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Setting new standards in financial services

Announcement No. 17/2012

  • Danske Bank Group’s business conditions have changed radically. A new normal exists. In response to the new challenges and opportunities, the Group is launching a new strategy, called New Standards.

  • With New Standards, the Group confirms its role as a universal bank in the regions in which we operate today, along with value-adding business within asset management (Danske Capital) and life insurance and pensions (Danica). The non-core Ireland portfolio will be divested.

  • New Standards entails clear segmentation choices and customer propositions focused on industry-leading advisory services. The Group will bring digitalisation and automation of banking to new levels.

  • A resolute focus on process optimisation and operational excellence is intended to significantly improve customer satisfaction and reduce costs.  Combined with improved capital efficiency, this will ensure higher returns on a stable capital base. The risk profile will be conservative.

  • The Group intends to raise approximately DKK 7 billion in new equity through an accelerated book building process to accelerate rating improvements and achievement of our capital targets, strengthen our funding position and better align us with our Nordic peers.

  • The Group sets prudent capital targets to be achieved by the end of 2013: a total capital ratio of 17% and a core tier 1 capital ratio in excess of 13%.

  • New Standards aims to lift Danske Bank Group into the top half of its Nordic peer group by the end of 2015, with a return on equity above 12% after tax, assuming more normalised market conditions.

New Normal
Global conditions for conducting financial services have changed fundamentally. Regulatory requirements are increasing; funding has become more expensive and difficult to obtain; and customers still expect more from their financial partners, and rightly so. Stakeholders are generally sceptical towards financial institutions because of their role in the financial crisis and the many unfortunate incidents in recent years. This is not a passing phenomenon; it is the New Normal.

In addition, Europe will continue to face low growth and financial uncertainty for some time and record-low interest rates will put pressure on the profitability of the financial sector.

"Danske Bank Group must respond to this new normal in a sustainable way," says Ole Andersen, Chairman of the Board of Directors. "This requires new standards for how we engage with customers and interact with other stakeholders while delivering a competitive and attractive return to our shareholders. The Board has found New Standards to be the right response to the challenges and opportunities."

New Standards
Danske Bank Group will remain a universal bank in the regions where we operate today, leveraging our single IT platform. We are organised to serve three distinct customer segments – Personal, Business and Corporates & Institutions – across our geographical range. Beginning on 15 November 2012, we will use the Danske Bank brand name in all our markets to benefit fully from our single platform.

Across all our segments, our strategy is to set new standards in two areas in particular:

  • We will offer industry-leading personal and business advisory services aimed at delivering value creation for each customer. We will strive to enhance our proactive customer approach using market-leading advisory tools and the most dedicated advisors.
  • We will advance our leading position in the digitalisation and automation of financial transactions, queries and simple document signing. To a great extent, these processes will happen instantly, intuitively, flawlessly and consistently across the customers’ preferred channels – including the PC, mobile phone, tablet and call centre – around the clock.

"We will offer fair, attractive propositions for everyone," says Eivind Kolding, Chairman of the Executive Board. "We believe our position is particularly advantageous for meeting the complete needs of the more demanding customer, however. This will be a cornerstone when we implement the strategy throughout the organisation. By combining unique customer propositions, sound financials and high ethical standards, we aim to be recognised as the most trusted financial partner."

New Standards in Personal Banking
Personal Banking will undergo the most radical changes. The conventional branch distribution model is rapidly becoming obsolete as customers generally prefer our market-leading digital channels. We will set new standards for digital innovation and cutting-edge advisory facilities, providing thorough personal consultation when it is needed. This will bring down costs significantly and enable us to serve all customers in a profitable yet competitive way.

Personal Banking will introduce a completely new approach to being a personal customer at Danske Bank. We will offer customers a fair, targeted and attractive value proposition and enhance our proactive customer approach through our various channels. The model will be launched in the Danish market in the early 2013 and introduced in other markets subsequently. With the new value proposition and customer approach, it is the intention to lift return on capital through additional cross selling, selective pricing and a change of the distribution model.

While major changes are not always welcome at first, we remain fully committed to attaining a high level of customer satisfaction.

New Standards in Business Banking
Since the Group’s reorganisation in June of this year, Business Banking has benefitted from its dedicated focus on business customers. Business customers are becoming more differentiated, complex and international. As a consequence, Business Banking will set new standards by creating value for customers through clear value propositions and dedicated support organisations targeting the differing needs of well-defined customer segments.

With our integrated solutions, we will offer seamless banking services so that customers can conduct their business at any time and anywhere. We will provide customers with predictable financing in a transparent credit framework. And we will offer a product suite that is normally reserved for larger corporates, including advanced liquidity management and trade finance processing. Drawing upon the experience of Corporates & Institutions, we will focus on debt capital issuance for a broader customer group. With the new customer approach, it is the intention to lift the return on capital through broader product offerings,  selective pricing and streamlining of the distribution model.

New Standards in Corporates & Institutions
Corporates & Institutions is a leading wholesale bank in the Nordic region that was named best-in-class in transaction and investment banking services. C&I will build on this position and strive to set new standards for wholesale banking within the Nordics, aiming at a position in the top three in all its focus areas.

It is C&I’s ambition that clients experience a reliable, competent, coordinated, dynamic and solutions-oriented financial partner. The focus will be on clients with complex needs so that C&I can leverage on its core strengths and build long-term client relationships.

C&I’s new strategy will fine-tune the current business model, adapting to constantly evolving technologies, regulations and market practices. C&I will reinforce its current leadership positions through investments in technology and people, expanding its footprint to extend its leadership in cash management and debt capital markets. With the investments, it is the intention to increase return on capital through higher market shares in high value segments and products and more efficient distribution.

New Standards inside the Danske Bank Group
Through our Lean programme, we will maintain a meticulous focus on process optimisation with the aim of increasing quality and customer satisfaction and of bringing down costs through operational excellence. We regard Lean not as a project but as part of a cultural change.

Similarly, we will emphasise uniform performance management throughout the Group. We are committed to meeting ambitious targets and to following up closely on our plans in order to ensure continual improvements in customer satisfaction and financial performance.

Focus will be on capital efficiency. Since capital is more scarce than ever, it is imperative that the capital available is employed optimally. We will achieve this by directing our attention consistently towards the most profitable business and implementing measures that enhance the profitability of our existing business.

To fulfil our vision of being recognised as the most trusted financial partner, we will seek a risk profile that reduces impairment rates to the level of our strongest peers’.

New Standards for serving society
We believe that banks play a fundamental role in ensuring growth and prosperity in the societies we serve and that the conventional banking model is superior when it comes to taking deposits and make funding available to personal and business customers. Banks also play a crucial role in helping customers with investment needs and in reducing risks. Banks manage much of the financial infrastructure efficiently and at a very low cost.

We will set new standards for how we fulfil our duties and safeguard the trust in and credibility of our business. We will be open about why a bank can fulfil its role only if it delivers sound, prudent results. We will be open about why we can succeed only if we attract employees with the right competencies, values and mindset, and about why we need to reward employees competitively and in conformance with market practices to achieve this.

New Standards and the business portfolio
The Group will continue to offer its strong product suite of financial services, including asset management at Danske Capital, real estate services, property finance and leasing.

Danica provides the Group with good returns over the business cycle and tangible synergies. Our customers regard Danica’s services within life insurance and pensions as a natural part of the Group’s product portfolio. In addition, we have satisfied ourselves that continued ownership of Danica will maximise value for the Group. Danica will therefore remain a core part of the Group and we will pursue additional synergies.

Our Non-core Ireland portfolio is managed in such a way as to optimise collections and it will be divested as soon as market conditions permit.

Financial ambitions
The strategy’s overarching goal is to deliver a competitive return to the Bank’s shareholders by the end of 2015. It is the Group’s ambition to be one of the top three major Nordic banks in terms of return on equity by the end of the strategy period. The Group is setting a target for a return on equity above 12% after tax. The improvement in return will roughly be split equally between cost and revenue initiatives, impact of higher interest rates and lower impairments over the period. Short term interest rates of around 2% are assumed.

Our desired capital level is based on the objective that we need a capital buffer sufficiently above the minimum regulatory requirements so that, even in the most severe stress scenarios, we will not fall below regulatory limits. On the basis of the expected outcome of the regulatory process, we are aiming at a minimum total capital ratio of 17%, with a core tier 1 capital ratio of at least 13% on a reported basis.

It is our intention to improve our credit ratings by a minimum of one notch as soon as possible. An improved rating is expected to enhance short-term market access, lower term funding costs and improve  institutional business, including deposit inflow. These benefits are expected to have a positive impact on earnings for the Group.

Positioning the Group as among the market leaders on capital with the associated anticipated ratings uplift is expected to also augment our competitive market position and have significant reputational benefits.

To accelerate the achievement of the rating targets by at least one year, the Board of Directors intends to issue new equity of approximately DKK 7 billion as market conditions allow. The funding, market positioning and other benefits outlined above are expected to mitigate earnings dilution from the new equity issued.

We expect to reach our capital targets by the end of 2013. We furthermore intend to issue tier 1 and/or tier 2 instruments that will enable us to repay the state hybrid capital of DKK 24 billion in April 2014 without jeopardising the 17% total capital ratio.

To support our ambitions for capital and optimise the use of our capital, we are aiming for zero to low growth in risk-weighted assets through 2014. Using capital more efficiently will enable us to continue to meet our customers’ increasing needs for products and services. Moreover, we are currently experiencing very low growth in lending demand.

The Group will maintain its strong liquidity and funding position. We will comply with the expected EU requirements for liquidity (the liquidity coverage ratio) by the end of 2012, well ahead of the EU requirements for 2015. This ambition assumes the acceptance of Danish mortgage bonds as liquidity buffer.

The Group’s focus on streamlining operations, closing branches, improving and automating customer service, as well as changed customer behaviour, will lead to a headcount reduction of around 2,000 in the period 2013-15, in addition to the reduction of around 1,000 expected in 2012. This represents a further reduction of around 1,000 people compared to our previous statements.

Nominal costs are expected to decline in the planning period to a level below DKK 26 billion in 2015. This would lead to a cost/income ratio below 48%.

Until we meet our capital targets and rating ambitions, the Group’s profit will generally be retained to strengthen our capital base. Consequently, no dividend payment will be proposed for 2012. It is the Group’s ambition to resume dividend payments of about 40% of net profit as soon as it is justifiable. We also intend to return excess capital to shareholders through share buy-back programmes and/or extraordinary dividend payments as soon as circumstances allow.

Danske Bank

Contacts available on 30 October 2012 from 10am CET:
Eivind Kolding, Chairman of the Executive Board, tel. +45 45 14 60 01
Kenni Leth, Head of Press Relations, tel. +45 45 14 56 83/ +45 51 71 43 68
Martin Gottlob, Head of Investor Relations, tel. +45 45 14 07 92

Press conference
The interim report for the first nine months of 2012 will be presented at a press conference at 10.00am CET. The press conference will be webcast live at, where the presentation material will also be available.

Conference call
Danske Bank will hold a conference call on 30 October at 09.00-09.30am CET and 2.30pm CET.
The conference call at 2.30pm CET will be webcast live at

Capital Markets Day

Danske Bank’s Executive Board will explain the new Group strategy in greater detail, including the individual strategies of Personal Banking, Business Banking and Corporates & Institutions, at a Capital Markets Day on 8 November 2012 in London.

Certain statements made in this announcement are forward looking statements. Any statements other than statements of historical fact, including without limitation those regarding Danske Bank’s financial condition, future operating performance, business strategy, management plans and objectives for future operations prospects for the group are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, express or implied, by the forward looking statements. Factors that might cause forward looking statements to differ materially from actual results include, among other things, general economic and business factors, competition, and interest rate and currency fluctuations. These statements may not be regarded as a representation that anticipated events will occur or that expected objectives will be achieved. The information presented herein speaks only as of today’s date and neither Danske Bank nor the Joint Bookrunners assume any responsibility to update any of the forward looking statements contained herein.

This announcement includes references to a potential share offering by Danske Bank. These references do not constitute an offer to sell, or a solicitation of offers to purchase or subscribe for, securities in the United States or in any other jurisdiction.  The securities referred to herein have not been, and will not be, registered under the Securities Act of 1933, as amended (“Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.