Danske Bank A/S

Thomas Borgen - Chief Executive Officer Jacob Aarup Andersen - Chief Financial Officer Claus Jensen - Head Investor Relations

Mads Thinggaard - Handelsbanken Capital Markets Omar Keenan - Deutsche Bank Jakob Brink - ABG Sundal Collier Norge ASA Per Grønborg - Skandinaviska Enskilda Banken AB Jan Wolter - Credit Suisse Securities Willis Palermo - Goldman Sachs Kim Bergoe - Nordea Markets Martin Brandt - Carnegie Investment Bank Jacob Kruse - Autonomous Research Daniel Do-Thoi - JPMorgan Securities

Thank you, operator, and I thank you all for taking time to listen into this call today. With me in the room today, I have our CFO, Jacob Aarup Andersen; and Head of IR, Claus Ingar Jensen.

Slide 1 please. In today's call, we have the pleasure of presenting Danske Bank's financial results for 2016.

We aim to keep this presentation to around 20 minutes. After the presentation, we will open for a Q&A session as usual.

Afterwards, feel free to contact our IR department if you have any more questions. Slide 2 please.

2016 was a satisfactory year for Danske Bank. We are pleased to report steady progress in our financial performance as well as continued improvement in customer satisfaction.

Net profit came in at DKK 19.9 billion, up 12% from the level in 2015 excluding goodwill impairment charges. This gain a return on shareholders' equity of 13.1% which fulfills our longer term financial ambitions of at least 12.5%.

The operating environment remain challenging throughout the year where a continuation of negative rates, low-to-moderate growth, and increased [geopolitical uncertainty]. As a result, the market generally saw subdued demand and strong competition in many areas.

We are therefore very much encouraged by the results, which demonstrates the strength of our diversified business model and also show that we have successfully executed our strategy of becoming a more customer-centric, simple and efficient bank. Macroeconomic developments in 2016 were characterized by modest growth in Denmark and Finland, whereas in Sweden growth declined slightly during the year from a high level.

In Norway, where we also saw modest growth, economic activity outside all industry picked up towards the end of the year. In Northern Ireland, uncertainty increased after the UK referendum in June although, the outcome did not have a large effect on the economy.

Developments in the financial markets were a key factor in a period. Early in 2016, global uncertainty caused a slowdown in customer activity that was followed by a robust rebound in the second half of the year.

This was particularly for our C&I business with only slight interruptions around the UK referendum, and EU membership in June, and the U.S. Presidential election in November.

Strong customer activity had a positive effect on our trading income. We saw good progress in lending activity as volume grew 5% of the level last year.

Growth was strongest at Personal Banking and Business Banking in Norway and Sweden, reflecting our strategy of realizing our Nordic potential. Partnerships agreements both new and existing ones were strong facilitators of growth at Personal Banking and in second half of 2016, we signed promising new agreements in Finland and in Sweden.

In Denmark, we continue to see demand from [watch loans] while unsecured lending declined. Expenses came in according to plan in 2016 as we continued to focus on costs.

We made good progress in improving cost efficiency through digitalization and improved internal processes. Going forward, we will remain vigilant regarding expenses to ensure that we remain competitive.

Credit quality was strong and it improved further in 2016. Impairments remained usually low, although, a couple of industries to which we have limited exposure were still challenged because of a weak market conditions.

Our capital position remained very solid. On the basis of sound earnings and continues business optimization, we strengthened our capital ratios during the year, despite the effect of the share buyback program that we recently completed.

On that basis, the Board of Directors is proposing a dividend of DKK 9 per share, which represents a payout ratio of 45%. We have also decided to launch a new share buyback program for DKK 10 billion.

In 2016, we continued our efforts to improve the customer experience. Digitalization and accessibility are focus areas for us and we launched many initiatives across our business units in order to strengthen our customer relations.

As a result, customer satisfaction improves further during the year, but we are now on target in most markets. All-in-all, a satisfactory year with good progress in most areas despite a challenging environment.

Finally, for 2017, we expect a net profit in the range of DKK 17 billion to DKK 19 billion. I will now turn the presentation over to Jacob, who will take you through the financial results in greater detail.

Slide 3 please.

Thank you, Thomas. Let's take a look at the main items of our financial results.

Net interest income came in at DKK 22 billion. This was 3% higher than in the year before.

Lending growth of 5% and lower funding costs offset margin pressure. A margin pressure we saw especially in the first half of 2016.

Adjusted for FX effects, NII was up 4%. In Q4, NII was up 5%, going partly to the repricing of Danish mortgages and volume growth.

Net income declined 6% from the level in the year before when we benefited from strong customer activity. It fell mainly because of subdued investment activity.

In Q4, however it benefited from performance fees and the booking of the shadow account balance from our Life and Pensions business. Net trading income came in at DKK 8.6 billion, up 26% as a result a strong client activity at C&I during most of the year.

The figure reflects a negative credit value adjustments of DKK 0.6 billion, because of a model improvement, and a gain of DKK 0.8 billion relating to the sales of Visa Europe and Danish Ship Finance, including DKK 0.4 billion in Q4. Other income rose 34% primarily because of property sales.

Operating expenses fell 3% to DKK 22.6 billion. That decline reflects our focus on cost efficiency and we achieved that despite increased cost related to regulatory requirements, a lower net contributing to the Danish Resolution Fund and lower depreciation of intangible assets also had positive effects.

The cost/income ratio came in at 47.2%. That's a decline in more than three percentage points from the year before.

Finally, we saw net reversals of loan impairment charges as a result of the nine credit conditions in most areas. Net reversals in Q4 of DKK 0.2 billion were mainly at Personal and Business Banking.

Slide 4, please. In 2016, we saw satisfactory developments at our two Nordic banking units, Personal Banking and Business Banking.

Income was lower than the year before when fee income in particular benefited from high custom activity. That was related to investments and remortgaging.

At both units the underlying business continued to improve with a good inflow of new business, strong credit quality and improvements in customer satisfaction. In Northern Ireland, we saw positive underlying business developments net of currency effects.

Let's look more closely at the three units. Personal Banking delivered good results with profit before tax and goodwill up 34% to DKK 5 billion.

Total income was 3% lower than in the year before [indiscernible] on NII and fee income. In 2015, activity driven income, particularly from remortgaging activity in Denmark was very high.

Expenses were down 9%, owing primarily to cost efficiency, lower depreciation of intangible assets and lower costs for guarantee funds. The return on the allocated capital was 21.8%.

Total leading volume was up 3%, owing to growth in Norway and Sweden, where lending volume measured in local currency rose 13% in both countries. These strong gains came from primarily from partnership agreements.

In Denmark where volume was almost stable – the trend towards higher mortgage lending and lower lending in conventional loan products continued throughout the year. In Finland, volumes were almost unchanged.

At Business Banking, we made good progress in all markets. Lending volume measured in local currency was up in all markets, most notably in Denmark, excluding Realkredit Danmarks and in Sweden where rose, 8% and 10% respectively.

Overall profit before tax was up 3%. Total income was almost unchanged from the level in 2015 when customer activity in Denmark in particular was very high.

NII benefited from higher lending, whereas low customer activity had an adverse effect on fees and trading income. Expenses were up 2%, partly because of higher regulatory costs.

The return on the allocated capital was 16.1%. And then finally Northern Ireland, where our business showed satisfactory developments, although a significant drop in the exchange rate had an adverse effect on the reported results.

Total income fell 7%, adjusted for the depreciation of the currency it was up 3%, despite a UK interest rate cut in August. Expenses were down 9% and again adjusted they were up 2% because of restructuring costs and increased in direct taxation.

The return on the allocated capital in Northern Ireland was 14.5%. Since the UK referendum on EU membership in June, there has been uncertainty of our future economic growth.

Economic data suggest that there was no significant effect on the Northern Ireland economy in 2016. However and our business performance remain robust.

Slide 5 please. At C&I profit before impairments rose 8% over the level from last year, but higher impairments cost profit before tax to be 10% lower.

The year had a challenging start with difficult market conditions and subdued client activity. Conditions improved significantly however, most notably in our FICC business, which took advantage of opportunities arising from high client activity.

Total income rose 7%, mainly because of higher NII and trading income. Fee income was lower because of a decline in activity in the beginning of the year, but increased in Q4 going to higher activity within corporate finance and equities.

The expenses were up 5% because of higher activity and increased costs for the Danish Resolution Fund. Impairments, which by nature fluctuated C&I, amounted to DKK 1.1 billion including DKK 1 billion in collective charges oil-related exposure account for all of the charges.

The overall result Q4 contributed significantly to a robust full-year performance, which reflects our efforts to reposition C&I towards a more client driven business model with lower risk and income volatility. At Wealth Management, profit before tax was in line with the year before as market developments and high volatility caused lower customer activity, mainly in the beginning of the year.

Market conditions improved in the second half and activity rose. Fee income fell 4% from the level last year, mainly because of lower management fees, while performance fees, the vast majority of which were booked in Q4 amount to DKK 0.5 billion.

Fee income in Q4 also benefited from a transfer from the shadow account in Danica. The expenses were up 5%, mainly because of establishment costs for the new business unit.

Assets under management were up 4%, moving to an inflow of DKK 43 billion from net sales and premiums. Slide 6 please.

Moving on to expenses, total expenses for 2016 amounted to DKK 22.6 billion, down 3% from the level last year. The number is in line with our expectations.

The decline reflects a continued focus on cost efficiency measures and lower net contribution to the resolution fund and lower depreciation of intangible assets. The increases in stock cost and consulting cost can be attributed primarily to increase customer activity and regulatory requirements for compliance and AML measures.

The number of FTEs were 1% higher than the level last year and this incur up the cost of the in-sourcing IT resources and increased stocking in compliance functions. Slide 7 please.

The positive trend in credit quality continued in 2016 and for the second year in a row, we had a net reversal for the group. The reversal was DKK 0.2 billion compared with a net reversal of DKK 0.1 billion in 2015.

The loan loss ratio excluding non-core activities was zero basis points for the full-year. With a net reversal of DKK 0.5 billion, Personal Banking had the largest decline has the positive effect of increased collateral values mainly in Denmark continued throughout the year.

At Business Banking, the net reversal of DKK 0.2 billion derived mainly from the Commercial Property segment in Denmark. Market conditions for the agriculture industry also remain challenging, although they improved slightly towards the end of 2016 as a result of higher output prices.

At C&I, we booked impairment charges of DKK 1.1 billion for the full-year of which DKK 450 million in Q4. The vast majority were against oil exposure as we continue to see difficult market conditions for subcontractors in the oil and gas industry.

Most of the charges DKK 1 billion of the DKK 1.1 billion were collective impairments since we expect weak market conditions to persist. In Northern Ireland, we posted another reversal of charges on the basis of better conditions in the property market and customers finances, although the reversal was less than half the amount in 2015.

Slide 8 please. Our capital position remains strong and with a reported common equity tier 1 capital ratio of 16.3% at the end of the year, we are significantly above our target range of 14% to 15%.

The total capital ratio was 21.8%, up from 21% at the end of 2015. The real level was almost unchanged in Q4, a slight decrease in credit and counterparty risk were offset by small increases in market and operational risk.

The leverage ratio was 4.6% according through transitional rules and 4.3% when the new rules are fully phased in. The implementation of IFRS 9, which is the new accounting standard for financial instruments, will begin on January 1, 2018.

The requirement for earlier recognition of expected credit losses is expected to increase the allowance account balance by DKK 3 billion to DKK 5 billion. The Company capital effect is expected to be phased in, according to transitional rules that have not yet been settled.

The share buyback of DKK 10 billion in 2017 will affect the core tier 1 capital ratio by 1.2 percentage point pro forma at the end of 2016. The new share buyback program will start on February 3 and one for no more than 12 months.

Slide 9 please. Finally, I would like to represent our guidance for 2017.

As usual, it is subject to uncertainty and macroeconomic developments. We expect lastly unchanged macroeconomic conditions in 2017 with a continuation of very low short-term interest rates, although, significant uncertainty about geopolitical risks persisted.

For net interest income, we expected to be higher than in 2016 as we benefit from volume growth and lower funding costs. Fee income is expected to be somewhat higher than last year subject to customer activity.

Net trading income and other income are expected to be less impacted by positive special items compared to 2016. We expect expenses to decline somewhat from the level in 2016.

For loan impairments, we expected charges to remain low, although, higher than in 2016. Finally, we expect net profit to be in the range of DKK 17 billion to DKK 19 billion for the year.

We maintained our longer term ambition for return on shareholders’ equity of at least 12.5% on the basis of unchanged assumptions. Slide 10, please.

Those were our initial comments and messages. We are now ready for your questions.

Please limit yourself to two questions. If you are listening to the conference call from our website, you are welcome to ask questions by email.

Operator, we are ready for the Q&A session.

Yes. Hello, this is Mads Thinggaard from Handelsbanken Capital Markets here.

My first question is taking a bit into the thing I mean the development you are seeing in Personal Banking in Norway, I don't know if you could put a bit of lights on what is happening with the margins here and also perhaps give a bit of an outlook we just [had, I mean to being on the] conference call talking about perhaps about a bit higher margins going forward. And also perhaps with the volumes being a bit lower now here by the end of the year in Norway, I mean the increase in the volumes being a bit lower.

Could you kind of give an outlook here also and then I was also a bit curious if you could kind of mention the deal with Akademikerne in Norway when is that actually maturing or expiring or is this a kind of running negotiations on that one. So that could be quite interesting to hear.

That was the first question.

Okay. That was a long introduction of the question.

First of all there is no question that we've been able to attract a substantial number of very high quality Personal Banking customers in Norway during the last 2.5 years. Many of these clients are coming through Akademikerne strategic relationship.

Second, it is rightly observed that the margins in [the recent] mortgage markets has been under pressure throughout the latter part of 2015 and throughout 2016. There has been – what we will refer as healthy competition.

Where margins are going from here it's always an uncertainty, but it is our belief that we are close to the bottom of the cycle. So we are comfortable that it's highly unlikely that we will have a margin expansion in Norway going forward also due to NIBOR being lower which increases what we call the difference between the funding rate and the customer rate.

Finally, we also did recently a rate hike which has been announced, which also have the effect during Q1. So all of this together should make a good platform for healthy development going forward.

When it comes to the volume, it has been a very high volume in 2015 and 2016. It is natural that that volume made ease of somewhat, but we will believe that it will be a double-digit and they will need to see at what level of double-digit it will be, but we will probably still increased our market share.

The strategic deal would agreement was a five-year agreement, which is now running.

Okay, great. Thanks and then just the second question on – if we look on the very high and are you it’s a considerable part is coming from other activities treasury and it seems that some fund transfer pricing changes are behind this?

Is that kind of unsustainable element of the DKK 300 million uptick in NII from Q3 or is Q4 more or less that the basis for looking forward?

Hi, Mads, it’s Jacob. And when we look at NII, it is correct, when you look at delta in Q4 versus Q3 and I think the delta is around DKK 300 million.

The growth there – roughly half of it comes from the business units in terms of reporting and the other half comes the internal bank as you was refer to. The increase in internal bank is very natural when you have a growing lending book and stable deposit margins.

So that's more technicality in the way we run the internal bank and you should expect that to balance out in the coming quarters. So there is nothing unsustainable about that.

That's simply just an effect of the way the model works. So that that NII will be spread out on the BUs in the coming quarters.

So it's just as high quality NII as the BU reported NII.

Okay, great. Great, thanks.

Good afternoon. Thanks so much for taking the questions.

First you have the question on your DKK 3.2 billion rate sensitivity. I was wondering if you could give us a little bit more color of how and I will behave when rates increase?

There's been such as discussion around some banks saying that this quite flows in the lending books. So the sensitivity might not get high as these guided numbers.

So just wondering if you could comment on if we get out to negative rates, where we see the full – is a DKK 3.2 billion quite close to reality. And just my second question is, I guess with a month out of the way, how was trading and also banking activities have been so far in 2017?

Thank you.

Okay, I’ll do the last one because that’s easy one, we do not comment on period which we are in the bits and we release Q1 you…

Jacob?

Fair enough.

But it’s a fair trail Omar. On the other one, are you referring to the fact that we mentioned that 25 basis points is sensitivity gives you DKK 750 million to DKK 800 million.

I mean that's when you're saying 100 basis points is DKK 3.2 billion. Is that the reference you're making?

Yes, yes.

Good, just want to make sure. And listen that is as always everything – all else equal statement.

I cannot guarantee you that that is the sensitivity we will have because it always all also depends on how the market participants behave et cetera. But it is the best estimate we can give you on the rate sensitivity on the book.

Obviously one thing I can guarantee you is probably not exactly that number. But it really depends on market condition.

So but that is the all else equal number we can give you.

Yes, okay. I mean I think some of the banks are saying that it would actually be far away from that number.

So I understand it's not precise, but some banks that will factor inflows in the lending book for instance? So as long as that's ballpark accurate that's okay.

We have given that number because we believe its ballpark accurate.

Great, thank you.

Thank you. So the first questions regarding a net interest income.

If I do the calculation from your slight peck on the positive impact from lower funding cost in 2017 versus 2016 or sort of a running impact or annualized impact get to around DKK 245 million. However, when we did the same calculation about a year ago, it also showed a significant positive impact for 2016, but it never really got to be utilized.

Could we expect some of this to actually happen in 2017? That was my first question.

The second question is regarding the dividend payout. So you've guide for DKK 17 billion to DKK 19 billion, I guess there's some conservatism, but still you’ve guide for DKK 17 billion to DKK 19 billion.

And if we assume that you'll keep your dividend policy of around 46% or up to 50%, you could actually see a decline in the dividend per share in 2017. I just want to hear how is your strategy actually could that happen or do you actually have a strategy of trying to keep the sort of the nominal kroner dividend per share increasing or could it theoretically bump up and down?

Thank you.

Okay. Thanks, Jakob.

Let me start with the NII. So on the funding calculation, I think when we do the math quickly, we ended a little bit lower than your number, but not materially different.

It is around the DKK 200 million levels. You can't really say that you didn't see it in 2016 because do remember that the funding benefit is then goes through the internal bank and goes out into customer rates.

So it is – in the end, we never reported as a separate item. But I do recognize the fact that in some of our markets we were in severe competition, so it can be an argument to some of that funding benefit was passed on to customers.

We are giving you that sensitivity because we do expect that this is a tailwind in 2017. So the best answer I can give you is that we are expecting to achieve these benefits and it’s part of the guidance we're giving in terms of NII growth for the full-year.

Okay. Jakob, when it comes to dividend, we have a very clear policy as you alluded to that we will pay between 40% and 50%.

We have not stated that we should increase the number of amounts year-on-year because that would be a different strategy than what we have given you as approved by the Board of Directors. 45% this year, for the calendar year 2016 amounted to DKK 9.

If we reach the midpoint of DKK 18 billion in 2017 and 50% we also reached to DKK 9. You asked the question, could it be bumpy up and down.

It is not our intention to have it bumpy up and down. It’s our intention to continuously try to improve the bottom line and then have the flexibility within the dividend policy between 40% and 50% to have a predictable dividend.

How the final will be adjusted accordingly, the year will see it come through, but we try to be very balanced and predictable and you shouldn’t expect anything else.

Many thanks.

Good morning. It’s Per from Danske.

Two questions from my thought related to NII. You write in the report that part of your strong Q4 NII is due to better utilization of your liquidity part.

Was this clever positioning this quarter or is this something where you have changed the strategy, so we should expect this improvement to be lasting or through the coming quarters? And more specifically also question related to your margin hike on the mortgage book, it looks like the outcome has been significantly higher than what your IR department has been guiding for the last half year.

Have you seen any impact besides the residential book, have you also seen these prices getting impact on the corporate book? That was my two questions.

Hi, Per. It’s Jacob.

I assume you are at SEB now by the way and you said Per from Danske.

Yes, sorry.

I’ll take question number two there. In terms of [ID] and the hikes there, I think I fix our way – where they have been guided to.

So I'm a little bit confused in terms of the impact you're stating.

Guiding has been [DKK 300 million] plan; I mean it’s up 94 Q-over-Q?

I think when you look at the details, I mean we can take them afterwards, the pure RD mortgage margin it's a smaller effect in the 90, so we can take that afterward. The guidance from…

Okay. And this is Claus here.

Your question around the liquidity profile impact on NII. It is true that there is – a part of the impact on NII this quarter are due to a more efficient use of our liquidity profile.

But it’s not something that we usually can predict from quarter-to-quarter, so I'm not able to give you any guidance on whether this is will be lasting, but it is nevertheless a minor part of the delta you have seen in our NII.

What is a minor part? Is that a three ticket amount or it is a two ticket amount?

Well, you are essentially asking me to separate cold and hot water and I’m not able to do that.

Okay. That’s the important part.

Thank you.

Yes. Hi, Jan Wolter at Credit Suisse.

Thanks for taking the questions. First on the guidance of the 2017, you said that you expect NII to be higher than in 2016.

Just wondering have you built in any changes in interest rates in that guidance? And secondly, also on the NII guidance, what kind of volume assumptions you have and that's my first question.

And second on the cost guidance below the 2016 number, what base should we use or which base are you using? Is that the reported DKK 22.6 billion?

And my third question is on the Danish SME margins you are seeing the more stable picture now in the fourth quarter. Can you just talk to what is driving that?

Have you seen any change in the competitive behavior in the Danish SME market? Thank you.

Thank you. Let me start with the NII question.

You asked in terms of what we expect on interest rates when we do the guidance. We never assume changes in the interest rates on guidance here, so when we guide here, we are assuming the current levels.

So you may assume that if there is a move up in the short end of the curve which we are not expecting in the short-term that that could have an additional cost of impact, but we never guide on interest rates and therefore it’s based on flat rates. In terms of volume assumptions, we are not giving you the explicit assumptions on volume, but we are entering the year 2017 with a good trajectory.

You know that we have been talking about in our 2018 bridge which we have referred too many times. A couple of percent of annual volume growth, we know we're running higher in 2016.

There are some reasons why we could believe that that volume growth could be a little bit higher than the 2% and as you’ve seen our partnership agreements in Sweden et cetera, but there is not a significantly high volume assumptions behind that. So it is business as usual on the volume side.

And regarding SME margins, you alluded to and that’s correct. They have been flattish for the last period.

We also expect them to be flattish going forward. There maybe some intra country movements, some up, some down, but all for the group more or less flattish that's how we see it for the time being.

Sorry and you also asked on cost. The base here is 22.6 there's no – it's the record number.

Okay. That is very clear.

Thank you for that.

Thanks.

Hi. Thank you for taking my question and for the presentation.

First one is just to come back on the targets, again the DKK 17 billion to DKK 19 billion. I was just trying to understand, if you had to give a proportion of what his controllable and what is not to reach DKK 19 billion.

So what’s in your view, so what’s depending on your initiatives on repricing and so on and what is depending on this market activity i.e. better trading?

That's the first question. And then the second one is on the asset gathering part of the business.

I was just wondering if you talk a little bit on the initiative you’re currently implementing in that business. We saw there was – and then also the flows where it being better at the end of the year.

So did you setup new targets for that business and what do you expect in terms of fee growth this year?

Okay, thank you very much. Let me start on the target side.

If you look at what is controllable and there are different degrees as what we can control within this guidance and we are very much a mirror of the economy that we are operating in as you know. But basically if you look at the topline, the NII side volume growth will be the volume growth that we can achieve, but we it’s out to say we can control that.

We have implemented some price increases that you are aware. So obviously and that is a tactic we will continue to focus on in terms of driving NII growth.

But you should not see our topline is something we can control as such. Obviously, fees we said.

But again fees are driven by customer activity. You mentioned trading income, we are not guiding specifically for trading income.

We are only saying that we have had some positive one-offs in 2016 on the training side that will not occur again in 2017. So topline, there is an element of cause of us being able to control the fees and the rates, but a lot of it is driven by market activity.

The one line, we can control to a much larger extent is obviously costs, where we will be very focused and rigid, and again in 2017. And then finally the credits side, the loan impairment side, with to a large extent obviously reflect the underlying performance of our clients.

So sorry to not be able to be more specific on it, but there are different degrees across the different lines of the income statement.

And to your second question about our new unit wealth management, which were established April 1, 2016. As you recall, it's a combination of the old Danske Capital in other words the asset management unit, Danica, our Life Insurance Company and Private Banking.

And we really believe that the underlying trends, in other words asset accumulation in the Nordics and also the demographics and also along with that it makes this a very interesting business for us going forward. Various analysts are out expecting the underlying market development should be in the range of 6% to 9% towards 2020.

Where exactly will be, we don't know, but we think we are in a mega trend. Our ambition is of course to take an over proportion of that market growth.

During 2016, the management has been put in place with substantial changes. So that platform in place, management in place and some internal ambitious are put in place.

We are so far not communicated any particular divisional targets to the market and we have no intention to do that now, but we will as we did with the - when we find prudent to give you and your colleagues some more insight into what do we think wealth management contribute with going forward.

All right, thank you very much.

Okay.

Hi, just one question for me and just trying to sort of square the circle on net interest income, again I'm afraid, but and also looking into the guidance. So if I look at – so what's been driving the margin and net interest income for the year and before in isolation?

And then looking forward, it looks like in Q4 the lending margin has been quite strong. What's the deposit margins actually been the negative, whereas it's the opposite looking at the full-year?

And then when I look at your guidance, I'm just trying to understand if it is a continuation of the same kind of drop or is it something else that you're expecting in your NII guidance? Referring to in your Factbook, the Page 7 where you show sort of the different drivers?

Yes, that’s fair. Kim, let me just give you some color and then hopefully that helps a bit.

Let’s just step back and look at that what we've been through in 2016. So you referred to some of the trends yourself and it is correct that we saw a different NII development that's towards the end of the year versus when you just look at the full-year picture.

If you look at the full-year picture, NII was up 3%, FX adjusted up 4% and the positives in NII was the lending volume and it was the deposit margins, especially in C&I and probably also in Business Banking as we reprice the deposit side of things, but the negatives on the full-year has been the lending margin. As you know a lot of that development was in the first part of the year and it became better in the latter part of the year.

In Q4, we didn’t saw continued lending volume growth, so that's been a positive throughout the year. But we saw lending margins trying to actually get positive contributor to our NII.

So you see in the bridge you refer to, you’ll see a positive impact from lending margins. There is a smaller negative effect on deposit margins in Q4 that is not a new trend, but it purely reflects the fact that we have been growing deposits a bit in our Swedish and Norwegian units, but we are paying a bit more for deposits given where rates are.

So that is not a change. So when you look into the New Year, we are looking at a stabilization of margins.

The stabilization of margins we've seen here in Q4 with basically stable deposit margins as you've seen in the last couple quarters and lending margins in most countries being stable and with a bit of upside especially in Norway on Personal Banking and Business Banking. So margin picture is more constructive, combined that with the fact that we are seeing continued good lending growth and combined that with the fact that we are seeing a continued tailwind from the funding role on the wholesale side.

So I would say the combination of those three factors makes us constructive on NII going into 2017.

And I sort of assume, obviously it takes into account what you've been describing in terms of the mix effect that I mean where you are growing is on the lower margin sort of the secured lending and actually the unsecured. I mean what I was saying is that when looking at volumes it looks like you're having stronger volume growth – on the lending side, you are having stronger volume growth on the lower margin the sort of household products, the housing products and you're actually seeing a decline in some of the unsecured lending.

So there is a negative mix effect in that that's part of that picture?

Yes. I can confirm that’s part of the guidance.

So we're not expecting a sudden mix change. The mix we've seen in recent period is the one we expect to continue.

Thank you.

Okay. Thank you.

Hey. Thanks for taking my questions.

So both of my questions related to Personal Banking, I see the lending volumes are both up in Sweden and Norway and how much in percent comes from Saco and Akademikerne. And how big is the delta effect, it could be in – they can still be gained from these two?

And then my second question is that once the agreement with Akava and TCO kicks in 2017, should we expect to see similar patterns in these two as we've seen in Saco and with Akademikerne?

Thanks. Let me try to address that.

We will not give you specific numbers on each of these different partnerships, but we can confirm that it is when you look at the growth we are seeing at these countries it's more than half of the growth that is coming from these partnership agreements. So it is a significant part.

When you refer to the different partnership and the effects we should expect to see. It is fair to say as Thomas alluded to in the beginning, in one of the other questions Akademikerne has been a very strong growth story and we do continue to see – expect to see good growth from Akademikerne, but in terms of the base effect that does mean that the growth rates will come down a bit compare to what you have seen.

On the other hand Saco was a strong contributor especially in the second half of last year as the agreement fully came into force. We have told you that the TCO agreement will come into force probably, effectively in the second quarter of this year.

So again, you will see some momentum coming from that. And we will not speculate exactly as to what the growth impact will be as each country has its different characteristics et cetera.

Each agreement has its own characteristic, but there is no doubt that we expect that this is a positive contribution to our growth and thereby maintaining the good growth momentum in all of our Nordic countries in Personal Banking.

And just an addition, it's no question that having these strategic agreement as a base also gives the various units a good bus which attracts also the non-clients or clients not related to the strategic partnerships; so overall, this is a very positive for us.

Okay. Thank you so much.

Hi. Thanks, it’s Jacob from Autonomous.

I just wanted to ask, firstly, on the payout, you're kind of paying out the 100% cash this year or year and a half. Would you say that’s a limit that you cannot reach with FSA and the current sort of regulatory framework that you have or regulatory uncertainty that exits?

Secondly, just on this TCO deal. I noticed that you’re already the most aggressive list prices in Sweden when it comes to mortgages.

How much far does this bring down pricing relative to where you are today? Thank you.

Let’s take your first question first. Of course, there is no legal limitations of the payout, and you need to separate it that when it comes to the dividend that's to be approved by the AGM.

I know when it comes to the share buyback it needs to be approved by the national or the relevant regulators. We believe we have a very solid capital strategy, which is a combination as you know now which never a stable and predictable dividend and then we take the profitable growth and after we met the capital targets and if we have any excess capital, we will distribute that back to the shareholders.

If there was a theoretical situation where we were above 100%, we would need to deal with it at that time, but the probability for us to be in the position where we will distribute more than 100% where we are seeing several places of growth opportunity is highly unlikely. So I think that will be my response to that question.

Jacob on your TCO question, first of all we don't comment on the pricing of different agreements, but there is no reason to expect that this should be struck at a lower level than what else we've been doing in the Swedish market, so.

And would you say given where your price at the moment, have you shifted the growth towards Sweden rather than the Norway in terms away of the more aggressive or is that reading too much into it?

Not as reading too much. We have an ambition to have profitable growth in Norway, in Sweden and in Finland.

Finland, we have not grown that much due to competition, due to pricing and the macroeconomic environment. We will probably see some will growth due to the agreements with Akava and Norway, Sweden we will continue with a balance and healthy growth.

So there is no change in that strategy. Could I have the final question please?

Hi, thank you. Just a quick question, the first one was on a follow-up on the NII sensitivity.

Just wondering whether that also includes for the DKK 750 million or DKK 800 million that was include the fact that you got negative deposit rates in C&I and Danish Business Banking? That’s my first question, i.e.

the sensitivity actually lower for the first 50 basis points or so rate hike. And then secondly when it comes to Sweden, can you just remind us again sort of at a high level, what kind of market share you're sort of targeting in the longer-term?

So yes, what market share you need to ensure sufficient profitability in that in Sweden? Thank you.

Thanks, Daniel. Let’s start on the NII side.

No, there is not a lower sensitivity in the first 50 basis points you referred to. So that is not a material impact.

So you should expect that to be the sensitivity from the level where it’s right now.

And when it comes to your second question, we have not guiding and will not guide on any particular market share overall in Sweden as we are profitable as of today, but we think we can leave even more profitable as we grow going forward. The market share are today is very diverse where we have a very small market share in Personal Banking.

We have a sizable market share in Business Banking and actually in C&I, we maybe one of the leading players particularly within what we call the trading activity, institutional clients and parts of corporate banking. The last new unit Wealth Management is also where we have a small market share, where we see a great potential to growth.

So we have a good platform. We have a good management in place.

So it's more of the same and make sure that we grow profitable, but we already are at a place, which is very solid.

Thanks. Just on the first one.

So the assumption here is that you can maintain sort of current negative rates in C&I and in business banking even in the face of another rate hike?

Well, first of all we never comment on what our price behavior would be, but we are saying underlining that assumption is that they will not have a major impact on the NII side is. But there are many, many assumptions when you do this given the diversity of the book across different currencies et cetera.

So we do not expect a large impact.

Okay. Thank you.

End of Q&A

Okay. Thank you for your interest in Danske Bank and for your good questions.

As always, you are welcome to contact our IR department if you have more questions as you have time to look further into the financial results. A transcript of this conference call will be added on our website and IR app within the next few days.

Thank you very much and have a nice afternoon