Investor Presentation - FY 2022
Investor Presentation - FY 2022
Danske Bank
Commercial real estate portfolio; prudently managed and adequately provisioned
Lending to CRE segment by major Nordic banks (index)
Lending to CRE by geography
Sweden
Other
Danske Bank has the second lowest concentration to
CRE as a percentage of the total corporate portfolio
(29%) among Nordic peers and the portfolio has been
stable/slightly declining in the last few years.
Out of the Danske Bank CRE portfolio, 26% is to
Sweden, lowest ratio among all Nordic banks active in
Sweden.
In addition to conservative underwriting, we perform
rigorous monitoring of individual names incl. stress
tests:
✓ An interest rate stress of 5% on all debt not currently
hedged
✓ Rent level stress, including vacancy
✓ Liquidity stress measuring borrower's ability to
refinance/ repay bond and commercial paper
redemptions in the coming 18 months
The portfolio is well diversified and provisioned to
mitigate a potential material correction in the sector
140
Danske Bank
130
Peer Bank 1
Peer Bank 2
Peer Bank 3
Peer Bank 4
Peer Bank 5
120
110
100
90
80
Q117
Q118
Q119
Q120
Q121
Q122
CRE portfolio avg. LTVs
56%
8
Resi
Non-resi
56%
50%
50%
48%
47%
46%
6
44%
Denmark
Sweden
Norway
Finland
4
2
19%
22%
60%
58%
73%
26%
81%
78%
40%
42%
Danske Bank Peer Bank 1 Peer Bank 2
Source: Company financial statements
Peer Bank 3
Peer Bank 4
Total CRE allowance account [DKK bn]
8.1
Allowance account
Hereof PMAS
3.3
0
2008 2010 2012 2014 2016 2018
2020 2022
Underwriting and subsequent monitoring based on cash flow and a clear focus on structural risk
Cash flow test
• A key part of the underwriting process is a cash flow test
prescribed by the Danish FSA, requiring that cash flow from the
financed properties is sufficient to fully amortise our loan over
maximum 30 years using a 10/30 year fixed interest rate.
• The test ensures that all lending is similarly benchmarked
irrespective of actual credit terms (amortisation, hedging
requirements] and thus serves as a sanity check/upper limit in
a growing market.
Stress test
⚫ In addition to the FSA cash flow test, it is a requirement that all new
lending is subjected to a standardised set of stress tests. The stress
tests cover both lower rent income due to a combination of lower rent
levels and higher vacancy, higher interest rate costs and lower
property values through higher investor yield requirements.
• To capture the difference in cash flow risk from different property
types, the stress test on rent income varies across property types,
reflecting the generally higher volatility/cyclicality in e.g. industrial and
retail properties compared to e.g. residential properties.
Structural risk
⚫ In addition to the two types of stress tests, significant effort is spent on
ensuring the best possible structural position for the bank, and best
practice across transactions.
• A key focus is to make sure the cash flow is diversified to the extent
possible e.g. through recourse to other cash flow generating properties,
alternatively ensure that cash flow is ring fenced within our legal reach. For
large clients with enhanced risk, a full portfolio review is conducted to make
sure our structural position is satisfactory and the cash flow from the
financed properties is sufficient to service debt including under additional
interest rate stress.View entire presentation