Danske Bank

EXECUTIVE BOARD • Chris Vogelzang (CEO) • Stephan Engels (CFO) • Berit Behring • Carsten Rasch Egeriis • Frans Woelders • Glenn Söderholm • Jacob Aarup-Andersen • Jakob Groot • Phillippe Vollot

BOARD OF DIRECTORS • Karsten Dybvad (Chairman) • Carol Sergeant (Vice Chairman) • Jan T. Nielsen (Vice Chairman) • Bente Avnung Landsnes • Christian Sagild • Gerrit Zalm • Lars-Erik Brenøe • Bente Bang • Charlotte Hoffmann • Kirsten Ebbe Brich • Thorbjørn Lundholm Dahl

Danske Bank delivered a financial result with a net profit of DKK 15.1bn (DKK 14.9bn) and a return on shareholders’ equity of 9.6% (9.8%). The financial result was impacted by a number of positive non-recurring items. During the year, Danske Bank announced its ambitions for the period towards 2023.

Danske Bank is a Nordic focused universal bank with four core Nordic markets – Denmark, Norway, Sweden and Finland – that are addressed via its four customer focused business units: Banking Denmark, Banking Nordic, Corporate and Institutions and Wealth Management.

A.P. Møller has been involved in Danske Bank since 1928. At the end of 2019, A.P. Moller Holding held just above 20% of the shares in Danske Bank. A.P. Moller Holding continues to see the importance and value of a leading Nordic bank with a strong presence in Denmark.

THE YEAR IN BRIEF In May 2019, Danske Bank announced Chris Vogelzang as its new CEO, to lead the efforts in rebuilding trust in the bank while developing the bank in line with customer expectations and technological developments, ensuring that Danske Bank will remain a leading bank in the Nordic region.

2019 proved to be yet a challenging year with difficult financial markets, interest rates declining further, a slight worsening of the macroeconomic environment and strong competition in all markets. Furthermore, the industry saw further regulatory and compliance related requirements that impacted the performance.

The AML case continued to be a focus point for Danske Bank in 2019, and the bank has embarked on a multi-year enhancement programme, designed to materially upgrade systems and controls related to money laundering and financial crime. The bank has over the past couple of years increased costs by more than DKK 2bn in AML programmes and compliance related activities (including the AML case), and will continue to invest in these activities. Currently, the bank has around 2,800 full time employees working with compliance and AML in order to strengthen its lines of defence and secure progress on digitalisation efforts.

Danske Bank remains a fundamentally strong bank, however given recent years’ developments and a number of structural challenges in the banking industry, including negative interest rates, digitalisation, rising customer expectations, increased costs and increased compliance focus, the bank needed to focus its priorities to accommodate these changes.

STRATEGY REVIEW In the autumn of 2019, Danske Bank announced a new strategic plan named ‘Better Bank 2023’. While remaining committed to the Nordic Integrator strategy, the Better Bank 2023 plan is addressing the challenges the bank is facing, both as part of the financial industry, like negative interest rates and changing customer expectations, as well as specific challenges to Danske Bank, like improving compliance and keeping costs under control.

Danske Bank has defined four ambitions to measure the progress; improve customer satisfaction, an engaged workforce, sustainable, ethical and transparent operations as well as achieving return on shareholders’ equity of 9-10% with a cost income ratio in the low 50s.

In order to transform the bank, considerable investments will go into digitisation of core processes and simplifying products and operations over the coming years. A large part of these investments will come in 2020 and are expected to have a short term negative impact on the result.

FINANCIALS The total income in 2019 was DKK 45bn (DKK 44bn) and expenses were DKK 28bn (DKK 25bn). Net profit amounted to DKK15.1bn, in line with 2018. The result was impacted by an increase in operating expenses, mainly related to higher costs for compliance and AML related activities as well as an increase in loan impairment. The result was further positively impacted by a number of positive one-off items. The underlying business was impacted by the continued margin pressure and increased funding costs.

Danske Bank remains well capitalised with a CET1 capital ratio of 17.3% (17%) vs a regulatory CET1 requirement of 14.9%. During 2019, the Board of Directors set a CET1 capital ratio target level above 16%, ensuring a prudent buffer to the capital requirement.

On 16 March 2020, Danske Bank announced that the bank had decided to suspend its financial guidance for 2020. Furthermore, Danske Bank announced that the Annual General Meeting, based on a recommendation from the Danish Financial Supervisory Authority (FSA) had been postponed due to the uncertainties whether the meeting could take place in accordance with the health and safety guidelines issued by the Danish Authorities due to COVID-19. On 23 March 2020, Danske Bank announced that the dividend of DKK 8.50 per share proposed in the Annual Report 2019 will be reassessed ahead of the Annual General Meeting. A new date for the Annual General Meeting has not yet been announced.

The bank has taken several actions and continues to invest significantly in enhancing systems and controls related to AML and financial crime. This is part of rebuilding the trust in the bank in order to successfully achieve the targets set by the new management in the ‘Better Bank 2023’ plan.

TOTAL INCOME (DKKm)

45,611 47,959 48,149

44,365 44,982

2015 2016 2017 2018 2019

NET PROFIT (DKKm)

13,123 19,858 20,900

14,862 15,072

2015 2016 2017 2018 2019

CET1 CAPITAL RATIO* (%)

16.1 16.3 17.6

17.0 17.3

2015 2016 2017 2018 2019

DIVIDEND YIELD (%)

4.3 4.2 4.1 6.6

2015 2016 2017 2018 2019

*) Common equity tier 1 capital ratio