Danske Bank (DANSKE) CMD 2012 summary

Strategy and 2015 objectives

• New Standards strategy responds to low trust, heavier regulation, digital customer behaviour, low growth and low rates; mission centres on customer focus, advice, digitalisation, openness and responsibility.

• Vision: be recognised as the most trusted financial partner by 2015; targets include top-two customer satisfaction in prioritised segments and top-three Nordic peer ROE.

• Move from an unfocused, one-size-fits-all model to customer segmentation, stronger advice, digital services and a fair universal-bank offer focused on complex needs.

• Emphasis on returns over growth for three years, with risk-weighted assets broadly stable; simplification targets include 20% lower processing time, 50% fewer front-office administrative tasks and 20% more customer meetings per adviser.

• Retain the Nordic universal-bank footprint and Danica; divest Irish and Northern Irish commercial real estate when a reasonable price is available.

Group financial targets and outlook

• 2015 ROE target above 12%, versus 3.8% annualised after-tax ROE in 9M 2012; requires DKK 15–20bn pre-tax result improvement.

• 9M 2012 total income was DKK 35.8bn, up 14% YoY; net profit DKK 3.6bn, core-business net profit DKK 7.2bn and core ROE 7.4%.

• 2015 nominal costs targeted below DKK 26bn and cost/income below 48%, versus 55%; workforce reductions targeted at 2,000 fewer FTEs over 2013–15 and 3,000 positions by 2015 from a base of ~20,000.

• Capital targets: 13% Core Tier 1 and 17% total capital by end-2013; full LCR compliance targeted by year-end 2012, supported by a liquidity buffer.

• Long-term dividend payout target ~40% of annual net profit; no 2012 dividend, with distributions lower until capital and rating targets are reached. 9M expenses were flat and impairments rose 18%; FY 2012 impairments expected near DKK 13bn.

Personal banking turnaround

• More than 40% of 4m personal customers were unprofitable; focus shifts to Private Banking, mass affluent and selected mass-market customers, including young people and students with potential.

• Customer programme planned for Denmark in Q1 2013, then other markets; segment-based pricing, advice and benefits aim to reduce unprofitable relationships and increase business.

• By 2015, branches to fall 40% from 2011 levels, with 80 new advisory centres; teller numbers to fall 60%, alongside investment in mobile payments and digital channels.

• Further staff reduction of 15% planned; 90% of loan approvals targeted for automation, with faster decisions and more consistent credit management.

• Pricing actions included DKK 2bn executed in 2012 and more than DKK 3.5bn of lending repricing over two years; further plan includes DKK 1.3bn pricing improvement, DKK 0.4bn cross-sell and cost and sales actions.