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Contents
Management’s report
4
6
7
10
15
20
22
28
32
34
Letter to our stakeholders
Financial highlights - Danske Bank Group
Executive summary
Strategy execution
Sustainability
Estonia and remediation matters
Financial review
Capital and liquidity management
Investor Relations
Organisation and management
Banking DK
Banking Nordic
Corporates & Institutions
40
47
53
59 Wealth Management
Northern Ireland
64
Non-core
66
Other Activities
68
Definition of alternative performance measures
69
Financial statements
74
75
76
77
80
81
Income statement
Statement of comprehensive income
Balance sheet
Statement of capital
Cash flow statement
Notes
Statements
238 Statement by the management
239
Independent auditor’s report
Management and directorships
244 Board of Directors
250 Executive Leadership Team
253 Supplementary information
04
Danske Bank / Annual Report 2020
Letter to our stakeholders
This year, Danske Bank will celebrate its 150-year
anniversary, and since the foundation in 1871, it has
been our role to contribute to economic growth in
the societies we are part of by enabling families and
businesses to save and invest and to prepare for the
opportunities and challenges that lie ahead.
The COVID-19 pandemic was a challenge that few had
anticipated. It hit without warning and turned lives and
businesses upside down.
But as a solid and well-capitalised bank, Danske Bank
has been in a good position to support our customers,
and we have helped reduce economic uncertainty by
extending credit lines, by helping customers assess
risks, and by contributing to the maintenance of a well-
functioning fi nancial infrastructure.
The crisis has reaffi rmed why we are here. We play
an important role for our customers and for the
fi nancial infrastructure across the Nordic countries.
We contribute to growth and prosperity, and we act as
an anchor that creates security and continuity when
economic cycles turn and crises arise.
COVID-19 continues to be a tremendous challenge. But
our experience over the past year has demonstrated our
ability to change and adapt, and it has shown us what
we can achieve when we all work together to overcome
such a challenging situation. This bodes well for the
profound and ambitious transformation we have ahead
of us.
In 2019, we announced our ambition to become a
better bank for customers, employees, society and
shareholders. In addition to changing the way we work
and the way we are organised, we are also making
substantial investments to become a more digital and
agile bank that has lower costs, fewer and simpler
products, and better and faster decisionmaking
processes.
This will make us more attractive to customers – and
more competitive. It will also make us a better and more
engaging place to work, which will help us to recruit
new talent and retain the good employees we already
have. Collectively, this will enable us to strengthen
our commercial momentum and to deliver to our
shareholders better and more sustainable fi nancial
results in a competitive market with low margins and
persistently low interest rates.
Over the past year, we have also continued to strengthen
our risk and compliance setup and have taken active
measures to address and resolve legacy issues that
have been both wrong and unacceptable. As we
continue this work, we are promoting a culture in which
mistakes are addressed, discussed and resolved in a
responsible manner. This is the only way we can rebuild
trust, and it is a key element of our ambition to become a
better bank that works in the interest of all stakeholders.
Danske Bank has evolved over a century and a half as
a refl ection of the societies we are part of. We have
helped shape these societies by creating opportunities,
by helping individuals and businesses to realise their
ambitions, and by helping to build and innovate the
fi nancial infrastructure.
As the largest fi nancial services provider in Denmark
and one of the largest fi nancial institutions in the
Nordic countries, we have a particular responsibility to
contribute to sustainable growth and development. We
will fulfi l this responsibility by continuing to evolve in
tandem with the world around us to run a sustainable
and profi table business that delivers the solutions that
our customers and society need.
Karsten Dybvad
Chairman of the
Board of Directors
Chris Vogelzang
Chief Executive Offi cer
Danske Bank / Annual Report 2020
05
Danske Bank 2020 at a glance
1st place
Green mortgage bonds
Launched new
commercial and
agile organisation
DKK
4.6 bn
Net profi t
DKK
42.4 bn
Total income
Continuing the journey towards
2023 ambitions
Good progress
on ESG targets
27 bn investment in
the green transition by
Danica Pension
Execution on
compliance
remediation and
the Estonia case
7 bn
Impairments affected
by COVID-19 and
oil exposure
Helping customers through
the corona crisis
Made liquidity of
DKK 100 bn available
06
Danske Bank / Annual Report 2020
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
Impairment charges other intangible assets*
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax, core
Profi t before tax, Non-core
Profi t before tax
Tax*
Net profi t
Attributable to additional tier 1 etc.
Balance sheet (end of year)
(DKK millions)
Due from credit institutions and central banks*
Repo loans
Loans
Trading portfolio assets
Investment securities
Assets under insurance contracts*
Total assets in Non-core
Other assets*
Total assets
Due to credit institutions and central banks
Repo deposits
Deposits
Bonds issued by Realkredit Danmark
Other issued bonds
Trading portfolio liabilities
Liabilities under insurance contracts*
Total liabilities in Non-core
Other liabilities*
Subordinated debt
Additional tier 1
Shareholders' equity
Total liabilities and equity
Ratios and key fi gures
Dividend per share (DKK)
Earnings per share (DKK)
Return on avg. shareholders' equity (%)
Net interest income as % of loans and deposits
Cost/income ratio (C/I), (%)
C/I, excluding impairment on intangible assets (%)*
Total capital ratio (%)
Common equity tier 1 capital ratio (%)
Share price (end of year) (DKK)
Book value per share (DKK)
Full-time-equivalent staff (end of year)
2020
2019
Index
20/19
2018
2017
2016
21,875
15,137
4,856
514
42,383
28,103
-
379
13,901
7,001
6,900
-596
6,304
1,715
4,589
551
345,938
257,883
1,838,126
682,945
296,769
545,708
2,797
139,064
4,109,231
125,267
223,973
1,193,173
775,844
360,127
499,331
591,930
2,975
135,596
32,337
8,508
160,171
4,109,231
2.0
4.7
2.6
0.75
67.2
66.3
23.0
18.3
100.7
187.6
22,376
21,877
15,201
5,441
2,463
44,982
27,193
1,603
355
15,831
1,516
14,315
-493
13,822
-1,249
15,072
786
174,377
346,708
1,821,309
495,313
284,873
494,993
7,519
135,958
3,761,050
98,828
232,271
962,865
795,721
350,190
452,190
535,891
2,501
128,353
31,733
14,237
156,271
3,761,050
8.5
16.7
9.6
0.80
64.8
60.5
22.7
17.3
107.8
183.1
22,006
100
100
89
21
94
103
-
107
88
-
48
-
46
-
30
70
198
74
101
138
104
110
37
102
109
127
96
124
98
103
110
110
119
106
102
60
102
109
102
23,571
15,258
4,570
966
44,365
24,991
-
20
19,354
-650
20,004
-282
19,722
4,548
15,174
781
201,435
316,362
1,769,438
415,811
276,424
377,369
14,346
207,282
3,578,467
148,095
262,181
894,495
741,092
330,477
390,222
417,279
4,014
204,243
23,092
14,300
148,976
3,578,467
8.5
16.5
9.8
0.88
56.4
56.3
21.3
17.0
128.9
174.3
20,683
23,806
15,852
7,087
1,403
48,149
22,722
-
-
25,427
-873
26,300
-12
26,288
5,388
20,900
786
351,398
228,538
1,723,025
449,292
324,618
296,867
4,886
160,905
3,539,528
155,528
220,371
911,852
758,375
405,080
400,596
322,726
3,094
164,531
29,120
14,339
153,916
3,539,528
10.0
22.2
13.6
0.89
47.2
47.2
22.6
17.6
241.6
172.2
19,768
22,028
14,366
8,607
2,957
47,959
22,642
-
-
25,317
-3
25,320
-
25,357
5,500
19,858
663
244,423
244,474
1,689,155
509,678
343,337
285,398
19,039
148,167
3,483,670
155,085
199,724
859,435
726,732
392,512
478,301
314,977
2,816
149,641
37,831
14,343
152,272
3,483,670
9.0
20.2
13.1
0.86
47.2
47.2
21.8
16.3
214.2
162.8
19,303
*For restatements, see notes G3, G17 and G18
The fi nancial highlights represent alternative performance measures that are non-IFRS measures. Note G3 provides an explanation of differences in the presentation between IFRS
and the fi nancial highlights. For a description of the alternative performance measures used and defi nition of ratios, see Defi nition of Alternative Performance Measures on page 69.
Danske Bank / Annual Report 2020
07
Executive summary
The year 2020 was a challenging year, not only for
Danske Bank but for the entire society, fi rst and
foremost due to the outbreak of the coronavirus
pandemic. For Danske Bank more specifi cally, 2020
marked the year when we turned a corner and in many
areas made good progress on our efforts to meet our
2023 ambition of becoming a better bank for all our
stakeholders.
Our agile transformation project called “Better Ways of
Working” kicked off successfully, and the phrase literally
got a second meaning as the pandemic signifi cantly
changed the way in which we work with our customers
and other stakeholders. From the middle of March, we
transformed our daily work into a “working from home
set-up” backed by virtual communication channels and
stable IT systems.
As a result, our dedicated employees made a
tremendous effort to help our customers counter the
disruption of their fi nancial situation and business
caused by the pandemic. Our support covered a wide
range of different initiatives, from dedicated advisory
services on a one-on-one customer basis to extending
credit lines and providing liquidity facilities.
In a year that to a large extent was dominated by the
corona crisis, the Nordic economies held up relatively
well and our underlying business was stable, with
growth coming from Banking Nordic and large corporate
customers. Visibility regarding the global economic
recovery is still limited however, and many uncertainties
remain. Due to the pandemic, the countercyclical buffer
requirement in Denmark was released in March with
the aim of increasing the lending capacity throughout
the sector and support the society. With strong capital
and liquidity positions, Danske Bank continues to be well
prepared to face these uncertainties and to continue to
support our customers.
Danske Bank posted a net profi t of DKK 4.6 billion
for 2020, against DKK 15.1 billion in the year before,
which, however, included signifi cant net positive non-
recurring items. The return on shareholders’ equity
in 2020 was 2.6%, against 9.6% in 2019. The net
profi t in 2020 was affected mainly by loan impairment
charges of DKK 7 billion, refl ecting expected credit
losses due to the corona crisis.
Total income in 2020 was stable, excluding one-off
effects. Net interest income in 2020 refl ected the
steady progress in our business and was stable from
the level in 2019, despite a challenging business
environment. Net fee income and net trading income
maintained the good momentum from last year, despite
signifi cantly lower remortgaging activity and diffi cult
conditions in the fi nancial markets in the beginning of
the year. Given an environment with continually negative
interest rates, the pricing of deposits was adjusted
accordingly, also for retail deposits with effect from
January 2021.
Costs were in line with our expectations. We are
seeing the effect of our cost management initiatives,
and underlying costs were lower in the latter half of
2020. Reported costs, however, came in higher than in
2019 as a result of planned costs for the Better Bank
transformation as well as costs for ongoing compliance
remediation and the Estonia case. In addition, an
extraordinary write-down of intangible assets was
made as a result of redesigning the organisation, and a
provision was made for part of the transformation costs
for 2021.
As a result of the continued execution of our 2023 plan
to become a more effi cient bank, we took additional cost
initiatives. Including the initiatives announced at the end
of January 2021, tangible progress has been made,
as we have now discontinued approximately 700 out
of the up to 1,600 positions that will be discontinued
as announced in October 2020. Part of the reduction
was achieved through layoffs, voluntary redundancy
agreements and natural attrition. Reducing the cost
base further is a key part of our 2023 plan to become a
better bank and to make sure that we can continue to be
competitive in a low-rate and low-margin environment.
Credit quality remained overall strong, and the high
level of expected credit losses mainly refl ects two
things. Firstly, the signifi cant impairment charges in the
fi rst quarter relating to changes in the forward-looking
macroeconomic scenarios driven by the corona crisis.
Most of these were later released as key economic
indicators performed better than expected. We have,
however, countered these model-driven releases with
sector-specifi c post-model adjustments of DKK 2.7
billion, as we continue our cautious approach to risks
08
Danske Bank / Annual Report 2020
and visibility is limited. Secondly, we have booked
charges against oil-related exposures of DKK 3.3
billion. So far, the need for charges against corona
crisis-sensitive sectors has been fairly limited due to
government support programmes and our balanced
portfolio.
Better Bank update
In 2020, we laid the foundation for our journey towards
becoming a better bank for all our stakeholders. While
this work will continue in the coming years towards
meeting our 2023 ambitions, we have made tangible
progress in many areas in 2020.
We announced changes to the organisation and to
the Executive Leadership Team (ELT). The aim of the
redesigned organisation is to reduce complexity,
increase effi ciency and become even more competitive
for our customers. From 1 January 2021, our
commercial activities are organised in two business
units, Personal & Business Customers headed by Glenn
Söderholm and Large Corporates & Institutions headed
by Berit Behring. We also announced a new Commercial
Leadership Team (CLT), comprising 12 senior leaders
from across the business in addition to the ELT, to
increase our execution power as one bank and achieve a
faster time to market.
We started an agile transformation project to change
the way in which we work at Danske Bank, called ‘Better
Ways of Working’. The aim is to enable us to respond
better and faster to customers’ changing expectations,
to ensure a better and more digital customer experience
as well as to bring down costs. The changes will directly
affect more than 4,000 employees across Danske Bank.
We accelerated the simplifi cation of the product offering
across the Group in order to reduce risk and complexity
– making it easier to be a customer at Danske Bank.
We continued to make progress on digitalising our know-
your-customer and ongoing due diligence processes in
order to increase effi ciency and improve the customer
experience.
We have seen strong progress on sustainable fi nance,
with green loans and bonds reaching a volume of
DKK 102 billion and green investments a volume of
DKK 27 billion. Furthermore, we have supported more
than 5,000 start-ups and scale-ups as a part of our
contribution to the sustainable development of society.
We strengthened our frameworks across anti-money
laundering and investor protection and improved our
compliance capabilities, as a robust compliance culture
is the foundation for fi ghting fi nancial crime and ensuring
that we always have the best interest of our customers
in mind. Furthermore, we are investing heavily into both
execution of compliance remediation and additional
dedicated initiatives to build the required capabilities and
processes for future good conduct outcomes.
Danske Bank is undertaking a multi-year enhancement
to its AML controls which are set out in a
comprehensive fi nancial crime plan. The bank has
made signifi cant progress and we continue to improve
our fi nancial crime framework in close dialogue with
the Danish FSA. In this context, the bank has received
a draft decision from the Danish FSA indicating that it
intends to appoint one or more independent expert(s)
to assist the Danish FSA in its ongoing supervisory
activities related to the execution of the bank’s fi nancial
crime plan. The bank is expecting a fi nal decision from
the Danish FSA in the near future.
Estonia and remediation matters
The internal investigation work that Danske Bank had
planned to complete during 2020 has been fi nalised and
Danske Bank has reported the fi ndings to the relevant
authorities investigating Danske Bank. We continue
to fully cooperate and will provide the authorities
with further information if and when requested. The
overall timing of the authorities’ investigations remains
unknown and is not within Danske Bank’s control.
In December 2020, Dansk Bank was informed by the
U.S. Department of Treasury’s Offi ce of Foreign Assets
Control that it had decided to close its investigation of
Danske Bank in relation to the Estonia case with no
action.
In addition to the Estonia case, during 2020, we handled
various legacy remediation issues such as Flexinvest Fri
and the debt collection case in Denmark. A new central
unit has been established with the task of overseeing
the remediation of the identifi ed legacy issues and
ensuring a fully transparent approach along with timely
communication with customers and other stakeholders.
Dividend
Due to the corona crisis, it was decided, as was the case
also for other European banks, not to pay dividends for
2019, but to add the proposed dividend amount back
Danske Bank / Annual Report 2020
09
to further bolster our already strong capital base. This
decision was made to support the initiatives and the
recommendations from the government and the Danish
FSA aimed at minimising the economic consequences of
the pandemic.
For 2020 we propose a dividend of DKK 2 per
share, which is slightly below the payout ratio set
by our general dividend policy. This is in line with the
recommendations issued by the Danish FSA for capital
preservation due to the uncertainty associated with the
corona crisis.
Our dividend policy, which states our ambition to pay out
40-60% of net profi t, remains unchanged.
Outlook for 2021
The outlook has been aligned with the new presentation
of earnings from Danica Pension, which going forward
will be presented as Net income from insurance
business. We refer to page 36 for a further description
and presentation of the changes.
We expect net profi t for 2021 to be in the range of
DKK 9-11 billion.
We expect total income to be slightly higher than the
level in 2020, subject mainly to commercial momentum
and broader economic developments.
Expenses are expected to be no more than DKK 24.5
billion, driven by ongoing cost initiatives and lower costs
for transformation and remediation.
Loan impairments are expected to be no more than
DKK 3.5 billion, subject to a modest macroeconomic
recovery based on a positive impact from COVID-19
vaccines.
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 government support
packages.
10
Danske Bank / Annual Report 2020
Strategy execution
Introduction
At the end of last year, we launched the Better Bank
transformation and announced clear ambitions towards
2023 for all our stakeholder groups: customers,
employees, society and shareholders. We started
our multi-year transformation to become a simpler
and more competitive bank, to continue our journey
towards becoming more integrated into the lives of
our customers and the Nordic societies as well as to
address a number of industry- and Danske Bank-specifi c
challenges.
Our 2023 ambitions for our key stakeholders
Customers
Employees
On average to be
among the top two in
customer satisfaction
in everything we do
At least 90% of
our employees are
engaged
Society
Shareholders
We will operate
sustainably, ethically,
and transparently –
and have a positive
impact on the societies
we are part of
Achieve a
9-10% return on
shareholders’ equity
and a cost/income
ratio in the low 50s
One year into our transformation, we are satisfi ed with
progress and traction, although 2020 was a year with
challenges that affected both the industry as a whole
and Danske Bank specifi cally. The year 2020 was a
busy period for the Group, as we served and supported
our customers during the corona crisis while continuing
our commitment to handling various remediation
matters such as the Estonia case, Flexinvest Fri and,
most recently, the debt collection case in Denmark.
Despite these infl uences, we are well on track with our
transformation and already in 2020, we took several
signifi cant steps towards becoming a better bank.
We spent about DKK 1.7 billion in transformation
initiatives to lay the foundation for delivering on our four
ambitions towards key stakeholders by 2023. Most of
our transformation costs were linked to four focus areas,
which are critical contributors in terms of fulfi lling our
2023 ambitions:
•
•
•
•
Better Ways of Working: We have transformed our
entire development organisation to work agilely,
thus creating the foundation for a step change
towards a more scalable, digital and better customer
experience going forward
Purpose, Brand, Culture & Engagement: We have
engaged our employees and leadership across the
organisation to defi ne a new internal culture that we
aspire to and a purpose to act as our “North Star”
Costs: During the year, we achieved a decrease
in our underlying cost base and have a clear path
towards becoming a simpler and more effi cient bank
in the future, and we expect lower costs already in
2021
Compliance under Control: We are establishing
an effective and effi cient compliance function and
implementing enhancements in core areas such
as conduct, trade surveillance and transaction
monitoring
Even though we are only one year into our
transformation, we can already see the fi rst tangible
deliveries towards our 2023 ambitions for each of our
key stakeholder groups:
Customers
Customers are the reason why we exist and we strive
to deliver the best customer experience. We want to
provide our customers with reliable, proactive and
relevant fi nancial advice that helps them become
fi nancially confi dent in the channel of their choice and at
any time.
We are currently on the right path towards achieving
our 2023 ambition in relation to customers. While
we are not yet meeting our target on average to be
among the top two in customer satisfaction and have
some way to go, we are on target for example for
commercial customers at Banking DK, Banking Nordic
and Corporates & Institutions due to the strength of our
product offering, high proactivity, and strict focus on
customer needs.
Danske Bank / Annual Report 2020
11
Employees
Our employees are our main asset, and we aspire to
have engaged employees who are proud to work at
Danske Bank. Further, we want a skilled and motivated
workforce and a strong talent pool to ensure that we
continue to meet increasing customer expectations.
To pave the way for improving our employee
engagement, in 2020, we explored the expectations
of our customers, colleagues and other stakeholders
through roundtables, surveys and other activities to
support us in identifying and shaping a new purpose and
cultural commitments. This will be integrated into the
organisation as part of our Purpose, Brand, Culture and
Engagement initiative in early 2021.
In addition, during the corona crisis we managed to
enable almost our entire workforce to work remotely
from home within a few weeks, so that our customers
continued to receive the services and advice they
needed while minimising the risk of infection among our
customers and employees in accordance with the health
and safety guidelines issued by the authorities. We will
continue on this path and give our employees much
more fl exibility in their work life, for example by working
from home, with “Working@Danske”.
As part of having a more open, diverse and inclusive
culture, we have a dedicated focus on increasing the
diversity of our staff with specifi c initiatives, such as
a new policy giving rainbow families equal rights to
parental leave, and have taken several other initiatives
to further support diversity in the hiring and internal
promotion processes.
In order to benefi t from the contribution each individual
at Danske Bank can make, we also further increased the
autonomy of our employees at work. As an example, the
entire Agile Transformation will lead to more personal
fl exibility and development in our daily work, closely
embedded in teams working cross-functionally and
moving closer to our customers, which will also further
drive employee engagement.
To become even more customer-centric, we have
developed our service models further over the course of
the last year and will continue on this path in 2021. As
an outcome, retail customers in both Denmark and the
other Nordic countries as well as mid-corp customers
stand to benefi t from improved advisory services
whenever and wherever they want to meet us.
We have further developed and launched new products
and tools throughout the year that enable us to provide
additional services to our customers. A majority of the
products launched targets solving customer needs while
also supporting a transition into a sustainable future.
They include new mortgage products in Denmark, where
we launched a FlexLife® loan type with a fi xed rate of
interest for 30 years. In order to further promote the
sustainability agenda, we continued to give customers
a broader range of choices. For example, we launched
Danica Balance Sustainable Choice and Danske Invest
Global Sustainable Future.
Throughout the year, we improved our digital solutions
for our customers, which led to Danske Bank being
awarded international prizes for Best Use of Mobile and
as Digital Financial Institution of the year in Denmark.
During the corona crisis, we increased digital interaction
with our customers signifi cantly. For example, most cust-
omer meetings were held digitally during the lockdown,
and we will continue to develop our digital platforms
such as Danske Mobile Banking and District in the years
to come, further leveraging recent learnings to meet the
changing expectations of our customers.
Moreover, we deepened our collaboration with partners
to create value for our customers. Our cooperation with
Axeptia is one example of this. The joint offering went
live in 2020 and gives us a unique position among
competitors. We can provide Axeptia’s credit manage-
ment solution to business customers, enabling them to
optimise their liquidity and cash fl ow. After initially going
to market in Norway, we are scaling the offering across
the Nordic countries.
We also launched a new commercial organisation with a
Commercial Leadership Team, which will drive the com-
mercial agenda, and introduced two new Chief Customer
Offi cers to ensure our customers have an even stronger
voice in our organisation.
12
Danske Bank / Annual Report 2020
Society
We are an integral part of our customers’ lives, and at
the core of our societal ambition is our desire to act in
the best interest of our customers. This includes open
and transparent communication while supporting our
customers’ transformation and the societies that we are
part of in becoming sustainable.
We have made signifi cant progress on our sustainability
agenda, which we launched in early 2020 with seven
dedicated targets towards 2023. Already now, we are
well ahead of our expectations in some areas. In the
area of sustainable investing, for instance, we have
already reached more than two thirds of our ambition of
DKK 30 billion in green investments in Danica Pension
by 2023, with current green investments totalling in
excess of DKK 20 billion. In relation to sustainable
fi nancing, early results are even more promising. Here,
the volume of green loans and bonds has surpassed
DKK 100 billion, against a target of well above DKK 100
billion in sustainable fi nancing, including arranged bonds,
by 2023. Hence, both targets will be revised during
2021. Furthermore, we continue to deliver on our long-
term commitment to help the societies we are a part of
to prosper, for example by fostering entrepreneurship.
Our digital platform The Hub is a key channel through
which we realise our target of supporting 10,000 start-
ups and scale-ups by 2023. Created fi ve years ago,
the platform provides access to investors, a recruiting
channel, and growth and impact expertise and tools
across the Nordic countries. The signifi cant milestones
of 500,000 job applications and more than 25,000
jobs posted through the platform recently reached are
testament to its success.
One of our important contributions to society is to
provide equal opportunities. Hence, we have taken
several steps on Diversity & Inclusion (D&I) such
as appointing D&I leads across the organisation,
updating our D&I policy, launching an internal education
programme for managers, and commencing new
initiatives on inclusion, equal opportunities and creating
an attractive workplace.
A robust compliance culture is the foundation for
fi ghting fi nancial crime and meeting our regulatory
compliance obligations, ensuring that we always
have the best interest of our customers in mind. We
have strengthened our frameworks across AML and
investor protection and have improved our compliance
capabilities after making it a focus area of the Better
Bank transformation in 2020. Further, we are investing
heavily into both execution of our AML remediation
and four additional Better Bank initiatives dedicated
to building the capabilities and processes required
to further improve compliance. It is essential that
we deliver on our AML remediation to safeguard the
fi nancial system. Over the course of the past year,
we have completed ODD on more than 2.5 million
customers across Danske Bank, a substantial portion of
which was completed by harnessing automation.
You can read more about our efforts in relation
to sustainability throughout this report and in the
Sustainability Report 2020.
Shareholders
In 2023, we have an ambition to achieve a return on
shareholders’ equity of 9-10%, as we will continuously
improve our profi tability level by leveraging our full
potential.
The year 2020 was a year of investment in our future
fi nancial performance on the basis of the Better Bank
transformation. As a result, we have progressed
considerably towards creating the foundation for
regaining commercial momentum. Examples include
adopting more agile ways of working and creating end-
to-end responsibilities for customer value propositions,
commencing the accelerated digitisation of the journeys
most relevant for our customers and advancing
towards more scalable and standardised processes and
operating models in our retail and mid-corp segments
across the Nordic countries.
But while we are expecting to reap the benefi ts of these
changes going forward, the past year was overshadowed
by the global corona crisis. It caused considerable
headwinds for our income, as retail and commercial
customers in the Nordic societies together with the rest
of the world felt the impact of lockdowns and heightened
uncertainty throughout the year. This increased
impairment levels, particularly in sectors signifi cantly
Danske Bank / Annual Report 2020
13
Road ahead for 2021
We will proceed on our journey to become a Better
Bank and will deliver on our ambitious agenda for all
our stakeholders. In 2021, we will continue to drive our
transformation and at an increasing pace see results
made possible by investments made in 2020 and
the new business unit structure from the beginning of
2021.
We expect that our customers will benefi t from the
digitalisation of key customer journeys and easier
access to banking products and services. Employees
in development functions will experience new ways of
working because the agile transformation will increase
employee empowerment and give a greater end-to-
end responsibility. Improving our compliance further
will mark an important next step in our commitment to
society and the protection of the integrity of fi nancial
markets. And fi nally, we will drive the process of
regaining commercial momentum by, for example,
leveraging new digital enablers and launching customer
service models and value propositions while continuing
to execute diligently on our cost roadmap to improve
profi tability.
affected by the lockdowns, either directly or indirectly.
Since summer, we have witnessed encouraging signs
for the recovery of our business lines across the
board, exemplifi ed by increased customer activity and
rebounding trading income in Corporates & Institutions.
However, despite the commencement of vaccination
programmes, tightened restrictions introduced across
our markets as recently as January and the extension
of monetary and fi scal support packages that are yet
to cease underpin the great uncertainty as to how the
global pandemic will continue to affect our business.
In addition, we used 2020 to invest in and pave the way
for further improvement of cost levels. Through intensive
efforts, we will manage to follow a strong trajectory
of enhanced cost levels until 2023 – with the fi rst
milestone to be reached in 2021, when we expect total
costs to amount to around DKK 24.5 billion.
A long-term structural decrease of our cost base will
be enabled by two key changes implemented over the
course of the past year. Firstly, our agile transformation
will allow us to accelerate the digitalisation of key
processes in coming months. Secondly, we launched
a new and simplifi ed commercial organisation in
January 2021 and will serve our customers from two
business units going forward: Personal & Business
Customers, and Large Corporates & Institutions. The
rethinking of our organisation allows us not only to
remove unnecessary complexity, but also to bundle our
commercial competencies to better support different
customer groups in the best possible way and further
enhance our business activity.
Further simplifi cation will drive our operational
performance. We continued to improve operational
effectiveness in customer-facing and back-offi ce
processes. For example, while introducing new relevant
products, we are also simplifying our product offering
and in 2020 reduced the number of products by 25% at
Banking DK and Banking Nordic and by more than 50%
at Corporates & Institutions. Further, we are improving
and modernising our IT infrastructure, leading to a
signifi cant reduction in developer waiting time.
14
Danske Bank / Annual Report 2020
Danske Bank / Annual Report 2020
15
Sustainability
The creation of societal value and business value can
and must go hand in hand. This assumption drives our
approach to sustainability and is an important lever for
our Better Bank plan and the transformation we want
to accomplish towards 2023. While 2020 in many
ways was a challenging year, the corona crisis has also
reinforced the importance of sustainable development,
and we will look to support our customers and society at
large in ‘building back better’.
Sustainability strategy towards 2023
The 17 UN Sustainable Development Goals (SDGs) and
society’s sustainability transition towards 2030 continue
to drive rapid change across markets. For the fi nancial
sector in particular, the EU Action Plan on Sustainable
Finance, the Task Force on Climate-related Financial
Disclosures (TCFD), the Principles for Responsible
Banking (PRB) and the Principles for Responsible
Investments (PRI), all of which are supported by Danske
Bank, are shaping market developments and our
business signifi cantly.
In 2020, we revisited our sustainability strategy to refl ect
both external and internal developments and to meet our
stakeholders’ expectations to capture the increasing risks
and opportunities. Our updated sustainability strategy
builds on our foundation, on results achieved in recent
years and on our Better Bank 2023 ambitions, thereby
further developing the areas that create both societal
value and business value. This will also strengthen
Danske Bank’s competitiveness.
The strategy has sustainable fi nance at its core and
refl ects our ambition to take a leading position on
sustainable fi nance in the Nordic countries by 2023.
The strategy includes fi ve additional focus areas, which
are of high importance for our stakeholders and are
vital to our performance and credibility on the overall
sustainability agenda.
2023 Group Sustainability Strategy
Sustainable fi nance
We help our customers achieve their sustainability
ambitions through fi nancing and investing
Entrepreneurship
We support new
businesses in creating
sustainable growth
Governance & integrity
We operate in a
responsible and
transparent manner
Financial confi dence
We help people
become fi nancially
confi dent
Employee well-being
& diversity
We foster well-being,
diversity and inclusion
in our workplace
Entrepreneurship Financial confidence
G
o
v
e
r
n
a
&
i
n
t
e
g
nce
rity
Sustainable
finance
Environmental
footprint
y
t
i
s
r
e
v
i
e
e
y
g & d
plo
m
well-bein
E
Environmental footprint
We minimise our own environmental footprint
16
Danske Bank / Annual Report 2020
With our updated strategy and associated 2023
targets, we aim to contribute to the UN’s 2030 Agenda
for Sustainable Development and the SDGs. In the past
couple of years, we have targeted our efforts on SDG 4:
Quality education, SDG 8: Decent work and economic
growth, and SDG 13: Climate action. Refl ecting our
work to promote equal opportunities in leadership and
our efforts to reduce illicit fi nancial fl ows and combat
fi nancial crime, the updated strategy also addresses
SDG 5: Gender equality and SDG 16: Peace, justice and
strong institutions.
Through our sustainable fi nance offerings, we potentially
have an indirect impact on all 17 SDGs. Depending
on the underlying activities, the impact can be both
negative and positive, which we will start mapping in
more detail in 2021 in line with our PRB commitment.
We monitor progress against our 2023 targets, and in
2020, we started to integrate environmental, social and
governance (ESG) related KPIs into our performance
management framework. We have so far included three
KPIs on Environmental footprint, Employee well-being
& diversity and Governance & integrity in the Group’s
variable remuneration structure to ensure that all
employees’ variable remuneration is clearly linked to our
ambitions in these areas.
Strategy focus areas and value creation
2020 status
SDGs
Sustainable fi nance
Increase volume of sustainable fi nance to 1) well above DKK 100 billion
in sustainable fi nancing including granted green loans and arranged
bonds and to 2) DKK 30 billion investments in the green transition by
Danica Pension
Sustainable fi nancing:
DKK 102 billion since 2019
Investing in the green transition:
DKK 27 billion since 2019
Set a climate target for our corporate loan portfolio in alignment with the
Paris Agreement on Climate Change
23% of corporate loan portfolio mapped for
climate impact
Entrepreneurship
10,000 start-ups and scale-ups supported with growth and impact tools,
services and expertise
5,065 start-ups and scale-ups supported
since 2016
Financial confi dence
2 million people supported with fi nancial literacy tools and expertise
1,154,913 people supported since 2018
Governance & integrity
Over 95% of employees trained annually in risk and compliance
95% of employees trained
Employee well-being & diversity
More than 35% women in senior leadership positions
28% share of women in senior leadership
positions
Environmental footprint
Reducing our CO2 emissions by 10% from 2019 and 75% from 2010
86% CO2 emissions reduction since 2010 and
48% since 2019
Danske Bank / Annual Report 2020
17
Our Group Sustainability Strategy cuts across the entire
business, and the majority of employees working with
sustainability are fi rmly rooted in our business units. To
further support coordination and to accelerate Group-
wide execution, we in 2020 established a Sustainable
Finance Council and a Diversity & Inclusion Council, both
of which include representatives from all business units
and from relevant Group functions.
TCFD reporting
– climate-related risks and opportunities
In our Sustainability Report 2020, we report
on the TCFD in relation to governance, strategy,
risk management, and metrics and targets. Our
TCFD execution relies on embedding climate
considerations into business units’ operations while
collaborating across our organisation to share and
develop best practices. We aim to continuously
improve in developing the required tools, methods
and practices for full TCFD implementation. In
2020, embedding all the necessary climate data for
suffi cient climate risks and opportunity disclosures
has been a key focus area and will continue to be
a priority in the coming years. Also, we actively
participate in industry-wide collaboration to enhance
our own and the fi nancial industry’s expertise. We
had an active role in UNEPFI’s TCFD pilot phase
II, and we will continue onto phase III in 2021,
when we also look to disclose more quantitative
information about the Group’s climate-related risks
and opportunities.
Sustainable fi nance
We defi ne sustainable fi nance as “fi nance to support
economic growth while reducing negative impacts and
increasing positive impacts on ESG factors”. This aligns
well with the EU’s defi nition, and it includes integration of
ESG considerations, which we are continuously working
to improve, into our fi nancing and investing activities
across the Group.
Sustainable fi nancing is the provision of loans and bonds
for projects and activities that have a clearly defi ned
environmental or social benefi t. We issue our own green
bonds to fi nance our green lending activities, and we
arrange sustainable bond issues for our customers to
support the fi nancing of their sustainable transition. The
overwhelming growth and interest in green loans felt
by both Danske Bank and Realkredit Danmark on the
back of our green bond issues, as well as the interest in
arranged sustainable bonds for customers, continued
in 2020 and led to the provision of DKK 102 billion in
sustainable fi nancing by the Group. This surpasses our
2023 target of DKK 100 billion set in 2019. We will
review our sustainable fi nancing ambitions in 2021.
Responsible investing is a cornerstone of our fi duciary
duty to protect and grow our customers’ investments
and ambition to create value for society. We integrate
ESG factors into our investment processes, products
and advisory services and we exercise active ownership
and apply screenings and restrictions as part of our
work. In 2019, Danica Pension communicated our
green investment pledge of DKK 100 billion by 2030.
In 2020, Danica Pension increased its investments in
the green transition by 164% – from DKK 10.3 billion
to DKK 27.2 billion. The current volume of investments
means Danica Pension is close to reaching its initial
2023 milestone of DKK 30 billion, and we will review
our investment milestones in 2021.
In addition to our volume targets on fi nancing and
investing, we also work to align our corporate loan
portfolio and Danica Pension’s investment portfolio
to the objectives of the Paris Agreement on Climate
Change. To support our work, we in 2020 joined the
Partnership for Carbon Accounting Financials (PCAF),
which aims to develop and implement a harmonised
approach to measuring and disclosing greenhouse gas
(GHG) emissions associated with loans and investments
based on the GHG Protocol. We also pledged to make
Danica Pension’s investment portfolio carbon-neutral by
2050 when we joined the global UN-convened Net-Zero
Asset Owner Alliance in 2020.
In December 2020, we launched our sustainable
fi nance framework to provide guidance on the
implementation of our ambition and targets, while also
identifying key focus areas for execution and potential
synergies. Towards 2023, we will further develop our
position across customer segments and sectors.
18
Danske Bank / Annual Report 2020
Entrepreneurship
When we support the growth of new businesses that
can drive innovation and job creation, we contribute
to the overall well-being and sustainable development
of society. Since 2016, we have supported 5,065
start-ups and scale-ups with growth and impact tools,
services and expertise. The Hub, Danske Bank’s free,
digital community platform, has been a key initiative in
our efforts to address the main scalability challenges
that growth companies face, such as recruitment and
access to capital.
Financial confi dence
To contribute to people’s fi nancial confi dence, we help
children and young people to develop sound money
habits and to progress all the way to a fi nancially secure
adulthood. Since early 2018, we have supported more
than one million children, young people and parents with
fi nancial literacy tools and expertise. To reach our 2023
target, we will scale up our initiatives and evolve our
fi nancial literacy programmes to refl ect the digitalisation
of money and developments in society and technology.
Governance & integrity
Setting the foundation and being clear on expectations
for individual behaviour across our Group is important
for building and maintaining a strong culture that
embeds compliance into everything we do. Our Code
of Conduct Policy identifi es the principles we seek to
uphold and the associated areas that underpin wider
rules and standards across policies, processes and risk
management. 95% of our employees completed and
passed risk and compliance training on time in 2020,
and as regulatory requirements continue to evolve, we
continue to invest in developing our risk management
framework and capabilities to ensure that expectations
remain fi rmly embedded in our daily activities.
In recent years, we have invested substantially in
enhancing our procedures, systems and competencies
to prevent money laundering and other fi nancial crime
risks. Despite coronavirus-related challenges, 2020
was a year in which we made solid transformational
progress towards strengthening our defences. Part of
our employee training on fi nancial crime prevention
includes understanding tax affairs at customer level and
detecting tax evasion. We have a fi rm position on tax
compliance, and we do not participate in abusive tax
arrangements.
Furthermore, we introduced an Anti-Bribery and
Corruption Policy in late 2020, which in 2021 will be
complemented by a separate instruction that includes
a set of criteria for sponsorship agreements. This will
improve our assessment of anti-corruption risks and
controls across the Group. In 2020, we updated our
Gifts and Hospitality Instruction and broadened the
scope, criteria and principles for providing and receiving
gifts and hospitality.
Adding to this, we in 2020 updated our Escalation
Policy to give additional clarity to employees on how
to recognise and properly raise issues of concern,
thereby enabling us to respond faster and more
effectively. Employees can also report concerns about
irregularities or wrongdoings anonymously through
our whistleblowing scheme, which also applies to
external stakeholders. In 2020, we redesigned the
whistleblowing reporting site to make it more inviting,
user-friendly and to provide a strong sense of trust
and security, and we further developed our training on
whistleblowing. The number of whistleblowing reports
increased by more than 50% from 2019 to 2020.
We also work closely with partners and suppliers to
promote responsible business conduct throughout our
supply chain. Our responsible sourcing process is part
of our supplier due diligence programme alongside other
supplier assessments, such as IT security, fi nancial
assessment and GDPR.
Employee well-being & diversity
To become a more engaging workplace, we seek
better ways of working, a sense of belonging and equal
opportunities for all our employees, and we foster well-
being among our employees, and build a diverse and
inclusive culture that mirrors the societies we are part
of. We recognise gender diversity as a driving force
for other diversity aspects, and we aim to increase the
share of women in senior leadership positions from 28%
in 2020 to 35% in 2023. Measures include targeted
recruitment where there is always at least one woman in
the fi nal fi eld of candidates for leadership positions and
on the hiring committee.
Danske Bank / Annual Report 2020
19
In terms of ESG ratings, these cover a range of analytical
activities that address a business’s societal impact.
Danske Bank has chosen to focus on dialogue with
six providers, who are selected on the basis of their
importance to our investors. This is described further in
the Capital and liquidity management section on p. 30.
Altogether, our independently assured Sustainability
Report 2020 serves as our Communication on Progress
to the UN Global Compact, it meets proposal 14, cf.
the 25 proposals by Finance Denmark’s Anti-money
Laundering Task Force, and ensures compliance with
sections 135a and b of the Danish FSA’s Executive
Order on Financial Reports for Credit Institutions
and Investment Firms etc. The report is available
at danskebank.com/sustainability. The report is
supplemented by our Sustainability Fact Book 2020,
which also includes our PRB reporting obligation.
In a short period of time, the coronavirus pandemic
drastically changed our ways of working. Also, the
execution of our Better Bank plan with increased focus
on cost and more effective ways of working led to
layoffs. Both of these factors have had a negative effect
on employee engagement, and reversing this trend is a
strong ambition for us.
In a survey conducted among our employees in 2020,
working from home was seen as an important measure
for improving mental health, because it increased
engagement, made life less stressful and decreased
common illnesses. On this basis, we in June introduced
our Working from Home initiative, which allows
employees across the Group to work from home one
to two days a week, subject to agreement with their
manager. Our expert team on mental health and well-
being and our close to 500 mental health ambassadors
also played a vital role in promoting initiatives that
build mental resilience and elevate the well-being of
our employees. We introduced a new intranet site that
provides inspiration, tools and training for management
and employees on how to cope with change and
uncertainties – in both a professional and a private
context.
Environmental footprint
Efforts to minimise our own environmental footprint
focus on reducing the emissions of greenhouse gases
from our premises, operations and travel. Key initiatives
include more digital meetings, energy-effi cient buildings,
environmentally friendly company cars and a reduction
in air travel. In 2020, our operations resulted in 7,871
tonnes of CO2 emissions, which is a 48% decrease
from 2019 and an 86% decrease from 2010. Because
this signifi cant drop in CO2 emissions was mainly a
result of the coronavirus pandemic, our current 2023
target will be retained without change.
More information
We have continued to integrate ESG considerations into
our Risk Management Framework, which is covered in
our Risk Management Report 2020.
20
Danske Bank / Annual Report 2020
Estonia and remediation matters
In 2020, Danske Bank continued the handling of a
number of remediation matters, including the Estonia
case, the Flexinvest Fri case and, most recently, the debt
collection case in Denmark.
Estonia case
Investigation
Danske Bank continues to cooperate with various
authorities regarding the terminated non-resident
portfolio at Danske Bank’s branch in Estonia. This
includes criminal and regulatory investigations by
authorities in Estonia, Denmark, France and the United
States.
Danske Bank reports to, responds to and cooperates
with various authorities, including the Danish State
Prosecutor for Serious Economic and International
Crime (“SØIK”), the U.S. Department of Justice (DOJ)
and the U.S. Securities and Exchange Commission
(SEC), in relation to the Estonia case.
The internal investigation work planned for completion in
2020 has been fi nalised and Danske Bank has reported
the fi ndings to the relevant authorities investigating
Danske Bank. The bank continues to fully cooperate and
will provide the authorities with further information if and
when requested.
The 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 fi nes, which could be material.
(which was initially dismissed but has been appealed)
and a number of court cases initiated against Danske
Bank in Denmark. Danske Bank intends to defend itself
against the various claims. The timing of completion
of any such lawsuits (pending or threatening) and their
outcome are uncertain and could be material.
Flexinvest Fri case
In November 2020, Danske Bank accepted a fi ne
of DKK 9 million from SØIK for violating the Danish
Executive Order on Investor Protection in connection
with the Flexinvest Fri case.
All affected customers have been contacted, and we
have compensated more than 99%. We have taken
several initiatives to handle the issue and make sure
something similar should not happen again.
Market monitoring
In 2019, the Danish FSA conducted an inspection of
Danske Bank’s market monitoring function and issued
a number of orders on 6 December 2019. Danske
Bank has since then taken a series of steps to ensure
compliance with the orders. In addition, the Danish FSA
also announced further investigation, which in June
2020 led the Danish FSA to fi le a criminal complaint
against Danske Bank A/S for violation of the Market
Abuse Regulation on account of inadequate market
monitoring and market manipulation in respect of
opposite trades. Danske Bank has a dialogue with and
cooperates with SØIK, but cannot comment further on
the criminal complaint as long as SØIK is investigating
the case.
In December 2020, Danske Bank was informed by
the U.S. Department of Treasury’s Offi ce of Foreign
Assets Control (“OFAC”) that it had decided to close
its investigation of Danske Bank in relation to the
Estonia case with no action. OFAC is the U.S. authority
responsible for civil enforcement of U.S. sanctions.
Debt collection case
In our efforts to become a better bank, we have in recent
years systematically improved compliance, risk and
control capabilities and processes and sought to foster
a management culture under which potential issues are
raised and addressed.
Civil claims
Danske Bank is also subject to ongoing litigation in
relation to the Estonia case. This includes, inter alia, an
action fi led against Danske Bank in the United States
District Court for the Southern District of New York
In connection with this work, several issues have been
identifi ed. These include the debt collection issue, which
we have worked on remediating since 2019, including
by providing information to the authorities and initiating
communication to customers in June 2020.
Danske Bank / Annual Report 2020
21
•
•
•
For some customers, repayment terms have been
set in such a way that the term of their loan is very
long or infi nite.
Discrepancies between investment profi les and
investment agreements that may have meant that
some customers have received a lower – or in some
cases a higher – return than agreed.
For a number of business customers, Danske Bank
has charged unjustifi ed credit renewal fees.
The fi nancial consequences of these matters for Danske
Bank have either already been recognised or are not
deemed material.
We are working hard to remediate these issues and will
contact and compensate affected customers as soon as
possible.
While we cannot guarantee that other issues will
not emerge in the remediation process, we remain
committed to solving any issue that emerges with
transparency and to compensate all affected customers.
On 21 September 2020, the Danish FSA issued four
orders to Danske Bank in relation to the systemic
errors in our debt collection system and the ongoing
remediation. On 20 October 2020, Danske Bank
confi rmed to the Danish FSA that it would comply with
the orders.
On 26 November 2020, the Danish FSA ordered
Danske Bank to arrange for and bear the costs of an
impartial investigation into the measures taken and to be
taken by Danske Bank to correct the errors in the debt
collection process and into the IT systems used for debt
collection.
We welcome the impartial investigation, and will
continue the cooperation with the Danish FSA.
Danske Bank remains committed to contacting and
compensating all affected customers.
Other legacy issues
As communicated on 22 October 2020, we have
identifi ed a number of other legacy issues. To accelerate
and strengthen the remediation efforts and to ensure
consistent and timely remediation of these issues, a
new central unit has been established with the task
of overseeing the remediation of the identifi ed legacy
issues and ensuring a transparent approach along
with timely communication with customers and other
stakeholders.
In addition to the debt collection case, the new
remediation unit is currently also overseeing
remediation of the following legacy issues, as previously
communicated:
•
•
•
Wrong profi t and loss reporting for custody
accounts, which for some customers have resulted
in wrong tax reporting.
Issues relating to the handling of dividend tax, which
have resulted in delays in tax reclaims.
Wrong registration of rebates on specifi c trades
(FX trades).
22
Danske Bank / Annual Report 2020
Financial review
2020
2019
Index
20/19
Income statement
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Impairment charges on goodwill
Impairment charges, other intangible assets
21,875
15,137
4,856
514
42,383
28,103
-
379
21,877
15,201
5,441
2,463
44,982
27,193
1,603
355
Profi t before loan impairment charges
13,901
15,831
Loan impairment charges
Profi t before tax, core
Profi t before tax, Non-core
Profi t before tax
Tax*
Net profi t
Attributable to additional tier 1 etc.
7,001
6,900
-596
6,304
1,715
4,589
551
1,516
14,315
-493
13,822
-1,249
15,072
786
Q4
2020
5,377
4,457
1,093
32
Q3
2020
5,509
3,369
1,463
202
10,959
10,543
7,694
6,692
-
379
2,886
713
2,173
-113
2,059
609
1,450
118
-
-
3,851
1,018
2,833
-37
2,795
692
2,103
117
Index
Q4/Q3
98
132
75
16
104
115
-
-
75
70
77
-
74
88
69
101
100
100
89
21
94
103
-
107
88
-
48
-
46
-
30
70
* In 2019, tax included a net income of DKK 4.1 billion 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.
2020 vs 2019
In 2020, profi t before loan impairment charges
amounted to DKK 13.9 billion (2019: DKK 15.8 billion).
The development related mainly to higher expenses
due to remediation and transformation costs and lower
income, as 2019 benefi ted from several non-recurring
items.
in amortisation of loan origination fees. There was
also a positive effect from structural changes to the
Group’s funding and liquidity management. The positive
developments were, however, offset by adverse
exchange-rate developments, lower lending margins,
higher funding costs and a fall in other interest income
from, among other things, mortgage lending activities.
Net profi t amounted to DKK 4.6 billion (2019:
DKK 15.1 billion), which was just above our
expectations. Net profi t was heavily affected by the
corona crisis, primarily in the form of loan impairment
charges, which increased to DKK 7.0 billion (2019:
DKK 1.5 billion). Further, net profi t for 2019 benefi ted
from Danske Bank’s exit from the International Joint
Taxation scheme.
Income
Net interest income was stable at DKK 21.9 billion.
There were positive effects from deposit and lending
volumes, higher deposit margins and an increase
Net fee income was stable at DKK 15.1 billion
(2019: DKK 15.2 billion). Net fee income at Wealth
Management increased. In Asset Management, net fee
income increased due to record-high performance fees.
In Danica Pension, net fee income increased due to
higher risk allowance fees and positive results from risk
products, for example the health and accident business.
At Corporates & Institutions, net fee income from Capital
Markets offerings increased. The increases were offset
by the effects of the corona crisis at Banking DK, which
resulted in a decline in card use and transaction-related
fees. Further, net fee income was affected by lower
income from a distribution agreement in Finland. Net fee
Danske Bank / Annual Report 2020
23
income in 2019 was affected by the compensation paid
to customers in relation to the Flexinvest Fri product, the
effect of which was partly offset by high remortgaging
activity.
Net trading income totalled DKK 4.9 billion (2019:
DKK 5.4 billion) and thus increased DKK 0.3 billion,
when taking the sale of LR Realkredit A/S in 2019
into account. Net trading income at Corporates &
Institutions, FI&C, increased due to higher customer
activity, improved market conditions and positive
value adjustments of the derivatives portfolio (xVA).
This development was partly offset by a decrease in
net trading income at Wealth Management, caused
largely by a lower investment result, which includes
provisions for pension yield tax in relation to the health
and accident business for this year and previous years
and the clean-up of accounting balances after the
merger of Danica Pension and the former SEB Pension.
Furthermore, income from remortgaging activity at
Banking DK decreased.
Other income amounted to DKK 0.5 billion, against
DKK 2.5 billion in 2019. The decrease in other income
was due mainly to other income in 2019 benefi ting from
the gain on the sale of Danica Pension Sweden and the
change in the presentation of Danica Pension in the
Financial Highlights as described in note G3.
Expenses
Operating expenses amounted to DKK 28.1 billion, an
increase of 3% from the level in 2019, which is at the
lower end of our guided range for 2020. Underlying
costs started to decrease in the second half of the
year as the initial effects of the cost transformation
are beginning to show and as a consequence of lower
spending due to the corona crisis. This was, however,
more than countered by higher remediation costs,
which totalled DKK 4.1 billion as guided and related to
compliance, fi nancial crime prevention and the Estonia
case. Further, expenses were affected by transformation
costs, which amounted to around DKK 1.7 billion,
including provisions for restructuring costs in 2020 and
partly in 2021.
Impairment charges for other tangible assets
Due to our transformation efforts and organisational
changes, software of DKK 0.4 billion (2019: DKK 0.4
billion) was impaired.
Loan impairments
Loan impairments in core activities amounted to
DKK 7.0 billion (2019: DKK 1.5 billion). In the fourth
quarter, the macroeconomic scenarios and weights
were updated following a similar update of the Group’s
Nordic Outlook. The downside has become a W-shape
scenario with positive trends for 2021 following a
second-wave impact during the winter. On the basis
of timely estimates applied in the Group’s impairment
process, loan impairments include a charge of
DKK 2.4 billion to cover the effects of the limited
visibility caused by the corona crisis. The impairment
charges are a combination of specifi c adjustments for
industries expected to be impacted by the corona crisis
and charges due to the updating of macroeconomic
scenarios. Impairments relating to specifi c customers
amounted to DKK 4.6 billion, of which a part also relates
to the corona crisis. This includes charges relating to
the oil and gas industry, as uncertainty in the offshore
segment continues to exist. Despite the above, credit
quality remained overall strong.
At the business units, Corporates & Institutions
saw loan impairments primarily against single-name
exposures, mainly in the oil and gas industry and, to a
smaller extent, in the retailing industry. Banking Nordic
was affected by an increase in total impairments
following charges made against single-name
exposures and charges occasioned by the changed
macroeconomic outlook. At Banking DK, charges were
driven by the continuously limited visibility relating to the
effects of the corona crisis, however, with limited credit
deterioration observed.
Loan impairment charges
2020
2019
(DKK millions)
Charges
Banking DK
Banking Nordic
C&I
Northern Ireland
Other Activities
Total
907
1,404
4,304
378
8
7,001
% of
net credit
exposure*
0.10
0.22
1.80
0.69
0.14
0.37
% of
net credit
exposure*
-0.04
0.08
0.57
0.01
-0.07
0.08
Charges
-342
510
1,348
5
-5
1,516
* Defi ned as net credit exposure from lending activities in core segments, excluding
exposures related to credit institutions and central banks and loan commitments.
efforts and also included restructuring costs not only
for the fourth quarter of 2020 but also partly for
2021.
Impairment charges for software related mainly
to our transformation efforts and organisational
changes and amounted to DKK 0.4 billion in the
fourth quarter of 2020.
Loan impairments amounted to DKK 0.7 billion,
against DKK 1.0 billion in the third quarter of 2020.
Loan impairments relating to specifi c customers
amounted to DKK 0.5 billion. In the fourth quarter,
the macroeconomic scenarios were updated. The
effect of these updates amounted to a reversal of
DKK 0.5 billion. However, given continually clouded
visibility regarding the corona crisis, additional
impairments of DKK 0.3 billion were booked to
cover specifi c adjustments for industries likely
to be affected by the corona crisis. Further, DKK
0.4 billion was booked in relation to the continued
implementation of revised EBA guidelines and
DKK 0.1 billion was booked at Banking DK. Overall
charges for Banking DK and Banking Nordic were
unchanged, while Corporates & Institutions saw
charges driven by single-name exposures, mainly in
the oil & gas and retailing industries.
24
Danske Bank / Annual Report 2020
Tax
Tax on profi t for the period amounted to DKK 1.7 billion,
or 27.2% of profi t before tax, against 22% of profi t
before tax for 2019 adjusted for the specifi c changes in
deferred tax. The increase in the effective tax rate was
due primarily to expenses that are expected to be non-
deductible.
Q4 2020 vs Q3 2020
In the fourth quarter, the Group posted a net profi t of
DKK 1.5 billion, against DKK 2.1 billion in the third
quarter. Loan impairment charges fell to DKK 0.7
billion, a decrease of 30%. However, this positive
effect was more than offset by an increase in
operating expenses related to transformation costs
and impairment charges on other intangible assets.
Net interest income amounted to DKK 5.4 billion,
a 2% decrease from the level in the third quarter of
2020. There were positive effects from lower funding
costs, favourable exchange rate developments,
higher deposit volumes and an increase in
amortisation of loan origination fees. However,
these effects were more than offset by the negative
effects from lower deposit and lending margins as
well as lower lending volumes. We also saw lower
income at the Internal Bank from managing short-
term liquidity in the fourth quarter.
Net fee income amounted to DKK 4.5 billion, an
increase of 32% from the level in the third quarter
of 2020. The increase was due to seasonality
at Corporates & Institutions, Capital Markets. At
Wealth Management, performance fees from asset
management booked in the fourth quarter of 2020
had a positive effect on net fee income. Some of the
effect was offset by lower income from a distribution
agreement in Finland.
Net trading income decreased to DKK 1.1 billion
(Q3 2020: DKK 1.5 billion). The decrease was due
mainly to provisions for pension yield tax in relation
to the health and accident business for previous
years and the clean-up of accounting balances after
the merger of Danica Pension and the former
SEB Pension.
Operating expenses increased to DKK 7.7 billion
from DKK 6.7 billion in the third quarter. The
increase was driven primarily by the transformation
Danske Bank / Annual Report 2020
25
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
2020
2019
935.0
655.3
213.5
0.3
52.2
1.6
19.8
943.7
635.0
209.1
0.1
54.3
-3.0
18.0
Total lending
1,838.1
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)
Bonds issued by Realkredit Danmark
Own holdings of bonds
Total Realkredit Danmark bonds
Other covered bonds issued
Own holdings of bonds
Total other covered bonds
Total deposits and issued mortgage
bonds etc.
Lending as % of deposits and issued
mortgage bonds etc.
2020
2019
398.0
327.2
393.7
-
84.2
-9.9
1,193.2
358.0
270.5
270.7
0.2
70.9
-7.4
962.9
2020
2019
775.8
43.5
819.4
160.9
97.1
258.0
795.7
9.7
805.4
176.5
61.9
238.4
2,270.5
2,006.7
Index
20/19
99
103
102
300
96
-
110
101
Index
20/19
111
121
145
-
119
-
124
Index
20/19
97
-
102
91
157
108
113
Q4
2020
935.0
655.3
213.5
0.3
52.2
1.6
19.8
Q3
2020
927.3
634.3
203.9
0.1
54.1
2.7
21.0
1,838.1
1,801.4
Q4
2020
398.0
327.2
393.7
-
84.2
-9.9
Q3
2020
396.6
304.9
354.4
0.2
81.4
-8.7
1,193.2
1,128.7
Q4
2020
775.8
43.5
819.4
160.9
97.1
258.0
Q3
2020
772.7
37.7
810.3
162.7
89.6
252.3
2,270.5
2,191.3
Index
Q4/Q3
101
103
105
300
96
59
94
102
Index
Q4/Q3
100
107
111
-
103
-
106
Index
Q4/Q3
100
115
101
99
108
102
104
-
*Includes only bonds issued to fund lending. For further information, see the Defi nition of alternative performance measures section.
81.0
90.8
81.0
82.2
26
Danske Bank / Annual Report 2020
Lending
At the end of 2020, total lending was up 1% from the
level at the end of 2019. At Banking Nordic, lending
grew in most market areas. Sweden and Norway saw
growth in the retail segment, Finland mostly saw growth
in the commercial segment. At Corporates & Institutions,
lending also increased, despite a decrease in bank
lending towards the end of the year. This was partly
offset by a decrease in lending at Banking DK as lending
volumes were adversely affected by lower demand for
credit among commercial and retail customers, refl ecting
the general uncertainty caused by the corona crisis. For
commercial customers in particular, the decline was
driven not only by uncertainty but also by the substantial
relief packages offered by the government, including tax
postponement and salary compensation schemes.
In Denmark, new gross lending, excluding repo loans,
amounted to DKK 87.2 billion (2019: DKK 72.8 billion)
due to an increase in fi xed-term loans in Denmark.
Lending to retail customers accounted for DKK 26.0
billion (2019: DKK 28.2 billion) of this amount. The
decrease in retail lending related to home loans.
The main increase in market share occurred in Finland,
where our market share rose to 9.9% from 9.6% in
2019. In Denmark, our market share of total lending,
excluding repo loans, decreased to 25.5% from 26.2%
in 2019 due primarily to decreasing market shares in the
retail segment of the mortgage credit market and in the
commercial segment of the banking market.
Market shares of lending
(%)
Denmark incl. RD (excl. repo)
Finland*
Sweden (excl. repo)*
Norway*
31 December
2020
31 December
2019
25.5
9.9
5.4
6.5
26.2
9.6
5.5
6.4
Source: Market shares are based on data from central banks at the time of reporting.
* The market shares for Finland and Norway are based on data as at 30 November
2020.
Lending equalled 81.0% of the total amount of deposits,
mortgage bonds and other covered bonds, against
90.8% at the end of 2019, which refl ects the increasing
level of deposits as well as own holdings of bonds.
Deposits
At the end of 2020, total deposits were up 24% from
the level at the end of 2019 as deposits increased at all
business units. Our market shares of deposits increased
in Denmark, Sweden, Finland and Norway.
Market shares of deposits
(%)
Denmark (excl. repo)
Finland*
Sweden (excl. repo)*
Norway**
31 December
2020
31 December
2019
30.5
11.8
5.1
7.8
28.9
10.7
4.3
6.5
Source: Market shares are based on data from central banks at the time of reporting.
* The market shares for Finland and Norway are based on data as at 30 November
2020.
Credit exposure
Credit exposure from lending activities in core segments
increased to DKK 2,728 billion, against DKK 2,444
billion at the end of 2019, driven primarily by a
DKK 169 billion increase in deposits with central banks
and due from credit institutions and central banks and
an increase in loans and loan offers at Corporates &
Institutions and at Banking Nordic.
Risk Management 2020, section (3), which is available
at danskebank.com/ir, provides details on Danske Bank’s
credit risks.
Credit quality
Credit quality remained overall strong in most segments
in 2020. The effects of the corona crisis are expected
to materialise in the coming quarters. Total net non-
performing loans (NPL) decreased DKK 2.5 billion from
the end of 2019. The decrease was due to a few single-
name exposures to the capital goods and shipping, oil
& gas industries at Corporates & Institutions, with the
effect being partly offset by an increase in NPL related
to single-name exposures in the hotels, restaurants and
leisure, transportation and consumer goods industries at
Banking Nordic and the retailing industry at Corporates
& Institutions. The coverage ratio decreased slightly to
75% from 78% at the end of 2019.
The risk management notes on pp. 178-213 provide
more information about non-performing loans.
Danske Bank / Annual Report 2020
27
Non-performing loans (NPL) in core segments
(DKK millions)
Gross NPL
31 December
2020
31 December
2019
31,776
34,713
NPL allowance account
12,934
13,367
Net NPL
18,842
21,346
Collateral (after haircut)
14,567
17,479
The Group has made netting agreements with many of its
counterparties concerning positive and negative market
values of derivatives. The net exposure was DKK 109.6
billion, against DKK 76.4 billion at the end of 2019.
The value of the bond portfolio was DKK 583 billion,
against DKK 473 billion at the end of 2019. Of the total
bond portfolio, 77% was recognised at fair value and
23% at amortised cost.
NPL coverage ratio (%)
NPL coverage ratio of which is in
default (%)
NPL as a percentage of total
gross exposure (%)
75.2
100.0
77.6
73.6
Bond portfolio
1.2
1.4
(%)
31 December
2020
31 December
2019
The NPL coverage ratio is calculated as allowance account NPL exposures relative
to gross NPL net of collateral (after haircuts).
Accumulated impairments increased to 1.2% (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
macroeconomic scenarios and post-model adjustments.
Allowance account by business units
31 December
2020
31 December
2019
Accum.
impairm.
charges
% of net
credit
expo-
sure*
Accum.
impairm.
charges
% of net
credit
expo-
sure*
(DKK millions)
Banking DK
11,520
1.20
11,662
Banking Nordic
C&I
Northern Ireland
Other Activities
5,643
4,387
990
15
0.85
1.74
1.87
0.24
4,333
3,718
730
8
Total
22,554
1.17
20,451
1.21
0.68
1.61
1.37
0.09
1.08
* Defi ned as net credit exposure from lending activities in core segments, excluding
exposures related to credit institutions and central banks and loan commitments.
Trading and investment activities
Credit exposure from trading and investment activities
amounted to DKK 1,239 billion at the end of 2020,
against DKK 1,124 billion at the end of 2019. The
increase was due primarily to increased positive market
values of derivatives, increased bond holdings and repo
deposits.
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
Total holdings
Bonds at amortised cost
included in total holdings
45
1
37
12
2
2
100
23
32
1
53
10
2
2
100
26
The fi nancial highlights on page 6 provide information
about the balance sheet.
Trading portfolio assets and trading portfolio liabilities
increased from net assets of DKK 43.1 billion at the end
of 2019 to net assets of DKK 183.6 billion at the end
of 2020. The increase in net assets was due mainly to
increased bond holdings and increased positive values of
derivatives.
Other balance sheet items
Due from credit institutions and central banks increased
DKK 172 billion from the end of 2019. The increase was
due to general liquidity management. More information
on this is provided under the Funding and liquidity
heading in the Capital and liquidity management section.
Assets under insurance contracts, including derivatives,
and Liabilities under insurance contracts increased
DKK 50.7 billion and DKK 56.0 billion, respectively, from
the end of 2019, primarily as a result of the positive
developments on the fi nancial markets.
28
Danske Bank / Annual Report 2020
Capital and liquidity
management
The main purposes of our capital management practices
are to support our business strategy and to ensure
a suffi cient level of capital to withstand even severe
downturns without breaching regulatory requirements.
Capital ratios
At the end of 2020, the total capital ratio was 23.0%,
and the CET1 capital ratio was 18.3%, against 22.7%
and 17.3%, respectively, at the end of 2019. The
movement in the capital ratios in 2020 was driven by
the cancellation of dividends for 2019, the accumulated
net profi t for 2020 and changes to IFRS 9 transitional
arrangements. The total capital ratio was further
affected by a redemption of additional tier 1 capital
instruments, which was partly offset by net issues of tier
2 capital, resulting in a 0.3 percentage point increase in
the total capital ratio.
During 2020, the total REA increased by approximately
DKK 17 billion, due mainly to the effect of initial
implementation of the EBA guidelines and two Swedish
corporate residential and commercial real estate
risk weight fl oors implemented in December 2020.
These increases were partly countered by the early
implementation of the CRR II SME supporting factor in
June 2020.
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 2020, the Group’s solvency need ratio
was 12.6%, a slight decrease of 0.1 percentage points
from the level at the end of 2019.
The solvency need still includes the DKK 10 billion
required under the orders issued by the Danish FSA
in 2018 as a consequence of the Estonia case. The
amount is covered by common equity tier 1 (CET1)
capital, as ordered by the Danish FSA.
A combined buffer requirement (CBR) applies in addition
to the solvency need ratio. At the end of 2020, the
Group’s combined capital buffer requirement was 5.6%.
In March 2020, as a result of the corona crisis, the
Danish Minister for Industry, Business and Financial
Affairs decided to release the countercyclical buffer
requirement and cancel the planned increases intended
to take effect in 2020. 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.
Capital ratios and requirements
(% of 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
Solvency need ratio
Total capital requirement
Excess capital
CET 1 capital
Total capital
2020
Fully phased-in*
18.3
23.0
13.2
0.1
2.5
3.0
12.6
18.2
5.1
4.8
18.0
22.6
13.2
0.1
2.5
3.0
12.7
18.2
4.7
4.4
* Based on fully phased-in rules and requirements incl. 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 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 2020,
which is available at danskebank.com/ir.
Minimum requirement for own funds and eligible
liabilities
The Group received an updated decision from the Danish
FSA on the minimum requirement for own funds and
eligible liabilities (MREL) on 28 December 2020 based
on Q2 2020 data. The requirement is set at two times
the solvency need and one time the SIFI buffer and
capital conservation buffer. Further, the CBR must now
be met in addition to the MREL. At the end of 2020, the
Danske Bank / Annual Report 2020
29
requirement was equivalent to DKK 200 billion and
DKK 237 billion with the CBR considered in addition
to the MREL, corresponding to 30.5% and 36.1% of
the REA adjusted for Realkredit Danmark, respectively.
Taking the deduction of capital and debt buffer
requirements in Realkredit Danmark into account, MREL
eligible liabilities amounted to DKK 279 billion.
Going forward, Danske Bank’s general dividend policy
is unchanged, and it is still our ambition to pay out 40-
60% of net profi t for the year.
In order to support the initiatives aimed at minimising
the economic consequences of the corona crisis, no
dividends were paid for 2019.
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 signifi cant amount of non-preferred senior debt
over the past couple of years.
Danske Bank has strong capital and liquidity positions,
and the Board of Directors monitors the situation closely
and remains committed to returning excess capital to
shareholders when the economic impact of the corona
crisis is clear.
The Danish FSA has set the subordination requirement
as the higher of 8% of TLOF and two times the solvency
need and one time the CBR.
Credit ratings
In 2020, all credit rating agencies incorporated the
impact of the corona crisis in their ratings.
At the end of 2020, the subordination requirement was
equivalent to DKK 201 billion. Subordinated MREL-
eligible liabilities stood at DKK 242 billion.
Leverage ratio
With the adoption of Capital Requirements Regulation
2 (CRR2), a minimum leverage ratio requirement of 3%
will be introduced in the second quarter of 2021. At the
end of December 2020, the Group’s leverage ratio was
4.5% under the transitional rules and 4.4% under the
fully-phased in rules.
Capital targets
The CET1 capital ratio target was kept at above 16%
in the short term to ensure a suffi ciently prudent buffer
in relation to the capital requirement. The total capital
target was kept at above 20%. Danske Bank fully meets
these capital targets.
The Board of Directors will continue to adapt capital
targets to regulatory developments in order to ensure a
strong capital position.
Capital distribution policy
As our capital position continues to be strong, the Board
of Directors is proposing a dividend of DKK 2.0 per
share. This is in line with the recommendations issued
by the Danish FSA for capital preservation due to the
uncertainty associated with the corona crisis.
On 31 March, Fitch Ratings (Fitch) placed its long-term
ratings on Danske Bank on Watch Negative due to the
sharp deterioration of economic conditions caused by
the corona crisis. At the same time, it downgraded its
Subordinated Tier 2 debt ratings to ‘BBB+’ from ‘A-‘ and
upgraded its Additional Tier 1 Capital Instrument ratings
to ‘BBB-‘ from ‘BB+’. These changes refl ected previously
announced changes to ratings criteria.
At the same time, Fitch affi rmed its ratings and revised
its outlook on Realkredit Danmark to Negative from
Stable. The change in outlook also refl ects the expected
consequences of the corona crisis. However, Fitch
expects the effects for Realkredit Danmark to be less
negative than for the Group as a whole and more
manageable relative to earnings and capitalisation.
On 19 June, Fitch removed its ratings from Rating
Watch Negative and affi rmed its ratings of Danske
Bank. At the same time, Fitch assigned a Negative
outlook to Danske Bank’s ‘A’ issuer rating. The Negative
outlook refl ects the economic uncertainties relating
to the fallout from the corona crisis and the fi nancial
uncertainties relating to the Estonia case. At the time,
Fitch revised its outlook for Realkredit Danmark from
Negative back to Stable.
S&P Global Ratings (S&P) and Moody’s Investors
Service (Moody’s) took no rating action in respect of
30
Danske Bank / Annual Report 2020
Danske Bank in 2020. S&P affi rmed its ratings and
outlook for Danske Bank on 2 July, 21 September and
16 December, and Moody’s affi med its ratings and
outlook for Danske Bank on 19 June, 23 September and
18 December.
Moody’s and S&P have a Stable outlook for Danske
Bank, whereas Fitch retains its Negative outlook. The
outlooks refl ect the economic uncertainties relating
to the fallout from the corona crisis and the fi nancial
uncertainties relating to the Estonia case.
societal impact. ESG analysis may include a broad range
of sub-assessments, and defi nitions vary considerably
among research providers.
Unlike credit ratings, ESG ratings are unsolicited and in
principle based on publicly available information.
ESG rating agency
Score at
31 December
2020
Score at
31 December
2019
Danske Bank’s ratings, 31 December 2020
Moody’s
S&P
Fitch
Ratings
CDP Worldwide, UK
B
C
ISS ESG, USA
C+ Prime
C Prime
MSCI ESG Ratings, USA
BB
B
Sustainalytics, USA
Medium Risk
Medium Risk
Counterparty
rating
A1/P-1
A+/A-1
A+
Vigeo Eiris, France
64
59
Deposits
A2/negative/P-1
-
A+/F1
Senior debt
A3/P-2
A/A-1
A+/F1
Issuer rating
A3/P-2
A/A-1
A/F1
Outlook
Stable
Stable
Negative
Non-preferred
senior debt
Tier 2
AT1
Baa3
BBB+
-
-
BBB
BB+
A
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 upgraded
the covered bonds issued from capital centre T to
‘AAA’ (Stable outlook) from ‘AA+’ (Stable outlook) on
8 January 2021, due to a lowering of the required
overcollateralisation.
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 analytical activities that address a business’s
Dansk Bank made the CDP Worldwide climate change
B List in 2020, an improvement from the C List in
2019, which puts the Group second only to the 271
companies on the A List.
In December, ISS ESG ratings upgraded its rating of
Danske Bank to ‘C+’ from ‘C’ due to a reassessment
of risk weights relating to business ethics, and also in
December, MSCI ESG Ratings upgraded its ESG rating
of Danske Bank to ‘BB’ from ‘B’, due to the strong
performance of Danske Bank’s green fi nancing.
In December, Sustainalytics lowered its ESG Risk Rating
for Danske Bank to High Risk from Medium Risk, due
primarily to an error correction.
Funding and liquidity
The corona crisis continued to impact the market for
credit in the second half of 2020, though credit markets
generally improved considerably from conditions in the
fi rst half of the year.
During 2020, the Group issued non-preferred senior
bonds of DKK 23.7 billion, senior debt of DKK 19.9
billion, covered bonds of DKK 31.4 billion and tier
2 capital of DKK 3.7 billion, bringing total long-term
wholesale funding to DKK 78.7 billion.
Our strategy of securing more funding directly in our
main lending currencies, including NOK and SEK,
Danske Bank / Annual Report 2020
31
New regulation
In December 2017, the Basel Committee on
Banking Supervision (BCBS) published the fi nal
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 fi rst half of 2021.
The Danish implementation of the EU banking package
(CRD IV and BRRD II) was adopted by the Danish
parliament in December 2020 and took effect on
28 December 2020. The Group expects the Danish
implementation of the EU banking package to have a
limited impact on the Group’s capital and REA.
As part of the European Banking Authority’s (EBA)
roadmap to enhance internal models used to calculate
credit risk, Danske Bank has started implementing the
revised set of EBA guidelines and technical standards,
which caused REA increases in 2020. We expect
further increases amounting to around DKK 30 billion
in the fi rst half of 2021, all else equal, and increases
again in the second half of 2021.
In October 2020, the Danish implementation of the EU
covered bonds package was published for consultation.
The draft legislation is expected to be presented to
the Danish parliament in the fi rst quarter of 2021.The
rules include a requirement for a cover pool liquidity
buffer and stipulate eligible cover pool assets. Further,
a new requirement for a minimum level of cover pool
overcollateralisation is introduced. On the basis of the
draft legislation, the new rules are expected to have a
limited impact on the Group.
remains in place, but we will also utilise central bank
facilities to obtain funding in the most cost-effi cient
manner.
We plan for regular issues in the EUR benchmark format
in covered bonds, senior and non-preferred senior
bonds as well as issues in the domestic USD market
for senior and non-preferred senior bonds in the Rule
144A format. The benchmark issues are expected to be
supplemented by private placements of bonds.
From time to time, we will issue in GBP, JPY, CHF
and other currencies when market conditions allow.
Issuance plans for subordinated debt in either the
additional tier 1 or tier 2 formats will depend on
balance-sheet growth and redemptions on the one side
and our capital targets on the other. Any issuance of
subordinated debt may cover part of our funding need.
Note G22 provides more information about the issuing
of bonds in 2020.
Danske Bank’s liquidity position remained robust. Stress
tests show that we have a suffi cient liquidity buffer well
beyond 12 months. At the end of 2020, our liquidity
coverage ratio stood at 154% (31 December 2019:
140%), with an LCR reserve of DKK 710 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 31 December 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).
The Supervisory Diamond
The Danish FSA has identifi ed a number of specifi c 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 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.
32
Danske Bank / Annual Report 2020
Investor Relations
Investor Relations keeps investors and analysts updated
on Danske Bank’s strategic development, fi nancial
performance and outlook through participation in all
types of proactive investor communication such as
roadshows, conferences and consultations, including
roadshows for debt investors on specifi c major
transactions.
This work normally includes extensive travel activity
with the participation of the Executive Leadership Team,
however, in 2020 all travelling activity ceased from
March due to the outbreak of the coronavirus pandemic.
As a result, all types of investor relations activities
were changed to virtual events in order to ensure that
we continued to provide timely updates on the latest
developments and maintained our relations with key
stakeholders in the investor community.
In 2020, investor events were held with participation
of more than 500 investors from the Nordic countries,
other European countries, Asia and the US.
Danske Bank shares
Danske Bank shares are listed on Nasdaq Copenhagen
and are included in a number of Danish and international
equity indices, such as the OMX Copenhagen 25 CAP
Index (OMXC25CAP). At the end of 2020, Danske Bank
shares had an index weighting of 5%.
Danske Bank’s share price declined from DKK 107.8
at 31 December 2019 to DKK 100.6 at 31 December
2020, a decrease of 7%. In comparison, the
OMXC25CAP Index increased 34%, while the
Europe 600 Banks Index decreased 24%.
Danske Bank shares
(DKK)
Share capital (millions)
Share price (end of year)
Total market capitalisation
(end of year) (billions)
Earnings per share
Dividend per share
Book value per share
Share price/book value per share
2020
8,622
100.7
85.9
4.7
2.0
187.6
0.5
2019
8,622
107.8
92.0
16.7
8.5
183.1
0.6
Danske Bank is covered by 29 sell-side analysts, who
regularly publish research reports and sector reports.
A list of the analysts and other relevant information,
including fi nancial reports, investor presentations,
share and bond information, is available at https://
danskebank.com/investor-relations/reports.
The average daily trading volume of Danske Bank shares
was 3.5 million. The Danske Bank share was the third
most actively traded share on Nasdaq Copenhagen
during 2020.
Danske Bank shares
Index 2015 = 100
Danske Bank Europe 600 Banks
300
250
200
150
100
50
0
2015
2016
2017
2018
2019
2020
Danske Bank / Annual Report 2020
33
Shareholders
At the end of 2020, Danske Bank had about 299,000
shareholders. The 10 largest shareholders together
owned about 42% of the share capital.
We estimate that shareholders outside Denmark, mainly
in the US and the UK, hold around 38% of the share
capital.
Danske Bank shareholders 2020
Other
5%
Rest of Europe
13%
UK
7%
USA
18%
A. P. Møller
Holding
21%
k
r
a
m
n
e
D
Rest of Denmark
36%
According to the Danish Companies Act, shareholders
must notify the company if the voting rights of their
shares represent 5% or more of the voting rights of
the company’s share capital or if the nominal value
of their shares represents 5% or more of the share
capital. Shareholders must also disclose changes in
shareholdings if they exceed or fall below specifi ed
percentage thresholds.
One shareholder has notifi ed Danske Bank of holding
5% or more of the share capital:
•
A.P. Møller Holding holds about 21% of the share
capital.
34
Danske Bank / Annual Report 2020
Organisation and management
General meeting
The general meeting is Danske Bank’s highest decision-
making authority.
In 2020, the annual general meeting was held on 9
June. The originally scheduled general meeting on 17
March 2020 was postponed upon recommendation
from the Danish Financial Supervisory Authority due to
uncertainty about whether the meeting could be held in
accordance with the health and safety guidelines issued
by the Danish authorities.
Danske Bank’s Articles of Association are available
at danskebank.com/about-us/corporate-governance
and contain information about the notice convening the
general meeting, shareholders’ admission and voting
rights as well as shareholders’ right to submit proposals
and have specifi ed business transacted at the meeting.
All shareholders have voting rights according to the
number of shares held at the date of registration, and
each share of DKK 10 carries one vote. No share has
any special rights attached to it.
Only the general meeting can amend the Articles of
Association. An amendment requires not less than
a two-thirds majority of the votes cast and not less
than two-thirds of the share capital represented at the
general meeting and entitled to vote.
A resolution to wind up Danske Bank by merger or
voluntary liquidation can be passed only if adopted by
not less than three-quarters of the votes cast and not
less than three-quarters of the share capital represented
at the general meeting and entitled to vote.
Board of Directors
The Board consists of thirteen members, nine elected by
the general meeting and four elected by and among the
employees.
Board members elected by the general meeting stand
for election every year. As prescribed by Danish law,
members elected by and among the employees serve on
the Board of Directors for a four-year term, with the next
election to be held prior to the annual general meeting in
2022.
The Nomination Committee operates as a preparatory
committee for the Board of Directors with respect to the
identifi cation and selection, as well as the competency
and suitability assessment of candidates to the Board of
Directors and to the Executive Leadership Team. Board
candidates are nominated by the Board of Directors
or the shareholders and are elected by the general
meeting.
Raija-Leena Hankonen and Martin Blessing were
appointed as new members of the Board of Directors at
the annual general meeting on 9 June 2020. Jens Due
Olsen stepped down from the Board of Directors on 7
April 2020.
Pages 244-249 provide information on the individual
members of the Board of Directors, including their
directorships. Note G37 on page 173 provides
information on the number of Danske Bank shares held
by the members of the Board of Directors, and note G36
on page 167 provides information on the remuneration
of the members of the Board of Directors.
Work of the Board of Directors in 2020
In 2020, the Board of Directors held 25 meetings, of
which 1 was held as a written meeting and 10 were
extraordinary meetings. As to committee meetings
(ordinary and extraordinary), the Audit Committee held
9 meetings, the Risk Committee held 9 meetings, the
Conduct & Compliance Committee held 8 meetings,
the Nomination Committee held 4 meetings and the
Remuneration Committee held 6 meetings.
The Board members’ participation in Board and
Committee meetings is illustrated below.
BoD
Committees
Audit CCC
Nomina-
tion
Remune-
ration
Risk
Karsten Dybvad
25/25
8/8
4/4
6/6
4/4
Jan Thorsgaard Nielsen 25/25 9/9
8/8
8/8
Carol Sergeant
Bente Bang
Martin Blessing
Lars-Erik Brenøe
24/25
25/25
12/12
24/25
Kirsten Ebbe Brich
25/25
8/8
Thorbjørn Lundholm Dahl 25/25
Raija-Leena Hankonen
12/12 5/5
Charlotte Hoffmann
24/25
Bente Avnung Landsnes 24/25 9/9
3/3
Jens Due Olsen
6/8
3/3
Christian Sagild
23/25 7/9
Gerrit Zalm
25/25
4/4
4/4
6/6
5/5
6/6
1/1
9/9
5/5
8/9
8/9
Organisation and management
Danske Bank / Annual Report 2020
35
In the fourth quarter, the Board of Directors carried out
the annual evaluation of the Board of Directors, including
its composition, the work on the Board committees, the
committee structure and the leadership of the Board
chairman. To ensure anonymity, an external consulting
fi rm facilitated the evaluation. All members of the
Board of Directors and the Executive Leadership Team
answered comprehensive questionnaires. The fi ndings
and conclusions were subsequently presented to and
discussed by the Board of Directors.
The aim of the evaluation was to ensure, among other
things, that the composition of the Board of Directors
as well as the special competencies of each Board
member enable the Board of Directors to perform its
tasks. As the Board of Directors operates as a collegial
body, its overall competencies and experience are the
sum of the individual board members’ competencies and
experience. The composition of the Board of Directors
aims to ensure the stable and satisfactory development
of Danske Bank for the benefi t of its customers,
employees, shareholders and other stakeholders. The
competencies of the Board of Directors collectively
are described in the Competency profi le, which is
available on danskebank.com. Pages 244-249 provide
information on the competencies of the individual Board
members.
The results of the 2020 evaluation were overall good
and showing good alignment both within the Board of
Directors and between the Board of Directors and the
Executive Leadership Team. The Board of Directors will
work on the agreed focus areas in 2021.
Executive Leadership Team
Team members
Title
Groot, member of the Executive Leadership Team and
Head of Corporates & Institutions, left his position with
Danske Bank.
Changes to the organisation
On 25 August 2020, we announced changes to the
organisation and to the Executive Leadership Team
(ELT). The aim of the redesigned organisation is to
reduce complexity, increase effi ciency and become even
more competitive for our customers.
A new Commercial Leadership Team was established
with effect from 1 February 2021. In addition to the
Executive Leadership Team, the Commercial Leadership
Team consists of 12 experienced leaders who undertake
important commercial roles in the Danske Bank Group.
The Commercial Leadership Team is responsible for
ensuring strong cooperation across the Group and
focuses on developing Danske Bank’s customer
offerings. The team is the key driver behind the Group’s
2023 plan to become a better and more competitive
bank.
Commercial Leadership Team
Team members
Title
Mark Wraa-Hansen
Head of Personal Customers Denmark
Stojko Gjurovski
Head of Personal Customers Nordic and Country
Manager Finland
Johanna Norberg
Head of Business Customers Denmark &
Nordic and Country Manager Sweden
Trond Mellingsæter
Country Manager Norway
Lars Alstrup
Head of Products & Solutions Personal
and Business Customers Denmark & Nordic
Paul Gregory
Head of Corporate & Institutional Banking
Claus Harder
Head of Markets & Transaction Banking
Chris Vogelzang
Chief Executive Offi cer
Atilla Olesen
Head of Investment Banking & Securities
Berit Behring
Head of Large Corporates & Institutions
(previously Head of Wealth Management and
Interim Head of Corporates & Institutions)
Karsten Breum
Chief People Offi cer (as of 25 August 2020)
Carsten Rasch Egeriis Chief Risk Offi cer
Stephan Engels
Chief Financial Offi cer (as of 1 April 2020)
Glenn Söderholm
Head of Personal & Business Customers
(previously Head of Banking Nordic and
Interim Head of Banking DK)
Philippe Vollot
Chief Compliance Offi cer
Frans Woelders
Chief Operating Offi cer (as of 18 March 2020)
On 18 May 2020, Jacob Aarup-Andersen, member of
the Executive Leadership Team and Head of Banking
DK, resigned. With effect from 25 August 2020, Jakob
Linda Olsen
COO for Personal & Business Customers
Rob de Ridder
COO for Large Corporates & Institutions
Kim Larsen
Head of Group Communications,
Brand & Marketing
Christoffer Møllenbach Head of Group Finance
Corporate governance recommendations
Corporate governance recommendations issued by
the Danish Committee on Corporate Governance
are available at corporategovernance.dk. The
recommendations are best practice guidelines for the
management of companies with shares admitted for
trading on a regulated market in Denmark, including
Nasdaq Copenhagen A/S. If a company fails to comply
with a recommendation, it must explain why it has
36
Danske Bank / Annual Report 2020
chosen a different approach. Danske Bank complies with
all recommendations.
The statutory corporate governance report issued in
accordance with section 134 of the Danish FSA’s
Executive Order of Financial Reports for Credit
Institutions and Investment Firms etc. section 107b of
the Danish Financial Statements Act, and the Nasdaq
Nordic Main Market Rulebook for Issuers of Shares
(“Main Market Rulebook”), is available at danskebank.
com/about-us/corporate-governance. The report
includes an explanation of Danske Bank’s status on all
recommendations.
The Danish Bankers Association, which is now part of
Finance Denmark, has issued a Corporate Governance
Code, which Danske Bank must comply with or explain
why it does not comply. The Corporate Governance Code
is available on fi nansdanmark.dk. Danske Bank complies
with all recommendations set out in the Code. Danske
Bank’s explanation of the status on all recommendations
is included in section E of its Corporate Governance
Report 2020.
New business segments
On 25 August 2020, the Group announced changes to
the organisation. The aim of the redesigned organisation
is to reduce complexity, increase effi ciency and become
even more competitive for our customers. Going
forward, our commercial activities will be organised in
four reporting business units:
•
•
Personal & Business Customers, which will serve
personal customers and small and medium-sized
corporates across all Nordic markets
Large Corporates & Institutions, which will serve
large corporates and institutional customers across
all Nordic markets
• Danica Pension
• Northern Ireland
Furthermore, going forward, earnings from Danica
Pension will be presented as Net income from insurance
business due to Danica Pension now being a separate
business unit. This will also increase transparency and
simplicity in the income statement, as Danica Pension’s
business model is very different from that of the rest of
the Group.
The table below shows the impact on the fi nancial
highlights. The interim report for the fi rst quarter of
2021 will refl ect the new structure, and comparative
fi gures for 2020 will be restated.
The effect of these changes on the fi nancial highlights for 2020 are presented in the table below.
Financial highlights 2020 with changed presentation of Danica Pension
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Net income from insurance business
Total income
Operating expenses
Impairment charges other intangible assets
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax, core
Profi t before tax, Non-core
Profi t before tax
Tax*
Net profi t
Financial
highlights
2020
Changed
presentation of
Danica Pension
Adjusted
highlights
2020
21,875
15,137
4,856
514
-
42,383
28,103
379
13,901
7,001
6,900
-596
6,304
1,715
4,589
276
-3,510
31
80
1,669
-1,454
1,454
-
-
-
-
-
-
-
-
22,151
11,627
4,887
594
1,669
40,929
26,649
379
13,901
7,001
6,900
-596
6,304
1,715
4,589
Danske Bank / Annual Report 2020
37
The table below shows the new business segments with the adjusted 2020 fi gures. The split between the
new business units Personal & Business Customers and Large Corporates & institutions is disclosed with
some uncertainty (5-10%), as the new business unit structure has not yet been fully implemented.
Adjusted 2020 fi gures for the new business units
(DKK millions)
Personal
& Business
Customers
Large Corpo-
rates &
Institutions
Danica
Pension
Northern
Ireland
Non-core
Other
Activities
Adjusted
highlights
Net interest income
Net fee income
Net trading income
Other income
Net income from insurance business
Total income
Operating expenses
Impairment charges other intangible
assets
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax, core
Profi t before tax, Non-core
Profi t before tax
Cost/income ratio (%)
16,084
5,481
1,168
702
-
4,983
5,910
3,491
6
-
23,435
14,390
15,618
7,771
-
-
7,817
1,996
5,821
-
5,821
66.6
6,619
4,619
2,000
-
2,000
54.0
Loans and advances (end of year)
1,518,829
266,811
Deposits (end of year)
685,609
433,090
-
-
-
-
1,669
1,669
-
-
1,669
-
1,669
-
1,669
-
-
-
1,359
264
98
16
-
1,736
1,212
-
524
378
146
-
146
69.8
51,290
84,158
-
-
-
-
-
-
-
-
-
-
-
-596
-596
-
1,896
2,146
-275
22,151
-28
130
-130
11,627
4,887
594
-
1,669
-303
40,929
2,048
26,649
379
379
-2,730
13,901
8
-2,738
-
-2,738
-
7,001
6,900
-596
6,304
66.0
1,196 1,840,022
-9,684 1,195,319
Full-time equivalent staff end of period
6,913
2,553
817
1,353
32
10,708
22,376
The new organisation is at present not fully in place, and additional customer and employee transfers between
business units may be made, which could result in changes to the above adjusted Financial highlights for
2020, mainly for the Personal & Business Customers and Large Corporates & Institutions units.
38
Danske Bank / Annual Report 2020
xxxx
xxxxxxx
xxxx
Danske Bank / Annual Report 2020
39
40
Danske Bank / Annual Report 2020
Banking DK
The year 2020 was marked by the corona crisis, and we introduced several supporting initiatives to help our customers
in the best way possible. We continued to make progress on the journey towards becoming a better bank by launching
a number of business initiatives, including the new fi xed-rate FlexLife® loan type and a number of services to support
the green transition. A new set-up for serving retail customers and a new offering to mass-affl uent customers to be
implemented in 2021 were also announced. In relation to commercial customers, we continued to strengthen our role
as our customers’ strategic fi nancial adviser. Profi t before loan impairment charges fell DKK 1.7 billion as operating
expenses increased due to remediation and transformation costs, while total income was negatively affected by
the corona crisis. Profi t before tax was adversely affected by the increase in loan impairment charges refl ecting the
uncertainty related to the corona crisis.
2020
2019
Index
20/19
Banking DK
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax
8,927
4,049
955
171
9,111
4,397
1,176
227
14,101
14,912
9,650
4,451
907
3,544
8,736
6,176
-342
6,518
Loans, excluding reverse transactions
before impairments
Allowance account, loans
934,994
943,723
9,931
10,235
Deposits, excluding repo deposits
397,987
357,967
Allocated capital (average)
37,703
36,430
Q4
2020
2,157
1,009
240
44
3,449
2,628
821
70
751
Q3
2020
2,289
925
173
41
3,428
2,377
1,051
228
823
934,994
927,270
9,931
10,194
397,987
396,648
37,045
37,003
Index
Q4/Q3
94
109
139
107
101
111
78
31
91
101
97
100
100
98
92
81
75
95
110
72
-
54
99
97
111
103
Net interest income as % p.a. of
loans and deposits
Profi t before tax as % p.a. of
allocated capital (avg.)
Cost/income ratio (%)
0.69
0.72
0.65
0.70
9.4
17.9
68.4
58.6
8.1
8.9
76.2
69.3
Full-time-equivalent staff
4,737
4,588
103
4,737
4,718
100
Fact Book Q4 2020 provides fi nancial highlights at customer type level for Banking DK. Fact Book Q4 2020 is available at danskebank.com/ir.
Danske Bank / Annual Report 2020
41
2020 vs 2019
Customer activity
In mid-March, the coronavirus hit Denmark with
immediate, adverse effects on society, businesses
and households. Consequently, we launched multiple
initiatives to help our customers in the best way
possible, including access to overdraft facilities,
interest-only payments on loans, postponement of debt
repayment, increase and extension of credit facilities,
and interest- and fee-exempt holiday loans.
We also reached out proactively to thousands of
commercial customers to offer advice on business
planning and on how to protect their business. This
was very well received by customers, which helped
strengthen our relations with them.
Many retail customers contacted us with questions
regarding the coronavirus situation. We focused our
resources on assisting with advice and support, for
example regarding how to postpone debt repayment,
apply for credit facilities to pay bills because of income
loss or get loans to fi nance holidays.
As a result of the corona restrictions, we also saw
a further increase in customers’ use of our digital
channels, including online meetings with their advisers.
Customers’ appetite for loans did, however, decline, and
their savings increased, refl ecting the high uncertainty
caused by the situation.
Financial results
Income at Banking DK decreased DKK 0.8 billion in
2020 from the level in 2019. Although the result was
negatively affected by the corona crisis, this effect was
somewhat mitigated by the introduction of negative
deposit rates. Profi t before loan impairment charges was
also affected by an increase in operating expenses of
DKK 0.9 billion and thus fell DKK 1.7 billion. An increase
in loan impairment charges of DKK 1.2 billion due to
the uncertainty related to the corona crisis resulted in a
decrease in profi t before tax of DKK 3.0 billion.
Lending volumes were adversely affected by lower
demand for credit among commercial and retail
customers, refl ecting the general uncertainty caused
by the corona crisis. For commercial customers in
particular, the decline was driven not only by uncertainty
but also by the substantial relief packages offered by
the government, including tax postponement and salary
compensation schemes.
Deposits, on the other hand, increased as businesses
scaled down investments, deferred dividend payments
and increased liquidity buffers. For retail customers, we
saw a tendency to hold back on investments and reduce
spending.
Net interest income fell 2% following the decrease in
lending volumes triggered by lower demand for credit
among commercial customers and customers switching
to loan and mortgage products with lower margins.
In June, negative interest rates were also introduced
for retail customers with signifi cant deposits, which
somewhat offset the negative effect on net interest
income.
Net fee income was also adversely affected by the
corona crisis and fell 8%, mainly as a result of a decline
in card use and transaction-related fees. Moreover, the
2019 net fee income level was high because of the
strong remortgaging activity driven by historically low
interest rates.
Net trading income decreased as a result of higher
remortgaging activity in 2019 than in 2020 combined
with lower activity, especially within foreign exchange,
due to the corona crisis.
Operating expenses rose 10% owing to an increase
in costs for and in the number of staff working with
fi nancial crime prevention, other regulatory requirements
and compliance activities, including monitoring and
controls, staff training and IT. Costs for the Better Bank
transformation, including restructuring, also contributed
to the increase.
The increase in loan impairment charges to DKK 0.9
billion was driven by the changed outlook and potential
downside risk for the portfolio caused by the uncertainty
resulting from the corona crisis. We continued to see
limited impairments from actual credit deterioration.
Credit quality
Credit quality remained strong overall in 2020. Some
credit deterioration in the commercial portfolio was
observed in the spring, but since then, the development
42
Danske Bank / Annual Report 2020
has been stable in both the commercial and the retail
portfolio. Overall, the effects of the corona crisis on
the retail customer portfolio were modest. However,
uncertainty remains high, and we remain vigilant in
terms of any possible deterioration.
Retail customers
FlexLife® loan with fi xed interest rate
Home fi nancing and advisory services are a cornerstone
of our business, and we continued to develop our
offering.
Credit exposure
Credit exposure decreased to DKK 1,034 billion from
DKK 1,054 billion at the end of 2019, driven by a
DKK 31 billion decline in the commercial portfolio.
Q4 2020 vs Q3 2020
Profi t before tax decreased in the fourth quarter of
2020 from the level in the third quarter, driven by
higher operating expenses.
Net interest income decreased, primarily because of
deposit margin pressure.
Net fee income increased, due to higher
remortgaging activities in the fourth quarter and a
provision for service fees made in the third quarter
of 2020.
Operating expenses increased due to transformation
costs as well as provisions for remediation cases
and seasonality.
The fourth quarter of 2020 saw a net loan
impairment charge of DKK 70 million, against a net
charge of DKK 228 million in the third quarter. The
charge covers additional post-model adjustments
following the uncertainty related to the corona
crisis as well as a reversal resulting from updated
macroeconomic expectations, which were more
positive than third quarter expectations.
Business initiatives
Despite the extraordinary events of 2020, we
accelerated our efforts to become an even better bank.
We supported our customers through the turmoil
resulting from the corona crisis, and at the same time,
we worked dedicatedly on executing on our Better Bank
strategy to the benefi t of all of our stakeholders.
In August, Realkredit Danmark launched a fi xed-
rate version of the FlexLife® loan. The new version
complements the successful FlexLife® variable-rate
mortgage loan launched back in 2017. The loan was the
fi rst to allow homeowners to combine a fi xed interest
rate with an interest-only period of up to 30 years and
adjust their monthly payments along the way if their
needs or plans change without the hassle and costs
associated with switching from one loan to another. The
new loan has been very well received by customers,
and since its launch, we have issued fi xed-rate FlexLife®
loans for close to DKK 8 billion.
New service model
In 2021, we will introduce a new customer service
model. Across branches and other advisory units, we
will have a shared responsibility for customers while
at the same time further strengthening specialist
competencies. This will enable us to provide even better
advisory services whenever and wherever customers
want to meet us, for example during busy remortgaging
periods, when we will be able to agilely reallocate
adviser capacity. Furthermore, the setup will allow us
to collaborate better and more effi ciently across the
organisation and position us to meet future regulatory
requirements.
Transactions at cashier’s desks in our branches have
declined by more than 90% over the past ten years. The
trend refl ects customers’ preference for doing their day-
to-day banking via their Mobile Banking and eBanking
solutions, and making payments using their cards and
mobile phone. The corona crisis has only added to this
trend, and in 2021, we will therefore, as announced in
November 2020, signifi cantly reduce the number of
branches with cashier’s desks.
Danske Bank / Annual Report 2020
43
New offering to mass-affl uent customers
To further strengthen our appeal to mass-affl uent
customers and our position in this attractive market,
we will introduce a new offering in 2021 that caters
to this customer group’s more complex fi nancial and
advisory needs. It will include access to wealth advisers
specialising in asset planning and investment, a new
fi nancial planning simulation tool that provides an easy
overview and targeted recommendations.
Angel Investor Academy
To help private banking customers looking to invest in
growth businesses, we launched our Angel Investor
Academy. Through keynote presentations by experts
and established business angels, the academy offers
participants the knowledge required to get started as
business angels. The academy refl ects our strengths
in relation to investment and growth businesses and
is a building block in our ambition to become a more
innovative and strategic fi nancial adviser.
Award-winning Mobile Banking app
Danske Mobile Banking is popular among our
customers, who in a recent survey rated our digital
solutions best in class relative to the solutions offered
by our competitors. But also industry, IT and CX
professionals recognise our solution: At the European
Customer Centricity Awards, Danske Bank came in fi rst
in the Best Use of Mobile category, and at the Global
Retail Banking Innovation Awards, Danske Mobile
Banking won the Best Open Banking Initiative award.
We continue to add new features to the app, and
in 2020, we added options such as the transfer of
amounts to and from accounts with other banks and the
option of viewing own card PINs.
Commercial customers
Strengthening our role as strategic fi nancial partner
The intensive contact with our commercial customers
during the corona crisis has further strengthened
our role as strategic fi nancial partner and underlined
the demand for a targeted and relevant dialogue with
customers about the future direction of their business.
We continued our strategic adviser training with focus
on topics such as crisis management, sustainability,
value chains and business plans, and on how to balance
fi nancial risks and opportunities. We also launched
a number of external communication activities for
customers, including the Strategic Business Talks
for medium-sized commercial customers looking for
inspiration and advice on how to develop their business,
and a new programme series in which small businesses
discuss various dilemmas and get advice from
experienced entrepreneurs and Danske Bank experts.
District
In 2020, we completed the migration of all Business
Online customers to District – our online solution that
makes it easy for businesses not only to do their day-
to-day banking but also to get a full overview of their
fi nancial position and thus a strong basis for decision-
making. We continued to develop and further improve
District with new innovative functionality, for example a
real-time overview of accounts with other banks.
New payment solution partnership
New technology and alternative payment solutions are
becoming increasingly important to our customers. In
2020, we announced a new partnership with AltaPay,
an international payment solutions provider, to develop
simple, innovative and long-lasting solutions for receiving
payments across channels, including online, in-store and
mobile, with multiple international payment methods
attached. Our partnership with AltaPay is another
example of initiatives to realise our ambition of helping
our customers with more than just conventional banking
services.
App to manage company receipts and expenses
Together with Zenegy, a tech start-up specialising
in cloud-based salary systems, we developed a
Mastercard-based app that allows businesses and
employees to easily keep track of business-related
receipts, expenses and purchases. The app, to be
launched in 2021, is a simple alternative to the
time-consuming and expensive processes that many
businesses have today, and it forms part of our ambition
to offer customers a platform on which they can pick and
choose the solutions they need.
44
Danske Bank / Annual Report 2020
A signifi cant milestone for The Hub
Since we launched The Hub, our start-up platform,
together with Rainmaking back in 2015, we have helped
more than 7,500 start-ups with growth and funding
tools and with meeting one of their most critical needs:
bringing together the right team. More than 25,000 jobs
have now been posted on The Hub – and in the fourth
quarter of 2020, we recorded the submission of job
application number 500,000 through the platform. This
makes The Hub one of the most successful platforms to
support Nordic start-ups and growth businesses.
Engagement and business with Entrepreneur of the Year
Once again, we participated as a Danish partner in the
EY Entrepreneur Of The Year programme – a unique
global programme that recognises entrepreneurial
achievement among individuals and businesses. Our
partnership refl ects our commitment to support growth,
innovation and sustainability, and it is an excellent
opportunity to demonstrate our strategic fi nancial
sparring expertise, grow our business with existing
customers and attract new customers.
Society
In line with our Better Bank ambitions, we are
committed to contributing to sustainable progress, for
example by making sustainable choices easy for our
customers and by fi ghting fi nancial crime.
Helping homeowners get started with energy
improvements
Buildings account for around 40% of energy
consumption, and the energy saving potential for Danish
homes is thus crucial to ensuring future sustainability.
At the same time, more and more homeowners focus on
how they can save money on their energy bill and also
live in a more sustainable way.
In 2020, we launched a series of new activities that
focus on reducing energy consumption and created a
new website hub to give customers an easy overview of
the help, services and products we offer customers to
get started with energy improvements in their home.
Partnership with AB Gruppen on Energihjem.dk
Among these initiatives is a partnership with AB
Gruppen, the provider of Energihjem.dk, which is the
largest Danish internet portal for homeowners looking
for advice on energy-saving solutions. In November,
a brand new version of the portal was launched,
making all relevant information about energy-saving
improvements, including fi nancial aspects, easily
accessible to homeowners. The Energihjem.dk portal
is an excellent opportunity for us to market Danske
Bank as a competent adviser and provider of attractive
solutions to homeowners looking to fi nance home and
energy improvements.
Home-improvement and energy-saving report
Together with OBH, consulting engineers, we introduced
a home improvement and energy-saving report to
help homeowners get started. As part of the report,
an experienced construction adviser goes through
the home and provides recommendations on how to
combine energy-saving improvements with other home
improvements the owner wants to make, for example
putting in a new kitchen.
Attractive loans to fi nance energy-saving solutions
We introduced attractive terms for retail customers
who want to invest in energy-saving solutions for their
homes. The loan can be either a mortgage loan from
Realkredit Danmark or a Danske Bolig Fri loan, a Danske
Prioritet Plus loan or another bank home loan.
Increasing demand for green mortgage bonds
In 2019, Realkredit Danmark was the fi rst Danish
mortgage credit institution to launch green bonds in
the Danish market. The loans are based on RD Cibor6®
Green and are offered to customers looking to fi nance
commercial property with an A or B energy rating.
We saw a signifi cant increase in demand for green
fi nancing from our commercial customers, and by the
end of 2020, Realkredit Danmark’s green mortgage
bond lending had reached a volume of around DKK 9.5
billion.
Favourable loan to fi nance electric cars
To help accelerate the green transition and make electric
cars a more attractive choice for our customers, we
introduced a new loan option. The loan is offered at a
0% variable interest rate and reduced establishment
costs, and with the option of taking out car insurance
with Tryg, our insurance partner, on favourable terms.
Danske Bank / Annual Report 2020
45
Banking DK
Below target
On target
5
4
3
2
1
Retail
customers
Commercial
customers
Environmentally friendly payment cards
Large or small, we want to make sustainable choices
simple for our customers. In 2020, we took the fi rst
steps towards replacing existing payment cards with
new environmentally friendly cards made from 86%
recycled plastic. The goal is to replace all existing plastic
cards used by Danske Bank customers. With this new
initiative, we will be among the fi rst banks in the world to
issue payment cards made of recycled plastic.
Fighting fi nancial crime
An important dimension of our commitment to having a
positive impact on society is our contribution to fi ghting
fi nancial crime. Compliance is therefore a key focus area
in our daily work. In 2020, we continued our training
efforts and IT investments and will do so also in 2021.
For example, we will further expand employee training
and dialogue to ensure that all employees across the
organisation remain aware of their role and are well
prepared to identify and act on unusual behaviour.
Customer satisfaction
Our focus on delivering the best customer experience
and seamless customer journeys continues.
Satisfaction among both commercial and retail
customers continued to grow in the fi rst half of the year.
The positive trend was driven by a close dialogue with
our customers during the corona crisis, proactively
advising customers via one-on-one contact, etc.
In the second half of the year, however, customer
satisfaction declined following the extensive press
coverage of a number of legacy issues.
Our 2023 ambition for commercial and retail customer
satisfaction is to be in the top two. At the end of
2020, we were ranked on target among commercial
customers. On retail customer satisfaction, we were
ranked below target in a number fi ve position. Against
this background, we are more than ever committed to
continuing our close dialogue with customers to offer
them the best experience every time they are in touch
with us.
46
Danske Bank / Annual Report 2020
Danske Bank / Annual Report 2020
47
Banking Nordic
In 2020, Banking Nordic continued to support customers through the effects of the corona crisis in combination
with strong growth across most of our market areas. Furthermore, Banking Nordic made progress in relation to
the Better Bank transformation, most recently with the Better Nordic Retail Bank transformation initiative to create
a stronger and more harmonised set-up for serving retail customers across the Nordic countries combined with
an acceleration of digital offerings. Profi t before loan impairment charges decreased DKK 0.3 billion as operating
expenses increased due to remediation and transformation costs. Profi t before tax was affected by the corona crisis
in the form of higher loan impairment charges.
Banking Nordic
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax
Loans, excluding reverse transactions
before impairments
Allowance account, loans
Deposits, excluding repo deposits
Allocated capital (average)
Net interest income as % p.a. of loans
and deposits
Profi t before tax as % p.a. of allocated
capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
2020
2019
Index
20/19
8,105
1,690
242
532
7,839
1,857
280
592
10,569
10,567
6,569
4,000
1,404
2,596
6,269
4,298
510
3,788
655,334
634,974
5,083
327,165
36,604
3,880
270,522
34,371
103
91
86
90
100
105
93
275
69
103
131
121
106
Q4
2020
2,003
323
62
120
2,509
1,795
714
-68
782
Q3
2020
2,055
438
60
135
2,688
1,585
1,102
364
738
655,334
634,314
5,083
5,060
327,165
304,891
36,081
36,547
Index
Q4/Q3
97
74
103
89
93
113
65
-
106
103
100
107
99
0.87
0.89
0.84
0.87
7.1
62.2
2,415
11.0
59.3
2,599
8.7
8.1
71.5
59.0
93
2,415
2,493
97
Fact Book Q4 2020 provides fi nancial highlights at customer level for Banking Nordic. Fact Book Q4 2020 is available at danskebank.com/ir.
48
Danske Bank / Annual Report 2020
2020 vs 2019
Customer activity
During 2020, Banking Nordic’s markets were hit by
the corona crisis. The coronavirus pandemic created
signifi cant turmoil on the global markets, and many
countries decided on periods of lockdown, which
impacted both businesses and societies as a whole.
Banking Nordic launched several initiatives to support
customers through the turmoil resulting from the
corona crisis. In the weeks following the outbreak of the
pandemic, many retail customers made use of initiatives
such as interest-only periods on mortgage loans and
a range of streaming services and live chats set up to
specifi cally give advice in relation to the market situation
resulting from the crisis.
A large number of customers in the large-customer
segments were contacted with advice, and we have
focused on the various corona crisis relief packages
introduced by governments as well as on giving advice
on tools to increase liquidity, including the establishment
or extension of credit lines.
Financial results
Banking Nordic’s income saw a fl at development from
2019 to 2020. Total underlying income increased,
mainly on the basis of a combination of a favourable
interest rate environment and growth across all market
areas, especially in the retail business in Sweden and
Norway, with a continuously good infl ow of customers.
Across our market areas, partnerships accounted for
a signifi cant part of the customer infl ow and acted as a
core lever for our growth strategies. Some of the positive
effects were, however, offset by lower income from a
distribution agreement in Banking Finland.
Overall, the fi nancial results were adversely affected by
currency effects, as the Norwegian krone depreciated
vis-à-vis the Danish krone during 2020. In addition,
the turmoil resulting from the corona crisis lowered
customer activity, which had an adverse infl uence on
fees and trading.
Banking Nordic saw growth in lending in most market
areas from the levels at the end of 2019. However,
while Sweden and Norway saw growth in the retail
space, Finland mostly saw growth in the commercial
space. Commercial lending in Sweden and Norway
was heavily infl uenced by lower credit appetite due to
general uncertainties because of the corona crisis as
well as relief packages from the government. Deposits
increased due to a combination of the onboarding of
HSB customers in Sweden and government packages
introduced as a result of the corona crisis and low
consumer spending.
Net interest income increased 3%, benefi ting from the
development in the interest rate environment, especially
the rate cuts made by the Norwegian central bank but
also the lower deposit margin pressure in Sweden for
part of the year. Furthermore, the increase was also
driven by growth generated by the partnership strategy.
Net fee income decreased 9% from 2019 to 2020 due
mainly to lower income from a distribution agreement in
Banking Finland. The underlying development in net fee
income was fl at from 2019 to 2020. Although Banking
Nordic saw dampened activity due to the corona crisis,
investment activity picked up, especially in the latter half
of 2020.
Net trading decreased as a result of lower activity,
especially within foreign exchange, due to the corona
crisis.
Asset Finance saw low investment activity in core
markets, but still maintained a good development
throughout 2020. The decrease in Other Income was
due mainly to realisation of investment properties in
2019.
Banking Nordic saw an increase in operating expenses
of 5% from the level in 2019 due to ongoing compliance
remediation as well as costs for the Better Bank
transformation. Underlying costs decreased due to
restructuring and tight cost control.
Loan impairments for the full year amounted to a
net charge of DKK 1,404 million, driven mainly by
the update of macroeconomic scenarios and single–
name exposures. The increase related mainly to the
commercial portfolio and was driven by Banking Sweden
and Banking Finland.
Danske Bank / Annual Report 2020
49
Credit quality
Credit quality remained strong despite the increasing
uncertainty about the future created by the second wave
of the coronavirus pandemic. Some credit deterioration
was observed from March in the commercial portfolio,
while the credit quality of the personal customer
portfolio remained stable. Yet some effect on the
personal customer portfolio is expected in the future.
Credit exposure
Credit exposure increased to DKK 807 billion from
DKK 764 billion at the end of 2019. The increase
was driven mostly by the personal customers and
commercial property portfolios in Sweden.
Q4 2020 vs Q3 2020
Lending at Banking Nordic increased 3%, and
despite a decline in total income, profi t before tax
increased 6% in the fourth quarter as a result of
impairment reversals.
Net interest income decreased 3% due to a less
favourable interest rate environment across market
areas, which also led to higher margin pressure on
deposits.
Net fee income decreased to DKK 323 million (Q3
2020: 438 million) due to lower income from a
distribution agreement in Banking Finland. Adjusted
for this, we saw an increase in net fee income of
10% due to good investment and lending activity.
Operating expenses increased 13%, due mainly to
restructuring as well as seasonality.
Loan impairments amounted to a net reversal of
DKK 68 million in the fourth quarter of 2020, driven
mainly by an improved macroeconomic outlook,
against a charge of DKK 364 million in the third
quarter of 2020.
Business initiatives
At Banking Nordic, our ambition is always to put our
customers fi rst by offering the best experience when
they do their day-to-day banking or seek fi nancial advice.
As a challenger in Sweden, Norway and Finland, we
are working towards providing the best offerings to
our customers, and we work diligently on supporting
a sustainable development and on contributing to the
societies that we are part of, to the benefi t of all of our
stakeholders.
Retail customers
Better Nordic Retail Bank
A key project at Banking Nordic in 2020 was the
Better Nordic Retail Bank project. It aims to create an
organisation in which customers will have their concerns
and problems solved faster at the fi rst point of contact,
experience more digital and better self-service solutions
and get an offering that is not only competitive, but also
tailored to their personal preferences. Important steps
were taken in 2020, and Retail Banking was reorganised
to become a harmonised Nordic Blueprint in the third
quarter with more specialised advisers.
Growth through partnerships
Partnerships continued to be the core consumer
strategy. In Sweden, the partnership with Saco/TCO
accounted for 46% of the mortgage portfolio, while
Akademikerne in Norway accounted for 60%, and both
are a core lever of growth in the markets.
In Sweden, the new agreement with HSB, Sweden’s
largest association for home savers, almost doubled the
retail customer base from around 177,000 to 267,000.
The migration of more than 102,000 HSB members
and an additional 12,000 new savers generated
SEK 4.2 billion in new deposits and SEK 725 million in
investments.
In Norway, the partnership with Tryg was off to a good
start, increasing the potential for holistic advisory
services for our customers. In addition, Danica Pensjon
entered into an agreement with NITO, which constitutes
the fi rst major opportunity for full product integration
across the various fi nancial services offered by Tryg,
Danica Pension and Danske Bank. NITO is a union with
92,000 engineers that already had a partnership with
Tryg.
In Finland, the offer to our partnership customers via the
Akava academic union and the share savers association
was widened during the year to include equity savings
accounts.
50
Danske Bank / Annual Report 2020
Commercial customers
Nordic Mid-Corp Transformation
The Nordic Mid-corp Transformation is a key project
that focuses on our SMEs and mid-corp customers. It
combines the strengths of local business knowledge
with the benefi ts of a scalable, harmonised Nordic
organisation with shared digital platforms and a pan-
Nordic IT and development agenda. The transformation
project was launched in the fi rst half of 2020. Since
then, signifi cant steps have been taken to align markets,
roles and responsibilities. The organisational blueprint is
now in place as is the strategy for 2023, which includes
a harmonised service model and a digital and product
development agenda. With the transformation, we
aim to further increase our Nordic footprint, grow the
market share in the Nordic SME and mid-corp space
and improve customer satisfaction. The new service
model delivers a combination of self-service solutions for
day-to-day banking combined with customised advisory
services that focus on supporting growth and our
customer’s fi nancial development.
Innovation and digitalisation
Throughout the year, Banking Nordic also improved
products and solutions in all segments. Danske Mobile
Banking was further developed for our retail customers,
and we saw a substantial improvement in the rating of
the app.
District is our digital platform for commercial customers,
as mentioned in the Banking DK section. In 2020, we
added new features to District, for example ’Accounts
from other banks’. This solution enables the user to get
an overview in District of all accounts of the business
across banks. Danske Bank is the fi rst bank to be able
to offer this in real time for the Nordic countries, and
during 2020, our subscription manager feature was
rolled out further, allowing customers to get an overview
of and manage their subscriptions. Going forward, we
will focus on new features and will launch several new
solutions, which will take District from being an online
banking solution to being a complete fi nancial platform,
which will also enable our advisers to focus on the more
complex tasks.
Society
As part of the Group’s ambition to operate sustainably
and have a positive impact on the societies that we are
part of, Banking Nordic strengthened its position and
took several new initiatives.
Sustainability is a core element in the future business
model of Banking Nordic and has therefore been a focus
area in our transformation programmes, not least for
the mid-corp transformation. This focus enables us to
be part of the global sustainable agenda and support
our customers in their future transformation. To support
a proactive and strategic approach to sustainability,
we have initiated relevant training for all customer-
facing colleagues working with the mid-corp segment
within specifi c topics to integrate societal impact and
sustainability in the dialogue with our customers,
for example with industry-specifi c insights and ESG
assessments.
Sustainability is also one of the key focus points in
Asset Finance. At the end of the year, GreenFleet70 was
launched in the Danish market. This is a unique concept
with a range of solutions and products targeting large
and medium-sized businesses. With GreenFleet70,
businesses and their employees can choose a company
car solution that focuses on reducing CO2 emissions
and thereby contributes to a reduced climate footprint.
In addition to a large selection of electric car models,
GreenFleet70 contains a number of tools and reports,
including an advanced planner.
Customer satisfaction
Customer satisfaction continues to be a key priority, and
we focus on our goal of delivering the best customer
experience by opening up the bank, building easy
customer journeys and providing customer-centric
solutions.
Our 2023 ambition is to be in the top two on
satisfaction among commercial and retail customers in
all our markets.
Danske Bank / Annual Report 2020
51
For commercial customers, we are on target in Finland
and Norway, and customers are satisfi ed with our
services and solutions, whereas we are not at the
desired level in Sweden. Actions to improve customer
satisfaction have been taken. For Retail customers, we
are challenged in all our markets. Especially in retail
Norway, we are challenged by capacity constraints due
to corona crisis-related requests.
To mitigate this, we deliver a good customer experience
by focusing on being extra close to our customers,
ensuring that they are fi nancially confi dent by proactively
giving advice, through one–on-one contact as well as
updates, webinars and podcasts for larger audiences.
We have paid special attention to speedily meeting
customers’ needs through tailored solutions, responding
to the unforeseen changes in their fi nancial situation
caused by the corona crisis.
Banking Nordic, retail customers
Below target
On target
5
4
3
2
1
Banking Nordic, commercial customers
Below target
On target
5
4
3
2
1
52
Danske Bank / Annual Report 2020
Danske Bank / Annual Report 2020
53
Corporates & Institutions
The corona crisis signifi cantly impacted economic activity, and combined with high economic uncertainty, this created
a challenging operating environment for our customers. We acknowledge our responsibility in helping minimise the
negative impact of the crisis on society and focused on supporting our customers with advisory services, execution
and liquidity, which contributed to high customer satisfaction and higher income. The investments in our capital
markets offerings continued to yield results, and we supported customers with a large volume of transactions in both
the primary debt and the equity markets, while affi rming our position as the leading Nordic bank within sustainable
fi nancing. Profi t before loan impairment charges increased DKK 2.1 billion due to an increase in total income. Profi t
before tax was negatively impacted by increased loan impairment charges against exposures in the oil and gas industry
and an increase in expenses due primarily to remediation and transformation costs.
2020
2019
Index
20/19
Corporates & Institutions
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Goodwill impairment charges
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax
Profi t before tax and goodwill
impairment charges
Loans, excluding reverse trans.
before impairments
of which loans in General Banking
Allowance account, loans
Deposits, excluding repo deposits
4,029
3,079
3,452
6
10,567
5,421
-
5,146
4,304
842
3,656
2,909
2,114
8
8,688
4,834
803
3,051
1,348
1,703
842
2,506
213,547
165,113
3,491
393,690
209,148
171,478
3,156
270,685
227,131
32,684
of which deposits in General Banking
336,404
Allocated capital (average)
36,626
Net interest income as % p.a.
of loans and deposits
Profi t before tax as % p.a.
of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
0.74
0.79
2.3
51.3
1,653
5.2
64.9
1,665
Q4
2020
1,019
978
740
-2
2,735
1,508
-
1,228
627
600
600
Q3
2020
1,060
630
1,094
-
2,783
1,282
-
1,502
406
1,096
1,096
213,547
165,113
3,491
393,690
336,404
35,548
203,926
167,402
4,312
354,380
295,887
36,903
0.71
0.73
110
106
163
75
122
112
-
169
-
49
34
102
96
111
145
148
112
-
-
-
6.8
55.1
99
1,653
11.9
46.1
1,684
Total income
(DKK millions)
FI&C
hereof xVA*
Capital Markets
General Banking
Total income
4,345
309
1,214
5,008
10,567
2,845
-283
1,211
4,631
8,688
153
-
100
108
122
904
143
557
1,275
2,735
1,265
314
212
1,306
2,783
*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.
Index
Q4/Q3
96
155
68
-
98
118
-
82
154
55
55
105
99
81
111
114
96
-
-
-
98
71
46
263
98
98
54
Danske Bank / Annual Report 2020
2020 vs 2019
High customer activity
In times when the economic outlook poses a signifi cant
challenge to businesses and the societies we are part
of, it is essential that we are there for our customers,
whether by assisting them in making good fi nancial
decisions in a highly volatile operating environment, or,
if necessary, by contributing buffer liquidity. Since the
corona crisis hit, customer demand for risk hedging,
liquidity and capital raising has been higher than usual,
and since March, we have increased credit facilities
to our customers by approximately DKK 70 billion. A
signifi cant number of these facilities remain unutilised
and now serve as backup liquidity facilities for our
customers. We continued to see increased customer
and investor demand for sustainable fi nancing, and
Equity Capital Markets had the busiest year ever
recorded. M&A activity in Corporate Finance and
originate-to-distribute activity in Loan Capital Markets
was, on the other hand, adversely affected by the
challenging market environment.
Financial results
Profi t before tax fell to DKK 0.8 billion, despite a 22%
increase in total income. Total income increased, driven
primarily by higher net trading income in FI&C and higher
net interest income in General Banking. The increase
was offset by higher loan impairment charges and
higher operating expenses.
Net interest income increased as a result of higher
average deposit and lending volumes.
Net trading income increased signifi cantly from
the level in 2019, as FI&C benefi ted from higher
customer activity and improved market conditions.
Positive developments in value adjustments (xVA) also
contributed to the result.
Net fee income increased from the level in 2019, as
the investments made in our capital markets offerings,
in Capital Markets and FI&C, continued to bear fruit in
the primary debt capital markets and the equity capital
markets.
Operating expenses increased, driven primarily
by ongoing compliance remediation as well as the
contribution to the Danish resolution fund and the
planned costs for the Better Bank transformation. Direct
staff costs fell as a result of fewer FTEs and the actions
announced in the third quarter of 2019 to restore
profi tability in FI&C. Reducing the cost base further is a
key part of our 2023 plan to become a better bank. As
part of the reduction plan, the full-time-equivalent staff
number fell in the last quarter of 2020, however, the
cost effects were limited in 2020.
Fixed Income & Currencies
Total income in FI&C increased from the level in
2019, driven by high customer activity, improved
market conditions and positive developments in value
adjustments of the derivatives portfolio (xVA).
We saw substantial interest from corporate customers
in fi nancing from capital markets, and we have been
successful in supporting them. As a result, fee
income from primary debt transactions increased
from the level in 2019. Secondary Rates & Credit
income was challenged by the volatility and spread
widening that followed the outbreak of the coronavirus
pandemic in March 2020. However, from the second
quarter onwards, income recovered as a result of a
normalisation of market conditions, higher customer
activity and strong performance in the credit markets.
Currencies & Liquidity also benefi ted from increased
hedging activity and more favourable market conditions.
Value adjustments of the derivatives portfolio (xVA)
contributed DKK 309 million in 2020, against
DKK -283 million in 2019. The continued normalisation
of credit markets and Danske Bank’s funding spread
led to a reversal of the negative funding valuation
adjustment made in the fi rst quarter of 2020. During
the year, 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
Total Capital Markets income was stable from the level
in 2019. In Equity Capital Markets, customer activity
was extraordinarily high, whereas the challenging
market environment led to lower trading income in
Investor Solutions, lower originate-to-distribute activity
in Loan Capital Markets and lower M&A income despite
good M&A activity towards the end of the year. We
will continue to focus on our Capital Markets platform,
remaining fully committed to being a leading capital
markets provider in the Nordic countries.
General Banking
Income from General Banking activities increased as
customers bolstered their liquidity in the wake of the
corona crisis, leading to higher average deposit and
lending volumes. Lending volumes normalised towards
the end of the year, as customers drew less on the
liquidity facilities provided, whereas deposit volumes
continued to increase.
Fee income from transaction banking services was
broadly stable, despite lower trade fi nance activity as a
result of the disruption of global trade.
Credit quality
In 2020, loan impairments amounted to DKK 4.3 billion,
a signifi cant increase from the level in 2019. Most of
Danske Bank / Annual Report 2020
55
the net charge was attributable to oil- and gas-related
exposures. The initial impairments were driven by
the rapid decline in oil prices, whereas the continued
uncertainty in the asset-heavy offshore service and
drilling segments led to additional impairments during
the year, as lower activity makes restructurings diffi cult.
Overall, credit quality remained strong despite continued
uncertainty about the outlook for the oil industry and
an increased potential second round effect from the
coronavirus pandemic.
Net credit exposure from lending activities amounted
to DKK 541 billion at the end of December 2020, an
increase of DKK 97 billion from the level at the end of
2019. Most of the increase in the exposure was driven
by loans and unutilised committed facilities to corporate
customers and exposures to central banks. Exposures to
fi nancial institutions also increased.
Q4 2020 vs Q3 2020
Profi t before tax decreased, mainly as the result
of higher loan impairment charges and higher
operating expenses.
We continued to see good activity in Primary Debt
Capital Markets. However, FI&C income decreased,
driven by lower trading income from Secondary
Rates & Credit due partly to lower customer activity
towards the end of the year.
Capital Markets income increased signifi cantly,
driven mainly by a seasonal increase in Corporate
Finance.
General Banking income was broadly stable from
the third quarter.
Operating expenses increased from the level in
the third quarter, owing mainly to costs related
to transformation activities as well as higher
performance-based compensation. The number
of full-time-equivalent staff fell, driven by the
announcement in October to discontinue positions,
however with limited effect on 2020 expenses.
Net loan impairment charges amounted to DKK 0.6
billion, against charges of DKK 0.4 billion in the third
quarter of 2020. In the fourth quarter, most of the
charges were driven by the oil and gas portfolio and,
to some extent, exposures to the retailing segment.
Business initiatives
Customers
The coronavirus pandemic and the economic uncertainty
that resulted from the spread of the virus remained the
overarching theme throughout the year. We therefore
dedicated our efforts to remaining very close to our
customers, supporting them with their investment
and risk hedging needs in the highly volatile operating
environment, and if necessary, by contributing buffer
liquidity. The fi rst months after the outbreak of the
coronavirus pandemic, we saw a steep rise in corporate
customers requesting additional short-term credit
facilities, yet later this demand faded, and our focus
instead switched to offering assistance with various
capital market transactions.
Equity Capital Markets had the busiest year ever
recorded, and Danske Bank ended 2020 in second
place in the Nordic league table, measured on deal value.
We supported customers with 54 ECM transactions in
the course of the year, including transactions such as
a SEK 14.3 billion recapitalisation of SAS, a DKK 6.2
billion secondary placing in green energy provider Ørsted
and a DKK 3.6 billion secondary placing in insurance
company Tryg. Other notable transactions include a
DKK 1.3 billion IPO of HusCompagniet, a DKK 602
million new issue and dual listing of Boozt, an EUR 88
million IPO of biotech company Nanoform, and three
offerings for technology provider Sinch totalling SEK 3.6
billion.
The market for green and sustainability-linked loans
and green bonds continued to grow, and sustainability
has now become an integral part of most fi nancing
discussions. Debt Capital Markets continued to help
customers with bond issuance, well-diversifi ed across
types, businesses and currencies, such as an EUR 6
billion senior unsecured bond for the Federal Republic
of Germany, and Danske Bank facilitated an increasing
number of green transactions. Examples are a joint
bookrunner role in supporting the Kingdom of Sweden
with its inaugural SEK 20 billion Green Bond issue, and
joint bookrunner roles in a Fixed Rate EUR 500 million
Green Bond for SBAB Bank and EUR 500 million Green
Bonds for one of Finland’s largest credit institutions,
MuniFin, and energy provider Vattenfall, respectively.
Further to this, we cemented our position as a leading
Nordic arranger of multibank loans. During the year, we
continued to broaden our capabilities to cover the full
spectrum across leveraged fi nance, corporate lending,
project fi nance, infrastructure fi nance, ship fi nancing,
real estate fi nancing and fund fi nance. In relation to
this, our project fi nance offering took substantial steps
forward, as illustrated by our roles in one of the largest
green fi nancings ever, the GBP 5.5 billion project
fi nancing for the fi rst two phases (2.4GW) of the Dogger
Bank offshore wind farm, and the Northvolt USD 1.6
billion project fi nancing for the Ett lithium-ion battery
project in Sweden. The two projects were named “Global
Green Deal of the Year” and “Europe Industrial Deal of
the Year”, respectively, by Project Finance International.
56
Danske Bank / Annual Report 2020
Institutional Banking strengthened its ties to our Investor
Services and this resulted in deeper customer relations
and a strong commercial momentum in the post-trade
area across the Nordic countries. Danske Bank now
advises institutional customers on a broad range of
services – from safekeeping of assets to regulatory-
driven reporting capabilities, allowing customers to focus
on their core business. As a result, Investor Services
continued to see solid growth in fee income.
In General Banking, we onboarded the Finnish state to
our award-winning cash management solution, and we
are now the state bank in Denmark, Sweden, Finland
and Ireland. Further to this, we began implementing our
new Trade Finance strategy. Trade Finance as a line of
industry is set to see substantial changes in the coming
years with technology and regulation as the key drivers.
As our customers’ preferred trade fi nance partner,
Danske Bank has played a leading role in Trade Finance
over the past decade, and we want to continue to do so,
facilitating and fi nancing our customers’ business needs
across borders also in the future.
Digitalisation efforts continued
In order to support and challenge our customers to
become more effi cient, we continued our efforts to make
day-to-day banking easy and safe. For instance, we
continued investing in our markets engine, optimising
end-to-end processes and making trading more
accessible and transparent for our customers. We
introduced a new digital foreign exchange (FX) platform
to provide faster, easier and more effi cient transaction
execution for customers, and this new platform has met
a ready audience.
In addition, new building blocks were added to District,
Danske Bank’s corporate fi nancial platform, allowing
customers to get a comprehensive, real-time overview
of their fi nancial position, including accounts, payments
and liquidity. One of the most notable additions to
District towards the end of the year was functionality
that enables customers to access solutions from other
partners. By utilising this new feature, customers can,
for instance, view accounts across banks in one place,
which gives them a full fi nancial overview and enables
them to make even better fi nancial decisions.
affected customers via our Nordic platform. The new
setup will bring customers who today use the German
branch closer to the Nordic core and is part of our efforts
to simplify the bank and reduce costs.
In the fourth quarter of 2020, Corporates & Institutions
began its restructuring journey. With our new
organisation that took effect across the bank in late
January 2021, we aim to become a simpler bank,
capable of sharing our expertise to a much wider extent,
and with new technology and products that will enable
us to provide high-quality advice and solutions to many
more customers.
Society
The year 2020 marked another leap forward for our
sustainable fi nancing activities, for which we continued
to see increasing demand, particularly in the second half
of the year when corona crisis-related fi nancing was less
of a focus point for our customers. Hence, we helped
a growing number of Nordic corporates and investors
develop towards a more sustainable economy, and our
Sustainable Bond arranging, for example, exceeded
the record year 2019. We will continue to expand our
sustainability-linked platform over the years to come
with the intention of making an impact in this fi eld and
support our customers towards a greener and more
sustainable future.
In 2020, we came out in fi rst place in the Nordic league
table, measured on arranging sustainability-linked loans,
and we were ranked number one among our Nordic
peers as bookrunner for green, social and sustainable
bonds on a global scale. By the end of 2020, we had
come far in reaching our initial sustainable fi nancing
target for 2023, and we look towards updating the
target later in 2021, once we have more clarity about
the EU taxonomy.
Sustainable finance report – target: well above 100 bn
Sustainable financing
More than DKK 100 billion in sustainable financing
102
100
Shaping internally to become a better bank
Recent years have seen a change in the way businesses
interact, and day-to-day banking can nowadays, to a
large extent, be carried out across borders.
47
Towards the end of the year, we communicated
our decision to close down our branch in Germany,
expectedly in the fi rst half of 2022, and instead service
2019
2020
2023 target
Sustainable bonds
Green loans, RD
Green loans, bank
Danske Bank / Annual Report 2020
57
In the aggregated ranking across the Nordic countries,
we regained our strong number one position. The
underlying country-specifi c results across all Prospera
reports that we subscribe to are a continued lead
position in Denmark and Finland, third place in Sweden
and fourth place in Norway.
In FI&C, we maintained our Nordic lead position in FX
and Interest Rates Swaps, but otherwise saw a mixed
picture with improvements in some areas and declines
in others.
In Capital Markets, we received good results in
Domestic Equities and in Loan Agency & Operations.
On the Relationship Banking side, we saw positive
developments in Corporate Banking Sweden and
Finland, but in Institutional Banking, we were challenged
in Norway and Sweden.
We maintained our longstanding number one ranking
as the preferred fi nancial provider of Cash Management
and Trade Finance in the Nordic region for the seventh
and tenth year, respectively.
Corporates & Institutions
Market position, all (rolling year)
5
4
3
2
1
The chart shows current average ranking over a full set of reports for all Prospera
surveys to which Corporates & Institutions subscribes in comparison with the
main competitors in each geographical market. A number one ranking in a market
indicates best average ranking in that market.
Anti-fi nancial crime initiatives
As part of our ongoing efforts to combat fi nancial
crime, we continue to invest in our front-to-back risk
management framework and our fi rst line of defence
teams while working closely with our customers to help
them understand and manage the risks that they may be
exposed to in the course of their day-to-day business. In
support of this, and to improve the customer experience,
we have implemented, and continue to develop, industry-
leading solutions to keep Danske Bank at the forefront
of the fi ght against fi nancial crime while also supporting
our societal commitments.
We will continue to partner with other Nordic banks
in the development of Invidem’s shared Know-Your-
Customer (KYC) service. Towards the end of the year, the
fi rst pilot customers began testing the Invidem solution.
We expect the platform to go fully live in the course of
2021.
Employees
The coronavirus pandemic not only affected customers
but also had substantial impact on the way in which we
organised in 2020. Thus, for the main part of the year,
the vast majority of our 1,700 Corporates & Institutions
employees were coordinating and servicing customers
from home, yet nevertheless, we managed to drive
customer satisfaction up, and new digital competencies
were acquired from which we will also benefi t in the
future.
In 2020, we ramped up our efforts to achieve a
more diverse and inclusive workforce at Corporates
& Institutions. We appointed a D&I Lead and D&I
Ambassadors and launched a broad inclusion-in-action
initiative, with participation of leaders from all levels
of Corporates & Institutions and over 80 employees
volunteering their time. The collaboration kick-started
an initiative to help identify actions for a more inclusive
place to work, which we will start implementing in 2021.
We will continue to follow up on our target for our First
Year Analyst programme, and it is our ambition to
achieve greater diversity, especially to have more female
leaders than we have today. We have approved several
process targets for recruitment, customer teams, social
events, training and awareness to help ensure we meet
the Group’s structural targets for 2023.
Customer satisfaction on upward trend
Amid the corona crisis, we demonstrated our
commitment to our customers, which translated into
improved customer satisfaction levels in a number of the
annual reviews conducted by Prospera, the independent
market research company in the Nordic countries.
58
Danske Bank / Annual Report 2020
Danske Bank / Annual Report 2020
59
Wealth Management
Wealth Management continued to expand its product offering to include even more sustainable options. Danica
Pension introduced the Danica Balance Sustainable Choice investment solution, which allows customers to invest
pension savings with a stronger focus on sustainability, and the solution attracted investments of DKK 580 million.
Danske Invest launched the Danske Invest Global Sustainable Future fund, which invests in businesses playing a
leading role in the work towards a more sustainable future. Despite the highly volatile market conditions caused by
the corona crisis, profi t before tax was stable at DKK 2.5 billion (adjusted for the gain from the sale of Danica Pension
Sweden and the goodwill impairment charges in 2019) and we were able to expand the product portfolio, create solid
fund performance and provide positive returns for customers.
Wealth Management
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Goodwill impairment charges
Profi t before tax
Profi t before tax and goodwill
impairment charges
Allocated capital (average)
Profi t before tax as % p.a. of
allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
2020
2019
-285
6,310
-26
-79
5,919
3,435
-
2,484
2,484
16,564
15.0
58.0
1,539
-248
5,902
340
1,405
7,398
3,589
800
3,009
3,809
15,569
19.3
59.3
1,563
Breakdown of assets under management*
(DKK billions)
Life conventional
Asset management
Assets under advice
192
998
576
194
934
489
Total assets under management
1,765
1,616
Index
20/19
-
107
-
-
80
96
-
83
65
106
-
-
98
99
107
118
109
Q4
2020
-72
2,148
-90
-64
Q3
2020
-70
1,371
20
14
1,922
1,334
916
-
1,006
1,006
16,849
876
-
459
459
17,166
23.9
10.7
47.7
65.7
1,539
1,568
192
998
576
190
918
525
1,765
1,632
Index
Q4/Q3
-
157
-
-
144
105
-
219
219
98
-
-
98
101
109
110
108
*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.
60
Danske Bank / Annual Report 2020
2020 vs 2019
Customer activity
The volatility in fi nancial markets in 2020 increased
customer demand for advice, especially during the
market turmoil seen in February and March, which
caused a lot of uncertainty and anxiety among
many customers. Hence, throughout 2020, Wealth
Management had a strong focus on communicating
about the corona crisis and its impact on the fi nancial
markets to both inform and reassure customers.
Several direct messages were sent to more than
500,000 investment customers in Danske Bank
with an assessment of the situation and general
recommendations. Many customers also had the
option of participating in webinars with our investment
strategists held throughout the year.
Customers retracted funds in the fi rst half of 2020 amid
the volatile fi nancial markets. As markets rebounded,
customer activity normalised. Throughout 2020, there
was keen interest in investment products with a strong
focus on sustainability, for example the Danske Invest
Global Sustainable Future equity fund, which was
launched in 2020.
Financial results
The profi t before tax of DKK 2.5 billion for 2020 was on
par with that for 2019, when adjusted for the gain
of DKK 1.3 billion from the sale of Danica Pension
Sweden and the goodwill impairment charge of
DKK 0.8 billion in 2019. Profi t before tax for Danica
Pension decreased slightly from the level in 2019, while
Asset Management’s profi t before tax increased from
the level in 2019.
The fi rst quarter of 2020 was signifi cantly impacted by
the market turmoil that resulted from the corona crisis.
Financial markets saw negative returns on equities,
and a rise in the discount curve led to low investment
returns. In the second quarter of 2020, market
conditions rebounded and they continued to improve in
the third and fourth quarters of the year.
Net trading income fell roughly DKK 360 million from
the level in 2019, due largely to a lower investment
result on life insurance products where Danica Pension
bears the investment risk. The investment result
includes provisions for pension yield tax in relation to the
health and accident business and write-downs of assets
in connection with the clean-up of accounting balances
after the merger of Danica Pension and the former SEB
Pension.
Other income amounted to a negative DKK 79 million,
against DKK 1.4 billion in 2019. The decrease was due
to 2019 benefi ting from the gain of DKK 1.3 billion from
the sale of Danica Pension Sweden.
Operating expenses decreased 4% from the level
in 2019. In 2019, expenses were impacted by
extraordinary costs for the integration of SEB Pension
and the compensation of approximately DKK 210 million
paid to certain customers with Flexinvest Fri. Total
operating expenses, excluding costs for the integration
of SEB Pension and for compensation paid in connection
with Flexinvest Fri, have increased, primarily because
of costs for ongoing compliance remediation as well as
planned costs for the Better Bank transformation.
Premiums in Danica Pension amounted to DKK 30.3
billion, against DKK 29.6 billion in 2019, when adjusted
for the sale of Danica Pension Sweden.
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.
At the end of 2020, Assets under Management totalled
DKK 1.8 trillion, against DKK 1.6 trillion at the end of
2019. The increase in Assets under Management was
due primarily to positive developments in the fi nancial
markets.
Net fee income amounted to DKK 6.3 billion and was
up 7% from the level in 2019. Net fee income in Danica
Pension increased from the 2019 level, largely due to
higher risk allowance fees and an improved result in the
health and accident business. Asset Management net
fee income increased, largely as a result of record-high
performance fees.
Net sales increased from the level in 2019. In the
Institutional segment, we saw a notable increase and
positive net sales in 2020. As expected, the retail
segment remained challenged in 2020 due to continued
Flexinvest Fri remediation meetings, but with better-
than-expected results and a smaller net outfl ow than in
2019.
Danske Bank / Annual Report 2020
61
Investment return on customer funds
In 2020, the performance of Wealth Management funds
was impressive, despite the market turmoil that resulted
from the corona crisis, and we are proud to have been
able to deliver solid returns to our customers in a very
challenging year.
ESG sustainability label – making Danske Invest the
fund manager in Europe with most funds bearing the
certifi cation.
Among the most important business initiatives during
2020 were:
Asset Management specifi cally was able to provide
customers with strong returns. More than 74% of Asset
Management investment products performed above
benchmark in 2020, against 70% in 2019.
Additionally, Danica Pension customers received
positive returns across investment profi les. Customers
with Danica Balance Mix achieved returns on
investments between 2.8% for low-risk profi les with 0
years to retirement and 12.2% for high-risk profi les with
30 years to retirement. The return for customers with
a Danica Balance medium risk profi le with 20 years to
retirement was 9.5%.
Q4 2020 vs Q3 2020
In the fourth quarter of 2020, profi t before tax
increased DKK 0.5 billion to DKK 1.0 billion, due
primarily to record-high performance fees in Asset
Management.
Net fee income was up 57% from the level in the
third quarter, due both to performance fees in Asset
Management and higher income from insurance risk
products and higher AuM-correlated fees in Danica
Pension.
Operating expenses increased 5% from the third
quarter to the fourth quarter of 2020 due largely
to costs related to our transformation activities as
well as higher performance-based compensation,
increased marketing costs due to higher activity
in the fourth quarter of 2020 and increased
consultancy expenses.
Business initiatives
Society
During 2020, we made a number of improvements
to our offerings in line with our ambition to have a
positive impact on the societies we are part of. Among
other things, we further strengthened our sustainable
investments offering. In recognition of our extensive
focus on sustainability, a substantial number of
Danske Invest’s funds were awarded the LuxFLAG
Launch of new sustainable pension solution
With the new Danica Balance Sustainable Choice
solution, Danica Pension’s about 800,000 customers
can invest their pension savings with an even stronger
focus on sustainability. In this new investment solution,
we select investments that actively contribute to making
a difference in areas such as climate, environment,
health, food production or other social aspects that
support the UN Sustainable Development Goals. Danica
Balance Sustainable Choice is Danica Pension’s next
step in enhancing its focus on sustainable investments
in the company’s general portfolio and a strong step
towards its ambition of investing DKK 100 billion in the
green transition by 2030.
Better fi nancial security for the self-employed
Many self-employed people lack fi nancial security and
are poorly covered in case of long-term illness and
loss of ability to work. Danica Pension has joined a
new partnership with the independent unemployment
insurance fund Ase and the non-profi t fund Pension for
Selvstændige to provide better fi nancial security for the
self-employed through insurance and pension savings.
With this new partnership, Danica Pension can reach
out to 60,000 self-employed people to provide advice
and relevant offerings.
New initiative to reduce sickness
Danica Pension launched Step Care, which is a new
initiative to reduce sickness absence among its
customers and get people on long-term sick leave
back to work. Step Care is a unique treatment method
with which a personal course of treatment is prepared
for the individual who may have a physical or mental
disorder. Depending on the symptoms, a psychologist or
physiotherapist will continuously monitor developments
and gradually intensify the treatment effort or involve
other professionals if necessary – completely according
to the personal needs of the customer.
Launch of new sustainable equity fund
To further strengthen our sustainable investments
offering, we have launched the Danske Invest Global
Sustainable Future equity fund, which invests in
businesses leading the global transition to increased
62
Danske Bank / Annual Report 2020
sustainability – a theme with substantial growth
potential and attractive investment opportunities.
The fund focuses on those businesses that are best
positioned to address global challenges related to
sustainability, such as climate change, overconsumption
of the earth’s resources and the shortage of water. The
fund has been launched across all markets for both retail
and institutional clients.
Enhanced process for norms-based investment
restrictions
We updated our process for applying norms-based
investment restrictions to businesses. The initiative
supports our ambition to meet changing customer
demands and invest customers’ assets according
to their values and preferences while providing an
attractive investment offering and return potential. The
decision to apply norms-based restrictions to specifi c
businesses is founded on a strong process, which
includes, for example, input and research from multiple
ESG data sources, Danske Bank’s investment teams,
Danske Bank’s Sustainability Position Statements,
our customers across the Nordic countries, Nordic
investment institutions and other relevant stakeholders.
As a result of the enhanced process, we have restricted
businesses that are involved in issues related, for
example, to climate change, biodiversity, human rights,
water pollution, etc.
Index funds with a sustainable layer
We launched a number of index funds aimed at retail
investors across the Nordic region to ensure a wider
range of passively managed funds in the retail segment.
The funds were formerly branded ProCapture and were
available exclusively to institutional customers. Going
forward, the funds are branded Danske Invest Index
and they further cement Danske Invest’s position as
the biggest Danish provider of index funds for retail
and institutional investors. Our range of index funds
differs from many other index funds by having a built-in
sustainable layer. In all Danske Invest funds, actively
as well as passively managed, the portfolio managers
exclude investments that derive a substantial share of
their revenue from activities that involve thermal coal,
tar sands, controversial weapons and tobacco. The index
funds in Danske Invest Index that have the designation
‘restricted’ added to the name go a step further by also
deselecting several other investments, for example
companies involved in activities such as weapons,
alcohol, gambling or pornography.
Employees
During 2020, we focused increasingly on diversity
and inclusion (D&I). Several local ambassadors were
appointed among employees at Wealth Management
with the purpose of facilitating the D&I agenda and being
local D&I spokespersons, both on behalf of the initiative
and on behalf of the local management and colleagues.
The ambassadors were appointed by their local senior
management due to their infl uencer abilities and interest
in the area.
Customers
We have a continuous focus on improving customer
satisfaction by providing strong advice and best-in-class
investment and pension savings products to meet
customer needs and demands. In 2020, among other
things, we ramped up our efforts within sustainable
investments and launched new business initiatives
in Danica Pension to increase health and fi nancial
security among customers. These initiatives are further
described in the ‘Society’ section. Our efforts are
refl ected through improved customer satisfaction scores
in Asset Management as well as Danica Pension.
Asset Management
According to Prospera’s most recent survey from June
2020, Asset Management in Denmark remained
ranked as number one. Among all providers in the
Nordic markets, our ranking improved from number
two to number one. In Sweden, our ranking improved
from number thirteen to number ten, and in Norway, our
ranking improved from number six to number four. In
Finland, our ranking fell from number four to number fi ve.
Danica Pension
According to the December 2020 Aalund Research
survey on customer satisfaction, Danica Pension
improved its overall ranking in Denmark from number
four to number one (shared). In Norway, Danica Pension
improved its ranking from number four to number two
(shared).
Danske Bank / Annual Report 2020
63
64
Danske Bank / Annual Report 2020
Northern Ireland
In 2020, Northern Ireland, like the rest of the world, was heavily affected by the corona crisis. We took several initiatives
to support our customers through these challenging times, and our digital solutions saw increased activity. Our service
efforts continued to be recognised, as we fi nished the year with customer satisfaction rankings of number one in
business banking and number two in personal banking. Profi t before loan impairment charges fell DKK 0.3 billion,
despite an increase in underlying lending, refl ecting the sharply reduced UK interest rates. Profi t before tax was affected
by an increase in loan impairment charges refl ecting the uncertainty related to the corona crisis.
Northern Ireland
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax
Loans, excluding reverse transactions
before impairments
Allowance account, loans
Deposits, excluding repo deposits
Allocated capital (average)*
Net interest income as % p.a. of
loans and deposits
Profi t before tax as % p.a. of
allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
* Allocated capital equals the legal entity’s capital.
2020
2019
Index
20/19
Q4
2020
Q3
2020
Index
Q4/Q3
1,359
264
98
16
1,736
1,212
524
378
146
52,179
890
84,158
6,269
1,524
363
110
14
2,011
1,216
794
5
789
54,287
696
70,943
6,425
89
73
89
114
86
100
66
-
19
96
128
119
98
324
66
6
4
400
307
93
83
10
332
64
13
4
414
310
103
43
60
52,179
890
84,158
6,210
54,122
883
81,360
6,172
1.02
1.26
0.93
0.99
2.3
69.8
1,353
12.3
60.5
1,285
0.6
3.9
76.8
1,353
74.9
1,347
105
98
103
46
100
97
99
90
193
17
96
101
103
101
100
2020 vs 2019
Customer activity
The year 2020 was heavily affected by the global
pandemic, which affected both our customers and our
profi tability. The bank’s reputation benefi ted, however,
from a ‘force for good’ strategy.
For personal customers, the bank ensured all branches
and contact centres remained open throughout the
year, and set up priority telephone numbers for elderly
customers and healthcare workers. Over 5,300
mortgage holidays were provided to support customers,
alongside hundreds of personal loan and credit card
payment holidays.
For businesses, we provided more than GBP 450
million worth of corona crisis-related business support
loans, with more than GBP 395 million of this volume
coming through the UK government-backed Coronavirus
Business Interruption Loan Scheme (CBILS) and Bounce
Back Loan Scheme (BBLS). This assistance spanned
around 10,000 local business funding approvals.
Danske Bank / Annual Report 2020
65
Financial results
Profi t before tax decreased to DKK 146 million for
the full year 2020 (2019: DKK 789 million), driven
primarily by higher loan impairments and lower income.
Total income amounted to DKK 1,736 million (2019:
DKK 2,011 million). Net interest income was affected
by the sharp decline in UK interest rates from late
March. Underlying lending (excluding the public sector)
and deposits both increased year-on-year. Lending
includes UK government-guaranteed corona crisis-
related business support loans, while the increase
in deposits refl ected additional liquidity being held by
both business and personal customers. Non-interest
income decreased as a result of very low activity levels,
particularly in the second quarter, due to corona crisis-
related lockdown measures.
At DKK 1,212 million, operating expenses were broadly
maintained, as local cost reduction initiatives were
offset by costs related to the Better Bank initiatives and
regulatory compliance.
Credit quality
Loan impairment charges increased, refl ecting the
weaker UK economic outlook with impairment charges
for potential future loan losses in sectors heavily
impacted by the corona crisis.
Q4 2020 vs Q3 2020
Total income amounted to DKK 400 million (Q3:
DKK 414 million) despite the challenging conditions
caused by the corona crisis. The decrease in in-
come was partly offset by a slight decrease in
expenses. Hence, profi t before loan impairment
charges fell to DKK 93 million (Q3: DKK 103
million). Profi t before tax amounted to DKK 10
million (Q3: DKK 60 million) and was affected by
increasing loan impairment charges due to the
corona crisis.
While we have seen improvement since the second
quarter of the year, activity levels continue to be
affected by renewed local coronavirus measures.
Business initiatives
Our vision is to be recognised as the best bank for
customers, colleagues, partners and society. In a
challenging environment, we continued to execute our
strategy to digitally transform the bank, improve the
customer experience and reduce costs.
A highlight of the ‘force for good’ strategy saw the bank
set up a ‘check in and chat’ service with colleagues
volunteering to call elderly customers to check in on
their general well-being, have a chat and ask if there is
any way we as a the bank can help. More than 14,000
telephone calls were made in 2020, with around 600
referrals issued to third-party support agencies that we
believed could also help these customers with guidance.
The corona crisis also affected the digital space, and in
2020, we saw more than 5 million digital logons from
customers per month and there was a 32% increase in
digital transactions year-on-year.
It was also a year in which our progress on the diversity
agenda was formally recognised with a Silver Diversity
Charter Mark. Danske Bank is the only bank in Northern
Ireland to have reached this level of accreditation and
one of only two companies awarded it across all sectors.
In Northern Ireland, we have also achieved a 50:50
gender split in senior roles across the organisation.
On the green agenda, the bank was delighted to be
accredited at platinum level in the annual Northern
Ireland environmental benchmarking survey carried out
by Business in the Community. The result showcased
Danske Bank as the highest-ranked bank in the country
when it comes to environmental responsibility.
Customer satisfaction
We were pleased to fi nish the year in fi rst place in
Corporate & Business Banking and in second place in
Personal Banking.
Northern Ireland
Below target
On target
7
6
5
4
3
2
1
Retail
customers
Business
customers
Despite current challenges, we continue to digitally
transform the bank, improve the customer experience
and reduce costs. Our strategy is still to build a growing
and effi cient bank that is the clear leader in Northern
Ireland and a successful challenger in the rest of the UK,
delivering target shareholder returns.
66
Danske Bank / Annual Report 2020
Non-core
The winding-up of Non-core portfolios is proceeding according to plan. Profi t before tax for 2020 was a negative
DKK 596 million. Total lending stood at DKK 3.1 billion at the end of 2020, against DKK 7.5 billion at the end of 2019
due to the sale of loan portfolios in the Baltics, which led to lower capital requirements for the Group.
Non-core
(DKK millions)
Total income
Operating expenses
Profi t before loan impairment charges
Loan impairment charges
Profi t before tax
Loans, excluding reverse transactions
before impairments*
Allowance account, loans
Deposits, excluding repo deposits
Allocated capital (average)
Net interest income as % p.a. of
loans and deposits
Profi t before tax as % p.a. of
allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
Loan impairment charges
(DKK millions)
Non-core banking**
Non-core conduits etc.
Total
2020
2019
Index
20/19
-215
293
-508
88
-596
3,083
771
2,146
1,473
-61
219
-280
213
-493
7,456
842
1,668
2,379
-
134
181
41
121
41
92
129
62
Q4
2020
-128
84
-212
-98
-113
3,083
771
2,146
1,253
Q3
2020
19
44
-25
12
-37
5,441
962
2,109
1,377
0.96
1.27
0.53
1.57
-40.5
-136.3
32
-20.7
-359.0
159
-27
116
88
19
194
213
-36.1
-10.7
-65.6
32
231.6
50
-100
1
-98
-14
27
12
20
-
60
41
Index
Q4/Q3
-
191
-
-
-
57
80
102
91
64
-
4
-
* 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.
Danske Bank / Annual Report 2020
67
Q4 2020 vs Q3 2020
Profi t before tax amounted to a loss of DKK 113
million, against a loss of DKK 37 million in the third
quarter of 2020.
The increase in loss before tax in the fourth quarter
was due mainly to losses related to the sale of Baltic
portfolios, which affected total income and loan
impairment charges. Further, there was a one-off
provision for legacy issues in Ireland, which affected
operating expenses.
2020 vs 2019
The Non-core unit posted a loss before tax of DKK 596
million, against a loss before tax of DKK 493 million
in 2019, due mainly to losses related to the fi nal exit
from Estonia, which affected total income and operating
expenses. Further, operating expenses for 2019
benefi ted from an adjustment of VAT regarding previous
years.
Net credit exposure totalled DKK 4.1 billion, against
DKK 10.4 billion at the end of 2019.
At the end of 2020, total lending amounted to
DKK 3.1 billion. The Group has exited its banking
activities in Estonia, Russia, and Latvia. The Danske
Bank Russia legal entity was deregistered in December
2020, and we have thus terminated our activities in
Russia. At the Lithuanian branch, the only portfolio
remaining is a small portfolio of commercial loans that
are actively managed down. The sale of the Baltic loan
portfolios has been the primary driver of the reduction of
total lending in Non-core to less than half the amount at
the end of December 2019, and this led to lower capital
requirements for the Group.
The Non-core conduits portfolio amounted to DKK 2.7
billion, against DKK 3.9 billion at the end of 2019. The
portfolio consists mainly of liquidity facilities for conduits.
Total impairments amounted to a net charge of DKK 88
million, against DKK 213 million in 2019. The decrease
was due primarily to the sale of the Baltic loan portfolios
and a single-name exposure in a legacy Non-core
portfolio.
68
Danske Bank / Annual Report 2020
Other Activities
Other Activities includes Group Treasury and Group support functions as well as eliminations. Net interest income
primarily refl ects 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.
Other Activities
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Impairment charges other intangible
assets
Profi t before loan impairment
charges
Loan impairment charges
Profi t before tax
Profi t before tax
(DKK millions)
Group Treasury
Own shares and issues
Additional tier 1 capital
Group support functions
Total Other Activities
2020
2019
Index
20/19
-260
-255
136
-131
-509
1,816
379
-2,704
8
-2,712
-754
94
550
-2,603
-2,712
-5
-227
1,421
217
1,407
2,548
355
-1,497
-5
-1,491
825
59
785
-3,160
-1,491
-
-
10
-
-
71
107
181
-
182
-
159
70
82
182
Q4
2020
-54
-67
134
-70
-56
541
379
-976
1
-976
-48
-34
116
-1,011
-976
Q3
2020
-157
-59
104
8
-104
261
-
-365
-23
-342
-172
-11
117
-276
-342
Index
Q4/Q3
-
114
129
-
-
207
-
267
-
285
-
-
99
-
285
2020 vs 2019
Other Activities posted a loss before tax of DKK 2,712
million, against a loss before tax of DKK 1,491 million in
2019.
Net interest income amounted to a loss of DKK 260
million, against a loss of DKK 5 million in 2019. The
decrease was caused primarily by a decline in income
from allocated liquidity costs that were affected by
higher deposit volumes. This effect was partly offset by
an increase in income from structural changes to the
Group’s funding and liquidity management.
Net trading income amounted to DKK 136 million,
against DKK 1,421 million in 2019. The decrease was
due mainly to the fact that 2019 benefi ted from the
gain from the sale of the shareholding in LR Realkredit
and from other positive market value adjustments of the
private equity portfolio.
Operating expenses amounted to DKK 1,816 million,
against DKK 2,548 million in 2019. The decrease in
2020 was due mainly to a net reversal of provisions
for operational risk-related losses, which was made in
2019, thus also affecting the 2019 expense level.
Q4 2020 vs Q3 2020
Other Activities posted a loss before tax of DKK 976
million, against a loss before tax of DKK 342 million
in the third quarter of 2020.
Net interest income amounted to a loss of DKK 54
million, against DKK 157 million in the third quarter
of 2020. The increase in quarterly income was
driven primarily by the Internal Bank where allocated
liquidity costs increased following a number of
corrective actions to reduce deposit compensation
to the business units. Income at the Internal Bank
from managing short-term liquidity was also lower in
the fourth quarter.
Net trading income amounted to DKK 134 million,
against DKK 104 million in the third quarter of
2020, due mainly to value adjustments of own
bonds.
Operating expenses amounted to DKK 541 million,
against DKK 261 million in the third quarter
of 2020. The increase was due primarily to
transformation work, including restructuring costs.
Danske Bank / Annual Report 2020
69
Defi nition 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 fi nancial statements. The APMs provide a more consistent basis for comparing the results of fi nancial 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 defi nes
operating targets and monitors performance.
Throughout the Management’s report, performance is assessed on the basis of the fi nancial highlights and segment reporting, which represent the
fi nancial information regularly provided to management. The differences between the fi nancial highlights and the IFRS fi nancial statements relate to certain
changes in the presentation. Net profi t is the same in the fi nancial highlights and in the IFRS income statement. Note G3 to the fi nancial statements
describes the differences between the fi nancial highlights and the IFRS fi nancial statements, and each line item in the fi nancial highlights is reconciled with
the consolidated fi nancial statements prepared under IFRS.
Defi nitions of additional ratios presented on page 6 and in other sections of the Management’s report:
Ratios and key fi gures
Defi nition
Dividend per share (DKK)
The dividend per share proposed in the Annual report and paid to shareholders in the subsequent year. Accordingly,
for 2020, it is the dividend to be paid in 2021. 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 interest income as % p.a. of
loans and deposits
Net profi t as disclosed in the fi nancial highlights divided by the average of the quarterly average shareholders’ equity
(beginning and end of each quarter) within the year. Net profi t and shareholders’ equity are stated as if the equi-
ty-accounted additional tier 1 capital was classifi ed as a liability. In the numerator, net profi t is reduced by interest
expenses of DKK 551 million (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 13,526 million (2019: 17,744 million) compared to a simple average of total equity (beginning and the end of
the period).
Net interest income in the fi nancial 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 0.72% (2019:
0.79%) due to the daily average of the sum of loans and deposits being DKK 124.8 billion (2019: DKK 54.9 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 (C/I), (%)
Operating expenses, impairment charges on goodwill and impairment charges other intangible assets divided by total
income. All amounts are from the fi nancial highlights.
C/I, excluding impairment on
intangible assets (%)
Book value per share
Loan impairment charges as %
of net credit exposure
Allowance account as % of net
credit exposure
Operating expenses divided by total income. All amounts are from the fi nancial highlights.
Shareholders’ equity (that is, excluding equity-accounted additional tier 1 capital) divided by the number of shares
outstanding at the end of the period.
This ratio is calculated on the basis of loan impairment charges and loans and guarantees in core segments. The nu-
merator is the loan impairment charges of DKK 7,001 million (2019: DKK 1,516 million) from the fi nancial highlights
and annualised. The denominator is the sum of Loans at amortised cost of DKK 1,022.3 billion (2019: DKK 972.1
billion), Loans at fair value of DKK 802.6 billion (2019: DKK 794.9 billion) and guarantees of DKK 68.7 billion (2019:
DKK 83.1 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 fi nancial statements. The ratio is calculated for each business unit.
This ratio is calculated on the basis of the allowance account and loans and guarantees in core segments. The
numerator is the allowance account of DKK 22.6 billion (2019: DKK 20.5 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 fi nancial
statements. The denominator is the sum of Loans at amortised cost of DKK 1,022.7 billion, Loans at fair value of
DKK 816.3 billion, and guarantees of DKK 71.7 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 fi nancial statements. The ratio is
calculated for each business unit.
Realkredit Danmark bonds
funding loans
On page 25, 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.
Market shares of lending and
deposits
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 – fi rst quarter 2020, the comparative data for market shares in Finland, Sweden and
Norway was updated with December 2019 data.
70
Danske Bank / Annual Report 2020
Danske Bank / Annual Report 2020
71
72
Danske Bank / Annual Report 2020
Financial statements
74 Income statement
75 Statement of comprehensive income
76 Balance sheet
77 Statement of capital
80 Cash fl ow statement
81 Notes
81 G1. Basis of preparation
90 G2.
91 G3.
Changes and forthcoming changes to
accounting policies and presentation
Business model and business
segmentation
97 G4. Activities by country
99 G5.
Net interest and net trading income or
loss
102 G6. Fee income and expenses
104 G7.
Gain or loss on sale of disposal groups,
Income from associates and Other
income
105 G8.
Insurance contracts
106 G9. Operating expenses
107 G10. Audit fees
108 G11. Loan impairment charges
109 G12. Trading portfolio assets and liabilities
115 G13. Investment securities
117 G14. Due from credit institutions and central
banks
118 G15. Loans at amortised cost
124 G16. Loans and issued bonds at fair value
127 G17. Asset and deposits under pooled
128 G18.
schemes and unit-linked investment
contracts
Assets and liabilities under insurance
contracts
131 G19. Intangible assets
135 G20. Due to credit institutions and central
banks and Deposits
136 G21. Tax
140 G22. Issued bonds
144 G23. Assets held for sale
145 G24 Other assets and Other liabilities
148 G25. Equity
Danske Bank / Annual Report 2020
73
150 G26. Note to the cash fl ow statement
151 G27. Guarantees, commitments and contingent
liabilities
154 G28. Balance sheet broken down by expected
due date
155 G29. Contractual due dates of fi nancial
liabilities
156 G30. Transferred fi nancial assets that are not
deregcognised
157 G31. Assets provided or received as collateral
158 G32. Offsetting of fi nancial assets and liabilities
159 G33. Fair value information for fi nancial
instruments
165 G34. Non-fi nancial assets recognised at fair
value
166 G35. Related parties
167 G36. Remuneration of management and
material risk takers
173 G37. Danske Bank shares held by the Board of
Directors and Executive Leadership Team
174 G38. Group holdings and undertakings
176 G39. Interests in associates and joint
arrangements
177 G40. Interests in unconsolidated structured
entities
178 Risk management
178 Risk exposure
178 Total capital
179 Credit risk
179 Credit exposure
200 Bond portfolio
203 Market risk
205 Liquidity risk
208 Insurance risk
212 Non-fi nancial risk
214 Highlights, ratios and key fi gures
215 Defi nitions of ratios and key fi gures
216 Financial statements – Danske Bank A/S
74
Danske Bank / Annual Report 2020
Income statement – Danske Bank Group
Statement of comprehensive income – Danske Bank Group
Note
(DKK millions)
2020
2019
Note
(DKK millions)
G5
G5
G5
G6
G6
G5
G7
G7
G7
G8
G8
G9
G9,G19
G11
G21
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
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.
23,219
41,133
36,234
28,118
16,434
5,760
22,552
-155
-93
4,608
28,795
48,284
32,822
-
13,393
7,089
6,304
1,715
4,589
4,038
551
4,589
4.7
4.7
2.0
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
15,072
14,285
786
15,072
16.7
16.7
8.5
Net profit
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit pension plans
G21
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
G12
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)
G21
Tax
Items that are or may be reclassified subsequently to profit or loss
Total other comprehensive income
Total comprehensive income
Portion attributable to
Additional Tier 1 capital holders
Total comprehensive income
Shareholders of Danske Bank A/S (the Parent Company)
Danske Bank / Annual Report 2020 53
2020
4,589
304
-38
266
-1,902
1,224
-
264
-12
-70
-496
-230
2019
15,072
228
-21
207
692
-324
5
9
3
47
432
639
4,359
15,711
3,808
551
14,925
786
4,359
15,711
Statement of comprehensive income – Danske Bank Group
Danske Bank / Annual Report 2020
75
Danske Bank / Annual Report 2020 53
Note
(DKK millions)
G21
G12
G21
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
Total comprehensive income
2020
4,589
304
-38
266
-1,902
1,224
-
264
-12
-70
-496
-230
2019
15,072
228
-21
207
692
-324
5
9
3
47
432
639
4,359
15,711
3,808
551
14,925
786
4,359
15,711
76
Danske Bank / Annual Report 2020
54 Danske Bank / Annual Report 2020
Danske Bank / Annual Report 2020 55
Balance sheet – Danske Bank Group
Statement of capital – 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
Intangible assets
Tax assets
Other assets
Total 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
Tax liabilities
Other liabilities
Non-preferred senior bonds
Subordinated debt
G14
G14
G12
G13
G15
G16
G17
G18
G19
G21
G24
G20
G12
G20
G22
G22
G17
G18
G21
G24
G22
Total liabilities
Equity
Share capital
Foreign currency translation reserve
Reserve for bonds at fair value (OCI)
Retained earnings
Proposed dividends*
G25
Shareholders of Danske Bank A/S (the Parent Company)
Additional tier 1 capital holders
Total equity
Total liabilities and equity
*For 2019, no dividends were paid in 2020. See note G1(a) for further information.
2020
2019
320,702
81,428
682,948
296,769
1,024,607
1,023,323
82,795
545,708
8,785
5,202
36,761
99,035
105,674
495,321
284,873
1,028,011
1,122,048
79,912
494,993
9,165
2,987
39,031
4,109,231
3,761,050
211,182
499,334
1,333,781
784,027
245,573
82,905
591,930
1,821
51,291
106,371
32,337
155,246
452,202
1,140,726
802,501
256,355
80,360
535,891
2,172
46,301
87,054
31,733
3,940,552
3,590,541
8,622
-1,050
354
150,521
1,724
160,171
8,508
8,622
-372
102
140,590
7,329
156,271
14,237
168,679
170,508
4,109,231
3,761,050
Changes in equity
Changes in equity
Shareholders of Danske Bank A/S (the Parent Company)
(DKK millions)
capital
reserve
value (OCI)
earnings
dividends
Total
capital
Total
Foreign
currency
Reserve for
Share
translation
bonds at fair
Retained
Proposed
Additional
tier 1
8,960
-745
90
132,768
7,616
148,688
14,299
162,988
14,285
786
15,072
14,539
14,925
786
15,711
-7,616
7,329
-7,239
-787
-62
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
Reclassified on disposal
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
Proposed dividends
Share capital reduction
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
Share based payments
Tax
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
Redemption of additional tier 1 capital
Proposed dividends reversed*
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
Share based payments
Tax
-338
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
692
-324
-
-
5
-
-
-
373
373
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-1,902
1,224
-678
-678
264
-12
252
252
-
-
-
-
-
9
3
-
12
12
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,285
228
-
-
-
-
-
26
254
-
377
-7,329
338
-19,768
19,552
90
23
4,038
304
-108
196
4,234
-
-
-
-
-
-4
-29,252
29,228
108
12
228
692
-324
5
9
3
26
639
-
-
-
-19,768
19,552
90
23
304
-1,902
1,224
264
-12
-108
-230
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,808
551
4,359
-1,724
1,724
7,329
-7,329
-
-
-4
-
-625
-625
-5,596
-5,600
-
-
-29,252
29,228
108
12
-59
-29,311
29,228
108
12
228
692
-324
5
9
3
26
639
-787
-7,239
-
-
-19,830
19,552
90
23
304
-1,902
1,224
264
-12
-108
-230
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total equity as at 31 December 2019
8,622
-372
102
140,590
7,329
156,271
14,237
170,508
4,038
551
4,589
Total equity as at 31 December 2020
8,622
-1,050
354
150,521
1,724
160,171
8,508
168,679
*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.
On 29 April 2019, the share capital was reduced by DKK 337,690,000 through cancellation of 33,769,000 shares from Danske Bank’s holding of own
shares acquired under the 2018 share buy-back programme. During 2020, no share capital reduction was made.
Danske Bank / Annual Report 2020
77
Danske Bank / Annual Report 2020 55
Statement of capital – Danske Bank Group
Changes in equity
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
Reclassified on disposal
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
Proposed dividends
Share capital reduction
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
Share based payments
Tax
Foreign
currency
translation
reserve
Reserve for
bonds at fair
value (OCI)
Retained
earnings
Proposed
dividends
Total
Additional
tier 1
capital
Total
-745
-
-
692
-324
5
-
-
-
373
373
-
-
-
-
-
-
-
-
90
-
132,768
14,285
7,616
-
148,688
14,285
14,299
786
162,988
15,072
-
-
-
-
9
3
-
12
12
-
-
-
-
-
-
-
-
228
-
-
-
-
-
26
254
14,539
-
377
-7,329
338
-19,768
19,552
90
23
-
-
-
-
-
-
-
-
-
228
692
-324
5
9
3
26
639
-
-
-
-
-
-
-
-
228
692
-324
5
9
3
26
639
14,925
786
15,711
-
-7,616
7,329
-
-
-
-
-
-
-7,239
-
-
-19,768
19,552
90
23
-787
-
-
-
-62
-
-
-
-787
-7,239
-
-
-19,830
19,552
90
23
Share
capital
8,960
-
-
-
-
-
-
-
-
-
-
-
-
-
-338
-
-
-
-
Total equity as at 31 December 2019
8,622
-372
102
140,590
7,329
156,271
14,237
170,508
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
Redemption of additional tier 1 capital
Proposed dividends reversed*
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
Share based payments
Tax
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,038
-
-1,902
1,224
-
-
-
-678
-678
-
-
-
-
-
-
-
-
-
-
-
264
-12
-
252
252
-
-
-
-
-
-
-
-
304
-
-
-
-
-108
196
4,234
-
-1,724
-4
7,329
-29,252
29,228
108
12
-
-
-
-
-
-
-
-
-
4,038
551
4,589
304
-1,902
1,224
264
-12
-108
-230
-
-
-
-
-
-
-
304
-1,902
1,224
264
-12
-108
-230
3,808
551
4,359
-
1,724
-
-7,329
-
-
-4
-
-625
-
-5,596
-
-
-
-
-
-29,252
29,228
108
12
-59
-
-
-
-625
-
-5,600
-
-29,311
29,228
108
12
Total equity as at 31 December 2020
8,622
-1,050
354
150,521
1,724
160,171
8,508
168,679
*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.
On 29 April 2019, the share capital was reduced by DKK 337,690,000 through cancellation of 33,769,000 shares from Danske Bank’s holding of own
shares acquired under the 2018 share buy-back programme. During 2020, no share capital reduction was made.
78
Danske Bank / Annual Report 2020
56 Danske Bank / Annual Report 2020
Statement of capital – Danske Bank Group
Statement of capital – Danske Bank Group
Dividend
The Board of Directors is proposing a dividend of DKK 2.00 per share, or a total of DKK 1,724 million to be paid out of the net profit for the Parent Company
of DKK 4,511 million. In Annual Report 2019, a dividend of DKK 8.50 per share, or a total of DKK 7,329 million out of the net profit for the Parent Company
of DKK 15,068 was proposed. In light of the coronavirus pandemic, no dividends were paid in 2020. For further information, see note G1(a).
Earnings per share (DKK millions)
Net profit attributable to the shareholders of the parent company
Number of shares issued at 1 January
Share capital reduction (share buy-back programme)
Average number of own shares held by the Group (including share buy-back programme)
Average number of shares outstanding
Number of dilutive shares issued for share-based payments
2020
4,038
2019
14,285
862,184,621
-
9,046,467
895,953,621
33,769,000
7,830,142
853,138,154
332,271
854,354,479
557,291
Adjusted average number of shares outstanding after share capital reduction, including dilutive shares
853,470,424
854,911,769
Earnings per share (DKK)
Diluted earnings per share (DKK)
4.7
4.7
16.7
16.7
The share capital consists of shares of a nominal value of DKK 10 each. All shares carry the same rights; there is thus only one class of shares.
Deferred tax assets that rely on future profitability, excluding temporary differences
Number of shares outstanding
Issued at 31 December 2019
Holding of own shares
Shares outstanding at 31 December 2020
(DKK millions)
Holding of own shares
Trading portfolio
Investment on behalf of customers
Total
2020
2019
862,184,621
8,535,245
862,184,621
8,479,706
853,649,376
853,704,915
Number
2020
Number
2019
4,034,791
4,500,454
2,578,835
5,900,871
8,535,245
8,479,706
Value
2020
406
453
859
Value
2019
278
636
914
Danske Bank Group accounts for all shares issued by Danske Bank A/S and held by Danske Bank Group as own shares that are eliminated in the statement
of changes in shareholders' equity. The disclosures above clarify the purpose of the acquisitions made by Danske Bank Group of its own shares.
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.
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
Expected/proposed dividends*
Intangible assets of banking operations
Deferred tax on intangible assets
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 / Annual Report 2020 57
31 December
31 December
2020
2019
168,679
170,508
160,329
156,541
176
-17
168,836
-8,415
-93
-
-75
2,551
-690
-147
-1,724
-5,354
204
-168
-2,206
-8,992
-
143,727
17,282
161,009
19,108
265
-31
170,741
-14,070
-167
37
-344
1,325
-926
-178
-7,329
-6,339
487
-12
-1,925
-8,439
-197
132,664
23,944
156,608
17,598
180,117
174,206
784,184
767,177
18.3%
20.5%
23.0%
17.3%
20.4%
22.7%
(DKK millions)
Holding as at 1 January
Acquisition of own shares
Sale of own shares
Value adjustment
Cancellation of own shares
Holding as at 31 December
Trading
portfolio
278
29,012
29,021
137
-
406
Investment
on behalf
of customers
636
240
207
-216
-
453
Total
2020
914
29,252
29,228
-79
-
Total
2019
5,305
19,768
19,552
-199
4,409
859
914
The Board of Directors is authorised to let Danske Bank acquire own shares up to a total nominal amount of 10% of the share capital. The shares may be
held for ownership or provided as collateral. If shares are acquired for ownership, the acquisition price may not deviate by more than 10% from the price
quoted at the time of acquisition. Danske Bank A/S has obtained permission from the Danish Financial Supervisory Authority to acquire own shares for
market-making purposes etc. and this amount is deducted from the Group’s common equity tier 1 capital.
*For 2019, no dividends were paid in 2020. The previously proposed dividends have been added back to common equity tier 1 capital in 2020.
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. In accordance with Commission Delegated Regulation (EU) 2020/2176 entering into force 23 December 2020, the deduction for software
assets in Common equity tier 1 capital has been reduced by DKK 580 million, net of tax, at the end of 2020.
Risk Management 2020 provides more details about the Group’s total capital, the total risk exposure amount and the Group’s solvency need. The report
is available at danskebank.com/investorrelations/reports and is not covered by the statutory audit.
Statement of capital – Danske Bank Group
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
Expected/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 / Annual Report 2020
79
Danske Bank / Annual Report 2020 57
31 December
2020
31 December
2019
168,679
176
-17
168,836
-8,415
-93
-
160,329
-75
2,551
-690
-147
-1,724
-5,354
204
-168
-2,206
-8,992
-
143,727
17,282
161,009
19,108
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
180,117
174,206
784,184
767,177
18.3%
20.5%
23.0%
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. In accordance with Commission Delegated Regulation (EU) 2020/2176 entering into force 23 December 2020, the deduction for software
assets in Common equity tier 1 capital has been reduced by DKK 580 million, net of tax, at the end of 2020.
Risk Management 2020 provides more details about the Group’s total capital, the total risk exposure amount and the Group’s solvency need. The report
is available at danskebank.com/investorrelations/reports and is not covered by the statutory audit.
80
Danske Bank / Annual Report 2020
58 Danske Bank / Annual Report 2020
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
G26
G26
G26
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
G14
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
Note G26 provides further information on the cash flow statement.
Notes – Danske Bank Group
G1. Basis of preparation
2020
2019
(a) General
Danske Bank / Annual Report 2020 59
6,304
-4,315
12,993
13,822
-5,245
10,369
14,982
18,946
59,794
-140,495
-83
-11,896
95,039
193,055
-33,550
5,323
4,337
-96,693
-17,527
-278
-8,449
-108,208
81,606
14,533
988
-11,690
186,506
-126,772
5
-872
-408
12
-1,263
3,721
-2,180
23,610
-
-5,600
-625
-653
1,683
-878
-666
12
151
11,791
-3,467
59,808
-7,239
-
-787
-729
18,273
59,377
199,608
-2,235
203,516
264,836
2,016
-67,244
400,889
199,608
6,131
314,572
80,186
6,235
92,800
100,574
400,889
199,608
Danske Bank Group prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRSs) and
applicable interpretations (IFRIC) issued by the International Accounting Standards Board (IASB), as adopted by the EU. Furthermore, the consolidated
financial statements comply with the Danish FSA’s Executive Order No. 1306 dated 16 December 2008 on the use of IFRSs by undertakings subject to
the Danish Financial Business Act.
As announced on 20 April 2020 and in light of the economic situation caused by the coronavirus pandemic, the Board of Directo rs 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 Combina tions (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. Exce pt for these changes, the
Group has not changed its significant accounting policies from those applied in Annual Report 2019.
For changes in the segment reporting, see note G3.
Financial statement figures are stated in Danish kroner and whole millions, unless otherwise stated. As a result, rounding discrepancies may occur
because totals have been rounded off and the underlying decimals are not presented to financial statement users.
Monetary assets and liabilities in foreign currency are translated at the exchange rates at the balance sheet date. Exchange rate adjustments of monetary
assets and liabilities arising as a result of differences in the exchange rates at the transaction date and at the balance sheet date are recognised in the
income statement. Non-monetary assets and liabilities in foreign currency that are subsequently revalued at fair value are translated at the exchange
rates at the date of revaluation. Exchange rate adjustments are included in the fair value adjustment of an asset or liability. Other non-monetary items in
foreign currency are translated at the exchange rates at the transaction date. The accounting treatment of foreign currency translation of units outside
Denmark is described in note G25.
For the purpose of clarity, the primary financial statements and the notes to the financial statements are prepared using the concepts of materiality and
relevance. This means that line items not considered material in terms of quantitative and qualitative measures or relevant to financial statement users
are aggregated and presented together with other items in the primary financial statements. Similarly, information not considered material is not
presented in the notes.
The significant accounting policies are incorporated into the notes to which they relate.
(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) 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). An overview of the classification and measurement basis for financial instruments can be found in section (c) of this note.
Further, the determination of the carrying amounts of some assets and liabilities requires the estimation of the 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 financial year could differ from those on which management’s estimates are based.
Measurement of expected credit losses on loans, financial guarantees and loan commitments, and bonds measured at amortised cost or fair value
through other comprehensive income
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 (stages 2 and 3). In determining the impairment for expected credit
losses, management exercises judgement and uses estimates and assumptions as explained below.
Danske Bank / Annual Report 2020
81
Danske Bank / Annual Report 2020 59
Notes – Danske Bank Group
G1. Basis of preparation
(a) General
Danske Bank Group prepares its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRSs) and
applicable interpretations (IFRIC) issued by the International Accounting Standards Board (IASB), as adopted by the EU. Furthermore, the consolidated
financial statements comply with the Danish FSA’s Executive Order No. 1306 dated 16 December 2008 on the use of IFRSs by undertakings subject to
the Danish Financial Business Act.
As announced on 20 April 2020 and in light of the economic situation caused by the coronavirus pandemic, the Board of Directo rs 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 Combina tions (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. Exce pt for these changes, the
Group has not changed its significant accounting policies from those applied in Annual Report 2019.
For changes in the segment reporting, see note G3.
Financial statement figures are stated in Danish kroner and whole millions, unless otherwise stated. As a result, rounding discrepancies may occur
because totals have been rounded off and the underlying decimals are not presented to financial statement users.
Monetary assets and liabilities in foreign currency are translated at the exchange rates at the balance sheet date. Exchange rate adjustments of monetary
assets and liabilities arising as a result of differences in the exchange rates at the transaction date and at the balance sheet date are recognised in the
income statement. Non-monetary assets and liabilities in foreign currency that are subsequently revalued at fair value are translated at the exchange
rates at the date of revaluation. Exchange rate adjustments are included in the fair value adjustment of an asset or liability. Other non-monetary items in
foreign currency are translated at the exchange rates at the transaction date. The accounting treatment of foreign currency translation of units outside
Denmark is described in note G25.
For the purpose of clarity, the primary financial statements and the notes to the financial statements are prepared using the concepts of materiality and
relevance. This means that line items not considered material in terms of quantitative and qualitative measures or relevant to financial statement users
are aggregated and presented together with other items in the primary financial statements. Similarly, information not considered material is not
presented in the notes.
The significant accounting policies are incorporated into the notes to which they relate.
(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) 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). An overview of the classification and measurement basis for financial instruments can be found in section (c) of this note.
Further, the determination of the carrying amounts of some assets and liabilities requires the estimation of the 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 financial year could differ from those on which management’s estimates are based.
Measurement of expected credit losses on loans, financial guarantees and loan commitments, and bonds measured at amortised cost or fair value
through other comprehensive income
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 (stages 2 and 3). In determining the impairment for expected credit
losses, management exercises judgement and uses estimates and assumptions as explained below.
82
Danske Bank / Annual Report 2020
60 Danske Bank / Annual Report 2020
Notes – Danske Bank Group
G1. Basis of preparation continued
(b) Significant accounting estimates and judgements
The expected credit loss is calculated for all individual facilities as a function of probability of default (PD), exposure a t 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. See further in the section below on the impact from the corona crises on the macroeconomic scenarios used.
Due to the corona crisis, the macroeconomic scenarios were revised during 2020, see further in the separate section below.
With the new suite of scenarios, the base case scenario enters with a probability of 60% (31 December 2019: 60%), the upside scenario with a
probability of 15% (2019: 10%) and the downside scenario with a probability of 25% (2019: 30%). On the basis of these assessments, the allowance
account at the end of 2020 amounted to DKK 23.3 billion (2019: DKK 21.3 billion). If the base case scenario was assigned a probability of 100%, the
allowance account would decrease DKK 0.4 billion (2019: 0.7 billion). Compared to the base case scenario, the allowance account would increase DKK
1.7 billion (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 pr obability of 100 %, the
allowance account would decrease DKK 0.4 billion (2019: DKK 0.5 billion) compared to the base case scenario. 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
the end of 2020, the allowance account would increase by DKK 0.03 billion (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 c redit risk.
Management applies judgement when determining the need for post-model adjustments. At the end of 2020, the post-model adjustments amounted to
DKK 6.4 billion (2019: DKK 4.0 billion) and continue to include the immediate risks arising from the corona crises that were introduced in the first quarter
of 2020, see further in the separate section below. On the types of risks covered by post-model adjustments, more information can be found in the risk
management notes. Further information on the allocation of post-model adjustment to the underlying exposures can be found in the section ‘Classification
of customers’ in the risk management notes.
Loan impairment charges for 2020 amounted to DKK 7.089 million (2019: DKK 1,729 million). Impairments were driven primarily by the update of the
macroeconomic scenarios as a result of the corona crisis and credit deterioration for selected customers, largely within the oil and gas exposure due to
the continued uncertainty within the offshore segment.
Accounting treatment of the impacts on expected credit losses from the corona crisis
The effect of the coronavirus pandemic began to affect the Group’s credit portfolio in the first quarter of 2020. Further credit deterioration remains to
be seen, as the effect is currently limited and mitigated by the continued government support packages. Based on the measures taken by governments
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, in the fourth quarter of 2020 a second wave of the corona pandemic evolved and new lock-downs were introduced. The economies continue to
be supported by government support packages. Significant uncertainty still remains as to the effectiveness of actions taken by governments to contain
the virus and as to when the roll-out of vaccine programmes will have a sufficient coverage to limit the spread of the virus. The economic activity is likely
to be impacted in the shorter term and it is yet unknown to which extent governments will continue to support the economies.
For most of the Group’s credit portfolio, the negative impact on individual customers of the corona crisis is expected to materialise over the coming
quarters. Customer assessments were made on an ongoing basis since the second quarter of 2020, and impairments were revisited in light of the
changed outlook. While customer activity in 2020 was higher than usual, portfolio impact still awaiting as customers are still assessing the
consequences. As a result, the financial consequences still remain to be seen when, for instance, government support comes to an end and as the
pandemic evolves.
Danske Bank / Annual Report 2020 61
Notes – Danske Bank Group
G1. Basis of preparation continued
(b) Significant accounting estimates and judgements
The Group’s forbearance practices have been updated to pay particular attention to customers affected by the corona crisis. This includes additional
guidance to ensure that concessions due to the corona crisis 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 are not considered a forbearance measure when taking the ongoing custo mer assessments into account. For
customers in rating categories 6 and 7, an individual assessment of the customer’s financial strength is made, whereas conces sions to lower-rated
customers are considered forbearance.
A large part of the impact on expected credit losses resulting from the corona crisis relates to changes to forward-looking information, with the
macroeconomic scenarios applied being significantly different from those applied in 2019. The Group’s base case scenario is based on the Nordic Outlook
from October and reflects a significant decline in economic activity in 2020 followed by a recovery in 2021. The downside scenario has been updated to
a W-shaped trend, where the second wave of the coronavirus pandemic causes lock-downs in the fourth quarter of 2020 and the first quarter of 2021.
The base case scenario is considered the most likely scenario with a likelihood of 60%, while the downside scenario has a likelihood of 25%. Further
information on the macroeconomic scenarios used can be found in the section ‘Macroeconomic scenarios’ in the risk management notes. During all
quarters of 2020, the base case macroeconomic scenarios used reflected a recovery in 2021. Therefore, the forward-looking information used during
the quarters of 2020 gradually became more positive when the period until recovery in 2021 shortened, leading to reversal of the modelled expected
credit losses in all main industries in the second half of 2020. Due to the continued significant uncertainty related to the magnitude of the pandemic and
to the extent to which governments will continue to support the economies, management deemed it appropriate to increase the post-model adjustment
related to the corona crisis during the second half of 2020.
The corona crisis-related post-model adjustments relate to industries directly affected by the corona crisis and for which the macroeconomic scenarios
themselves do not lead to a sufficient increase in expected credit losses. This includes expected, but not yet materialised, credit deterioration in relation
to the Personal customers and Commercial property industries in Denmark as government support ends. This also 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). The targeted post-model
adjustment related to such sectors amounts to DKK 2.0 billion.
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 and the section on credit risk in the risk management notes provide more details on expected credit losses. At the end of 2020, financial assets
covered by the expected credit loss model accounted for about 52% of total assets (2019: 57%).
Fair value measurement of financial instruments
At the end of 2020, no unusual challenges in obtaining reliable pricing apart from insignificant parts of the portfolio remain ed. The majority of valuation
techniques continues to employ only observable market data, and there has 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. 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 and ColVA) 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. At 31 December
2020, the adjustments totalled DKK 1.6 billion (2019: DKK 1.5 billion), including the adjustment for credit risk on derivatives that are credit impaired. .
Note G33(a) 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 in volved in determining
whether certain hedge accounting relationships that hedge the interest rate risk due to changes in IBORs continue to qualify for hedge accounting. EUR
and USD denominated swaps cleared on a CCP have been converted to ESTR and SOFR discounting respectively, and the conversion had no significant
impact on the Group’s hedge accounting values. Following IASB’s project ‘Interest Rate Benchmark Reform, phase I’ 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).
Danske Bank / Annual Report 2020
83
Danske Bank / Annual Report 2020 61
Notes – Danske Bank Group
G1. Basis of preparation continued
(b) Significant accounting estimates and judgements
The Group’s forbearance practices have been updated to pay particular attention to customers affected by the corona crisis. This includes additional
guidance to ensure that concessions due to the corona crisis 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 are not considered a forbearance measure when taking the ongoing custo mer assessments into account. For
customers in rating categories 6 and 7, an individual assessment of the customer’s financial strength is made, whereas conces sions to lower-rated
customers are considered forbearance.
A large part of the impact on expected credit losses resulting from the corona crisis relates to changes to forward-looking information, with the
macroeconomic scenarios applied being significantly different from those applied in 2019. The Group’s base case scenario is based on the Nordic Outlook
from October and reflects a significant decline in economic activity in 2020 followed by a recovery in 2021. The downside scenario has been updated to
a W-shaped trend, where the second wave of the coronavirus pandemic causes lock-downs in the fourth quarter of 2020 and the first quarter of 2021.
The base case scenario is considered the most likely scenario with a likelihood of 60%, while the downside scenario has a likelihood of 25%. Further
information on the macroeconomic scenarios used can be found in the section ‘Macroeconomic scenarios’ in the risk management notes. During all
quarters of 2020, the base case macroeconomic scenarios used reflected a recovery in 2021. Therefore, the forward-looking information used during
the quarters of 2020 gradually became more positive when the period until recovery in 2021 shortened, leading to reversal of the modelled expected
credit losses in all main industries in the second half of 2020. Due to the continued significant uncertainty related to the magnitude of the pandemic and
to the extent to which governments will continue to support the economies, management deemed it appropriate to increase the post-model adjustment
related to the corona crisis during the second half of 2020.
The corona crisis-related post-model adjustments relate to industries directly affected by the corona crisis and for which the macroeconomic scenarios
themselves do not lead to a sufficient increase in expected credit losses. This includes expected, but not yet materialised, credit deterioration in relation
to the Personal customers and Commercial property industries in Denmark as government support ends. This also 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). The targeted post-model
adjustment related to such sectors amounts to DKK 2.0 billion.
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 and the section on credit risk in the risk management notes provide more details on expected credit losses. At the end of 2020, financial assets
covered by the expected credit loss model accounted for about 52% of total assets (2019: 57%).
Fair value measurement of financial instruments
At the end of 2020, no unusual challenges in obtaining reliable pricing apart from insignificant parts of the portfolio remain ed. The majority of valuation
techniques continues to employ only observable market data, and there has 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. 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 and ColVA) 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. At 31 December
2020, the adjustments totalled DKK 1.6 billion (2019: DKK 1.5 billion), including the adjustment for credit risk on derivatives that are credit impaired. .
Note G33(a) 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 in volved in determining
whether certain hedge accounting relationships that hedge the interest rate risk due to changes in IBORs continue to qualify for hedge accounting. EUR
and USD denominated swaps cleared on a CCP have been converted to ESTR and SOFR discounting respectively, and the conversion had no significant
impact on the Group’s hedge accounting values. Following IASB’s project ‘Interest Rate Benchmark Reform, phase I’ 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).
84
Danske Bank / Annual Report 2020
62 Danske Bank / Annual Report 2020
Notes – Danske Bank Group
G1. Basis of preparation continued
(b) Significant accounting estimates and judgements
Measurement of goodwill and customer rights
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. At 31 December 2020, goodwill amounted to DKK 6.1 billion (31 December 2019: DKK 6.2 billion).
(c) Overview of classification and measurement basis for financial instruments and insurance contracts
Financial instruments account for around 98% of total assets and liabilities. A portion of financial assets relate to investments made under insurance
contracts. The following sections provide a general description of the classification and measurement of financial instruments and obligations under
Despite the corona crises, the impairment test conducted in 2020 did not reveal any impairment loss. The impairment test conducted in 2019 revealed
a total impairment loss of DKK 1.6 billion in FI&C and Capital Markets at Corporates & Institutions and in Danica Pension at Wealth Management, leaving
no excess value for those units at the end of 2019.
The Group recognises financial assets and liabilities when it becomes a party to the terms of the contract. A financial asset, or a portion of a financial
asset, is derecognised if the contractual rights to cash flows from the asset have expired, or have been transferred, usually by sale, leading to substantially
all the risks and rewards of the asset or significant risks and rewards being transferred. Financial liabilities are derecognised when the liability has been
The goodwill in FI&C and Capital Markets of DKK 2.1 billion (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 (2019: DKK 1.6 billion) is highly sensitive to changes in solvency
capital requirements, growth in the terminal period and the discount rate.
The remaining goodwill mainly consists of DKK 1.8 billion (2019: DKK 1.8 billion) in Danske Capital at Wealth Management and DKK 0.5 billion (2019:
DKK 0.5 billion) in General Banking at Corporates & Institutions, both showing significant amounts of excess value in the impairment tests in 2020 and
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 impacted by the expectation of lower income
and higher loan impairment charges caused by the corona crisis.
Note G19 provides more information about the impairment test in 2020 and 2019 including 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 o wn portfolio of insurance
contracts. Section (c) of this note and note G18 provide further information on the measurement of insurance liabilities. The risk management notes
contain a sensitivity analysis for life insurance.
Danske Bank / Annual Report 2020 63
Notes – Danske Bank Group
G1. Basis of preparation continued
insurance contracts.
Financial instruments – general
settled, has expired or has been extinguished.
Regular way purchases and sales of financial instruments are recognised and derecognised at the settlement date. Fair value adjustments of unsettled
financial instruments are recognised from the trade date to the settlement date if the financial asset is classified at fair value through profit or loss or
through other comprehensive income. The classification is shown in the table below.
Financial instruments and obligations under insurance contracts, classification and measurement end of 2020
Amortised cost
I Fair value OCI
I
Fair value through profit or loss
Held to collect
assets/Liabilities
Held to collect
and sell
financial
assets*
Managed
FVPL due
at fair
to SPPI
Held for
trading
value
test Designated
hedge **
Total
Interest rate
Cash in hand and demand deposits with central
Due from credit institutions and central banks
(DKK billions)
Assets
banks
Derivatives
Bonds
Shares
Loans
Assets under pooled schemes and unit-linked
investment contracts
Assets under insurance contracts
Total financial assets, 31 December 2020
Total financial assets, 31 December 2019
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 investment contracts
Liabilities under insurance contracts ***
Non-preferred senior bonds
Subordinated debt
Loan commitments and guarantees
Total financial liabilities, 31 December 2020
Total financial liabilities, 31 December 2019
-
-
-
-
-
-
-
-
321
29
132
1,022
1,504
1,329
118
1,183
240
104
32
3
1,680
1,404
117
365
287
16
207
816
2
2,048
117
108
669
911
816
486
944
803
16
4,034
12
3,682
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
496
496
450
52
-
-
48
0
83
521
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93
-
151
784
83
592
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14
-
-
-
-
-
-
0
3
-
-
6
3
-
-
-
-
321
81
380
583
17
83
521
211
499
1,334
784
246
83
592
106
32
3
1,703
1,683
12
3,890
9
3,545
* Unrealised fair value gains and losses are presented in Other comprehensive income, and realised fair value gains and losses are recycled to the income statement.
**The interest rate risk on some fixed-rate financial assets and liabilities is hedged by derivatives (fair value hedging). The interest rate risk on some fixed-rate bonds 'hold to collect and sell'
is also hedged by derivatives. The fair value represents changes in the fair value of the interest rate risk on the hedged items, i.e. not a full fair value of the hedged items.
*** Liabilities under insurance contracts are recognised at the present value of expected insurance benefits.
Danske Bank / Annual Report 2020
85
Danske Bank / Annual Report 2020 63
Notes – Danske Bank Group
G1. Basis of preparation continued
(c) Overview of classification and measurement basis for financial instruments and insurance contracts
Financial instruments account for around 98% of total assets and liabilities. A portion of financial assets relate to investments made under insurance
contracts. The following sections provide a general description of the classification and measurement of financial instruments and obligations under
insurance contracts.
Financial instruments – general
The Group recognises financial assets and liabilities when it becomes a party to the terms of the contract. A financial asset, or a portion of a financial
asset, is derecognised if the contractual rights to cash flows from the asset have expired, or have been transferred, usually by sale, leading to substantially
all the risks and rewards of the asset or significant risks and rewards being transferred. Financial liabilities are derecognised when the liability has been
settled, has expired or has been extinguished.
Regular way purchases and sales of financial instruments are recognised and derecognised at the settlement date. Fair value adjustments of unsettled
financial instruments are recognised from the trade date to the settlement date if the financial asset is classified at fair value through profit or loss or
through other comprehensive income. The classification is shown in the table below.
Financial instruments and obligations under insurance contracts, classification and measurement end of 2020
(DKK billions)
Assets
Cash in hand and demand deposits with central
banks
Due from credit institutions and central banks
Derivatives
Bonds
Shares
Loans
Assets under pooled schemes and unit-linked
investment contracts
Assets under insurance contracts
Total financial assets, 31 December 2020
Total financial assets, 31 December 2019
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 investment contracts
Liabilities under insurance contracts ***
Non-preferred senior bonds
Subordinated debt
Loan commitments and guarantees
Total financial liabilities, 31 December 2020
Total financial liabilities, 31 December 2019
Amortised cost
I Fair value OCI
I
Fair value through profit or loss
Held to collect
assets/Liabilities
Held to collect
and sell
financial
assets*
Held for
trading
Managed
at fair
value
FVPL due
to SPPI
test Designated
Interest rate
hedge **
Total
321
29
-
132
-
1,022
-
-
1,504
1,329
118
-
1,183
-
240
-
-
104
32
3
1,680
1,404
-
-
-
117
-
-
-
-
117
108
-
-
-
-
-
-
-
-
-
-
-
-
-
-
365
287
16
-
-
-
-
52
-
48
0
207
83
521
-
-
-
-
-
816
-
-
669
911
816
486
944
803
-
496
-
-
-
-
-
-
-
-
496
450
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93
-
151
784
-
83
592
-
-
-
-
-
14
-
-
2
-
-
321
81
380
583
17
2,048
83
521
16
4,034
12
3,682
0
3
-
-
6
-
-
3
-
-
211
499
1,334
784
246
83
592
106
32
3
1,703
1,683
12
3,890
9
3,545
* Unrealised fair value gains and losses are presented in Other comprehensive income, and realised fair value gains and losses are recycled to the income statement.
**The interest rate risk on some fixed-rate financial assets and liabilities is hedged by derivatives (fair value hedging). The interest rate risk on some fixed-rate bonds 'hold to collect and sell'
is also hedged by derivatives. The fair value represents changes in the fair value of the interest rate risk on the hedged items, i.e. not a full fair value of the hedged items.
*** Liabilities under insurance contracts are recognised at the present value of expected insurance benefits.
86
Danske Bank / Annual Report 2020
64 Danske Bank / Annual Report 2020
Notes – Danske Bank Group
G1. Basis of preparation continued
(c) Overview of classification and measurement basis for financial instruments and insurance contracts
Classification and measurement of financial assets and financial liabilities – general
Financial assets are classified on the basis of the business model adopted for managing the assets and on their contractual cash flow characteristics
(including embedded derivatives, if any) are grouped into one of the following measurement categories:
Amortised cost (AMC)
Fair value through other comprehensive income (FVOCI)
Fair value through profit or loss (FVPL)
Financial assets are measured at AMC if they are held within a business model for the purpose of collecting contractual cash flows (hold to collect) and
if cash flows are solely payments of principal and interest on the principal amount outstanding.
Financial assets are measured at FVOCI if they are held within a business model for the purpose of both collecting contractual cash flows and selling
(hold to collect and sell) and if cash flows are solely payments of principal and interest on the principal amount outstanding. FVOCI results in the assets
being recognised at fair value in the balance sheet and at AMC in the income statement. Gains and losses, except for expected credit losses and foreign
exchanges gains and losses, are therefore recognised in other comprehensive income until the financial asset is derecognised. When the financial asset
is derecognised the cumulative gains and losses previously recognised in other comprehensive income are reclassified to the income statement.
All other financial assets are mandatorily measured at FVPL including financial assets held within other business models, such as financial assets
managed at fair value or held for trading and financial assets with contractual cash flows that are not solely payments of principal and interest on the
principal amount outstanding.
Financial liabilities
Generally, financial liabilities are measured at amortised cost and when relevant with bifurcation of embedded derivatives not closely related to the host
contract. Financial liabilities measured at fair value comprise the trading portfolio (derivatives and obligations to repurchase securities) and liabilities
designated at fair value through profit or loss under the fair value option. Value adjustments relating to the inherent credit risk of financial liabilities
designated at fair value are recognised in other comprehensive income unless this leads to an accounting mismatch.
The business model assessment
The business model assessment in Danske Bank Group has been applied separately for each business unit represented by the Group’s reportable
segments, and it is based on observable factors for the different portfolios, such as (1) how the performance of the business model and the financial
assets held within that business model are evaluated and reported to the Executive Board and the Board of Directors, (2) the risks that affect the
performance of the business model and the way such risks are managed and (3) past and expected frequency, value and timing of sales from the portfolio.
In general, the business model assessment of the Group can be summarised as follows:
The Group’s banking units, comprising Banking DK, Banking Nordic, General Banking at C&I and Northern Ireland, have a “hold to collect” business
model. The financial assets consist primarily of loans. The management and reporting of performance are based on collecting the contractual cash
flows, and loans are only very infrequently sold.
The trading units at C&I (FI&C and Capital Markets) and the financial assets related to the Group’s insurance activities have a business model that
is neither “hold to collect” nor “hold to collect and sell” and the financial assets are mandatorily recognised at FVPL. The assets consist of bonds,
shares, repo transactions and short-term loans. Some of the financial assets are included in portfolios with a trading pattern that falls under the
definition of “held for trading” while other portfolios are managed and their performance reported on a fair value basis.
Group Treasury has portfolios of bonds within the “hold to collect” business model, the “hold to collect and sell” business models and the “other”
business model.
The remaining portfolio of Non-core is “hold to collect”. The financial assets consist primarily of loans.
Danske Bank / Annual Report 2020 65
Notes – Danske Bank Group
G1. Basis of preparation continued
(c) Overview of classification and measurement basis for financial instruments and insurance contracts
The SPPI test (solely payment of principal and interest on the principal amount outstanding)
The second step in the classification of the financial assets in portfolios being “hold to collect” and “hold to collect and sell” relates to the assessment of
whether the contractual cash flows are consistent with the SPPI test. The principal amount reflects the fair value at initial recognition less any subsequent
changes, e.g. due to repayment. The interest must represent only consideration for the time value of money, credit risk, other basic lending risks and a
margin consistent with basic lending features. If the cash flows introduce more than de minimis exposure to risk or volatility that is not consistent with
basic lending features, the financial asset is mandatorily recognised at FVPL.
In general, the Group’s portfolios of financial assets that are “hold to collect” or “hold to collect and sell” (loans and bonds) have contractual cash flows
that are consistent with the SPPI test, i.e. they have basic lending features.
However, loans granted under Danish mortgage finance law are funded by issuing listed mortgage bonds with matching terms. Such loans are granted
by the Realkredit Danmark subsidiary only. Borrowers may repay such loans by delivering the underlying bonds. This represents an option to prepay at
fair value that can be both above and below the principal amount plus accrued interest. Changes in the fair value of the underlying bonds include other
elements than the effect of changes in the relevant benchmark interest rate and the prepayment option is therefore not consistent with the SPPI test in
IFRS 9 and are mandatorily measured at FVPL.
All equity instruments have contractual cash flows that do not pass the SPPI test. All such holdings are recognised at FVPL since the Group has decided
not to use the option to designate equity instruments at FVOCI.
Financial liabilities are generally measured at amortised cost and when relevant with bifurcation of embedded derivatives not closely related to the host
contract. Financial liabilities measured at fair value comprise derivatives, the trading portfolio and liabilities designated at FVPL under the fair value
option. Value adjustments relating to the inherent own credit risk of financial liabilities designated at fair value are, however, recognised in Other
comprehensive income unless this leads to an accounting mismatch.
IFRS 9 allows the designation of financial liabilities at FVPL when doing so results in more relevant information, because either (1) it eliminates or
significantly reduces an accounting mismatch that would otherwise arise, or (2) is part of a portfolio of financial instruments that are managed and their
performance reported on a fair value basis to management.
The Group designates the following financial liabilities at FVPL:
Mortgage bonds issued by Realkredit Danmark. The bonds fund the loans granted by Realkredit Danmark, i.e. loans that due to the SPPI test are
mandatorily recognised at FVPL. The fair value of the loans is based on the fair value of the issued bonds (the loans and the issued bonds that are
funding the loans have matching contractual terms) adjusted for changes in the fair value of the credit risk of borrowers. To eliminate the accounting
mismatch that exists if the loans are measured at FVPL and the issued bonds at AMC, the issued bonds are designated at FVPL, and fair value
changes of the issued bonds (including fair value changes related to own credit risk) are offset by the fair value changes of the loans. Hence, changes
in the fair value attributable to the Group’s own credit risk on the issued bonds are also recognised in the income statement since an accounting
mismatch would otherwise arise.
Financial liabilities in FI&C and Capital Markets at C&I. These financial liabilities are part of a portfolio of financial assets and liabilities that is
managed and performance reported to the Management on a fair value basis. The financial liabilities consist of repo transactions, deposits and
commercial papers. Changes, if any, in the fair value attributable to the Group’s own credit risk is, however, recognised in other comprehensive
income.
Hedge accounting
The Group uses derivatives to hedge the interest rate risk on some fixed-rate assets and fixed-rate liabilities measured at amortised cost and on some
bonds measured at fair value through other comprehensive income. Hedged risks that meet the criteria for fair value hedge accounting are treated
accordingly. The interest rate risk on the hedged assets and liabilities is measured at fair value through profit or loss. At end-2019, hedging derivatives
measured at fair value accounted for about 0.3% of total assets and about 0.2% of total liabilities (31 December 2018: 0.2% and 0.05%, respectively).
For further information on hedge accounting, see note G12(d).
Danske Bank / Annual Report 2020
87
Danske Bank / Annual Report 2020 65
Notes – Danske Bank Group
G1. Basis of preparation continued
(c) Overview of classification and measurement basis for financial instruments and insurance contracts
The SPPI test (solely payment of principal and interest on the principal amount outstanding)
The second step in the classification of the financial assets in portfolios being “hold to collect” and “hold to collect and sell” relates to the assessment of
whether the contractual cash flows are consistent with the SPPI test. The principal amount reflects the fair value at initial recognition less any subsequent
changes, e.g. due to repayment. The interest must represent only consideration for the time value of money, credit risk, other basic lending risks and a
margin consistent with basic lending features. If the cash flows introduce more than de minimis exposure to risk or volatility that is not consistent with
basic lending features, the financial asset is mandatorily recognised at FVPL.
In general, the Group’s portfolios of financial assets that are “hold to collect” or “hold to collect and sell” (loans and bonds) have contractual cash flows
that are consistent with the SPPI test, i.e. they have basic lending features.
However, loans granted under Danish mortgage finance law are funded by issuing listed mortgage bonds with matching terms. Such loans are granted
by the Realkredit Danmark subsidiary only. Borrowers may repay such loans by delivering the underlying bonds. This represents an option to prepay at
fair value that can be both above and below the principal amount plus accrued interest. Changes in the fair value of the underlying bonds include other
elements than the effect of changes in the relevant benchmark interest rate and the prepayment option is therefore not consistent with the SPPI test in
IFRS 9 and are mandatorily measured at FVPL.
All equity instruments have contractual cash flows that do not pass the SPPI test. All such holdings are recognised at FVPL since the Group has decided
not to use the option to designate equity instruments at FVOCI.
Financial liabilities
Financial liabilities are generally measured at amortised cost and when relevant with bifurcation of embedded derivatives not closely related to the host
contract. Financial liabilities measured at fair value comprise derivatives, the trading portfolio and liabilities designated at FVPL under the fair value
option. Value adjustments relating to the inherent own credit risk of financial liabilities designated at fair value are, however, recognised in Other
comprehensive income unless this leads to an accounting mismatch.
IFRS 9 allows the designation of financial liabilities at FVPL when doing so results in more relevant information, because either (1) it eliminates or
significantly reduces an accounting mismatch that would otherwise arise, or (2) is part of a portfolio of financial instruments that are managed and their
performance reported on a fair value basis to management.
The Group designates the following financial liabilities at FVPL:
Mortgage bonds issued by Realkredit Danmark. The bonds fund the loans granted by Realkredit Danmark, i.e. loans that due to the SPPI test are
mandatorily recognised at FVPL. The fair value of the loans is based on the fair value of the issued bonds (the loans and the issued bonds that are
funding the loans have matching contractual terms) adjusted for changes in the fair value of the credit risk of borrowers. To eliminate the accounting
mismatch that exists if the loans are measured at FVPL and the issued bonds at AMC, the issued bonds are designated at FVPL, and fair value
changes of the issued bonds (including fair value changes related to own credit risk) are offset by the fair value changes of the loans. Hence, changes
in the fair value attributable to the Group’s own credit risk on the issued bonds are also recognised in the income statement since an accounting
mismatch would otherwise arise.
Financial liabilities in FI&C and Capital Markets at C&I. These financial liabilities are part of a portfolio of financial assets and liabilities that is
managed and performance reported to the Management on a fair value basis. The financial liabilities consist of repo transactions, deposits and
commercial papers. Changes, if any, in the fair value attributable to the Group’s own credit risk is, however, recognised in other comprehensive
income.
Hedge accounting
The Group uses derivatives to hedge the interest rate risk on some fixed-rate assets and fixed-rate liabilities measured at amortised cost and on some
bonds measured at fair value through other comprehensive income. Hedged risks that meet the criteria for fair value hedge accounting are treated
accordingly. The interest rate risk on the hedged assets and liabilities is measured at fair value through profit or loss. At end-2019, hedging derivatives
measured at fair value accounted for about 0.3% of total assets and about 0.2% of total liabilities (31 December 2018: 0.2% and 0.05%, respectively).
For further information on hedge accounting, see note G12(d).
88
Danske Bank / Annual Report 2020
66 Danske Bank / Annual Report 2020
Notes – Danske Bank Group
G1. Basis of preparation continued
(c) Overview of classification and measurement basis for financial instruments and insurance contracts
Insurance activities – general
The Group issues life insurance policies, which are divided into insurance and investment contracts. Insurance contracts are contracts that entail
significant insurance risk or entitle policyholders to bonuses. Investment contracts are contracts that entail no significant insurance risk and comprise
unit-linked contracts under which the investment risk lies with the policyholder.
Insurance contracts
Insurance contracts comprise both an investment element and an insurance element, which are recognised as aggregate figures.
IFRS 4, Insurance Contracts, includes an option to continue the accounting treatment of insurance contracts under local GAAP. The Group’s life insurance
provisions are therefore recognised at their present value in accordance with the Danish FSA’s Executive Order on Financial Reports for Insurance
Companies etc. The life insurance provisions are presented under Liabilities under insurance contracts.
Assets earmarked for insurance contracts are recognised under Assets under insurance contracts if most of the return on the assets accrues to the
policyholders. Most of these assets are measured at fair value.
Investment contracts
Investment contracts are recognised as financial liabilities, and, consequently, contributions and benefits under such contracts are recognised directly
in the balance sheet. Deposits are measured at the value of the savings under Deposits under pooled schemes and unit-linked investment contracts.
Savings under unit-linked investment contracts are measured at fair value under Assets under pooled schemes and unit-linked investment contracts.
The return on the assets and the crediting of the amounts to policyholders’ accounts are recognised under Net trading income or loss.
Assets funded by shareholders’ equity
The separate pool of assets equal to shareholders’ equity is recognised at fair value and consolidated with other similar assets.
Income from insurance business
Insurance activities are consolidated in the various income statement items. Insurance premiums are recognised under Net premiums. Net insurance
benefits in the income statement consists of benefits disbursed under insurance contracts and the annual change in insurance obligations not deriving
from additional provisions for benefit guarantees and changes to the collective bonus potential. The return on earmarked assets is allocated to the
relevant items in the income statement. The return to policyholders is recognised under Net trading income or loss as are changes to additional
provisions for benefit guarantees. Note G8 provides more information.
The sources of the Group’s net income from insurance business comprise the return on assets funded by Danica Pension’s shareholders’ equity, income
from unit-linked business and health and accident business, and income from conventional life insurance business, the so-called risk allowance.
The risk allowance is determined in accordance with the Danish FSA’s executive order on the contribution principle. The contribution principle regulates
how earnings are allocated between policyholders and the life insurance company’s shareholders’ equity and defines the maximum payment to
shareholders’ equity (the risk allowance).
Insurance contracts guarantee a certain long-term return on policyholders’ funds. If the technical basis exceeds the interest accrual to policyholders and
the risk allowance, the difference is allocated to the bonus potential. The bonus potential serves as a risk buffer. If the technical basis is insufficient to
cover the risk allowance, the shortfall can be covered by the bonus potential. If the bonus potential is insufficient to cover the shortfall, the difference can
be covered by the individual bonus potentials or the profit margin; otherwise, the risk allowance that cannot be recognised will be lost. If the technical
basis is insufficient to cover the interest accrual to policyholders, the shortfall is covered by the bonus potentials or the profit margin. Any remaining
shortfall is paid by the Group in the form of an outlay. If the Group has made such an outlay, the outlay may be recovered the following year.
Danske Bank / Annual Report 2020
89
Danske Bank / Annual Report 2020 67
Notes – Danske Bank Group
G1. Basis of preparation continued
(d) Financial highlights
The financial highlights and reporting for each segment shown in note G3 are used in the Management’s report and represent the financial information
regularly provided to management. The Reclassification column in note G3 shows the reconciliation between the presentation in the financial highlights
and the presentation in the consolidated financial statements prepared under IFRS and includes the following:
Operating leases and impairment charges other intangible assets
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 (the Group acts as a lessor). 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
development in the cost base.
The Group’s transformation project ‘Better Ways of Working’ entails an ongoing digital journey that lead to the recognition of impairment charges on
existing software in 2020. To better reflect the development in the underlying cost base, the impairment charges are presented separately in the Financial
highlights, whereas they are recognised under Operating expenses in the IFRS income statement.
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
inco