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DNB Bank ASA DNB Boligkreditt AS Thor Tellefsen – Head of Long Term Funding
LBBW September 29, 2015
DNB – A Brief Overview
2
DNB - Norway’s Leading Financial Services Group
• Approximately 30% market share in Norway
• 34% owned by the Norwegian Government
• Credit Ratings:
• Moody's Aa3 (stable)
• S&P A+ (negative)
• DBRS AA (under review negative)
3
The DNB Group
100% owned by DNB Bank and functionally an integrated part of the parent
Mortgages originated within DNB Bank’s distribution network in accordance with the bank's credit policy
DNB Bank ASA
Aa3 / A+ / AA
(Senior/ short term issuance)
DNB Life and
Asset Management
DNB ASA
DNB
Boligkreditt AS
(Covered Bonds: AAA/Aaa)
4
The Norwegian Economy
5
27.04.2012 6
Still a solid Norwegian Economy
Outlook for the Norwegian Economy 2016 *
Budget surplus > 5 %
Oil fund (still increasing) > EUR 740 bn
Unemployment < 5 %
GDP growth + 1.4 %
* Source: DNB Markets
Government finances are still rock-solid - Expect expansionary fiscal policy, but no “crisis package”
7
Note: Current account balance as a percentage share of country GDP; forecasts for 2015-16
1) Source: OECD Economic Outlook No. 97, June 2015
2) Source: DNB Markets
General government net financial liabilities 1)
(As a percentage of nominal GDP 2015*)
Annual budget deficit/surplus for 2014 1)
-300
-250
-200
-150
-100
-50
0
50
100
150
200
Perc
ent
Norwegian Pension/Oil Fund: EUR 740 bn (as of today)
Expected development 2016
Net oil revenues EUR 22 bn
Oil fund accrued interest EUR 21 bn
Government spending EUR 24 bn (2014: EUR 16 bn)
Source: DNB Markets
Estimated Norwegian budget surplus 2016: > 5% 2)
Oil Price and Oil Investments - Assumptions from DNB Markets
Oil price development
8
Oil investments
2012 prices, NOK billion
0
50
100
150
200
250
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15E
20
16E
20
17E
20
18E
Oil investments DNB Markets Forecast
Unemployment - Expected to increase, but still among the lowest in Europe
9
3.5 % 4.3 % 4.6 % 4.9 % 5.0 %
-2%
0%
2%
4%
6%
8%
2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e
Unemployment rate
DNB Markets forecast:
Still among the lowest unemployment in Europe (Source: OECD May 2015)
0,00
2,00
4,00
6,00
8,00
10,00
12,00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Denmark Finland Norway Sweden United Kingdom Euro area (15 countries)
98
205
155
1997 2000 2003 2006 2009 2012 2015e 2018e
Oljeinvesteringer Prognose
98
205
155
1997 2000 2003 2006 2009 2012 2015e 2018e
Oljeinvesteringer Prognose
Source: Statistics Norway and DNB Markets
10
1,7 % 2,5 %
3,4 %
2,3 % 2,2 %
1,4 % 1,4 % 1,8 % 2,1 %
-2%
0%
2%
4%
6%
8%
2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e
GDP growth Year on year, per cent
Economic Growth in Norway is Slowing Down - but Norway is still expected to perform well versus EU area
-2
-1,5
-1
-0,5
0
0,5
1
1,5
2
2,5
3
3,5
2013 2014 2015E 2016E 2017E 2018E
Norge Sverige
Danmark Finland
EU Tyskland
Norway
Denmark
Sweden
Finland
Germany
GDP growth
Year on year, per cent
Norway still expected to perform well versus Euro area
Financial Performance and Capital
11
Pre-tax operating profit before impairment (NOK bn)
DNB Delivers Healthy Profit
12
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013 2014 H1-15
Pre-tax operating profit before impairment Impairment of loans
28.7
24.7
2.2 1.6
16.7
1.2
138
101 92
32
40 55
170
141 147
2012 2013 2014
CET1 build up Dividends
13
Core Capital Generation
CET1 build up and dividend Basis points (bps) – transitional rules
8.5
9.2 9.4
10.7
11.8
12.7 13.0 *
2009 2010 2011 2012 2013 2014 2015 Q2
CET1 capital ratio - transitional rules Per cent
* Assuming 50 % dividend payout ratio
* A 10 percentage point change in retained earnings corresponds to a 10 percentage point change in the CET1 ratio at end June 2015
Strong Capital Position vs. Peers
14
Capital adequacy figures as at 30.06.2015 – comparison with Nordic peers
Leverage
Basis
*) DNB's risk weights are conservative set due to requirements from the Norwegian FSA. Applying average risk weights on mortgages and corporate portfolio as used by
Swedish peers (Year-end 2014), the CET1-ratio would increase by approximately 4.4%-points.
5,8 % 4,4 % 4,5 % 4,1 % 4,4 % 4,2 %
43,2 %
22,2 %
17,7 % 16,4 %
21,9 % 25,9 %
DNB SEB Swedbank Handelsbanken Nordea Danske Bank
Leverage ratio RWAs (as % of total assets)
13.0
10.5 10.5 9.0
10.8 11.0
15.0
17.2
22.4 21.3
16.0 14.3
Common equity tier1 ratio transitional rules Common equity tier1 ratio Basel III
Per cent
19,4 *)
DNB SEB Swedbank Handelsbanken Nordea Danske Bank
Risk
Weighted
Basis
Loan Book and The Housing Market
15
Loan Book EAD by segments as at 30 June 2015 1)
16
Commercial real estate 11%
Shipping 7%
Logistics 1%
Oil, gas and offshore 7%
Energy 3%
Other corporate customers
6%
Public sector 2%
Fishing and fish farming
2%
Trade 3%
Manufacturing 5%
Telecom and media 2%
Services 2%
Residential mortgages 43%
Private individuals 7%
Mortgage Lending in DNB Is Based on Cash Flow
17
Approval of a loan is based on
1. Willingness to repay the loan: By means of scoring model based on historical behaviour
2. Capability of repaying the loan: In calculating the capability or ability to repay, an adequate margin (currently 5.0%), accommodate the effects of a possible increase in interest rates, is included in the model
3. Collateral:
Credit should thus not be approved solely on the basis of the proposed collateral
3%
8%
0%2%4%6%8%
10%
Current mortgagerate
Mortgage rateincluding stress
test
5
%
• All borrowers are subsequently classified monthly by behaviour scoring
FSA regulation*
• Loan to value (LTV) max 85%
• Must amortise > 70% LTV
• Yearly amortisation: the lower of 30 years annuity payment and 2,5%
• Debt-servicing capability.
• Must be able to tolerate +500 bp interest rate increase * Subject to quarterly Board meeting reporting, banks are allowed to deviate from requirements for max. 10% of granted loans
House Price Growth Can be Explained by Fundamentals
Nominal House Prices 2000-2014
18
0
50
100
150
200
250
300
20
00
20
00
20
01
20
02
20
03
20
03
20
04
20
05
20
06
20
06
20
07
20
08
20
09
20
09
20
10
20
11
20
12
20
12
20
13
20
14
Norway UK Sweden Denmark USA
Norwegian Real House Prices - Selected deflators
Source: Eiendomsverdi AS (member of the European AVM Alliance) Source: Real Estate Norway, Statistics Norway
* Disposable income per capita deflated house prices
0
50
100
150
200
250
300
350
1985 1989 1993 1997 2001 2005 2009 2013
Nominal Wages Disposable income CPI
Housing Market: Real Demand Exceeding Supply for Several Years
19
1)
DNB Boligkreditt Covered Bonds – Cover Pool Data
Rating: AAA / Aaa
Pool statistics as of 30 June 2015. The pool cut date is coinciding with our financial quarterly reporting
* Eligible loan balance, nominal loans.
20
House price decline Current 10 % 20 % 30 %
WA indexed LTV 54.5 % 59.2 % 66.6 % 76.1 %
Eligible overcollateralization 42.0 % 40.2 % 34.8 % 25.9 %
Stresstest – House price decline
Number of Mortages in the Cover Pool 440 663
Portfolio Characteristics
Cover Pool Size 570 392 422 925
Weighted Average LTV Indexed 54.5%
Weighted Average Seasoning (in months) 57
Average Loan Balance 1 294 396
Over Collateralisation * 42,0 %
DNB: Well diversified within Norway
21
• Well diversified residential mortgage book within Norway
• Limited mortgage exposure to the most oil affected areas
Eastern Norway: 64 %
Western Norway: 17 %
Northern Norway: 8 %
Southern Norway: 6 %
Mid- Norway: 5 %
Rogaland: 6,7 %
Hordaland: 7,9 %
Vest-Agder: 1,7 %
Funding
22
DNB has Significantly Improved The Long Term Funding Structure Since
the Financial Turmoil Started in 2007
Average life of long term funding
(Senior debt and covered bonds) Share of stable long-term funding*
* Deposits from customers, subordinated debt, covered bonds and senior debt > 12 months residual maturity.
2,4
4,1
1
2
3
4
5
2008 2009 2010 2011 2012 2013 2014 2015
23
Ratio of deposits to net loans
75%
85%
95%
105%
115%
125%
135%
2003 2005 2007 2009 2011 2013 Q1 15
123.8% 50,1
53,0 54,8
57,8
62,5 64,7 65,4 65,2 65,0
A Well Established International Covered Bond Issuer
24
Tenor Redeems
EUR 2 000 mn 5 years (2016 - Jan)
EUR 2 000 mn 5 years (2016 - Oct)
EUR 1 500 mn 7 years (2017 - Jan)
EUR 2 000 mn 5 years (2017 – Apr)
EUR 1 500 mn 7 years (2017 - Aug)
EUR 1 500 mn 5 years (2018 - Jan)
EUR 1 500 mn 5 years (2018 – Nov)
EUR 1 500 mn 7 years (2019 - Jun)
EUR 1 250 mn 5 years (2019 – Oct)
EUR 1 500 mn 10 years (2021 - Jun)
EUR 2 000 mn 10 years (2022 - Mar)
EUR 1 000 mn 10 years (2022 - Nov)
EUR 1 000 mn (FRN) 5 years (2019 – Jan)
EUR 1 000 mn (FRN) 7 years (2021 – Nov)
USD 2 000 mn 5 years (2015)
USD 2 000 mn 5 years (2016)
USD 2 000 mn 5 years (2018)
USD 1 250 mn 5 years (2020)
AUD 600 mn 5 years (2016)
GBP 500 mn (FRN) 5 years (2020)
Best USD issuer
2013
Best USD deal 2013
Issuance of Long Term Debt
25
2015 EURO bill Tenor
Covered Bonds 3,7 5,8
Senior Bonds 1,6 5,1
Sum 5,3 5,6
Tier 1 / LT 2 1,3
Total 6,6
TLTRO 0,3 3
2014 EURO bill Tenor
Covered Bonds 5,8 6,3
Senior Bonds 1,8 5,4
Sum 7,5 6,1
Subordinated debt 0,0
Total 7,5
2013 EURO bill Tenor
Covered Bonds 7,1 6,3
Senior Bonds 1,5 5,6
Sum 8,6 6,2
Subordinated debt 0,9 10nc5
Total 9,5
Funding Contacts
• Thor Tellefsen,
Senior Vice President, Head of Long Term Funding
Phone direct: + 47 24 16 91 22
Mobile + 47 915 44 385
E-mail: [email protected]
• Trond Sannes Marthinsen,
Senior Vice President, Long Term Funding
Phone direct: + 47 24 16 92 75
Mobile: + 47 99 03 48 20
E-mail [email protected]
• Kristine Øvrebø,
Senior Vice President, Long Term Funding
Phone direct: + 47 24 16 91 25
Mobile: + 47 916 08 005
E-mail: [email protected]
www.dnb.no
26
Long Term Funding:
Appendix
27
Appendix A:
Cover Pool Portfolio Information
Portfolio Characteristics
28
Report date: 30.06.2015
Report currency: NOK
1. General cover pool information
1.1 Key characteristics
Total cover pool, nominal balance* 570 392 422 925
Number of mortgages 440 663
Number of borrowers 370 482
Average loan balance 1 294 396
Outstanding covered bonds, nominal balance 399 360 425 475
Substitute assets (% of total cover pool) 0,0
WA indexed LTV (%) 54,5
WA seasoning (in months)** 57
WAL of cover pool (contractual maturity in years) 12,6
WAL of outstanding covered bonds (contractual maturity in years) 5,0
* All cover pool assets are denominated in NOK.
** Seasoning indicates the number of months since collateral for the loan was established.
Description of hedging arrangements:
All issuances of covered bonds in foreign currency are swapped to NOK to eliminate FX-risk entirely.
Fixed interest rate exposures in the form of fixed rate covered bonds and fixed rate mortgages are swapped to 3 month NIBOR.
1.2 Overcollateralisation
Cover pool size Nominal Market value
Residential mortgages, eligible loan balance 567 100 651 726 569 680 786 632
Residential mortgages, non eligible loan balance 3 291 771 199 3 291 771 199
Substitue assets 0 0
Market value derivatives (net MtM) 67 933 814 299
Total cover pool (incl. non eligible loan balance) 570 392 422 925 640 906 372 130
Total cover pool, eligible loan balance 567 100 651 726 637 614 600 931
Covered bonds outstanding 399 360 425 475 468 943 418 834
Overcollateralisation (incl. non eligible loan balance) 42,8 % 36,7 %
Overcollateralisation, eligible loan balance 42,0 % 36,0 %
29
Cover Pool – Overcollateralisation History
Maturity Structure
30
1.3 Maturity structure cover pool
Contractual maturity (years) Loan balance %
≥ 0 ≤ 1 17 689 732 940 3,1 %
1 ≤ 2 18 875 123 939 3,3 %
2 ≤ 3 19 447 814 169 3,4 %
3 ≤ 5 44 198 825 243 7,7 %
5 ≤ 10 126 986 076 415 22,3 %
> 10 343 194 850 217 60,2 %
Total 570 392 422 924 100,0 %
1.4 Maturity structure covered bonds
Contractual maturity (years) Loan balance %
≥ 0 ≤ 1 4 149 760 000 1,0 %
1 ≤ 2 60 851 944 500 15,2 %
2 ≤ 3 53 709 090 000 13,4 %
3 ≤ 5 110 832 504 475 27,8 %
5 ≤ 10 145 771 396 000 36,5 %
> 10 24 045 730 500 6,0 %
Total 399 360 425 475 100,0 %
Expected maturity (years) Loan balance %
≥ 0 ≤ 1 61 662 215 000 15,4 %
1 ≤ 2 52 138 689 500 13,1 %
2 ≤ 3 66 749 150 000 16,7 %
3 ≤ 5 101 485 144 475 25,4 %
5 ≤ 10 93 803 296 000 23,5 %
> 10 23 521 930 500 5,9 %
Total 399 360 425 475 100,0 %
Loan Size
31
2.1 Loan size
Private individuals Loan balance Number of loans
≤ 1,000,000 96 483 633 625 211 669
> 1,000,000 ≤ 2,000,000 209 469 321 832 143 354
> 2,000,000 ≤ 3,000,000 134 365 609 299 55 382
> 3,000,000 ≤ 4,000,000 60 857 371 804 17 718
> 4,000,000 ≤ 5,000,000 26 464 982 607 5 941
> 5,000,000 26 443 735 419 4 041
Total 554 084 654 587 438 105
Housing cooperatives
≤ 5,000,000 2 914 509 521 1 674
> 5,000,000 ≤ 10,000,000 3 173 291 907 439
> 10,000,000 ≤ 20,000,000 4 020 291 843 281
> 20,000,000 ≤ 50,000,000 4 369 122 817 141
> 50,000,000 ≤ 100,000,000 1 297 878 342 19
> 100,000,000 532 673 908 4
Total 16 307 768 338 2 558
Property Types, Largest Borrowers and Occupancy Types
32
2.2 Property types
Loan balance % WA LTV
Private ownership
Detached 297 956 275 944 52,2 % 55,5
Semi-detached 80 327 517 922 14,1 % 54,6
Apartment 94 881 426 482 16,6 % 54,5
Share in housing cooperative
Semi-detached 9 469 136 744 1,7 % 58,2
Apartment 66 946 505 741 11,7 % 56,4
Housing cooperative 16 307 768 338 2,9 % 25,3
Second home (vacation) 4 464 970 299 0,8 % 55,5
Other 38 821 454 0,0 % 53,4
Total 570 392 422 925 100,0 % 54,5
2.3 Largest borrowers
Private individuals
5 largest (% of total mortgages) 0,03 %
10 largest (% of total mortgages) 0,06 %
Housing cooperatives
5 largest (% of total mortgages) 0,12 %
10 largest (% of total mortgages) 0,21 %
2.4 Occupancy type
Loan balance % WA LTV
Owner occupied 486 229 318 674 85,2 % 55,5
Housing cooperative 16 307 768 338 2,9 % 25,3
Second home 4 464 970 299 0,8 % 55,5
Buy-to-let 762 953 518 0,1 % 58,4
No data 62 627 412 096 11,0 % 54,2
Total 570 392 422 925 100,0 % 54,5
Composition of the Residential Mortgage Cover Pool
33
2.5 Repayment type
Loan balance % WA LTV
Amortization 360 803 439 106 63,3 % 52,8
Interest only* 209 588 983 818 36,7 % 57,4
Total 570 392 422 925 100,0 % 54,5
*No principal payments for a limit period of time.
2.6 Flexible loans
Drawn balance 126 351 310 690
Total limit on flexible loans 174 763 762 282
Percentage drawn of limit 72,3 %
WA LTV* 53,9
* The WA LTV is calculated based on limit.
2.7 LTV buckets
Indexed LTV Loan balance %
≥ 0 ≤ 40 115 718 805 124 20,3 %
40 ≤ 50 71 531 733 771 12,5 %
50 ≤ 60 109 237 088 468 19,2 %
60 ≤ 70 194 087 591 666 34,0 %
70 ≤ 75 60 149 933 214 10,5 %
75 ≤ 80 10 098 389 691 1,8 %
80 ≤ 85 4 065 754 900 0,7 %
85 ≤ 90 2 097 921 789 0,4 %
90 ≤ 95 1 085 461 981 0,2 %
95 ≤ 100 804 717 088 0,1 %
100 ≤ 105 453 151 810 0,1 %
105 ≤ 115 454 268 313 0,1 %
> 115 607 605 111 0,1 %
Total 570 392 422 925 100,0 %
Composition of the Residential Mortgage Cover Pool
34
2.8 Seasoning*
Loan balance % WA LTV
< 12 months 106 336 893 732 18,6 % 62,9
12 < 24 months 76 968 286 908 13,5 % 59,2
24 < 36 months 69 926 244 336 12,3 % 56,7
36 < 60 months 109 278 298 242 19,2 % 55,4
≥ 60 months 207 882 699 707 36,4 % 47,2
Total 570 392 422 925 100,0 % 54,5
* Seasoning indicates the number of months since collateral for the loan was established.
2.9 Interest rate type
Loan balance % WA LTV
Floating rate 493 542 294 412 86,5 % 54,6
Fixed rate with reset < 2 years 22 650 456 957 4,0 % 49,9
Fixed rate with reset ≥ 2 but < 5 years 41 936 347 346 7,4 % 57,1
Fixed rate with reset ≥ 5 years 12 263 324 209 2,2 % 50,2
Total 570 392 422 925 100,0 % 54,5
2.10 Loan performance
Loan balance % WA LTV
Performing loans 568 768 139 536 99,72 % 54,5
Delinquent loans (arrears 31 to 90 days) 828 595 573 0,15 % 61,2
Gross non performing loans (arrears 91 days +) 795 687 816 0,14 % 60,9
Total 570 392 422 925 100,00 % 54,5
Geographical Distribution
35
2.11 Geographical distribution
Loan balance % WA LTV
Average loan
balance
Akershus 103 757 833 807 18,2 % 52,0 1 438 464
Aust-Agder 9 278 104 451 1,6 % 60,4 1 157 737
Buskerud 35 711 828 027 6,3 % 54,8 1 196 817
Finnmark 8 490 849 541 1,5 % 58,8 1 080 398
Hedmark 12 242 283 093 2,1 % 54,8 1 011 090
Hordaland 44 908 732 312 7,9 % 54,9 1 367 293
Møre og Romsdal 9 489 596 628 1,7 % 57,5 1 242 907
Nordland 21 796 453 614 3,8 % 54,2 1 081 334
Nord-Trøndelag 7 579 478 543 1,3 % 61,2 1 160 716
Oppland 19 316 991 339 3,4 % 57,9 921 392
Oslo 122 413 846 805 21,5 % 51,9 1 515 623
Østfold 34 528 885 775 6,1 % 54,6 1 033 923
Rogaland 37 974 048 524 6,7 % 59,8 1 598 167
Sogn og Fjordane 2 126 510 010 0,4 % 59,9 1 036 816
Sør-Trøndelag 23 179 612 396 4,1 % 55,6 1 473 499
Telemark 13 314 637 651 2,3 % 58,9 1 028 078
Troms 14 923 754 950 2,6 % 49,8 1 370 157
Vest-Agder 9 830 215 434 1,7 % 62,3 1 376 010
Vestfold 39 528 760 024 6,9 % 54,6 1 101 509
Total 570 392 422 925 100,0 % 54,5 1 294 396
Northern Norway: 8 %
Mid- Norway: 5 %
Western Norway: 17 %
Southern Norway: 6 %
Eastern Norway: 64 %
100 %
Cover Pool sensitivity analysis
36
3.1 Stresstest - House price decline
House price decline Current 10 % 20 % 30 %
Total cover pool balance (nominal, NOKbn) 570,4 570,4 570,4 570,4
WA indexed LTV (%) 54,5 59,2 66,6 76,1
Eligible cover pool balance (nominal, NOKbn) 567,1 560,1 538,3 502,7
Total outstanding covered bonds (nominal, NOKbn) 399,4 399,4 399,4 399,4
Eligible overcollateralization 42,0 % 40,2 % 34,8 % 25,9 %
Net Non Performing Loans in DNB Boligkreditt AS
37
0,00%
0,10%
0,20%
0,30%
90+ days Arrears
13 bp
Covered bonds issued by DNB Boligkreditt AS qualifies for Level 1-assets pursuant to LCR-regulation (Slide 1 of 2)
38
Covered bonds issued by DNB Boligkreditt AS fulfil the requirements to qualify as
Level 1-assets pursuant to Commission Delegated Regulation (EU) 2015/61
regarding liquidity coverage requirement for credit institutions (“LCR-regulation”).
With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS
confirms the following:
• Covered bonds issued by DNB Boligkreditt AS meet the requirements to be
eligible for the treatment set out in Article 129(4) of Regulation (EU) No
575/2013 (“CRR”) and the requirements referred to in Article 52(4) of Directive
2009/65/EC, cf. the European Commission’s website:
http://ec.europa.eu/finance/investment/legal_texts/index_en.htm
• The exposures to institutions in the cover pool meet the conditions laid down
in Article 129(1)(c) and in Article 129(1) last subparagraph of CRR
Covered bonds issued by DNB Boligkreditt AS qualifies as Level 1-assets pursuant to LCR-regulation (Slide 2 of 2)
39
With reference to Article 10(1)(f) of the LCR-regulation, DNB Boligkreditt AS
confirms the following (cont.):
• DNB Boligkreditt AS gives the information required in Article 129(7) of CRR
to its investors
• Covered bonds issued by DNB Boligkreditt AS are assigned a credit
assessment by a nominated ECAI which is at least credit quality step 1 in
accordance with Article 129(4) of CRR, and the equivalent credit quality step
in the event of short term credit assessment
• The cover pool does at all times meet an asset coverage requirement of at
least 2 % in excess of the amount required to meet the claims attaching to
the covered bonds issued by DNB Boligkreditt AS
ECB eligibility and CRD-compliance of covered bonds issued by DNB Boligkreditt AS
40
• All covered bonds issued by DNB Boligkreditt AS fulfil the eligibility criteria for marketable
assets set by the Eurosystem and are thus eligible for Eurosystem monetary policy
operations.
• The Eurosystem set additional criteria for own use of eligible instruments in the
Eurosystem monetary policy operations. In the case of covered bonds, the instruments
must be issued in accordance with the criteria set out in Part 1, points 68 to 70 of Annex
VI to Directive 2006/48/EC. The covered bonds issued by DNB Boligkreditt AS fulfil these
criteria, but the Eurosystem has not checked the fulfilment of these conditions for
Norway, since Norway is not part of the EU. Therefore, covered bonds issued by DNB
Boligkreditt AS are market with a "N/A" what regards CRD-compliance in ECB's eligible
asset database.
• DNB Boligkreditt AS confirms that the covered bonds it issues are compliant with
the CRD-requirement set forth in the Eurosystem guidelines. In addition, DNB
Boligkreditt AS confirms that it gives the information required in Regulation (EU) No
575/2013 ("CRR") article 129 (7) to its investors, so that the covered bonds issued by
DNB Boligkreditt AS are eligible for the preferential treatment set out in CRR article 129
(4).
Future Updates On Cover Pool Developments
41
Information about the cover pool of DNB Boligkreditt may be accessed via
DNB Boligkreditt’s web page:
https://www.dnb.no/about-us/investor-relations/funding.html
Contacts DNB Boligkreditt AS:
- Per Sagbakken, CEO: [email protected] +47 906 61 159
Portfolio information will be updated when DNB quarterly results are released
Appendix B:
The Norwegian Mortgage Market
Appendix
42
The Norwegian Residential Mortgage Market
Source: Finance Norway - FNO 43
• Nearly 80% of Norwegians own their home: • Few mortgages are buy-to-let.
• Norway is primarily a floating interest rate market: • The large majority of mortgages originated by DNB are floating rate.
• Rates on floating rate mortgages can be reset at any time and at the bank’s own
discretion, by giving debtors six weeks’ notice.
• Loans are normally underwritten with a term of 15-25 years: • Average size for new mortgages originated by DNB is approximately NOK 1,000,000
(EUR 125,000).
• In Norway, all borrowing costs are deductible from taxable income at
the current rate of 27%: • Households are therefore better able to withstand an increase in interest rates.
Source: Statistics Norway, EFF, NEF, Finn.no, Econ Pöyry, DNB Markets and Norwegian Central Bank
44
Norwegian Households are Solid
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Debt Assets
Housing assets Financial assets
0
1000
2000
3000
4000
5000
6000
1981 1986 1991 1996 2001 2006 2011
Housing assets Debt Financial assets
Household assets and debt 2013 (NOK billion)
Household assets and debt (NOK billion)
1) Loan debt as a percentage of disposable income adjusted for estimated reinvested dividend income for 2000 – 2005 and redemption/reduction of equity capital for 2006 – 2012 Q3
2) Interest expenses after tax as a percentage of disposable income adjusted for estimated reinvested dividend income for 2000 – 2005 and redemption/reduction of equity capital for 2006 –
2016 plus interest expenses
Sources: Statistics Norway and Norges Bank
Per cent
Appendix C:
The Norwegian Covered Bond legislation
Appendix
45
Norwegian Covered Bond Framework
Overview
• The Norwegian covered bond framework was fully enacted in June 2007:
• Prior to adoption, close discussions were held with rating agencies in order to provide
investors with robust protection.
• Covered bondholders have dual recourse:
• To the issuing entity.
• A preferential claim over a cover pool of eligible assets.
• The NPV of the assets in the cover pool must at all times at least be higher than the NPV of
the outstanding covered bonds.
• Covered bonds are issued by specialised credit institutions licensed and supervised by the
Norwegian Financial Supervisory Authority (NFSA):
• The activities of the company are limited to acquiring eligible assets and financing
these predominantly by covered bonds.
• Norwegian covered bonds qualify for 10% risk weighting in eligible European jurisdictions
and comply with the CRD of the EU:
• Certain bonds cleared through appropriate clearing systems may be eligible as
collateral for liquidity loans in the ECB.
46
Norwegian Covered Bond Framework (cont.)
• Eligible assets:
• Mortgage assets:
• Residential property: 75% LTV • Commercial property: 60% LTV (The DNB Boligkreditt covered bond
programme exclude this asset class) • Loans to municipalities, governments and other public sectors
• Liquid substitution assets, maximum 20% of cover pool
• Derivatives contracts
• Should property prices fall, the part of the loan that exceeds the relevant LTV-
limit is still included in the cover pool and protects the covered bondholders, but is not taken into account when calculating the value of the pool. To maintain the value of the cover pool, new loans with LTV up to 75% must be added.
• The same principle applies to loans in default.
• All property values shall be set by a competent and independent person.
• ALM requirements:
• Matching requirements to control interest rate, foreign exchange and liquidity risk.
47
Norwegian Covered Bond Framework (cont.)
• Supervision by an Independent Inspector:
• An Independent Inspector, appointed by the Norwegian FSA, monitors assets
and liabilities on a regular basis, and the compliance with certain requirements
laid down in the covered bond legislation. Suspected irregularities will be
reported to the NFSA. The company’s external auditor may be appointed.
• Bankruptcy proceedings are laid down in a special framework: • Should the issuing company go bankrupt, assets in the cover pool and the
corresponding cash flows are separated from the bankruptcy estate.
• Holders of covered bonds and derivative counterparties have a preferential claim over the cover pool assets.
• The estate manager must seek to ensure that contractual payments for covered bonds and secured derivatives are made. To meet contractual payments, assets may be sold or new covered bonds issued.
• Should the cover pool be unable to make contractual payments and an imminent change is unlikely, it will be wound down. The covered bonds/derivative counterparts rank pari passu. Claims on covered bonds are made based on the agreed future cash flow discounted at the market rate for comparable bonds in the relevant currency.
48
Appendix D:
Oil, Gas, Offshore and Shipping Exposure
Appendix
49
50
DNB has a well-diversified oil-related portfolio ~8% of total Group EaD to oil-related portfolios
Investment
grade or
similar
20.1
60%
Sub-IG or
similar
5.3
16%
Seismic
1.4
4%
Leveraged
Buyout
(LBO)
6.8
20%
Other
0.1
0%
OSV
23.5
42.6%
Rig
18.0
32.7%
FPSO/FSO
5.2
9.8%
Subsea
construct.
4.2
7.9%
Other
3.5
6.6%
OSV: Offshore Service Vessels, F(P)SO: Floating (Production) Storage Offloading.
LNG: Liquid Natural Gas. IG: Investment grade. All figures as at 30 June 2015.
Oilfield Services –
NOK 34bn
(1.7% of total Group EaD)
NOK bn and per cent of NOK 34bn
Oil & Gas exposure –
NOK 74bn
(3.8% of total Group EaD)
NOK bn and per cent of NOK 76bn
Offshore exposure –
NOK 55bn
(2.8% of total Group EaD)
NOK bn and per cent of NOK 55bn
Exploration
&
Production
IG
23.6
32%
Exploration
& Prod.
Sub-IG
4.0
5%
Reserve
Based
Lending
(RBL)
10.1
14%
Exploration
Financing
(EFF)
2.9
4%
Midstream
incl LNG
21.1
28%
Refining &
petchem
11.7
16%
Other
0.9
1%
51
Oil-related portfolio - 59% of portfolio is low risk and 37% is medium risk
DNB’s oil-related portfolio split by sub-segment in terms of exposure (EaD) and by risk grade
NOK 153bn as at 30 June 2015 (and NOK 160bn as at 31 Mar 2015)
EaD: Exposure at Default, PD: Probability of default. Risk grade system, please see backup slide for details.
DNB's risk classification system, where 1 represents the lowest risk and 10 the highest risk. Figures from Fact book as at 30 June 2015.
58
14
1 0
-10
10
30
50
70
90
11030 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-performing
and net doubtful
commitments
NOK billion
Grade 1-4
Low Risk
Grade 5-7
Medium
Grade 8-10
High Risk
16
35
4 1
-10
10
30
50
70
90
11030 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-performing
and net doubtful
commitments
NOK billion
- Grade 1-4
Low Risk
Grade 5-7
Medium
Grade 8-10
High Risk
16
6 1 0
-10
10
30
50
70
90
11030 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-performing
and net doubtful
commitments
NOK billion
- Grade 5-7
Medium
Net non-performing
and net doubtful
commitments
NOK billion
Grade 1-4
Low Risk
Grade 7-10
High Risk
Oil and Gas
Offshore Oilfield services
90
56
6 1
-10
10
30
50
70
90
11030 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-
performing and
net doubtful
NOK billion
- Grade 5-7
Medium
Net non-
performing and
net doubtful
NOK billion
Grade 1-4
Low Risk
Grade 7-10
High Risk
Total Oil-related
DNB’s Maritime Business is Diversified and Profitable -Shipping, Offshore and Logistic
52
• DNB’s maritime business is profitable
and has considerable loss-absorbing
capacity
• Broad product range, more than lending
• Unchanged strategy but increased focus
on client prioritisation and portfolio
management
Pre-tax operating profit before write-downs Shipping, Offshore and Logistics, NOK million
2 300 2 352
2 718 2 781 2 882
2 978
1 794
474
218 160
943
500
167
544
2009 2010 2011 2012 2013 2014 1H 15
NOK mill
Pre-tax operating profit incl interest on allocated capital, beforeimpairment
Individual impairment
Shipping, Offshore and Logistic (SOL) Portfolio EAD by segments as at 30 June 2015
53
Chemical and product tankers
8 %
Container 10 %
Crude oil tankers 11 %
Cruise 5 %
Dry cargo 12 % Gas
12 %
Logistics 3 %
Offshore 27%
RoRo/PCC 4 %
Other shipping 6 %
Other non-shipping
2%
The SOL Portfolio - a dominant part within the Low- and Medium Risk Segment
Based on DNB's risk classification system. The volume represents the expected outstanding amount in the event of default. PD = probability of default
54
The crude oil sector
The container sector
SOL portfolio
66
133
12 3
0
20
40
60
80
100
120
140
160 31 Dec. 2013
31 March 2014
30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
1
23
0 0
0
10
20
30
40
50
60
70
80
90
100 31 Dec. 2013
31 March 2014
30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
1
22
2 1
0
10
20
30
40
50
60
70
80
90
100 31 Dec. 2013
31 March 2014
30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
The dry bulk sector
8 12
2 1
0
10
20
30
40
50
60
70
80
90
100 31 Dec. 2013
31 March 2014
30 June 2014
30 Sept. 2014
31 Dec. 2014
31 March 2015
30 June 2015
Net non-performing
and net doubtful
commitments
NOK billion
PD 0.01% - PD 0.75% - PD 3.0% -
Appendix E:
Financial Performance and Capital
– Additional slides
Appendix
55
Key Financial Ratios
• Estimated CET 1-ratio Full IRB as of 30.06.15: 14.8%
H1 2015 2014 2013 2012 2011 2010 2009
Return on equity 14.1 13.8 13.2 11.7 11.4 13.6 10.6
Cost income 39.7 41.9 45.7 49.5 47.1 47.6 48.3
Comb. weighted total average spread 1.28 1.27 1.27 1.18 1.12 1.15 1.15
Write down ratio (%) 0.17 0.12 0.17 0.24 0.28 0.26 0.67
Common Equity tier 1 ratio * 13.0 12.7 11.8 10.7 9.4 9.2 8.5
Total capital ratio 16.2 15.2 14.0 12.6 11.4 12.4 12.1
56
57
Profit Figures
Pre-tax operating profit before impairment NOK million
Pre-tax operating profit before impairment
excl. basis swaps NOK million
Profit for the period NOK million
Profit for the period
excl. basis swaps NOK million
6 7227 626
6 964
9 273
7 396
2Q14 3Q14 4Q14 1Q15 2Q15
6 6897 177
6 456
7 462 7 450
2Q14 3Q14 4Q14 1Q15 2Q15
4 553
5 6204 965
6 533
5 062
2Q14 3Q14 4Q14 1Q15 2Q15
4 5295 292
4 5945 211 5 101
2Q14 3Q14 4Q14 1Q15 2Q15
58
Income Statement
1st half 1st half
Amounts in NOK million 2Q15 1Q15 4Q14 3Q14 2Q14 2015 2014
Net interest income 8 728 8 587 8 700 8 228 7 867 17 315 15 559
Net commissions and fees 2 489 2 212 2 313 2 229 2 242 4 701 4 426
Net gains on financial instruments at fair value 1 174 3 400 279 1 817 1 132 4 574 3 221
Net financial and risk result, DNB Livsforsikring 158 52 185 136 183 209 288
Net insurance result, DNB Forsikring 153 99 129 121 139 252 241
Other operating income 221 361 446 256 391 582 788
Net other operating income, total 4 194 6 124 3 352 4 560 4 087 10 318 8 965
Total income 12 923 14 711 12 052 12 788 11 954 27 633 24 523
Operating expenses 5 312 5 215 5 045 5 088 5 150 10 527 10 318
Restructuring costs and non-recurring effects 215 223 42 74 83 438 106
Pre-tax operating profit before impairment 7 396 9 273 6 964 7 626 6 722 16 668 14 099
Net gains on fixed and intangible assets 45 12 42 13 (3) 56 (3)
Impairment of loans and guarantees 667 575 821 183 554 1 241 634
Pre-tax operating profit 6 774 8 710 6 184 7 456 6 165 15 483 13 462
Tax expense 1 695 2 130 1 236 1 828 1 600 3 825 3 399
Profit from operations held for sale, after taxes (17) (47) 16 (8) (11) (64) (30)
Profit for the period 5 062 6 533 4 965 5 620 4 553 11 594 10 032
Profit attributable to shareholders 4 952 6 519 4 965 5 620 4 553 11 471 10 032
59
A Very Robust Residential Loan Portfolio
LTV
Percentage of
Residential Mortgage book
16%
30%
33%
14%
7%
0%
5%
10%
15%
20%
25%
30%
35%
0-40 40-60 60-75 75-85 >85
30 June 2015
LTV Collateral categories
Continued Reduction in Non-performing Loans
60
Net non-performing and net doubtful loans and guarantees
18.419.5 19.7
20.7
16.4 16.114.9
17.3
13.913.1
1.55 1.50 1.501.38
1.19
1.05 1.01 0.960.83
0.77
31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 March 30 June 30 Sept. 31 Dec. 31 March 30 June
2010 2011 2012 2013 2014 2015
DNB Group As a percentage of net loans
Per cent
NOK billion
1) Includes non-performing commitments and commitments subject to individual impairment.
Accumulated individual impairment is deducted.
61
Impairment of loans and guarantees
1st half 1st half
Amounts in NOK million 2Q15 1Q15 4Q14 3Q14 2Q14 2015 2014
Personal customers 58 (34) (67) 84 53 24 101
- Mortgage loans (17) (81) (141) 33 (5) (98) (21)
- Consumer finance 75 46 74 51 58 122 122
Small and medium-sized enterprises 284 308 450 165 157 592 222
Large corporates and international customers 425 256 496 18 292 682 511
- Nordic Corporates Division (5) (15) 333 (3) 97 (20) 40
- International Corporates Divison 93 (39) 166 86 (17) 54 39
- Shipping, Offshore and Logistics Division 302 242 (21) (116) 152 544 304
- Energy Division 43 12 5 5 (2) 56 22
- Baltics and Poland 47 50 1 39 53 98 84
- Other units (56) 7 13 8 9 (50) 22
Total individual impairment 767 530 879 267 502 1 298 834
Total collective impairment of loans (101) 44 (58) (84) 52 (57) (200)
Impairment of loans and guarantees 667 575 821 183 554 1 241 634
Total impairment in relation to average volumes
(annualised) 0.18 0.16 0.23 0.05 0.16 0.17 0.10
Core Capital Requirements *
62
Source: Norges Bank
1) As of 30 June 2015
2) Ex. Pillar 2 requirements
4,5 % 4,5 % 4,5 % 4,5 %
2,5 % 2,5 % 2,5 % 2,5 %
2,0 % 3,0 % 3,0 % 3,0 %
1,0 % 2,0 %
1,0 %
1,5 %
0,0 %
2,0 %
4,0 %
6,0 %
8,0 %
10,0 %
12,0 %
14,0 %
16,0 %
2013 2014 2015 2016
CET1 Minimum Requirement Conservation Buffer Systemic Risk Buffer
SIFIs Countercyclical Buffer
9,0 %
10,0 %
12,0 %
13,5 % 2)
11.8 %
12.7 % 13.0 %1)
* In addition, Norwegian banks are expected to be subject to Pillar 2 requirements from 2016
63
* Transitional rules, as per 30.06.15
Capital Adequacy Across the Key Relevant Entities
13,0 12,8
13,8
16,2 16,2
17,7
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
18,0
20,0
DNB Group DNB Bank Group DNB Bank ASA
CET1
Total Capital Ratio
30 June 31 Dec. 30 June 31 Dec.
Amounts in NOK billion 2015 2014 2015 2014
Deposits with central banks 159 59 156 54
Due from credit institutions 248 373 545 608
Loans to customers 1 491 1 439 710 723
Other assets 744 779 585 613
Total assets 2 642 2 649 1 996 1 998
Due to credit institutions 229 214 308 269
Deposits from customers 970 942 923 903
Short-term debt securities issued 172 207 172 207
Long-term debt securities issued 604 605 165 160
Other liabilities and provisions 494 523 286 332
Additional Tier 1 capital 8 8
Other equity 166 159 135 128
Total liabilities and equity 2 642 2 649 1 996 1 998
Ratio of deposits to net loans (%) 65.0 65.4 130.0 124.8
Adjusted ratio of deposits to net loans (%) 1) 64.4 63.5 128.7 121.0
Total combined assets 2 939 2 936 1 996 1 998
Currency-adjusted loans to customers 1 479 702
Currency-adjusted deposits from customers 961 913
DNB Group DNB Bank ASA
Balance sheets
64
1) Excluding short-term money market deposits
• DNB Bank
• EMTN program of EUR 45 billion
• Samurai Shelf (JPY) JPY 500 billion Inaugural Samurai issue 2011, Shelf 2013
• USD 144A program USD 10 billion Established 2012
• USCP program of USD 18 billion
• Yankee CD program of USD 12 billion
• ECP/CD program of EUR 15 billion
• DNB Boligkreditt (Covered Bonds)
• Covered Bond program of EUR 60 billion Established 2007
• Covered Bond program of USD 12 billion Established 2010
• Covered Bond program of AUD 4 billion Established 2011
DNB is a Well Established International Borrower - with a strong focus on diversification of funding sources
65
DNB Senior Curve
66
Tenor Redeems
EUR 1 000 mn 10 years (2020 - Jun)
EUR 2 000 mn 10 years (2021 - Feb)
EUR 1 000 mn 10 years (2022 - Jan)
EUR 1 000 mn (FRN) 5 years (2019 – Jan)
EUR 1 000 mn (FRN) 5 years (2020 – Jan)
EUR 300 mn (FRN) 5 years (2020 – Aug)
USD 2 000 mn 5 years (2017 – Apr)
Disclaimer
• This material has been prepared on the basis of the information provided by DNB Bank ASA (referred to as "DNB Bank") under the Covered Bond program and public available sources. DNB ASA – the holding company of the DNB group is referred to as "DNB " in this presentation.
• This material does not constitute an offering circular in whole or part and you must read the actual offering circular related to the Covered Bond program and the notes which may be issued from time to time thereunder as referred to in this material (respectively the "Program" and the “Notes”) before making an investment decision. The offering circular for the Program is available from the Arranger. You should consult the offering circular for more complete information about DNB and the Program.
• This material is presented solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments and should not be treated as giving investment advice. It has no regard to the specific investment objectives, financial situation or particular needs of any recipient. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. It should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this material are subject to change without notice and DNB Bank is not under any obligation to update or keep current the information contained herein. In addition, institutions mentioned in this material, their affiliates, agents, directors, partners and employees may make purchases and/or sales of the Notes as principal or agent or may act as market maker or provide investment banking or other services in respect of the Program or the Notes which may be issued from time to time thereunder. DNB, the Arranger and the Dealers and their respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material.
• The Notes are not to be offered or sold in any jurisdiction in circumstances in which the distribution of this document or the Notes would be prohibited in such jurisdiction. This document must not be acted on or relied on by persons who are not eligible to invest in the Notes. Any investment or investment activity to which this communication relates is available only to persons eligible to invest in the Notes and will be engaged in only with such persons.
• Furthermore, you should consult with your own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that you deem it necessary, and make your own investment, hedging and trading decisions (including decisions regarding the suitability of an investment in the Notes which may be offered from time to time under the Program) based upon your own judgment and advice from such advisers as you deem necessary and not upon any view expressed in this presentation.
67