Danske Bank A/S

Good morning, everyone. Welcome to the conference call for Danske Bank's financial results for the first nine months of 2025. My name is Claus Inger Jensen, and I'm head of Danske Bank's investor relations. With me today, I have our CEO, Carsten Eris, and our CFO, Cecile Hillary. We aim to keep this presentation to around 20 minutes. 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, where I'm pleased to share the highlights of Danske Bank's financial results for the first nine months of 2025. This period saw solid financial performance rooted in our strategic priorities as outlined in our 428 strategy. Net profit for the first nine months came in at 16.7 billion, equivalent to a return on equity of 12.9% for the first nine months and 12.6% for the third quarter. On the macroeconomic front, the Nordic region shows promising growth, aligning closely with structural rates, and despite some downward revisions of GDP growth for Denmark, the economy remains strong. The support of low interest rates set by central banks in Europe are contributing positively to the business environment we are operating in. And our achievements can be attributed to a good performance across core income lines, prudent cost management, and while maintaining strong credit quality. We are pleased with the increased commercial momentum that we saw during the first nine months. This is in particular evident from an uplift in lending and deposit volumes of 4% and 3%, respectively. The positive traction for lending is mainly due to higher customer activity in the corporate segment, whereas the increase in deposits is driven by the retail segment, where our customers favor savings over spending. Our asset management business continues to grow, reaching an all-time high of more than $950 billion in assets under management, bolstered by strong net sales in both the private banking and institutional segments. Credit quality continued to be strong and was supported by favorable macroeconomic conditions. For the first nine months, the loan loss ratio amounted to two basis points, unchanged from the preceding quarter, and the PMA buffer is kept largely unchanged. And then just a few comments when comparing to the preceding quarter. Core income came in slightly better. NII was unchanged as a combination of lending growth and the contribution from our structural hedge had a positive effect that offset the impact of lower market rates. Fee income was higher due to a positive development in asset prices and continually strong momentum for net sales across all channels within asset management, which resulted in a solid increase of 6% in assets under management. We therefore maintain our guidance range from net profit of between 21 and 23 billion. However, we now expect net profit to be at the upper end of that range. The expectation is driven by better NII and an improved outlook for loan impairment charges, which we now expect to be no more than 0.6 billion. And then slide two, please. At personal customers, we saw stable financial performance supported by deposit growth and healthy customer activity while managing the impact of policy rate cuts on deposit margins in the first nine months of the year. In Q3, total income was supported by an 8% increase in fee income that reflected a positive uplift across all fee categories. Net interest income also benefited from an updated hedge, our updated hedge allocation framework. And Cecile is going to talk about that a little bit later. We continue to see strong credit quality and prudent cost management, which support our 2026 financial objectives. And the trajectory on cost income and return on allocated capital is in line with our 2026 targets. In terms of lending, the development in home loans generally remains stable, reflecting a somewhat subdued housing market when looking across the Nordic countries as a result of cautious consumer sentiment. In Denmark, housing market activity has gradually risen, and total home loans in PC Denmark grew modestly as the lending volume of our bank loan product, Danske Boligfri, increased by another 11% in Q3 and is now up more than 35% year-on-year. This is also a reflection of changed customer preferences, with customers substituting the more conventional ReelKredit Denmark mortgage product by bank home loans, which highlights our ability to offer flexible loan products through a rate cycle. And then simultaneously, we've adapted our pricing and our holistic advice to serve our customer needs and enhance Kredit Danmark's competitiveness. And then finally, while deposit volumes are typically affected by increased summer spending, we continue to see elevated cash savings and an overall 2% deposit growth year on year. And then additionally, our commercial traction within private banking was underpinned by another quarter of higher net sales and inflow to investment products. This, in turn, drove assets under management to record high levels and, again, shows our ability to expand offerings and support customers' financial planning, regardless of the market environment. Slide three, please. At business customers, we see the momentum building and our financial performance reflected continued progress on our commercial priorities. Core banking income was up 3% in the third quarter relative to the same quarter last year, supported by solid fee income driven by higher everyday banking fees, including FX activity, as well as finance-related fee income growth. Total income quarter-on-quarter was supported by stable fee income, despite typical seasonality, and NII benefited from the updated Treasury allocation framework. our growth agenda was supported by improved credit demand and our efforts to expand our customer base, resulting in increased market shares across all four Nordic countries. And this was underpinned by the growth in lending volumes of 1% quarter on quarter, and then 4% year on year, which again was largely broad based across industries. With a sustained focus on diligent cost management, the cost-income ratio continues to be in line with our 2026 target, and the robust credit quality and benign level of impairments further supported profitability, with profit before tax increasing 3% quarter-on-quarter and in line with our 2026 targets. Our strategy execution has been encouraging and clearly highlights the business potential, and we continue to focus on improvements to our digital offerings, coupled with targeted advisory services to support customers efficiently across the region, where complex solutions are in demand from our customers across the Nordics. And then slide four, please. In our corporate and institutional franchise, we saw a strong financial result for the first nine months of the year. Total income was up 8% year on year as we continue to leverage our strong balance sheet to the benefit of our corporate and institutional customers and saw strong customer demand for our investment solutions. In addition, we focus on executing our strategy to be the leading Nordic wholesale bank. Importantly, our leading solutions in product areas such as loan capital markets, debt capital markets and cash management see solid customer demand and help us continue to attract new corporate customers outside Denmark, in turn delivering on our strategy. Total income was up 1% relative to the second quarter, driven by solid customer activity in our markets area alongside continually strong credit quality. And this helped us generate a return on allocated capital of 25%, well ahead of our 2026 target. And then we continued to grow our corporate lending book. We saw lending growth of 12% year on year and 4% quarter on quarter. We were also very proud that as the only Nordic bank, Denske Bank was mandated as joint global coordinator in the largest ever capital raising transaction in the Nordic countries. Operating expenses, they grew 2% relative to the second quarter as we continue to invest in the business and selectively add competencies as needed to drive our advisory offering and execute the strategy. And then assets under management grew 6% in the third quarter relative to the preceding quarter to a record high level of 954 billion, primarily driven by strong net sales across channels and also a robust investment performance. And then with that, let me hand over to Cecile for a walkthrough of our financial results for the group. And that's on page five, please.

Thank you, Carsten. As Carsten just mentioned, our financial performance was solid in the first nine months of the year. Net profit for the group came in at $16.7 billion and was down 5% year-on-year, firstly due to the loan impairments line and secondly from lower insurance income. NII remained stable as the impact of rate cuts was mitigated by the growth we saw in volumes and the contribution of our structural hedge. Fee income benefited from higher customer activity and the growth of assets under management. The result for the third quarter came in at 5.5 billion, up 1% from the level in the second quarter, mainly due to lower loan impairment charges. Total income was slightly down as income from both trading and insurance activities decreased from strong levels in the second quarter. This decline was partly mitigated by stronger fee income thanks to the rebound in customer activity in the third quarter. Trading income saw a decline in Q3 mainly due to valuation adjustments in Group Treasury and a one-off in Q2. Trading income from customer activity at LCNI was on par with the level in Q2. Income from insurance activities came in lower in the first nine months of 2025 compared to the year before, partly due to an increase in provisions in the first quarter. In the third quarter, the result was lower due to return on investments and the result of the health and accident business. We continue to focus on repricing, preventive care and reactivation initiatives to improve the financial outcome of insurance contracts and respond to current market trends related to long-term illnesses. Operating expenses were almost unchanged relative to the same period last year, as well as the preceding quarter. And finally, as Carsten mentioned, credit quality remains strong with a net reversal in the third quarter. Slight slicks, please. Let us take a closer look at the key income lines, starting with net interest income. Overall, NII remained stable both year on year and quarter on quarter, despite the impact of lower rates on deposit margins. When comparing net interest income, not only with the same period last year, but also with the preceding quarter, NII has benefited from a continually positive development in lending volumes, particularly evident on the corporate side. The growth in deposit volumes contributed to an NII year-on-year with a stable quarter-on-quarter level. In addition, our deposit hedge has helped to mitigate the impact of rate cuts on deposit margins and the lower return on shareholders' equity. In this context, please be aware that as part of our ongoing focus on asset and liability management, we have increased our bond portfolio hedge slightly to approximately 170 billion. With respect to deposit margins, The increase that can be observed relates to changes to our fund transfer pricing framework implemented in the second quarter with the objective of allocating NII from the structural hedge to the business units according to their contribution. It is important to note that these are not driven by changes to customer pricing and do not impact Group NII. Our NII sensitivity, which was updated in the second quarter, remains unchanged. With respect to expectations for the full year, I would like to highlight that they are based on the current rent environment with forward rates as of the end of September and subject to balance sheet developments. We consider the current market view and consensus on NII to be a good indication for the full year of 2025. Now, let us turn to fee income. Slide seven, please. Our fee income grew by 2% relative to last year. Adjusted for a non-recurring item from last year and the divestment of PC Norway, fee income was up 3%. The increase mainly came from everyday banking transactions due to higher activity among existing as well as new customers. Relative to the second quarter, fee income was up 3% in the third quarter, driven by higher investment activity among our customers and the recovery from the sentiments we saw in the second quarter. Investment fees benefited from increasing asset prices and continued growth in assets under management with positive net sales for all types of clients. Income from financing had a positive effect in the third quarter, driven by higher corporate activity, whereas free income from everyday banking and capital markets transactions declined slightly from the second quarter due to summer seasonality. However, the somewhat muted transaction activity in ECM and M&A was offset by continually good primary activity in DCM and LCM. Next, let us look at net trading income. Slide 8, please. Net trading income increased 12% from the level in the same period last year. The increase was mainly due to positive market value adjustments in Group Treasury, partly offset by XVA adjustments. Trading income at LC&I improved from the level in the same period last year due to higher customer activity. In Q3, customer activity at LC&I held up well, despite the third quarter being a seasonally slower quarter. Net trading income was down 27%, mainly due to the positive one-off item booked in the second quarter, as well as valuation adjustments made in Group Treasury. This concludes my comments on the income lines. Let's turn to expenses. Slide 9, please. Looking at the cost development for the first nine months, our focus on cost management and improved efficiency continues to yield the expected results. Operating expenses are in line with our full-year guidance of up to 26 billion. And at 45.6%, the cost-to-income ratio is progressing towards our 2026 target. Relative to the level last year, costs were in line as structural cost takeouts and the planned reduction in costs for the financial crime plan mitigated the impact of wage inflation and performance-based compensation. The relatively modest increase in digital investments should be seen in the light of the significant ramp-up we made last year. Relative to the preceding quarter, costs were down by 1%, mainly due to lower costs related to financial crime prevention, which continued the trajectory towards a lower run rate by year-end, according to plan. While the cost discipline and trajectory during the year have been encouraging, we continue to expect full-year expenses to end close to the guided level, given higher quarterly costs in Q4 due to seasonality. Slide 10, please. Let us take a look at our credit portfolio and the trend in impairments. Credit quality continues to be strong, underpinned by a well-diversified and low-risk credit portfolio. The macroeconomic environment remains benign, with increasing employment and steadily improving household finances. Consequently, impairments continue to be below the normalised level. In the third quarter, credit deterioration related to a few single name exposures was offset by workout cases. In combination with the update of our macroeconomic models, we saw a small net reversal for the quarter. The update of the macroeconomic models included a small revision to the weighting of our scenarios towards a slightly more balanced approach, with the upside scenario now weighted at 25%, the base case scenario at 50%, and the downside and severe downside scenarios combined at 25%. In addition, we have kept our PMA buffer unchanged at 5.7 billion. The decreases in PMAs for CRE and agriculture have been reallocated to global tension. We continuously keep our macroeconomic scenarios under review in conjunction with the PMA buffer. Given the strong asset quality we saw in the first nine months, we have lowered our full year guidance for loan impairment charges from around 1 billion to no more than 0.6 billion. Slide 11, please. Our capital position remained strong in the third quarter and was further supported by another quarter of solid capital generation post-dividend accrual and lower REA as a result of lower market risk. At the end of Q3, the reported CET1 capital ratio was unchanged compared to the preceding quarter at 18.7%, despite a temporary impact from Danica of around 0.4 percentage points due to the call of a Tier 2 instrument. We continue to operate with a healthy CET1 buffer versus the regulatory requirements, now at 390 basis points, and we intend to progress steadily in the coming years towards our stated capital targets of a CET1 capital ratio above 16%. The ongoing share buyback program we announced in February is being executed and we continue to provide support throughout the year. Now, let us turn to the final slide and our financial outlook for 2025. Slide 12, please. As previously mentioned by Carsten, we reiterate our outlook for net profit to be in the range of 21 to 23 billion. However, we now expect net profit to be in the upper end of that range. For total income, we continue to expect slightly lower income this year than in 2024. Income will be driven by lower, albeit resilient, net interest income and will be supported by our focus on fee income. We will continue to drive the commercial momentum and growth in line with our financial targets for 2026. Income from trading and insurance activities remain subject to financial market conditions. We continue to expect operating expenses of up to 26 billion, reflecting our focus on cost management and cost-to-income targets for 2026. We have revised our full year guidance for loan impairment charges of around 1 billion due to continually strong credit quality. We now expect loan impairment charges of no more than 0.6 billion. 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.