Jyske Bank (JYSK) Danske bank danish banking seminar 2020 presentation summary

Economic outlook and response

• Danish GDP was expected to decline 3%–10% in 2020; government support measures totalling an estimated DKK 300bn–400bn had supported more than 250,000 jobs.

• COVID-19 had increased unemployment by about 50,000; respondents reporting some or large effects fell to an average 54% in May from 62% in April, while 80% saw no near-term bankruptcy risk, up from 72%.

• A share repurchase programme was cancelled and DKK 1bn reserved for potential COVID-19-related credit deterioration; exposure to especially affected industries was estimated at about 3%, below natural market share.

• At Q1 2020, capital buffer was 6.5pp and liquidity coverage ratio 229%; non-performing loans had declined, and individual impairment charges were DKK 0.

Credit quality and lending

• Q1 impairment charges rose DKK 1,067m QoQ; management estimates increased DKK 1,020m, including DKK 1,000m related to COVID-19. Cost of risk rose 85bp QoQ.

• The impairment balance reached 1.2% of loans, advances and guarantees; NPLs declined 11bp QoQ to 1.2%, while forborne loans were 1.7% versus 2.0% at end-2019.

• Mortgage-like lending reached 77% of lending, up 10pp since Q2 2014; Danish mortgage credit institutions averaged 5bp impairment charges since 2000 versus 51bp for Danish banks.

• Q1 2020 showed no noticeable COVID-19 impact on credit demand or quality; sector lending growth and margins also showed no significant impact in April.

Earnings and 2020 outlook

• Net fee income rose 32% YoY in Q1 2020; adjusted for covered-bond issuance expenses and performance fees, it increased 17%. Assets under management declined 1% YoY.

• Q1 expenses rose 5% YoY, but fell 1% excluding the DKK 78m one-off expense from the Gibraltar sale; full-time employees declined 4% YoY.

• Net interest income was expected to increase in coming quarters, supported by negative deposit rates; the deposit surplus was DKK 29bn, up DKK 4bn QoQ in Q1 2020.

• 2020 outlook: core income below 2019; expenses flat excluding one-offs; impairment charges significantly above 2019; net profit DKK 0.0bn–1.5bn.

• CET1 ratio guidance was 15%–17% and capital ratio guidance 20%–22% for the coming 2–3 years.