Danske Bk Avs Bear S/Adr

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first nine months of 2026. My name is Claus Ingar Jensen, and I'm head of Danske Bank's investor relations. With me today, I have our CEO, Carsten Egeriis, and our CFO, Cecile Hillary. We aim to keep this presentation to around 25 minutes, and after the presentation, we will open up for a Q&A session as usual. Afterwards, feel free to contact the investor relations department if you have any more questions. I will now hand you over to Carsten. Slide two, please.

Thanks very much, Claus. Good morning and thank you for joining us for our Q3 conference call, where I'm pleased to share the highlights of Danske Bank's financial results for the first nine months. We delivered a solid third quarter supported by good customer activity and continued execution of our strategy. Core income grew 9% year-on-year alongside disciplined cost management and strong credit quality. Let me start with our customers. The Nordic operating environment remained supportive of commercial activity. Corporate lending grew by more than 5% year-on-year, supporting market share gains across the Nordics. Deposits also remained strong, and within asset management, customers added more than 5 billion of debt inflows during the quarter, with contributions both from private banking and from mass retail. Credit demand, as reflected in volumes, was slightly affected by seasonal effects, while fair value movements in Reikredit Danmark bonds also impacted lending volumes. But against that backdrop, the overall commercial performance remained resilient. This activity translated into solid financial results. Our return on equity for Q3 came in at a record high, 15.1%, and the cost-to-income ratio of 43.9 tracks well within our full-year guidance of below 45%. And credit quality remains strong with net reversals of impairments. We also maintained a strong capital position. Our CET1 capital ratio increased to 17.2%, reflecting strong capital generation after dividend accrual. The confirmed Pillar 2 release reduced regulatory requirements by 40 basis points, in line with previous communication. Given the solid financial performance in Q3, we have also narrowed our net profit guidance for the full year to a range between 24 and 25 billion, driven by an improved outlook for loan impairment charges, which we now expect to be no higher than 600 million. So overall, the quarter shows continued strategic execution supported by resilient customer activity. And despite a seasonally slower quarter, we're confident in our trajectory and the performance of our franchise going forward. Please turn to slide three. Let me turn to the performance of our business units. The key message here is that customer activity remains resilient across group. All three business units delivered income above the level a year ago, and each generated returns above its 2026 target. The broad-based performance gives us confidence in the strength of our franchise and in the progress we're making against our strategic priorities. In personal customers, good activity and deposit margin affects supported income, while continued strong credit quality also contributed to a ROAC of 40%. Total income was just under 5 billion, significantly above the level a year ago. and nominal lending was up 1% year-over-year and stable compared to Q2, while deposits remained strong, growing 4% from last year, which should also be seen in light of the positive net inflow to assets under management. Business customers continued to build momentum, higher customer activity, growing fee income, and progress in our corporate offerings supported both income and volume growth, with ROAC increasing to 23%. Total income reached $3.8 billion, with growth in both lending and deposits reflecting continued strength in business relationships. In large corporates and institutions, we saw continued strength across lending, asset management, financing, and also advisory activities. Our debt capital markets franchise also benefited from constructive bond issuance activity, and ROEC remained strong at 22%. Total income was $4.7 billion, above the level a year ago. Lending was stable quarter on quarter, reflecting seasonal effects, while deposits increased 3%. Relative to the same period last year, lending and deposits were up 5% and 13% respectively. So in summary, across the three businesses, this is a solid and a sustained performance. It reflects our strong customer franchise. It reflects our continued momentum and also our attractive profitability across the group. And then slide four, please, and I'll hand it over to Cecile.

Thank you, Carsten. Looking at the income statements, Q3 was another quarter of solid financial performance with good momentum in our core income lines, continued cost management and strong credit quality. For the first nine months, total income was supported by growth in net interest income and fee income, underpinned by customer activity and higher volumes. Trading income was affected by market volatility, while income from our insurance business has performed well in the context of changing interest rate expectations. Other income normalized after the 231 million one-off in Q2. Compared with Q2, NII grew 3%, primarily driven by deposit margin expansion, and fee income was stable. Both trading and insurance income were affected by volatile market conditions. Costs remain in line with our guidance and reflect our continued focus on efficiency driven by our tech and AI investments. Credit quality continues to be strong with a well-provisioned portfolio and net reversals of impairments in Q3. Overall, the quarter shows resilient earnings quality where NII further benefited from the rate hike. Fee income continues to be strong and costs are under control. I will now go through the key lines in more detail. Slide 5 please. Turning now to net interest income, we delivered a solid performance, with NII up 4% year-on-year, supported by improved volumes and the contribution from our structural hedge. The quarterly development was also positive, with higher rates supporting an improvement in deposit margins. Alongside the positive volume trend, this underpinned the resilience of our net interest income. The other category primarily reflects Treasury's internal fund transfer pricing allocations. Importantly, these allocations have no impact on net interest income at group level. Our structural hedge was impacted by higher short-term rates in Q3, but this was partly countered by higher income from our shareholder equity base, which remains unhedged and benefited from higher central bank rates. The notional of the structural hedge, including bonds and derivatives, was kept stable in Q3 at around 190 billion, and as such, the structural hedge remains a key stabilizing feature of our NII profile. Finally, we have updated our interest rate sensitivity. All else equal, a 25 basis point increase in rates would add approximately 400 million krona to NII in year 1, 350 million in year 2, and 100 million in year 3. A 25 basis points decrease will lead to an impact of around minus 550 million in year 1, minus 250 million in year 2, and minus 100 million in year 3. The revised sensitivity reflects the current balance sheet composition. For example, corporate lending facilities have pushed the NII benefits slightly further out in year 2. Note, however, that the combined upside is the same total of 850 million over 3 years as previously communicated. So in summary, we see the NII trajectory as solid. Customer volumes are contributing positively and with the recent rate hikes, this supports our income trajectory. And finally, to address questions about expectations for NII for the full year, we reaffirm our expectation of NII to be slightly above 38 billion for full year 2026, driven by continued volume growth and based on current market implied rates, which do not include another hike until late in the year. Turning to fee income. This was a solid quarter despite typical Q3 seasonality. For the first nine months, net fee income increased by 14%. Importantly, the growth was broad-based across all four fee categories. Investment fees were the largest contributor, driven by higher asset under management from consistently positive net inflows together with rising asset prices. Everyday banking fees were supported by continued demand for FX and cash management solutions. Lending and guarantee fees were driven by higher customer activity, particularly due to corporate credit demand. Capital markets fees were underpinned by a good performance from our DCM and advisory franchise. Compared with the second quarter, net fee income was broadly stable at 4.1 billion kroner. Lending and guarantee fees declined, mainly due to seasonality, including lower refinancing volumes for adjustable rate mortgages. This was mitigated by investment fee income, which remained a strong driver. Overall, the fee income development demonstrates the breadth of customer activity across our franchise and the benefit of a diversified fee base even in a seasonally slower quarter. Looking towards Q4, we expect the current trend to continue. However, given recent market volatility, we expect Q4 performance fees to be well below the historical average of around 400 million. This development relates to fixed income funds performance given current volatility in fixed income markets. Slide 7 please. Turning to trading income, the result was lower year-over-year and quarter-over-quarter, reflecting both softer customer activity and negative fair value effects in Group Treasury. Net trading income for the first nine months was 1.5 billion krona, down 37% from the same period last year. The main driver was a lower result in LC&I, where customer activity in secondary fixed income markets remained subdued. For the third quarter, net trading income was 397 million kroner. We saw better customer activity in FX trading, but this was more than offset by lower income from fixed income trading in what is also a seasonally slower quarter. The quarter was also affected by unrealized market value adjustments, together with other balance sheet movements in Group Treasury, which created negative accounting effects. These items fluctuate from quarter to quarter and do not reflect a corresponding change in business activity. Finally, as far as Q4 trading income is concerned, if the current market conditions persist, we expect trading income to be in line with Q3, all things equal. In addition, there are typically seasonal effects leading to lower customer activity in trading at the end of the fourth quarter. I will now move on to the expense line. Slide 8 please. Turning to expenses, our cost trajectory remains in line with our full year guidance, with a Q3 cost to income ratio of 43.9%. Year on year, expenses were slightly higher, mainly due to staff costs, including severance and performance-based compensation. This was more than offset by lower FCRP and radiation costs, showing continued progress in reducing legacy cost items and allowing for increased investments in tech and AI in line with our plans. Quarter on quarter, this trend was confirmed and despite higher investment spend, the underlying cost development remains well controlled. We continue to make targeted forward 2018 investments in our digital and technology platform. These investments support AI-enabled growth and overall enhance our efficiency and resilience. Overall, we reaffirm our full-year 2026 cost outlook of 26 to 26.5 billion, with a cost-to-income ratio expected to be below 45%. The message remains centered around increased efficiency and continued investments in strategic priorities. I will now move on to asset quality. Slide 9, please. Turning to asset quality, the picture remains strong. Our diversified and stable credit portfolio continues to perform well whilst we remain prudently provisioned given the macro and geopolitical environments. In Q3, further improvement in credit quality led to a net reversal of 200 million. With a year-to-date level of impairment charges at CZK 65 million, we have revised our full-year impairment guidance from around CZK 1 billion to no more than CZK 600 million, corresponding to approximately three basis points cost of risk. Macroeconomic charges remained modest in the quarter. Our scenarios continue to reflect elevated uncertainty, including geopolitical risks, trade tensions and market volatility, so that we capture the potential impact of a more severe and prolonged adverse environment. Post-model adjustments stood at 5.2 billion with a reallocation of provisions towards agriculture given additional political tail risks. We continue to take a prudent approach in light of potential disruptions and uncertainty. The total overlay of around 30 basis points is equivalent to almost four years of normalized cost of risk. Overall, asset quality continues to support the earnings profile and capital generation of the bank. I will now move on to capital. Slide 10 please. Turning to capital, our position remained strong. Our CET1 ratio increased by 20 basis points during the quarter to 17.2%, driven by retained earnings after the accrual of dividend. Capital generation continued to be strong at 302 basis points annualised. Our total capital ratio increased to 21.3%, further supported by the issuance of a 5 billion krona equivalent AT1 transaction to a broad Nordic investor base in Q3. Risk exposure amounts were broadly stable at 847 billion. Lower credit risk exposure was countered by higher market risk REA that mainly reflected interest rate volatility. Following the formal SHREP review of the resolved legacy cases, our CET1 capital requirement has been reduced by around 40 basis points to 14.3% as previously guided. This means that our management buffer to the regulatory requirements has improved to around 300 basis points. We continue to manage capital prudently. Our capital framework already includes an REA buffer of more than 110 billion kroner to absorb the transition and implementation of our IRB models. That buffer has been recently reviewed in close alignment with our regulator, the Danish FSA. Looking ahead, our CET1 trajectory remains consistent with the glide path to move gradually towards our stated CET1 target of around 16% in 2028. This allows us to finance our growth plan and deliver on our capital distribution agenda. So in summary, the third quarter demonstrated strong capital generation, stable balance sheet management, and continued ability to deliver on both growth and distribution. Slide 11, please. Finally, turning to the financial outlook for 2026, we have narrowed our net profit guidance to a range of 24 to 25 billion, corresponding to a return on equity above 14%. The revised guidance is a result of impairment charges now expected to be no higher than 600 million to reflect the quality of our credit portfolio. We continue to expect total income to be somewhat above 59 billion, supported by higher co-banking income from strong customer activity, growing volumes and the effects of recent policy rate hikes. We continue to see good commercial momentum across our businesses. We expect operating expenses to be in the range of 26 to 26.5 billion. This reflects our focus on growth, tech and AI investment and cost management. We expect our cost to income ratio to be below 45% for full year 2026. Slide 12 please and back to Claus.