DANSKE BANK A/S HOLMENS KANAL 2-12 DANSKE BANK GROUP DK-1092 KØBENHAVN K 2011 TEL. +45 33 44 00 00 CVR-NR. 611262 28-KØBENHAVN WWW.DANSKEBANK.COM L REPORTL ANNUAL REPORT A ANNU 2011 DANSKE BANK GROUP 15 countries 645 branches 21,320 employees 5,000,000 customers DENMARK IRELAND SWEDEN GERMANY Supplementary information DANSKE BANK NATIONAL IRISH BANK DANSKE BANK DANSKE BANK HAMBURG DANICA PENSION FINANCIAL CALENDAR LINKS REALKREDIT DANMARK NORTHERN IRELAND NORWAY ESTONIA 27 March 2012 Annual general meeting The Danske Bank Group www.danskebank.com NORDANIA LEASING NORTHERN BANK FOKUS BANK SAMPO PANK 10 May 2012 Interim Report – First Quarter Retail Banking Denmark www.danskebank.dk 2012 DANSKE CAPITAL Retail Banking Finland www.sampobank.com ENGLAND FINLAND LATVIA 7 August 2012 Interim Report – First Half DANSKE MARKETS Retail Banking Sweden www.danskebank.se 2012 DANSKE BANK LONDON SAMPO PANKKI DANSKE BANKA Retail Banking Norway www.fokus.no 30 October 2012 Interim Report – First Nine Months 2012 Banking Activities www.northernbank.co.uk LITHUANIA Northern Ireland 7 February 2013 Annual Report 2012 DANSKE BANKAS Banking Activities Ireland www.nationalirishbank.ie Realkredit Danmark www.rd.dk RUSSIA CONTACTS Danske Capital www.danskecapital.com DANSKE BANK Henrik Ramlau-Hansen +45 45 14 06 66 Danica Pension www.danicapension.dk ST. PETERSBURG Chief Financial Officer Martin Gottlob +45 45 14 07 92 POLAND Head of Investor Relations More information about the Group’s financial results is available at www.danskebank.com/reports. DANSKE BANK WaRSAW LUXEMBOURG DANSKE BANK INTERNATIONAL DANSKE BANK / ANNUAL REPORT 2011 3 ANNUAL REPORT 2011 CONTENTS MANAGEMENT’S REPORT FINANCIAL STATEMENTS 4 Executive statement 58 Contents 6 Financial highlights 60 Income statement 7 Overview 61 Statement of comprehensive income 8 Financial review 62 Balance sheet 24 Business units 63 Statement of capital 26 Banking Activities 66 Cash flow statement 30 Danske Markets and Treasury 67 Notes 32 Danske Capital 162 Danske Bank A/S 34 Danica Pension 37 Other Activities STATEMENT AND REPORTS 38 Capital and liquidity management 183 Statement by the management 46 Investor relations 184 Auditors’ reports 48 Organisation and management 55 Corporate responsibility MANAGEMENT AND DIRECTORSHIPS 186 Board of Directors 188 Executive Board Annual Report 2011 is a translation of the original report in the Danish language (Årsrapport 2011). In case of discrepancies, the Danish version prevails. 4 DANSKE BANK / ANNUAL REPORT 2011 EXECUTIVE STATEMENT When 2011 began, we hoped that the financial conditions had a pronounced effect in Denmark, as crisis was receding and that macroeconomic non-viable banks were liquidated under the rules fundamentals would lead to a gradually improving of Bank Package 3, causing losses for senior debt business environment. holders. Danske Bank was downgraded twice, mainly because the rating agencies felt that Bank As it turned out, 2011 was yet another year of Package 3 implicitly weakened systemic support. mounting challenges for the financial sector and The adoption of Bank Package 4 in late summer and our customers. the prospect that systemically important financial institutions would be designated in Denmark took The public budget deficits and weak economies of a some of the pressure off the banks. The market for number of Western countries caused considerable senior debt generally closed down in mid-2011, turbulence in the capital markets, and several while the covered bond market was periodically euro-zone countries needed massive bailout accessible. Although the difficult funding situation packages. A number of EU countries announced affected the Group, we carried out planned issues and implemented fiscal tightening, and growth successfully. rates fell in our key markets. Earnings, on the other hand, suffered from the In April 2011, the Group strengthened its capital economic and capital market woes and were position markedly through a share offering with unsatisfactory in view of the Group’s business pre-emption rights for existing shareholders. The platform and potential. We have therefore launched net proceeds amounted to almost DKK 20 billion. initiatives to improve earnings and ensure that our With the extra capital, Danske Bank was in a business model is competitive and creates value position to repay, as early as in 2012, the hybrid even in times of low economic growth and high capital raised in 2009 from the Danish state. An capital and funding costs. agreement with the state on prepayment terms that would be financially satisfactory for Danske Bank Key elements of this work are product repricing could not be reached, however, and we decided not and a stronger focus on good, efficient service to prepay the loan. to selected customer segments through the right channels. In December, the European Banking Authority (EBA) tested the capital strength of Danske Bank In addition, the Group adopted a new three-year and 70 other European banks. The test assessed cost-savings programme. It focuses on improving the banks’ need for recapitalisation. As expected, both customer service and operating efficiency. Danske Bank passed the test with a capital level The cost reductions are supported by customers’ substantially above the EBA’s requirement. use of the Group’s new self-service products, such as mobile banking, for an increasing number of Banks’ access to funding suffered from the unrest banking transactions. in the capital markets. Funding costs rose, and issuance opportunities became fewer. These DANSKE BANK / ANNUAL REPORT 2011 5 EX E CUTIV E STAT E M E NT These initiatives will gradually reduce the Once again in 2011, our staff made a substantial, need for staff resources. We expect that a proficient and invaluable contribution for which we substantial number of reductions can be made are very grateful. without redundancies if staff turnover, including retirements, is unchanged. Management changes After 43 years with the Group – 25 on the Being a universal Nordic bank, the Group remains Executive Board and 14 as CEO – Peter Straarup dedicated to strengthening advisory tools and is retiring. The Board of Directors has appointed solutions for large corporate customers in the Eivind Kolding as chief executive officer effective Nordic region. We also aim to become the market 15 February 2012. Peter Straarup will retire at the leader in the business segment by virtue of our same time. increasingly advanced product range. Consequently, on 19 December 2011, Eivind The Group continues to invest heavily in digital Kolding resigned as Chairman of the Board of product innovation, focusing on usability and Directors and from the three board committees on increased accessibility, in particular for personal which he served. The former Vice Chairman of the customers. The mobile banking application for Board of Directors, Ole Andersen, succeeds Eivind smartphones was developed further in 2011, and a Kolding as Chairman. Niels B. Christiansen has tablet banking solution was introduced towards the been elected Vice Chairman. end of the year. Customers like the products, and these technology initiatives enable us to support Eivind Kolding continues as member of Danske the changes in customer behaviour. Bank’s Board of Directors until he assumes the position of CEO. We believe that the Group has the right foundation to improve its earnings. The capital and liquidity positions are satisfactory, our technology is market-leading, employee satisfaction is above Ole Andersen Peter Straarup the sector average, and customer satisfaction is Chairman of the Chief Executive Officer rising. On the basis of our strong market position in Board of Directors the Nordic countries, we will continue to focus on serving existing customers as well as possible. Our various initiatives are intended to lift the return on equity considerably over a three-year period. Our ambition is gradually to achieve a competitive return that, as a minimum, matches the Group’s cost of capital. 6 DANSKE BANK / ANNUAL REPORT 2011 FINANCIAL HIGHLIGHTS INCOME STATEMENT Index (DKK millions) 2011 2010 11/10 2009 2008 2007 Net interest income 23,537 23,843 99 27,524 27,005 24,391 Net fee income 8,298 8,699 95 7,678 8,110 9,166 Net trading income 7,325 7,707 95 18,244 6,076 7,378 Other income 3,648 3,882 94 3,083 3,585 3,010 Net income from insurance business 569 2,146 27 2,810 -1,733 1,118 Total income 43,377 46,277 94 59,339 43,043 45,063 Expenses 25,987 26,010 100 28,907 28,726 25,070 Profit before loan impairment charges 17,390 20,267 86 30,432 14,317 19,993 Loan impairment charges 13,185 13,817 95 25,677 12,088 687 Profit before tax 4,205 6,450 65 4,755 2,229 19,306 Tax 2,482 2,786 89 3,042 1,193 4,436 Net profit for the year 1,723 3,664 47 1,713 1,036 14,870 Attributable to non-controlling interests 11 3 - -14 25 57 BALANCE SHEET (END OF YEAR) (DKK millions) Due from credit institutions and central banks 74,041 89,619 83 109,236 79,795 128,242 Repo loans 256,027 306,962 83 239,183 369,999 504,940 Loans and advances 1,698,025 1,679,965 101 1,669,552 1,785,323 1,700,999 Trading portfolio assets 909,755 641,993 142 620,052 860,788 652,137 Investment securities 109,264 118,556 92 118,979 140,793 37,651 Assets under insurance contracts 230,668 217,515 106 196,944 181,259 190,223 Other assets 146,623 159,276 92 144,531 126,017 135,338 Total assets 3,424,403 3,213,886 107 3,098,477 3,543,974 3,349,530 Due to credit institutions and central banks 177,592 175,825 101 184,653 434,334 522,750