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Danske Bank / Annual Report 2021 3
Contents
Management’s report
Letter to our stakeholders
4
6
8
9
12
16
23
24
28
32
35
38
40
42
48
52
53
56
Danske Bank 2021 at a glance
Financial highlights - Danske Bank Group
Executive summary
Strategy execution
Sustainability
Business units
Personal & Business Customers
Large Corporates & Institutions
Danica Pension
Northern Ireland
Non-core
Group Functions
Financial review
Capital and liquidity management
Investor Relations
Organisation and management
Definition of alternative performance measures
Financial statements
Income statement
58
59
60
61
64
65
Statement of comprehensive income
Balance sheet
Statement of capital
Cash flow statement
Notes
Statements
220 Statement by the management
221
Independent auditor’s report
Management and directorships
226 Board of Directors
232 Executive Leadership Team
234 Supplementary information
Danske Bank / Annual Report 2021
4
Danske Bank / Annual Report 2021 5
Letter to our stakeholders
Finance is a service – a means to help customers
achieve their ambitions.
As a bank, we offer products and solutions that serve
to make something else possible. It is not a mortgage, a
loan or a pension scheme that our customers ultimately
desire; they desire what our solutions enable them to do:
buy a house, start a new business or plan for a secure and
comfortable retirement.
Throughout our history, we have helped our customers
achieve their dreams and ambitions. We have provided the
financial means that have enabled their success, which is
why we say that we exist to release the potential in people
and businesses. And it is the reason why we celebrated
our 150-year anniversary last year by celebrating the
successes and achievements of our customers.
Since the solutions we offer are a means to an end, it is our
strategy to invest in further digitalisation of our services.
Doing so will make it as easy and seamless as possible for
our customers to interact with us and to apply for the loans
and services they need – when they need them. It is also
our strategy to strengthen our advisory expertise to offer
unrivalled advisory services, no matter how complex the
financial needs of our customers may be.
Our ambitions in both respects have been emboldened
by our experiences of dealing with the global COVID-19
pandemic. For almost two years, we have been working with
our customers to help them deal with the uncertainties of
lockdown, disrupted supply chains, unpredictable demand
and financial insecurity. And thanks to our set-up – and
because we are fortunate to operate in some of the world’s
most digitalised economies, we have been able to do so
largely undeterred by lockdowns and physical restrictions.
The Nordic economies are emerging from the corona crisis
with a more positive economic outlook than most other
countries. Together with our colleagues in the financial
sector across the Nordic countries, we have worked hard to
be part of the solution.
Becoming an integral part of the solution is also the
ambition we have in terms of sustainability and the green
transition. We see this as both the greatest challenge and
the greatest opportunity for us and for our customers.
Climate change poses a risk to lives and livelihoods; it
also poses a risk to business models, financial assets and
our way of life. But climate change is also a commercial
opportunity for entrepreneurs and businesses working
to introduce ideas and solutions that make the green
transition possible. And climate change is an opportunity
for all of us to reinvent our economies to make them more
resilient and sustainable.
As the largest financial services provider in Denmark, and
as one of the largest financial institutions in the Nordic
countries, we have both the power and the responsibility
to contribute to positive and sustainable change for the
societies we are part of, and we are committed to helping
our customers turn challenges into opportunities.
We have faced challenges of our own, and while we have
maintained an unrelenting focus on helping our customers
with the uncertainties of the corona crisis and helping them
to invest and prepare for the green transition, we have also
continued our work to address our own legacy issues and to
make progress on our ambitions to become a better bank.
We still have work to do, but we have come a long way
already. Among our main achievements, we have improved
profitability by increasing income and lowering costs, and
we have further strengthened our compliance organisation.
We have created a more flexible and inclusive workplace,
and we now have the highest level of customer satisfaction
among large and institutional customers across the
Nordic countries. And we also have a Nordic lead within
sustainable finance.
These achievements are important steps towards fulfilling
the ambitions we have of being a leading Nordic bank
across all customer segments, and they demonstrate how
we create value for all stakeholders by using the power
of finance to create sustainable progress today and for
generations to come.
This is our purpose, and it is our promise to all stakeholders.
Karsten Dybvad
Chairman of the Board
of Directors
Carsten Egeriis
Chief Executive Officer
Danske Bank / Annual Report 2021
6
Danske Bank 2021
at a glance
Our purpose
We release the potential in people and
businesses by using the power of finance
to create sustainable progress today
and for generations to come
People and businesses hold a lot of untapped potential, and a loss for the individual is also a
loss for society.
Release the potential
in people and
businesses
At Danske Bank, we believe that human potential is the most valuable asset in the world
and is the key to driving positive change. Therefore, we want to be potential-seekers as well
as risk managers.
We want to support changemakers, large and small, and break down barriers for action.
When we combine financial solutions with knowledge, we enable people, businesses and
society to make a difference and create a positive development.
The power of finance
We believe that our resources will create a positive impact if applied with focus and
responsibility.
We are committed to using our expertise and size to drive scale – alone and in partnership
with others – while creating volume by encouraging and inspiring our customers to use their
power.
We believe that having a long-term approach is key to creating a positive impact.
Sustainable progress
As well as being committed to long-term focus by developing sustainable solutions that
contribute to long-term positive impact and that enable all to take part, we also deliver on
our short-term goals.
Key figures 2021 for Sustainable Finance solutions
DKK 192 billion
in green bonds issued on
behalf of customers
DKK 631 billion
invested in Article 8 and
Article 9 funds
DKK 33.5 billion
green investments by
Danica Pension since 2019
6,329
start-ups and scale-ups supported
with growth and impact tools,
services and expertise since 2016
Danske Bank / Annual Report 2021 7
Strategic focus
Our strategic focus is to become a better bank for everyone, and we have four ambitions for becoming a better bank towards
2023.
Customers
On average among the
top two banks in
customer satisfaction in
everything we do.
Employees
Target a Satisfaction
& Motivation
score of 77
Society
Operate sustainably,
ethically and
transparently – and
have a positive impact
on the societies
we are part of.
Investors
Achieve a return
on shareholders’
equity of 8.5-9%
and a cost/income
ratio in the mid-50s.
Our 2023 ambitions
On the basis of delivering a total income of more than DKK 43 billion
and costs of around DKK 23.5 billion as well as a normalised capital level,
we expect to deliver a cost/income ratio in the mid-50s
and a return on equity of 8.5-9%
This continues to build on a solid foundation and relentless execution on our commercial priorities, coupled with bringing
structural costs down by building on the progress we have made with enhancing and digitising processes, a continuous and
natural adjustment of our organisation and managing our non-personnel costs.
Key figures 2021
DKK 42,584 million
Total income
DKK 12,920 million
Net profit
7.6%
Return on shareholders’ equity
Danske Bank / Annual Report 2021 8
Financial highlights – Danske Bank Group
Income statement
(DKK millions)
Net interest income*
Net fee income*
Net trading income*
Net income from insurance business*
Other income*
Total income
Operating expenses*
Impairment charges on goodwill
Impairment charges, other intangible assets
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Profit before tax
Tax
Net profit
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 figures
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)
2021
2020
Index
21/20
2019
2018
2017
22,049
13,525
4,126
2,088
797
42,584
25,627
-
36
16,921
348
16,573
-2
16,571
3,651
12,920
451
320,042
253,954
1,834,372
509,589
303,425
547,806
2,027
164,620
3,935,834
101,786
193,391
1,167,638
770,661
355,757
374,958
588,736
2,529
164,354
39,321
5,497
171,207
3,935,834
2.0
14.6
7.6
0.73
60.3
60.2
22.4
17.7
113.0
200.6
21,754
22,151
12,217
4,297
1,669
594
40,928
26,648
-
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
0.76
66.0
65.1
23.0
18.3
100.7
187.6
22,376
100
111
96
125
134
104
96
-
9
122
5
240
0
263
213
282
82
93
98
100
75
102
100
72
118
96
81
86
98
99
99
75
99
85
121
122
65
107
96
97
22,104
12,636
4,350
2,385
1,059
42,534
25,545
803
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
494,992
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
0.81
62.8
60.5
22.7
17.3
107.8
183.1
22,006
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
*The financial highlights have been restated as explained in notes G2(a) and G3(a). The financial highlights represent alternative performance measures that are non-IFRS measures.
Notes G1(d) and G3 provide an explanation of differences in the presentation between IFRS and the financial highlights. For a description of the alternative performance measures
used and definition of ratios, see Definition of Alternative Performance Measures on page 56.
Danske Bank / Annual Report 2021
9
Executive summary
For Danske Bank, 2021 was a year in which we continued
to make progress with the transformation to become a
better bank and delivered structural progress towards our
2023 ambitions. Among other things, we strengthened our
value propositions for our customers through digitalisation,
expert advisory services and sustainable solutions, and in
the third quarter, we updated our 2023 financial ambitions.
In 2022, we will continue to further execute on commercial
initiatives across our markets.
In 2021, we also celebrated Danske Bank’s 150-year
anniversary. Throughout its history, Danske Bank has
assumed the role of a provider of financial advice and
solutions that have enabled our customers to make a
successful transition to new times and take advantage of
new opportunities. This is exactly the approach we also
have today when we engage with customers to help them
transform changes in the digital space and the green
transition into commercial or personal opportunities.
Following the gradual reopening of societies and the
vaccine roll-out during 2021, the recovery in the Nordic
economies became evident, with strong labour markets
and consumer spending, albeit also with some inflation
fears and scarcity of labour being reported. In Denmark,
the recovery is broadly based, and the attention has shifted
towards mitigating the risk of overheating. However, despite
the fact that most of the population has been vaccinated,
we saw the coronavirus on the rise again during the last
months of the year, leading to new restrictions to contain
the virus. Naturally, developments are closely monitored,
and at Danske Bank, we are ready to continue supporting
our customers with their needs.
Even though the economy is doing well, the government
support packages contributed to subdued credit demand
in the banking sector in Denmark. The upcoming transition
to a gradual return to market-based financing, with banks
offering creditworthy and viable businesses loans on
reasonable terms, is likely to generate more bank lending
from the first half of 2022, thus supporting our income
streams.
Despite the subdued credit demand in the banking sector
in Denmark, our diversified business model continued to
prove valuable. During 2021, we were able to further utilise
our platform and strengthen our market position for capital
markets-related activities, and our efforts to capitalise on
the opportunities for increased investment activity provided
by market conditions also paid off.
Danske Bank posted a net profit of DKK 12.9 billion for
2021, against DKK 4.6 billion in 2020. The return on
shareholders’ equity was 7.6%, against 2.6% in 2020.
Strategic focus
As 2021 is now behind us, we have reached the mid-point
of the period for our transformation to become a better
bank with satisfactory results, and we will continue to
deliver value for all of our stakeholder groups: customers,
employees, society and shareholders. Enhancing our
services and products to customers as well as supporting
innovation in society will continue to be part of the agenda
along with focusing on ensuring employee engagement.
In October, we updated our 2023 ambitions. We confirmed
that our business model will allow for a sustainable return
on shareholders’ equity of 8.5-9% in 2023 and 9-10%
through the cycle. With recent progress, we are further
strengthening our position to deliver long-term sustainable
value creation. In addition, following a thorough business
review, we also extended the timeline for reaching a more
normalised compliance cost level to 2025 to allow us to
sustain the resilience of Danske Bank.
As the next step in our ongoing transformation, we
announced in January 2022 a further fine-tuning of the
organisation that will take effect no later than May 2022.
Going forward, the commercial activities will be organised
in three business units: Personal Customers, Business
Customers and Large Corporates & Institutions. The aim
is to become even more customer-centric and to enhance
the commercial focus as well as to accelerate execution of
our 2023 plan. This work is supported by our Commercial
Leadership Team, which was established at the beginning of
2021 to drive the commercial and customer agenda across
all our markets. We are now past our foundational work,
and in the coming years, we will be focusing even more on
our commercial momentum.
Focus on enhancing the customer experience
During 2021, we continued our execution of the Better
Bank plan by improving the customer experience as well as
enhancing value propositions for our customers.
One of the main focus areas at Personal & Business
Customers was and still is to improve the customer
experience via digital solutions and advisory services
specialisation, and this led to multiple business initiatives
throughout the year. For business customers, for example,
we launched a new service model across all markets,
which allows us to even better match the service level
and offerings to a specific customer’s needs. At Personal
Customers Denmark, we improved our digital self-service
options in relation to home finance by enabling customers
to perform online remortgaging calculations, and we
launched a new modern website for Realkredit Danmark –
providing customers with a better overview of their existing
loans and the opportunity to calculate the costs associated
with the various loan types. On average, the rd.dk website
now gets 80,000 visits each month, an increase of 23%
from the number of visits to the old site.
We enhanced our value proposition for the Private Banking
segment as we started to offer customers in Denmark the
opportunity to invest in our Global Portfolio Solution – a
solution that was previously available exclusively to our
corporate customers.
Danske Bank / Annual Report 2021 10
At Large Corporates & Institutions, we continued our efforts
to making daily banking activities easy and safe for our
customers, for example by enhancing our financial platform
District.
Our efforts to help our large corporate and institutional
customers adjust to the post-COVID-19 operating
environment and support them with their sustainability
transition continued to produce high customer satisfaction
in this segment. Across the Nordic countries, we
maintained our number one position on the basis of an
aggregated ranking in the annual reviews conducted by
Prospera. Customer satisfaction also remained strong
among business customers in Denmark, Norway and
Finland, where we ranked in the top two in 2021, whereas
we are more challenged in Sweden. In respect of personal
customers, customer satisfaction was challenged in 2021
and below our ambition. The development in the personal
customer segment continues to have our attention, and
we will keep focusing on improving customer journeys
further with emphasis on expert advisory services, digital
convenience and sustainability offerings.
During the year, we continued to make progress with the
remediation of our legacy issues as a part of our efforts to
become a better bank. We are working hard to remediate
these issues and compensate affected customers as soon
as possible.
Sustainability
On the sustainability agenda, we made considerable
progress with our ambitions during the year, and as an
integral part of our strategy, Danske Bank is dedicated
to further accelerating this agenda. Furthermore, we
joined the Net-Zero Banking Alliance and the Net Zero
Asset Managers Initiative, and in doing so, committed
ourselves to becoming a net-zero bank by 2050 or sooner.
Most recently, we have also set targets to reduce carbon
emissions in our corporate loan portfolio in three key
sectors by 20-50% by 2030.
Within sustainable finance, we continued to take a leading
role, supported by our customers’ strong positioning in
the sustainability transition. During 2021, we supported
issuers and investors in a substantial number of
transactions, affirming our position as a leading Nordic
bank within sustainable finance. Activity was high across
business areas, and we are proud to be ranked number
one among the Nordic banks within arranging of both
sustainability-linked loans and sustainable bonds in terms
of volumes supported. In 2021, we arranged sustainable
bonds in the amount of USD 12 billion for our customers.
For personal customers, we launched a number of
initiatives to promote sustainable development, for example
an attractive car loan offer for personal customers in
Denmark for both electric cars and plug-in hybrid cars.
For business customers, we expanded our sustainable
product offering, mainly our offers of green loans for large
investments.
Capital, funding and regulation
Our capital position remained strong with a total capital
ratio of 22.4% and a CET1 capital ratio of 17.7%.
The total risk exposure amount (REA) increased
approximately DKK 76 billion in 2021, due mainly to the
implementation of EBA guidelines. In the FSA joint decision,
our Pillar II add-on related to model risk was reduced by
DKK 4.1 billion in the fourth quarter, partly mitigating the
REA increases associated with EBA guidelines.
In 2021, the Group issued covered bonds of DKK 33.3
billion, senior debt of DKK 27.3 billion, non-preferred senior
debt of DKK 4.4 billion, tier 2 capital of DKK 5.6 billion and
additional tier 1 capital of DKK 4.5 billion, bringing total
long-term wholesale funding to DKK 75.1 billion.
Regarding the terminated non-resident portfolio at Danske
Bank’s former branch in Estonia, the internal investigation
work that was planned for completion in 2020 has been
finalised, and Danske Bank has reported the findings to the
relevant authorities investigating Danske Bank. Danske
Bank continues to fully cooperate and will provide the
authorities with further information if and when requested.
Financials
Total income was up 4% from the level in 2020. The
increase was driven mainly by a strong performance in our
capital markets activities on the back of good customer
activity, and we continued to support customers with
advisory services and capital.
During 2021, we started to see an increased flow into
investments, and our repricing initiatives in Denmark for the
personal as well as the business segment are having the
desired effect. However, continuing margin pressure across
the Nordic countries and lending product mix effects more
than offset the effect of our repricing initiatives, keeping net
interest income at a relatively stable level.
Net fee income increased from the level in 2020, driven
by good customer activity and higher assets under
management in Asset Management. The strong activity
in the debt and equity capital markets we have seen in
the past quarters continues, and our leading platform has
enabled us to capitalise on this trend. We therefore take a
number one position as the leading Nordic bank in terms of
volumes in both products.
Net trading income declined from the level in 2020 due
to lower activity in 2021 along with less positive value
adjustments on the derivatives portfolio. The sale of Aiia
Danske Bank / Annual Report 2021 11
Thus Danske Bank’s dividend policy remains unchanged,
targeting a dividend of 40-60% of net profit.
Outlook for 2022
We expect net profit to be in the range of DKK 13–15
billion, including the gains from MobilePay, Danske Bank
International and Danica Pension in Norway.
We expect income from core banking activities to be
higher in 2022 due to good economic activity and progress
towards our 2023 financial ambitions. Net income from
insurance business and trading activities are expected to be
at normalised level, subject to financial market conditions.
We expect costs in 2022 to reflect continued focus on
cost management and to be around DKK 25 billion due to
elevated remediation costs and the inclusion of Swedish
bank tax and regulatory expenses of around DKK 0.4 billion.
Loan impairments are expected to be below normalised
level, given stable macroeconomic conditions and our
overall strong credit quality.
We maintain our ambition for a return on shareholders’
equity of 8.5-9% in 2023.
The outlook is subject to uncertainty and depends on
economic conditions.
to Mastercard and the sale of Visa shares in the Group’s
private equity portfolio had a positive effect on net trading
income.
In 2021, Danica Pension saw good momentum, driven by
good performance in the underlying business as well as
strong tailwind from higher returns on investments. Danica
Pension saw significant growth in premiums of 30% as well
as an inflow of new large customers, which shows Danica
Pension’s strong position in the market.
We continued to see a downward trend in expenses, driven
by the cost initiatives we launched during the past year,
and operating expenses thus fell from the year-earlier level.
The decrease reflects lower costs for transformation and
consultancy, and as planned, our AML and compliance
costs were lower as well, ensuring that we remain on
the right trajectory. However, a provision related to the
VAT case in Sweden as well as a provision for taxation of
business travellers and a one-off investment ensuring good
working–from-home conditions had a partly offsetting effect
together with higher expenses for bonus payments that
reflect higher customer activity.
During 2021, we saw a low level of actual credit
deterioration compared with the level in 2020, also for
corona-affected and oil-related portfolios. These portfolios
benefited from model-driven reversals made as a result of
better-than–expected macroeconomic developments. In
addition, Danske Bank has since the end of 2019 actively
reduced its net oil-related exposure (excluding oil majors).
The post-model adjustments made during 2020 to cover
pandemic-related tail risks are largely unchanged, as it
remains to be seen how both the rolling off of government
support packages and tapering from centrals banks,
including the timing of these, might affect those businesses
at which earnings are still catching up. Overall, credit quality
remained strong, and we remain confident with our current
management overlays.
Dividend
In accordance with Danske Bank’s dividend policy, Danske
Bank intends to pay out a total dividend of DKK 7.5 per
share for 2021, corresponding to 50% of the net profit for
the year. The Board of Directors proposes an initial dividend
payment of DKK 2 per share to the annual general meeting.
The remaining DKK 5.5 per share is intended to be paid out
in three tranches following the publication of interim reports
in 2022, subject to a decision by the Board of Directors
in accordance with the authorisation given to the Board
and based on the usual assessment of the bank’s capital
position at the end of each interim period. This approach
is taken to preserve the dividend policy of the bank while
ensuring a prudent capital management with a high degree
of flexibility in light of the Estonia matter, where we remain
unable to estimate any potential outcome or timing.
Danske Bank / Annual Report 2021 12
Strategy execution
Two years ago, we embarked on a multi-year transformation
to become a better bank by 2023 and formulated strong
ambitions for all of our stakeholder groups: customers,
employees, society and shareholders. As we planned for
at the time, the key focus for the past two years has been
on addressing the challenges facing our core business and
reversing the downward trend we saw in 2019.
Now that we are past the mid-point of the transformation
period, we continue to be satisfied with its traction. The
structural progress we have achieved over the course of
the past two years is significant and lays the tracks not
only for 2023 but also for the years to come. Thus, we are
now well-positioned to deliver sustainable value creation,
and the outcomes of our transformation in 2021 are
evidence of the progress we are making towards fulfilling
the 2023 ambitions for customers, employees, society and
shareholders as set out in our Better Bank transformation
agenda:
Customers
Customers are the reason why we exist and we strive
to deliver the best customer experience. We want to
provide our customers with best-in-class,
proactive advice and relevant products
and services through the channel of
their choice and at any time.
We continue to show traction in line with our 2023
ambition to be on average in the top two in customer
satisfaction across our customer segments. We have
sustained our strong results for business customers and
large corporate and institutional customers. Personal
customer satisfaction remains challenged, and we are
focusing on improving this with a number of initiatives
launched in 2021 and are working with our Chief Customer
Officers to ensure we take an even more customer-centric
approach to everything we do.
High-quality advisory services, innovative digital solutions,
and relevant products for our customers are at the core of
our business.
In the personal customer segment, we have continued to
transform our service model and enhance digital solutions
to become more proactive, to provide customers with
easier access to banking products and services and to
offer a more convenient experience. Our continued efforts
to develop our digital solutions led to Danske Bank’s
Mobile Banking app winning the 2021 award for Best User
Experience in the Customer Centricity World Series.
We focus on improving our mortgage offering to regain
our leading position in the home finance market and
took a series of initiatives to provide a better home loan
experience. A second key priority continues to be the
expansion of our retail investment offering to address
customers’ growing need for specialist advice. In Sweden,
Norway and Finland, we continued to build and strengthen
our partnership offerings.
For our business customers and large corporate and
institutional customers, our compelling offering and
expertise enabled us to meet their evolving needs, for
instance within investments, equity and debt capital
markets, as well as green products. We continued
to develop District, our financial platform that helps
customers get a full overview of their finances across
banks and borders. We launched new tools targeted at
solving customer needs with regard to payments and risk
management, including via partnerships. In addition, for our
business customers, we introduced a new service model to
better match our customers’ needs through a combination
of specialised advisory services and digital self-service
solutions.
More information is available in the Personal & Business
Customers and Large Corporates & Institutions sections of
this report.
Danske Bank / Annual Report 2021
Danske Bank / Annual Report 2021
13
Employees
Our employees are our most valuable strength, and
we aspire to have engaged employees who are proud
of working at Danske Bank. Further, we want a skilled
and motivated workforce and a strong
and diverse talent pool to ensure that we
continue to meet increasing customer
expectations.
We continue to have a strong focus on improving employee
engagement as part of our Better Bank ambitions. Due
to a change in survey methodology, we now target a
Satisfaction & Motivation score of 77 in 2023. The updated
methodology provides us with more in-depth insight into
specific drivers of engagement and enables us to focus
our investments on proactively driving engagement. The
new target of 77 represents the progress expected of a
business that invests in employee engagement. Our long-
term aspiration is to be a workplace where engagement
is an integral part of the culture and a natural part of our
everyday focus and how we work together.
During 2021, our Satisfaction & Motivation score
increased from 71 to 74, driven by improvements in
reputation and working conditions. While engagement is on
the right track, we are still striving for further improvement.
Leadership is a key driver of engagement, and we
are investing in leadership development and large-
scale leadership programmes as part of our cultural
transformation. Danske Bank’s newly launched
Purpose and Culture Commitments ignite our cultural
transformation, embody the internal culture we aspire to,
and provide purpose to guide our actions. The commitments
are essential in guiding our behaviour when engaging with
customers, society and each other. Launched in the spring
of 2021, our Purpose and Culture Commitments have
been well received by employees, and the organisation
has engaged in the process of reflecting, interpreting and
bringing to life our Purpose and Culture Commitments to
ensure they are present in everything we do.
We always strive to grow our attractiveness as an employer
as well as our talent pool to ensure that the skills of our
workforce match the future needs of our customers and
the challenges that a modern financial institution faces.
A crucial step in this regard has been the completion of
the agile transformation of our development organisation.
As a result, more than 4,000 employees in development
functions experience new ways of working with increased
empowerment and greater end-to-end responsibility. A
second key component is our decision to make our flexible
ways of working permanent. Our employees have adjusted
well to the changes that have become necessary as a result
of the pandemic, and we support this transition.
To foster an ever more open, diverse and inclusive culture at
Danske Bank, we maintain a dedicated focus on increasing
the diversity of our staff.
More information is available in the Sustainability section of
this report and in Sustainability Report 2021.
Society
At the core of our societal ambition is our desire to act
in the best interest of our customers and the societies
that we are a part of. This includes protecting the
integrity of markets, supporting innovation
in society, maintaining open and
transparent communication, and creating
sustainable progress for our customers.
Our work to protect society and the integrity of markets
continues to be a high priority, and we have a commitment
to our customers, the sector as a whole as well as with
regulators and authorities to combat financial crime. Our
However, after a thorough business review during 2021, we
are extending the timeline for reaching a more normalised
cost level to 2025 to allow us to sustain the resilience of
Danske Bank. In parallel, we have validated our commercial
plans across all areas and pressure-tested assumptions,
ensuring we are well-positioned to deliver sustainable value
creation and an improved customer experience.
We have therefore adjusted our 2023 ambition to a return
on shareholders’ equity of 8.5-9%, but we are still confident
that our business model will allow for a sustainable return
on shareholders’ equity of 9-10% through the cycle.
Our roadmap for delivering a total income level of around
DKK 43.5 billion and a cost level of around DKK 23.5
billion, resulting in a cost/income ratio in the mid-50s, in
2023 builds on our strong position and solid momentum
within Large Corporates & Institutions and our business
customers segment, as well as our efforts to enhance
digitalisation and modernising our platform across the
Group. In the short term, regaining momentum in relation to
personal customers in Denmark is key, and something we
need to do while also building the future retail bank across
the Nordic countries and capitalising on our momentum in
the MidCorp segment. We will leverage our market-leading
position for Large Corporates & Institutions and capitalise
on the growing activity shift from conventional balance
14
work is guided by a comprehensive plan for regulatory
compliance and the prevention of financial crime
(Financial Crime Plan), which is showing results in terms
of both quality and efficiency gains. Our investment in
strengthening our control environment is resulting in
tangible progress, for instance in terms of transaction
monitoring and trade and communication surveillance.
Furthermore, subsequent to the review of more than 99%
of the customers covered by our ‘Know your Customer’
remediation and additional investment in the process, we
are now transitioning into a business-as-usual operating
model while also witnessing increased efficiency, better
quality and a better customer experience, for instance
thanks to process digitalisation.
In parallel, we continue to progress with the remediation
of our legacy issues. Following nearly 50,000 customer
meetings, we officially closed the Flexinvest Fri case. And
despite our challenged starting point for this customer
dialogue, one of our main achievements was that customer
satisfaction among Flexinvest Fri customers is now on par
with that of other customers.
We progressed considerably with our sustainability
agenda. Key proof points include the surpassing in 2021
of our 2023 targets in the area of sustainable financing
and sustainable investing, which led us to set new 2023
ambitions.
More information is available in the Sustainability section of
this report and in Sustainability Report 2021.
Shareholders
Two years ago, we set out an ambitious plan, and in
October 2021, we confirmed that our business model
will allow for a return on shareholders’ equity of 8.5-9%
and a cost/income ratio in the mid-50s in 2023, with
line of sight to reaching a sustainable
return on shareholders’ equity of 9-10%
and a cost/income ratio in the low 50s
through-the-cycle.
Through our transformation efforts, we have gained more
clarity on our challenges – and while risks still exist, we
are diligently executing our plans and in 2021 delivered a
return on shareholders’ equity of 7.6%, an improvement
from 2.6% in 2020. As a result of our dedicated focus and
continuous prioritisation of strengthening our foundation,
we are now well-positioned in terms of reaching our
profitability potential.
With the current scope and trajectory, we still expect to
finalise our financial crime remediation by the end of 2023.
Danske Bank / Annual Report 2021 15
sheet lending to capital markets activity, including the
transition to green products, which our strong franchise is
already now well-positioned for and which will support more
robust and capital-light income generation going forward.
Throughout this journey, it will be a priority to structurally
bring down costs in a sustainable way and enhance
capital efficiency without compromising the commercial
momentum and income opportunities.
Growth trajectory towards 2023
Our transformation to become a better bank for all our
stakeholders continues in 2022. We expect to make
significant progress towards our four key stakeholder
ambitions for 2023 while at the same time charting the
course for sustained value delivery beyond 2023.
As we have progressed on the transformation journey
and as our understanding of what needs to be done has
matured further, we expect to address the challenges
that remain as we continue to progress our plans and
concentrate on execution. An example of this is regaining
momentum in our retail business in Denmark.
As we move towards 2023 and beyond, our customers will
increasingly start to experience the results of our efforts
and investments towards simplifying and digitalising key
customer journeys. Our focus on developing digital tools
that enable self-service and increase adoption rates will
allow for both a better customer experience and a lowering
of structural costs in a sustainable way. For example,
we expect to progress with our ambition to enable digital
welcoming and handling of everyday banking and financing
needs for all personal and business customers, while also
increasing self-service in relation to mortgage products. The
progress we have already made on digitising our processes,
for example to proactively deliver advice and tailored
solutions across digital channels, serves as a strong
enabler for further enhancement, coupled with ongoing
adjustment of our organisation and stringent focus on non-
personnel costs.
To drive our cultural transformation, we will engage with
all our employees on activities targeted at anchoring
the Purpose and Culture Commitments across the
organisation. As part of our commitment to society, our
efforts to strengthen our control environment will continue
as we execute our Financial Crime Plan. At the same time,
we will build on the strong momentum established since
2019 and further integrate sustainability into our products
and processes.
Danske Bank / Annual Report 2021 16
Sustainability
The European Green Deal and other political initiatives for
a sustainable future require not only technological change
but also changes in consumption and social practices.
Fortunately, we see a fast-growing demand for sustainable
products, solutions and operations across sectors.
Danske Bank’s new purpose places people, their potential
and sustainable progress for individuals, businesses
and society firmly at the heart of everything we do. As
a large financial institution, Danske Bank has the ability
to instigate change and support sustainable progress by
using the power of finance. Our Better Bank plan and our
sustainability strategy are helping us to accomplish this.
Sustainability Strategy 2023
We have designed our 2023 Group Sustainability Strategy
to optimise synergies between societal and business
interests to create value for all key stakeholder groups
and to enable us to deliver on our purpose. In 2021, this
involved elevating our ambition of being merely one of
the leading banks for sustainable finance in the Nordic
countries to also being the leading bank for sustainable
finance in Denmark.
Sustainable finance is at the core of our sustainability
strategy, and surrounding this are five additional focus areas
that cover themes that are important for our stakeholders
and business.
Our sustainability strategy has a heightened focus on five
of the 17 UN Sustainable Development Goals (SDGs).
Through our sustainable finance offerings, we have a
potential indirect impact on all 17 SDGs – impact that can
be both positive and negative, depending on the underlying
activities, and which we are working to measure. As there
is currently no common impact measurement and valuation
approach tailored to banks, we in 2021 co-founded the
global Banking for Impact consortium, the aim of which is
to support the development of new guidelines on impact
measurement for financial institutions in order to accelerate
the transition to a more sustainable economy.
Danske Bank supports a number of other sustainability
initiatives, including the Task Force on Climate-related
Financial Disclosures (TCFD) and the Principles for
Responsible Banking (PRB). In view of our commitment
to helping to fight climate change, we joined two new
Group Sustainability Strategy
Entrepreneurship Financial confidence
&
i
n
t
e
g
G
o
v
e
r
n
a
n
ce
rity
Sustainable
finance
Environmental
footprint
y
t
i
s
r
e
v
i
e
e
y
plo
m
E
g & d
well-bein
SUSTAINABLE FINANCE
We help our customers achieve their sustaina bility
ambitions through financing and investing
ENTREPRENEURSHIP
We support new businesses in creating
sustainable growth
FINANCIAL CONFIDENCE
We help people become financially confident
GOVERNANCE & INTEGRITY
We operate in a responsible and transparent
manner
EMPLOYEE WELL-BEING & DIVERSITY
We foster well-being, diversity and inclusion in
our workplace
ENVIRONMENTAL FOOTPRINT
We minimise our own environmental footprint
Danske Bank / Annual Report 2021 17
significant industry initiatives in 2021: the UN-convened
Net-Zero Banking Alliance and the Net Zero Asset
Managers Initiative. By joining these initiatives, we are
consolidating our commitments towards becoming a net-
zero bank by 2050 or sooner.
Governance, transparency and stakeholder dialogue are key
elements when it comes to ensuring an efficient execution
of our strategy towards 2023 and for delivering on our key
sustainability commitments. Our governance structure sets
clear roles and responsibilities, and it supports alignment
across the Group.
Entrepreneurship
Financial confidence
6,329 start-ups and scale-ups supported with growth
and impact tools, services and expertise since 2016. The
implications of COVID-19 on the Nordic start-up ecosystem
are still uncertain, but supporting 10,000 startups by 2023
remains our focus.
Since 2018, we have supported almost 1.6 million
people with financial literacy tools and expertise, and we
are well on our way to reaching the target of 2 million
people by 2023.
Governance
& integritet
96% of employees trained
annually in risk and compliance,
which is in line with our annual
target of over 95%.
Employee well-being
& diversity
With a gender balance of 32%
women in senior leadership
positions, we maintain our focus
to ensure that we reach our
target of more than 35% by
2023.
Environmental
footprint
COVID-19 restrictions have
led to a 69% carbon
emission reduction since
2019, but new initiatives are
needed to reach our updated
target of 40% by 2023.
TCFD – climate-related risks and opportunities
Since 2019, Danske Bank has been reporting in line
with the recommendations of the TCFD. Every year, we
develop our disclosures to reflect our increasing climate
ambitions and our actions to embed all the necessary
climate data for sufficient climate risk and opportunity
disclosures. To explain our approach, we published our
first Climate and TCFD progress update report in June
2021, which supplements the Group’s TCFD reporting
in our Sustainability Report 2021.
Taxonomy regulation
Reporting in accordance with EU Taxonomy Regulation
became a requirement in 2021, and we disclose the
proportion of taxonomy-eligible and taxonomy non-
eligible activities in our Sustainability Report 2021.
As such, the disclosures comprise association to
economic activities that contribute significantly to
environmental objectives in the form of climate
change mitigation and climate change adaptation.
Danske Bank / Annual Report 2021 18
Sustainable finance
In 2021, Danske Bank raised the standards for sustainable
finance, and we will utilise our expertise and size – alone
and in partnership with others – to create volume and
provide transition finance by encouraging and inspiring our
customers to use their leverage. This is reflected in our
updated sustainable finance volume targets and the short-
and medium-term carbon emission reduction targets which
we are introducing across our financing and investments
portfolios. We set reduction targets based on analysis of
our portfolios’ actual carbon footprint following current best
standards.
Our main approach is to work with our customers and
support them in reducing their absolute emissions as much
as possible and to use offsetting only as a supplement to
decarbonisation – and only for emissions
that cannot be further reduced due to
technological or financial constraints.
Although divestments may be
unavoidable, we generally prefer to
engage with businesses to explore
their potential and help them in their
green transition – both in our role as
investor and as lender.
Our sustainable finance commitments and approach
Lending
Asset management
Asset ownership
Sustainable finance
volume targets
DKK 300 billion in sustainable
financing, including granted green
loans and arranged sustainable bonds
by 2023.
DKK 150 billion investments in
funds with sustainable investment
objective by 2030.
DKK 50 billion investments in the
green transition by Danica Pension
by 2023 – and DKK 100 billion by
2030.
Net-zero
commitments
Net-Zero Banking Alliance (NZBA)
joined in October 2021.
Net Zero Asset Managers Initiative
joined in March 2021.
Net-Zero Asset Owner Alliance
joined in June 2020 by Danica
Pension.
Carbon emission
reduction targets
Reduce carbon emissions in our
corporate lending portfolio in three key
sectors by between 20-50% by 2030
against a 2020 baseline.
Reduce the carbon intensity of our
investment products by at least 50%
by 2030 against a 2020 baseline.
Reduce carbon emissions in Danica
Pension’s portfolio in five key sectors
by between 15-35% by 2025
against a 2019 baseline.
Approach to
net-zero path
• Provide financing for innovative and low-carbon solutions
• Decarbonise our overall balance sheet by actively engaging with customers through our provision of advice and financing
to enable decarbonisation journeys in line with the Paris Agreement (transition finance)
• Engage with investee companies to guide and influence from a decarbonisation perspective
• Restrict financial flows to carbon intensive companies, e.g. by limiting credit risk exposures and investments
Overall, we made good progress on our sustainable finance
ambition in 2021, maintaining our ranking as number one
among Nordic arrangers in Bloomberg’s Global League
Table for bookrunners of sustainable bonds. Our Green
Bond Framework defines the loans or investments eligible
to be funded by the proceeds from green bonds issued by
Danske Bank.
Since 2019, we have quadrupled our sustainable financing
through green loans and through sustainable bonds
arranged for customers to DKK 192 billion in 2021.
Sustainable bonds cover green, social and sustainability
bonds. Through Danica Pension, we have more than tripled
our investments in the green transition to DKK 33.5 billion.
During the year, we also launched competitive responsible
investment offerings in line with the EU’s Sustainable
Finance Disclosure Regulation (SFDR). Accordingly, our
ESG funds (which comply with Article 8 of the SFDR) had
DKK 566 billion invested, and our funds with a sustainable
objective (which comply with Article 9 of the SFDR) had
DKK 65 billion invested at the end of the year.
Our Group-wide sustainable finance framework continues to
provide guidance on the implementation of our ambition and
Danske Bank / Annual Report 2021 Danske Bank / Annual Report 2021
19
targets, and it helps to ensure that we work in an effective
and consistent manner as we develop our offerings and
products. Both the framework and our new Sustainable
Finance Policy, which was introduced in 2021, are inspired
by and aligned with the PRB. In our policy, we recognise the
need to channel more capital towards sustainable activities
– and less towards activities that are not compatible with a
sustainable future.
Entrepreneurship
Danske Bank supports new businesses that will create
innovative solutions in which growth and positive societal
impact go hand in hand. Since December 2015, we have
supported 6,329 start-ups and scale-ups – with our target
being to reach 10,000 by 2023 – and facilitated more
than 43,000 jobs. The implications of COVID-19 for the
Nordic start-up ecosystem are still uncertain. Start-ups and
scale-ups have proven to be robust, but the development of
the ecosystem as a whole is yet not clear. Our free, digital
community platform, The Hub, is a key initiative in helping
growth companies to recruit the talent they need to scale
up and to gain access to venture capital. In 2021, the online
profiles of impact start-ups were integrated into The Hub
from +impact, the former digital matchmaking platform,
and impact start-ups now represent about 18% of the
businesses listed on The Hub.
Financial confidence
Since early 2018, Danske Bank has supported almost 1.6
million children, young people and parents by providing
financial literacy tools and expertise, and we are making
progress on reaching the target of 2 million by 2023. This
is an essential part of our efforts to help people across our
markets to achieve greater financial confidence. In 2021,
we updated all Danske Bank’s educational programmes. For
example, our free digital learning tool, Moneyville, through
which children aged 5 to 9 can learn about money in an
interactive and colourful universe, was relaunched and now
includes a sustainability dimension.
Governance and integrity
Danske Bank continues to develop and embed a strong
compliance culture that sets clear expectations for the
conduct of employees and of the Group. Our Code of
Conduct Policy outlines a set of principles that govern our
behaviour and way of doing business, and in 2021, the
code was updated to connect our new Purpose and Culture
Commitments with key Group policies. Following this, we
also released new code of conduct training as part of our
annual mandatory risk and compliance training courses.
In 2021, 96% of our employees completed and passed
the training on time, which is in line with our annual target
of over 95%. Furthermore, we also launched a mandatory
eLearning course that teaches all employees how we work
with sustainability, how they can get involved, and how they
can use this insight when they engage in discussions with
colleagues, customers and partners.
In 2021, we also continued to make substantial
investments to enhance our financial crime prevention
procedures and competencies, and we made solid
progress on strengthening our defences. We introduced a
new Financial Crime Policy, which sets the principles for
governance of all financial crime risks across the Group,
20
including bribery and corruption, and we further developed
our anti-bribery and corruption control framework. We
also strengthened the mandatory risk and compliance
training course on anti-bribery and corruption as well as
the training on conflicts of interest and market abuse.
The training on financial crime prevention includes
understanding tax affairs at customer level and detecting
tax evasion. We have a firm position on tax compliance,
and, as a matter of policy, we do not participate in any
aggressive tax arrangements.
Danske Bank promotes a working culture in which
employees feel they can share their concerns with their
colleagues, managers or HR, and we encourage employees
to speak up about suspected wrongdoing as soon as
possible. Employees can also report concerns anonymously
through our whistleblowing scheme, which also applies
to external stakeholders. In 2021, we demonstrated our
ongoing commitment to ensuring that employees have
the right tools to voice their concerns with confidence by
enhancing our whistleblowing reporting site further through
the introduction of the option to submit concerns via voice
recording and using voice-altering software. The number of
reports submitted in 2021 was similar to that in 2020, and
this consistency demonstrates that whistleblowing is now
properly embedded in the organisation.
Danske Bank is upgrading procurement processes
to strengthen risk mitigation and to build a resilient
and sustainable supply chain, and we have started
implementing a new supplier ESG assessment platform. In
2021, 141 high-risk suppliers were ESG assessed, and our
target is that all active suppliers – handled through Group
Procurement – are ESG assessed by 2023.
Diversity & Inclusion
At Danske Bank, we believe that a diverse and inclusive
culture will help us to release the full potential of our
employees and to become a better bank for all our
stakeholders. In 2021, we continued our efforts to advance
our Diversity & Inclusion (D&I) agenda, both at Danske
Bank and towards society in general. During the year, we
reviewed our D&I Policy and hired D&I subject matter
experts to develop and implement actions, and our D&I
Council, local D&I Leads and advocates worked to anchor
D&I efforts centrally and across the Group. In our aim
for gender equality, we focus on preventing biases and
developing gender-balanced recruitment processes. With
a gender balance of 32% women in senior leadership
positions in 2021, we maintain our focus to ensure that
we reach our target of more than 35% by 2023. We
also further improved LGBTQ+ rights and conditions, and
in 2021, we implemented a Group-wide Transgender
Instruction.
Employee well-being
Our ways of working and engaging with each other are
currently undergoing significant change, with a transition
Danske Bank / Annual Report 2021 21
towards more hybrid and flexible ways of working. Building
employee and leadership capabilities to embrace and thrive
in a hybrid work environment is a key focus for us in our
cross-functional programme Working@Danske – and it
goes hand in hand with our ongoing culture transformation.
In 2021, we negotiated local collective agreements with
the Danish financial services union regarding working from
home, and approximately 18,000 employees across the
Group received a DKK 8,000 cash allowance to upgrade
their individual home offices.
complemented by a 60% reduction by 2030 in relation
to 2019. Alongside this, we will continue to increase
the scope of our reporting, including categories such as
employee commuting and emissions associated with
employees working from home in our scope 3 emissions.
More information
We have continued to integrate ESG and sustainability
considerations into our Risk Management Framework,
which is covered in our Risk Management 2021 report.
In February 2021, we launched our new agile development
organisation that encourages more collaborative
relationships between departments and a reduction in
bureaucracy. This entailed reorganising more than 4,000
employees, moving them from specialist departments into
26 cross-functional teams.
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 five 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. 50.
Environmental footprint
Reducing carbon emissions from our premises and
travel is a central element in our efforts to minimise
our environmental footprint. In 2021, our operations
resulted in 4,733 tonnes of CO2 emissions, which is a
69% decrease from 2019. The COVID-19 pandemic has
led to a significant change in our ways of working, with
digital meetings replacing a number of physical meetings,
thereby reducing travel-related emissions on a more
permanent basis. To reflect this, we in 2021 updated our
target to a 40% reduction by 2023 in relation to 2019 –
Altogether, our Sustainability Report 2021 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
Executive Order on Financial Reports for Credit Institutions
and Investment Firms etc. The report is supplemented by
our Sustainability Fact Book 2021, which also includes our
PRB reporting obligation. Our Sustainability Report 2021 is
available for download at danskebank.com/sustainability.
Danske Bank / Annual Report 2021 22
Danske Bank / Annual Report 2021 23
Business units
Our four commercial business units support our strategy for each customer segment.
Personal & Business Customers
Our Personal & Business Customers unit provides advisory services to personal customers, Private
Banking customers and small and medium-sized businesses in Denmark, Sweden, Norway and
Finland. We offer customised advice based on the customer’s current situation and needs. With our
intuitive digital solutions, we aim to make it as easy as possible for our customers to do most of their
banking business whenever and wherever they want. Our business customers have access to the
market’s most innovative digital solutions that make day-to-day banking easy.
Large Corporates & Institutions
Large Corporates & Institutions aims to be the preferred long-term financial partner for the
largest Nordic corporate and institutional customers, supporting them throughout their life cycle
in good and bad times by applying a holistic view on their business needs, while also delivering
best-in-class products to customers in Personal & Business Customers. We are supporting our
customers by providing easy day-to-day banking offerings, risk facilitation, execution services
and strategy advice via the preferred platform of our customers.
Danica Pension
Danica Pension’s strategy is based on our ambition to be our customers’ financial security
provider and thereby enhance customer satisfaction. We focus on proactively helping our
customers – both personal and business customers – to ensure that they have the right pension,
insurance and healthcare solutions, while we also generate attractive returns after costs and
contribute to creating a more sustainable society.
Northern Ireland
Danske Bank is the leading bank in Northern Ireland, serving personal, business and corporate
customers. The business is also a growing bank in targeted sectors across the rest of the United
Kingdom. We support our customers through face-to-face, online and mobile solutions. Danske Bank
was delighted to win the 2021 Business in the Community ‘Environmental Leadership‘ award and
is seen as one of the leading companies in the country when it comes to sustainability diversity and
being responsible.
Business units contribution, 2021
Profit before tax
Total income
FTE
P&BC
LC&I
Danica Pension
Northern Ireland
Non-core
Group Functions
P&BC
LC&I
Danica Pension
Northern Ireland
Non-core
Group Functions
P&BC
LC&I
Danica Pension
Northern Ireland
Non-core
Group Functions
-1,444 mio. dkk
7,906 mio. dkk
627 mio. dkk
23,644 mio. dkk
10,252
6,565
386 mio. dkk
2,088 mio. dkk
1,576 mio. dkk
2,088 mio. dkk
7,638 mio. dkk
14,650 mio. dkk
P&BC
LC&I
Danica Pension
Northern Ireland
Group Functions
P&BC
LC&I
Danica Pension
Northern Ireland
Group Functions
2,684
960
Northern Ireland
Group Functions
1,268
P&BC
LC&I
Danica Pension
Danske Bank / Annual Report 2021 24
Personal & Business Customers
During 2021, Personal & Business Customers launched a number of initiatives to digitalise services with the aim of improving
the customer experience. Customer activity increased in many of our market areas and especially within investment offerings.
We continue to progress with the Better Bank plan. At the end of 2021, we saw mortgage activity in Personal Customers
Denmark pick up, leading to improvements in our market share.
In 2021, profit before tax increased DKK 2,243 million from the level in 2020, due primarily to lower loan impairment charges
and lower expenses. The decrease in impairment charges was attributable to fewer charges against individual exposures and
overall stronger credit quality.
Personal & Business Customers
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Loans, excluding reverse transactions before
impairments
Allowance account, loans
Deposits, excluding repo deposits
Covered bonds issued
Allocated capital (average)
2021
2020
Index
21/20
15,664
6,516
673
791
23,644
15,253
8,391
486
7,906
16,018
6,080
575
702
23,375
15,716
7,659
1,996
5,663
1,536,121
1,532,786
14,146
700,434
13,957
685,609
1,040,484
1,058,209
73,861
68,929
Q4
2021
3,909
1,711
177
177
5,974
4,420
1,554
31
1,522
Q3
2021
3,988
1,538
184
202
5,913
3,544
2,368
-96
2,464
1,536,121
1,522,000
14,146
14,206
700,434
693,548
1,040,484
1,042,506
73,006
74,136
0.71
0.72
8.5
12.8
8.3
13.3
74.0
59.9
Index
Q4/Q3
98
111
96
88
101
125
66
-
62
101
100
101
100
98
-
-
-
-
98
107
117
113
101
97
110
24
140
100
101
102
98
107
-
-
-
-
Net interest income as % p.a. of loans and deposits
0.71
0.75
Profit before loan impairment charges as % p.a. of
allocated capital
11.4
11.1
Profit before tax as % p.a. of allocated capital (avg.)
10.7
8.2
64.5
67.2
Cost/income ratio (%)
Full-time-equivalent staff
Assets under management
(DKK millions)
Assets under custody
6,565
6,913
95
6,565
6,669
98
713,745
596,467
120
713,745
681,626
105
Fact Book Q4 2021 provides financial highlights at customer type level for Personal & Business Customers. Fact Book Q4 2021 is available at danskebank.com/ir.
Business initiatives and strategy
In 2021, Personal & Business Customers focused on the
execution of the Better Bank plan and on releasing the
potential of the commercial organisation. Our main areas of
attention were scalability, a faster time to market via digital
solutions, and advisory services specialisation.
Personal customers
The personal customer segment is a key part of Danske
Bank’s business. It is our ambition to be the leading bank for
personal customers in Denmark and a strong challenger in
the other Nordic markets. To realise this ambition, we are
putting strategic focus on our home finance and investment
offerings, alongside enhancing the value propositions for
specific segments. In addition, core partnerships continue to
play a pivotal role in our ability to increase scalability as part
of the growth strategy.
To execute the plan, we implemented a number of strategic
changes and initiatives in 2021.
Improved customer experience for homeowners
In Denmark, we want to be the preferred bank for
homeowners.
Danske Bank / Annual Report 2021
25
We reached an important milestone for the fixed-rate
FlexLife® loan offered by Realkredit Danmark when we
reached a loan portfolio of DKK 22 billion. Furthermore,
we improved our digital self-service options for home
loans by enabling customers to perform remortgaging
calculations online at rd.dk. In October, we launched a new
modern website for Realkredit Danmark to make it easier
for customers to navigate the site. Customers are now
provided with a better overview of their existing loans and
the opportunity to calculate the costs associated with the
various loan types. On average, the rd.dk website now gets
80,000 visits each month, an increase of 23% from the
number of visits to the old site. Furthermore, at the end of
2021, we launched a new home purchase calculator, which
gives customers looking to buy a home an estimate of the
home they can afford.
In the other Nordic countries, we also accelerated the digital
customer experience within home finance. In Norway for
example, we launched a digital solution for customers who
would like to request changes to their existing home loans.
Enhanced value propositions
To further strengthen our position among the mass-affluent
customers, in the third quarter of 2021, we launched a
new value proposition that caters to this customer group’s
more complex finances and advisory needs. It includes
access to wealth advisers specialised in asset planning and
investment and a new financial planning simulation tool that
provides an easy overview with targeted recommendations.
The offering combines strong digital solutions with advisory
services to release our customers’ financial potential. The
offering has been well received by customers, and we see
increased activity, especially in the investment area.
To be a leading bank for personal customers in Denmark
and a challenger in the other Nordic countries, we need to
be a preferred bank for the next generation. In the fourth
quarter of 2021, we therefore strengthened our proactivity
and value proposition towards this segment, including
enhanced digital 1:1 dialogue, increased accessibility and
targeted campaigns.
Strengthened investment offering
One of our key focus areas is to increase investment
sales, which represent a significant part of the segment
income. We do this in several ways, including through
more digitalisation and more time for advisory services, a
simplified price structure and an attractive product offering.
This resulted in an increase in investment activity among
our personal customers, and we saw growth, especially for
our digital investment robot June. The inflow was two and a
half times higher than in 2020. June was created to make
investments easy and simple, providing customers and non-
customers, new and seasoned investors alike with a digital
self-service solution that delivers attractive returns.
Danske Bank / Annual Report 2021 26
In the first quarter of 2021, we launched a new digital
investment tool for our personal customers called Proctor.
Proctor is designed to provide customers with an improved
and more customised overview of the costs associated with
investing.
In our Private Banking segment, we started offering
customers in Denmark the opportunity to invest in our
Global Portfolio Solution, which was previously available
exclusively to our corporate customers, marketed under the
name Danske Porteføljepleje GPS. Danske Porteføljepleje
GPS combines a number of the latest investment tools and
aims to create more robust portfolios that produce a higher
risk-adjusted return than Danske Bank’s other investment
solutions.
Continued Nordic growth via partnerships
Across the Nordic countries, partnerships continue to
be a key lever for growth. In the third quarter of 2021,
we successfully entered into a new partnership with
members of the Norwegian Journalists’ Association, and
in Finland, we extended our agreement with Akava. Our
partnership strategy enables us to team up with strong
partners across our markets and gives us access to a
large number of potential customers. The strategy is to
provide a competitive, full-range offering to the partnership
customers to create mutual value, increase scalability and
strengthen our green offering proposition. We continue
to accelerate the implementation of a more harmonised
Nordic service model with digital sales and data-driven
leads.
Supporting sustainable progress
Sustainability continues to be a strategic top priority at
Personal & Business Customers, and sustainability is
embedded in everything we do, including our efforts to
continue to improve the customer experience and our
products.
The green transition on the roads was also a key focus area,
and in Denmark, we introduced a new, attractive car loan
offer for personal customers for both electric cars and plug-
in hybrid cars to support the transition to more sustainable
and less carbon-demanding means of transportation. We
also launched payment cards made of recycled plastic for
our youngest customers who have the so-called Pocket
Money cards. The cards were introduced across Denmark,
Sweden, Norway and Finland.
In Finland, we launched a new service to help our customers
make more sustainable housing choices in cooperation with
our partner Akava. The service helps customers get a better
overview of how to improve the environmental footprint
of their homes, for example through renovation, energy
classification and heating.
bank for business customers in the Nordic countries. We
want to achieve this by leveraging enhanced digital solutions
combined with market-leading advisory services to create
focused value propositions.
Launch of new service model
In the fourth quarter of 2021, we increased our competitive
strongholds for business customers with a new, modified
service model launched across Denmark, Sweden, Norway
and Finland. The service model allows us to even better
match our service level and offerings to the customers’
needs, thereby embracing the new way of banking with a
combination of specialist advice for customers with complex
needs and increased focus on digital self-service solutions
and online advice for customers with less complex needs.
Improved customer experience with digital solutions
In the last quarter of 2021, we took another step towards
delivering best-in-class self-service solutions for our
business customers by further enhancing our District
platform. With a new solution called Marketplace,
customers are able to browse products and initiate the
ordering process themselves, which empowers them to
cover new needs within a short time frame. Additionally,
Marketplace enables customers to explore new and relevant
solutions offered digitally. The solution was initially launched
in Sweden, and the rest of the Nordic markets will follow in
2022.
In 2021, we continued to strengthen our ability to serve
our business customers remotely across all markets – a
trend that accelerated with the rise of the pandemic, as
more and more customers requested online services. This
development has brought us a step closer to our ambition
of delivering high satisfaction through our digital solutions,
securing more scalability in how we deliver our advice and
services, and – ultimately – helping more customers realise
their potential.
Sustainability
In Denmark, we experienced an acceleration of green
financing, and Realkredit Danmark’s green mortgage loans
for properties in Denmark passed the DKK 10 billion mark.
Furthermore, we lowered the threshold for obtaining green
loans from Realkredit Danmark from DKK 100 million to
DKK 30 million and removed the threshold for obtaining
green loans for real estate in Norway and Sweden, which
we expect will increase demand for these loan types even
further.
In Sweden, via Danske Finans, we launched GreenFleet
70 for businesses. GreenFleet70 is a tool for mapping the
environmental footprint of a business’s car fleet, and the tool
offers advice on how to reduce emissions.
Business customers
Business customers continue to be of high strategic
importance to us, and our ambition is to be the number one
Customer satisfaction
Customer satisfaction for business customers in 2021
continued to be in line with our ambitions. Among our
Danske Bank / Annual Report 2021 27
Q4 2021 vs Q3 2021
Profit before tax in the fourth quarter
amounted to DKK 1,522 million, a
decrease of 38%, due primarily to
an increase in operating expenses
caused by higher expenses in the
fourth quarter resulting from changes
to the allocation of costs between the
business units.
• Net interest income amounted to
DKK 3,909 million (Q3 2021:
DKK 3,988 million), a decrease of
2%, which was driven by challenging
interest markets in Denmark, where
rates decreased, and in Norway,
where rates increased. In Demark,
this resulted in a continued decline in
the funding value of deposits, which
prompted us to take repricing actions
toward the end of the year.
• Net fee income increased 11% from
the preceding quarter as a result
of increased customer activity and
refinancing activity in the fourth
quarter.
• Operating expenses increased to
DKK 4,420 million (Q3 2021:
DKK 3,544 million), as the changes
to the allocation of costs between
the business units related to the
reorganisation at the beginning of the
year were implemented mainly in the
fourth quarter. This resulted in higher
allocated costs for risk management
and technology development.
• Loan impairment charges amounted
to DKK 31 million (Q3 2021: a
reversal of DKK 96 million). The
increase in impairment charges
was attributable to a one-off charge
related to forborne customer
exposures in the fourth quarter.
• Lending volumes were on par with
volumes in the third quarter of
2021 as the need for credit facilities
continued to be at a low level among
business customers, who were
generally helped by government
support packages. For personal
customers, we saw a slight increase.
• Deposit volumes were on par with
the third quarter of 2021.
DKK 1,522 million
Profit before tax
for the fourth quarter of 2021
business customers in Denmark,
Norway and Finland, we were ranked
in the top two in 2021.
Customer satisfaction among our
personal customers was challenged
primarily by reputation and capacity
constraints. To tackle these
challenges, we launched a number of
initiatives in 2021.
Feedback shows that the satisfaction
rate among personal customers is
higher when we advise customers
through direct dialogue. We have
therefore focused on improving our
digital solutions and self-service tools
to free up more time for proactivity,
accessibility and dialogue with our
customers. We also support our
customers in their use of our digital
solutions, such as our globally award-
winning Mobile Banking app, which is
tremendously popular among users
and proves that a great customer
experience can take place digitally as
well. We received further recognition
in the third quarter of 2021 for
having the best digital customer
experience on the market in Denmark
and were named Digital Financial
Corporation of the year by Danish
financial news medium FinansWatch
and research company Wilke. We
will maintain our dedicated focus on
creating market-leading digital tools,
services and experiences for our
customers – something we consider
a trademark of Danske Bank.
2021 vs 2020
Profit before tax amounted to
DKK 7,906 million (2020:
DKK 5,663 million), mainly as
a result of a decrease in loan
impairment charges and lower
operating expenses.
Net interest income decreased
2% due to a lower funding value of
deposits across all markets as well
as margin pressure and a challenged
interest rate environment across the
Nordic countries. These effects were
only partly mitigated by repricing
initiatives for deposits.
Net fee income stood at DKK 6,516
million, an increase of 7% (2020:
DKK 6,080 million). This was
driven by an increase in investment
activity and growth in assets under
management.
Net trading income increased to
DKK 673 million (2020:
DKK 575 million) due to higher
foreign exchange activity in line with
the reopening of the societies in
which we operate.
Other income amounted to DKK 791
million (2020: DKK 702 million). The
increase was due primarily to our
real estate agency home seeing good
activity in the housing market in the
first half of 2021 as well as to good
activity within Asset Finance.
Operating expenses decreased 3%
as a result of lower costs in relation
to the Better Bank transformation.
In 2021, loan impairment charges
amounted to DKK 486 million
(2020: DKK 1,996 million), and
impairments thus returned to a
more normal level. The impairment
charges for 2021 were driven
mainly by charges against individual
customer exposures made as a
result of the corona crisis as well as
model adjustments.
Credit quality
Credit quality remained solid in
2021. The COVID-19 effects on the
personal customer portfolio remained
modest. We continue to be vigilant
for any possible deterioration as
uncertainty remains high.
Credit exposure
Credit exposure increased to
DKK 1,768 billion at end-2021
(end-2020: DKK 1,763 billion),
driven mainly by positive
developments for Personal
Customers Norway and
developments for Business
Customers outweighing the
decreases seen for Personal
Customers Denmark and Global
Commercial Real Estate.
Danske Bank / Annual Report 2021 28
Large Corporates & Institutions
Economic activity improved during 2021 as societies gradually reopened. This led to high activity across most business areas, as
we continued to work alongside our customers to help them adjust to the changing-COVID-19 operating environment and with the
transition towards a low-carbon economy. The investments we have made over the years to improve our Investment Banking &
Securities offering meant that not only did we take advantage of the elevated market activity and deliver record-high net fee income
from our capital markets activities, we also managed to increase our market shares in the Nordic debt and equity capital markets –
two of our strategic focus areas. Overall, market conditions were favourable, and we made good progress on a number of strategic
priorities, as reflected in our number one position among the Nordic banks within arranging of sustainability-linked loans and
sustainable bonds in terms of volumes supported. Profit before tax increased DKK 5,492 million from the level in 2020, driven by
significantly lower loan impairment charges, higher net fee income and lower operating expenses.
Large Corporates & Institutions
(DKK millions)
2021
2020
Index
21/20
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Loans, excluding reverse trans. before impairments
of which loans in General Banking
Allowance account, loans (incl. credit institutions)
Deposits, excluding repo deposits
of which deposits in General Banking
Covered bonds issued
Allocated capital (average)
4,732
6,777
3,137
5
5,034
5,911
3,485
6
14,650
14,437
7,025
7,625
-13
7,638
264,824
232,890
4,363
383,547
340,477
26,055
43,591
7,672
6,764
4,619
2,146
271,359
225,067
4,557
433,090
378,939
22,728
44,825
Net interest income as % p.a. of loans and deposits
0.73
0.79
Profit before loan impairment charges as % p.a. of
allocated capital
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
17.5
17.5
48.0
2,684
15.1
4.8
53.1
2,553
Total income
(DKK millions)
General Banking
Markets
of which xVA*
Asset Management
of which performance fees
Investment Banking & Securities (IBS)
6,203
3,909
104
2,653
385
1,886
6,322
4,345
309
2,555
640
1,214
Total income
14,650
14,437
94
115
90
83
101
92
113
-
-
98
103
96
89
90
115
97
-
-
-
-
105
98
90
34
104
60
155
101
Q4
2021
1,179
2,057
720
3
3,959
1,463
2,495
-243
2,738
264,824
232,890
4,363
383,547
340,477
26,055
41,915
Q3
2021
1,161
1,499
565
-
3,225
1,811
1,414
-22
1,436
244,046
220,608
3,974
376,909
330,126
26,862
42,916
0.76
0.76
23.8
26.1
37.0
2,684
13.2
13.4
56.2
2,716
1,555
1,005
50
912
305
487
1,535
685
-40
637
25
368
3,959
3,225
Index
Q4/Q3
102
137
127
-
123
81
176
-
191
109
106
110
102
103
97
98
-
-
-
-
99
101
147
-
143
-
132
123
*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.
Assets under management
(DKK millions)
Institutional clients
Retail clients
487,560
325,025
464,890
288,207
Total assets under management1
812,585
753,097
1 Includes assets under management from Group entities.
105
113
108
487,460
325,025
478,051
313,311
812,585
791,362
102
104
103
Danske Bank / Annual Report 2021
Danske Bank / Annual Report 2021
29
Large Corporates & Institutions will contribute to the
Group’s 2023 ambitions by leveraging our strong market
position and by capitalising on the growing Nordic capital
markets. Two years into the Better Bank transformation,
we have laid the tracks for a profitable growth journey in
the years ahead, as we become even more efficient and
focused in our activities. During the global pandemic, we
proved our commitment to being a relationship-driven bank.
We leveraged Danske Bank’s financial strength to support
our customers with credit and risk management throughout
the crisis, which brought significant costs for all of society
but also enabled us to forge even stronger ties with our
customers.
Business initiatives and strategy
It is our ambition at Large Corporates & Institutions to be
the preferred strategic financial partner for our customers by
supporting them throughout their life cycle and by applying
a holistic view to their business to help them reach their
ambitions. At the beginning of the year, we were part of the
launch of the Group’s new agile development organisation
and the reorganisation of business units in order to create
a simpler organisation that is better equipped to develop
improved customer offerings at a higher speed and at a
lower cost.
As part of the Better Bank strategy and to further
strengthen our commercial momentum, Large Corporates &
Institutions has identified four focus areas.
Enable growth with sustainable finance and investments
The sustainable finance market continued to grow rapidly
in 2021 and we supported issuers and investors in a
substantial number of transactions, affirming our position
as a leading Nordic bank within the area of sustainable
finance. It is our ambition to integrate sustainability into
everything we do – across products and advisory services
– and use the power of finance to support our customers
on their sustainable transition. Significant investments are
needed over the coming decades across the private and
public sectors in order to transition society to a low-carbon
economy, and banks have an important role to play in
terms of not only financing this journey but also advising
customers as they make the transition, and we continue
to invest in both our advisory resources and our product
capabilities to support our customers.
Danske Bank is well-positioned to take an active role and be
a strategic financial partner to corporates and institutions
in the Nordic countries, as evidenced, for example, by
our role as lead manager and Sustainability Linked Bond
structuring adviser for Elekta AB (publ) in connection with
the first sustainability-linked bond issue in Sweden with a
purely social KPI. We are also proud to have assisted the
Danish central bank with its issue of Denmark’s first green
government bond, which will finance renewable energy
and the green transition of the transport sector and is
an important step in the Danish government’s ambitious
climate plan. In a very active year, we were also pleased
to be ranked number one among Nordic banks according
to the Bloomberg League tables for arrangers of both
sustainability-linked loans and sustainable bonds in terms
of volumes supported with many high-profile green and
ESG-linked transactions, including financing to Copenhagen
Infrastructure Partners. In 2021, we arranged sustainable
bonds in the amount of USD 12 billion for our customers,
which is more than we or any Nordic arranger has ever
arranged in a full year.
In 2021, we also reached our ambition of having at least
DKK 400 billion in funds that promote environmental and/
or social characteristics and ensure good governance
as categorised in Article 8 of the Sustainable Finance
Disclosure Regulation. By 2030, we aim to have DKK 150
billion in funds with a sustainable investment objective
(Article 9 category). To meet our customers’ demand for
30
investments with varying degrees of sustainability focus,
we already now have 10 investment strategies categorised
and disclosed under Article 9 and more than 130 strategies
under Article 8. Furthermore, we have recertified 71 of
our funds for the LuxFLAG ESG label and remain the fund
manager in Europe with the highest number of funds
granted an ESG label from LuxFLAG.
Advisory and investment offering
The favourable market environment in 2021 contributed to
record-high fee income from our capital markets activities,
but also led to a period during which corporate customers
drew less on their credit facilities. This illustrates the value
of our diversified business model, as higher net fee income
more than compensated for lower net interest income and
net trading income.
In order to support our customers in executing their
strategic agendas, and to enable growth in capital-light
income areas, we have during recent years invested in
building a strong capital markets advisory offering across
the Nordic markets with a heightened focus on advice
relating to the sustainable transition. Among many
successful transactions executed during 2021, we are
proud to have supported insurance company Tryg as Joint
Global Coordinator and Joint Bookrunner in a DKK 37
billion rights issue – the largest ever ECM capital-raising
transaction in the Nordic countries. For ECM in Sweden,
2021 was a record year with many highlights, such as
the successful Cary Group IPO and the Real Estate IPO of
Nivika, which illustrate our successful long-term journey in
the Swedish ECM market – an important part of our focus
on strengthening our offerings and growing our franchise in
Sweden. Overall, we ended 2021 as the leading Nordic bank
in terms of supported volumes within debt and equity capital
markets – ensuring a strong foundation for the future.
Strengthen our position outside Denmark
We see further growth potential across our home markets
and particularly in Sweden where we have successfully,
profitably and with balanced risks, grown our customer
base and income over the past years. During 2021, we
welcomed a number of new customers to Large Corporates
Sweden, and we continued to mature and expand our
existing customer relations. For example, we are proud to
have been chosen by OX2 (a leading European developer
of wind and solar farms) as supplier of a number of core
services across financing and cash management, and as
bookrunner in their recent IPO.
To support our growth ambitions, we have further developed
and formalised our customer acquisition process, drawing
on in-depth screening and thorough analysis of the fit
between potential customer needs and our strengths, and
we have utilised strategic advisory services to support our
customers in transformational developments within their
business.
Deploy capital more efficiently
A prerequisite for being able to both offer a competitive
and attractive service to customers and an attractive
return to shareholders is to continuously become more
effective in our capital deployment. During the past years,
we have executed a number of capital efficiency initiatives
that will continue as part of our 2023 ambitions, and we
have reduced allocated capital by 3% from 2020, despite
an underlying increase from the implementation of new
regulation. We have improved our income composition to
achieve a larger share of capital-light income, and we are
becoming less reliant on our balance sheet – enabled for
example by the continued development of our capabilities
to originate bond and loan transactions for corporate
customers and distribute to debt investors and banks where
feasible. This has led to several lead positions this year both
within Leveraged Finance and Corporate M&A financings,
with bond and loan transactions for customers such as
Coloplast.
Digitalisation efforts continued
In order to support customers in making their daily banking
activities easy and safe, we launched a range of new
products, for instance new and enhanced functionality and
features in our corporate banking platform District, including
a new self-service cash flow forecasting module that
enables customers to forecast and prepare for their liquidity
needs accordingly. We also launched a new, advanced third-
party offering for payroll management and made significant
progress with the delivery of a new expense management
solution as well as a credit management software helping
businesses reduce outstanding invoices and credit risk –
both expected to be launched in early 2022.
We are continuing our investments in digitalising our ‘Know
Your Customer’ processes and controls in order to improve
efficiency and the customer experience – all part of making
daily banking activities easier and safer for our customers.
Customer satisfaction
During 2021, we continued to receive overall positive
customer satisfaction scores as measured by Prospera,
the independent market research company in the Nordic
market, and as reflected in league tables. We maintained
our number one position across the Nordic countries on
the basis of an aggregated ranking of the annual reviews
conducted by Prospera, and our strong position within
day-to-day banking services as reflected in number one
positions in the Nordic aggregated Prospera reports across
cash management, foreign exchange, trade finance, external
asset management and interest rate swaps.
While this suggests that our holistic coverage model and
product competencies are appreciated by our customers,
there are also clear indications of areas where we need to
improve – including a better customer experience with our
KYC processes.
Danske Bank / Annual Report 2021 31
Q4 2021 vs Q3 2021
Profit before tax increased to
DKK 2,738 million (Q3 2021:
DKK 1,436 million), mainly as a
result of higher income and lower
operating expenses.
• Net interest income increased
2% from the third quarter, driven
by higher activity-driven income
and higher net interest income
from lending.
• Net fee income amounted to
DKK 2,057 million (Q3 2021:
DKK 1,499 million), a significant
increase from the level in the third
quarter, driven by seasonality in
Investment Banking & Securities
and performance fees in Asset
Management.
• Net trading income amounted
to DKK 720 million (Q3 2021:
DKK 565 million). The increase
was driven by positive value
adjustments on the derivatives
portfolio and higher underlying
trading income amid more volatile
fixed income markets.
• Operating expenses decreased
19% from the level in the third
quarter, as the changes to the
allocation of costs between the
business units related to the reor-
ganisation at the beginning of the
year were mainly implemented in
the fourth quarter. The decrease
was partly offset by higher perfor-
mance-based compensation.
• Loan impairments amounted to
a net reversal of DKK 243 million
in the fourth quarter, (Q3 2021:
a reversal of DKK 22 million).
The reversal in the fourth quarter
of 2021 related primarily to
individual exposures, but general
improvements in credit quality
also contributed.
DKK 2,738 million
Profit before tax
for the fourth quarter of 2021
significantly below the record level in
2020, reflecting, among other things,
more challenging market conditions
for Fixed Income hedge funds.
Net trading income declined 10%
and amounted to DKK 3,137 million
(2020: DKK 3,485 million) due
to lower value adjustments on the
derivatives portfolio than in 2020
and to the fact that trading income
was high in 2020 amid volatile
markets and high customer activity.
Operating expenses declined 8%
(2020: DKK 7,672 million), mainly
because the reorganisation at the
beginning of the year resulted in
changes to the allocation of costs
between the business units. Lower
transformation costs also contributed
to the decrease, while higher
performance-based compensation
had the opposite effect.
Credit quality
Overall credit quality remained
strong. During 2021, the general
rating trend was slightly positive,
and loan impairment charges
amounted to a net reversal of
DKK 13 million, a notable decrease
from the level in 2020 (DKK 4.6
billion). In 2020, most of the net
charge was attributable to oil- and
gas-related exposures. In 2021, we
saw an ongoing strengthening of
credit quality. Since the fourth quarter
of 2019, we have actively reduced
net oil-related exposure (excluding oil
majors) by 54%.
2021 vs 2020
Profit before tax increased to
DKK 7,638 million (2020:
DKK 2,146 million), as a result of
significantly lower loan impairment
charges, higher fee income and lower
operating expenses.
Net interest income decreased to
DKK 4,732 million (2020:
DKK 5,034), due mainly to lower
income from deposits, as the
significant increase in volumes
lowered the value of surplus deposits.
However, deposits were repriced with
effect from the third quarter to reflect
the reduced funding value. Higher
activity-driven net interest income
and higher net interest income from
undrawn committed credit facilities
more than compensated for the
decline in net interest income from
lower average lending volumes.
General Banking lending volumes
have declined from the level in
the first half of 2020, when we
committed substantial credit facilities
in order to support our customers in
managing the impact of the corona
crisis. As the economic outlook
improved, customers drew less on
their credit facilities, and the facilities
provided in 2020 began to roll off.
Lending demand did, however, pick
up during the second half of 2021,
and General Banking lending volumes
increased 6% from the third quarter.
Net fee income increased to
DKK 6,777 million (2020:
DKK 5,911 million), reflecting
record-high income from capital
markets activities. Income from
corporate daily banking products,
such as FX and cash management,
also improved net fee income,
as did increased assets under
management. Assets under
management increased 8% from
the level in 2020, driven by rising
asset prices. During 2021, Asset
Management realised positive net
sales in the retail segment, whereas
there was a net outflow in the
institutional segment. Performance
fees in Asset Management were
Danske Bank / Annual Report 2021
32
Danica Pension
An exciting year has ended, and we can look back on a year that started with lockdowns, government support packages,
re-opening, new lockdowns and high returns on equities and alternative investments. Our customers received high returns
in 2021 – in fact, our returns were at the top of the market. However, the second part of 2021 was also characterised by
uncertainty and nervousness in the financial markets. We saw significant growth in premiums as well as an inflow of new
large business customers, which shows that we have a strong position in the market. The inflow of new customers and the
increase in assets under management will help support Danica Pension and the Group’s ambitions for the future.
Danica Pension generated a solid financial result in 2021, delivering good returns both to our customers and to the Group.
Profit was up 25% from the level in 2020 due to an improved health and accident business, good investments results and a
healthy underlying business that is growing rapidly.
Danica Pension
(DKK millions)
Result, life insurance
Result, health and accident insurance
Return on investments, shareholders' equity etc.
Net income before tax in Danica Pension1
Included within Group Treasury2
Net income from insurance business
Premiums, insurance contracts
Premiums, investment contracts
Provisions, insurance contracts
Provisions, investment contracts
Allocated capital (average)
Net income as % p.a. of allocated capital
Solvency coverage ratio
Full-time-equivalent staff
Assets under management
(DKK millions)
Life insurance
Health and accident insurance
Total3
2021
2020
2,642
-438
-20
2,184
-96
2,088
37,617
5,563
2,517
-643
-78
1,797
-127
1,669
28,958
1,292
449,344
428,736
20,847
12,918
16.2
210
960
29,525
13,735
12.2
191
817
462,930
17,449
480,379
447,783
16,822
464,605
Index
21/20
105
-
-
122
-
125
130
431
105
71
94
-
-
-
103
104
103
Q4
2021
780
-236
5
549
-37
512
10,416
1,936
Q3
2021
550
160
-94
616
-22
594
9,369
1,582
449,344
441,804
20,847
12,317
16.6
210
35,775
12,411
19.1
222
960
963
462,930
465,430
17,449
17,362
480,379
482,792
Index
Q4/Q3
142
-
-
89
-
86
111
122
102
58
99
-
-
-
99
101
100
¹ Figures are for the Danica Group.
2 Includes the difference between the actual return on the investment of shareholders’ equity (net of interest on subordinated debt) and the sum of interest on allocated capital and
allocated capital and shareholder costs. Special allotments are also included. Note G38 of Annual Report 2021 provides further information.
³ Assets under management in Q4 2021 and full year 2021 are reduced by the reclassification of DKK 24 billion regarding Danica Norway to assets held for sale.
During 2021, we improved our health package, and towards
the end of the year, we moved the target for investments of
DKK 50 billion in the green transition forward from 2025 to
2023.
In December, Danica Pension announced the sale of its
Norwegian activities. With the sale, Danica Pension is
focusing its business further and is in an even stronger
position to develop the best pension solutions for the
customers in Denmark. The sale is subject to approval by
the Norwegian authorities, which is expected in the first
half of 2022. Because the sale is subject to approval by the
Norwegian authorities, the expected profit from the sale of
approximately DKK 400 million will be recognised in 2022.
Business initiatives and strategy
Health solutions
One of our key strategic areas is the continued development
of our health solutions, and at the beginning of 2021,
Danica Pension launched a new health package, which
gives customers quick and easy access to online
consultations with doctors, psychologists and dieticians.
Danske Bank / Annual Report 2021 Danske Bank / Annual Report 2021
33
We were pleased to see that our health package helped
more than 8,000 customers in 2021. Over 6,000
consultations were with psychologists. A total of 40% of
these customers would not have sought help from our
psychologists had our digital solution not been available.
We know that early treatment of both mental and physical
issues reduces the long-term consequences. Thus, it is our
ambition that the early involvement of health personnel will
lead to less long-term illness and ultimately have a positive
effect on our health and accident results.
Improved health and accident results
We were pleased to note that the large investments made
in our healthcare solutions and in the health and accident
business meant that we successfully contributed to
preventing long-term illness and to ensuring a faster return
to work for more of our customers. This is of great benefit
to the individual, to businesses, to society, as well as to our
financial results. Danica Pension’s improved health and
accident result was due to a combination of an improved
investment result and fewer claims in 2021 than in 2020.
The corona crisis and its after-effects – particularly the
mental effects – remain an unknown factor, however, and
we are not yet able to predict how they will impact our
customers. We are certain that in this respect too, it is the
right decision for us to focus on prevention and early action
to reduce absence due to illness among our customers.
More sustainable investments
One of our key strategic aims is to further enhance our
800,000 customers’ options for investing their pension
savings with a strong focus on sustainability.
For the Danica Balance Sustainable Choice investment
solution, we select investments that actively contribute
to making a difference within areas such as climate,
environment, health, food production and other social
aspects and that thus support the UN Sustainable
Development Goals. Our customers are free to choose the
percentage of their savings that they want to invest with this
special sustainability focus.
An example of our strong focus on sustainability is our
DKK 1 billion investment in an impact fund managed by
BlackRock. The companies in which the fund invests work
actively to promote one or more of the UN Sustainable
Development goals. Part of the investment will be placed in
Danica Balance Sustainable Choice.
34
Investments in the green transition
It is Danica Pension’s ambition that
by 2050, all of its investments are
carbon neutral. In the first quarter
of 2021, Danica Pension set new
sub-targets for investments targeted
at reducing carbon intensity in
key sectors towards 2025. These
include the energy, utilities, transport,
steel and cement sectors. Danica
Pension aims to help reduce carbon
emissions in these key sectors by
between 15% and 35% relative to
2019 levels. In November 2021,
Danica Pension’s target of investing
DKK 50 billion in the green transition
was moved forward from 2025 to
2023, as we reached the original
target of investing DKK 30 billion in
the green transition by 2023 already
in 2021.
Financial security and proactive
advisory services
We will continue to focus on creating
financial security for our customers
through relevant and proactive
advisory services with the aim of
creating attractive returns after
costs.
Customer satisfaction
We maintain a focus on improving
customer satisfaction by providing
pension savings products that meet
customer needs and demands.
According to the December 2021
Aalund Research survey on customer
satisfaction, Danica Pension is
the new number one in terms of
business-to-customer ratings.
Despite an improved overall score
for our business customer segment,
Danica Pension drops from first to
fourth place in Aalunds business-to-
business rating.
2021 vs 2020
Danica Pension saw good
momentum during 2021, a
momentum that was driven by a
good performance in the underlying
business as well as higher returns on
investments.
Net income from insurance business
increased to DKK 2,088 million
(2020: DKK 1,669 million), due
primarily to a better result for the
health and accident business and the
life insurance business.
The result of the life insurance
business increased to DKK 2,642
million (2020: DKK 2,517 million).
Positive investment results on life
insurance products where Danica
Pension has the investment risk and
an increase in fees resulting from
higher assets under management
had a positive impact on the result for
2021. Life insurance products where
Danica Pension has the investment
risk benefited from an increase in
the interest yield curve (including
the volatility adjustment) and high
returns on risky assets. An accounting
correction of DKK 250 million had a
negative effect on the result in 2021.
The result of the health and accident
business was a loss of DKK 438
million (2020: a loss of DKK 643
million). The underlying business
improved, and the investment result
increased considerably from 2020,
but was also in 2021 affected by
provisions for potential pension yield
tax.
The return on investments allocated
to shareholders’ equity etc. increased
DKK 58 million from 2020, mainly
because the result in 2020 was
affected by write-downs of assets
in connection with the clean-up of
accounting balances after the merger
of Danica Pension and the former
SEB Pension. The investment return
on assets and liabilities allocated to
shareholders’ equity was lower in
2021 than in 2020.
Total premiums increased 32%,
driven mainly by an increase in single
premiums due to an inflow of new
business customers.
Assets under management increased
DKK 39 billion due to the positive
developments in the financial
markets and an inflow of new
business customers. Assets under
management were, however, also
affected by the reclassification in
December of almost DKK 24 billion
regarding Danica Norway to assets
held for sale.
Q4 2021 vs Q3 2021
Net income from insurance business
decreased to DKK 512 million (Q3
2021: DKK 594 million). The result of
the life insurance business increased
from the third-quarter result, whereas
the result in the health and accident
business decreased to a loss of DKK
236 million. The return on investments
allocated to shareholders’ equity
increased in the fourth quarter.
•
•
•
•
•
The result of the life insurance
business increased 42%, as the
third quarter of 2021 was negatively
affected by an accounting correction
of DKK 250 million. Adjusted for
the accounting correction in the
third quarter, the result of the life
insurance business was on the same
level in the fourth quarter as in the
third quarter.
The result of the health and accident
business decreased in the fourth
quarter to a more normal level, as the
third quarter saw a high investment
result. The underlying business was
still stable and developing in the right
direction.
The return on investments
allocated to shareholders’ equity
etc. increased DKK 99 million, due
mainly to higher returns on assets
allocated shareholders’ equity.
Total premiums increased 13%,
driven mainly by an increase in single
premiums due to an inflow of new
business customers.
Assets under management
increased DKK 21 billion. The
increase in assets under management
was due mainly to positive develop-
ments in the financial markets.
Assets under management were,
however, also affected by the
reclassification in December of almost
DKK 24 billion regarding Danica
Norway to assets held for sale.
DKK 512 million
Net income from
insurance business
for the fourth quarter of 2021
Danske Bank / Annual Report 2021
35
Northern Ireland
In 2021, we moved forward with growing optimism, ensuring that Danske Bank plays a key role in the economic recovery across
Northern Ireland. 2021 saw an increase in profit before tax, which was DKK 240 million higher than in 2020, due to net loan
impairment reversals.
Northern Ireland
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Loans, excluding reverse transactions before
impairments
Allowance account, loans
Deposits, excluding repo deposits
Allocated capital (average)*
Net interest income as % p.a. of loans and deposits
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
* Allocated capital equals the legal entity’s capital.
2021
2020
Index
21/20
Q4
2021
Q3
2021
Index
Q4/Q3
1,341
288
-66
12
1,576
1,317
259
-127
386
55,848
802
98,980
6,713
0.87
5.8
83.6
1,268
1,359
264
98
16
1,736
1,212
524
378
146
52,179
890
84,158
6,269
1.02
2.3
69.8
1,353
99
109
-
75
91
109
49
-
264
107
90
118
107
94
346
87
-53
2
382
380
2
-31
33
334
72
-13
3
395
367
29
-31
60
55,848
802
98,980
6,682
0.87
2.0
99.5
1,268
57,365
857
99,665
6,936
0.85
3.5
92.9
1,289
104
121
-
67
97
104
7
-
55
97
94
99
96
98
In a challenging environment, we maintained the quality
of our loan book, and the economic outlook for Northern
Ireland improved, supporting a reduction in loan impairment
charges. UK interest rates rose in the fourth quarter, which,
while it had a negative impact on net trading income in
2021, also provides an opportunity for income growth in
2022. Throughout the year, we executed our strategy to
digitally transform the bank and improve the customer
experience.
Business initiatives and strategy
As the biggest bank in Northern Ireland, in 2021, we
showed leadership through the pandemic, supporting
economic growth by launching the ‘Helping Northern
Ireland Grow Again’ business fund – targeted at medium
to large-sized business customers. This evolved into a
wider campaign to boost growth in areas such as small
businesses, asset finance and mortgages.
Residential mortgages was a particularly strong focus area,
and the bank introduced the UK’s first ever carbon neutral
mortgage – a groundbreaking product that reflects our focus
on sustainability. The Danske Bank carbon neutral mortgage
was showcased at the global COP26 climate change
conference.
Small business lending, excluding government-backed
corona support loans in 2020, was up 9% year-on-year
and is approaching pre-pandemic levels. Lending to larger
businesses was more subdued, with many organisations
carrying excess liquidity and some delaying growth plans.
Digital banking trends continued to accelerate in Northern
Ireland. Logons to Danske Bank’s digital channels increased
10% year-on-year, and we are now seeing around 6 million
logons per month. Payments from wearable technologies,
which include Apple Pay and Google Pay, were up 54%
year-on-year.
To ensure we keep pace with customer expectations around
digital banking in the UK marketplace, we have established
a Technology and Digital Development unit within the bank
in Northern Ireland, working closely with Group teams to
ensure collaboration and shared learnings that enhance
customer journeys, provide opportunities for cost reduction
and help us become a better bank.
Sustainability
On sustainability, the bank was delighted to win the 2021
Business in the Community ‘Environmental Leadership’
award and to be accredited at platinum level in their annual
Danske Bank / Annual Report 2021
36
Northern Ireland environmental benchmarking survey. These
accolades showcased Danske Bank as one of the leading
companies in the country when it comes to environmental
responsibility.
The bank also leads the way when it comes to diversity and
inclusion. In Northern Ireland, we have won multiple awards
for our work in this area. In 2021, we set up an internal
diversity network for race equality, which complements
existing colleague networks on gender equality, LGBTQ+ and
disabilities.
Strategic focus
Customers
The vision for the business unit is to sustain its leading
position in Northern Ireland, while pursuing opportunities in
low-risk sectors in other parts of the United Kingdom. This
includes focusing on areas in Great Britain like provision of
social housing, syndicated lending and targeted residential
mortgage lending through selected broker networks. This will
help enable risk-astute growth and diversified credit quality
and make the business more geographically diverse within
the UK.
Alongside driving commercial momentum, the bank will
continue to work hard to maintain its high customer service
levels.
Customer satisfaction
We were very pleased to finish the year in first place across
both Personal Banking and Corporate & Business Banking.
2021 vs 2020
Profit before tax increased to DKK 386 million (2020:
DKK 146 million), driven by lower loan impairment charges.
Profit before loan impairments continued to be impacted by
the corona crisis with customer activity remaining below
pre-pandemic levels.
Net interest income was down slightly to DKK 1,341
million (2020: DKK 1,359 million). Lower demand for loans
was largely offset by ongoing pricing actions. Customer
borrowing activity remained subdued, aside from public
sector balances, with many personal and business
customers continuing to pay off debt and hold additional
liquidity, as reflected in deposit growth rates.
Danske Bank / Annual Report 2021 37
Q4 2021 vs Q3 2021
The fourth quarter saw a profit
before tax of DKK 33 million (Q3
2021: DKK 60 million), with the
reduction driven by adverse mark-
to-market movements in trading
income.
•
•
•
•
Net interest income increased to
DKK 346 million (Q3 2021:
DKK 334 million) and net fee
income increased to DKK 87
million (Q3 2021: DKK 72
million), reflecting continued
improvement in commercial
activity and the impact of pricing
actions.
Net trading income was negative
in the third and fourth quarters
due to adverse mark-to-market
movements.
Operating expenses increased to
DKK 380 million (Q3 2021:
DKK 367 million).
Lending activity remained
subdued with many personal and
business customers continuing
to pay off debt and hold additional
liquidity.
DKK 33 million
Profit before tax
for the fourth quarter of 2021
Net fee income grew 9% to DKK 288
million (2020: DKK 264 million),
reflecting the combined benefit
of a partial recovery in customer
activity levels and pricing actions
implemented during the year.
Net trading income was negatively
impacted by adverse mark-to-
market movements on hedging
portfolios reflecting UK interest
rate expectations in the third and
fourth quarter supported by a rise
in the Bank of England Base Rate in
December.
Operating expenses increased to
DKK 1,317 million (2020:
DKK 1,212 million), driven by
increased allocated costs for
Group-supplied services.
Net loan impairment reversals for
the full year primarily reflected an
improved economic outlook in the
UK.
Danske Bank / Annual Report 2021 38
Non-core
Non-core comprises legacy credit exposures, mainly in Lithuania, Ireland and the UK as well as non-strategic private equity
investments. The winding up of the Non-core portfolios is proceeding ahead of plan. Total lending stood at DKK 2.1 billion at the
end of 2021, around DKK 1 billion less than at the end of 2020, which led to lower capital requirements for the Group. Profit
before tax in 2021 amounted to a loss of DKK 2 million, against a loss of DKK 596 million in 2020.
Non-core
(DKK millions)
Total income
Operating expenses
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Loans, excluding reverse transactions before
impairments*
Allowance account, loans
Deposits, excluding repo deposits
Allocated capital (average)
Net interest income as % p.a. of loans and deposits
Profit before tax as % p.a. of allocated capital (avg.)
Cost/income ratio (%)
Full-time-equivalent staff
Loan impairment charges
(DKK millions)
Non-core banking**
Non-core conduits etc.
Total
2021
2020
25
234
-210
-207
-2
2,123
811
2,191
872
0.38
-0.2
-
-215
293
-508
88
-596
3,083
771
2,146
1,473
0.96
-40.5
-
Index
21/20
-
80
-
-
-
69
105
102
59
Q4
2021
2
152
-149
-124
-25
2,123
811
2,191
735
Q3
2021
Index
Q4/Q3
22
28
-6
-11
6
2,429
814
2,128
809
9
-
-
-
-
87
100
103
91
-0.10
-13.6
-
0.10
3.0
-
25
32
78
25
25
100
-254
47
-207
-27
116
88
-
41
-
-124
-
-124
-11
-
-11
-
-
-
* 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.
Strategy and initiatives
The Non-core unit focuses on actively managing down
legacy assets and portfolios by way of divestment,
refinancing with other credit institutions or amortisation.
After the sale of the portfolios held by the Lithuanian branch,
the only portfolio remaining at the Lithuanian branch is a
small portfolio of commercial loans to local customers, for
which amortisation is accelerated further.
At the end of 2021, total lending amounted to DKK 2.1
billion. The sale of most of the Baltic loan portfolios resulted
in a reduction of total lending at Non-core to around DKK 1
billion less than the amount at the end of 2020, which led to
lower capital requirements for the Group.
2021 vs 2020
Profit before tax amounted to a loss of DKK 2 million (2020:
a loss of DKK 596 million). The improvement in the result
was due mainly to the sale of the remaining loan portfolio
in Danske Bank Ireland and the corresponding net reversal
of loan impairment charges. In addition, divestment of the
Latvian commercial loan portfolio held by the Lithuanian
branch and some 70% of the remaining Lithuanian
commercial loan portfolio also contributed positively to
the improvement in the result, as did a slight decrease in
operating expenses. Operating expenses related primarily
to the closing of the subsidiary bank in Luxembourg and
the branch in Hamburg. Further, the result for 2020 was
affected by losses related to the final exit from Estonia.
Danske Bank / Annual Report 2021
39
Q4 2021 vs Q3 2021
The Non-core unit posted a loss
before tax of DKK 25 million (Q3
2021: a profit of DKK 6 million), due
primarily to an increase in operating
expenses in the fourth quarter from
the level in the third quarter.
•
•
•
Total income amounted to
DKK 2 million (Q3 2021: DKK 22
million). In terms of the Group’s
private equity investments,
the portfolio has been split into
a core portfolio and a non-
core portfolio, with the core
portfolio representing strategic
investments. The non-core
portfolio was transferred to the
Non-core unit in the third quarter
of 2021.
Operating expenses amounted to
DKK 152 million (Q3 2021:
DKK 28 million). The increase
related to the closing of the
subsidiary bank in Luxembourg
and the branch in Hamburg.
Loan impairment charges
amounted to a net reversal of
DKK 124 million (Q3 2021: a net
reversal of DKK 11 million). The
decrease was due to net reversals
in Ireland and Lithuania.
DKK -25 million
Profit before tax
for the fourth quarter of 2021
Danske Bank / Annual Report 2021 40
Group Functions
Group Functions includes Group Treasury, Technology & Services and other Group functions. In addition, Group Functions
includes eliminations.
In 2021, the loss before tax decreased DKK 1,279 million from the level in 2020, due primarily to increases in net interest
income and net trading income.
Group Functions
(DKK millions)
Net interest income
Net fee income
Net trading income
Other income
Total income
Operating expenses
Impairment charges, other intangible assets
Profit before loan impairment charges
Loan impairment charges
Profit before tax
Full-time-equivalent staff
Profit before tax
(DKK millions)
Group Treasury
Own shares and issues
Additional tier 1 capital
Group support functions
Total Group Functions
2021
2020
312
-56
381
-10
627
2,032
36
-1,442
2
-1,444
-260
-37
139
-131
-289
2,048
379
-2,716
8
-2,723
10,252
10,708
599
-67
451
-2,427
-1,444
-754
94
550
-2,614
-2,723
Index
21/20
-
-
274
-
-
99
9
-
25
-
96
-
-
82
93
53
Q4
2021
117
-31
171
-9
249
490
36
-277
4
-280
Q3
2021
50
-4
84
-39
91
382
-
-291
-2
-290
Index
Q4/Q3
234
-
204
-
274
128
-
-
-
-
10,252
10,364
99
319
1
101
-702
-280
-2
27
118
-432
-290
-
4
86
163
97
Net trading income increased to DKK 381 million (2020:
DKK 139 million), due primarily to a gain of DKK 180
million on the sale of Aiia to Mastercard, but also driven by
developments in unrealised market value adjustments on
interest rate hedges subject to fair value accounting.
Operating expenses, after allocation to the business units,
were on par with the level in 2020 and amounted to
DKK 2,032 million (2020: DKK 2,048 million).
The number of full-time-equivalent staff has decreased by
456 since the end of 2020.
Strategy and initiatives
Group Functions supports the business units by handling
the pricing of funding, the allocation of funding costs for
lending and deposit activities to the business units and the
investment of shareholders’ equity. The operating expenses
related to the sub-units within Group Functions are
allocated to the business units. To further strengthen cost
management and drive cost efficiency, a new, simplified and
automated cost allocation model was implemented in 2021.
2021 vs 2020
Group Functions posted a loss before tax of DKK 1,444
million, (2020: a loss of DKK 2,723 million). The
improvement was due primarily to increases in net interest
income and net trading income.
Net interest income amounted to DKK 312 million (2020:
a loss of DKK 260 million), due primarily to an increase in
allocated liquidity costs at Group Treasury’s Internal Bank
following a number of corrective actions to reduce internal
deposit compensation to the business units.
Danske Bank / Annual Report 2021
41
Q4 2021 vs Q3 2021
Group Functions posted a loss
before tax of DKK 280 million (Q3
2021: loss of DKK 290 million),
due primarily to higher net interest
and net trading income, which was
partly offset by higher operating
expenses.
•
•
•
Net interest income amounted
to DKK 117 million (Q3 2021:
DKK 50 million), due primarily
to a decrease in central bank
funding costs in connection with
the Group’s borrowings from
the European Central Bank’s
targeted longer-term refinancing
operations. A provision for
taxation of business travellers had
a negative impact on net interest
income.
Net trading income amounted to
DKK 171 million (Q3 2021:
DKK 84 million), due mainly to a
gain of DKK 180 million on the
sale of Aiia to Mastercard.
Operating expenses increased to
DKK 490 million (Q3 2021:
DKK 382 million). The increase
was due primarily to a provision for
taxation of business travellers in
the fourth quarter.
DKK -280 million
Profit before tax
for the fourth quarter of 2021
Danske Bank / Annual Report 2021 42
Financial review
Income statement
(DKK millions)
Net interest income*
Net fee income*
Net trading income*
Net income from insurance business*
Other income*
Total income
Operating expenses*
Impairment charges, other intangible assets
Profit before loan impairment charges
Loan impairment charges
Profit before tax, core
Profit before tax, Non-core
Profit before tax
Tax
Net profit
Attributable to additional tier 1 etc.
2021
2020
Index
21/20
22,049
13,525
4,126
2,088
797
42,584
25,627
36
16,921
348
16,573
-2
16,571
3,651
12,920
451
22,151
12,217
4,297
1,669
594
40,928
26,648
379
13,901
7,001
6,900
-596
6,304
1,715
4,589
551
100
111
96
125
134
104
96
9
122
5
240
0
263
213
282
82
Q4
2021
5,551
3,824
1,015
512
174
11,076
6,753
36
4,286
-239
4,525
-25
4,500
846
3,654
102
Q3
2021
5,533
3,106
820
594
166
10,218
6,104
-
4,114
-151
4,265
6
4,270
936
3,334
117
Index
Q4/Q3
100
123
124
86
105
108
111
-
104
158
106
-
105
90
110
87
* Comparative information has been restated as described in notes G2(a) and G3(a).
2021 vs 2020
Net profit increased to DKK 12,920 million (2020:
DKK 4,589 million) due to an increase in income driven
by higher net fee income and net income from insurance
business combined with a decrease in operating expenses.
Furthermore, there was a significant decrease in loan
impairment charges achieved on the basis of strong credit
quality.
Income
Net interest income amounted to DKK 22,049 million
(2020: DKK 22,151 million). Net interest income saw
a positive impact from the deposit repricing initiatives
at Personal & Business Customers Denmark that were
implemented during 2021. Continuing margin pressure
across the Nordic countries and lending product mix
effects, however, more than offset the effect of the repricing
initiatives, keeping net interest income at a relatively stable
level. At Large Corporates & Institutions, we saw higher
activity-driven net interest income and higher net interest
income from undrawn committed credit facilities, which
compensated for the decline in net interest income from
lower average lending volumes.
Net fee income increased to DKK 13,525 million (2020:
DKK 12,217 million). Good customer activity and higher
assets under management were the main driver of higher
net fee income. We saw strong activity in the capital
markets, and our leading platform enabled us to capitalise
on this trend. Performance fees in Asset Management
were significantly below the record level in 2020, reflecting,
among other things, more challenging market conditions for
Fixed Income hedge funds.
Net trading income stood at DKK 4,126 million (2020:
DKK 4,297 million). A gain of DKK 180 million on the sale
of Aiia to Mastercard and a gain of DKK 227 million on the
sale of VISA shares in the Group’s private equity portfolio
had a positive effect on net trading income. In 2021, we saw
lower activity along with less positive value adjustments on
the derivatives portfolio than in 2020.
Net income from insurance business amounted to
DKK 2,088 million (2020: DKK 1,669 million). Income
from insurance business had strong tailwind from higher
returns on investments, just as the underlying business
within health and accident insurance delivered a good
performance. Some of the effect was offset by provisions
related to potential pension yield tax and an accounting
correction of DKK 250 million.
Other income amounted to DKK 797 million (2020:
DKK 594 million), due partly to our real estate agency home
seeing good activity on the housing market as well as good
activity within Asset Finance.
Expenses
Operating expenses decreased to DKK 25,627 million
(2020: DKK 26,648 million). We continued to see a
downward trend driven by the cost initiatives launched
during the past year. The decrease mainly reflects lower
costs for transformation and consultancy but also our
constant focus on lowering the cost base. As planned, our
AML and compliance costs were lower as well, ensuring
that we remain on the right trajectory. However, a number
of items had a partly offsetting effect: provisions of
DKK 500 million related to a VAT case in Sweden following
Danske Bank / Annual Report 2021 43
Tax
Tax on profit for year amounted to DKK 3,651 million, or
22.0% of profit before tax, which is on par with corporate
income tax in Denmark (2020: 27.2%).
Q4 2021 vs Q3 2021
Net profit increased to DKK 3,654 million (Q3 2021:
DKK 3,334 million), due mainly to higher net fee and net
trading income and a net reversal of loan impairment charges.
•
•
•
•
•
•
Net interest income increased to DKK 5,551 million (Q3
2021: DKK 5,533 million). Higher activity-driven income and
higher net interest income from lending at Large Corporates
& Institutions were partly offset by challenging interest
markets in Denmark and Norway. In Demark, this resulted
in a continued decline in the funding value of deposits.
Furthermore, a provision for business traveller’s tax also had
a negative impact on net interest income.
Net fee income continued its strong performance and
amounted to DKK 3,824 million (Q3 2021: DKK 3,106
million), a significant increase from the level in the third
quarter, driven by seasonality in Investment Banking &
Securities and performance fees in Asset Management, as
well as increased customer activity and refinancing activity in
the Personal & Business Customers segment.
Net trading income increased to DKK 1,015 million
(Q3 2021: 820 million), driven mainly by positive value
adjustments on the derivatives portfolio and increased
underlying trading activity along with a gain of DKK 180
million on the sale of Aiia to Mastercard.
Net income from insurance business amounted to
DKK 512 million (Q3 2021: DKK 594 million). The
underlying business was still stable and developing in the
right direction. The result of the health and accident business
decreased to a more normal level, as the third quarter saw a
high investment result.
Operating expenses amounted to DKK 6,753 million (Q3
2021: DKK 6,104 million). The increase was driven primarily
by expenses for holiday pay and for employee bonus pools
and other bonuses due to higher activity, combined with
a provision of DKK 190 million for taxation of business
travellers.
Loan impairments were down further due to model-driven
reversals as credit quality improved more than expected.
Loan impairments amounted to a net reversal of
DKK 239 million (Q3 2021: net reversal of DKK 151
million). Impairment reversals relating to individual customer
exposures subject to credit deterioration amounted to
DKK 184 million.
DKK 3,654 million
Net profit
for the fourth quarter of 2021
a ruling by the European Court of Justice, a provision of
DKK 190 million for taxation of business travellers, and
a one-off investment of DKK 122 million to ensure good
working-from-home conditions, along with higher expenses
for employee bonus pools and other bonuses that reflect
higher customer activity.
Loan impairments
Credit quality remained strong in 2021. Loan impairment
charges in core activities were at a low level in 2021
compared with the level in 2020, amounting to DKK 348
million (2020: DKK 7,001 million).
Impairments mainly reflected credit deterioration relating
to individual customers, primarily in segments hit by the
lockdown of societies in parts of 2021. The full effect of
the corona crisis is, however, still uncertain and depends
on possible changes in consumer spending patterns,
upcoming payment of postponed VAT, the decrease in
savings accumulated during the crisis and the further risk of
lockdowns due to new variants of the corona virus.
Personal & Business Customers accounted for the main
part of the loan impairment charges made in 2021,
which were made against individual customer exposures
as a result of the corona crisis, for instance in the hotel,
restaurants and leisure segments. We continue to see
more normalised impairment levels than in 2020, although
on a quarterly basis, impairments were up slightly due to
changes in macroeconomic scenarios.
At Large Corporates & Institutions, loan impairment charges
fell significantly in 2021 from the level in 2020 owing to a
decline in charges against exposures to customers in the oil
and gas industry. Charges against exposures to customers
outside the oil and gas industry were limited.
The effects of new macroeconomic scenarios are driven
primarily by changes in property prices and inflation
expectations. The scenario weights were changed as follows
in the fourth quarter of 2021:
The base-case scenario has a probability of 70% (2020:
60%), the upside scenario has a probability of 10% (2020:
15%), and the downside scenario has a probability of 20%
(2020: 25%).
The changes reflect the increasing risk of a downside
scenario in 2022, for example as a result of new virus
variants affecting the economy.
Loan impairment charges
2021
2020
(DKK millions)
Charges
% of
net credit
exposure*
Charges
% of
net credit
exposure*
Personal & Business
Customers
Large Corporates &
Institutions
Northern Ireland
Group Functions
Total core
486
0.03
1,996
0.13
-13
-127
2
348
-0.00
-0.24
0.04
0.02
4,619
378
8
7,001
1.69
0.69
0.14
0.37
* Defined as net credit exposure from lending activities in core segments, excluding
exposures related to credit institutions and central banks and loan commitments.
Danske Bank / Annual Report 2021 44
Balance sheet
Lending (end of period)
(DKK millions)
Personal & Business Customers
Large Corporates & Institutions
Northern Ireland
Group Functions incl. eliminations
Allowance account, lending
Total lending
Deposits (end of period)
(DKK millions)
Personal & Business Customers
Large Corporates & Institutions
Northern Ireland
Group Functions incl. eliminations
Total deposits
Covered bonds
(DKK millions)
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
2021
2020
Index
21/20
1,536.1
264.8
55.8
-2.9
19.6
1,532.8
271.4
52.2
1.6
19.8
1,834.4
1,838.1
700.4
383.5
99.0
-15.3
685.6
433.1
84.2
-9.7
1,167.6
1,193.2
770.7
42.4
813.1
165.1
86.9
252.0
775.8
43.5
819.4
160.9
97.1
258.0
Q4
2021
1,536.1
264.8
55.8
-2.9
19.6
Q3
2021
1,522.0
244.0
57.4
-2.6
19.4
1,834.4
1,801.4
700.4
383.5
99.0
-15.3
693.5
376.9
99.7
-15.4
1,167.6
1,154.7
770.7
42.4
813.1
165.1
86.9
252.0
761.7
44.9
806.6
166.0
95.4
261.4
2,232.7
2,222.7
100
98
107
-
99
100
102
89
118
-
98
99
97
99
103
89
98
98
Index
Q4/Q3
101
109
97
-
101
102
101
102
99
-
101
101
94
101
99
91
96
100
100
Total deposits and issued mortgage bonds etc.
2,232.7
2,270.5
Lending as % of deposits and issued mortgage
bonds etc.
82.2
81.0
82.2
81.0
* Includes only bonds issued to fund lending. For further information, see the Definition of alternative performance measures section.
Lending
Lending amounted to DKK 1,834.4 billion, a minor decrease
from the level at the end of 2020. Lending demand did,
however, pick up during the second half of 2021. At
Personal & Business Customers, an increase in lending
at Personal Customers Nordic was offset by a decrease
in lending at Personal Customers Denmark, as customers
repaid bank loans faster and switched to mortgage loans.
The decline in lending at Large Corporates & Institutions
was due to customers drawing less on a substantial number
of the credit facilities committed in 2020 in order to support
customers in managing the impact of the corona crisis in
step with the improvement of the economic outlook.
In Denmark, new gross lending, excluding repo loans,
amounted to DKK 91.4 billion. Lending to personal
customers accounted for DKK 31.4 billion of this amount.
Our market share of lending decreased in Denmark, Finland,
Norway and Sweden. In Denmark, our market share of
lending, excluding repo loans, decreased to 24.8% at the
end of 2021 (end-2020: 25.6%).
Our personal banking activities do not have the desired
momentum, but we are optimistic that we have the ability
to implement initiatives that will enable us to work in a more
Danske Bank / Annual Report 2021
45
efficient and simple way, thereby improving our market
position.
Corporates & Institutions, combined with lower deposits
with central banks.
Market shares of lending
(%)
Denmark incl. RD (excl. repo)
Finland*
Sweden (excl. repo)*
Norway*
31 December
2021
31 December
2020
24.8
9.3
5.1
6.4
25.6
9.7
5.4
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
2021.
Lending equalled 82.2% of the total amount of deposits,
mortgage bonds and other covered bonds (2020: 81.0%).
Deposits
Deposits amounted to DKK 1,167.6 billion, down 2%
from the level at the end of 2020. Deposits continued to
be affected by low consumer spending, direct government
support to customers and business customers having
secured backup liquidity.
In Denmark, our market share of deposits decreased to
29.1% at the end of 2021 (end-2020: 30.2%). In Sweden,
our market share of deposits was on par with the level at
end-2020, whereas in Finland and Norway, our market
share of deposits was lower than at the end of 2020.
Market shares of deposits
(%)
Denmark (excl. repo)
Finland*
Sweden (excl. repo)*
Norway**
31 December
2021
31 December
2020
29.1
10.1
5.1
7.8
30.2
12.8
5.1
7.9
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
2021.
Credit exposure
Credit exposure from lending activities in core segments
decreased to DKK 2,716 billion (end-2020: DKK 2,728
billion), as higher activity among personal customers in
Norway was more than offset by lower activity among
personal customers in Denmark, in particular, and at Large
Risk Management 2021, section 3, which is available at
danskebank.com/ir, provides details on Danske Bank’s
credit risks.
Credit quality
Credit quality remained strong in 2021, supported by a
positive rating trend. However, we remain vigilant for any
possible deterioration as the uncertainty associated with the
corona crisis remains. Large Corporates & Institutions has
actively reduced its net oil-related exposure (excluding oil
majors) by 54% since the end of 2019.
Non-performing loans (NPL) in core segments
(DKK millions)
Gross NPL
NPL allowance account
Net NPL
31 December
2021
31 December
2020
27,636
31,776
11,980
15,657
12,934
18,842
Collateral (after haircut)
14,258
14,567
NPL coverage ratio (%)
NPL coverage ratio of which is in
default (%)
NPL as a percentage of total
gross exposure (%)
89.5
99.8
75.2
100.0
1.0
1.2
The NPL coverage ratio is calculated as allowance account NPL exposures relative
to gross NPL net of collateral (after haircuts).
Total net non-performing loans (NPL) decreased DKK 3.2
billion from the level at the end of 2020, driven mainly by a
lower level of NPL in the shipping, oil and gas, agriculture,
transportation, and hotels, restaurants and leisure
industries, offsetting higher NPL in the personal customers
segment driven by the introduction of a new loss given
default (LGD) model.
The NPL coverage ratio increased to 89.5% from 75.2%
at the end of 2020 due to a combination of lower exposure
and a close-to-unchanged level of collateral.
The risk management notes on pp. 159-195 provide more
information about non-performing loans.
Accumulated impairments decreased to 1.0% (end-2020:
1.2%) of lending and guarantees due to the lower allowance
account.
Danske Bank / Annual Report 2021 46
Allowance account by business units
31 December
2021
31 December
2020
Accum.
impairm.
charges
% of net
credit
expo-
sure*
Accum.
impairm.
charges
% of net
credit
expo-
sure*
15,840
1.01
15,773
1.01
(DKK millions)
Personal &
Business Customers
Large Corporates &
Institutions
5,227
1.84
5,777
Northern Ireland
850
1.44
990
Group Functions
Total
17
21,935
0.36
1.15
15
22,554
1.84
1.87
0.31
1.17
* Defined 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 1,068 billion at the end of 2021 (end-
2020: DKK 1,239 billion). The decrease was due primarily
to decreased bond holdings.
The Group has made netting agreements with many of its
counterparties concerning positive and negative market
values of derivatives. The net exposure was DKK 76.8
billion (end-2020: DKK 109.6 billion).
The value of the bond portfolio was DKK 540 billion (end-
2020: DKK 583 billion). Of the total bond portfolio, 73%
was recognised at fair value and 27% at amortised cost.
Bond portfolio
(%)
Government bonds and bonds
guaranteed by central or local
governments
Bonds issued by quasi-
government institutions
Danish mortgage bonds
Swedish covered bonds
Other covered bonds
Corporate bonds
Total holdings
Bonds at amortised cost included
in total holdings
31 December
2021
31 December
2020
45
3
35
10
5
2
100
27
45
1
37
12
2
2
100
23
The financial highlights on page 8 provide information about
the balance sheet.
Trading portfolio assets and trading portfolio liabilities
decreased to net assets of DKK 134.6 billion (end-2020: net
assets of 183.6 billion). The decrease in net assets was due
mainly to decreased bond holdings and less positive value
adjustments on the derivatives portfolio.
Other balance sheet items
Due from credit institutions and central banks decreased
to DKK 320.0 billion (end-2020: DKK 345.9 billion). The
decrease 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.
Estonia matter
Investigation
Danske Bank continues to cooperate with various authorities
regarding the terminated non-resident portfolio at Danske
Bank’s former branch in Estonia. This includes criminal and
regulatory investigations by authorities in Estonia, Denmark,
France and the US.
Danske Bank reports to, responds to and cooperates with
various authorities, including the Danish Special Crime Unit
(“SCU”) (formerly the Danish State Prosecutor for Serious
Economic and International Crime), the U.S. Department
of Justice (DOJ) and the U.S. Securities and Exchange
Commission (SEC), in relation to the Estonia matter.
The internal investigation work that was planned for
completion in 2020 has been finalised, and Danske Bank has
reported the findings 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 completion and the outcome of the investigations by and
subsequent discussions with the authorities are uncertain.
It is not yet possible to reliably estimate the timing, form of
resolution, or amount of potential settlement, or fines, which
could be material.
Civil claims
Danske Bank is also subject to ongoing litigation in relation
to the Estonia matter. This includes, inter alia, an action
against Danske Bank and Danske Markets, Inc. (and other
defendants) in the United States District Court for the Eastern
District of New York 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.
Other legacy issues
The remediation of other legacy issues, which a central unit
has been overseeing since October 2020, has progressed
throughout the year, and several of the issues have been
closed. We are still working on remediating the issues related
to our tax services that were communicated in September
2021.
Danske Bank / Annual Report 2021 47
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.
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 culture under which potential issues are raised and
addressed.
In connection with this work, several issues have been
identified. These include the debt collection issues. At the
end of October 2021, we had reviewed all of the 197,000
customer cases in our debt collection systems for which
there is a risk of overcollection as a result of the data
errors originally identified. The review has shown that
actual overcollection has taken place for approximately
7,800 of these customers.
As we have communicated on an ongoing basis, our
investigation of the data errors originally identified has
also uncovered a number of potential additional issues
that we are still investigating, which means that the
number of customers who are expected to be eligible for
compensation is increasing. We will continue to update
affected customers and other stakeholders on our progress
on the debt collection matter.
On 3 December 2021, the Danish FSA ordered Danske
Bank to extend and broaden the impartial investigation of
Danske Bank’s debt collection. We welcome the continued
impartial investigation, and will continue the cooperation
with the Danish FSA.
Market monitoring
In June 2020, the Danish FSA filed 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 self-matching trades, and
on 25 June 2021, Danske Bank was preliminarily charged
with this alleged violation. Danske Bank has a dialogue with
and cooperates with the SCU, but cannot comment further
as long as the SCU is investigating the case.
Flexinvest Fri case
All affected customers have been contacted and
compensated in the Flexinvest Fri case, and the orders
we received in connection with this issue are considered
complied with by the Danish FSA. We have taken several
initiatives to make sure something similar should not
happen again.
Danske Bank / Annual Report 2021 48
Capital and liquidity management
The main purposes of our capital management practices are
to support our business strategy and to ensure a sufficient
level of capital to withstand even severe downturns without
breaching regulatory requirements.
Capital ratios
At the end of 2021, the total capital ratio was 22.4%, and
the CET1 capital ratio was 17.7%, against 23.0% and
18.3%, respectively, at the end of 2020. The movement in
the capital ratios in 2021 was driven mainly by an increase
in the total REA, which was partly countered by the realised
net profit and a decline in the capital deduction for Danica
Pension. The total capital ratio was supported by net issues
of additional tier 1 and tier 2 capital amounting to about
DKK 4.4 billion.
During 2021, the total REA increased approximately
DKK 76 billion, due mainly to the implementation of
the EBA guidelines. Part of the REA increase was
mitigated by the removal of Pillar II add-ons related to
model risk.
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 2021, the Group’s solvency need ratio was
11.4%, a decrease of 1.2 percentage points from the level
at the end of 2020. The decrease was due primarily to the
above-mentioned removal of Pillar II add-ons associated
with the implementation of EBA guidelines.
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 to financial
institutions in addition to the solvency need ratio. At the end
of 2021, the Group’s combined capital buffer requirement
was 5.6%.
In June 2021, the Danish Minister for Industry, Business
and Financial Affairs reactivated the countercyclical buffer
at 1.0% from 30 September 2022, while the Norwegian
central bank raised its national buffer requirement to 1.5%,
effective from 30 June 2022. In September 2021, the
Swedish FSA also decided to increase the countercyclical
buffer rate to 1.0%, effective as of 29 September 2022. In
December 2021, the national buffer requirements in both
Denmark and Norway were further increased to 2.0%,
effective from 31 December 2022. This will increase the
Group’s CBR by 1.4 percentage points. Consequently,
the fully phased-in countercyclical buffer requirement will
be 1.5%, bringing the fully phased-in CET1 requirement to
13.9%.
Capital ratios and requirements
(% of total REA)
Capital ratios
CET1 capital ratio
Total capital ratio
Capital requirements (incl. buffers)**
CET1 requirement
- portion from countercyclical buffer
- portion from capital conservation
buffer
- portion from SIFI buffer
Solvency need ratio
Total capital requirement
Excess capital
CET1 capital
Total capital
2021
Fully phased-in*
17.7
22.4
12.5
0.1
2.5
3.0
11.4
17.0
5.1
5.4
17.4
22.1
13.9
1.5
2.5
3.0
11.4
18.4
3.4
3.7
* 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 2021.
The calculation of the solvency need ratio and the combined
capital buffer requirement is described in more detail in
section 6 of Risk Management 2021, which is available at
danskebank.com/ir.
Minimum requirement for own funds and eligible liabilities
On 20 December 2021, the Group received an updated
decision, effective from 1 January 2022, from the Danish
FSA on the minimum requirement for own funds and eligible
liabilities (MREL) based on data from the fourth quarter of
2020. The MREL decision further takes into account the
aforementioned Pillar II add-on conversion, which took place
in the fourth quarter of 2021.
The requirement is set at two times the solvency need and
one time the SIFI buffer and the capital conservation buffer.
Further, the CBR must be met in addition to the MREL. At
the end of 2021, the point-in-time requirement including
the CBR was equivalent to DKK 243 billion, or 33.9% of
the REA adjusted for Realkredit Danmark. The backward-
looking MREL at the end of 2021, set by the Danish FSA,
was 30.5% of the REA adjusted for Realkredit Danmark.
Taking the deduction of capital and debt buffer requirements
in Realkredit Danmark into account, MREL eligible liabilities
amounted to DKK 287 billion.
The transition to the full MREL has been relatively shorter for
the Group than for its peers. In combination with a relatively
Danske Bank / Annual Report 2021
49
high Danish MREL, the Group has issued a significant
amount of non-preferred senior debt over the past couple of
years.
The Danish FSA has set the subordination requirement as
the higher of 8% of total liabilities and own funds (TLOF) and
two the times the solvency need plus one time the CBR.
At the end of 2021, the subordination requirement was
equivalent to DKK 219 billion. Subordinated MREL-eligible
liabilities stood at DKK 253 billion.
Point-in-time MREL requirement and eligible funds;
Q4 2021
(DKK billions) (% of total REA)
243
(33.9%)
243
(33.9%)
287
(40.0%)
34
(4.7%)
89
(12.4%)
164
(22.9%)
MREL requirement
incl. CBR
MREL funds
PS > 1y
CET, AT1, T2
NPS > 1y
Note: The requirement and eligible funds are adjusted for Realkredit Danmark’s
capital and debt buffer requirements.
Leverage ratio
A minimum leverage ratio requirement of 3% became
applicable in the second quarter of 2021 with the
application of the amendments to the Capital Requirements
Regulation (CRR II). At the end of 2021, the Group’s
leverage ratio was 4.9% under the transitional rules and
4.8% 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 sufficiently 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 its capital
targets to regulatory developments in order to ensure a
strong capital position.
Capital distribution policy
In accordance with Danske Bank’s dividend policy, Danske
Bank intends to pay out a total dividend of DKK 7.5 per
share for 2021, corresponding to 50% of the net profit for
the year. The Board of Directors proposes an initial dividend
payment of DKK 2 per share to the annual general meeting.
The remaining DKK 5.5 per share is intended to be paid out
in three tranches following the publication of interim reports
in 2022, subject to a decision by the Board of Directors in
accordance with the authorisation given to the Board and
based on the usual assessment of the bank’s capital position
at the end of each interim period. This approach is taken to
preserve the dividend policy of the bank while ensuring a
prudent capital management with a high degree of flexibility
in light of the Estonia matter, where we remain unable to
estimate any potential outcome or timing.
Thus Danske Bank’s dividend policy remains unchanged,
targeting a dividend of 40-60% of net profit.
Danske Bank has strong capital and liquidity positions, and
the Board of Directors remains committed to returning excess
capital to shareholders.
Credit ratings
On 11 June 2021, Fitch Ratings (Fitch) revised its outlook
on Danske Bank A/S’s long-term issuer rating to Stable from
Negative, while affirming Danske Bank’s long-term issuer
rating at ‘A’ and the short-term issuer rating at ‘F1’.
The outlook revision reflects Danske Bank’s resilient asset
quality and profitability as well as solid capital ratios, which
provide a sizeable buffer to absorb any potential fines from
ongoing regulatory investigations.
On 13 July 2021, Moody’s Investors Service (Moody’s)
revised its outlook on Danske Bank’s deposit rating to Stable
from Negative, while affirming Danske Bank’s long-term
deposit rating at ‘A2’ and the short-term deposit rating at ‘F1’.
At the same time, Moody’s upgraded its rating of Danske
Bank’s non-preferred senior debt to ‘Baa2’ from ‘Baa3’, to
better capture the risk characteristics of the debt class. This
is the result of the implementation of revised Moody’s bank
rating methodology.
Stable outlooks incorporate the economic uncertainties
relating to the fallout from the corona crisis as well as the
financial uncertainties relating to the Estonia case.
On 16 December 2021, S&P Global Ratings (S&P) upgraded
Danske Bank’s counterparty rating to ‘AA-/A-1+’ from ‘A+/A-
1’ and raised its issuer and senior debt ratings to ‘A+’ from
‘A’. At the same time, S&P revised its outlook to Negative
from Stable. The rating action concludes S&P’s rating criteria
revision, while the Negative outlook reflects S&P’s concern
about the fallout from the Estonia case.
Danske Bank / Annual Report 2021 50
Danske Bank’s ratings, 31 December 2021
Fitch
Moody’s
S&P
Counterparty
rating
A+
A1/P-1
AA-/A-1+
Deposits
A+/F1
A2/Stable/P-1
Senior debt
Issuer rating
Outlook
Non-preferred
senior debt
Tier 2
AT1
A+/F1
A/F1
Stable
A
BBB+
BBB-
A3/P-2
A+/A-1
A3/P-2
A+/A-1
Stable
Negative
Baa2
BBB+
-
-
BBB
BB+
Covered bonds issued by Realkredit Danmark (RD) are rated
‘AAA’ (Stable outlook) by Fitch, S&P and Scope Ratings.
Fitch upgraded the covered bonds issued from RD’s capital
centre T to ‘AAA’ (Stable outlook) from ‘AA+’ (Stable outlook)
on 8 January 2021, due to a lowering of the required
amount of overcollateralisation.
Covered bonds issued by Danske Bank A/S are rated ‘AAA’
(Stable outlook) by both Fitch and S&P.
Covered bonds issued by Danske Hypotek AB are rated
‘AAA’ (Stable outlook) by S&P and ‘AAA’ by Nordic Credit
Rating.
Covered bonds issued by Danske Mortgage Bank Plc are
rated ‘Aaa’ by Moody’s.
Environmental, Social and Governance (ESG) ratings
Danske Bank currently focuses on the following ESG rating
agencies (a reflection of investor priorities).
ESG rating agency
Score at
31 December
2021
Score at
31 December
2020
CDP Worldwide, UK
B
B
ISS ESG, USA
C+ Prime*
C+ Prime
MSCI ESG Ratings, USA
BBB
BB
Sustainalytics, USA
Medium Risk
High Risk
Vigeo Eiris, France
61
64
* Raised on 13 January 2022.
On 10 June 2021, ISS ESG downgraded Danske Bank
to C Prime from C+ Prime, due primarily to announced
staff redundancies since they impact its assessment
of employment security and responsible workforce
restructuring. On 13 January 2022, ISS ESG again raised
its rating to C+ Prime, reflecting a reassesment of its
Corporate Governance and Business Ethics factor.
On 24 June 2021, Sustainalytics upgraded Danske Bank’s
ESG Risk Rating to Medium Risk from High Risk. The
improved rating reflects its assessment of business ethics.
On 28 September 2021, MSCI upgraded Danske Bank to
BBB from BB due to an improvement in the score related to
social factors and an improvement in the score related to
governance factors.
In December 2021, Vigeo Eiris downgraded Danske Bank’s
ESG score to 61 from 64, due primarily to a deterioration of
its environment performance score for Danske Bank.
Funding and liquidity
During 2021, market attention gradually shifted away from
the impact of the COVID-19 pandemic to traditional themes
such as inflation and central bank monetary policies.
Throughout the year, the markets proved to be liquid with
stable investor appetite for Danske Bank issues.
At the end of December 2021, the Group had issued
covered bonds of DKK 33.3 billion, senior debt of DKK 27.3
billion, non-preferred senior debt of DKK 4.4 billion, tier 2
capital of DKK 5.6 billion and additional tier 1 capital of
DKK 4.5 billion, bringing total long-term wholesale funding
to DKK 75.1 billion.
Our strategy of securing more funding directly in our main
lending currencies, including NOK and SEK, remains in
place, but we will also utilise central bank facilities to obtain
funding in the most cost-efficient 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 make issues 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 bond issues in 2021.
Danske Bank’s liquidity position remained robust. Stress
tests show that we have a sufficient liquidity buffer well
beyond 12 months. At the end of December 2021, our
Danske Bank / Annual Report 2021 51
liquidity coverage ratio stood at 164% (31 December
2020: 154%), with an LCR reserve of DKK 687 billion
(31 December 2020: DKK 710 billion).
In addition, the BCBS published the revised minimum capital
requirements for market risk in January 2019. These
standards are collectively referred to as “Basel IV”.
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 2021, the total nominal value of
outstanding long-term funding, excluding equity-accounted
additional tier 1 capital and debt issued by Realkredit
Danmark, was DKK 381 billion (31 December 2020:
DKK 369 billion).
The Supervisory Diamond
The Danish FSA has identified a number of specific
risk indicators for banks and mortgage institutions and
set threshold values with which all Danish banks must
comply. The requirements are known as the Supervisory
Diamond.
At the end of 2021, Danske Bank was in compliance
with all threshold values. A separate report is available at
danskebank.com/ir.
Realkredit Danmark also complies with all threshold
values.
New regulation
In December 2017, the Basel Committee on Banking
Supervision (BCBS) published the finalisation of the Basel
III framework, which includes the following:
standardised approach for credit risk
•
•
internal ratings-based (IRB) approach for credit risk
• minimum capital requirements for CVA risk
• minimum capital requirements for operational risk
•
•
output floor
leverage ratio
As a part of the EU’s Banking Package 2021 and in order
to implement Basel IV, the European Commission adopted
proposals in October 2021 to amend, inter alia, Regulation
(EU) No 575/2013 (CRR) and Directive 2013/36/EU
(CRD). The proposals include some adjustments to the
Basel IV standard, and the output floor is subject to a
transitional arrangement that means that the output floor
must be fully implemented by 1 January 2030.
In order to estimate any effects that the finally adopted
regulation and directive may have on the Group, the
Group continuously monitors the legislative negotiations
and conducts impact assessments. On the basis of the
Group’s current and updated analysis of the EU Banking
Package 2021, the Group’s current capital planning
takes into account the expected REA impact of the initial
implementation expected in 2025. The fully phased-in
impact of the EU Banking Package 2021 on the Group
depends on the final outcome of the EU legislative process,
including the calibration of the output floor. Taking into
account the proposed transitional arrangements with
regards to the output floor, the Group currently expects the
output floor to restrict the Group at the earliest in 2033,
when the transitional arrangements are set to lapse.
The outcome of the EU legislative negotiations on
the proposals is uncertain and may result in further
adjustments.
The EBA roadmap to enhance internal models used for
calculating credit risk has materialised in the expected
increase in the REA for Danske Bank. In 2021, Danske
Bank’s REA thus increased by DKK 98 billion as a result of
the EBA IRB roadmap.
Danske Bank / Annual Report 2021 52
Investor Relations
Investor Relations keeps investors and analysts updated
on Danske Bank’s strategic development, financial
performance and outlook through participation in all types
of proactive investor communication such as roadshows,
conferences and consultations, including roadshows for
debt investors on specific major transactions.
Throughout 2021, virtual events continued to be the
preferred type of event. However, in relation to the update
of Danske Bank’s financial targets for 2023 on 29
October, Investor Relations hosted a hybrid event with
physical attendance from institutional investors and
analysts in Denmark alongside the virtual participation of
internationally-based investors and analysts. At this event,
the Executive Leadership Team presented the commercial
plans towards 2023 and associated financial targets.
In 2021, 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 2021, Danske Bank shares
had an index weighting of 3%.
Danske Bank’s share price increased from DKK 100.65
at 31 December 2020 to DKK 112.95 at 31 December
2021, an increase of 12%. In comparison, the OMXC25CAP
Index increased 17%, while the Europe 600 Banks Index
increased 34%.
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
2021
8,622
113.0
96.4
14.6
2.0
200.6
0.6
2020
8,622
100.7
85.9
4.7
2.0
187.6
0.5
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
financial reports, investor presentations, share and bond
information, is available at danskebank.com/investor-
relations/reports.
The average daily trading volume of Danske Bank shares
was 4.7 million. The Danske Bank share was the 7th most
actively traded share on Nasdaq Copenhagen during 2021.
Danske Bank shares
Index 2015 = 100
Danske Bank Europe 600 Banks
200
175
150
125
100
75
50
25
0
2015
2016
2017
2018
2019
2020
2021
Shareholders
At the end of 2021, Danske Bank had about 291,000
shareholders. The 10 largest shareholders together owned
about 40% 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 2021
Other
6%
Rest of Europe
13%
UK
4%
USA
21%
A. P. Møller
Holding
21%
k
r
a
m
n
e
D
Rest of Denmark
35%
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 specified percentage thresholds.
One shareholder has notified Danske Bank of holding 5% or
more of the share capital:
•
The A.P. Møller Holding Group holds about 21% of the
share capital.
Danske Bank / Annual Report 2021 53
Organisation and management
General meeting
The general meeting is Danske Bank’s highest decision-
making authority.
In 2021, the annual general meeting was held on 16 March.
Danske Bank’s Articles of Association are available at
danskebank.com/corporate-governance and contain
information about the notice convening the general meeting,
the shareholders’ admission and voting rights as well as the
shareholders’ right to submit proposals and have specified
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 Danske Bank’s
Articles of Association. Any 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 eleven members, seven elected by
the general meeting and four elected by and among the
employees.
Board members elected by the general meeting stand for
election each 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
nomination and appointment of candidates to the Board of
Directors and to the Executive Leadership Team of Danske
Bank. Board candidates are nominated by the Board of
Directors or the shareholders and are elected by the general
meeting.
On 15 March 2021, Topi Manner withdrew his candidacy
for the Board of Directors of Danske Bank A/S. The
members of the Board of Directors were re-elected at the
annual general meeting on 16 March 2021, except for
Christian Sagild, who did not seek re-election. Gerrit Zalm
stepped down from the Board of Directors on 19 April
2021.
Pages 226-231 of Annual Report 2021 provide information
about the individual members of the Board of Directors,
including their directorships. Note G37 on page 154
provides information on the number of Danske Bank shares
held by the members of the Board of Directors, and note
G36 on page 151 provides information on the remuneration
of the Board of Directors.
Work of the Board of Directors in 2021
In 2021, the Board of Directors held 26 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 5 meetings,
the Risk Committee held 8 meetings, the Conduct &
Compliance Committee held 7 meetings, the Nomination
Committee held 6 meetings and the Remuneration
Committee held 8 meetings.
The members’ participation in Board and Committee
meetings in 2021 is illustrated below.
Board
Committees
Audit CCC Nomina-
tion
Remune-
ration
Risk
Karsten Dybvad*
26/26
7/7
6/6
8/8
6/6
Jan Thorsgaard Nielsen 26/26 5/5
7/7
Carol Sergeant
Bente Bang
Martin Blessing
Lars-Erik Brenøe
Kirsten Ebbe Brich
26/26
26/26
26/26
26/26
26/26
7/7
7/7
Thorbjørn Lundholm Dahl 26/26
Raija-Leena
Hankonen-Nybom
26/26 5/5
Charlotte Hoffmann
26/26
6/6
8/8
8/8
8/8
8/8
8/8
Bente Avnung Landsnes 26/26 5/5
6/6
Christian Sagild**
Gerrit Zalm***
1/1
5/5
6/6
1/3
2/2
2/2
*Karsten Dybvad joined the Risk Committee in April 2021
**Christian Sagild stepped down from the Board of Directors in March 2021
*** Gerrit Zalm stepped down from the Board of Directors in April 2021
In the fourth quarter, the Board of Directors carried out its
annual evaluation of i.a. its composition, the work of the
Board committees, the Board committee structure and the
leadership of the Board chairman. To ensure anonymity,
an external consulting firm facilitated the evaluation. All
members of the Board of Directors and the Executive
Leadership Team answered comprehensive questionnaires.
The findings and conclusions were subsequently presented
to and discussed by the Board of Directors.
Danske Bank / Annual Report 2021
54
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
benefit of its customers, employees, shareholders and other
stakeholders. The competencies of the Board of Directors
collectively are described in the Competency profile, which
is available at danskebank.com. Pages 226-231 of Annual
Report 2021 provide information on the competencies of
the individual Board members.
The results of the 2021 evaluation were overall good and
showed 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 2022.
Norberg, respectively. New Head of Personal Customers
Christian Bornfeld and new Head of Business Customers
Johanna Norberg will join the Executive Leadership Team
no later than 1 May 2022 replacing Glenn Söderholm.
Glenn Söderholm will step out of the Executive Leadership
Team when the changes take effect, after which he will stay
on as senior adviser to the Executive Leadership Team.
Berit Behring will continue to head Large Corporates &
Institutions.
Changes to the organisation
A new Commercial Leadership Team was established
with effect from 1 January 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.
Executive Leadership Team
Team members
Title
Commercial Leadership Team
Team members
Title
Carsten Rasch Egeriis
Chief Executive Officer
Lars Alstrup
Magnus Agustsson
Chief Risk Officer
Berit Behring
Head of Large Corporates & Institutions
Karsten Breum
Head of Group HR
Stephan Engels
Chief Financial Officer
Glenn Söderholm
Head of Personal & Business Customers
Philippe Vollot
Chief Administrative Officer
Frans Woelders
Chief Operating Officer
On 19 April 2021, Chris Vogelzang, Chief Executive Officer
and member of the Executive Leadership Team, resigned
and the Board of Directors appointed Carsten Rasch Egeriis
new Chief Executive Officer.
On 25 May 2021, Danske Bank announced that the Board
of Directors had appointed Magnus Agustsson new Chief
Risk Officer.
On 25 November 2021, Danske Bank announced that
Philippe Vollot had been appointed Chief Administrative
Officer with overall responsibility for Group Compliance as
well as First Line Financial Crime Prevention and Financial
Crime Risk divisions. Philippe Vollot continues as member of
the Executive Leadership Team.
On 7 January 2022, Danske Bank announced changes
to the Executive Leadership Team, as the commercial
activities are to be organised in three business units
headed by Berit Behring, Christian Bornfeld and Johanna
Head of Products and Solutions, Personal &
Business Customers
Stojko Gjurovski
Head of Personal Customers Nordic and Country
Manager Finland
Paul Gregory
Head of Corporate and Institutional Banking
Claus Harder
Head of Markets & Transaction Banking
Kim Larsen*
Head of Group Communications, Brand & Marketing
Trond Mellingsæter
Country Manager Norway
Christoffer Møllenbach Head of Group Finance
Johanna Norberg
Head of Business Customers and Country Manager
Sweden
Atilla Olesen
Head of Investment Banking & Securities
Linda Olsen
COO for Personal & Business Customers
Rob de Ridder
COO for Large Corporates & Institutions
Mark Wraa-Hansen
Head of Personal Customers Denmark
* Resigned from his position with Danske Bank in 2021
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 chosen a different approach. Danske Bank complies
with all recommendations.
Danske Bank / Annual Report 2021 55
The statutory corporate governance report issued in
accordance with section 134 of the Danish FSA’s Executive
Order on 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 (“Nordic 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 at finansdanmark.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
2021.
Data ethics
The rapid technological development has in many ways
changed the way in which Danske Bank operates. The rising
level of digitalisation and the increased amount of data
offer Danske Bank new possibilities for using data to the
benefit of both Danske Bank and its customers, but also
raise several ethical dilemmas related to the use of the data
available.
Data ethics is about responsible use of data. Ethical data
management includes transparency and accountability
in decisions and processes that involve the use of data –
promoting the values of respect, integrity and fairness. Data
ethics is about doing the right thing for people and society.
To address the dilemmas, Danske Bank has developed ethical
principles for its use of data. They define how Danske Bank
strives to act with regard to data use across the Group and in
its business relations. The application of the principles of data
ethics enables Danske Bank to do more than merely comply
with the law, thus supporting good conduct across the Group
and building trust in Danske Bank.
Danske Bank strives to be transparent about the purposes
for which data is used and to communicate this clearly. We
aim to ensure that processes are clearly understood in terms
of risk as well as social, ethical and societal consequences
of our use of data. We assess and evaluate the impact of the
use of advanced technologies, analytics, and computational
methods on the parties involved.
Some of the principles are already integrated into Danske
Bank’s privacy and security processes, and during 2022,
Danske Bank will elaborate on the principles and continue to
integrate them into its processes and steering and control
mechanisms.
The Data Ethics Principles document constitutes our Report
on Data Ethics as required under section 135d of the Danish
Executive Order on Financial Reports for Credit Institutions
and Investment Firms, etc.
The principles are available on Danske Banks website here:
danskebank.com/corporate-governance.
Danske Bank / Annual Report 2021 56
Definition of alternative
performance measures
Danske Bank’s management believes that the alternative performance measures (APMs) used in the Management’s report
provide valuable information to readers of the financial statements. The APMs provide a more consistent basis for comparing
the results of financial periods and for assessing the performance of the Group and each individual business unit. They are also
an important aspect of the way in which Danske Bank’s management defines operating targets and monitors performance.
Throughout the Management’s report, performance is assessed on the basis of the financial highlights and segment reporting,
which represent the financial information regularly provided to management. The differences between the financial highlights
and the IFRS financial statements relate to certain changes in the presentation. Net profit is the same in the financial highlights
and in the IFRS income statement. Notes G1 and G3 to the financial statements describe the differences between the financial
highlights and the IFRS financial statements, and each line item in the financial highlights is reconciled with the consolidated
financial statements prepared under IFRS.
Definitions of additional ratios presented on page 8 and in other sections of the Management’s report:
Ratios and key figures
Definition
Dividend per share (DKK)
The dividend per share proposed in the annual report and paid to shareholders in the subsequent year. Accordingly, for
2021, it is the dividend to be paid in 2022.
Return on average
shareholders’ equity (% p.a.)
Net interest income as % p.a. of
loans and deposits
Net profit as disclosed in the financial highlights divided by the average of the quarterly average shareholders’ equity
(beginning and end of each quarter) within the year. Net profit and shareholders’ equity are stated as if the equity-
accounted additional tier 1 capital was classified as a liability. In the numerator, net profit is reduced by interest
expenses of DKK 451 million (full-year 2020: DKK 551 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 7,733 million (2020: DKK 13,526 million) compared to a simple average of total equity (beginning
and the end of the period).
Net interest income in the financial highlights divided by the daily average of the sum of loans and deposits. If the
ratio was calculated applying the sum of loans and deposits end of period, the ratio for 2021 would be 0.73% (2020:
0.73%) due to the daily average of the sum of loans and deposits being DKK 5.4 billion higher (2020: DKK 124.8
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 financial 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 financial 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
numerator is the loan impairment charges of DKK 348 million (2020: DKK 7,001 million) from the financial highlights
and annualised. The denominator is the sum of Loans at amortised cost of DKK 1,022.7 billion (2020: DKK 1,022.3
billion), Loans at fair value of DKK 816.3 billion (2020: DKK 802.6 billion) and guarantees of DKK 71.7 billion (2020:
DKK 68.7 billion) at the beginning of the year, as disclosed in the column “Lending activities – core” in the “Breakdown
of credit exposure” table in the notes to the financial statements. The ratio is calculated for each business unit.
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 21.9 billion (2020: DKK 22.6 billion) at the end of the period, as disclosed
in the “Allowance account in core activities broken down by segment” table in the notes to the financial statements.
The denominator is the sum of Loans at amortised cost of DKK 1,026.1 billion (2020: DKK 1,022.7 billion), Loans at
fair value of DKK 809.9 billion (DKK 816.3 billion), and guarantees of DKK 81.0 billion (2020: 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 financial statements. The ratio is calculated for each business unit.
Realkredit Danmark bonds
funding loans
On page 44, information is provided on the funding of lending by deposits and covered bonds. The ‘Bonds issued by
Realkredit Danmark’ line 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 2020 included November 2020 data for Finland
and Norway as December 2020 data was not available at the time of publication of Annual Report 2020. This was
subsequently updated to December 2020 data in Interim report – first quarter 2021.
Danske Bank / Annual Report 2021 57
Financial statements
58 Income statement
138 G28. Balance sheet broken down by expected due
59 Statement of comprehensive income
date
60 Balance sheet
61 Statement of capital
64 Cash flow statement
65 Notes
65 G1. Basis of preparation
73 G2. Changes and forthcoming changes to
accounting policies and presentation
75 G3. Business model and business segmentation
81 G4. Activities by country
83 G5. Net interest and net trading income or loss
86 G6. Fee income and expenses
88 G7. Gain or loss on sale of disposal groups, Income
from hldings in associates and Other income
89 G8. Insurance contracts
90 G9. Operating expenses
91 G10. Audit fees
92 G11. Loan impairment charges
93 G12. Trading portfolio assets and liabilities
99 G13. Investment securities
101 G14. Due from credit institutions and central banks
102 G15. Loans at amortised cost
108 G16. Loans and issued bonds at fair value
111 G17. Asset and deposits under pooled schemes
and unit-linked investment contracts
112 G18. Assets and liabilities under insurance
contracts
115 G19. Intangible assets
119 G20. Due to credit institutions and central banks
and Deposits
120 G21. Tax
124 G22. Issued bonds
139 G29. Contractual due dates of financial liabilities
140 G30. Transferred financial assets that are not
deregcognised
141 G31. Assets provided or received as collateral
142 G32. Offsetting of financial assets and liabilities
143 G33. Fair value information for financial
instruments
149 G34. Non-financial assets recognised at fair value
150 G35. Related parties
151 G36. Remuneration of management and material
risk takers
154 G37. Danske Bank shares held by the Board of
Directors and Executive Leadership Team
155 G38. Group holdings and undertakings
157 G39. Interests in associates and joint
arrangements
158 G40. Interests in unconsolidated structured entities
159 Risk management
159 Risk exposure
159 Total capital
160 Credit risk
161 Credit exposure
181 Bond portfolio
184 Market risk
186 Liquidity risk
189 Insurance risk
194 Non-financial risk
196 Highlights, ratios and key figures
197 Definitions of ratios and key figures
128 G23. Assets held for sale and Liabilities in disposal
198 Financial statements – Danske Bank A/S
groups
129 G24 Other assets and Other liabilities
132 G25. Equity
134 G26. Note to the cash flow statement
135 G27. Guarantees, commitments and contingent
liabilities
Danske Bank / Annual Report 2021
58
60 Danske Bank / Annual Report 2021
Income statement – Danske Bank Group
Statement of comprehensive income – Danske Bank Group
Note
(DKK millions)
2021
2020
Note
(DKK millions)
G5
G5
G5
G6
G6
G5
G7
G8
G8
G9
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*
Other income*
Net premiums
Net insurance benefits
Operating expenses
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)
* Comparative information has been restated as described in note G2(a)
22,077
35,601
30,904
26,774
18,495
6,378
36,600
5,733
37,518
71,208
30,822
16,712
141
16,571
3,651
12,920
12,469
451
12,920
14.6
14.6
2.0
23,219
41,133
36,234
28,118
17,025
5,760
21,962
4,360
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
Net profit
Other comprehensive income
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
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
Shareholders of Danske Bank A/S (the Parent Company)
Additional Tier 1 capital holders
Total comprehensive income
*A positive amount is a tax expense and a negative amount is a tax income
Danske Bank / Annual Report 2021 61
2021
12,920
-90
-146
56
1,708
-1,270
-326
6
-152
270
326
12,795
451
13,246
2020
4,589
304
38
266
-1,902
1,224
264
-12
70
-496
-230
3,808
551
4,359
13,246
4,359
Danske Bank / Annual Report 2021
Statement of comprehensive income – Danske Bank Group
59
Danske Bank / Annual Report 2021 61
Note
(DKK millions)
G21
G12
G21
Net profit
Other comprehensive income
Remeasurement of defined benefit pension plans
Tax*
Items that will not be reclassified to profit or loss
Items that are or may be reclassified subsequently to profit or loss
Translation of units outside Denmark
Hedging of units outside Denmark
Unrealised value adjustments of bonds at fair value (OCI)
Realised value adjustments of bonds at fair value (OCI)
Tax*
Items that are or may be reclassified subsequently to profit or loss
Total other comprehensive income
Total comprehensive income
Portion attributable to
Shareholders of Danske Bank A/S (the Parent Company)
Additional Tier 1 capital holders
Total comprehensive income
*A positive amount is a tax expense and a negative amount is a tax income
2021
12,920
-90
-146
56
1,708
-1,270
-326
6
-152
270
326
2020
4,589
304
38
266
-1,902
1,224
264
-12
70
-496
-230
13,246
4,359
12,795
451
13,246
3,808
551
4,359
Danske Bank / Annual Report 2021
60
62 Danske Bank / Annual Report 2021
Danske Bank / Annual Report 2021 63
Balance sheet – Danske Bank Group
Statement of capital – Danske Bank Group
Note
(DKK millions)
G14
G14
G12
G13
G15
G16
G17
G18
G23
G19
G21
G24
G20
G12
G20
G22
G22
G17
G18
G23
G21
G24
G22
G22
G25
Assets
Cash in hand and demand deposits with central banks
Due from credit institutions and central banks
Trading portfolio assets
Investment securities
Loans at amortised cost
Loans at fair value
Assets under pooled schemes and unit-linked investment contracts
Assets under insurance contracts
Assets held for sale*
Intangible assets
Tax assets
Other assets*
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
Liabilities in disposal groups held for sale*
Tax liabilities
Other liabilities*
Non-preferred senior bonds
Subordinated debt
Total liabilities
Equity
Share capital
Foreign currency translation reserve
Reserve for bonds at fair value (OCI)
Retained earnings
Proposed dividends
G25
Shareholders of Danske Bank A/S (the Parent Company)
Additional tier 1 capital holders
Total equity
Total liabilities and equity
* Comparative information has been restated as described in note G2(a)
2021
2020
293,386
71,156
509,590
303,777
1,027,442
1,024,461
76,654
547,806
28,800
8,819
4,510
39,433
320,702
81,428
682,948
296,769
1,024,607
1,023,323
82,795
545,708
709
8,785
5,202
36,255
3,935,834
4,109,231
Tax
172,976
374,959
1,292,030
794,909
223,854
76,982
588,736
29,577
1,864
56,268
107,654
39,321
211,182
499,334
1,333,781
784,027
245,573
82,905
591,930
47
1,821
51,244
106,371
32,337
3,759,130
3,940,552
8,622
-612
34
161,439
1,724
171,207
5,497
8,622
-1,050
354
150,521
1,724
160,171
8,508
176,704
168,679
3,935,834
4,109,231
Changes in equity
Shareholders of Danske Bank A/S (the Parent Company)
Foreign
currency
Reserve for
(DKK millions)
Share capital
reserve
value (OCI)
earnings
dividends
Total
tier 1 capital
Total
translation
bonds at fair
Retained
Proposed
Additional
Total equity as at 1 January 2020
8,622
-372
102
140,590
7,329
156,271
14,237
170,508
4,038
551
4,589
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
Total other comprehensive income
Total comprehensive income
Transactions with owners
Paid interest on additional tier 1 capital
Proposed dividends
Proposed dividends reversed
Redemption of additional tier 1 capital
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
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
Dividends paid
Proposed dividends
Redemption of additional tier 1 capital
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
Share based payments
Tax
3,808
551
4,359
1,724
-7,329
-625
-625
-
-
-4
-5,596
-5,600
-29,252
29,228
108
12
-59
-29,311
29,228
108
12
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-1,902
1,224
-678
-678
264
-12
252
252
1,708
-1,270
438
438
-326
6
-
-320
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,038
304
-
-
-
-
-108
196
4,234
-
-1,724
7,329
-4
-29,252
29,228
108
12
-90
-
-
-
-
298
208
-
16
-
-1,724
-19,801
19,715
146
-111
304
-1,902
1,224
264
-12
-108
-230
-
-
-
-
-
-
-90
1,708
-1,270
-326
6
298
326
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-320
12,677
12,795
451
13,246
-1,724
1,724
-1,708
-466
-466
-1,708
-
-3,000
-3,000
-19,801
19,715
146
-111
-
4
-
-
-19,801
19,719
146
-111
304
-1,902
1,224
264
-12
-108
-230
-90
1,708
-1,270
-326
6
298
326
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total equity as at 31 December 2020
8,622
-1,050
354
150,521
1,724
160,171
8,508
168,679
12,469
12,469
451
12,920
Total equity as at 31 December 2021
8,622
-612
34
161,439
1,724
171,207
5,497
176,704
Danske Bank / Annual Report 2021
61
Danske Bank / Annual Report 2021 63
Statement of capital – Danske Bank Group
Changes in equity
(DKK millions)
Share capital
Foreign
currency
translation
reserve
Reserve for
bonds at fair
value (OCI)
Retained
earnings
Proposed
dividends
Additional
tier 1 capital
Total
Total
Shareholders of Danske Bank A/S (the Parent Company)
Total equity as at 1 January 2020
Net profit
Other comprehensive income
Remeasurement of defined benefit pension plans
Translation of units outside Denmark
Hedging of units outside Denmark
Unrealised value adjustments
Realised value adjustments
Tax
Total other comprehensive income
Total comprehensive income
Transactions with owners
Paid interest on additional tier 1 capital
Proposed dividends
Proposed dividends reversed
Redemption of additional tier 1 capital
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
Share based payments
Tax
8,622
-
-372
-
102
-
140,590
4,038
7,329
-
156,271
4,038
14,237
551
170,508
4,589
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-1,902
1,224
-
-
-
-678
-678
-
-
-
-
-
-
-
-
-
-
-
264
-12
-
252
252
304
-
-
-
-
-108
196
4,234
-
-
-
-
-
-
-
-
-
-1,724
7,329
-4
-29,252
29,228
108
12
-
-
-
-
-
-
-
-
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
-625
-
-
-5,600
-
-
-
-
-29,252
29,228
108
12
-59
-
-
-
-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
Net profit
Other comprehensive income
Remeasurement of defined benefit pension plans
Translation of units outside Denmark
Hedging of units outside Denmark
Unrealised value adjustments
Realised value adjustments
Tax
Total other comprehensive income
Total comprehensive income
Transactions with owners
Paid interest on additional tier 1 capital
Dividends paid
Proposed dividends
Redemption of additional tier 1 capital
Acquisition of own shares and additional tier 1
capital
Sale of own shares and additional tier 1 capital
Share based payments
Tax
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,469
-
1,708
-1,270
-
-
-
438
438
-
-
-
-326
6
-
-320
-90
-
-
-
-
298
208
-320
12,677
-
-
-
-
-
-
-
-
-
12,469
451
12,920
-90
1,708
-1,270
-326
6
298
326
-
-
-
-
-
-
-
-90
1,708
-1,270
-326
6
298
326
12,795
451
13,246
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16
-1,724
-
-19,801
19,715
146
-111
-
-1,724
1,724
-
-
-1,708
-
-
-466
-
-
-3,000
-466
-1,708
-
-3,000
-
-
-
-
-19,801
19,715
146
-111
-
4
-
-
-19,801
19,719
146
-111
Total equity as at 31 December 2021
8,622
-612
34
161,439
1,724
171,207
5,497
176,704
Danske Bank / Annual Report 2021
62
64 Danske Bank / Annual Report 2021
Statement of capital – Danske Bank Group
Statement of capital – Danske Bank Group
Dividend
In accordance with Danske Bank's dividend policy, Danske Bank intends to pay-out a total dividend of DKK 7.5 per share for 2021, corresponding to 50 per
cent of the net profit for the year. The Board of Directors proposes an initial dividend payment of DKK 2 per share to the annual general meeting. T he remaining
DKK 5.5 per share is intended to be paid out in three tranches following the publication of interim reports in 2022, s ubject to a decision by the Board of
Directors in accordance with the authorisation given to the Board and based on the usual assessment of the bank’s capital pos ition at the end of each interim
period. This approach is taken to preserve the dividend polic y of the bank while ensuring a prudent capital management with a high degree of flexibility, in light
of the Estonia matter, where we remain unable to estimate any potential outcome or timing.
Thus Danske Bank’s dividend policy remains unchanged, targeting a dividend of 40-60% of net profit.
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
Earnings per share (DKK millions)
Net profit attributable to the shareholders of the parent company
Number of shares issued at 1 January
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
2021
12,469
2020
4,038
862,184,621 862,184,621
9,046,467
8,804,138
853,352,805 853,138,154
332,271
621,939
Adjusted average number of shares outstanding after share capital reduction, including dilutive shares
853,974,744 853,470,424
Earnings per share (DKK)
Diluted earnings per share (DKK)
14.6
14.6
4.7
4.7
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.
Number of shares outstanding
Issued at 1 January
Holding of own shares
Shares outstanding at 31 December
(DKK millions)
Holding of own shares
Trading portfolio
Investment on behalf of customers
Total
2021
2020
862,184,621 862,184,621
8,535,245
8,832,178
853,352,443 853,649,376
Number
2021
Number
2020
4,223,165
4,609,013
4,034,791
4,500,454
8,832,178
8,535,245
Value
2021
477
521
998
Value
2020
406
453
859
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.
(DKK millions)
Holding as at 1 January
Acquisition of own shares
Sale of own shares
Value adjustment
Holding as at 31 December
Trading
portfolio
406
19,629
19,603
45
477
Investment
on behalf
of customers
453
124
112
56
521
Total
2021
859
19,754
19,715
100
Total
2020
914
29,252
29,228
-79
998
859
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.
Danske Bank / Annual Report 2021 65
31 December
31 December
2021
2020
176,704
168,678
171,384
160,329
200
-23
176,881
-5,419
-78
-104
2,593
-983
-173
-6,466
-5,325
-51
198
-35
-2,220
-6,882
151,935
19,933
171,868
20,888
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
192,757
180,117
860,173
784,184
17.7%
20.0%
22.4%
18.3%
20.5%
23.0%
Deferred tax assets that rely on future profitability, excluding temporary differences
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
Minimum Loss Coverage for Non-Performing Exposures
Deferred tax on intangible assets
Defined benefit pension plan assets
Statutory deduction for insurance subsidiaries
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 (%)
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.
Risk Management 2021 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/repor ts and is not covered by the statutory audit.
Danske Bank / Annual Report 2021
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
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
Minimum Loss Coverage for Non-Performing Exposures
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
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 (%)
63
Danske Bank / Annual Report 2021 65
31 December
2021
31 December
2020
176,704
200
-23
176,881
-5,419
-78
171,384
-104
2,593
-983
-173
-6,466
-5,325
-51
198
-35
-2,220
-6,882
151,935
19,933
171,868
20,888
168,678
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
192,757
180,117
860,173
784,184
17.7%
20.0%
22.4%
18.3%
20.5%
23.0%
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.
Risk Management 2021 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/repor ts and is not covered by the statutory audit.
Danske Bank / Annual Report 2021
64
66 Danske Bank / Annual Report 2021
Danske Bank / Annual Report 2021 67
Cash flow statement – Danske Bank Group
Notes – Danske Bank Group
(DKK millions)
Cash flow from operations
Profit before tax
Tax paid
Adjustment for non-cash operating items
Cash flow from operations before changes in operating capital
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
G26
Cash flow from financing activities
Issue of subordinated debt
Redemption of subordinated debt
Issue of non-preferred senior bonds
Redemption of non-preferred senior bonds
Dividends paid
Redemption of equity accounted additional tier 1 capital
Paid interest on equity accounted additional tier 1 capital
Principal portion of lessee lease payments
Cash flow from financing activities
Cash and cash equivalents as at 1 January
Foreign currency translation
Change in cash and cash equivalents
Cash and cash equivalents, end of period
Cash and cash equivalents, end of period
Cash in hand
Demand deposits with central banks
Amounts due from credit institutions and central banks within three months
G14
G14
G14
Total
Note G26 provides further information on the cash flow statement.
2021
2020
16,571
-2,459
4,916
6,304
-4,315
12,993
19,028
14,982
-38,509
48,984
-82
-7,007
-4,114
-41,751
-7,596
-5,291
-1,224
59,794
-140,495
-83
-11,896
95,039
193,055
-33,550
5,323
4,337
-37,562
186,506
-
-885
-686
8
5
-872
-408
12
-1,563
-1,263
10,102
-3,718
4,352
-6,309
-1,708
-3,000
-466
-654
3,721
-2,180
23,610
-
-
-5,600
-625
-653
-1,401
18,273
400,889
2,634
-40,526
199,608
-2,235
203,516
362,997
400,889
6,765
286,621
69,611
6,131
314,572
80,186
362,997
400,889
G1. Basis of preparation
(a) General
the Danish Financial Business Act.
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 consolidate d
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
On 1 January 2021 the Group implemented the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16 (Interest Rate Benchmark Reform, phase 2) and
IFRS 16 (Covid-19 Related Rent Concessions). The Group has changed the presentation in the income statement of indirect fees earned when cus tomers
are granted, refinance or prepay Danish mortgage loans. Further information on the changes to accounting policies in 2021 can be found in note G2 .
Except for these changes, the Group has not changed its significant accounting policies from those applied
in the Annual Report 2020. The
implementation of the amendments to IFRSs had no impact on the financial statements.
For changes in the financial highlights and 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 estimate d
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 2021
65
Danske Bank / Annual Report 2021 67
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 consolidate d
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.
On 1 January 2021 the Group implemented the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, IFRS 16 (Interest Rate Benchmark Reform, phase 2) and
IFRS 16 (Covid-19 Related Rent Concessions). The Group has changed the presentation in the income statement of indirect fees earned when cus tomers
are granted, refinance or prepay Danish mortgage loans. Further information on the changes to accounting policies in 2021 can be found in note G2 .
Except for these changes, the Group has not changed its significant accounting policies from those applied
in the Annual Report 2020. The
implementation of the amendments to IFRSs had no impact on the financial statements.
For changes in the financial highlights and 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 estimate d
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 2021
66
68 Danske Bank / Annual Report 2021
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 uncert ainty 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), includ ing 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 and in the risk management notes for the impact from the corona crisis on the macroeconomic
scenarios used.
With the new suite of scenarios, the base case scenario e nters with a probability of 70% (2020: 60%), the upside scenario with a probability of 10%
(2020: 15%) and the downside scenario with a probability of 20% (2020: 25%). On the basis of these assessments, the allowance account at the end of
2021 amounted to DKK 22.7 billion (2020: DKK 23.3 billion). If the base case scenario was assigned a probability of 100%, the allowance a ccount would
decrease DKK 1.7 billion (2020: 0.4 billion). Compared to the base case scenario, the allowance account would increase DKK 8.5 billion (2020: DKK 1.7
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 wa s assigned a probability of 100%, the allowance account would
decrease DKK 0.2 billion (2020: DKK 0.4 billion) compared to the base case scenario.
In determining the expected credit losses, management is required to exercise judgement in defining what is considered a sign ificant increase in credit
risk. According to the Group’s definition of a significant increa se 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 lifetim e
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 2021, the allowance account would increase by DKK 0.03 billion (2020: 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 2021, the post-model adjustments amounted to
DKK 6.3 billion (2020: DKK 6.4 billion) and continue to include the risks arising from the corona crisis due to the continued significant uncertainty
related to the economic effects of the pandemic. See further in the separate section below. Further information on the types of risks covered by post-
model adjustments and the allocation of post-model adjustments to the underlying exposures can be found in the section ‘Classific ation of customers’
in the risk management notes.
Loan impairment charges for 2021 amounted to DKK 141 million (2020: DKK 7,089 million). The Group saw more normalised impairment levels during
2021. There was a low level of credit deterioration, including for corona-affected and oil-related portfolios. These portfolios also benefitted from model-
driven reversals made as a result of better than expected macroeconomic developments. In 2020, impairments were affected by b oth exposure to the
oil and gas industry and a significant change in the macroeconomic scenarios used to calculate expected credit losses following the outbreak of the
pandemic. The Group made sufficient impairment charges for pandemic -related tail risks, however it remains to be seen how both the rolling off of
government support packages and tapering from the central banks, including the timing of these, might affect those businesses at which earnings are
still catching up.
Accounting treatment of the impacts on expected credit losses from the corona crisis
2021 marked the second year of the corona virus pandemic and affected the expected credit loss differently than in 2020. 2020 was marked by large
increases in the post-model adjustments, especially related to the corona virus, and an expectation of a speedy recovery after lockdowns ended.
2021 has seen overall good customer activity in core markets and reversals to modelled ratings. With the ongoing detection of new variants of the
corona virus and lockdowns imposed and lifted repeatedly throughout 2021, the uncertainty remains high related to credit deterioration across most
industries and specifically corona related industries .
The Group has retained most post-model adjustments not related to implemented model changes as the uncertainties relating to the corona crisis and
the economy in general remains elevated. 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 Shi pping,
oil and gas industry). The targeted post-model adjustment related to such sectors amounts to DKK 1.8 billion ( 2020: DKK 2.0 billion).
The Group applies the European Banking Authority’s (EBA’s) definition of loans subject to forbearance measures, which states that a probation p eriod
of a minimum of two years must pass from the date when forborne exposures are considered to be p erforming again. Exposures with forbearance
measures are divided into performing and non-performing loans. The increase in forborne exposures relates to proactive forbearance measures taken
by the Group to improve the financial position of weak customers f ollowing the corona crisis.
Danske Bank / Annual Report 2021 69
Notes – Danske Bank Group
G1. Basis of preparation continued
(b) Significant accounting estimates and judgements
The applied macroeconomic scenarios in 2021 differ from those used at 31 December 2020. In Q1 2021 the downside scenario was changed to
capture the severe recession scenario applied in the Group’s Internal Capital Adequacy Assessment Process 8 (ICAAP) processes and is similar in
nature to regulatory stress tests. The severe recession scenario reflects negative growth and falling property prices for a l onger period. The change of
the downside scenario has been made in order to capture the risk of prolonged lockdowns due to new coronavirus variants and in order for the ECL
calculation to include potential downside risks due to the elevated asset prices across the Nordics.
With the changed downside scenario the scenario weighting was also changed and afterwar ds kept stable for the first nine months of 2021. In Q4 2021,
the scenarios weights has been updated to the current weights of Base case 70%, downside 20% and 10% upside.
Except as described above, all other policies and principles remain in place. Stagin g criteria are unchanged, including the 30 days past due criteria and
PD-based criteria for transfer to stage 2.
Fair value measurement of financial instruments
At the end of 2021, no unusual challenges in obtaining reliable pricing apart from insignificant parts of the portfolio remained. The majority of valuatio n
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 adjustme nts 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
2021, the adjustments totalled DKK 1.0 billion (2020: DKK 1.6 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 fix ed interest rates on the financia l
instruments to variable interest rates by the use of swaps. The ongoing Interest Rate Benchmark Reform will replace existing benchmark interban k
offered rates (IBORs) with alternative risk-free rates. As a result of these developments, accounting judgement is involved in determining whether ce rtain
hedge accounting relationships that hedge the interest rate risk due to changes in IBORs continue to qualify for hedge accoun ting. Following IASB’s project
‘Interest Rate Benchmark Reform’ 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) .
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, ch anges in the economic outlook,
customer behaviour and competition. At 31 December 2021, goodwill amounted to DKK 6.1 billion (2020: DKK 6.1 billion).
Despite the corona crisis, the impairment test conducted in 2021 did not reveal any impairment loss (2020: DKK 0 billion).
The goodwill in Danica Pension of DKK 1.6 billion (2020: DKK 1.6 billion) is sensitive to changes in solvency capital requirements, growth in the termina l
period and the discount rate.
The remaining goodwill mainly consists of DKK 2.1 billion (2020: DKK 2.1 billion) in Markets, DKK 1.8 billion (2020: DKK 1.8 billion) in Asset Managemen t
and DKK 0.5 billion (2020: DKK 0.5 billion) in General Banking (all part of the business segment Large Corporates & Institutions) showing significan t
amounts of excess value in the impairment tests in 2021 and 2020.
Note G19 provides more information about the impairment test in 2021 and 2020 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 own portfolio of insuranc e
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 2021
67
Danske Bank / Annual Report 2021 69
Notes – Danske Bank Group
G1. Basis of preparation continued
(b) Significant accounting estimates and judgements
The applied macroeconomic scenarios in 2021 differ from those used at 31 December 2020. In Q1 2021 the downside scenario was changed to
capture the severe recession scenario applied in the Group’s Internal Capital Adequacy Assessment Process 8 (ICAAP) processes and is similar in
nature to regulatory stress tests. The severe recession scenario reflects negative growth and falling property prices for a l onger period. The change of
the downside scenario has been made in order to capture the risk of prolonged lockdowns due to new coronavirus variants and in order for the ECL
calculation to include potential downside risks due to the elevated asset prices across the Nordics.
With the changed downside scenario the scenario weighting was also changed and afterwar ds kept stable for the first nine months of 2021. In Q4 2021,
the scenarios weights has been updated to the current weights of Base case 70%, downside 20% and 10% upside.
Except as described above, all other policies and principles remain in place. Stagin g criteria are unchanged, including the 30 days past due criteria and
PD-based criteria for transfer to stage 2.
Fair value measurement of financial instruments
At the end of 2021, no unusual challenges in obtaining reliable pricing apart from insignificant parts of the portfolio remained. The majority of valuatio n
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 adjustme nts 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
2021, the adjustments totalled DKK 1.0 billion (2020: DKK 1.6 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 fix ed interest rates on the financia l
instruments to variable interest rates by the use of swaps. The ongoing Interest Rate Benchmark Reform will replace existing benchmark interban k
offered rates (IBORs) with alternative risk-free rates. As a result of these developments, accounting judgement is involved in determining whether ce rtain
hedge accounting relationships that hedge the interest rate risk due to changes in IBORs continue to qualify for hedge accoun ting. Following IASB’s project
‘Interest Rate Benchmark Reform’ 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) .
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, ch anges in the economic outlook,
customer behaviour and competition. At 31 December 2021, goodwill amounted to DKK 6.1 billion (2020: DKK 6.1 billion).
Despite the corona crisis, the impairment test conducted in 2021 did not reveal any impairment loss (2020: DKK 0 billion).
The goodwill in Danica Pension of DKK 1.6 billion (2020: DKK 1.6 billion) is sensitive to changes in solvency capital requirements, growth in the termina l
period and the discount rate.
The remaining goodwill mainly consists of DKK 2.1 billion (2020: DKK 2.1 billion) in Markets, DKK 1.8 billion (2020: DKK 1.8 billion) in Asset Managemen t
and DKK 0.5 billion (2020: DKK 0.5 billion) in General Banking (all part of the business segment Large Corporates & Institutions) showing significan t
amounts of excess value in the impairment tests in 2021 and 2020.
Note G19 provides more information about the impairment test in 2021 and 2020 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 own portfolio of insuranc e
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 2021
68
70 Danske Bank / Annual Report 2021
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.
(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 characteristic s
(including embedded derivatives, if any) are grouped into one of the following measurement categories:
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 financia l
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 unsettle d
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 2021
Amortised cost
Fair value OCI
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
(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 2021
Total financial assets, 31 December 2020
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 ***
Non-preferred senior bonds
Subordinated debt
Loan commitments and guarantees
293
32
-
147
-
1,026
-
-
1,498
1,504
88
-
1,158
-
223
-
-
107
39
2
-
-
-
119
-
-
-
-
119
117
-
-
-
-
-
-
-
-
-
-
-
-
-
253
237
12
-
-
-
502
669
-
371
-
-
-
-
-
-
-
-
371
-
39
-
37
1
215
77
522
-
-
-
-
-
810
-
-
891
810
911
816
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
85
-
134
795
-
77
589
-
-
-
1,680
-
-
8
-
-
1
-
-
293
71
260
540
13
2,052
77
522
9
3,829
16
4,034
0
4
-
-
1
-
-
1
-
-
6
173
375
1,292
795
224
77
589
108
39
2
3,674
Total financial liabilities, 31 December 2021
1,617
Total financial liabilities, 31 December 2020
1,703
* 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.
3,890
1,680
496
12
-
-
-
Danske Bank / Annual Report 2021 71
Notes – Danske Bank Group
G1. Basis of preparation continued
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.
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 liabilitie s
designated at fair value through profit or loss under the fair value option. Value adjustments relating to the inherent credit risk of financial liabilitie s
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 financia l
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, Personal Business & Customers, General Banking at Large Corporates &Institutes (LC&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 LC&I (Markets and Investment Banking & Securities) and the financial assets related to the Group’s insurance activities at
Danica Pension 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
Group Treasury has portfolios of bonds within the “hold to collect” business model, the “hold to collect and sell” business models and the “other”
on a fair value basis.
business model.
The remaining portfolio of Non-core is “hold to collect”. The financial assets consist primarily of loans.
Danske Bank / Annual Report 2021
69
Danske Bank / Annual Report 2021 71
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 characteristic s
(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.
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 liabilitie s
designated at fair value through profit or loss under the fair value option. Value adjustments relating to the inherent credit risk of financial liabilitie s
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 financia l
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, Personal Business & Customers, General Banking at Large Corporates &Institutes (LC&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 LC&I (Markets and Investment Banking & Securities) and the financial assets related to the Group’s insurance activities at
Danica Pension 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 2021
70
72 Danske Bank / Annual Report 2021
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 subsequen t
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.
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.
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 Markets and Investment Banking & Securities at LC&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-2021, hedging derivative s
measured at fair value accounted for about 0.2% of total assets and about 0.2% of total liabilities (31 December 2020: 0.3% and 0.1%, respectively) .
For further information on hedge accounting, see note G12(d).
Danske Bank / Annual Report 2021 73
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
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.
The separate pool of assets equal to shareholders’ equity is recognised at fair value and consolidated with other similar assets.
Assets funded by shareholders’ equity
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 derivin g
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 additiona l
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 technica l
basis is insufficient to cover the interest accrual to policyholders, the shortfall is covered by the bonus potentials or the profit margin. Any remainin g
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 2021
71
Danske Bank / Annual Report 2021 73
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 derivin g
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 additiona l
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 technica l
basis is insufficient to cover the interest accrual to policyholders, the shortfall is covered by the bonus potentials or the profit margin. Any remainin g
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 2021
72
74 Danske Bank / Annual Report 2021
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 informatio n
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 led 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 Financia l
highlights, whereas they are recognised under Operating expenses in the IFRS income statement.
Markets and Investment Banking & Securities (both part of Large Corporates & Institutions) and Group Treasury (part of Group Functions)
In the IFRS income statement, income from Markets and Investment Banking & Securities and Group Treasury is presented as Net interest income, the
net of Fee income and Fee expenses. Net trading income or loss and Other income, depending on the type of income. The distribution of income between
the various income line items can vary considerably from one year to the next, depending on the underlying transactions and market conditions. To better
reflect income in those areas, the following reclassifications are made in the financial highlights:
All income contributed by Markets, excluding Market’s share of margins on customer derivatives, is presented as Net trading income
Trading-related income at Investment Banking & Securities is presented as Net trading income. However, income contributed by Equity Finance
(also part of Large Corporates & Institutions, Investment Banking & Securities) is presented as Net fee income
All income in Group Treasury, except income at Internal Bank, income on bonds held to collect and bonds held to collect and sell, are presented as
Net trading income.
Danica Pension
In the IFRS income statement, income and expenses in Danica Pension is consolidated on a line-by-line basis. In the financial highlights, earnings in the
business segment Danica Pension is presented as a single line Net income from insurance business due to Danica Pension being a separate business
unit. This increases transparency and simplicity in the income statement part of the financial highlights, as Danica Pension’s business model is very
different from the business model of the other commercial activities within the Group. Net income insurance business is prese nted before elimination of
intra-group transactions.
Non-core
In the IFRS income statement and balance sheet, income and expense items and asset and liability items from the Non-core segment are included in the
various income statement and balance sheet line items, as the segment does not fulfil the requirements in IFRS 5, Non-current Assets Held for Sale and
Discontinued Operations.
The Non-core segment includes certain customer segments that are no longer considered part of the Group’s core business. To better reflect activitie s
from the Group’s core and non-core business, the profit or loss of the Non-core segment is presented as one amount in a separate line item ‘Profit before
tax, Non-core’ in the financial highlights. Similarly, assets are presented together as Total assets in Non-core and liabilities together as Total liabilities in
Non-core in the balance sheet in the financial highlights.
(e) Reporting on the ESEF Regulation
The Commission’s Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) requires a spe cial digital reporting
format for annual report for publicly listed entities. The ESEF Regulation includes requirements related to the preparation of the annual report in XHTML
format and iXBRL tagging of the consolidated financial statements key elements including Income statement, Statement of comprehensive income,
Balance sheet, Statement of capital and Cash flow statement.
Danske Bank Group’s iXBRL tagging is prepared in accordance the ESEF taxonomy which is included in the appendices of the ESEF Regulation and is
developed based on the IFRS taxonomy that is published by IFRS Foundation. For the annual report for 2021 , the ESEF Taxonomy for 2020 has been
applied.
The account balances in the consolidated financial statement is XBRL tagged to the elements in the ESEF Regulation that is as sessed to correspond to
the content of the account balances. For account balances that are ass essed not to be covered by the account balances defined in the ESEF taxonomy,
the Group has incorporated entity specific extensions to the taxonomy. These extensions are – except subtotals – embedded in the elements in the ESEF
Taxonomy.
The annual report comprises – in accordance with the requirements of the ESEF Regulation – of a zip-file [danskebank-2021-12-31.zip], that includes an
XHTML-file, that can be opened with standard web browsers and a number of technical XBRL files that make automated extrac ts of the incorporate d
XBRL data possible.
Danske Bank / Annual Report 2021 75
Notes – Danske Bank Group
G2. Changes and forthcoming changes to accounting policies and presentation
(a) Changes to significant accounting policies and presentation during the year
On 1 January 2021, the Group implemented amendments to IFRS 9, IAS 39, IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform, phase 2) and IFRS
16 (Covid-19 Related Rent Concessions). The implementation of the amendments to IFRSs had no impact on the financial statements.
In 2021 the Group has changed the presentation in the income statement of indirect fees earned when customers are granted, refinance or prepay
Danish mortgage loans. Comparative information in the income statement has been restated to reflect the change in presentatio n.
In 2021, the Group has changed the presentation of the line items Gain and loss on sale of disposal groups and Income from holdings in associates fr om
separately presentation on the face of the income statement to be presented under Other Income. Comparative information in th e income statement has
been restated to reflect the change in presentation. Further information is provided in note G7.
The Group has changed the presentation of Assets held for sale and Liabilities in disposal groups held for sale to be present ed separately on the face of
the balance sheet rather than within Other assets and Other liabilities respectively. Comparative information in the balance sheet has been restated to
reflect the change in presentation. Further information is provided in note G23.
The sections below explain in more detail the changes to accounting policies and presentation implemented.
Interest Rate Benchmark Reform – phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
In August 2020, the IASB issued amendments to various standards to cover the effects on financial statements when old interest rate benchmarks are
replaced by alternative benchmark rates as a result of the benchmark reform.
The amendments introduce a practical expedient to account for a change to the basis for determination of the contractual cash flows at the date on which
interest rate benchmarks are altered or replaced. Under the practical expedient, a change to the determination of the contrac tual cash flows is applied
prospectively by altering the effective interest rate, i.e. not leading to a modification gain or loss recognised in the income statement. To be applicable for
the practical expedient, a change must meet two conditions: (a) the change is a direct consequence of the reform and (b) the new basis for determinin g
the contractual cash flows is economically equivalent to the previous basis.
The amendments further introduce reliefs from existing hedge accounting requirements. The reliefs include that hedge accounti ng would not discontinu e
solely due to the benchmark reform and that, for the retrospective effectiveness test for fair value hedges under IAS 39, the cumula tive fair value changes
of the hedged item and the hedging instrument may be reset to zero to minimise the risk that a hedge will fail the retrospective effectiveness test when
the benchmark transitions to an alternate benchmark. The amendments further require that the hedging relationships and docume ntations are amended
to reflect changes in the hedged item, the hedging instrument a nd the hedged risk (which do not represent a discontinuation of the existing hedge).
The implementation has been applied retrospectively without restatement of prior periods. The implementation of the amendment s had no impact on
shareholders’ equity at 1 January 2021. See notes G12 and G33 for further detail.
Covid-19 Related Rent Concessions (amendments to IFRS 16)
The amendment introduces a practical expedient under which a lessee may elect not to assess whether a COVID-19 related rent concession meets the
definition of a modification. Danske Bank Group has not been granted any concessions, and the amendment has no impact on the financial statements.
Change in the presentation of indirect fees earned on Danish mortgage loans
The Group’s Danish mortgage loans are granted through Realkredit Danmark and funded by issued listed mortgage bonds with matc hing terms, both
measured at fair value through profit and loss. When customers are granted, refinance or prepay such loans, the Group earns di rect fees as well as
indirect fees with the latter being changed as a discount or premium to the quoted price on the bonds funding the specific loan. In the income statement,
the indirect fees are now included within Fee income to align with the presentation of the direct fees. Previously, the indir ect fees were included within
Net trading income or loss. Comparative information has been restated, leading to a reclassification to Fee income from Net trading income or loss of
DKK 590 million in 2020.
(b) Standards and interpretations not yet in force
The International Accounting Standards Board (IASB) has issued one new accounting standard (IFRS 17) and amendments to existing internation a l
accounting standards (IFRS 1, IFRS 3, IFRS 9, IFRS 16, IAS 1, IAS 8, IAS 12,IAS 16 and IAS 37), that have not yet come into force. The Group has not
early adopted any of the changes. The sections below explain the IFRS changes that are likely to affect the Group’s future financial reporting. For the
changes not described below, no significant impact is expected.
Danske Bank / Annual Report 2021
73
Danske Bank / Annual Report 2021 75
Notes – Danske Bank Group
G2. Changes and forthcoming changes to accounting policies and presentation
(a) Changes to significant accounting policies and presentation during the year
On 1 January 2021, the Group implemented amendments to IFRS 9, IAS 39, IFRS 4 and IFRS 16 (Interest Rate Benchmark Reform, phase 2) and IFRS
16 (Covid-19 Related Rent Concessions). The implementation of the amendments to IFRSs had no impact on the financial statements.
In 2021 the Group has changed the presentation in the income statement of indirect fees earned when customers are granted, refinance or prepay
Danish mortgage loans. Comparative information in the income statement has been restated to reflect the change in presentatio n.
In 2021, the Group has changed the presentation of the line items Gain and loss on sale of disposal groups and Income from holdings in associates fr om
separately presentation on the face of the income statement to be presented under Other Income. Comparative information in th e income statement has
been restated to reflect the change in presentation. Further information is provided in note G7.
The Group has changed the presentation of Assets held for sale and Liabilities in disposal groups held for sale to be present ed separately on the face of
the balance sheet rather than within Other assets and Other liabilities respectively. Comparative information in the balance sheet has been restated to
reflect the change in presentation. Further information is provided in note G23.
The sections below explain in more detail the changes to accounting policies and presentation implemented.
Interest Rate Benchmark Reform – phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
In August 2020, the IASB issued amendments to various standards to cover the effects on financial statements when old interest rate benchmarks are
replaced by alternative benchmark rates as a result of the benchmark reform.
The amendments introduce a practical expedient to account for a change to the basis for determination of the contractual cash flows at the date on which
interest rate benchmarks are altered or replaced. Under the practical expedient, a change to the determination of the contrac tual cash flows is applied
prospectively by altering the effective interest rate, i.e. not leading to a modification gain or loss recognised in the income statement. To be applicable for
the practical expedient, a change must meet two conditions: (a) the change is a direct consequence of the reform and (b) the new basis for determinin g
the contractual cash flows is economically equivalent to the previous basis.
The amendments further introduce reliefs from existing hedge accounting requirements. The reliefs include that hedge accounti ng would not discontinu e
solely due to the benchmark reform and that, for the retrospective effectiveness test for fair value hedges under IAS 39, the cumula tive fair value changes
of the hedged item and the hedging instrument may be reset to zero to minimise the risk that a hedge will fail the retrospective effectiveness test when
the benchmark transitions to an alternate benchmark. The amendments further require that the hedging relationships and docume ntations are amended
to reflect changes in the hedged item, the hedging instrument a nd the hedged risk (which do not represent a discontinuation of the existing hedge).
The implementation has been applied retrospectively without restatement of prior periods. The implementation of the amendment s had no impact on
shareholders’ equity at 1 January 2021. See notes G12 and G33 for further detail.
Covid-19 Related Rent Concessions (amendments to IFRS 16)
The amendment introduces a practical expedient under which a lessee may elect not to assess whether a COVID-19 related rent concession meets the
definition of a modification. Danske Bank Group has not been granted any concessions, and the amendment has no impact on the financial statements.
Change in the presentation of indirect fees earned on Danish mortgage loans
The Group’s Danish mortgage loans are granted through Realkredit Danmark and funded by issued listed mortgage bonds with matc hing terms, both
measured at fair value through profit and loss. When customers are granted, refinance or prepay such loans, the Group earns di rect fees as well as
indirect fees with the latter being changed as a discount or premium to the quoted price on the bonds funding the specific loan. In the income statement,
the indirect fees are now included within Fee income to align with the presentation of the direct fees. Previously, the indir ect fees were included within
Net trading income or loss. Comparative information has been restated, leading to a reclassification to Fee income from Net trading income or loss of
DKK 590 million in 2020.
(b) Standards and interpretations not yet in force
The International Accounting Standards Board (IASB) has issued one new accounting standard (IFRS 17) and amendments to existing internation a l
accounting standards (IFRS 1, IFRS 3, IFRS 9, IFRS 16, IAS 1, IAS 8, IAS 12,IAS 16 and IAS 37), that have not yet come into force. The Group has not
early adopted any of the changes. The sections below explain the IFRS changes that are likely to affect the Group’s future financial reporting. For the
changes not described below, no significant impact is expected.
Danske Bank / Annual Report 2021
74
76 Danske Bank / Annual Report 2021
Danske Bank / Annual Report 2021 77
Notes – Danske Bank Group
Notes – Danske Bank Group
G2. Changes and forthcoming changes to accounting policies and presentation continued
G3. Business model and business segmentation
IFRS 17, Insurance Contracts
In May 2017, the IASB issued IFRS 17, Insurance Contracts. IFRS 17 replaces IFRS 4, Insurance Contracts, which was an interim standard that did not
prescribe the measurement of insurance contracts but relied on existing accounting practices. IFRS 17 is a comprehensive standard with principles for,
for example, the measurement of insurance contracts at a current (fulfilment) value in the balance sheet, the recognition of insurance contract revenue
in the income statement and the presentation of information on the performance in relation to insurance contracts. In June 2020, the IASB issued some
amendments to IFRS 17 which included a deferral of the effective date to 1 January 2023.
IFRS 17 was adopted by the EU in November 2021.
The standard may have a significant impact on the financial statements due to the new principles for calculating insurance provisions and for the
presentation in the income statement and balance sheet. The Group has undertaken a pre-analysis to assess the impact on th