Danske Bank A/S

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first quarter of 2025. My name is Claus Engar Jensen, and I'm head of Danske Bank's investor relations. With me today, I have our CEO, Carsten Iris, and our new CFO, Cecile Hillary. We aim to keep this presentation to around 20 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 over to Carsten.

Slide one, please. Thanks, Klaus, and I would also like to welcome you to our conference call for the first quarter of 2025. Despite the fact that the past month has seen increased uncertainty regarding the global economic outlook, the first quarter has been solid. With a net profit of 5.8 billion, equivalent to a return on shareholders' equity of 13.3%, we've had a good start to the year. The macroeconomic backdrop in Q1 was strong, primarily in Denmark, where GDP growth reached 3.7% in 2024, and the economy has continued along the same path in the first quarter. When comparing to the first quarter of last year, the result came in 2% higher, mainly due to an uplift in fee income, where we continue to benefit from expanding our customer interactions. Overall, total income reflects strong customer activity, particularly for our corporate customers. Operating expenses were stable on the back of prudent cost management and improved efficiency, and our cost-income ratio was in line with our target level of 45%. Compared to the previous quarter, the result for core income was in line with our outlook of slightly lower income from the expected decline in market rates. The lower fee income was driven by the usual seasonality for primarily investment and capital markets related fees, whereas the underlying trend derived from customer activity continued to add momentum. Credit quality continued to be strong and supported by favorable macroeconomic conditions. Loan impairment charges in the first quarter were maintained at a low level and below our outlook for the full year. For the first quarter, it reflects only a few cases with actual credit deterioration and no impact from model-driven charges. And as such, we also maintain our outlook for the full year. Let me give a few comments on the macro environment. This is slide two, please. There is no doubt that the geopolitical environment has become more complex since the beginning of April, and the situation around tariffs has affected consumer and business sentiment. We're looking into a rapidly changing geopolitical agenda, but based on what we currently know about the magnitude of a global trade war, we estimate a limited direct effect on the Danish and the Nordic economies. And I'd like to update you on three important takeaways for us at Danske Bank. Firstly, the current macroeconomic backdrop is strong, and this is the case for all our markets in the Nordic region and for Denmark in particular. If we apply the impact from a potentially prolonged trade war to our recent economic outlook, we have a solid starting point to weather any potential slowdown. Secondly, as it will also appear from today's financial report, the credit quality of our loan portfolio continues to be strong, based on a very diversified credit exposure with limited direct exposure to tariffs. We also maintain a strong level of post-model adjustments, and we have prudent macroeconomic scenarios modeled in place. In addition our strong capital and liquidity positions add to the picture of a very robust balance sheet. And then thirdly, as part of our prudent risk management, we've launched several actions across the bank to monitor and to assess the situation and to identify corporate customers most vulnerable in the current situation. And these actions are also comparable to the initiatives that we've taken during both the COVID pandemic and also in relation to the invasion of Ukraine. And I strongly believe that this forms a strong background for us to manage a potential slowdown in growth and, most importantly, to support our customers in challenging times. Let me give a few comments to the business units before handing over to Cecile, and this is page three. Personal customers. In personal customers, we saw stable financial performance. Total income declined 6% from the level in the same period last year, in part due to the divestment of PC Norway. Adjusted for PC Norway, total income was stable quarter on quarter and supported by growth in fee income and solid customer activity. Relatively flat net interest income supported the top line, with a 2% decline quarter over quarter driven by declining rates and mitigated by steady deposit inflows up 3% year over year. Fee income increased 3% versus the same period last year as customers take advantage of our fund and our advisory offerings. We saw strong credit quality and prudent cost management, and both the return on allocated capital and the cost income ratio remain on track to meet our 2026 targets. In terms of lending, the development in home loans was generally stable as the market begins to return more normalized levels of activity. In Denmark, bank home loans grew 11% from the level for the same period last year and mitigating a decline in volumes at Re-Kredit Danmark. Customers continue to choose our Danske Bolig Free Home loans as its greater flexibility fits their needs, and this is a testament to the strength of our holistic offering across the group. That said, we are also committed to increasing our share of the market at Re-Kredit Danmark, and we continue to implement a number of initiatives to increase our competitiveness, including recent pricing adjustments. And then finally, we saw continued deposit growth, especially within private banking, as well as net sales growth in investment products across both our retail and private banking customers, reflected in the AUM result for the quarter. And this clearly shows our ability to expand our offering and customer franchise to support customers' financial needs, regardless of the market environment. Slide four, please. In business customers, the financial performance reflected solid growth in lending in the context of an expanding customer base. Total income increased 1% year over year and 7% quarter over quarter, with an uplift across each of our core income lines. Net interest income increased 3% year-over-year, driven by growth in lending, as well as continued expansion of our customer base in the mid-size segment and subsidiaries of multinational corporates. We also saw an uplift in fee income year-over-year across our markets, supported by sustained customer activity and our subscription-based service model. Return on allocated capital now exceeds our 2026 target of 21%. The cost income ratio likewise continues to be ahead of our 2026 goal based on prudent cost management while we continue to invest in and build our business. Lending grew 3% year over year, driven by activities across all our Nordic markets, while deposits declined by 3% due primarily to build up ahead of a large bond repayment at a client. We continue to execute on our strategy and in Q1, we made further improvements to our digital offerings and launched upskilling programs and sales and advisory services to enhance our advisors ability to support customers efficiently across the region. Slide five. In the first quarter of 2025, Elsie and I continued the strong performance that we saw in 2024. Total income was up 13% year on year, driven by solid customer activity and higher volumes, and contributed to a return on allocated capital of 23%. It was also satisfactory that lending volumes grew 6% year on year, supported by activities in Sweden and Norway, as we continue to execute our strategy to grow the franchise outside our home market in Denmark. We typically see some seasonality in the first quarter across our wholesale offering, and this was also the case in the first quarter of 2025, with total income 13% lower than in the fourth quarter last year, given lower capital markets activity and after record high performance fees of $0.7 billion in Q4. Fee income came in 16% higher in the first quarter of 2025 compared to the same period last year, driven by solid customer activity. Notably in DCM, some of the largest corporate issuers in the Nordics trusted us with significant capital markets transactions. And also, our leading cash management offering continued to increase our market share in the first quarter of 2025, adding eight new house bank mandates. And then lastly, total assets under management grew 7% year on year, driven not only by higher asset prices, but also by robust net sales. Net trading income increased more than 50% relative to the level in the preceding quarter, driven by customer activity and fixed income and FX, but was 6% lower year-on-year due to adjustments of the methodology for calculating the fair value of the derivatives portfolio. And then with that, let me hand, and I'm pleased to hand over to our new CFO, to Cecile, for the group financial results, and this is slide 6.

Thank you, Carsten. As Carsten just mentioned, we saw a solid financial performance in Q1. Net profit for the Group was up 2% year-on-year, with a decline of 4% quarter-on-quarter, mainly due to seasonality effects relating to fee income. Total income for the first quarter came in at 13.9 billion in line with the results from last year and represents further good progress towards our financial ambitions for 2025 and 2026. In Q1, total income decreased 4% relative to the preceding quarter as a result of slightly lower NII and lower fee income due to seasonality effects, primarily for investments and capital markets activities. Net trading income increased in Q1, mainly due to seasonally higher customer activity, whereas income from insurance activities saw a negative impact from a provision of 0.2 billion related to a legacy pension plan. Excluding this one-off, insurance income was in line with expectations, and claims in the health and accident business were in line with the level a year ago. At 6.3 billion, operating expenses were 1% lower compared to the same period last year and 6% lower than the preceding quarter due to year-end seasonality. And finally, due to continually strong credit quality, loan impairment charges were maintained at a low level with a minor charge of 50 million in the first quarter. Slide 7, please. Let us take a closer look at the key income lines, starting with net interest income. Overall, NII remained stable despite the impact on deposit margins from lower rates, fewer days and the remaining impacts from PC Norway. When comparing net interest income, not only with the same period last year, but also with the preceding quarter, NII has benefited from improved lending margins based on lower funding costs and from a continually positive development in volumes. This is particularly evident on the corporate side. In addition, our deposit hedge has mitigated the impact from rate cuts on deposit margins and the lower return on shareholders' equity. With respect to NII expectations for the full year, I would like to stress that they are based on the current rate environments, with forward rates as of the end of April and subject to balance sheet developments. As such, we reiterate our expectation of NII of above 35 billion in 2025. Now let us turn to fee income. Slide eight, please. Fee income continued the positive trajectory we've seen in previous quarters. Compared to the level in the same period last year, fee income rose 8% driven by all categories of fee income. As I mentioned in my comments on the income statement, seasonality effects for primarily investments and capital market activities have an impact when we compare Q1 with the preceding quarter. Fee income from everyday banking activities increased by 7% year over year and by 8% compared to Q4, as we continue to expand business relations with our customers. Fee income related to lending activities was stable relative to the level last year, as higher contribution from strong corporate lending activity was offset by lower retail lending activity. The quarterly developments was impacted by lower contribution from refinancing auctions in Q1. The continued customer activity was also clearly visible in fee income generated from our capital market activities, which was up 32% from the level last year. The decline from the preceding quarter was mainly due to lower ECM M&A activities. However, strong DCM primary market activity was able to offset much of the quarterly effects. And finally, investment fees, where we saw an increase of 7% year over year based on a good trend in our asset management business and on continually strong strategy execution in our private banking activities. When comparing to the previous quarter, please be mindful of the annual performance fee income in Q4, which amounted to 0.7 billion. Assets under management in Q1 were slightly down, however, partly mitigated by positive net sales within the retail as well as the private banking segments. Slide nine, please. Next, let us look at net trading income. Overall, trading income added positively to the results both year-over-year as well as quarter-over-quarter with an increase of 15% and 58% respectively. The increase was driven by LC&I with higher customer activity in the secondary fixed income markets, offset by XVA valuation adjustments. There was a further uplift in group functions due to a negative market value adjustment in the first quarter of last year. That concludes my comments on the income lines. Let's turn to expenses. Slide 10, please. Looking at the cost development for the first quarter, I am pleased to report that our focus on cost management and improved efficiency continues to yield results. The trajectory for operating expenses is progressing according to our full year guidance of up to 26 billion and the cost to income ratio at 45.2% is in line with our 2026 targets. Compared to the level in the first quarter of last year, costs were down 1% as structural cost takeouts mitigated the impact from wage inflation, performance-based compensation, and the planned investment ramp-up. Relative to the preceding quarter, costs were down by 6%. However, please bear in mind the seasonality we have for higher costs in the last quarter of the year. Slide 11, please. Let us look at our strong asset quality and the trend in impairments. Our well-diversified and low-risk credit portfolio continued to perform well with a benign macroeconomic environment, including healthy and steadily improving household finances. Impairments in Q1 amounted to just 50 million as actual single-name credit deterioration and staged migration were negligible. Increasing geopolitical and economic risks from tariffs do have an impact on consumer and business sentiments in the context of the Nordic economies. So far, the outlook remains benign across our markets, and especially in Denmark. But we have maintained our prudent approach with a severe and prolonged downturn scenario that includes a decline of around 40% in property prices. In addition, we have kept our significant PMA buffer and repurposed part of the allocation from commercial real estate and construction towards global tensions. As tail risks related to commercial real estate ease, this reallocation mitigates the potential impacts of tariffs and trade uncertainties. We will continue to review our macroeconomic scenarios in conjunction with a PMA buffer. But given the current state of our strong asset quality, we remain comfortable with a full year guidance for impairment charges. Slide 12, please. Our capital position remained strong and was further supported by another quarter of healthy capital generation post dividend accrual. At the end of Q1, the reported CET1 ratio increased to 18.4%, up from 17.8% in Q4. A reduction in risk exposure amounts in Q1 also contributed to the positive developments in the CET1 capital ratio. Our prudent front-loading of CRR3 in Q2 2024 was more than sufficient to mitigate the implementation that took effect on January 1st. operational risk REA ended up being lower than initially anticipated due to improved data quality and governance. Credit risk REA also benefited as other mitigating actions decreased the effects of implementing CRR3. This countered otherwise higher credit volumes. Accordingly, we have released the CRR3 buffer. We continue to operate with a healthy CET1 buffer versus the regulatory requirements as we steadily progress towards our stated capital target of a CET1 ratio above 16%. The ongoing share buyback program we announced in February is being executed and will continue to provide support throughout the year. Now let us turn to the final slide and our financial outlook for 2025. Slide 13, please. As previously mentioned, we reiterate our outlook for net profits to be in the range of 21 to 23 billion, with no changes to individual lines. And finally, our financial targets for 2026 also remain unchanged, subject to our current economic and market expectations. Slide 13, please, and back to Klaus.