Danske Bank A/S

Welcome to the conference call for Danske Bank's Financial Results for 2021. Thank you all for taking the time to listen in on this call today.

My name is Claus Jensen and I am here of Danske Bank's Investor Relations. With me today I have our CEO, Carsten Egeriis and our CFO, Stephan Engels.

Slide one please. In today's call, we will present for Danske Bank's financial results for 2021.

We aim to keep this presentation to around 30 mts. After the presentation, we will open up for a Q&A session as usual and afterwards feel free to contact the Investor Relations department if you have any more questions.

I will now hand over to Carsten Egeriis.

Thanks Claus. 2021 has been a very busy year at Danske Bank where 2020 marked a year in which we turned the corner and laid the foundation for continued execution of our plans.

2021 was a year that saw the first results of our significant efforts. The year started with a more or less complete lockdown in many countries, followed by a complete reopening of the societies over the summer.

Thanks to the successful rollout of vaccine programs. However, the combination of a new coronavirus and the winter season led to the renewed lockdown measures we have recently seen in many countries.

Despite different degrees of lockdown, economic activity was at a very high level during the year and was characterized by potential capacity constraints in the labor market and higher inflation. In this somewhat turbulent environment, we saw strong customer activity in all segments of our business, especially in our capital markets business, we saw strong progress and high activity levels, and I'm very pleased that not only our strong competencies within advisory and digital services, but also our strong value propositions within sustainable products have been able to meet our customer needs and expectations.

In order to facilitate our ongoing transformation and strengthen our focus on commercial momentum, we made an announced changes to our organizational setup in the last few months. Firstly, in order to strengthen execution, we will reorganize our commercial organization with the aim of supporting and even stronger focus on delivering value to our personal and business customers by separating P&BC into personal customers and business customers.

Secondly, in order to accelerate our progress and to further focus on creating a great customer experience, we have appointed Philippe Vollot as Chief Administrative Officer to enhance our end to end focus our on our comprehensive financial crime plan. In terms of our sustainability agenda, we made important and tangible progress on all our various targets through 2021 and we continued to raise the bar and lead the industry to the benefit of our customers, society and all our stakeholders.

Just yesterday, I was proud to announce that as the first Nordic bank to do so, we are setting CO2 reduction targets for selected key sectors towards 2030 in relation to our loan portfolio. With these targets together with our customers, we are making a commitment and as a bank, we are fully focused on offering our customers the best advisory services and attractive financing options to support and to facilitate our customer's sustainable transitions.

In 2021, we reached the midpoint of our ambitious 2023 plan and we took the opportunity to adjust the plan due to the headwinds we have faced in some areas in the past two years. This work confirmed that in a normalized state, we can deliver on our financial ambitions of a return on equity of 9% to 10% and a cost income ratio in the low 50s.

For 2023 specifically, expect to deliver a return on equity of 8.5% to 9% and a cost income ratio in the mid 50s. One of our key messages from our communication at Q3 was an even stronger focus on execution of our commercial priorities with a key focus on regaining momentum in the retail segment.

And in this context, I'm happy to note that already in Q4, we started to see an uplift in lending volumes in our retail business in Denmark and towards the end of the quarter, a higher market share for new lending at rightfully [ph] Denmark. Financially 2021 was a further step in the right direction due to stronger income as a result of high customer activity and a continually diligent execution of our cost initiatives, we managed to increase profit before loan impairment charges by 22% from the level in 2020.

Loan impairment charges came in significantly lower the normalized levels and thus contributed to a net profit of approximately DKK13 billion or almost three times the level from last year. The return on equity improved from 2.6% in 2020 to 7.6% in 2021.

In accordance with Danske Bank's dividend policy, we intend to pay out a total dividend of DKK7.5 per share corresponding to 50% of reported net profit. The board of directors proposes an initial dividend payment of DKK2 to the Annual General Meeting and the remaining DKK5.5 is intended to be paid out in three trenches following the publication of interim reports in 2022, subject to a decision by the board of directors in accordance with the authorization given to the board and based on the usual assessment of Danske Bank's capital position at the end of each interim period.

This approach is taken to preserve the dividend policy of the bank while also ensuring a prudent capital management with a high degree of flexibility in light of the Estonia matter. As we remain unable to estimate any potential outcome or timing.

Thus Danske Bank's dividend policy remained unchanged targeting a dividend of 40% to 60% of net profit. For 2022, we expect net profit to be in the range of DKK13 billion to DKK15 billion, which Stephan will elaborate on later.

Next slide please. With the progress we've made throughout the year, we're now on the right path to accelerate our commercial momentum and to keep improving operational efficiency.

The key strategic aspects, which we will emphasize in all of our initiatives will center around three pillars. First, through digital convenience, we will empower our customers in their daily banking needs and enhance our efficiency and further enable our advisory And this leads to the second pillar specialized and tailored advisory where our service model and value proposition will strengthen the focus on our customer's more complex need, for example in relation to the green transition, which leads me to the third pillar, which is providing the right solutions and advice in relation to sustainability.

For our corporate segment, we continue to expand offerings through our district platform, a key enabler of our newly implemented service model and our ability to capitalize on ancillary business. At the same time, we have equipped our business advisors to become more efficient.

Towards 2023, we aim to have close to three out of four credit cases for small business customers handled digitally. We're already seeing good progress with 50% of credit cases being handled in our digital process and which will further improve our time to market and also free up capacity for our advisors.

For the retail segment, we continue to develop innovative solutions and to nudge our customers using fee incentives. This has already led to our advisors spending less time on daily banking needs and more time on home finance needs and investment opportunities, which in turn supports our efforts to enhance the value proposition for selected segments, such as private banking, mass affluent, and young potentials.

Moreover, we're seeing an increasing use of our digital tool for re-mortgaging, including around 900 daily calculations and overall activity on our R&D side has in fact increased 23% since we launched the revamp site underpinning again, the improving trend we have seen for front book market share. And within retail investments, we saw strong activity with positive net sales for each quarter of the year, particularly in Denmark and Sweden.

In Denmark, we see our customers placing more of their investments under our advisory, whether this be in Danske and desk products or products offered by other providers. For our corporate franchise, customers continue to appreciate our strong advisory offerings and throughout 2021, we've maintained our number one position in the Nordic ECM and DCM league tables and recent Prospera surveys have been also been very satisfactory.

Finally, in relation to our market leading position within sustainability, we continue to train our advisors to service our customer's growing need for green transition services and we're all well positioned to maintain our number one position as a leading Nordic bank within sustainability advisory and fundraising. In addition, we have also been focusing on upscaling our retail advisory capabilities to better identify sustainability related opportunities in which we can help our customers to make sustainable choices.

And this is for example, when it comes to sustainable home renovation. We will continue to improve our digital solutions, our advisor services, and to solidify our position within sustainability.

So before I hand over to Stephan, I'd just like to take a step back. In 2021, it was a very eventful year for Danske Bank.

We managed to uplift our top line by 4% with increasing momentum on key parameters in Q4 and also to enhance efficiency and to sharpen our organizational setup and we continue to see improvements in how we service our customers and together with our franchise, our strong franchise in the LC&I segment a solid platform for business customers and also the green shoots that we're seeing in our retail business, the foundation is there for continued progress in 2022. And now, I'll hand over to Stephan to review our financial performance.

Thank you, Carsten. Slide four, please.

As Carsten just mentioned, we had good results in 2021, including continually strong performance in Q4. Overall, the results were founded on good progress for all key reporting lines, including total income expenses and loan impairment charges.

Total income benefited from a positive development in all income lines. NII was stable from last year as deposit repricing initiatives mitigated continued margin pressure.

In Q4, we saw small improvement in underlying NII, which for the first time in '21 was attributable to higher lending volumes. Net fee income benefited from stronger customer activity and came in 11% higher than in 2020, not only on the basis of strong demand for capital market financing solutions among our customers, but also on the basis of a rebound in activity related fee income from personal and business customers.

In Q4, fee income continued to benefit from strong customer activity in all areas, as well as from the annual booking of performance fees in our asset management unit. Trading income contributed more than DKK4 billion of total income, only slightly less than in 2020.

In Q4, trading income was up from the preceding quarter due to a gain of DKK0.2 billion of the sale of [indiscernible] to MasterCard. Our insurance activities also contributed strongly and above normalized level to the improvement in total income, Danica benefited from a combination of solid progress in the underlying business and a better investment result based on improved market conditions.

Other income for which we usually don't have many comments was up 34%, due mainly to good activity in asset finance and higher income from our real estate agency home in Denmark, driven by generally higher turnover in the housing market. Operating expenses came in 4% lower than last year as we saw the expected decline in transformation and compliance cost.

Furthermore, our initiatives to reduce costs continue to yield results and contributed positively in the form of lower staff cost. This was partly counted by mainly one-off items and higher performance based compensation.

In Q4, cost came in slightly higher than expected, due primarily to higher performance based compensation. The elevated level of costs for our legacy cases also had a negative impact on expenses.

I will comment on the cost development in more detail later in this call. The change in impairment charges was a very significant driver of the improvement in profit before tax in our co-activities.

Total charges for '21 amounted DKK2.3 billion and in Q4, we booked a reversal of DKK0.2 billion reflecting strong credit quality. As such, net profit for the year amounted to DKK12.9 billion up from DKK4.6 billion in 2020.

Slide five please. Now looking at our P&BC business unit, we have made solid and consistent progress and while we continue to navigate in a low interest rate environment, we ended 2021 with several green shoots that are worth recognizing, including the uptake in lending, we see both in PCDK [ph], PC Nordic and for our business customers.

Clearly we still need to improve our retail position in Denmark, but we have recently seen that the value proposition that we offer to our customers is being recognized as the trend in the front book lending keeps improving with reality Denmark, recent accounting for market share of 18% as Carsten alluded to before. Part of this can be ascribed to our fixed rate, flex loan, flex life loan, which has already reached more than DKK20 billion in new loan agreements.

Specifically, the month of December marked a very strong return as new Denmark lending amounted to 24% of the market in a month that is especially important given the high amount of refinancing. And while we have mitigated margin pressure through several deposit growth, deposit repricing initiatives that have yet to fully in our full year numbers, we have also managed to capitalize on the incentive that creates that for our customers to allocate cash savings into our recognized investment solutions and support [ph] fee income across the Nordic countries in particular Denmark and Sweden.

Our retail net sales have increased in all quarters of 2021. In general, we have seen a strong inflow of assets under custody, which combined with the market development resulted in assets under custody in P&BC to increase by 20%.

We continue to make progress in respect of our underlying expenses to enhance our operational efficiency, which together with a very strong quality of our loan book have underpinned a solid 40% uplift in profit before tax. Slide six, please.

Turning to LC&I profit before tax was up significantly as a result of a 15% increase in fee income for the full year, significantly lower impairment charges and lower operating expenses. The record high fee income from capital market activities made 2021 a remarkable year.

The development demonstrates that the investments we have made over recent years to build a strong capital markets advisory offering to achieve a larger proportion of capital light income have been very prudent. For the full year, the strong fee income also compensated for lower NII as increasing corporate current demand towards the end of the year could not offset the negative impact from NII from lower income from deposits.

Income from other activities in investment banking and securities came in around DKK1.9 billion for the full year translating into to a 55% increase from last year and cementing our position as a lead Nordic bank in terms of volumes and providing a strong foundation for the future. Through 2021 LC&I continued to partner with our customers in executing their strategic agendas.

This was especially evident as we've supported issuers and investors alike in a substantial number of green transactions affirming our position as a leading Nordic bank with sustainable finance. In terms of volumes, we have arranged sustainable bonds in the amount of US dollar $12 billion for our customers, which is more than we or any Nordic arranger has ever arranged in a full year.

Our asset management activities are also developing favorably and we saw continued good momentum in 2021 with 68% of our funds performing above benchmark, supporting a sustained fee generation for our investment offerings. In conclusion LC&I in '21 contributed strongly to the group's 2023 ambitions by leveraging a strong market position and capitalizing on the Nordic -- on the growing Nordic capital markets, for instance, with sustainable finance and investments and thereby growing capital light income.

Slide seven, please. Now let's take a look at Danica Pension and our activities in Northern Island, Danica delivered very strong financial results for 2021 in particular, due to favorable financial market conditions that underpinned products where Danica bears the investment risk.

Additionally, the positive performance was attributed to sound underlying business development as Danica was able to boost premiums by 30% after securing new key mandates. Life insurance continued its solid underlying performance in Q4, although the step up from Q3 was due largely to the accounting correction of DKK250 million recognized in Q3.

The health and accident business saw underlying business progress, but was also in '21 affected by provisions related to the pension year tax. Assets under management ended the year up 3% and largely flat quarter over quarter, but were affected by the Danica Norway transaction we now in December.

Consequently, we have reclassified almost 24 billion of assets held for sale. Adjusting for this assets under management would've been up almost 9% year-over-year and 5% in the fourth quarter alone.

Due to the strong equity markets in '21, combined with the uncertainty related to financial markets that we have already seen in the month of January, we would be cautious to commit to the strong results we have seen in 2021 going forward. Our operations at Northern Island progressed steadily in '21 on the back of our strong competitive position with market leading levels of customer satisfaction in both personal and business banking.

With total income -- while total income was down for the year, this was largely attributable to negative mark to market movements on the hatching portfolios, reflecting UK interest rate expectations. Even so profit before tax improved by DKK240 million due to strong credit quality and significant impairment reversal for the year.

Lending activity remains subdued with many personal and business customers continuing to pay off debt and hold additional liquidity. On the other hand, we maintain the healthy quality of our loan book and the economic outlook for Northern island continues to improve.

In the first quarter, we saw continue new improvement in commercial activity and the impact of pricing actions, higher UK rates in combination with an improved outlook for the economy supports our constructive view going forward. Next slide, please.

Now let us take a closer look at the underlying development in net interest income for the group. On NII, we have managed to navigate through a difficult operating environment where margin pressure and retail lending dynamics counted our deposit repricing initiatives.

NII for the year ended in line with 2020, but we have seen small and gradual improvements in all quarters of 2021. In Q4, we continued our efforts, optimized deposit pricing structures for business customers in Denmark.

Further while we have yet to see the full contribution from the lower retail threshold, we introduced earlier in the year, we would continue to adjust and optimize our pricing for both retail and corporates to the competitive landscape. For the first time in a while, we reversed the trend on lending volumes as they contributed positively in Q4.

This was a result of lending in reality Denmark, improving in combination with the continually positive development in retail, Norway, as well as green shoots within corporate credit demand that are emerging. We expect corporate lending to improve further in 2022 as business sentiment remains constructive and corporates are likely to expand their credit facilities due to account for the rising inflationary pressure to invest further in optimizing their supply chains or to obtain transition financing related to their green agenda.

At the same time, we also expect to assist our customers by taking over credits from the government support packages. The direct from lending margins in Q4 can largely be attributed to timing effects in terms of the Norwegian rate hike as our customer rights lack NIBOR due to the notice period customers have.

And finally, Q4 was affected by a positive contribution from TATRO [ph] which countered the NII cost related to our one-off business travelers tax. Slide nine, please.

Let's have a look at fee income. As we discussed on some of our previous slides, fee income was strong and grew 11% from the level last year.

It is the highest level we have seen for three years and fee income made a valuable contribution to the good result for the year. The increase was due mainly to much stronger income from almost all fee generating business activities.

Capital markets related activities in, in particular, which were up 36% from last year saw strong customer activity throughout the year, including continued good momentum in Q4. Fees generated by investment activities, benefited from higher customer activity, stronger investment offerings and positive developments in -- development in assets under management.

Income in Q4 included the annual booking of performance fees of DKK0.3 billion in asset management. Both year over year and relative to the preceding quarter, activity related fees were up positively impacted by the higher customer activity for example, through cash management activities and transaction banking and further supported by the reopening of societies during the year and the strong economic activity in general.

For lending and guarantee related income however, we saw a decline due to a lower amount of refinancing of variable rate mortgage and a very high remortgaging activity in 2020. The uplift in Q4 was due partly to stronger customer activity and income from the refinancing auction that takes place towards the end of the year.

Slide 10, please. Trading income came in at DKK4.1 billion for the year, slightly lower than the level in 2020, which benefited from very high activity in the financial markets.

Income in 2021 included gains of DKK0.4 billion from the sale of Visa shares and IA [ph], whereas trading income in 2020 benefited from higher positive XVA adjustments. At P&BC, trading income was up 17% from the level in 2020 driven by stronger customer activity, following the reopening of societies.

At LC&I, which is the main contributor to this item, 2021 was characterized by good customer activity, albeit not at the level in 2020 when the trading environment was more supportive and driven by higher volatility and easier monetary policy. In Q4 trading income was up 11% excluding value adjustments due to more volatile markets.

The result for the trading line, which has been relatively stable over the last five quarters reflects both cyclical as well as structural changes in our markets business. Slide 11, please.

Now let's take a look at our operating expenses, for the full year, the main contributors to our improving cost trajectory was a decrease in cost for transformation for which we booked significant amounts in 2020 and lower cost for ML, including in particular, the Estonia case where we concluded our internal investigation in Q4 2020. These significant improvements were accounted by a higher amount of one-off costs, higher activity driven performance based compensation, additional legacy remediation costs as well as higher resolution fund contribution due to the inflow of deposits.

Adjusting for one-offs, our underlying costs was 6% lower year over year and the digital efficiency gains that Carsten alluded to earlier are already starting to show and will continue to materialize in 2020 and beyond. This will have a positive effect on staff cost as the number of FTEs, continue to decline.

Adjusting for the compliance related upscaling, we ended the year with a reduction in FTE's of more than 1100. We expect further effects from natural attrition and our announced investments of business areas to underpin our ongoing improvements in operational efficiency.

In Q4, expenses came in higher against previous quarter, partly ascribed to seasonality effects, but also from remediation costs at an elevated level as expected. With a high activity and corresponding uplift in fee income described earlier, performance based compensation also increased.

In addition, we saw higher expenses related to a one off provisioning from the ruling around business travelers tax, as well as the Corona related staff cost of DKK0.2 billion related to unused vacation days, which is considered of a more one-off nature. So as we continue with our better bank agenda, we have seen solid improvements in our underlying cost tagout in line with the communication around our 2023 ambitions, we remain confident that we are past the peak in financial crime cost.

We will keep redeploying resources to our financial crime agenda through our 2023, but once we conclude our remediation program in 2023, we have line of sight for material cost takeout. We still have work to do to simplify our cost structure, but the entire EOT is committed to improving the cost income ratio.

Slide 12 please. Turning to credit quality and impairments, the improvement seen throughout the year continued in Q4.

Actual single name credit deterioration and losses remained limited and we therefore end of the year with a loan loss level of one basis point for the group. While some sectors remain impacted by the recent restrictions, the quality of our loan book continue to improve and we saw net reversals during the quarter, particularly among corporates at LC&I.

Due to the uncertainties that the rapidly rising inflation has created, coupled with the restrictions imposed because of the Omnichron variant and the fact that new potential variants could result in similar uncertainties, we saw a slight increase in provisions related to our macro model as we prudently adjust our economic scenarios. In addition, we made a slight amendment to our post model adjustments, as we continue to maintain a healthy buffer to account for tail risk associated with the pandemic, including the repayment of Corona related state loans that is due to start on April the 1st.

But overall, we remain very comfortable with the quality of our loan book while we expect -- while we expect impairment levels to normalize somewhat going forward, we are reassured by the significant de-risking of balance sheet that has undergone in recent years. Next slide, please.

Now let's take a look at our capital position in which remained strong and with a healthy buffer to regulatory requirements. Our reported core tier one capital ratio decreased to 17.7%, following the final REA [ph] increase associated with the implementation of EBA guidelines.

In total, we have increased REA by DKK98 billion in relation to the EBA Guidelines during '21 but along with this increase, we have as guided for previously, now received the relief from our initially established pillar to add on. As a result of our current CET requirement has been reduced to 12.5% and compared to Q3, our capital buffer improved to more than 500 basis points.

In addition to the effect from the increase in REA, our total capital ratio was affected by the redemption of DKK3 billion 81 nodes that were effect redeemed at par on November 23. In our capital planning, we remain mindful of the regulatory landscape, including the announcement to raise Danish countercyclical buffer to 2%.

We continue to generate and preserve a healthy level of capital, but even today, we are comfortable with a buffer we have to the fully faced in requirements and we continue to expect a limited REA impact from Basel 4. The bank's leverage ratio was at 4.9%, according to transitional rules and 4.8% under fully first in rules.

Next slide place. And finally to our outlook in 2022, our significant progress in '21 marked an important stepping stone as we further enhanced our platform and commercial momentum.

From here on, we continue to execute on our outlined initiatives in order to reach our profitability targets in 2023 and beyond. For 2022, we expect income from core banking activities to be higher than in '21, while net income from insurance is expected to normalize from the strong performance we saw this year and like trading income, this will be subject to the development of the financial markets.

We expect cost in 2022 to reflect our ongoing focus on cost management and to be around DKK25 billion. Besides mitigating actions to account for inflationary pressure, our cost base will continue to reflect elevated remediation cost, as well as the inclusion of the Swedish bank tax and regulatory expenses off around DKK0.4 billion in total.

Credit quality is expected to remain strong and underpins impairments that will remain below eight basis points, which we view as our normalized loan loss ratio. Net profit for 2022, which will include the gains from Mobile Pay DB Luxembourg and Danica Norway us is expected to be in the range of DKK13 billion to DKK15 billion.

Slide 15 please and over to Claus.

Thank you, Stephen. Those were our initial comments and messages.

We are now ready for your questions. Please limit yourself to two questions and if you are listening to the conference call from our website, you are welcome to ask questions by email.

A transcript of this conference call will be added to our website and the IR app within the next few days. Operator, we are ready for the Q&A session.

Yeah. Good morning.

Here is Sofie from JPMorgan. So given that you still have the US overhang if there is the potential find, what's your view on kind of potential share buybacks given that your stocks trades below book values.

And so how do you think about share buybacks? Is that fully kind of something you're not considering or would you consider that in future?

And, then my second question would be on kind of on the cost line. There were some headlines in the local press last week or earlier this week, do you expect quite continuation of very high level of AML costs still until 2025.

Cost guidance is a little bit higher than expected for 2022, but how should we think about costs beyond 2022? So if you could comment there then.

Thank you.

Yeah. Hi morning.

Let me take those in turn. No, I mean, we would consider share buybacks in the future, but as of now we continue with the dividend policy 40% to 60% and that is something that we would consider as we get potential line of sight into the Estonia matter.

Then on the cost line, the AML costs we presented I believe in Q3 the trajectory on AML costs, we see a normalized AML cost of DKK1.5 billion from 2025 and out. We haven't changed that.

So that continues to be the case and likewise in terms of cost in 2022 going into 2023, we remain committed to the mid fifties cost income ratio in DKK23.5 of costs in 2023.

Okay. That's clear.

Thank you.

Thank you for taking the question. The, first question is on the development on the [indiscernible] payment in the the coming years.

How should we look at that?

The 81 [ph] payments fall basically into categories as we have equity and debt accounted 81s. The equity accounted 81s are distribution of shareholder profit.

And those, we expect to go down as we change the setup in general and that applies for both the lines given that we are redeeming instruments here that partly have been issued during our call it higher credit spread times. We expect a positive funding effect from those actions

Secondly, on the activity pipeline, the line [ph] was, as you said, were strong, how does the pipeline look going into 2022? Are we to expect a similar activity level and also we should see that, how does that feed into higher performance based compensation?

Thank you.

Yeah. So, we're guiding to a higher core banking income in 2022.

So, the combination of NII and fees and obviously we had a very strong Q4 in fees. So we would expect to roughly maintain fee income, but have an overall higher banking income driven, particularly by NII.

We see a strong customer activity and strong customer demand and we see the sort of escape velocity from Q4 and also November, December continuing into 2022 and then you asked the question on performance pay, which will be a function of particularly the capital market based income but again, I would expect that to be more or less in line with what we've seen in '21 and '22.

Yes. Thank you.

Two questions from my side, just for comment. I'm wondering a bit that your call, there's a good result.

You're generating 7.6% return on equity. I hope you don't perceive that be a good result, but then to my questions on the cost guidance, I could hear from the earlier question that you're still guiding for DKK23.5 billion in '23.

Can you give a bit more light on '22, and especially what's the impact of the state of Luxemburg Mobile Pay, Danica Norway, when do we expect that to kick into the cost and are those investments included in your guidance?

Hi, Per. On whether or not it's a good result, we're proud of the progress for me, it's about progress and it's about momentum, and we feel very good about the momentum that we're seeing across all our business areas and the significant improvement that we've seen in across all the lines and all the businesses over 2021.

Then in terms of the impact of the various different one-offs, we have both Mobile Pay Luxemburg and the Danica transaction most likely hitting us in the first of this year. And we expect gain from divestments of Mobile Pay of around DKK450 million Lux around DKK350 and Danica Norway about DKK400 million.

So it's about a DKK1.2 billion impact altogether.

But how much is there will be a lower cost due to those divestment, how much will that give you a tailwind on '22 costs?

Per, it depends a little bit on when the transactions will really happen, because until then we will still account for those costs. So we expect probably a net -- net positive of DKK 400 million in '23 and maybe a slightly lower amount in '22.

That depends a little bit.

Okay. My second, second question on the, this business traveler tax, I'm just wondering when I look at your [indiscernible] on NII, you have a negative others, which you advised to be that, but there is a slight doubt this morning, you stated that there's plus DKK50 million 1 off in Q4.

He says that it's linked to the expense line. I'm just a bit confused what the impact of this is on the NII line?

Now, the business several tax agreement or the, the payment that we have made falls in two pieces. One is staff cost.

And the other part is interest charge for basically the time this thing has been hanging out. And that interest part goes into the NII line.

That's roughly call it DKK60 million, DKK70 million. And also we have, as stated in my little speech, we have a positive effect from TLTRO in Q4, which basically wipes that out, but that's in normal NII.

Okay. So we're, so the plus DKK50 million from the intern bank that is address in slides, I just...

No Per. Per this DKK50 million is a minus, it's a negative one of on the NII line.

Okay. Okay.

Minus in front of it, then, I understand it better. Thank you.

Thank you. Just coming back to the question on your dives in the first half of 2022, are those DKK1.2 billion are they included in the net profit line with 1.2 or are they taxed, I don't think you have told us that before if they're taxed or not.

They, first of all, they are included in the net profit guidance, obviously, as, stated. And secondly, they all differ a bit in tax treatment.

But, but some of them, some of it is, is basically tax free.

But, but after DKK1.2 billion, how much of that, will it be taxed?

Well if, if you if you take them one by one, you can say all of them are tax free, except from the Luxemburg, where there is a tax element in it. The other one are not to be text.

Okay. So only Luxemburg is not is text.

Okay. Thank you.

And then, and then on guidance for 2022 just trying to reconcile your -- your bits and pieces here, you say around DKK14 billion is the midpoint of the guidance. Then after or before text, that's around DKK18 billion, you're adding DKK25 billion of costs, and then no loan loss.

In my small example, here I get you DKK43 billion of revenues. Is, that how you look at it?

Or is it too get to DKK43 billion, already in '22? And hence we have to put in positive loan losses or, or watch the moving parts here?

Look, I look, I think that's probably we're not going to give exact figures here, but we remain committed to DKK43.5billion of income in 2023. And we see that there will be a gradual improvement and, and momentum in the business towards the DKK43.5billion number.

And, and again, Jacob, I think you need to keep in mind if you -- if you work the way backwards, which you just did. If the other way of doing is exclude the, the one offs from the net profits range that we have given, and then and then apply the normal tax line, then you are getting call it a second holding point to understand, because I think the way you did it now at Watts was, was creating a bit too much of profit before tax.

Yeah, no, I get it. Thank you.

Okay. That was my question.

Thank you

Thank you very much. Can I maybe just start on the dividend decision?

So when you are moving to a quarterly dividend, should we view that as this is a change in policy that has been requested by shareholders, or is this the reflection of any increased uncertainty around, AML investigations or timings given that you were paying, annual dividend while this was ongoing in the past? So maybe start with that, that the first question.

Yeah. Hi on we don't have any news or, or insight around the timing of, of the investigation.

So this is really about preserving the dividend policy of the bank while it's ensuring a prudent management of the bank's capital and ensuring that we have a high degree of flexibility prior to, possible outcomes of the Estonia matter. And then look, I mean, please also keep in mind that the past couple of years we've had restrictions clearly on, dividends, and therefore it just hasn't been relevant to look at it in the way we're looking at it now.

And then I think your second question around, look, I mean, do we expect this going forward and that's pre too premature to comment on or plan for the following years, right. So for now we're planning on, on 2022,

And, and there may be a second completely unrelated question, but on Northern Ireland, I mean, we're seeing rate hikes in the UK. You have an extreme liquidity position in, in the Northern Irish business.

So it's small at a group level, but when I play around with numbers, clearly the interest rate sensitivity in that business is substantial and disproportionate to larger to some of your other businesses. How much of your overall rates and is Northern island, or can you give us some more color as to how to think of how big that could be in 2022?

I don't have the details on how big it is. I mean, clearly there will be tailwinds.

There are no question about it. Claus, do you have the details on?

The sensitivity, the interest rate sensitivity? We we provide the, is on a, on a group level and we don't have it on a divisional level, but I think we have discussed this issue before and where we have said that a quite a significant part of that is linked to the Danish fine size.

And, also bear in mind that the size of the balance sheet in Northern Ireland is pretty limited compared to the whole group. So but you -- we don't have any specific number to provide for Northern island rate sensitivity.

Unfortunately.

Thank you.

But if the Bank of England keeps on writing hiking rates, it's definitely good news.

And, it's by far the lowest loan to deposit ratio in the group. Right.

Which should help. Yeah.

Yes. Good morning.

Thank you for taking my questions. I was thinking about the lending growth in Denmark.

It looks like it's coming up towards the end of the year. Is this a business momentum you expect to continue into 2022, or was it something particular that happened at the end of the year?

I know that reorging is of course mostly now, but to the corporate trend, it looks also quite good and a particular reason why we should not expect that to continue in negative manner?

No, I mean, we, remain cautiously optimistic the credit demand and, and the momentum on the credit side as you state, we saw good momentum in in Denmark on the mortgage side. We also saw good momentum on the large corporate and institution side, as well as on, on real estate more broadly.

And we would expect that there would be credit demand in the business banking sector, as well as we phase out government lending in in April. So, we, we're cautiously optimistic on the on the lending credit demand side.

Perfect. Thank you.

Could you just remind us on the sensitivity that we talked about in the previous question on the higher rates as I mentioned, most of this is alluded to Denmark. What kind of sensitivity do you have?

Is it do you give anything from 25 basis points or a hundred basis points, or how do you do it?

Yeah, I mean, it's about 900. It's about -- it's about DKK800 million for 25 [indiscernible], right.

And then 600 on the -- on the other way. So 25 up is around 825 down is around 600,[indiscernible] which never happens.

Thanks. Thank you.

Morning everybody. Thanks for taking my questions.

Couple, if I think getting back one second to the dividends the faculty are changing the approach to the dividend payment. Can we see it as a, as a sign that maybe this case is getting closer to an end, or am I reading too much into that?

If that is not the case and assuming this case goes on for another 2, 3, 4, whatever, whatever the number of years is, should we expect this kind of approach to be, to continue every single year till the moment the case comes to comes to an end?

Yeah. Thank, thanks, Ricardo.

So again, we don't have any news or, or insight around timing of the investigation. So this is again about preserving the dividend policy while ensuring prudent management of the bank's capital and retaining flexibility.

And, we can speculate on, this, in detail in terms of, timing and, period of future dividend payments.

All right. Okay.

Thanks. And if I, make, instead of, instead of proposing seven and a half, but paying it in installment, that if you, you think about pain, maybe that's all proposing a little less for paying everything in one goal.

Was this kind of possibility as being discussed?

No. I mean, we, we believe that that this is again a reflection the seven and a half Corona dividend is again, a reflection of our dividend policy of the bank.

And the payment structure is again, a reflection of ensuring prudent management of our capital position and retaining flexibility in terms of potential outcomes.

Okay. Okay.

Thanks Carsten. Thanks.

Thank you. Just two questions.

Also on, on guidance now that you insinuate basically flat fees year-over-year and still expect core banking income to increase. Then when you say increasing, what kind of -- run rate in 2022, should we think of in terms of percentage increase, that's going to be my first question then.

The second question is, is also on guidance and that's also to your comments around normalizing income in Danica. And my question simply is, is what is enormous income level and Danica to light up the recent re-pricing initiatives you guys have launched within your health and excellent business?

Yep. Thanks much.

And on Danica, we would say normalized income is in the range of one and a half to DKK1.7 billion. And then on your question on NII again, we would expect that a, a, a significant part of the income progress from this year towards the 43.5 and 2023 will come from from NII which again, reflects that we see favorable momentum on the credit book.

And in general on expect expectation of, of favorable credit demand in 2022.

Okay. But, but I mean, I guess this is sort of a little bit of a game of words since you won't give me a, a, a number, right, so when you say increase in NII, what threshold does it have to be over before it's increasing in your book?

Yeah, I mean, it's not so much a game of awards. It's just, we, we've got it on 43.5 in 2023 and, and, a big part of that will come from NII.

And, but we're not going to, we're not going to go into details on the exact numbers.

Okay. All right.

Okay. All right.

Very clear. Thanks.

And can we have the last question, please?

Yes, yes. Good morning.

Thank you for taking my question. The first question, just to follow up on the, NII question, I was just wondering if you could in terms of how to think about margins over margins for the group as we had into 2022?

Should we think that this is more going to stabilize from this level in particular, given, given obviously the virus deposit rep pricings done over the course of '21 and secondly you've referred to the bank techs in Sweden. I was just wondering in terms of similar initiatives for Denmark, what is the latest development and there, and how you're thinking about the potential for their niche financial sector, that's going forward?

Thank you.

Thanks. No on margins, I would expect them to, to stabilize, but clearly there is also upside potential as we see more demand for higher margin bank lending which would be the expectation so stable to potential upside on the margin side.

And then Steven, do you want talk on the tax?

Yeah. On the tax part, keeping might not all of our business is covered by, by the Swedish bank tax.

So we explained roughly DKK0.3 billion, as an impact from the Swedish bank tax. The other question, if I understood it correctly was more about the changes in the Danish tax line, the, the honor tax, if I get it right.

There again, we need -- it needs to be seen what it, what it will look like they are first guesses out. And I think as, as everybody else has clearly stated that that probably will flow back its way into pricing and also reflecting the competitive environment on this medal.

Thank you very much.

Well, thank you very much. I'll for your interest in Denki Bank and for your questions very much appreciated.

And then as always, you're very welcome to contact our investor relations department. If you have more questions after you've had a chance to take a look at the financial results in, in detail.

So thanks very much and have a good day.