Customer activity remained good, and progress in core banking activities in a challenging operating environment. Net loss of DKK 5.1 billion and return on equity of -3.1% for the year

02 Feb 2023 07:30 CET

Press release   Danske Bank
Holmens Kanal 2 - 12
DK-1092 København K
Tel. +45 45 14 14 00



2 February 2023

Customer activity remained good, and progress in core banking activities in a
challenging operating environment
Further progress on the sustainability agenda with ambitious sustainable finance
targets and clear commitment to green transition
Net loss of DKK 5.1 billion and return on equity of -3.1% for the year

Danske Bank has announced its financial results for 2022.

Carsten Egeriis, Chief Executive Officer, comments on the financial results:

"2022 was a year of significant economic uncertainty and high volatility. We
stayed close to our customers to help them navigate and to support households,
businesses and society as a whole.

Good customer activity and larger lending volumes in our corporate segments
throughout the year led to increasing net interest income for the eighth
consecutive quarter and a robust level of net fee income. While the
unprecedented volatility in especially the rates markets impacted our trading
income and our insurance business, we saw positive trends towards the end of the
year. Furthermore, underlying costs continued to trend in a downward direction.

To have a net loss on the bottom line is of course not satisfactory. However, it
comes as a consequence of the conclusion of the Estonia matter, which marks an
important turning point for Danske Bank. We can now focus even more on creating
value for our customers as well as all our other stakeholders and on continuing
to reinforce our commercial momentum.

In this challenging macroeconomic environment, we continued our dedicated
execution of our plan to become a simpler and better bank for our stakeholders.
Our efforts throughout the year have positioned us even more strongly in terms
of delivering on our targets. This remains our focus for 2023, and we are
confident that we will reach our ambitions."

The annual report is available at www.danskebank.com. Highlights are shown
below:

2022 vs 2021
Total income of DKK 41.2 billion (down 3%)
Operating expenses of DKK 26.5 billion (up 3%)
Loan impairments of DKK 1.6 billion (2021: DKK 348 million)
Provision for Estonia matter and goodwill impairment: DKK 15.4 billion
Net loss of DKK 5.1 billion (2021: profit of DKK 12.9 billion)
Return on shareholders' equity of -3.1% after provision for Estonia matter and
goodwill impairment
Strong capital position, with a total capital ratio of 22.1% and a CET1 capital
ratio of 17.8%

In a strong position to support customers in handling significant uncertainty
While the deteriorating macroeconomic outlook and higher interest rates are
expected to impact both businesses and households, the quality of our lending
book remained strong with low loan impairment charges that consisted primarily
of increased management buffers. This ensures that we can continue to support
our customers in navigating the difficult macroeconomic conditions.

2022 was a year of almost unprecedented uncertainty and volatile markets that
were caused, among other things, by intense geopolitical tension and soaring
inflation, especially energy price inflation, which in turn led to a decline in
real incomes and asset repricing as a result of monetary tightening.
Consequently, our customers had to navigate the most challenging environment in
decades. These conditions continued in the last quarter of 2022, which saw a
continually deteriorating macroeconomic outlook, and mean that we will most
likely see lower economic activity in 2023.

Towards the end of the year, however, there was increased risk appetite among
investors in the financial markets, albeit from low levels, and some signs point
towards both energy prices and the rate hikes by central banks having peaked, at
least for now. In addition, labour markets and consumer spending in the Nordic
countries remain resilient, providing a strong starting point for weathering the
coming economic slowdown.

Core banking activities continue to deliver good results
Throughout 2022, our business model delivered a reinforced commercial momentum,
as our core banking lines improved, driven primarily by improved net interest
income on the back of normalised interest rates from the central banks and
positive trends in volumes. Among other things, the market share of bank lending
in our business in Denmark increased throughout the year. Fee income was
resilient, although weakening towards the end of the year, with especially
activity-driven fees holding up well and good customer demand for our risk
advisory solutions. In the fourth quarter of 2022, income lines related to
financial markets continued to improve due to the more constructive market
conditions.

The rise in mortgage rates fuelled remortgaging activity in 2022, and this had a
positive effect on fee income. Our market share of new mortgage lending
increased from the level in 2021 despite lower customer activity in the housing
market as well as declining house prices.

The demand for credit from corporate customers was particularly strong during
2022, as capital markets became more expensive and less accessible. Factors such
as higher energy prices also contributed to an increased need for working
capital. Danske Bank's strong liquidity and capital positions enabled us to
support customers across our home markets, and we thus supported our corporate
customers with more than DKK 40 billion in additional lending.

Net trading income recovered in the second half of the year, as market
conditions became more supportive. Income from insurance business also saw a
negative effect from the financial market turmoil in 2022. The result stabilised
towards the end of the year, driven by value adjustments, as the interest rate
environment normalised. The underlying business is still strong, and we continue
to see improvements in our health and accident business.

We saw underlying costs continuing to trend lower as a result of our efforts to
increase efficiency. Total costs, however, continued to be impacted by high
remediation costs given our efforts to close legacy issues. In August 2022, we
communicated an accelerated solution to the debt collection case and stated that
further sample checks related to the customer compensation model were needed.
These sample checks confirm the validity of the model we proposed in August, and
the work we have done has further reinforced the robustness of the model across
different customer segments and has given us an even clearer picture of
compensation levels. As a consequence, we decided to make an additional
provision of DKK 310 million in the fourth quarter of 2022.

At the outset of the Better Bank plan, we had a clear ambition to simplify our
business, improve efficiency, increase digitalisation and strengthen compliance,
as well as to sharpen our commercial focus. 2022 was a year of many
accomplishments, including the reorganisation of our Personal Customers and
Business Customers units, significant progress with our remediation efforts and
consistent steps towards fully digital banking solutions across our segments.
Our focus is on delivering on our 2023 targets, and before we reach the end of
the first half of 2023, we will give investors an update on our mid-term
financial targets beyond 2023.

"Our core banking activities continued to deliver good results throughout the
year, despite the low macroeconomic visibility and high volatility in the
financial markets. Net interest income increased for the eighth consecutive
quarter - and 14% year on year - as a result of increased lending, driven
particularly by our corporate customers, and the normalised interest rates. Net
trading income recovered in the second half of the year, despite a reduction in
risk utilisation, as market conditions became more supportive. Our efforts to
increase efficiency continued to result in a decrease in underlying costs, while
the closing of legacy issues resulted in high remediation costs. We note the
strong commercial momentum in our core banking activities, our efficiency gains
as well as the clarity provided about our legacy issues, while the resolution of
the Estonia matter of course significantly impacted the results. This progress
makes us confident with regards to reaching our 2023 targets," says Stephan
Engels, Chief Financial Officer.

Maintaining our ambition to being a leader within sustainability
The financial sector plays an important role in the transition towards a more
sustainable society, and at Danske Bank, we have continued to support our
customers in their green transition with relevant sustainable finance products
and advisory services. As we proceed with our ambition to be one of the leading
banks in the Nordic countries for sustainable finance, we continued on our net-
zero pathway.

To support our customers in the transition, we set ambitious 2030 targets at the
beginning of 2022 for carbon emission reductions related to corporate lending in
the key oil and gas, shipping and utilities sectors. Building on this
commitment, in January 2023, we published Danske Bank's Climate Action Plan,
which sets new Paris-aligned emission reduction targets for our financial
activities as well as for our own operations. To ensure that we will fulfil our
commitments under the Paris Agreement, these targets encompass our entire
business and all of our activities. The new plan is based on the standards and
guidance of the Science Based Targets initiative. With the new plan, we
reinforce the commitment we have made to support and enable our customers'
sustainable transition journeys by continuing to develop our offerings across
segments and by remaining at the forefront of this evermore important agenda.

Danske Bank has also taken a strong lead among international banks when it comes
to helping customers to reduce their carbon emissions. A recent survey from the
Bloomberg Intelligence research unit published in October 2022 ranked Danske
Bank as number one among 54 international banks when it comes to setting targets
for reducing the carbon emissions of our lending activities.

During 2022, we came closer to fulfilling our commitment to provide DKK 300
billion in sustainable financing by the end of 2023, as we increased the amount
of sustainable financing from DKK 192 billion at the end of 2021 to DKK 273
billion at the end of 2022. Investments in the green transition increased from
DKK 33.5 billion to DKK 37.7 billion, bringing us closer to our 2023 target of
DKK 50 billion.

Also, by year-end 2022, we remained the leading Nordic arranger of sustainable
bonds, and in Bloomberg's global ranking for green bonds, we attained a ranking
as no. 16.

Dividend for 2022
On 27 October 2022, Danske Bank made an additional provision of DKK 14.0 billion
in relation to the Estonia matter. Consequently, the Board of Directors will
propose to the annual general meeting in 2023 not to pay out dividend for 2022.
Danske Bank's dividend policy remains unchanged, targeting a dividend of 40-60%
of net profit. Danske Bank has strong capital and liquidity positions, and the
Board of Directors remains committed to our capital distribution policy.

Outlook for 2023
We expect net profit for 2023 to be in the range of DKK 15-17 billion.

"Our outlook is in line with our 2023 financial ambitions and is based on an
expectation of growth in income from our core banking activities in 2023, driven
by higher net interest income and our continued efforts to drive commercial
momentum, while income lines related to financial markets are expected to
recover from the levels in 2022 despite a high degree of uncertainty.
Furthermore, we expect our continued focus on cost management to be reflected in
lower costs despite inflationary pressure. Credit quality remains strong, and
hence impairments are expected to increase primarily because of a weaker
macroeconomic outlook that will affect model-driven impairments," says Stephan
Engels.

The outlook is subject to uncertainty and depends on economic conditions.


Danske Bank

Contact: Stefan Singh Kailay, Head of Media Relations, tel. +45 45 14 14 00

More information about Danske Bank's financial results is available at
www.danskebank.com/reports.

More information:
Access the news on Oslo Bors NewsWeb site

581201_Danske Bank press release 2 February 2023.pdf
581201_Danske Bank Annual Report 2022.pdf
581201_Risk Management 2022.pdf
581201_danskebank-2022-12-31-en.zip