INVESTOR PRESENTATION - DLROther operating expenses (contribution to Resolution Fund) -3 -3 108...
Transcript of INVESTOR PRESENTATION - DLROther operating expenses (contribution to Resolution Fund) -3 -3 108...
INVESTOR PRESENTATION
April 2020
DLR KREDIT Q1 2020 – KEY TAKEAWAYS
Financial summary Q1 2020
• DLR’s earnings from core activities were satisfactory in Q1 2020, and better than expected
• Core income amounted to DKK 268m, an increase of DKK 16m on the same period in 2019
• DLR has instituted additional impairment charges of DKK 62m, a management supplement based on the current
expected consequences of the corona pandemic, mainly for DLR’s commercial property customers
• Furthermore, financial market turmoil in the latter part of March 2020 negatively affected the return on DLR’s portfolio
holdings by DKK 50-60m
• Pre-tax profit was DKK 140m, down DKK 135m on the same period in 2019
Capital and debt
• DLR’s total capital ratio was 17.0 at the end of Q1 2020, and the common equity tier 1 (CET 1) capital ratio was 15.5
• Including the result for the period would produce a total capital ratio of 17.2 and a CET 1 of 15.6
Lending activity
• The total loan portfolio (nominal outstanding bond debt) amounted to DKK 157bn at the end of Q1 2020
• With gross lending of DKK 10.8m and net lending of DKK 2.6m (nominal), lending activity in Q1 2020 exceeded both
the activity in Q1 2019 and expected activity
2
1. Interim financial results Q1 2020
2. Lending and credit risk
3. Capital structure and rating
4. Funding
AGENDA
3
INCOME STATEMENT
(DKKm) Q1 2020 Q1 2019 Index
Administration fee income 427 401 107
Other core income, net 40 27 150
Interest expenses, senior debt and subordinated debt -14 -10 138
Fee and commission income, net -109 -97 112
Core income 345 321 107
Staff costs and administrative expenses, etc. -74 -65 113
Other operating expenses (contribution to Resolution Fund) -3 -3 108
Results from core activities 268 252 106
Provision for loans and receivable impairment, etc. -52 -5
Portfolio earnings (securities) -76 27
Profit before tax 140 275 51
Profit after tax 109 214 51
4
BALANCE SHEET
(DKKm)
31 March 2020
31 Dec 2019
Assets:
Loans and advances 157,889 156,837
Due from credit institutions and central banks 3,446 4,179
Bonds at fair value 12,631 11,732
Shares, etc. 36 36
Other assets 989 660
Total assets 174,991 173,444
Liabilities:
Issued bonds 158,493 157,639
Other liabilities 1,659 1,186
Provisions for deferred tax 8 8
Subordinated debt 1,300 1,300
Total equity 13,530 13,311
Total equity and liabilities 174,991 173,444
5
RETURN ON SECURITIES HOLDINGS
(DKKm) Q1 2020 Q1 2019
Interest income from/return on:
• Bonds 28 27
• Credit institutions and central banks, net -1 -1
• Currency 0 1
• Shares 0 0
Total interest income on securities holdings 27 27
Value adjustment, etc. -103 0
Total return on securities holdings -76 27
Interest expenses on:
• Senior debt 6 6
• Subordinated capital (Tier 2) 8 4
Total interest expenses on external capital 14 10
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1. Interim financial results Q1 2020
2. Lending and credit risk
3. Capital structure and rating
4. Funding
AGENDA
7
LENDING ACTIVITY IN Q1 2020
DLR’s lending activity in Q1 2020 has been at a satisfactory level
Gross lending of DKK 10.8bn is up DKK 3.9bn on Q1 2019
Net lending of DKK 2.5bn is up DKK 0.7bn on Q1 2019
The loan portfolio expanded to DKK 157.3bn at 31 March 2020
8
12,8
20,2
11,3
33,2
23,5 23,1
35,2
27,7
43,1
10,8
0,2 1,6 -1,2
-0,8 0,9
4,8 3,0
5,6 7,7
2,5
80
90
100
110
120
130
140
150
160
-5
5
15
25
35
45
55
2011 2012 2013 2014 2015 2016 2017 2018 2019 Jan-Mar 2020
DKK bn. DKK bn
Lending activity - Gross and net lending, and total portfolio
Gross lending Net lending Loan portfolio (right axis)
Note: Net lending calculated at cash value
NET LENDING
DLR’s net lending to commercial and private rental housing properties amounted to DKK 2.1bn in Q1 2020,
whereas net lending to agriculture and owner-occupied dwellings amounted to DKK 0.4bn
Higher market shares within all major market segments
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Note: Net lending calculated at cash value
25%
27%
29%
31%
33%
143214321432143214321432143214321
202020192018201720162015201420132012
DLR's market share – Agricultural loan portfolio
6%
7%
8%
9%
10%
11%
143214321432143214321432143214321
202020192018201720162015201420132012
DLR's market share – Commercial loan portfolio
Office and retail Private rental housing
270
143
892
17 4
Agriculture
Ow
ner-
occupie
d
Offic
e a
nd r
eta
il
Private
coopera
tive
housin
g
Private
renta
l housin
g
Oth
er
pro
pert
ies
DKKm
DLR's net lending split on property segments
1,187
LOANS COMPRISED BY THE UNIFORM
GUARANTEE AGREEMENT
10
The uniform guarantee agreement comprises all loans offered as from January 2015
Loans granted until end-2014 are still covered by the former guarantee agreements for agricultural and
commercial lending, respectively
75 pc of DLR’s loan portfolio is now comprised by the uniform guarantee agreement which includes direct loss
guarantees, a loss offsetting facility and a portfolio guarantee
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
20
40
60
80
100
120
3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1
2015 2016 2017 2018 2019 2020
DKK bn
DLR's lending covered by the uniform guarantee agreement - Applies to loans offered after 1/1/2015
Loans covered by uniform guarantee agreement, Agriculture Loans covered by uniform guarantee agreement, Commercial
Share of loans covered by uniform guarantee agreement (right axis)
LOAN PORTFOLIO
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DLR’s loan portfolio, 31 March 2020 Distribution on loan types
Outstanding
bond debt
Distribution on
property
categories
Fixed rate
loans ARM short ARM 1Y/2Y ARM 3Y/4Y ARM 5Y
Other floating
rate loans
Agriculture 89.4 56.9% 20.4% 47.7% 2.7% 3.9% 23.7% 1.6%
Owner occupied. Incl. Residential
farms 8.5 5.4% 49.9% 9.0% 7.2% 6.8% 24.9% 2.2%
Office and retail 26.5 16.9% 39.5% 21.0% 3.4% 4.1% 30.9% 1.0%
Private residential rental housing 27.4 17.4% 36.1% 24.0% 2.7% 3.3% 33.2% 0.7%
Private cooperative housing 3.1 2.0% 56.7% 13.6% 0.4% 1.7% 26.3% 1.2%
Other properties 2.4 1.5% 34.8% 25.4% 1.0% 5.6% 32.8% 0.5%
Total 157.3 100.0% 28.9% 36.0% 3.0% 4.0% 26.8% 1.4%
23,2%
36,4%
4,3% 5,0%
28,3%
1,9%
28,9%
36,0%
2,8% 3,5%
26,8%
1,4%
0%
10%
20%
30%
40%
50%
60%
Fixed-rate loans ARM-Short loans ARM-1Y ARM-3Y ARM-5Y Other floating-rate
Change in loan type composition
March 2019 March 2020
GEOGRAPHICAL DISTRIBUTION OF LENDING - Outstanding bond debt at 31 March 2020
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Northern Jutland
34.6 DKKbn (22.0%)
Southern Jutland
and Funen
43.0 DKKbn (27.3%)
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
[CELLEOMRÅDE]
Agricultural properties
Owner-occupied dwellings
Office and retail properties
Private rental housingpropertiesCo-operative housing properties
[CELLEOMR…
[CELLEOMR…
[CELLEOMR…
[CELLEOMR…
[CELLEOMR…
[CELLEOMR…
47%
5%
25%
19%
[VÆR
DI]
1%
Central Jutland
48.0 DKKbn
(30.5%)
Zealand/Capital
29.2 DKKbn (18.6%)
Greenland
1.1 DKKbn (0.7%)
Faroe Islands
1.4 DKKbn (0.9%)
ARREARS AND LOAN LOSSES
At mid-April 2020, DLR’s 105-
days arrears amounted to DKK
6.9m, corresponding to 0.4 pc of
payments due
Arrears have only increased
moderately due to the corona
pandemic
The moderate effect in Q1 partly
reflects that the corona virus first
affected the Danish economy in
late-March
On top of that the main
agricultural segments have not
been significantly affected by the
corona-epidemic
In Q1 2020, DLR recorded
losses of DKK 11.6m (before
loss offsetting)
In Q1 2020, DKK 3.0m was off-
set in commission payable to the
distribution owner banks
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0
1
2
3
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1
2014 2015 2016 2017 2018 2019 2020
Pc.
105-days arrears, pc of payments due
Agriculture Office and retail Private rental
Private cooperative housing Owner-occupied Total arrears
-30
0
30
60
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1
2014 2015 2016 2017 2018 2019 2020
Loan losses before loss offsetting DKKm
Agriculture Owner-occupiedPrivate rental and cooperative housing Office and businessManufacturing and manual industry
LOAN LOSS PROVISIONS
Provisions for impairments on loans and receivables negatively affected the Q1 2020 result by DKK 52m
Total provisions amounted to DKK 479m in Q1 2020, of which “stage 1” and “stage 2 “ (group-wise provisions incl.
management supplement) amounted to DKK 270m and “stage 3” (individual) amounted to DKK 209m
In Q1 2020, DLR instituted additional “corona-specific” impairment charges of DKK 62m as a management
supplement based on the current expected consequences of the corona pandemic
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0
100
200
300
400
500
600
700
2013 2014 2015 2016 2017 2018 2019 Q1 2020
mio. kr.
Accumulated individual impairment provisions
Agriculture Owner-occupied
Private rental and cooperative housing Office and retail
Stage 1 and 2
2012 2013 2014 2015 2016 2017 2018 2019 Q12020
Impairment provision as share of lending
Periodical impairment provisions
Accumulated impairment provisions
-0.1
0.50
0.40
0.30
0.20
0.10
0.00
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TAKEOVERS AND FORCED SALES
The number of completed forced sales on
properties in which DLR holds a mortgage was 15
in Q1 2020 against 17 in Q1 2019
In Q1 2020, DLR repossessed 1 property, against
3 properties in Q1 2019
At end-Q1 2020, DLR had a stock of 7
repossessed properties worth DKK 38m
0
10
20
30
40
50
60
70
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1
2014 2015 2016 2017 2018 2019 2020
DKK m.
Forced Sales Properties where DLR holds mortgage
0
10
20
30
40
2013 2014 2015 2016 2017 2018 2019 Q1 2020
DLR's stock of repossessed properties (number)
Full-time agriculture Part-time agriculture and residential Private rental and cooperative housing Office and retail Other properties
STATUS ON AGRICULTURE
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The prices of milk and pork continue to be at a stable high level, but could come under some pressure as a result
of the current worldwide corona-pandemic
180
200
220
240
260
280
300
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2015 2016 2017 2018 2019 2020 2021
DKK0.01/kg
Development in milk price quotation - Milk price incl. supplements etc..
Milk conventional Forecast February 2020
Source: Arla.dk & SEGES Note: Q2 2020 milk prices are based on preliminary price for May 2020
7
8
9
10
11
12
13
14
15
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
2015 2016 2017 2018 2019 2020 2021
DKK/kg
Development in pork price quotation
Danish Crown quotation Forecast, February 2020
Source: SEGES
Note: Q2 2020 pork prices are based on prices end-of-April 2020
1. Interim financial results Q1 2020
2. Lending and credit risk
3. Capital structure and rating
4. Funding
AGENDA
17
CAPITAL BASE
(DKKm) Q1 2020 2019 2018
Equity
- Share capital
- Distributable reserved
- Non-distributable reserves
570
10,622
2,338
570
10,403
2,338
570
10,066
2,338
Total equity 13,530 13,311 12,974
CET1 12,703 12,647 12,344
Subordinated capital (Tier 2) 1,300 1,300 650
Capital base 14,003 13,947 12,994
DLR’s total capital ratio, %
Capital requirement, % 1)
Capital surplus, % point
17.0
12.7
4.3
17.1
13.7
3.4
16.9
13.0
3.9
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1) 9.2% individual solvency need added 2.5% capital conservation buffer, 1% SIFI buffer requirement and 0% counter-cyclical buffer.
CAPITAL STRUCTURE
DLR’s total equity amounted to DKK 13,530m at end-Q1 2020 compared with DKK 13,311m at end-Q4 2019
The total capital ratio was 17.0% at end-Q1 2020 and the core capital (CET1) ratio was 15.5% (non-audited
result of the period not included)
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6%
8%
10%
12%
14%
16%
18%
2013 2014 2015 2016 2017 2018 2019 K12020
DLR's capital ratios
Capital ratio CET 1 ratio
0
2
4
6
8
10
12
14
16
2014 2015 2016 2017 2018 2019 K1 2020
DKK bn
DLR's capital structure
Equity Hybrid core capital (EUR) Hybrid core capital (PRAS) Tier 2 capital
CAPITAL REQUIREMENT AND CAPITAL RATIO
At end-Q1 2020 DLR’s capital base amounted to DKK 14,003m, equivalent to a capital ratio of 17.0%
DLR had excess capital of DKK 3,542m at end-Q1 2020, on top of the total capital requirement of DKK
10,462m
DLR’s total capital requirement was reduced to 12.7% as a consequence of the counter-cyclical buffer being
reduced to zero
20
1.85%
-
2
4
6
8
10
12
14
16
Adequate capital base (solvencyneed)
Capital surplus Capital base Capital target Q2 2020
DKKbn
DLR's capital requirement and capital ratio, 31 march 2020
Adequate capital base (solvency need) Buffer requirement (SIFI, capital conservation and contra-cyclical buffer)
DKK 3.5bn (4.3%)
DKK 7.6 bn (9.2%)
DKK 12.7bn (15.5%)
DKK 14.0bn (17.0%)
DKK 2.9bn (3.5%)
10.5 bn
(12.7%)
(DKKm)
Q2 Q3 Q4 Q1
2019 2019 2019 2020
Standard IRB Standard IRB Standard IRB Standard IRB
Credit risk 2,924 3,037 3,099 2,933 3,223 2,925 3,270 2,908
Supplements to 8% requirement 545 534 551 549
Market risk 245 165 204 203
Supplements to 8% requirement 335 320 435 457
Operational risk 193 193 190 190
Supplements to 8% requirement 0 0 0 0
Other risk 0 0 0 0
Adequate capital base, total 7,279 7,245 7,529 7,577
Total risk exposure STA/IRB 79,995 79,883 81,784 82,135
Of which from credit risk 36,552 37,962 38,744 36,656 40,292 36,561 40,871 36,355
Individual solvency need, % 9.10 9.07 9.21 9.23
Statutory adequate capital base 7,279 7,245 7,529 7,577
Supplements due to statutory requirements 0 0 0 0
Individual solvency need after supplements,% 9.10 9.07 9.21 9.23
SIFI-requirement,%-points 1.0 1.0 1.0 1.0
Capital preservation buffer, %-points 2.5 2.5 2.5 2.5
Countercyclical buffer, %-points 0.5 1.0 1.0 0.0
SIFI-requirement Faroe Island, %-points 0.01 0.01 0.01 0.01
Total statutory capital requirement, %-points 13.1 13.6 13.7 12.7
SOLVENCY NEED STATEMENT
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OWNERSHIP STRUCTURE
22
31 march 2020 31 march 2019 31 march 2018
Share capital Share of share capital Share of share capital Share of share capital
DKKm % % %
Local Banks 263 46.0% 45.5% 42.1%
Nationwide Banks and Jyske Bank 148 26.0% 31.3% 34.9%
Nykredit Realkredit 69 12.1% 12.2% 12.2%
PRAS 41 7.2% 6.8% 6.8%
DLR 46 8.1% 4.1% 3.8%
Other Banks 3 0.7% 0.2% 0.2%
Total 570 100% 100% 100%
DLR’s RATINGS WITH S&P
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DLR has an issuer credit rating (ICR) of A- with a stable outlook
The rating is supported by an ALAC-uplift of +1
The high issuer credit rating adds an extra buffer of 2 unused ‘uplifts’ to the AAA-rating of DLR’s covered bonds
DLR’s covered bonds are supported by a further high overcollateralisation of Capital Center B compared to
S&P’s OC-requirements
A-/Stable/A-2
A/--/A-1
1. Interim financial results Q1 2020
2. Lending and credit risk
3. Capital structure and rating
4. Funding
AGENDA
24
DLR’s COVERED BOND SERIES
25
LCR bond size requirements
• 89% of DLR’s total amount of outstanding bond amount currently comply with the LCR bond size requirement
for Level 1B (+500m EUR) or Level 2A (+250m EUR)
• DLR’s largest covered bond series are dominated by the CIBOR-based ARM-Short bonds and the ARM bullet
bonds with long maturities
-
2
4
6
8
10
12
14
16
18
1 %
B O
ct 2022
CIB
OR
6M
+20 B
2021 IO
CIB
OR
6M
+24 B
2020 IO
CIB
OR
6M
-4 B
2022 IO
1 %
B O
ct 2021
CIB
OR
6M
-7 B
2024 IO
1 %
B 2
050
1 %
B O
ct 2023
1 %
B O
ct 2020
0,5
% B
2040
CIB
OR
6M
-6 B
2023 IO
1 %
B O
ct 2024
1 %
IO
B 2
050
CIT
A6M
+36 B
2023 IO
1,5
% B
2040
1 %
B J
an 2
021 IT
2 %
B 2
050
1,5
% B
2050
1 %
B 2
040
1,5
% B
2037
2 %
B 2
047
DKK bn.
LCR complaint bonds, April 2020
Level 1B Level 2A
A WELL BALANCED FUNDING STRUCTURE
26
The many new callable bonds issued over the past year have implied that 29 pc of all DLR’s covered bonds were
long-term fixed-rate bonds at the end of April 2020
Also, there has been a significant shift away from ARM bullet bonds with short maturities
Overall, DLR’s funding structure is today far more well-balanced than 5 yeas ago
3%
31%
36%
1%
29%
Q1 2020
ARM 1Y
ARM 2Y
ARM 3Y/5Y
ARM-Short Loans
Other floating rate
loans
Fixed-rate loans
57%
15%
13%
15%
Q4 2013
MATURITY PROFILE
- on DLR’s outstanding bonds
27
The transition towards loans with longer interest reset periods has contributed to reduce DLR’s annual refinancing
need, and the most common interest rate fixation period on the reset loans is now 5 years
When refinancing the variable rate bonds funding ARM-Short loans, DLR targets the 5 year segment for new
issuances
Only 16 pc of DLRs outstanding bonds have to be refinanced within the coming year
0
5
10
15
20
25
30
35
40
45
0-1 y 1-2 y 2-3 y 3-4 y 4-5 y 5-10 y 10-20 y +20 y
DKKbn
Maturity profile of DLR's outstanding bonds - April 2020
ARM 1Y F2 ARM 3Y/5Y ARM-Short Loans Other floating rate loans Fixed-rate loans
REFINANCING - of bonds maturing in the coming 12 months
28
Close to DKK 25bn DLR covered bonds are up for refinancing within the next 12 months
• Refinancing of 1Y-5Y interest reset loans amounts to approx. DKK 13bn, while around DKK 12bn stems from
refinancing of variable rate loans
• Going forward, refinancing of 1Y interest reset loans will be concentrated in January of each year, and refinancing
of 3-5Y interest reset loans will take place in April
• Variable rate loans of approx. DKK 12bn are up for refinancing at 1 July 2020
Maturity date Bond type Loan type Currency Reference rate Refinancing
frequency
Amount
(DKKbn)
01-07-2020 SDO Variable rate DKK 6M CIBOR 1 - 10 y 11,970
01-10-2020 SDO Interest reset loan DKK 01-10-2020 5 y 7,516
01-01-2021 SDO Interest reset loan DKK and EUR 01-01-2021 1 - 5 y 5.379
01-04-2021 SDO Interest reset loan DKK 01-04-2021 1 - 5 y 173
Total 25,038
ISSUED SENIOR DEBT - April 2020
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Type Amount (DKKbn) Issue date Maturity date Maturity
(years) Reference rate Spread
SRN 1,000 15-06-2017 15-06-2020 3 3M CIBOR 0.62%
SSB 2,000 20-03-2018 01-04-2021 3 3M CIBOR 0.31%
SNP 1,000 02-07-2018 02-07-2021 3 3M CIBOR 0.70%
SRN 1,000 15-09-2017 15-06-2022 4¾ 3M CIBOR 0.75%
SSB 1,000 01-10-2019 01-10-2022 3 3M CIBOR 0.94%
SNP 750 12-04-2019 01-07-2023 4 3M CIBOR 1.15%
SNP 250 12-04-2019 01-07-2023 4 Fixed rate 1.07%
Total, senior debt 7,000
DLR issues Senior Secured Bonds (SSB) to provide supplementary security for DLR’s covered bonds in Capital
Center B, including out of rating considerations. DLR’s issued SSBs total DKK 3bn
Further, DLR has issued Senior Resolution Notes (SRN) and Senior Non-Preferred Notes (SNP) totaling DKK 4bn
to meet the debt buffer requirement which, when fully phased-in from June 2020, will amount to 2 pc of
unweighted loans outstanding. From 2022, the total of DLR’s capital and debt buffer (loss-absorbing capital/debt)
requirements must make up at least 8 pc of the institution’s total liabilities
30
CONTACT IR
Jakob Kongsgaard Olsson, Head of IR & Rating
Direct number: 33 42 07 06
Mail: [email protected]
www.dlr.dk