken over in other
countries (31 December 2019: DKK 0 million). The properties are held for sale and included under Other assets in the balance sheet.
Forbearance measures lead to changes in staging for impairment purposes, and impairments relating to forborne exposures are handled according to
the principles described in the Annual Report 2019, note G15.
In first half 2020, the Group increased the use of concessions to assist customers affected by the COVID-19 pandemic. The Group granted such conces-
sions representing an increase in gross exposure of around DKK 60 billion, of which around DKK 9 billion is considered forbearance measures, see note
G1 for the definition of when such concessions are considered to be a forbearance measure. In our Nordic markets, such concessions are made on a
voluntary basis, while in Northern Ireland, the Bank was selected by the UK Government to provide concessions through the UK government-backed
lending schemes.
The table below shows the net exposures that are subject to forbearance measures and is based on the EBA's definition as described in the Annual
Report 2019.
Exposures subject to forbearance measures
(DKK millions)
Active forbearance
Under probation
Total
30 June 2020
31 December 2019
Performing Non-performing1
Performing
Non-performing1
11,065
12,956
24,021
9,269
-
9,269
8,161
4,933
13,094
9,341
-
9,341
1These loans are part of the total non-performing loan amount. For more details, see the “Non-performing loans in core activities” table.
Danske Bank / Interim report – first half 2020 68/87
Notes – Danske Bank Group
Credit exposure continued
Non-performing loans
The Group defines non-performing loans as stage 3 exposures. However, for non-retail exposures with one or more non-performing loans, the entire
amount of the customer’s exposure is considered to be non-performing. For retail exposures, only impaired facilities are included in non-performing loans.
The Group excludes exposures in stage 3 with no impairment charges or where the allowance account is considered immaterial to the gross exposure.
The impact of COVID-19 on total gross NPL exposures was limited in the first half of 2020. At the same time, net NPL decreased driven by a decrease
in net NPL in default partly due to an increase in the expected credit loss. The decrease for net NPL in default was partly offset by an increase in net NPL
in non-default.
The table below shows the reconciliation as at 30 June 2020 between the gross exposure in stage 3 and gross non-performing loans.
Non-performing loan bridge
(DKK billions)
Gross exposure in stage 3
None or an immaterial allowance account
Gross non-performing loans
Expected credit loss
Net non-performing loans
Non-default
30 June 2020
Default
31 December 2019
Total Non-default
Default
28.5
9.1
19.4
5.7
13.7
19.6
3.4
16.3
10.1
6.1
48.1
12.5
35.7
15.9
19.8
21.2
4.1
17.1
5.1
12.0
21.5
3.9
17.6
8.3
9.4
Total
42.8
8.0
34.7
13.4
21.3
For 2019, the amounts in the rows ‘Gross exposure in stage 3’ and ‘None or an immaterial allowance account’ have been restated. This has no impact
on non-performing loans (gross and net), as the increase in the gross exposure in stage 3 relates to collateralised exposures with an immaterial allowance
account.
Non-performing loans in core activities
(DKK millions)
Total non-performing loans
- portion from customers in default1
Coverage ratio (default) (%)
Coverage ratio (non-default) (%)
Coverage ratio (total non-performing loans) (%)
Non-performing loans as a percentage of total gross exposure (%)
1Part of which is also shown in the ”Exposures subject to forbearance measures” table.
Allowance account in core activities
(DKK millions)
ECL allowance account as at 1 January 2019
Transferred to stage 1 during the period
Transferred to stage 2 during the period
Transferred to stage 3 during the period
ECL on new assets
ECL on assets derecognised
Impact of net remeasurement of ECL (incl. changes in models)
Write-offs debited to the allowance account
Foreign exchange adjustments
Other changes
30 June 2020 31 December 2019
19,838
6,124
100
74
89
1.4
21,346
9,372
74
85
78
1.4
Stage 1
Stage 2
Stage 3
Total
1,574
784
-357
-34
263
-320
-602
-
4
-7
5,375
-699
1,067
-542
1,174
-1,183
726
-5
22
-27
13,405
-86
-710
576
2,461
-2,875
1,141
-791
82
33
20,353
-
-
-
3,898
-4,377
1,264
-796
109
-
ECL allowance account as at 31 December 2019
1,306
5,908
13,237
20,451
Transferred to stage 1 during the period
Transferred to stage 2 during the period
Transferred to stage 3 during the period
ECL on new assets
ECL on assets derecognised
Impact of net remeasurement of ECL (incl. changes in models)
Write-offs debited to the allowance account
Foreign exchange adjustments
Other changes
424
-191
-11
277
-170
-146
-
-13
-5
-402
603
-703
1,183
-792
1,844
-
-38
-79
-23
-412
714
1,759
-1,605
2,606
-197
-199
-9
-
-
-
3,219
-2,568
4,304
-197
-250
-94
ECL allowance account as at 30 June 2020
1,470
7,523
15,872
24,866
Danske Bank / Interim report – first half 2020 69/87
Notes – Danske Bank Group
Credit exposure continued
Allowance account in core activities broken down by segment
(DKK millions)
Banking DK
ECL allowance account as at 1 January 2019
ECL on new assets
ECL on assets derecognised
Impact on remeasurement of ECL (incl. change in models)
Write-offs debited to allowance account
Foreign currency translation
Other changes
12,593
1,631
-2,296
24
-397
-1
109
Banking
Nordic
4,149
935
-1,062
415
-104
13
-13
C&I
2,806
1,278
-843
798
-281
54
-94
ECL allowance account as at 31 December 2019
11,662
4,333
3,718
ECL on new assets
ECL on assets derecognised
Impact on remeasurement of ECL (incl. change in models)
Write-offs debited to allowance account
Foreign currency translation
Other changes
775
-1,276
761
-157
-3
-14
906
-537
719
-31
-92
4
1,460
-715
2,580
-
-96
-84
ECL allowance account as at 30 June 2020
11,749
5,301
6,862
Northern
Ireland
Allowance
account Total
Other
792
52
-172
29
-14
44
-
730
62
-38
228
-9
-57
-1
915
12
3
-5
-1
-
-
-1
8
16
-2
16
-
-2
1
38
20,353
3,898
-4,377
1,264
-796
109
-
20,451
3,219
-2,568
4,304
-197
-250
-94
24,866
The method used for calculating expected credit losses is described in detail in note G15 of the Annual Report 2019.
The incorporation of forward-looking elements reflects the expectations of the Group’s senior management and involves the creation of scenarios (base-
case, upside and downside scenarios), including an assessment of the probability for each scenario. The purpose of using multiple scenarios is to model
the non-linear impact of assumptions about macroeconomic factors on the expected credit losses.
The forward-looking information is based on a three-year forecast period converging to steady state in year seven. The base case is based on the macro-
economic outlook as disclosed in the Group’s Nordic Outlook reports. The base-case is an extension of the Group’s official view of the Nordic economies
(the Nordic Outlook report). As at 30 June 2020, this is based on a recession scenario in 2020 with a recovery in 2021. This base case is more negative
than the scenario applied at the end of 2019, despite including expectations of substantial government support packages to mitigate the macroeconomic
impacts from the COVID-19 pandemic. The downside scenario has been updated to a longer-lasting COVID-19 scenario that includes a steeper decline
than during the global financial crisis with a close to double-digit decrease in GDP and has a likelihood of 20%, to reflect the risk that government support
packages are not sufficient to sustain the recovery. This scenario builds on a prolonged recovery with continued declines in economic activity in 2021
and includes substantial increases in unemployment and decreases in house prices.
Forecasts are produced for the coming three years. After this period, the outlook returns to a steady-state level after a further four years. The macroe-
conomic parameters in the base case and downside scenario entering into the ECL calculation for the first two years of the forecast horizon as an average
across the Group’s core markets are included below.
30 June 2020
Group average
GDP
Industrial Production
Unemployment
Inflation
Consumption Expenditure
Property prices - Residential
Interest rate - 3 month
Interest rate - 10 year
Base case
2020
2021
Downside
2020
-4.2
-6.8
6.8
0.5
-4.4
-0.6
-0.1
0.1
3.4
4.3
6.3
1.6
4.1
1.8
0.0
0.4
-9.5
-11.7
7.8
0.1
-11.5
-3.5
-0.1
0.0
2021
-3.3
-6.2
9.0
-1.7
-0.1
-13.1
0.2
1.5
After the first two years of the forecast horizon, the macroeconomic scenarios revert slowly towards a long-term average.
The upside scenario represents a slightly better outlook than the base case scenario across the macroeconomic parameters.
Danske Bank / Interim report – first half 2020 70/87
Notes – Danske Bank Group
Credit exposure continued
At 31 December 2019, the following scenarios were used:
Base case scenario – average 2020-2022
Denmark
Finland
Norway
Sweden
GDP
Industrial Production
Unemployment
Inflation
Private Consumption Expenditure
Property prices - Residential
Interest rate - 3 month
Interest rate - 10 year
1.5
2.9
4.0
1.4
1.7
2.9
-0.36
-0.48
1.2
1.4
6.5
1.5
1.1
1.1
-0.41
-0.23
2.2
2.8
2.2
2.1
2.2
2.4
2.04
1.34
1.2
1.7
7.6
1.6
1.5
1.8
-0.16
-0.05
At 31 December 2019, the upside scenario represents a slightly better outlook than the base case scenario across the macroeconomic parameters,
mainly to capture uncertainty to the upside and the downside scenario is based on a mild recession in the first year of the forecast horizon with a gradual
recovery after that.
The base-case scenario enters with a probability of 70% (31 December 2019: 60%), the upside scenario with a probability of 10% (31 December 2019:
10%) and the downside scenario with a probability of 20% (31 December 2019: 30%). On the basis of these assessments, the allowance account as at
30 June 2020 amounted to DKK 24.9 billion (31 December 2019: 20.5 billion). If the base case scenario was assigned a probability of 100%, the
allowance account would decrease DKK 1.1 billion (31 December 2019: 0.7 billion). Compared to the base case scenario, the allowance account would
increase DKK 6.1 billion (31 December 2019: 2.4 billion), if the downside scenario was assigned a probability of 100%. The increase reflects primarily
the transfer of exposures from stage 1 to stage 2 and increased expected credit losses within stage 2. If instead the upside scenario was assigned a
probability of 100%, the allowance account would decrease by DKK 0.8 billion (31 December 2019: 0.5 billion) compared to the base-case scenario.
However, note that the applied scenarios differ from the scenarios used at 31 December 2019, and the changes in sensitivities from end of 2019 to end
of the second quarter 2020 are therefore not directly comparable. Further, it should be noted that the expected credit losses in the individual scenarios
(i.e. without the weighting) do not represent forecasts of expected credit losses (ECL).
Management applies judgement when determining the need for post-model adjustments. At 30 June 2020, the post-model adjustments amounted to
DKK 4.3 billion (31 December 2019: 4.0 billion). The post-model adjustments cover, for instance, specific macroeconomic risks in the Agriculture or the
Shipping, Oil and Gas industries that are not fully captured by the expected credit loss model. For these supplementary calculations are made in order to
ensure sufficient impairment coverage. The post-model adjustments introduced in the first quarter of 2020 continue to include the immediate risks
arising from the COVID-19 pandemic. Remaining adjustments are made to take into account non-linear downside risks, for instance on the property
market in Copenhagen and other high growth areas for which the macroeconomic forecasts used in the models are based on the property market as a
whole. Finally, post-model adjustments are made for portfolios where the credit risk assessment process has identified underestimation of the expected
credit losses. Excluding the post-model adjustment related to the COVID-19 pandemic, the post-model adjustments decreased from 31 December 2019
to 30 June 2020, as part of the post-model adjustments at 31 December 2019 are now covered through the scenarios used at 30 June 2020 to reflect
the worsening of the macroeconomic outlook in the first half of 2020.
Danske Bank / Interim report – first half 2020 71/87
Notes – Danske Bank Group
Credit exposure continued
Credit exposure from Non-core lending activities
The Non-core business 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 of this part of the loan portfolio. The portfolio consists primarily of loans to customers in the Baltics and liquidity facilities for
Special Purpose Vehicles (SPVs) and conduit structures.
In December 2019 and January 2020, the Group entered into agreements to sell portfolios of loans with personal customers in Latvia and Lithuania. The
transactions settled in the first half of 2020. In June 2020, the Group entered into an agreement to sell a portfolio of Estonian corporate loans managed by
the Lithuanian branch. The settlement requires the approval of the competent authorities. Further information can be found in note G9.
Credit portfolio in non-core activities broken down by industry (NACE) and stages
(DKK millions)
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Gross exposure
Expected credit loss
Net exposure
Net exposure, ex collateral
Non-core banking
Personal customers
Commercial customers
Public Institutions
Non-core conduits etc.
3,878
26
2,582
1,270
2,637
194
3
171
20
-
330
1
329
-
855
Total
6,515
194
1,185
6
-
6
-
-
6
38
-
38
-
-
230
-
230
-
724
3,872
26
2,576
1,270
2,637
156
3
132
20
-
100
1
99
-
131
2,197
25
1,021
1,151
112
38
954
6,509
156
231
2,309
70
-
52
18
-
70
26
-
26
-
-
26
Credit portfolio in non-core activities broken down by industry (NACE) and stages
31 December 2019
(DKK millions)
Non-core banking
Personal customers
Commercial customers
Public Institutions
Non-core conduits etc.
Gross exposure
Expected credit loss
Net exposure
Net exposure, ex collateral
Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
6,247
976
3,327
1,944
3,340
308
24
254
30
141
320
4
316
-
908
10
3
7
-
-
10
55
17
37
-
-
157
-
156
-
639
6,236
973
3,320
1,944
3,340
253
7
216
30
141
163
3
160
-
268
3,284
25
1,609
1,650
578
105
-
78
26
-
55
796
9,576
394
432
3,862
104
35
1
34
-
-
35
Total
9,586
449
1,228
Danske Bank / Interim report – first half 2020 72/87
Notes – Danske Bank Group
Credit exposure continued
Credit portfolio in non-core activities broken down by rating category and stages
30 June 2020
(DKK millions)
1
2
3
4
5
6
7
8
9
10
11 (default)
Total
PD level
Net exposure, ex collateral
Lower Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Expected credit loss
Gross exposure
Net exposure
Upper
-
0.01
0.03
0.06
0.14
0.31
0.63
1.90
7.98
25.70
0.01
0.03
0.06
0.14
0.31
0.63
1.90
7.98
25.70
99.99
100.00 100.00
137
1,728
2,375
577
772
246
260
83
25
78
234
-
26
47
14
31
10
15
26
11
4
9
-
17
30
9
20
6
7
29
1
19
1,049
6,515
194
1,185
-
-
-
-
1
2
2
-
-
-
-
6
-
-
-
-
-
-
5
23
10
-
-
-
-
-
-
-
-
-
27
-
17
911
137
1,728
2,374
577
771
244
258
83
25
78
234
-
26
47
14
31
10
10
3
1
4
9
-
17
30
9
20
6
7
2
1
2
138
-
653
1,043
212
291
76
20
-
-
-
15
-
26
34
2
7
2
-
-
-
-
-
-
15
9
-
2
-
-
-
-
-
-
38
954
6,509
156
231
2,309
70
26
Credit portfolio in non-core activities broken down by rating category and stages
31 December 2019
(DKK millions)
1
2
3
4
5
6
7
8
9
10
11 (default)
Total
PD level
Net exposure, ex collateral
Lower Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Expected credit loss
Gross exposure
Net exposure
Upper
-
0.01
0.03
0.06
0.14
0.31
0.63
1.90
7.98
25.70
0.01
0.03
0.06
0.14
0.31
0.63
1.90
7.98
25.70
99.99
100.00 100.00
137
1,793
2,773
1,670
1,279
743
482
215
66
50
379
-
26
60
39
52
28
29
35
21
146
15
-
17
39
26
34
18
17
2
2
7
1,067
-
-
-
1
2
3
3
2
-
-
-
-
-
-
-
-
-
6
30
18
-
-
-
-
-
-
-
-
5
-
-
3
788
137
1,793
2,773
1,669
1,277
740
479
212
66
50
379
-
26
60
39
52
28
23
4
3
146
15
-
17
39
26
34
18
12
2
2
4
278
-
639
1,333
683
475
143
113
131
44
-
300
-
26
49
-
13
1
2
-
2
-
11
-
14
14
-
6
-
-
-
1
-
-
9,586
449
1,228
10
55
796
9,576
394
432
3,862
104
35
Notes – Danske Bank Group
Credit exposure continued
Counterparty credit risk and credit exposure from trading and investment securities
(DKK billions)
Counterparty credit risk
Derivatives with positive fair value
Reverse transactions and other loans at fair value1
Credit exposure from other trading and investment securities
Bonds
Shares
Other unutilised commitments2
Total
Danske Bank / Interim report – first half 2020 73/87
30 June 31 December
2019
2020
389.8
334.4
557.0
7.5
0.2
294.0
343.1
472.5
13.7
0.3
1,288.9
1,123.6
1 Reverse transactions and other loans at fair value included as counterparty credit risk are loans at the trading units of Corporates & Institutions. These loans consist of reverse transactions of
DKK 334.1 billion (31 December 2019: DKK 342.0 billion), of which DKK 39.5 billion relates to credit institutions and central banks (31 December 2019: DKK 23.6 billion), and other primarily
short-term loans of DKK 0.3 billion ((31 December 2019: DKK 1.1 billion), of which DKK 0 billion (31 December 2019: DKK 0 billion) relates to credit institutions and central banks.
2 Other unutilised commitments comprise private equity investment commitments and other obligations.
Derivatives with positive fair value
(DKK millions)
Derivatives with positive fair value before netting
Netting (under accounting rules)
Carrying amount
Netting (under capital adequacy rules)
Net current exposure
Collateral
Net amount
Derivatives with positive fair value after netting for accounting purposes:
Interest rate contracts
Currency contracts
Other contracts
30 June
2020
31 December
2019
920,980
531,206
389,774
289,779
99,995
67,356
622,353
328,372
293,980
217,620
76,361
50,730
32,639
25,631
302,237
85,594
1,944
228,428
64,374
1,178
389,775
293,980
Total
Bond portfolio
(DKK millions)
30 June 2020
Held-for-trading (FVPL)
Managed at fair value (FVPL)
Held to collect and sell (FVOCI)
Held to collect (AMC)
Central and
local govern-
ment bonds
Quasi-
government
bonds
Danish
mortgage
bonds
Swedish
covered
bonds
Other
covered
bonds
Corporate
bonds
149,590
11,525
13,843
35,495
1,898
741
2,745
1,489
33,442
35,936
84,948
84,472
60,022
2,249
8,664
7,105
4,120
596
4,085
1,727
10,318
1,106
910
-
Total
259,389
52,152
115,195
130,287
Total
210,452
6,872
238,798
78,040
10,528
12,335
557,025
31 December 2019
Held-for-trading (FVPL)
Managed at fair value (FVPL)
Held to collect and sell (FVOCI)
Held to collect (AMC)
96,642
9,520
9,737
36,972
1,549
631
1,550
854
52,694
40,151
83,474
73,847
27,206
3,066
8,589
7,211
3,510
458
4,164
2,021
7,511
561
445
187
189,112
54,387
107,959
121,092
Total
152,872
4,583
250,166
46,072
10,152
8,705
472,550
At 30 June 2020, the Group had an additional bond portfolio, including bond-based unit trust certificates, worth DKK 207,532 million (31 December
2019: DKK 196,918 million) recognised as assets under insurance contracts and thus not included in the table above. The section on insurance risk on
the Annual Report 2019 provides more information. For bonds classified as hold-to-collect, fair value exceeded amortised cost as at 30 June 2020 and
31 December 2019, see note G14.
Danske Bank / Interim report – first half 2020 74/87
Notes – Danske Bank Group
Bond portfolio continued
Bond portfolio broken down by geographical area
(DKK millions)
30 June 2020
Denmark
Sweden
UK
Norway
USA
Spain
France
Luxembourg
Finland
Ireland
Italy
Portugal
Austria
Netherlands
Germany
Belgium
Other
Total
31 December 2019
Denmark
Sweden
UK
Norway
USA
Spain
France
Luxembourg
Finland
Ireland
Italy
Portugal
Austria
Netherlands
Germany
Belgium
Other
Total
Central and
local govern-
ment bonds
Quasi-
government
bonds
Danish
mortgage
bonds
Swedish
covered
bonds
Other
covered
bonds
Corporate
bonds
46,061
54,060
3,654
6,070
17,312
5,086
12,399
-
14,158
7,052
2,232
153
5,366
5,071
29,345
2,434
-
-
-
-
-
1,263
-
-
4,726
811
-
-
-
-
-
-
5
66
238,798
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
78,040
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,131
6,508
-
1
922
-
628
4
-
-
-
20
939
1
374
1,688
3,856
1,084
1,926
10
7
41
138
1,837
31
12
-
32
397
348
-
928
Total
286,547
135,956
5,869
14,504
18,585
5,094
13,363
4,864
17,434
7,087
2,244
153
5,398
5,488
30,633
2,440
1,367
210,452
6,872
238,798
78,040
10,528
12,335
557,025
30,552
24,040
5,237
5,416
21,213
7,396
10,176
-
8,483
7,978
5,334
272
4,041
4,718
16,787
1,228
-
-
1
-
-
1,105
-
-
2,597
635
-
-
-
-
-
-
-
243
250,166
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,072
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,546
5,774
-
1
384
-
829
4
-
-
-
119
1,343
6
145
827
2,415
824
2,908
12
4
22
1
704
6
7
-
2
256
154
5
559
281,545
72,528
7,608
14,098
22,330
7,401
10,582
2,599
10,651
7,989
5,341
272
4,043
5,093
18,284
1,239
947
152,872
4,583
250,166
46,072
10,152
8,705
472,550
Danske Bank / Interim report – first half 2020 75/87
Notes – Danske Bank Group
Bond portfolio continued
Bond portfolio broken down by external ratings
(DKK millions)
30 June 2020
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
Sub-inv. grade or unrated
Total
31 December 2019
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
Sub-inv. grade or unrated
Total
Central and
local govern-
ment bonds
Quasi-
government
bonds
Danish
mortgage
bonds
Swedish
covered
bonds
Other
covered
bonds
Corporate
bonds
160,848
6,471
26,742
1,857
-
7,978
-
4,172
135
2,250
-
-
-
-
6,328
83
461
-
-
-
-
-
-
-
-
-
-
-
238,614
-
-
-
-
145
-
-
38
-
-
-
-
-
77,985
-
56
-
-
-
-
-
-
-
-
-
-
-
9,538
356
608
-
-
5
-
-
-
-
-
-
-
20
1,201
153
1,392
735
517
2,526
1,332
1,046
2,114
479
303
278
24
234
Total
494,514
7,063
29,259
2,592
517
10,654
1,332
5,219
2,288
2,729
303
278
24
253
210,452
6,872
238,798
78,040
10,528
12,335
557,025
101,484
10,941
18,235
1,224
-
8,434
-
6,940
376
5,224
7
-
-
8
4,354
3
225
-
-
-
-
-
-
-
-
-
-
-
250,107
-
-
-
-
4
15
-
39
-
-
-
-
-
46,070
-
3
-
-
-
-
-
-
-
-
-
-
-
8,876
734
531
-
-
5
-
-
-
-
-
-
-
7
597
4
1,133
437
459
2,315
1,228
408
1,138
321
285
148
1
231
411,487
11,682
20,127
1,661
459
10,758
1,243
7,348
1,553
5,545
292
148
1
246
152,872
4,583
250,166
46,072
10,152
8,705
472,550
Danske Bank / Interim report – first half 2020 76/87
Notes – Danske Bank Group
Market risk
The notes on market risk provides an update on the Annual Report 2019 where it has been assessed that an update is required as a result of the COVID-
19 pandemic.
Trading-related market risk at Corporates & Institutions
The trading-related activities at Corporates & Institutions cover trading in fixed income products, derivatives, foreign exchange, money markets, debt capital
markets and equities. Trading-related activities in Corporates & Institutions mainly involve market making and processing large client flows.
The table below shows the VaR for the trading-related activities at Corporates & Institutions.
Value-at-Risk for trading-related activities at C&I
(DKK millions)
Total
30 June 2020
Average
End of year
Average
End of year
31 December 2019
30
34
26
26
In the first half of 2020, the average trading-related market risk was DKK 30 million, which was slightly higher compared to the average for 2019.The
market risk was fairly unchanged until the beginning of March, after which the COVID-19 market stress caused an increase in the average trading-related
market risk driven by higher bond spread risk and interest rate risk. The risk remained elevated for two months, after which the average trading-related
market risk decreased.
Market risk in the banking book
The Group’s total interest rate sensitivity in the banking book (economic value-based measure) measured as the change in the net present value of assets,
liabilities and off-balance sheet items in the banking book subject to a parallel interest rate curve shift of +100bp and -100bp is shown in the table below.
The net risk position decreased from DKK 2.7 billion as at 31 December 2019 to DKK 0.4 billion as at 30 June 2020. The decrease is primarily due to
changes in the volume of floored deposits combined with model changes on the duration of certain demand deposits (net reducing the interest rate risk
on liabilities) and increases in the average duration of the liquidity buffer bond portfolio (increasing the interest rate risk on assets).
Interest rate risk in banking book (a parallel yield curve shift of 100 points)
At last business day (DKK millions)
Total
30 June 2020
31 December 2019
+100bp
-100bp
+100bp
1,543
-433
4,433
-100bp
-2,681
Earnings-at-Risk (EaR) is a regulatory measure that seeks to stress the net interest income under a number of different scenarios using defined param-
eters. At 30 June 2020, the only scenario causing a decline in the net interest income compared to the base scenario is the scenario ‘short rates up’,
having an Earnings-at-Risk impact of DKK -489 million. At 31 December 2019, the worst scenario was a parallel downward yield curve shift of 1%, which
however had a positive impact on the Group’s Earnings-at-Risk of DKK 6 million compared to the base scenario calculation.
The Group uses a credit spread risk in the banking book measure based upon a 10-day 99% VaR approach. Due to the volatility experienced since the
outbreak of the COVID-19 pandemic, this measure increased to DKK 241 million as at 30 June (31 December 2019: DKK 99 million).
Danske Bank / Interim report – first half 2020 77/87
Financial statements – Danske Bank A/S
The financial statements of the Parent Company, Danske Bank A/S, are prepared in accordance with the Danish Financial Business Act and the Danish
FSA’s Executive Order No. 281 of 26 March 2014 on Financial Reports for Credit Institutions and Investment Companies, etc. as amended by the Exec-
utive Order No. 707of 1 June 2016, the Executive Order No. 1043 of 5 September 2017 and the Executive Order No. 1441 of 3 December 2018.
Note G2 provides further information on changes in accounting policies implemented as at 1 January 2020. Except for these changes, Danske Bank A/S
has not changed its significant accounting policies from those applied in the Annual Report 2019 and explained on page 212 in Annual Report 2019.
The table below shows the differences in net profit and shareholders’ equity between the IFRS consolidated financial statements and the Parent Com-
pany’s financial statements presented in accordance with Danish FSA rules.
Consolidated financial statement (IFRS)
Domicile properties
Tax effect
Consolidated financial statements (Danish FSA rules)
Net profit
First half
2020
Net profit
First half
2019
1,036
-3
-
1,032
7,020
-
-
7,020
Equity
Equity
30 June 2020 31 December 2019
164,500
264
-31
170,508
265
-31
164,733
170,741
Income statement – Danske Bank A/S
Note
(DKK millions)
Interest income
Interest expense
Net interest income
Dividends from shares etc.
Fee and commission income
Fees and commissions paid
P1
Net interest and fee income
Value adjustments
Other operating income
Staff costs and administrative expenses
Amortisation, depreciation and impairment charges
Loan impairment charges etc.
Income from associates and group undertakings
Profit before tax
Tax
Net profit
Danske Bank / Interim report – first half 2020 78/87
First half
2020
13,637
6,411
7,226
118
6,349
957
12,736
814
738
10,548
1,646
4,643
3,064
516
-516
1,032
First half
2019
14,803
8,484
6,319
430
6,230
1,054
11,925
1,580
773
9,301
1,610
522
4,948
7,790
771
7,020
Statement of comprehensive income – Danske Bank A/S
Danske Bank / Interim report – first half 2020 79/87
(DKK millions)
Net profit
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit pension 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 bonds at fair value (OCI)
Realised value adjustments of bonds at fair value (OCI)
Tax
Items that are or may be reclassified subsequently to profit or loss
Total other comprehensive income
Total comprehensive income
Portion attributable to
Shareholders of Danske Bank A/S (the Parent Company)
Additional Tier 1 capital holders
Total comprehensive income
First half
2020
First half
2019
1,032
7,020
390
-102
288
-3,581
2,077
51
-15
146
-1,322
-1,035
130
-15
115
439
-28
189
-8
-39
554
669
-2
7,689
-318
316
-2
7,298
390
7,689
Balance sheet – Danske Bank A/S
Note
(DKK millions)
P2
P2
P3
Assets
Cash in hand and demand deposits with central banks
Due from credit institutions and central banks
Loans and other amounts due at fair value
Loans and other amounts due at amortised costs
Bonds at fair value
Bonds at amortised cost
Shares etc.
Holdings in associates
Holdings in group undertakings
Assets under pooled schemes
Intangible assets
Land and buildings
Investment property
Domicile property
Other tangible assets
Current tax assets
Deferred tax assets
Assets held for sale
Other assets
Prepayments
Total assets
Liabilities and equity
Amounts due
Due to credit institutions and central banks
Deposits and other amounts due
Deposits under pooled schemes
Issued bonds at fair value
Issued bonds at amortised cost
Current tax liabilities
Other liabilities
Deferred income
Total amounts due
Provisions for liabilities
Provisions and pensions and similar obligations
Provisions for deferred tax
Provisions for losses on guarantees
Other provisions for liabilities
Total provisions for liabilities
Subordinated debt
Subordinated debt
Equity
Share capital
Accumulated value adjustments
Equity method reserve
Retained earnings
Proposed dividends*
Shareholders of Danske Bank A/S (the Parent Company)
Additional tier 1 etc.
Total equity
Total liabilities and equity
*For 2019, no dividends were paid in 2020. See note G1(a) for further information.
Danske Bank / Interim report – first half 2020 80/87
30 June 31 December
2019
2020
30 June
2019
191,629
114,319
298,748
851,172
404,836
93,561
7,529
278
88,969
50,336
5,980
4,487
183
4,304
4,666
3,815
911
2,388
416,723
1,418
77,548
108,698
319,469
866,361
327,326
86,531
13,632
328
90,877
53,885
6,072
4,912
217
4,696
4,882
2,737
472
1,128
315,951
1,063
116,825
133,735
256,271
870,074
365,228
86,323
7,101
374
87,292
52,615
7,165
5,073
219
4,854
4,969
2,366
419
3,505
323,495
1,668
2,541,764
2,281,873
2,324,499
227,789
1,195,692
50,942
7,017
275,712
16
587,713
579
181,660
1,071,274
54,251
6,780
270,242
154
495,054
628
235,568
1,057,015
53,463
13,276
279,663
32
491,506
417
2,345,460
2,080,044
2,130,941
439
238
2,766
320
3,763
277
286
2,406
336
3,305
173
5,944
2,445
337
8,899
27,809
27,784
21,434
8,622
-1,747
23,630
125,655
-
156,160
8,573
8,622
-260
26,762
114,052
7,329
156,504
14,237
8,622
-59
23,340
117,082
-
148,985
14,239
164,733
170,741
163,224
2,541,764
2,281,873
2,324,499
Danske Bank / Interim report – first half 2020 81/87
Statement of capital – Danske Bank A/S
Changes in equity
(DKK millions)
Total equity as at 1 January 2020
Net profit
Other comprehensive income
Remeasurement of defined benefit pension 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
Transactions with owners
Paid interest on additional tier 1 capital
Proposed dividends reversed**
Redemption of additional tier 1 capital
Acquisition of own shares and additional tier 1 capital
Sale of own shares and additional tier 1 capital
Tax
Accumulated
value adjust-
ments*
Equity
method
reserve
Retained
earnings
Proposed
dividends
Additional
tier 1 capital
Total
Total
-260
-
26,762
-3,132
114,052
3,848
7,329
-
156,504
717
14,237
316
170,741
1,032
Share
capital
8,622
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-3,581
2,077
51
-15
-19
-1,487
-
-
-
-
-
-
-
390
-
-
-
-
63
452
-1,487
-3,132
4,301
-
-
-
-
-
-
-
-
390
-3,581
2,077
51
-15
44
-1,035
-
-
-
-
-
-
-
390
-3,581
2,077
51
-15
44
-1,035
-318
316
-2
-
-
-
-
-
-
-
-
-
-
-
-
-
7,329
-5
-18,851
18,805
24
-
-7,329
-
-
-
-
-
-
-5
-18,851
18,805
24
-391
-
-5,596
7
-
-
-391
-
-5,600
-18,844
18,805
24
Total equity as at 30 June 2020
8,622
-1,747
23,630
125,655
- 156,160
8,573 164,733
* Accumulated value adjustments includes foreign currency translation reserve, reserve for bonds at fair value through Other comprehensive income (FVOCI) and valuation reserve.
** For 2019, no dividends were paid in 2020. The previously proposed dividends have been reversed to Retained earnings in 2020. See note G1(a) for further information.
Danske Bank / Interim report – first half 2020 82/87
Statement of capital – Danske Bank A/S
Change in equity
(DKK millions)
Total equity as at 1 January 2019
Net profit
Other comprehensive income
Remeasurement of defined benefit pension 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
Transactions with owners
Paid interest on additional tier 1 capital
Dividends paid
Share capital reduction
Acquisition of own shares and additional tier 1 capital
Sale of own shares and additional tier 1 capital
Tax
Share
capital
8,960
-
-
-
-
-
-
-
-
-
-
-
-338
-
-
-
Accumulated
value adjust-
ments *
Equity
method
reserve
Retained
earnings
Proposed
dividends
Additional
tier 1 capital
Total
Total
-640
-
23,340
202
109,650
6,427
7,616
-
148,925
6,629
14,299 163,225
7,020
390
-
439
-28
189
-8
-13
580
580
-
-
-
-
-
-
-
-
-
-
-
-
-
130
-
-
-
-
-41
89
202
6,516
-
-
-
-
-
-
-
-
130
439
-28
189
-8
-54
669
-
-
-
-
-
-
-
130
439
-28
189
-8
-54
669
7,298
390
7,689
-
-
-
-
-
-
-
383
338
-9,438
9,390
42
-
-7,616
-
-
-
-
-
-7,233
-
-9,438
9,390
42
-394
-
-
-57
-
-
-394
-7,233
-
-9,494
9,390
42
Total equity as at 30 June 2019
8,622
-59
23,542
116,880
- 148,985
14,239 163,224
* Accumulated value adjustments includes foreign currency translation reserve, reserve for bonds at fair value through Other comprehensive income (FVOCI) and valuation reserve.
Danske Bank / Interim report – first half 2020 83/87
30 June
2020
30 June
2019
788
633
-757
611
2,744
26
-3,232
814
210
1,040
18
979
2,979
21
-3,668
1,580
Total
17,003
-
-
-
3,467
-3,761
1,314
-669
77
-149
Notes – Danske Bank A/S
P1. Value adjustments
(DKK millions)
Loans at fair value
Bonds
Shares etc.
Currency
Derivatives
Assets under pooled schemes
Other liabilities
Total
P2. Impairment charges for loans and guarantees
Due to credit institutions and
central banks
Stage 2
Stage 1
Stage 3
Loans and other amounts due
at AMC
Stage 2
Stage 1
Stage 3
Loan commitments and
guarantees
Stage 2
Stage 1
Stage 3
ECL allowance account as at 1 January 2019
Transferred to stage 1 during the period
Transferred to stage 2 during the period
Transferred to stage 3 during the period
ECL on new assets
ECL on assets derecognised
Impact of net remeasurement of ECL (incl. changes
in models)
Write offs debited to the allowance account
Foreign exchange adjustments
Other changes
ECL allowance account as at 31 December 2019
Transferred to stage 1 during the period
Transferred to stage 2 during the period
Transferred to stage 3 during the period
ECL on new assets
ECL on assets derecognised
Impact of net remeasurement of ECL (incl. changes
in models)
Write offs debited to the allowance account
Foreign exchange adjustments
Other changes
12
-
-
-
4
-7
-
-
-
-
9
-
1
-
5
-3
2
-
-
-
ECL allowance account as at 30 June 2020
15
1
-
-
-
4
-2
-1
-
-
-
2
-
-1
-
11
-3
20
-
-
-
28
2
-
-
-
-
-
-
-
-
-
363
456
-45
-3
141
-155
-357
-
-1
-23
3,628 10,966
-33
-515
311
2,164
-2,276
-423
560
-308
653
-781
457
-
9
-48
1,147
-669
52
-64
518
136
-8
-2
57
-44
-92
-
1
-
961
-131
87
-104
215
-224
141
-
4
-1
551
-5
-79
106
231
-271
19
-
11
-13
2
376
3,747 11,083
565
949
550
17,283
-
-
-
-
-
-
-
-
-
189
-90
-3
155
-66
-92
-
-7
-9
-184
305
-555
803
-502
975
11
-16
-13
-5
-216
558
1,572
-1,362
2,669
-348
-139
-74
59
-23
-
75
-46
-13
-
-2
-
-58
107
-30
154
-109
286
-
-12
-
-
-84
30
122
-124
45
-
-18
2
-
-
-
2,897
-2,214
3,891
-337
-196
-95
2
453
4,572 13,737
616
1,286
521
21,230
P3. Issued bonds at amortised cost
Issued bonds at amortised cost includes non-preferred senior bonds of DKK 98,075 million.
Notes – Danske Bank A/S
Ratios and key figures
Total capital ratio (%)
Tier 1 capital ratio (%)
Return on equity before tax (%)
Return on equity after tax (%)
Income/cost ratio (%)
Interest rate risk (%)
Foreign exchange position (%)
Foreign exchange risk (%)
Loans plus impairment charges as % of deposits
Liquidity coverage ratio (90 days) (%)
Sum of large exposures as % of CET1 capital
Impairment ratio (%)
Growth in loans (%)
Loans as % of equity
Return on assets (%)
Earnings per share1
Book value per share (DKK)
Proposed dividend per share (DKK)2
Share price end of period/earnings per share (DKK)1
Share price end of period/book value per share (DKK)
1 After the deduction of interest on equity accounted additional tier 1 capital.
2 For 2019, no dividends were paid in 2020. See note G1(a) for further information.
Danske Bank / Interim report – first half 2020 84/87
First half
2020
Full year
2019
First half
2019
26.3
23.7
0.3
0.6
103.1
2.6
0.3
-
93.7
144.1
127.9
0.3
-1.6
7.0
-
0.8
192.3
-
105.4
0.46
26.4
23.7
7.0
9.0
144.7
3.4
3.8
-
106.7
119.8
125.1
0.1
2.8
6.9
0.7
16.7
198.9
8.5
6.4
0.54
24.9
23.2
4.8
4.3
168.1
3.7
3.9
-
102.7
122.9
103.8
-
-3.2
6.9
0.3
8.2
191.1
-
12.6
0.54
Danske Bank / Interim report – first half 2020 85/87
Statement by the management
The Board of Directors and the Executive Leadership Team (the management) have considered and approved Interim report – first
half 2020 of the Danske Bank Group.
The interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU.
Furthermore, the interim report has been prepared in accordance with Danish disclosure requirements for interim reports of listed
financial institutions.
In our opinion, the interim financial statements give a true and fair view of the Group’s assets, liabilities, total equity and financial
position at 30 June 2020 and of the results of the Group’s operations and the consolidated cash flows for the period starting on 1
January 2020 and ending on 30 June 2020. Moreover, in our opinion, the management’s report includes a fair review of
developments in the Group’s operations and financial position and describes the significant risks and uncertainty factors that may
affect the Group.
Copenhagen, 17 July 2020
Executive Leadership Team
Chris Vogelzang
CEO
Berit Behring
Carsten Rasch Egeriis
Stephan Engels
Jakob Groot
Glenn Söderholm
Philippe Vollot
Frans Woelders
Board of Directors
Karsten Dybvad
Chairman
Jan Thorsgaard Nielsen
Vice Chairman
Carol Sergeant
Vice Chairman
Martin Blessing
Lars-Erik Brenøe
Raija-Leena Hankonen
Bente Avnung Landsnes
Christian Sagild
Gerrit Zalm
Bente Bang
Elected by the employees
Kirsten Ebbe Brich
Elected by the employees
Thorbjørn Lundholm Dahl
Elected by the employees
Charlotte Hoffmann
Elected by the employees
Danske Bank / Interim report – first half 2020 86/87
Independent auditors’ review report
To the shareholders of Danske Bank A/S
Independent auditors’ review report on the consolidated and parent interim financial statements
We have reviewed the consolidated and parent interim financial statements of Danske Bank A/S for the financial period 1 January
to 30 June 2020, pp. 30-84 which comprise the income statement, statement of comprehensive income, balance sheet, statement
of capital and notes, for the Group and Parent Company, respectively, as well as the consolidated cash flow statement.
Management’s responsibility for the consolidated and parent interim financial statements
Management is responsible for the preparation of the consolidated interim financial statements in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU and Danish disclosure requirements for listed financial companies and for the preparation
of the Parent Company’s interim financial statements in accordance with the Danish Financial Business Act and Danish disclosure
requirements for listed financial companies, and for such internal control as Management determines is necessary to enable the
preparation of the consolidated and parent interim financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ responsibility
Our responsibility is to express a conclusion on the consolidated and parent interim financial statements. We conducted our review
in accordance with the International Standard on Engagements to Review Interim Financial Information Performed by the
Independent Auditor of the Entity and additional requirements under Danish audit regulation. This requires that we express a
conclusion about whether anything has come to our attention that causes us to believe that the consolidated and parent interim
financial statements, taken as a whole, have not been prepared, in all material respects, in accordance with the applicable financial
reporting framework. This also requires us to comply with relevant ethical requirements.
A review of financial statements in accordance with the International Standard on Engagements to Review Interim Financial
Information Performed by the Independent Auditor of the Entity is a limited assurance engagement. The auditor performs
procedures primarily consisting of inquiries of management and others within the entity, as appropriate, and applying analytical
procedures, and evaluates the evidence obtained.
A review is substantially less in scope than an audit performed in accordance with International Standards on Auditing. Accordingly,
we do not express an audit opinion on the consolidated and parent interim financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial statements
for the financial period 1 January to 30 June 2020 have not been prepared, in all material respects, in accordance with IAS 34
Interim Financial Reporting as adopted by the EU and Danish disclosure requirements for listed financial companies, and that the
Parent Company’s Interim Financial Statements have not been prepared, in all material respects, in accordance with the Danish
Financial Business Act and Danish disclosure requirements for listed financial entities.
Emphasis of matter
We draw attention to note G1 to the consolidated interim financial statements which describes the uncertainty related to the
financial impacts of COVID-19 on the measurement of the group’s exposures.
We also draw attention to note G12 to the consolidated interim financial statements that includes a description of the contingent
liability regarding the uncertainty as to the outcome of the investigations by the authorities in Estonia, Denmark, France and the
USA into the terminated non-resident portfolio at Danske Bank’s Estonian Branch.
We agree to the accounting treatment of these matters in the consolidated interim financial statements, and accordingly our
conclusion is not modified.
Copenhagen, 17 July 2020
Deloitte
Statsautoriseret Revisionspartnerselskab
Business Registration No. 33 95 35 56
Erik Holst Jørgensen
State-Authorised
Public Accountant
Identification No
(MNE) mne9943
Jens Ringbæk
State-Authorised
Public Accountant
Identification No
(MNE) mne27735
Supplementary information
Danske Bank / Interim report – first half 2020 87/87
Financial calendar
4 November 2020
4 February 2021
16 March 2021
28 April 2021
23 July 2021
29 October 2021
Contacts
Stephan Engels
Chief Financial Officer
Claus Ingar Jensen
Head of Investor Relations
Links
Danske Bank
Denmark
Finland
Sweden
Norway
Northern Ireland
Ireland
Realkredit Danmark
Danske Capital
Danica Pension
Interim report – first nine months 2020
Annual report 2020
Annual general meeting
Interim report – first quarter 2021
Interim report – first half 2021
Interim report – first nine months 2021
+45 45 14 60 02
+45 45 12 84 83
danskebank.com
danskebank.dk
danskebank.fi
danskebank.se
danskebank.no
danskebank.co.uk
danskebank.ie
rd.dk
danskecapital.com
danicapension.dk
Danske Bank’s financial statements are available online at danskebank.com/Reports.