Download DNB Group - Digital, Regulation and Macro Challenges

DNB Group
- Digital, Regulation
and Macro Challenges
Bjørn Erik Næss, CFO
Morgan Stanley European
Financials Conference
London, March 26th
AGENDA
• DNB ambitions – deliver on financial promises
• DNB’s customers digital behaviour – impact for DNB
• DNB in a tough regulatory environment – DNB well
prepared for the future Basel 4
• DNB in a changing macro environment
2
Financial ambitions - 2016 and 2017
Return on equity
> 12 per cent
Min.
14% CET1-ratio*
as capital plateau
3
* Based on transitional rules
> 50% dividend
when capital plateau is reached
DNB delivers healthy profit growth
Pre-tax operating profit and ROE
NOK billion
40
Pre-tax operating profit before impairment
22.0 %
Impairment of loans and guarantees
35
Return on equity
13.8 %
30
28.7
10.0 %
25
20
15
0.0 %
15.1
10
5
0
4
20.0 %
-10.0 %
1.6
0.2
2007
2008
2009
2010
2011
2012
2013
2014
-20.0 %
Strong capital accumulation
CET1-ratio and Equity capital
15.0
15.1
Per cent, NOK million
Equity
14.0
13.6
CET1-ratio transition rules
FL CET1-Basel 3/CRD IV
13.0
158,723
12.7
101,403
12.1
12.0
11.8
10.7
11.0
10.0
9.2
9.4
8.5
9.0
8.0
2009
5
2010
2011
2012
FL CET1-Basel 3/CRD IV = Best estimate for DNB’s future Fully loaded CET Basel 3 / CRD IV
2013
2014
AGENDA
• DNB ambitions – deliver on financial promises
• DNB’s customers digital behaviour – impact for DNB
• DNB in a tough regulatory environment – DNB well
prepared for the future Basel 4
• DNB in a changing macro environment
6
Present in all channels
Mobile
Internet banking
Chat
In-store outlets
Bank i butikk
– bank services in-store outlets
24h Telephone banking
7
Branches (also open on Saturdays)
Our customers prefer online banking
Share of customer traffic
Sales digital vs. traditional
Savings agreements
Manual
14%
Mobile
bank, 42%
Manual,
50%
SMS, 25%
Internet
bank, 30%
Digital
11%
Call Center,
2%
8
Digital,
50%
Digital
86%
Insurance
Branch
office, 1%
Car loans
Consumer loans
Manual,
36%
Digital,
64%
Manual
89%
Modernising the way we do banking
- we expect 50-70 per cent reduction in manual transactions
Average number of manual transactions in
pilot branches (rebased)
Key takeaways
100
•
Fundamentally changing the way we
operate our branches:
o Eliminating manual cash-services
o Moving manual banking transactions to digital
channels
39
Jan Feb Mar Apr May Jun
Jul Aug Sep Oct
2014 2014 2014 2014 2014 2014 2014 2014 2014 2014
9
•
Continued reduction in number of branches
Continuous efficiency improvements in distribution
- number of branches reduced by more than 40% since 2007
Development in number of DNB branches
in Norway
244
Key takeaways
•
Optimising the balance between branches
and digital presence
•
Customers are embracing digital banking
•
Efficiency gains by reducing cost–to–serve
through use of digital channels
137
2007
10
2008
2009
2010
2011
2012
2013
2014
Increasing our cost/income ambition
Cost/income DNB vs peer groups
Per cent
C/I ambition for 2017
European banks (top 50)*
Nordic peer group
DNB
75.0
~40%
70.0
65.0
60.0
55.0
50.0
45.0
40.0
2005
11
2006
2007
2008
2009
2010
2011
2012
2013
2014
Combination of
top line growth and
cost focus
AGENDA
• DNB ambitions – deliver on financial promises
• DNB’s customers digital behaviour – impact for DNB
• DNB in a tough regulatory environment – DNB well
prepared for the future Basel 4
• DNB in a changing macro environment
12
DNB is well positioned for new capital requirements
15.1%
13.6%
13 %
12.7%
DNB’s
regulatory
CET1-ratio
11.8%
12 %
1.0%
10 %
1.0%
1.0%
2.0%
3.0%
3.0%
3.0%
2.5%
2.5%
2.5%
2.5%
4.5%
4.5%
4.5%
4.5%
2014
Conservation Buffer
Countercyclical Buffer
2015
2016
Systemic Risk Buffer
CET1-transition rules
9%
2.0%
2013
CET1 Minimum Requirement
SIFIs
Fully loaded CET1/CRD IV
13
DNB already well prepared for a tougher future regime
Mortgage risk weights
50%
DNB risk
weights –
transition
rules
40%
80%
Future risk
weights –
Basel 4 ?
???
30%
20%
Current
IRB
risk weights
20%
0%
0%
DNB
14
???
60%
40%
10%
RW
Corporate risk weights
100%
Nordea
LGD Floor 20%
SHB
SEB
PD Floor 0.2%
Swedbank Danske
Pillar 2 requirement
DNB
Nordea
RW
SHB
SEB
Swedbank Danske
PD/LGD Floors
Strong capital position vs. peers
Capital adequacy figures as at 31 December 2014 – comparison with Nordic peers
Leverage ratio
42.3%
25.1%
Leverage
Basis
6.0%
4.1%
DNB Group
Danske Bank
RWAs (as % of total assets)
23.3%
4.8%
21.7%
4.3%
SEB
Common Equity Tier 1 ratio, transitional rules
Nordea
19.5%
17.1%
4.5%
3.7%
Swedbank
Handelsbanken
Common Equity Tier 1 ratio, Basel III
21.2 %
Risk
Weighted
Basis
18.3 %*
12.7 %15.1%
DNB
15
15.1 %
11.7 %
Danske Bank
16.3 %
20.4 %
15.7 %
10.1 %
10.4 %
10.6 %
SEB
Nordea
Swedbank
8.7 %
Handelsbanken
* DNB’s risk weights are conservatively set due to requirements from the Norwegian FSA. Applying average risk weights
on mortgages and corporate portfolio as used by Swedish peers would increase DNB’s CET1 ratio.
AGENDA
• DNB ambitions – deliver on financial promises
• DNB’s customers digital behaviour – impact for DNB
• DNB in a tough regulatory environment – DNB well
prepared for the future Basel 4
• DNB in a changing macro environment
16
Slower Economic Growth in Norway is Expected
– Exports, private and public consumption will ensure a soft landing
GDP growth and unemployment
Year on year, per cent
Mainland GDP growth
7%
Unemployment rate
6%
5%
4.3
4%
3.5
3%
2.5
2.5
2%
1%
0%
-1%
2004
2005
2006
2007
2008
-2%
17
Source: Statistics Norway/DNB Markets forecasts
2010
2011
2012
2013
2014
2015e
2016e
2017e
2018e
Scenario: Lower oil price
- What if oil price would stay at $50/bbl.?
GDP growth and unemployment
Year-on-year, per cent
Main assumptions and a downside $50/bbl.-scenario by DNB Markets
7%
Mainland GDP
6%
GDP $50/bbl-scenario
Unemployment
Unempl. $50/bbl-scen.
5%
5.2
4%
4.3
3%
2.5
2%
1%
0.6
0%
-1%
2004
2005
2006
2007
2008
2010
2011
2012
-2%
18
Sources: Statistics Norway, forecast and scenario by DNB Markets as of 29 Jan 2015
2013
2014
2015e
2016e
2017e
2018e
Two powerful tools to ensure a stable macro development
Monetary policy
Higher interest rates in Norway
than in the rest of Europe
Fiscal policy
Large public wealth gives ample leeway to
smooth business cycles
Central bank rates
National budget structural, non-oil deficit
Per cent
ECB
2015 prices, NOK billion
Sweden
Norway
7
250
6
200
Structural, non-oil deficit
4 per cent return on the fund capital
58
5
150
4
100
3
2
50
1
0
2008
2008
19
0
2010
2010
2012
2012
2014
2014
2016e
2016
Source: Thomson Datastream, DNB Markets
2018e
2018
2001
2003
2005
2007
2009
2011
2013 2015e
Both income and capital ratios build up
are sensitive to currency fluctuations
Factors affecting the CET1 ratio
USD/NOK
2016 effect, bps
9.00
8.50
8.00
+6%
7.50
+ 15%
+15%
7.00
+45
bps
NOK/USD
NOK/EUR
Currency
effects
6.50
6.00
÷ 15%
5.50
31/12/2014
30/9/2014
* MTM: mark-to-market
30/6/2014
31/3/2014
31/12/2013
20
NOK/USD
NOK/EUR
÷ 45
bps
The financial ambition of 12% ROE stay firm
Lending volumes expected to grow at an annual rate of around
3-4 per cent, subject to stable exchange rates
Stable development in volume-weighted spreads
Commissions and fees – underlying growth of 5 per cent
Flat nominal costs throughout 2015 (excluding restructuring costs)
Impairment expected to stay below normalised levels 1) in 2015
1) Normalised levels are around 20 bps of EaD (exposure at default), which corresponds to losses of approx. NOK 4 billion.
21
Thank you
DISCLAIMER
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this presentation may include forward-looking statements such as statements of future
expectations. These statements are based on the management’s current views and assumptions and involve both
known and unknown risks and uncertainties.
Although DNB believes that the expectations reflected in any such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove to have been correct.
Actual results, performance or events may differ materially from those set out or implied in the forward-looking
statements. Important factors that may cause such a difference include, but are not limited to: (i) general economic
conditions, (ii) performance of financial markets, including market volatility and liquidity (iii) the extent of credit
defaults, (iv) interest rate levels, (v) currency exchange rates, (vi) changes in the competitive climate, (vii) changes in
laws and regulations, (viii) changes in the policies of central banks and/ or foreign governments, or supra-national
entities.
DNB assumes no obligation to update any forward-looking statement.
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