Danske Bank A/S

Good morning everyone. Welcome to the conference call for Danske Bank's financial results for 2025. My name is Claus Inger Jensen and I am head of Danske Bank's investor relations. With me today I have our CEO Carsten Iris and our CFO Cecil Hilary. 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 house and i would also like to welcome you to our conference call where i'm pleased to share the highlights of denske bank's financial results for 2025. although the geopolitical situation overall continue to be challenging the macroeconomic backdrop for our customers and thus our business in the Nordics continue to be stable and slightly improving during the year. This is clearly reflected in our financial results as 2025 has been a year of solid performance for Denske Bank. Measured in terms of profit before impairment charges, 2025 represented the best result ever. Net profit for the year came in at $23 billion, equivalent to a robust return on equity of 13.3%. The result was based on improved income due to higher customer activity and furthermore evidenced by positive volume development. I'm pleased to see that despite the sale of our personal customer business in Norway, and several rate cuts during the year, we were able to maintain net interest income at the same level as in 2024. The slightly lower net profit in 2025 was solely due to a more normalized but still a low level of loan impairment charges compared to net reversals in 2024. When comparing to the preceding quarter, Core income came in better as a result of higher NII from an increase in lending and deposits and significantly higher fee income based on growth across all fee categories, and in particular from record high performance fees within asset management. Operating expenses came in line with expectations and credit quality remained strong. And as a result, net profit for Q4 amounts to $6.3 billion, up 14% from the preceding quarter. And Cecile will comment on the details of the financial results later in this call. Let me talk about our strategy execution. It remained on track. And as we continue to see robust commercial momentum and invest in our business, also as laid out in our strategy plan. During 2025, the scaling of our digital and our Gen AI technological capabilities across the bank has been in focus, and we are now starting to see tangible results in our workflows leading to improved productivity. And I'm really looking forward to presenting a more comprehensive update with our strategy update in connection with the presentation of our Q1 results on the 30th of April. And then I would like to comment on our capital distribution. Based on our strong earnings and our solid capital position, I'm pleased to announce the distribution of the full net profit for 2025. Ordinary dividend will account for 60% in accordance with our dividend policy. In addition, we propose an extraordinary dividend of 20%, taking total dividend per share to 22.7 kroner. and a new share buyback program of $4.5 billion. In total, a payout ratio for 2025 of 100%. And then finally, on the financial outlook for 2026, which Cecile will elaborate on later, we expect a net profit of between $22 to $24 billion, driven by growing core banking income from continued efforts to drive commercial momentum. And then let me continue with the performance on the business units. And that's slide two, please. At personal customers, the financial performance has been solid, with total income up 2% relative to the same quarter in 2024 and up 3% quarter on quarter. The performance was based on good customer activity that led to higher lending and deposit volumes, up 1% and 5%, respectively, relative to the level in 2024. The uplift in activity and volumes came from all our Nordic businesses, driven in particular by private banking and also home loans in Denmark and Sweden. In the private banking segment, 2025 was a year of strong momentum based on the continued execution of our strategic priorities. The investment business was supported by strong net sales, which helped lift assets under management to record high levels, with Danske Invest retail funds reclaiming the market leader position in Denmark. In the housing markets, activity improved in 2025. In Sweden, lending increased 1% in local currency, with improving momentum towards the end of the year. The better traction in Sweden came from higher customer activity supported by a strengthened customer offering. In Denmark, housing market activity also improved in 2025, especially in the larger cities. Total lending was stable year on year, but our bank home loan product, Danske Boligfri, grew another 12% compared to the preceding quarter and 44% year on year. The product now accounts for more than $70 billion in lending, and the positive development is a testament to our flexible loan offering and ability to cater to the changing customer preferences. Furthermore, total income in Q4 was supported by a 14% increase in fee income, driven primarily by high refinancing activity for adjustable rate mortgages and by investment fee income. Cost came in higher in Q4 due to expected higher seasonal expenses, which explains the higher cost-income ratio. And then slide three, please. At business customers, 2025 was a year of solid financial performance based on strong customer activity that continued throughout the year. Total income was up 8% compared to the same quarter in 2024 and 5% quarter-on-quarter. This was driven primarily by a positive development in net interest income based on a strong uplift in volume and activity-driven fee income. Lending as well as deposit volumes were up 5% based on growth in all countries. The increase in business momentum reflects the continued execution of our growth agenda as we welcomed new corporate customers. And as a result, we gained market share across all four Nordic countries. Return on allocated capital as well as cost income ratio were in line with our targets. The increase in ROAC was supported by reversals of loan impairment charges on the back of continued strong credit quality. Business customers continues to be a key strategic focus for us. And in 2026, we will continue to strengthen our advisory capabilities, for instance, by investing in analytics to generate leads for advisors and improving the one corporate bank digital platform. And then slide four, please. Turning to our large corporate and institutions business, we are pleased that our continued focus on advisory solutions for our customers and our sustained efforts over the years to improve our business offering have shown positive results in 2025. Thanks to strong execution and customer focus, 2025 was a record year for LC&I. Firstly, we continue to see strong volume growth with corporate lending up 14% from the level in the fourth quarter of 2024, which supported a 15% increase in NII. Deposits, which by nature are more volatile, have seen a healthy overall trajectory, but also sizable fluctuations related to large corporate transactions. Secondly, in line with our strategy of growing our Nordic footprint, we are expanding our one corporate bank concept in the Nordic region. In 2025, we continue to win new house bank mandates within daily corporate banking. And in addition, 2025 has been an exceptionally strong year for our investment solutions. Assets under management grew 16% relative to last year and reached all-time high. Besides higher asset prices, we have successfully been able to grow net inflow and add new customer mandates within the institutional as well as the private banking segment. The impressive investment performance in asset management enables us to recognize performance fees of $0.9 billion, up 27% from last year, which was already a year of strong performance. And then with respect to profitability and cost efficiency, the strong performance in 2025 has enabled LC&I to deliver significantly better compared to our targets. And then with that, let me hand over to Cecile for a walkthrough for our financial results for the group. And that is slide five, please.

Thank you, Carsten. 2025 was a year of solid financial performance. Net profit for the group came in at 23 billion compared to 23.6 billion the year before. Total income improved mainly due to a 3% increase in fee income, reflecting increased customer activity and strong performance in asset management. NII was unchanged as the positive effects from increased volumes and a positive contribution from our structural hedge were able to mitigate lower rates. Operating expenses were in line with the level in 2024. Loan impairment charges came in at a more normalized but still low level, whereas we had net reversals in 2024. The results for Q4 came in at 6.3 billion, up 14% from the level in the third quarter, mainly due to higher core income. NII benefited from positive volume effects. When excluding the tax-related contribution, NII was up 2%. Fee income was up 39% quarter-on-quarter, as all fee income categories contributed positively, with performance fees in asset management as the single most important source of fee income in the quarter. Trading income saw a decline in Q4, mainly due to seasonally lower customer activity in fixed income markets. Income from insurance activities was impacted by a model recalibration for the health and accident business that led to a net negative effect of 200 million. The impact follows the annual update of model parameters, as well as adjustments following an inspection by the Danish FSA. When looking at the net financial results in isolation, we saw a positive development from a better investment results. We continue to focus on repricing, preventive care and reactivation initiatives in the health and accident business to improve the financial outcome of insurance contracts and respond to current market trends related to long-term illnesses. Operating expenses came in higher in Q4 due to year-end seasonality related to performance compensation and severance costs. And finally, as credit quality continues to be strong, loan impairment charges were kept at a very low level. Slide 6, please. Let us take a closer look at the key income lines, starting with net interest income. NII for the full year remained stable as the headwind from deposit margins due to lower central bank rates was mitigated by an increase in lending and deposit volumes, as well as improved lending margins and a positive contribution from the structural hedge, which grew to circa $180 billion at the end of Q4. Relative to the preceding quarter, NII increased more than 4%, supported by a 200 million tax-related effect. As interest rates were stable during the quarter, the impact from margins was insignificant. However, NII benefited from a continually positive development in volumes, particularly evident on the corporate side, whereas the impact from the structural hedge was similar to that in Q3. With respect to the deposit margin developments, as I mentioned in Q3, the increase observed in Q3 relates to changes to our funds transfer pricing framework implemented in Q2 with the objective of allocating NII from the structural hedge to the business units. It is important to note it is not driven by changes to customer pricing and does not impact group NII. Our NII sensitivity remains unchanged quarter on quarter. With respect to the outlook for 2026, we expect NII to grow, supported by stable rates and structural growth, particularly within lending. The outlook is, as always, subject to markets and balance sheet developments. Now, let us turn to fee income. Slide 7, please. In 2025, the income amounted to over 15 billion, corresponding to a 3% increase compared to 2024. This represents a record high level for Danske Bank, based on high customer activity and strong performance in asset management throughout the year. Relative to the third quarter, fee income was up 39% in Q4, mainly driven by sustained strong performance in asset management that led to record high performance fees, up 40% from the same quarter in 2024. In addition to higher performance fees, fee income was supported by continued growth in assets under management with positive net sales for all categories of clients. AUM ended the year at an all-time high of over 1 trillion kroner. Income from financing had a positive effect in Q4, driven by higher corporate activity and a seasonally solid refinancing activity at RealCredit Denmark. Within our capital markets business, fee income in Q4 benefited from a continuation of good DCM momentum, and a rebound in activity in ECM. Next, let us look at net trading income. Slide 8, please. Overall, we have seen a stable development for trading income in 2025. With positive value adjustments in Treasury, the headline number was up 8%. Stable customer activity, mainly within fixed income, further contributed to the results. In Q4, trading income came in lower due to seasonally lower customer activity at the end of the year. This concludes my comments on the income lines. Let's turn to expenses. Slide nine, please. Looking at the development for the full year, operating expenses are in line with our full year guidance of up to 26 billion. We have managed our cost base as expected and mitigated the impact of inflation which supported a slightly improved cost-to-income ratio of 45.5%. Relative to the level last year, costs were in line as the intended structural cost takeouts and a lower contribution to the resolution fund mitigated the impact of wage inflation and performance-based compensation. The relatively modest increase in digital investments in 2025 should be seen in the light of the significant ramp-up we made in 2024. Furthermore, we executed structural cost take-outs within our financial crime prevention division. Going forward, ongoing efficiency in that division will mainly come from technology improvements, with a limited reduction stemming for post-resolution rightsizing. Relative to the preceding quarter, Q4 costs were impacted by year-end seasonality, including performance-based compensation, severance costs, and investments in our tech transformation. We intend to maintain the same focus on cost discipline in 2026 whilst continuing to invest in our digital and commercial agenda in line with our growth strategy. Accordingly, we expect expenses in the range of 26 to 26.5 billion in 2026. Slide 10, please. Turning to our asset quality and the trend in impairments. Throughout 2025, our well-diversified and low-risk credit portfolio benefited from a benign macroeconomic environment, particularly in Denmark, with sustained low unemployment, real wage growth, improving household finances, as well as strong corporate balance sheets. In Q4, our strong credit quality underpinned another quarter of low impairment charges, amounting to 35 million, which took full year charges to 294 million, equivalent to two basis points of our loan portfolio. Actual single name credit deterioration remains modest, and we continue to benefit from modest stage migration. Charges related to our macro models were negligible in the quarter. and we continue to apply both a downturn and a severe downturn scenario. With reduced external uncertainties in the commercial real estate sector, including lower and stable rates, our post-model adjustments review resulted in net releases of 300 million in Q4. Although the PMA buffer has overall been reduced, we have bolstered the buffer related to global tensions further, and we continue to apply a prudent approach to cater for potential risks and uncertainties that are not captured through our macroeconomic models. We will continue to review the PMA buffer sector by sector going forward. I would also like to emphasize that our impairment guidance for 2026 of around 1 billion is remains below our normalized level, but is not predicated upon significant PMA releases. Slide 11, please. Our capital position remains strong and has consistently been supported by a healthy capital generation throughout the year. At the end of Q4, the fully phased-in CET1 ratio was 17.6%, when including the effects from the adoption of the new conglomerate directive that took effect on January 1st. Furthermore, the ratio includes the full deduction of the additional 40% distribution of the net profit for 2025, announced this morning, in addition to the already accrued dividend of 60%. The increase in risk exposure amount in Q4 relates to higher operational risk REA, which, as per normal practice, is subject to an end-of-year calibration that reflects a higher top line and profitability, as well as lending-related credit risk REA. We continue to operate with a healthy buffer to the regulatory requirements as we steadily execute towards our capital target of above 16%. We will provide more detail on our capital trajectory with our strategy update in connection with the presentation of our Q1 results. With that, let me turn to the final slide and outline our financial outlook for 2026. Slide 12, please. We expect total income to be around $58 billion. This will be driven by growing poor banking income and the continued commercial momentum and growth that we see in our markets. Income from trading and insurance activities remain subject to financial market conditions. We expect operating expenses in the range of 26 to 26.5 billion in 2026, reflecting our growth ambitions and continued investment spend alongside a sustained focus on cost management. Cost-to-income ratio is expected to be around 45%, in line with the target for 2026 announced at our strategy launch. We expect loan impairment charges to be around 1 billion, below our normalized loan-release ratio, as a result of continued strong credit quality. We expect net profit to be in the range of 22 to 24 billion. Slide 13, please, and back to class.