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JYSKE BANK GROUP CREDIT PROFILE The Jyske Bank Group in brief The merger with the Danish mortgage institution BRFkredit on 30 April 2014, firmly established the Jyske Bank Group as the fourth largest financial service group in Denmark with total assets of DKK 573bn, a total of 4,168 employees, 890,000 customers and a market share of 8 % of aggregate Danish mortgage lending in addition to Jyske Bank’s existing market share of around 8 % of bank lending and 8 % of bank deposit taking. The merger increased the diversification in the credit portfolio leading to a more balanced split between the SME/corporate sector and the private individuals/ residential sector in the overall Group profile, which is expected to underpin stability in future earnings. The Jyske Bank Group has a strong nationwide market presence and an extensive distribution platform with 101 branches focusing on retail clients, inclusive 34 branches specialized in SME and corporate clients and nine private banking branches throughout Denmark. The Jyske Bank Group is a Danish SIFI. With a CET1 ratio of 15.3 % as per 31 March 2015 the Jyske Bank Group is strongly capitalized and already compliant with the fully loaded CET1 requirements of the CRD IV and the Danish SIFI regulation. The Group remains well positioned for organic growth as well as to continue being a strong player in the consolidation in the Danish banking sector via select acquisitions. Jyske Bank has recently expanded the product line with competitively priced, collateralized home loans as part of the strategic focus to become the “preferred bank of the Danish houseowners”. The Jyske Bank Group has 3 core business lines: The Jyske Bank Group, Banking activities Retail and commercial Banking in Denmark focusing primarily on Danish individuals, families, SMEs, as well as local and regional public institutions and state institutions. Customers are serviced via the nationwide branch network and via the Internet and mobile phone banking platforms. Jyske Bank offers a full range of financial services in connection with financial solutions, including leasing and financing activities, Mortgage and insurance products are offered via sourcing agreements with strategic partners such as DLR, BRFKredit, PFA (life pensions), and GF Forsikring (insurance). The Jyske Bank Group, Trading and investment activities Investment advice and asset management services, including trading in fixed-income products, foreign currency, bonds, shares, commodities and derivatives aimed at national and international investors, partly through the activities in Jyske Markets in DK-Silkeborg, partly through the Private Banking entities in Zurich, Gibraltar, Copenhagen, and Weert (NL). The Jyske Bank Group, BRFkredit mortgage lending activities BRFkredit is Denmark’s fourth largest mortgage lender and carries out the Jyske Bank Group’s mortgage lending activities, specialising in owner-occupied homes, vacation homes, commercial properties and subsidised housing. Mortgage products are distributed via partners, an online web-platform and a mobile sales force. The Jyske Bank Group’s structure – with the most significant 100 % owned subsidiaries: Jyske Finans A/S Jyske Bank (Gibraltar) Ltd. Financial performance highlights (DKKm) Net interest income (NII) Net fee & commission income NII, fee & commission income Value adjustments Other operating income Operating expenses, depriciation & amortisation Core profit before loan imp. charges Loan imp.charges & prov. etc. Core profit Investment portfolio earnings Pre-tax profit Tax Net profit 5,315 1,761 7,076 -42 3,152 -5,231 4,955 -1,953 3,002 101 3,103 -14 3,089 Key balance sheet items (DKKbn) 2014* Bank loans Mortgage loans Total assets Bank deposits Issued bonds Issued mortgage bonds Total equity Total RWA Jyske Bank (Schweiz) AG Jyske Bank A/S · Vestergade 8-16 · DK-8600 Silkeborg www.jyskebank.dk · www.jyskebank.info Merete Poller Novak Senior Vice President, Head of Debt IR & Capital Markets Funding Tel. + 45 89 89 25 26 · Mobile + 45 40 64 25 96 · [email protected] Steen Nøhr Nygaard Senior Director, Head of Treasury Division Tel. + 45 89 89 25 22 · Mobile + 45 40 64 25 50 · [email protected] 2014* 120,4 218,9 541,7 128,3 43,4 208,5 27,6 176,4 Selected key ratios 2014* Q4 2014 1,428 626 2,054 -250 98 -1,341 561 -717 -156 -145 -301 80 -221 Q4 2014 120,4 218,9 541,7 128,3 43,4 208,5 27,6 176,4 Q4 2014 -6.9 -0.2 -0.5 16.4 15.3 0.3 1.7 Pre tax return on opening equity (% p.a.) 17.8 Net return on total assets (% p.a.) 0.6 Net return on RWA (% p.a.) 1.8 Total capital ratio (%) 16.4 CET1 ratio (%) 15.3 Impairment ratio for the period (%) 0.7 Acc. impairment ratio (%) 1.7 Balance of imp. charges and prov. & balance of discounts for assets taken over/ 2.4 2.4 total loans advances & guarantees (%) Loans & advances/equity 13.1 13.1 Equity/total assets (%) 5.1 5.1 *) Incl. of 8 months of BRFkredit earnings (1.5-31.12.2014) Q1 2015 1,440 617 2,057 -150 71 -1,338 640 -327 313 189 502 -109 393 Q1 2015 118,9 229,2 573,1 131,5 54,1 219,8 28,0 178,8 Q1 2015 7.3 0.3 0.9 16.3 15.3 0.1 1.7 Index 15/14 101 99 100 60 72 100 114 46 Index 15/14 99 105 106 103 125 105 101 101 Index 15/14 99 100 33 100 2.3 96 13.4 4.9 102 96 S&P’s view on the merger with BRFkredit The strategic position of the Jyske Bank Group was strengthened by the merger based on the prospects for cross sales activity. Through the more diversified retained earnings the Jyske Bank Group has the potential to achieve a stable RAC-ratio above 10% which will underpin existing rating despite potential future removal of state support. S&P relies on the Groups commitment to reduce the dependence on short term funding (predominantly BRFkredit’s short term funding via 1 year ARM mortgage loans) over the coming quarters. Jyske Bank issuer rating profile Senior unsecured A- Jyske Bank A/S BRFkredit A/S April 2015 Short Term debt A-2 Stand Alone Credit Profile bbb+ Outlook Stable Latest macro economics for Denmark compared to Euro Area Real GDP y/y growth, % (Q4 2014) Unemployment rate, % (Feb 2015) HICP growth (Mar 2015), % Current account balance, % of GDP (2014) Public budget balance, % of GDP (2014) Public gross debt, % of GDP (2014) Euro DK Area 1.5 0.9 6.2 11.3 0.3 -0.1 6.3 2.3 1.2 -2.4 45.2 91.9 BRFkredit mortgage bond ratings CRD-compliant covered bonds AAA from Capital Centre E UCITS-compliant mortgage bonds from Capital Centre B and the General Capital Centre AAA GDP growth, % 4 2 0 -2 -4 -6 -8 05 06 07 08 09 10 11 12 13 14 Denmark Euro area JYSKE BANK GROUP CREDIT PROFILE April 2015 Group funding profile The Jyske Bank Group’s bank lending activities are primarily funded via customer deposits which ensures stability in long term funding. Longer term capital market funding is done via public benchmarks and private placements under Jyske Bank’s USD 8bn EMTN program. Short term funding sources include the interbank market, repo markets and the French CD market. Mortgage lending activities Mortgage lending in BRFkredit is regulated by the “balance principle”, where mortgage loans and the issued mortgage bonds have matching conditions and the underlying payments from lenders to bondholders are matched. DKKbn Bank loans, bank deposits and the funding 130 gap. Apr. 2010 - Apr. 2015 120 110 100 90 80 70 60 50 40 30 20 10 0 -10 -20 Redemption profile as per April 2014 DKKbn 8 6 4 2 04-10 07-10 10-10 01-11 04-11 07-11 10-11 01-11 04-12 07-12 10-12 01-13 04-13 07-13 10-13 01-14 04-14 07-14 10-14 01-14 04-14 Bank lending activities Deposits from corporates and Institutional customers Core deposits from personal customers and SMEs Bank loans ex. home loans funded by BRF Home loans funded by BRF Net funding gap (DKKbn) 0 2015 2016 2017 2018 2019 2020 2021 2022 >=2026 Jyske Bank senior unsecured EMTN bonds BRF senior secured bonds BRF senior unsecured bonds Bank lending – credit quality Break down of the Jyske Bank Groups portfolio of bank loans and guarantees 6 5 4 39 3 2 5 3 0 22 6 Public Authorities Agriculture, hunting, forestry, fishing industry Manufacturing, mining Energy supply Building, construction Commerce Transport, hotels, restaurants, information, communication Finance, insurance Real property Other Sectors Personal 4 Jyske Bank A/S Public authorities Agriculture, hunting, forestry, fishing industry Manufacturing and mining, etc. Energy supply Building and construction Commerce Transport, hotels and restaurants Information and communication Finance and insurance Real property Other sectors Corporates individually assessed total Corporates collectively assessed Total balance corporate customers Personal individually assessed Personal collectively assessed Total balance personal customers Total all customers Q1 2015 Balance of loan impairments in % of total loans etc. 0.0% Q1 2015 Loans, advances & guarantees Q1 2015 Loss for the period Q1 2015 Q1 2015 2014 2013 Loan imBalance of pairment loan impairment charges charges and provisions for guarantees (DKKm) 9,806 (DKKm) 0 (DKKm) 0 0 (DKKm) 0 0 14.4% 7,173 6 210 1,033 810 568 3.6% 0.5% 4.1% 3.8% 2.8% 4.1% 1.7% 13.9% 2.7% 5.3% 2.0% 3.8% 5,568 4,493 1,925 7,248 2,737 531 46,454 9,526 7,195 92,850 58,603 161,259 10 0 0 4 1 1 27 3 21 73 0 73 30 0 30 103 29 0 3 25 12 4 41 69 30 423 -278 145 56 82 138 283 199 24 78 273 78 22 772 1,328 196 4,003 916 4,919 768 428 1,196 6,115 177 24 75 250 66 19 755 1,256 183 3,615 1,219 4,834 737 338 1,075 5,909 132 22 77 211 61 16 690 1,150 54 2,981 659 3,640 576 275 851 4,491 Mortgage lending – key numbers Selected key ratios – mortgage lending BRFkredit a/s – 31 March 2015 Loan loss provisions (% of mortgage lending) 90 days arrears in % of installment payments 90 days arrears in % of total lending Average loan-to- value (%) Private (owner Subsidised Private rental occupied & vacahousing properties tion homes) (rental housing) (rental housing) 0.29 0.05 1.83 0.52 0.04 0.36 0.01 0.00 0.01 70.1 49.2 73.4 BRF Mortgage lending – mainly housing purposes 13 11 19 45 Ho 18 3 5% usin g p urp oses 8 Owner-occupied Vacation homes Private rental Subsidised Office & business Industry Prop. for educ. etc. Offices & Business properties 1.55 1.24 0.01 66.3 Other (agriculture, industry & crafts) 0.68 0.00 0.00 58.7 Total 0.69 0.38 0.01 65.7 LTV brackets Refinancing profile BRFkredit mortgage bonds 100 100 75 75 50 25 0 Q1 2015 >100% 80% - 100% 60% - 80% 40% - 60% 20% - 40% 0% - 20% 50 25 0 Q1 2015 Other loan types Refinancing beyond one year Refinancing within one year