investor presentation - dlrother operating expenses (contribution to resolution fund) -3 -3 108...

INVESTOR PRESENTATION

April 2020

DLR KREDIT Q1 2020 – KEY TAKEAWAYS

Financial summary Q1 2020

• DLR’s earnings from core activities were satisfactory in Q1 2020, and better than expected

• Core income amounted to DKK 268m, an increase of DKK 16m on the same period in 2019

• DLR has instituted additional impairment charges of DKK 62m, a management supplement based on the current

expected consequences of the corona pandemic, mainly for DLR’s commercial property customers

• Furthermore, financial market turmoil in the latter part of March 2020 negatively affected the return on DLR’s portfolio

holdings by DKK 50-60m

• Pre-tax profit was DKK 140m, down DKK 135m on the same period in 2019

Capital and debt

• DLR’s total capital ratio was 17.0 at the end of Q1 2020, and the common equity tier 1 (CET 1) capital ratio was 15.5

• Including the result for the period would produce a total capital ratio of 17.2 and a CET 1 of 15.6

Lending activity

• The total loan portfolio (nominal outstanding bond debt) amounted to DKK 157bn at the end of Q1 2020

• With gross lending of DKK 10.8m and net lending of DKK 2.6m (nominal), lending activity in Q1 2020 exceeded both

the activity in Q1 2019 and expected activity

2

1. Interim financial results Q1 2020

2. Lending and credit risk

3. Capital structure and rating

4. Funding

AGENDA

3

INCOME STATEMENT

(DKKm) Q1 2020 Q1 2019 Index

Administration fee income 427 401 107

Other core income, net 40 27 150

Interest expenses, senior debt and subordinated debt -14 -10 138

Fee and commission income, net -109 -97 112

Core income 345 321 107

Staff costs and administrative expenses, etc. -74 -65 113

Other operating expenses (contribution to Resolution Fund) -3 -3 108

Results from core activities 268 252 106

Provision for loans and receivable impairment, etc. -52 -5

Portfolio earnings (securities) -76 27

Profit before tax 140 275 51

Profit after tax 109 214 51

4

BALANCE SHEET

(DKKm)

31 March 2020

31 Dec 2019

Assets:

Loans and advances 157,889 156,837

Due from credit institutions and central banks 3,446 4,179

Bonds at fair value 12,631 11,732

Shares, etc. 36 36

Other assets 989 660

Total assets 174,991 173,444

Liabilities:

Issued bonds 158,493 157,639

Other liabilities 1,659 1,186

Provisions for deferred tax 8 8

Subordinated debt 1,300 1,300

Total equity 13,530 13,311

Total equity and liabilities 174,991 173,444

5

RETURN ON SECURITIES HOLDINGS

(DKKm) Q1 2020 Q1 2019

Interest income from/return on:

• Bonds 28 27

• Credit institutions and central banks, net -1 -1

• Currency 0 1

• Shares 0 0

Total interest income on securities holdings 27 27

Value adjustment, etc. -103 0

Total return on securities holdings -76 27

Interest expenses on:

• Senior debt 6 6

• Subordinated capital (Tier 2) 8 4

Total interest expenses on external capital 14 10

6




4. Funding

AGENDA

7

LENDING ACTIVITY IN Q1 2020

DLR’s lending activity in Q1 2020 has been at a satisfactory level

Gross lending of DKK 10.8bn is up DKK 3.9bn on Q1 2019

Net lending of DKK 2.5bn is up DKK 0.7bn on Q1 2019

The loan portfolio expanded to DKK 157.3bn at 31 March 2020

8

12,8

20,2

11,3

33,2

23,5 23,1

35,2

27,7

43,1

10,8

0,2 1,6 -1,2

-0,8 0,9

4,8 3,0

5,6 7,7

2,5

80

90

100

110

120

130

140

150

160

-5

5

15

25

35

45

55

2011 2012 2013 2014 2015 2016 2017 2018 2019 Jan-Mar 2020

DKK bn. DKK bn

Lending activity - Gross and net lending, and total portfolio

Gross lending Net lending Loan portfolio (right axis)

Note: Net lending calculated at cash value

NET LENDING

DLR’s net lending to commercial and private rental housing properties amounted to DKK 2.1bn in Q1 2020,

whereas net lending to agriculture and owner-occupied dwellings amounted to DKK 0.4bn

Higher market shares within all major market segments

9

Note: Net lending calculated at cash value

25%

27%

29%

31%

33%

143214321432143214321432143214321

202020192018201720162015201420132012

DLR's market share – Agricultural loan portfolio

6%

7%

8%

9%

10%

11%

143214321432143214321432143214321

202020192018201720162015201420132012

DLR's market share – Commercial loan portfolio

Office and retail Private rental housing

270

143

892

17 4

Agriculture

Ow

ner-

occupie

d

Offic

e a

nd r

eta

il

Private

coopera

tive

housin

g

Private

renta

l housin

g

Oth

er

pro

pert

ies

DKKm

DLR's net lending split on property segments

1,187

LOANS COMPRISED BY THE UNIFORM

GUARANTEE AGREEMENT

10

The uniform guarantee agreement comprises all loans offered as from January 2015

Loans granted until end-2014 are still covered by the former guarantee agreements for agricultural and

commercial lending, respectively

75 pc of DLR’s loan portfolio is now comprised by the uniform guarantee agreement which includes direct loss

guarantees, a loss offsetting facility and a portfolio guarantee

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

20

40

60

80

100

120

3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

2015 2016 2017 2018 2019 2020

DKK bn

DLR's lending covered by the uniform guarantee agreement - Applies to loans offered after 1/1/2015

Loans covered by uniform guarantee agreement, Agriculture Loans covered by uniform guarantee agreement, Commercial

Share of loans covered by uniform guarantee agreement (right axis)

LOAN PORTFOLIO

11

DLR’s loan portfolio, 31 March 2020 Distribution on loan types

Outstanding

bond debt

Distribution on

property

categories

Fixed rate

loans ARM short ARM 1Y/2Y ARM 3Y/4Y ARM 5Y

Other floating

rate loans

Agriculture 89.4 56.9% 20.4% 47.7% 2.7% 3.9% 23.7% 1.6%

Owner occupied. Incl. Residential

farms 8.5 5.4% 49.9% 9.0% 7.2% 6.8% 24.9% 2.2%

Office and retail 26.5 16.9% 39.5% 21.0% 3.4% 4.1% 30.9% 1.0%

Private residential rental housing 27.4 17.4% 36.1% 24.0% 2.7% 3.3% 33.2% 0.7%

Private cooperative housing 3.1 2.0% 56.7% 13.6% 0.4% 1.7% 26.3% 1.2%

Other properties 2.4 1.5% 34.8% 25.4% 1.0% 5.6% 32.8% 0.5%

Total 157.3 100.0% 28.9% 36.0% 3.0% 4.0% 26.8% 1.4%

23,2%

36,4%

4,3% 5,0%

28,3%

1,9%

28,9%

36,0%

2,8% 3,5%

26,8%

1,4%

0%

10%

20%

30%

40%

50%

60%

Fixed-rate loans ARM-Short loans ARM-1Y ARM-3Y ARM-5Y Other floating-rate

Change in loan type composition

March 2019 March 2020

GEOGRAPHICAL DISTRIBUTION OF LENDING - Outstanding bond debt at 31 March 2020

12

Northern Jutland

34.6 DKKbn (22.0%)

Southern Jutland

and Funen

43.0 DKKbn (27.3%)

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

[CELLEOMRÅDE]

Agricultural properties

Owner-occupied dwellings

Office and retail properties

Private rental housingpropertiesCo-operative housing properties

[CELLEOMR…

[CELLEOMR…

[CELLEOMR…

[CELLEOMR…

[CELLEOMR…

[CELLEOMR…

47%

5%

25%

19%

[VÆR

DI]

1%

Central Jutland

48.0 DKKbn

(30.5%)

Zealand/Capital

29.2 DKKbn (18.6%)

Greenland

1.1 DKKbn (0.7%)

Faroe Islands

1.4 DKKbn (0.9%)

ARREARS AND LOAN LOSSES

At mid-April 2020, DLR’s 105-

days arrears amounted to DKK

6.9m, corresponding to 0.4 pc of

payments due

Arrears have only increased

moderately due to the corona

pandemic

The moderate effect in Q1 partly

reflects that the corona virus first

affected the Danish economy in

late-March

On top of that the main

agricultural segments have not

been significantly affected by the

corona-epidemic

In Q1 2020, DLR recorded

losses of DKK 11.6m (before

loss offsetting)

In Q1 2020, DKK 3.0m was off-

set in commission payable to the

distribution owner banks

13

0

1

2

3

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

2014 2015 2016 2017 2018 2019 2020

Pc.

105-days arrears, pc of payments due

Agriculture Office and retail Private rental

Private cooperative housing Owner-occupied Total arrears

-30

0

30

60

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

2014 2015 2016 2017 2018 2019 2020

Loan losses before loss offsetting DKKm

Agriculture Owner-occupiedPrivate rental and cooperative housing Office and businessManufacturing and manual industry

LOAN LOSS PROVISIONS

Provisions for impairments on loans and receivables negatively affected the Q1 2020 result by DKK 52m

Total provisions amounted to DKK 479m in Q1 2020, of which “stage 1” and “stage 2 “ (group-wise provisions incl.

management supplement) amounted to DKK 270m and “stage 3” (individual) amounted to DKK 209m

In Q1 2020, DLR instituted additional “corona-specific” impairment charges of DKK 62m as a management

supplement based on the current expected consequences of the corona pandemic

14

0

100

200

300

400

500

600

700

2013 2014 2015 2016 2017 2018 2019 Q1 2020

mio. kr.

Accumulated individual impairment provisions

Agriculture Owner-occupied

Private rental and cooperative housing Office and retail

Stage 1 and 2

2012 2013 2014 2015 2016 2017 2018 2019 Q12020

Impairment provision as share of lending

Periodical impairment provisions

Accumulated impairment provisions

-0.1

0.50

0.40

0.30

0.20

0.10

0.00

15

TAKEOVERS AND FORCED SALES

The number of completed forced sales on

properties in which DLR holds a mortgage was 15

in Q1 2020 against 17 in Q1 2019

In Q1 2020, DLR repossessed 1 property, against

3 properties in Q1 2019

At end-Q1 2020, DLR had a stock of 7

repossessed properties worth DKK 38m

0

10

20

30

40

50

60

70

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1

2014 2015 2016 2017 2018 2019 2020

DKK m.

Forced Sales Properties where DLR holds mortgage

0

10

20

30

40

2013 2014 2015 2016 2017 2018 2019 Q1 2020

DLR's stock of repossessed properties (number)

Full-time agriculture Part-time agriculture and residential Private rental and cooperative housing Office and retail Other properties

STATUS ON AGRICULTURE

16

The prices of milk and pork continue to be at a stable high level, but could come under some pressure as a result

of the current worldwide corona-pandemic

180

200

220

240

260

280

300

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

2015 2016 2017 2018 2019 2020 2021

DKK0.01/kg

Development in milk price quotation - Milk price incl. supplements etc..

Milk conventional Forecast February 2020

Source: Arla.dk & SEGES Note: Q2 2020 milk prices are based on preliminary price for May 2020

7

8

9

10

11

12

13

14

15

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

2015 2016 2017 2018 2019 2020 2021

DKK/kg

Development in pork price quotation

Danish Crown quotation Forecast, February 2020

Source: SEGES

Note: Q2 2020 pork prices are based on prices end-of-April 2020




4. Funding

AGENDA

17

CAPITAL BASE

(DKKm) Q1 2020 2019 2018

Equity

- Share capital

- Distributable reserved

- Non-distributable reserves

570

10,622

2,338

570

10,403

2,338

570

10,066

2,338

Total equity 13,530 13,311 12,974

CET1 12,703 12,647 12,344

Subordinated capital (Tier 2) 1,300 1,300 650

Capital base 14,003 13,947 12,994

DLR’s total capital ratio, %

Capital requirement, % 1)

Capital surplus, % point

17.0

12.7

4.3

17.1

13.7

3.4

16.9

13.0

3.9

18

1) 9.2% individual solvency need added 2.5% capital conservation buffer, 1% SIFI buffer requirement and 0% counter-cyclical buffer.

CAPITAL STRUCTURE

DLR’s total equity amounted to DKK 13,530m at end-Q1 2020 compared with DKK 13,311m at end-Q4 2019

The total capital ratio was 17.0% at end-Q1 2020 and the core capital (CET1) ratio was 15.5% (non-audited

result of the period not included)

19

6%

8%

10%

12%

14%

16%

18%

2013 2014 2015 2016 2017 2018 2019 K12020

DLR's capital ratios

Capital ratio CET 1 ratio

0

2

4

6

8

10

12

14

16

2014 2015 2016 2017 2018 2019 K1 2020

DKK bn

DLR's capital structure

Equity Hybrid core capital (EUR) Hybrid core capital (PRAS) Tier 2 capital

CAPITAL REQUIREMENT AND CAPITAL RATIO

At end-Q1 2020 DLR’s capital base amounted to DKK 14,003m, equivalent to a capital ratio of 17.0%

DLR had excess capital of DKK 3,542m at end-Q1 2020, on top of the total capital requirement of DKK

10,462m

DLR’s total capital requirement was reduced to 12.7% as a consequence of the counter-cyclical buffer being

reduced to zero

20

1.85%

-

2

4

6

8

10

12

14

16

Adequate capital base (solvencyneed)

Capital surplus Capital base Capital target Q2 2020

DKKbn

DLR's capital requirement and capital ratio, 31 march 2020

Adequate capital base (solvency need) Buffer requirement (SIFI, capital conservation and contra-cyclical buffer)

DKK 3.5bn (4.3%)

DKK 7.6 bn (9.2%)

DKK 12.7bn (15.5%)

DKK 14.0bn (17.0%)

DKK 2.9bn (3.5%)

10.5 bn

(12.7%)

(DKKm)

Q2 Q3 Q4 Q1

2019 2019 2019 2020

Standard IRB Standard IRB Standard IRB Standard IRB

Credit risk 2,924 3,037 3,099 2,933 3,223 2,925 3,270 2,908

Supplements to 8% requirement 545 534 551 549

Market risk 245 165 204 203


Operational risk 193 193 190 190


Other risk 0 0 0 0

Adequate capital base, total 7,279 7,245 7,529 7,577

Total risk exposure STA/IRB 79,995 79,883 81,784 82,135

Of which from credit risk 36,552 37,962 38,744 36,656 40,292 36,561 40,871 36,355

Individual solvency need, % 9.10 9.07 9.21 9.23

Statutory adequate capital base 7,279 7,245 7,529 7,577

Supplements due to statutory requirements 0 0 0 0

Individual solvency need after supplements,% 9.10 9.07 9.21 9.23

SIFI-requirement,%-points 1.0 1.0 1.0 1.0

Capital preservation buffer, %-points 2.5 2.5 2.5 2.5

Countercyclical buffer, %-points 0.5 1.0 1.0 0.0

SIFI-requirement Faroe Island, %-points 0.01 0.01 0.01 0.01

Total statutory capital requirement, %-points 13.1 13.6 13.7 12.7

SOLVENCY NEED STATEMENT

22

OWNERSHIP STRUCTURE

22

31 march 2020 31 march 2019 31 march 2018

Share capital Share of share capital Share of share capital Share of share capital

DKKm % % %

Local Banks 263 46.0% 45.5% 42.1%

Nationwide Banks and Jyske Bank 148 26.0% 31.3% 34.9%

Nykredit Realkredit 69 12.1% 12.2% 12.2%

PRAS 41 7.2% 6.8% 6.8%

DLR 46 8.1% 4.1% 3.8%

Other Banks 3 0.7% 0.2% 0.2%

Total 570 100% 100% 100%

DLR’s RATINGS WITH S&P

23

DLR has an issuer credit rating (ICR) of A- with a stable outlook

The rating is supported by an ALAC-uplift of +1

The high issuer credit rating adds an extra buffer of 2 unused ‘uplifts’ to the AAA-rating of DLR’s covered bonds

DLR’s covered bonds are supported by a further high overcollateralisation of Capital Center B compared to

S&P’s OC-requirements

A-/Stable/A-2

A/--/A-1




4. Funding

AGENDA

24

DLR’s COVERED BOND SERIES

25

LCR bond size requirements

• 89% of DLR’s total amount of outstanding bond amount currently comply with the LCR bond size requirement

for Level 1B (+500m EUR) or Level 2A (+250m EUR)

• DLR’s largest covered bond series are dominated by the CIBOR-based ARM-Short bonds and the ARM bullet

bonds with long maturities

-

2

4

6

8

10

12

14

16

18

1 %

B O

ct 2022

CIB

OR

6M

+20 B

2021 IO

CIB

OR

6M

+24 B

2020 IO

CIB

OR

6M

-4 B

2022 IO

1 %

B O

ct 2021

CIB

OR

6M

-7 B

2024 IO

1 %

B 2

050

1 %

B O

ct 2023

1 %

B O

ct 2020

0,5

% B

2040

CIB

OR

6M

-6 B

2023 IO

1 %

B O

ct 2024

1 %

IO

B 2

050

CIT

A6M

+36 B

2023 IO

1,5

% B

2040

1 %

B J

an 2

021 IT

2 %

B 2

050

1,5

% B

2050

1 %

B 2

040

1,5

% B

2037

2 %

B 2

047

DKK bn.

LCR complaint bonds, April 2020

Level 1B Level 2A

A WELL BALANCED FUNDING STRUCTURE

26

The many new callable bonds issued over the past year have implied that 29 pc of all DLR’s covered bonds were

long-term fixed-rate bonds at the end of April 2020

Also, there has been a significant shift away from ARM bullet bonds with short maturities

Overall, DLR’s funding structure is today far more well-balanced than 5 yeas ago

3%

31%

36%

1%

29%

Q1 2020

ARM 1Y

ARM 2Y

ARM 3Y/5Y

ARM-Short Loans

Other floating rate

loans

Fixed-rate loans

57%

15%

13%

15%

Q4 2013

MATURITY PROFILE

- on DLR’s outstanding bonds

27

The transition towards loans with longer interest reset periods has contributed to reduce DLR’s annual refinancing

need, and the most common interest rate fixation period on the reset loans is now 5 years

When refinancing the variable rate bonds funding ARM-Short loans, DLR targets the 5 year segment for new

issuances

Only 16 pc of DLRs outstanding bonds have to be refinanced within the coming year

0

5

10

15

20

25

30

35

40

45

0-1 y 1-2 y 2-3 y 3-4 y 4-5 y 5-10 y 10-20 y +20 y

DKKbn

Maturity profile of DLR's outstanding bonds - April 2020

ARM 1Y F2 ARM 3Y/5Y ARM-Short Loans Other floating rate loans Fixed-rate loans

REFINANCING - of bonds maturing in the coming 12 months

28

Close to DKK 25bn DLR covered bonds are up for refinancing within the next 12 months

• Refinancing of 1Y-5Y interest reset loans amounts to approx. DKK 13bn, while around DKK 12bn stems from

refinancing of variable rate loans

• Going forward, refinancing of 1Y interest reset loans will be concentrated in January of each year, and refinancing

of 3-5Y interest reset loans will take place in April

• Variable rate loans of approx. DKK 12bn are up for refinancing at 1 July 2020

Maturity date Bond type Loan type Currency Reference rate Refinancing

frequency

Amount

(DKKbn)

01-07-2020 SDO Variable rate DKK 6M CIBOR 1 - 10 y 11,970

01-10-2020 SDO Interest reset loan DKK 01-10-2020 5 y 7,516

01-01-2021 SDO Interest reset loan DKK and EUR 01-01-2021 1 - 5 y 5.379

01-04-2021 SDO Interest reset loan DKK 01-04-2021 1 - 5 y 173

Total 25,038

ISSUED SENIOR DEBT - April 2020

29

Type Amount (DKKbn) Issue date Maturity date Maturity

(years) Reference rate Spread

SRN 1,000 15-06-2017 15-06-2020 3 3M CIBOR 0.62%

SSB 2,000 20-03-2018 01-04-2021 3 3M CIBOR 0.31%

SNP 1,000 02-07-2018 02-07-2021 3 3M CIBOR 0.70%

SRN 1,000 15-09-2017 15-06-2022 4¾ 3M CIBOR 0.75%

SSB 1,000 01-10-2019 01-10-2022 3 3M CIBOR 0.94%

SNP 750 12-04-2019 01-07-2023 4 3M CIBOR 1.15%

SNP 250 12-04-2019 01-07-2023 4 Fixed rate 1.07%

Total, senior debt 7,000

DLR issues Senior Secured Bonds (SSB) to provide supplementary security for DLR’s covered bonds in Capital

Center B, including out of rating considerations. DLR’s issued SSBs total DKK 3bn

Further, DLR has issued Senior Resolution Notes (SRN) and Senior Non-Preferred Notes (SNP) totaling DKK 4bn

to meet the debt buffer requirement which, when fully phased-in from June 2020, will amount to 2 pc of

unweighted loans outstanding. From 2022, the total of DLR’s capital and debt buffer (loss-absorbing capital/debt)

requirements must make up at least 8 pc of the institution’s total liabilities

30

CONTACT IR

Jakob Kongsgaard Olsson, Head of IR & Rating

Direct number: 33 42 07 06

Mail: [email protected]

www.dlr.dk

investor presentation - dlrother operating expenses (contribution to resolution fund) -3 -3 108...

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