Jyske Bank Interim Financial Report

Transcript

Jyske Bank Interim Financial Report Q1 - Q3 2015 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 1 of 54 Interim Financial Report, first nine months of 2015 Management’s Review The Jyske Bank Group Summary Comments by Management First nine months of 2015 Loan impairment charges and provisions for guarantees and value adjustments of acquired assets Investment portfolio earnings Banking activities Mortgage activities Leasing activities Core profit and investment portfolio earnings Capital structure and capital management Liquidity management Other information 3 4 4 5 11 13 14 16 18 19 20 21 23 Statement by the Executive and Supervisory Boards Statement by the Executive and Supervisory Boards 25 Interim financial statements Income statement and statement of comprehensive income Balance sheet Statement of changes in equity Capital statement Summary of cash flow statement Notes Jyske Bank A/S 26 27 28 29 30 31 46 Jyske Bank A/S Vestergade 8-16 DK-8600 Silkeborg Tel.: +45 89 89 89 89 www.jyskebank.dk E-mail: [email protected] Business Reg. No. 17616617 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 2 of 54 The Jyske Bank Group CORE PROFIT AND PROFIT FOR THE PERIOD DKKm Net interest income Net fee and commission income Value adjustments Other income Income from operating lease (net) Core income Core expenses Core earnings before impairment Loan impairment charges Core profit Investment portfolio earnings Pre-tax profit Tax Net profit or loss for the period Index 15/14 Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 115 1,500 1,513 1,440 1,428 1,529 118 372 350 617 626 360 65 -251 536 -150 -250 132 6 60 68 52 78 172 117 22 27 19 20 19 75 1,703 2,494 1,978 1,902 2,212 102 1,321 1,294 1,338 1,341 1,297 51 382 1,200 640 561 915 31 30 24 327 717 398 58 352 1,176 313 -156 517 117 -26 125 189 -145 84 63 326 1,301 502 -301 601 521 76 305 109 -80 53 50 250 996 393 -221 548 The year 2014 5,315 1,761 -42 3,074 78 10,186 5,231 4,955 1,953 3,002 101 3,103 14 3,089 Q1-Q3 2015 4,453 1,339 135 180 68 6,175 3,953 2,222 381 1,841 288 2,129 490 1,639 Q1-Q3 2014 3,887 1,135 208 2,996 58 8,284 3,890 4,394 1,236 3,158 246 3,404 94 3,310 SUMMARY OF BALANCE SHEET, END OF PERIOD DKKm Loans and advances - of which mortgage loans - of which bank loans - of which repo loans Bonds and shares, etc. Total assets 380,545 242,355 109,915 28,275 78,836 531,063 358,638 215,998 117,534 25,106 89,155 521,140 106 112 94 113 88 102 Due to credit institutions and central banks Deposits - of which bank deposits - of which repo deposits Issued bonds at fair value Issued bonds at amortised cost Subordinated debt Equity 31,947 138,753 125,481 13,272 225,944 52,556 1,354 29,233 51,761 148,103 128,476 19,627 198,099 37,750 1,354 27,830 62 31,947 39,865 46,176 49,885 51,761 49,885 94 138,753 141,077 151,546 152,693 148,103 152,693 98 125,481 129,021 131,547 133,198 128,476 133,198 68 13,272 12,056 19,999 19,495 19,627 19,495 114 225,944 229,414 219,789 208,539 198,099 208,539 139 52,556 47,947 54,061 43,413 37,750 43,413 100 1,354 1,355 1,362 1,355 1,354 1,355 105 29,233 28,996 27,970 27,561 27,830 27,561 17.3 17.3 38.6 38.6 - 2.6 2.6 10.5 10.5 4.1 4.1 -2.3 -2.3 5.8 5.8 35.1 35.1 10.3 5.8 64.0 26.0 14.6 47.0 - 4.7 0.9 77.6 18.9 3.5 51.9 7.3 1.4 67.6 -6.9 -0.8 70.5 13.8 2.0 58.6 17.8 13.7 51.4 16.9 15.8 10.7 29,473 174,853 16.7 15.7 10.7 28,986 173,601 369 308 1.2 319 293 1.1 - 369 308 1.2 336 305 1.1 293 295 1.0 313 290 1.1 319 293 1.1 313 290 1.1 4,102 4,289 - 4,102 4,112 4,168 4,191 4,289 4,191 380,545 242,355 109,915 28,275 78,836 531,063 375,184 233,700 113,830 27,654 87,686 541,031 376,175 229,167 118,860 28,148 98,779 573,074 361,799 218,864 120,423 22,512 92,309 541,679 358,638 215,998 117,534 25,106 89,155 521,140 361,799 218,864 120,423 22,512 92,309 541,679 SELECTED DATA AND FINANCIAL RATIOS Earnings per share for the period (DKK) Profit for the period, per share (diluted) (DKK) Pre-tax profit p.a. as a percentage of opening equity Profit for the period as a pct. of av. equity Expenses as a percentage of income Capital ratio (%) Common Equity Tier 1 capital ratio (CET1 %) Individual solvency requirement (%) Capital base (DKKm) Weighted risk exposure (DKKm) Share price at end of period (DKK) Book value per share (DKK) Price/book value per share (DKK) No. of full-time employees at end-period¹ 16.9 17.1 16.3 16.4 16.7 16.4 15.8 16.1 15.3 15.3 15.7 15.3 10.7 11.0 10.7 10.9 10.7 10.9 - 29,473 30,177 29,206 28,990 28,986 28,990 - 174,853 176,979 178,841 176,433 173,601 176,433 BRFkredit has been included in the income statement as of 1 May 2014 and in the balance sheet as of the end of the second quarter 2014. ¹) In the third quarter of 2015, 29 Financial Management degree holders were hired. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 3 of 54 SUMMARY  Core income: DKK 6,175m (Q1-Q3 2014: DKK 5,924m excl. of bargain purchases of DKK 2,360m).  Pre-tax profit or loss: DKK 2,129m (Q1-Q3 2014: DKK 1,044m excl. of bargain purchases of DKK 2,360m).  The pre-tax profit corresponded to an annualised return of 10.3% on opening equity (Q1-Q3 2014: 6.0% p.a. excl. of bargain purchases).  Value adjustments under core profit: DKK 135m (Q1-Q3 2014: DKK 208m).  Loan impairment charges under core profit: DKK 381m (Q1-Q3 2014: DKK 1,236m).  Loans and advances: DKK 381bn (End-2014: DKK 362bn). o Mortgage loans: DKK 242bn (End-2014: DKK 219bn). o Traditional bank loans and advances: DKK 96bn (End-2014: DKK 102bn).  Bank deposits: DKK 125bn (End-2014: DKK 133bn).  Capital adjustment   o The launch of a share buy-back programme in the equivalent value of up to DKK 500m. o It is the intention, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m. Capital ratio 16.9%, of which Common Equity Tier 1 capital ratio of 15.8% (end-2014: 16.4% and 15.3%). o Capital buffer: DKK 10.3bn (End-2014: DKK 9.7bn). o Target: capital ratio of 17.5% and Common Equity Tier 1 capital ratio of 14.0%. Merger with BRFkredit proceeds faster than expected: Pre-tax profit, BRFkredit: DKK 617m COMMENTS BY MANAGEMENT In connection with the publication of the interim financial report for the first nine months of 2015, Anders Dam, CEO and Managing Director, states: "The third quarter of 2015 is the first quarter since the merger with BRFkredit that is fully comparable with the corresponding period in 2014. A pre-tax profit of DKK 326m is, seen in isolation, not satisfactory. However, the interestrate development had an adverse effect on the profit in the amount of about DKK 250m. The management expects that earnings and cost synergies will be realised in line with its most recent statement about these. Therefore, considering the Group's strength in respect of capital, the Supervisory Board has decided to launch a share buy-back programme in an amount of up to DKK 500m, which is expected to be completed on 1 July 2016. Moreover, it is the intention of the Supervisory Board, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m," concludes Anders Dam. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 4 of 54 First nine months of 2015 Economic trends It is expected that the cautious economic recovery will continue, particularly fuelled by low interest rates and a gradually lower propensity to save in Denmark as well as the euro zone. But uncertainty has increased. Nationally, GDP growth was slightly weaker in the second quarter, and also, consumer confidence fell. After the first half of the year where house prices rose markedly all over the country, the increase has slowed down in recent months. Internationally, the growth signals have turned for the worse, and in particular there is focus on the slowdown in China. Capital adjustment Jyske Bank pursues a conservative and long-term capital policy. Jyske Bank's Supervisory Board reviews at least every quarter the expected long-term capital base for the Group. The assessment includes expectations of earnings as well as earnings under a stress scenario, the weighted risk exposure, other capital transactions, including acquisitions and capital payments as well as regulatory initiatives and requirements on the part of Standard & Poor's. Considering the current strong capital position and the Supervisory Board's recent review of the capital base and expectations of this, it has been decided that Jyske Bank will initiate a capital adjustment with a view to optimising and balancing the capital structure and the capital levels in line with the long-term capital management objective and capital policy. Jyske Bank will launch a share buy-back programme in the equivalent value of up to DKK 500m. The share buy-back programme is part of Jyske Bank’s adjustment of its capital level. The programme will be carried out during the period of early November 2015 to June 2016. Jyske Bank will, at the same time, explore the market for opportunities to issue subordinated capital instruments. The programme will be carried out according to the EU Commission's regulation No. 2273/2003 of 22 December 2003. The share buybacks will be conducted through ABG Sundal Collier. It is the intention of the Supervisory Board, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m. The Group's capital target is unchanged, namely a Common Equity Tier 1 capital ratio of 14% and a capital ratio of 17.5% when the capital adequacy rules have been fully phased in in 2020. After recognising the planned and expected initiatives, the Common Equity Tier 1 capital ratio amounted to 15.8% and the capital ratio to 16.9% as at 30 September 2015. Material circumstances Like the second quarter, the third quarter was also characterised by turmoil in the interest-rate markets, but while the second quarter saw rising long-term interest rates, the third quarter saw falling long-term rates. The long-term interest rates had a negative effect on value adjustments of clients' transactions relating to interest-rate hedging. On 26 August 2015, Danmarks Nationalbank, the central bank of Denmark, lowered its current-account ceiling to a third of the previous level, and hence it limited the Bank's possibility of investing funds at an interest rate of 0%. The rate on the certificates of deposit of Danmarks Nationalbank is unchanged at -0.75% and hence the business activities relating to deposits are to an even greater extent affected by the negative interest rates. At end-January, Jyske Bank and Jyske Invest Fund Management entered into an agreement on portfolio management advice and distribution so that, in future, Jyske Bank will render advice to Jyske Invest on all investments and handle the sale of Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 5 of 54 Jyske Invest's funds to distributors, primarily other financial institutions. Through the conclusion of the agreement, Jyske Bank desires to create opportunities of generating additional growth in the capital management area and hence position Jyske Bank as an important asset manager. The merger was implemented in the second quarter of 2015. In this connection, Jyske Bank took over 23 employees. On 13 July 2015, Standard & Poor's confirmed Jyske Bank's rating. The increasingly robust capital and risk position of Jyske Bank offsets the fact that Standard & Poor's no longer allows for government support in its rating. Current status of the merger of Jyske Bank and BRFkredit The Group maintains its focus on the integration of Jyske Bank and BRFkredit and is working determinedly to reap the synergies. The integration with BRFkredit proceeds faster than expected. The goal for annual synergies are unchanged at a minimum of DKK 600m, and it is expected that the synergies will have full annual effect as of mid-2018, while earlier expectations pointed to end-2018. Integration costs are expected to be in the range of DKK 100-150m. As at 30 September 2015, about half of the integration costs has been expensed. Earnings and cost synergies  Growth in new home loans continued in the third quarter of 2015 and had, at the end of September reached the level of DKK 53bn and as at today DKK 55bn. The annual earnings on these will in future more than match the commission previously received from Totalkredit.  Distribution of mortgage loans to corporate clients has begun. A selective strategy towards selected corporate clients and types of commercial property is being pursued.  Cost of capital of BRFkredit has fallen by about DKK 100m annually compared with the level in 2013.  The development of the Group's expenses proceeds according to plans, including the plan to reduce the number of employees to the level of about 4,000 full-time employees.  At the end of the third quarter of 2015, the number of full-time employees was 4,102 and is thus still falling even though 29 Financial Management degree holders were hired in August. The number of full-time employees was 4,444 on 30 April 2014 when Jyske Bank and BRFkredit merged. The growth in respect of the Group's home loans contributes to reducing the average risk on the loan portfolio, and, despite the lower interest rate margins on home loans than on traditional bank loans and advances, there is a reasonable relationship between return and risk. Two-channel strategy The objective is to obtain more full-service clients for the Group. Jyske Bank still caters to clients' need for home financing, among other things, through Jyske Bank's branch network, and also, BRFkredit still distributes home financing products through its mobile corps of senior advisers and also through its telephone and internet services. By maintaining both distribution channels, the Group has the opportunity to reach a wider group and hence attract more clients. Organisation Group functions have been established within a number of areas relating to staff functions. The purposes of these are to eliminate overlapping functions with a view to saving resources and also to making better use of core competences. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 6 of 54 BRFkredit Bank In May 2015, BRFkredit Bank migrated to the Bankdata IT platform. The personal clients have been transferred to Finansnetbanken and therefore they continue within a self-service set-up. Corporate clients have been transferred to Jyske Bank's corporate client branches. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 7 of 54 Net profit or loss for the period Over the first nine months of 2015, the Jyske Bank Group generated a pre-tax profit of DKK 2,129m. Calculated tax amounted to DKK 490m, and after tax the profit amounted to DKK 1,639m. The pre-tax profit corresponded to a return on opening equity of 10.3% p.a. against a return of 26% p.a. for the corresponding period of 2014, where bargain purchases of DKK 2,360m were recognised. Exclusive of bargain purchases, the return on opening equity in the first nine months of 2014 came to 6.0%. CORE PROFIT AND PROFIT FOR THE PERIOD DKKm Net interest income Net fee and commission income Value adjustments Other income Income from operating lease (net) Core income Core expenses Core earnings before impairment Loan impairment charges Core profit Investment portfolio earnings Pre-tax profit Tax Net profit or loss for the period Q1-Q3 2015 4,453 1,339 135 180 68 6,175 3,953 2,222 381 1,841 288 2,129 490 1,639 Q1-Q3 2014 3,887 1,135 208 2,996 58 8,284 3,890 4,394 1,236 3,158 246 3,404 94 3,310 Index The year 15/14 Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 2014 115 1,500 1,513 1,440 1,428 1,529 5,315 118 372 350 617 626 360 1,761 65 -251 536 -150 -250 132 -42 6 60 68 52 78 172 3,074 117 22 27 19 20 19 78 75 1,703 2,494 1,978 1,902 2,212 10,186 102 1,321 1,294 1,338 1,341 1,297 5,231 51 382 1,200 640 561 915 4,955 31 30 24 327 717 398 1,953 58 352 1,176 313 -156 517 3,002 117 -26 125 189 -145 84 101 63 326 1,301 502 -301 601 3,103 521 76 305 109 -80 53 14 50 250 996 393 -221 548 3,089 BRFkredit has been included in the income statement as of 1 May 2014 and in the balance sheet as of the end of the second quarter 2014. Core income amounted to DKK 6,175m against DKK 8,284m in the first nine months of 2014, and core expenses amounted to DKK 3,953m against DKK 3,890m in the first nine months of 2014. Core profit amounted to DKK 1,841m against DKK 3,158m in the first nine months of 2014. Net interest income amounted to DKK 4,453m against DKK 3,887m in the first nine months of 2014. Net interest income is supported by the continued growth in home loans and the merger with BRFkredit, yet affected negatively by the low interest-rate level and Danmarks Nationalbank's (the central bank of Denmark), lower current-account ceiling, increasing pressure on interest rate margins due to the competitive situation and a decline in traditional bank loans and advances by DKK 6bn in the first nine months of 2015. Net fee and commission income amounted to DKK 1,339m against DKK 1,135m in the first nine months of 2014. The increase can be attributed to the first quarter of 2015 when the favourable development in the financial markets resulted in high performance-related fees, and the low interest-rate level resulted in much refinancing activity at BRFkredit. Jyske Bank still offers transfers of home loans without charging any fees. Value adjustments amounted to DKK 135m against DKK 208m in the first nine months of 2014. In the third quarter of 2015, the falling market rates had a negative effect on clients' transactions relating to interest-rate hedging. The ensuing effect was a negative value adjustment of DKK 64m. For the first nine months of 2015, the total effect is a positive value adjustment of DKK 232m against a negative value adjustment of DKK 355m for the same period last year. Also, the third quarter of 2015 saw negative value adjustments in respect of the liquidity buffer. New home loans are recognised at amortised cost and risk management takes place in a portfolio calculated at fair value. According to the joint funding agreement between Jyske Bank and BRFkredit, the loans are transferred at fair value. In the third quarter of 2015, this resulted in a negative value adjustment of DKK 86m. It is expected that as of 1 January 2016, home loans will be recognised at fair value at the first recognition. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 8 of 54 Due to the issue of fixed-rate home loans at a discount, it is expected that net interest income from the discount will be recognised as income in the magnitude of DKK 150m in the coming quarters. Other income amounted to DKK 180m against DKK 2,996m in the first nine months of 2014. The difference can primarily be ascribed to the recognition of bargain purchases of DKK 2,360 relating to the merger with BRFkredit and the profit of DKK 296m from the sale of Silkeborg Data. Core expenses amounted to DKK 3,953m against DKK 3,890m in the first nine months of 2014. In the third quarter of 2014, the provision for holiday pay obligations at BRFkredit was adjusted, as a result of which core expenses were reduced by about DKK 20m for the third quarter of 2014. The salary increase of 1.8% as of 1 July 2015 prescribed by the collective agreement caused an increase in core expenses of about DKK 15m in the third quarter of 2015. Moreover, core expenses were also affected because payments to the statutory Resolution Fund was recognised as an expense as of 1 July 2015. In the third quarter of 2015, about DKK 20m were recognised as an expense. The contributions to the Guarantee Fund for Depositors and Investors will presumably cease at the end of 2015. It is expected that the annual payment to the Resolution Fund will amount to about DKK 75m against the payment of DKK 145m to the Guarantee Fund for Depositors and Investors. The Group's impairment charges under core profit amounted to DKK 381m in the first nine months of 2015 against DKK 1,236m in the corresponding period of last year. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 9 of 54 Business volume and financial position SUMMARY OF BALANCE SHEET, END OF PERIOD DKKm Loans and advances - of which mortgage loans - of which loans and advances, traditional loans and advances - of which loans and advances, new home loans - of which repo loans Bonds and shares, etc. Total assets Due to credit institutions and central banks Deposits - of which bank deposits - of which repo deposits Issued bonds at fair value Issued bonds at amortised cost Subordinated debt Equity The Index year 15/14 Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 2014 106 380,545 375,184 376,175 361,799 358,638 361,799 112 242,355 233,700 229,167 218,864 215,998 218,864 Q3 2015 380,545 242,355 Q3 2014 358,638 215,998 95,706 105,577 14,209 28,275 78,836 531,063 11,957 25,106 89,155 521,140 119 14,209 16,964 18,796 18,092 11,957 18,092 113 28,275 27,654 28,148 22,512 25,106 22,512 88 78,836 87,686 98,779 92,309 89,155 92,309 102 531,063 541,031 573,074 541,679 521,140 541,679 31,947 138,753 125,481 13,272 225,944 52,556 1,354 29,233 51,761 148,103 128,476 19,627 198,099 37,750 1,354 27,830 62 31,947 39,865 46,176 49,885 51,761 49,885 94 138,753 141,077 151,546 152,693 148,103 152,693 98 125,481 129,021 131,547 133,198 128,476 133,198 68 13,272 12,056 19,999 19,495 19,627 19,495 114 225,944 229,414 219,789 208,539 198,099 208,539 139 52,556 47,947 54,061 43,413 37,750 43,413 100 1,354 1,355 1,362 1,355 1,354 1,355 105 29,233 28,996 27,970 27,561 27,830 27,561 91 95,706 96,866 100,064 102,331 105,577 102,331 Jyske Bank is still seeing satisfactory demand for its new home loan products. Since the launch of Jyske Bank's own new home loan products in mid-December 2013, Jyske Bank had at the end of the third quarter of 2015 granted loans totalling DKK 53bn, and as at today DKK 55bn. At the end of the third quarter of 2015, an amount of DKK 52bn, against DKK 31bn at end-2014, was recognised in the Group's balance sheet. The new home loan products are primarily sold to existing clients with mortgage loans with Totalkredit and to a lesser degree to new clients. A small proportion of the clients who switch from Totalkredit, raise home loans that are higher than their mortgage loans. The reason for this is that rising house prices have allowed home owners to raise additional loans or to refinance existing bank loans into home loans. The demand for new loans from existing corporate clients is still limited, and solid corporate clients are in a position to reduce the drawdown under their commercial credit facilities. An inflow of corporate clients has been recorded, and to some extent the ensuing volume offsets existing clients' lower drawdown under their commercial credit facilities. Since end-2014, traditional bank loans and advances have on the whole fallen from DKK 102bn to DKK 96bn, corresponding to a 6% decline. At the end of the third quarter of 2015, bank deposits (exclusive of repo deposits) amounted to DKK 125bn, i.e. about DKK 8bn less than at end-2014 and about DKK 4bn less than at the end of the first half of 2015. This development is a consequence of the low interest-rate level and the business initiatives implemented with a view to optimising the extent and pricing of the deposit portfolio. At the end of the third quarter 2015, the business volume within asset management amounted to DKK 117bn against DKK 94bn at end-2014. The development of the business volume was affected by negative returns in the third quarter of 2015. At the end of the third quarter, the Jyske Bank Group's equity amounted to DKK 29.2bn against DKK 27.6bn at end-2014. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 10 of 54 Loan impairment charges and provisions for guarantees and value adjustments of acquired assets Under core profit, an amount of DKK 381m was recognised as an expense under loan impairment charges and provisions for guarantees against DKK 1,236m in the same period in 2014. In the statutory reporting format, an amount of DKK 1,085m has been recognised as an expense under loan impairment charges and provisions for guarantees. The difference from impairment charges under core profit can be attributed to reclassification relating to write-downs on impaired loans and advances from BRFkredit Bank, BRFkredit and SparLolland. In the third quarter of 2015, impairment charges were, on a net basis, kept at a stable and low level. Extensive losses and impairment charges were established in the agricultural segments. In the third quarter of 2015, individual impairment charges relating to agricultural clients rose by DKK 75m. At the end of the third quarter of 2015, management's estimates amounted to DKK 360m, of which DKK 224m related to agricultural clients, against DKK 406m as at 30 June 2015. LOANS, ADVANCES AND GUARANTEES AS WELL AS VALUE ADJUSTMENTS OF LOANS AND ADVANCES, ETC. DKKm Loans, advances and guarantees The Index year 15/14 Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 2014 106 394,199 389,814 390,277 375,017 371,669 375,017 Q1 - Q3 2015 394,199 Q1 - Q3 2014 371,669 3,160 3,084 102 3,160 4,016 3,771 3,795 3,084 3,795 28,433 4,516 31,740 3,778 90 120 28,433 4,516 29,327 4,572 31,097 4,647 31,659 4,233 31,740 3,778 31,659 4,233 23,917 27,962 86 23,917 24,755 26,450 27,426 27,962 27,426 6,762 5,545 122 6,762 6,780 6,718 6,360 5,545 6,360 4,913 4,250 116 4,913 4,965 5,161 4,706 4,250 4,706 1,849 1,295 143 1,849 1,815 1,557 1,654 1,295 1,654 2,625 0 46 704 89 907 2,717 0 253 347 289 278 26 2,105 0 0 203 24 2,338 0 46 260 19 2,625 0 0 241 46 3,024 0 0 332 67 3,213 0 0 97 92 907 2,717 0 585 414 1,878 3,024 62 1,878 2,105 2,338 2,625 3,024 2,625 Total balance for loan impairment charges and provisions for guarantees and balance of discounts for acquired assets 8,640 8,569 101 8,640 8,885 9,056 8,985 8,569 8,985 Operational loan impairment charges and provisions for guarantees Operating loss 1,085 939 1,489 795 73 118 233 376 284 310 568 253 1,049 344 495 262 2,538 1,139 Non-performing loans and past due exposures Loans and advances assessed individually: Loans and advances with OEI before loan impairment charges Impairment charges Loans and advances with OEI after loan impairment charges Balance of loan impairment charges and provisions for guarantees Individual impairment charges and provisions for guarantees Collective impairment charges and provisions for guarantees Value adjustments of acquired assets: Balance of discounts for acquired assets, beginning of period Discounts relating to business combinations Other additions Positive value adjustments (interest income) Negative value adjustments (loss) Balance of discounts for acquired assets, end of period Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 11 of 54 The total balance of loan impairment charges and provisions for guarantees and the balance of discounts for assets taken over amounted to 2.1% of total loans, advances and guarantees. At the end of the third quarter of 2015, the Jyske Bank Group had no exposures amounting to more than 10% of the adjusted capital base. The Group had two exposures amounting to between 5% and 7.5% of the adjusted capital base and two exposures between 7.5% and 10% of the adjusted capital base. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 12 of 54 Investment portfolio earnings INVESTMENT PORTFOLIO EARNINGS DKKm Net interest income Net fee and commission income Value adjustments Other income Income Expenses Investment portfolio earnings before loan impairment charges Loan impairment charges Investment portfolio earnings Q1-Q3 2015 495 -1 -212 11 293 5 Q1-Q3 2014 502 -2 -254 9 255 9 288 0 288 246 0 246 Index 15/14 Q3 2015 Q2 2015 Q1 2015 Q4 2014 99 122 186 187 213 50 -1 1 -1 0 83 -148 -67 3 -357 122 2 7 2 1 115 -25 127 191 -143 56 1 2 2 2 117 117 -26 0 -26 125 0 125 189 0 189 -145 0 -145 Q3 2014 235 -1 -150 2 86 2 The year 2014 715 -2 -611 10 112 11 84 0 84 101 0 101 Investment portfolio earnings amounted to DKK 288m against DKK 246m for the same period in 2014. In comparison with the first nine months of 2014, it must be considered that earnings from investment portfolios from BRFkredit were not recognised until 1 May 2014. For the first nine months of 2015, net interest income was in line with the corresponding period last year. The decline in net interest income in the third quarter of 2015 can be attributed to lower bond holdings. Value adjustments were negatively affected by the widening of the Danish-German yield spread and in particular by the widening of credit spreads on Danish mortgage bonds. Market risk At the end of the third quarter of 2015, the aggregate interest-rate, currency and equity-price risk – expressed as Value-atRisk (VaR) – amounted to DKK 58m (calculated with a time frame of one day and 99% probability) against DKK 60m at the end of the second quarter of 2015.The net decline of DKK 2m was a result of opposing effects. Generally, volatility within equity risk, currency risk and interest-rate risk increased in the third quarter, which increased the VaR, but at the same time the Group reduced its holding of non-callable mortgage bonds, which reduced the VaR due to a lower OAS effect on the VaR on these. Value-at-Risk as a percentage of equity % 0.3 0,3 0.2 0,2 0.1 0,1 0.0 0,0 2011 2012 Total 2013 2014 Interest-rate Currency 2015 2016 Equities The Group’s portfolio of held-to-maturity bonds amounted to DKK 4.6bn against DKK 6.9bn at end-2014. The portfolio is still dominated by low-risk securities. At the end of the third quarter of 2015, the market value was DKK 168m higher than the carrying amount against DKK 246m at end-2014. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 13 of 54 Segment information The business segments reflect all activities with respect to banking, mortgage finance and leasing, inclusive of investing activities relating to clients' regular transactions. The investment portfolio earnings of the legal entities relate to the activities of the relevant entities. Banking activities SUMMARY OF INCOME STATEMENT DKKm Net interest income Net fee and commission income Value adjustments Other income Core income Core expenses Core profit before loan impairment charges Loan impairment charges Core profit Investment portfolio earnings Pre-tax profit Q1-Q3 2015 2,757 1,215 396 147 4,515 3,135 Q1-Q3 2014 2,894 1,106 272 2,981 7,253 3,377 Index 15/14 95 110 146 5 62 93 Q3 2015 952 331 -227 46 1,102 1,056 Q2 2015 946 313 731 61 2,051 1,010 Q1 2015 859 571 -108 40 1,362 1,069 Q4 2014 901 515 -266 65 1,215 1,048 Q3 2014 1,019 333 181 167 1,700 1,043 The year 2014 3,795 1,621 6 3,046 8,468 4,425 1,380 361 1,019 236 1,255 3,876 1,220 2,656 224 2,880 36 30 38 105 44 46 60 -14 5 -9 1,041 59 982 98 1,080 293 242 51 133 184 167 662 -495 -72 -567 657 414 243 66 309 4,043 1,882 2,161 152 2,313 SUMMARY OF BALANCE SHEET, END OF PERIOD DKKm Loans and advances - of which bank loans - of which repo loans Total assets 125,098 96,823 28,275 252,819 127,326 102,220 25,106 253,590 98 95 113 100 125,098 96,823 28,275 252,819 128,786 101,132 27,654 258,573 131,854 103,706 28,148 290,870 127,741 105,229 22,512 266,301 127,326 102,220 25,106 253,590 127,741 105,229 22,512 266,301 Deposits - of which bank deposits - of which repo deposits Issued bonds 138,531 125,259 13,272 47,840 142,818 123,191 19,627 32,378 97 102 68 148 138,531 125,259 13,272 47,840 140,846 128,790 12,056 43,232 146,761 126,762 19,999 48,883 147,467 127,972 19,495 38,210 142,818 123,191 19,627 32,378 147,467 127,972 19,495 38,210 Pre-tax profit The pre-tax profit from banking activities amounted to DKK 1,255m against DKK 2,880m for the same period in 2014 where bargain purchases of DKK 2,360m were recognised. The new home loans made a positive contribution to net interest income, which was, generally, affected by fierce competition in the market place and the falling volume of traditional bank loans and advances. To this must be added, that business activities relating to deposits were still under pressure due to the low interest-rate level and the lower currentaccount ceiling of Danmarks Nationalbank. Trading and investing activities saw a continued increase in the number of clients and, therefore, a sound activity level. The results of the trading and investing activities in the third quarter of 2015 were in line with those of the second quarter of 2015. Net fee and commission income were still satisfactory but adversely affected by falling equity and bond markets, which resulted in lower performance-related investment fees in the second and the third quarters of 2015. To this must be added that Jyske Bank still offers transfers of home loans without charging fees. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 14 of 54 Value adjustments amounted to DKK 396m against DKK 272m in the first nine months of 2014. In the third quarter of 2015, the falling market rates had a negative effect on clients' transactions relating to interest-rate hedging. The ensuing effect was a negative value adjustment of DKK 64m. For the first nine months of 2015, the total effect from clients' transactions relating to interest-rate hedging was a positive value adjustment of DKK 232m against a negative value adjustment of DKK 355m for the corresponding period last year. Also, the third quarter of 2015 saw negative value adjustments in respect of the liquidity buffer. New home loans are recognised at amortised cost and risk management takes place in a portfolio calculated at fair value. According to the joint funding agreement between Jyske Bank and BRFkredit, the loans are transferred at fair value. In the third quarter of 2015, this resulted in a negative value adjustment of DKK 86m. It is expected that as of 1 January 2016, home loans will be recognised at fair value at the first recognition. Due to the issue of fixed-rate home loans at a discount, it is expected that net interest income from the discount will be recognise as income in the magnitude of DKK 150m in the coming quarters. For the first nine months of 2015, core expenses amounted to DKK 3,135m against DKK 3,377m for the corresponding period in 2014. The increase in core expenses from the second quarter of 2015 to the third quarter of 2015 can primarily be attributed to expenses for the statutory Resolution Fund and the 1.8% increase in salaries prescribed by the collective agreement as of 1 July 2015. Business volume Satisfactory demand for new home loan products was still recorded. Growth in new home loan products was not reflected in Banking activities as, at the same time, in the first nine months of 2015 a large volume was transferred to BRFkredit, and therefore this growth is recognised under Mortgage activities. The demand for new loans from existing corporate clients is still limited, and solid corporate clients are in a position to reduce the drawdown under their commercial credit facilities. An inflow of corporate clients has been recorded, and to some extent the ensuring volume offsets the existing clients' lower drawdown under their commercial credit facilities. Volatility in the financial markets continued and resulted in satisfactory client activities within risk management in respect of assets, equity and liabilities. Trading and investing activities saw a stable development in respect of business volume and market share. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 15 of 54 Mortgage activities SUMMARY OF INCOME STATEMENT Q1-Q3 Q1-Q3 Index Q3 Q2 DKKm 2015 2014 15/14 2015 2015 Contribution income, etc. 1,255 601 209 431 418 Other net interest income 102 69 148 4 39 Net fee and commission income 173 51 339 60 52 Value adjustments -272 -78 349 -24 -206 Other income 25 8 313 13 5 Core income 1,283 651 197 484 308 Core expenses 697 379 184 225 242 Core profit before loan impairment charges 586 272 215 259 66 Loan impairment charges 21 18 117 -27 -28 Core profit 565 254 222 286 94 Investment portfolio earnings 52 22 236 -31 27 Pre-tax profit 617 276 224 255 121 Contribution income, etc. covers contribution income as well as interest rate margin on jointly funded loans. 1 Q1 2015 406 59 61 -42 7 491 230 261 76 185 56 241 Q4 2014 390 28 116 19 7 560 248 312 58 254 -73 181 Q3 2014 372 30 35 -52 7 392 203 189 -16 205 18 223 The year 2014 965 123 167 -59 15 1,211 627 584 76 508 -51 457 1) SUMMARY OF BALANCE SHEET, END OF PERIOD DKKm Loans and advances - of which mortgage loans - of which bank loans Total assets 242,355 242,355 0 263,175 219,017 215,998 3,019 253,653 111 242,355 233,700 231,835 221,665 219,017 221,665 112 242,355 233,700 229,167 218,864 215,998 218,864 0 0 2,668 2,801 3,019 2,801 104 263,175 267,894 267,953 261,300 253,653 261,300 Bank deposits Issued bonds 0 230,660 5,041 203,471 0 0 4,554 4,990 5,041 4,990 113 230,660 234,129 224,967 213,742 203,471 213,742 Mortgage activities were included in the income statement as of 1 May 2014 and in the balance sheet as of the end of the second quarter 2014. Pre-tax profit For the third quarter, the pre-tax profit from leasing activities amounted to DKK 255m against DKK 223m for the corresponding period in 2014. Contribution income etc. were still positively affected by the increasing loan portfolio, including, in particular, jointly funded home loans. Moreover, the contribution rates were raised in early 2015. The transfer of banking activities to Jyske Bank in May affected other net interest income adversely, taking full effect in the third quarter of 2015. In the third quarter of 2015, net fee and commission income amounted to DKK 60m, hence being at a stable level in 2015. The increase in the third quarter of 2015 relative to the third quarter of 2014 can primarily be attributed to higher commission income from restructuring of loans, refinancing and conclusion of fixed-price agreements. Value adjustments in the third quarter of 2015 improved relative to the corresponding period last year, primarily because last year a negative return was recorded on the company's core portfolio of mortgage bonds. In the third quarter of 2015, core expenses amounted to DKK 225m, including DKK 8m allocated for the new statutory Resolution Fund. Generally, core expenses fell, and the falling level can materially be attributed to a decline in payroll costs. The increase in expenses from the third quarter of 2014 to the third quarter of 2015 can be attributed to the adjustment of the provision for holiday pay obligations in the third quarter of 2014. Impairment charges amounted to an income of DKK 27m in the third quarter of 2015, which was mainly attributable to reversals of previous impairment charges relating to corporate clients. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 16 of 54 Business volume Mortgage loans grew by DKK 8.7bn in the third quarter of 2015, which was mainly attributable to jointly funded home loans transferred from Jyske Bank. Also BRFkredit's other loan segments recorded higher lending over the period. In the second quarter of 2015, BRFkredit's banking activities were transferred to Jyske Bank. Of these, loans and advances amounted to DKK 2.6bn and deposits to DKK 4.5bn. For further details about BRFkredit, please see BRFkredit's interim report for the first nine months of 2015. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 17 of 54 Leasing activities SUMMARY OF INCOME STATEMENT DKKm Net interest income Net fee and commission income Value adjustments Other income Income from operating lease (net) Core income Core expenses Core profit before loan impairment charges Loan impairment charges Pre-tax profit SUMMARY OF BALANCE SHEET, END OF PERIOD DKKm Loans and advances Total assets Deposits Q1-Q3 2015 339 -49 11 8 68 377 121 Q1-Q3 2014 323 -22 14 7 58 380 134 Index 15/14 105 223 79 114 117 99 90 Q3 2015 113 -19 0 1 22 117 40 Q2 2015 110 -15 11 2 27 135 42 Q1 2015 116 -15 0 5 19 125 39 Q4 2014 109 -5 -3 6 20 127 45 Q3 2014 108 -8 3 -2 19 120 51 The year 2014 432 -27 11 13 78 507 179 256 -1 257 246 -2 248 104 50 104 77 -3 80 93 -7 100 86 9 77 82 -3 85 69 0 69 328 -5 333 13,092 15,069 12,295 13,897 106 108 13,092 15,069 12,698 14,564 12,486 14,251 12,393 14,078 12,295 13,897 12,393 14,078 222 244 91 222 231 231 236 244 236 Pre-tax profit The pre-tax profit from leasing activities amounted to DKK 257m against DKK 248m for the corresponding period in 2014. The results were satisfactory and were achieved due to an increasing business volume and focus on cost control. Improvements were recorded within operating lease, including private leasing. The increasing use of contracts with dealer bonus affected net fee and commission income adversely as fee income is recognised over the term of the contract. Expenses amounted to DKK 121m and were 10% below the level for the corresponding period in 2014. Business volume In the first nine months of 2015, new sales were satisfactory, and there was a net increase in business volume. A positive future development of the business volume is still expected. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 18 of 54 Core profit and investment portfolio earnings The pre-tax profit for the first nine months of 2015 broken down by core earnings and investment portfolio earnings is stated below: BREAKDOWN OF THE PERIOD'S PROFIT DKKm Net interest income Net fee and commission income Value adjustments Other income Income from operating lease (net) Income Expenses Profit before loan impairment charges Loan impairment charges Pre-tax profit Q1 - Q3 2015 Core profit 4,453 1,339 135 180 68 6,175 3,953 2,222 381 1,841 Q1 - Q3 2014 Investment portfolio earnings Reclassification 495 704 -1 0 -212 0 11 0 0 241 293 945 5 241 288 0 288 704 704 0 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Total 5,652 1,338 -77 191 309 7,413 4,199 Core profit 3,887 1,135 208 2,996 58 8,284 3,890 3,214 1,085 2,129 4,394 1,236 3,158 Investment portfolio earnings Reclassification 501 253 -2 0 -254 0 10 0 0 216 255 469 9 216 246 0 246 253 253 0 Total 4,641 1,133 -46 3,006 274 9,008 4,115 4,893 1,489 3,404 Page 19 of 54 Capital structure and capital management Common Equity Tier 1 capital and capital base At the end of the third quarter of 2015, Common Equity Tier 1 capital (CET1) amounted to DKK 27,714m and 94% of the capital base against DKK 26,956m and 93% at end-2014. The Common Equity Tier 1 capital ratio fell to 15.8% due to the share buy-back programme and an expected ordinary dividend totalling DKK 1.0bn. CAPITAL AND CORE CAPITAL RATIOS Capital ratio (%) Core capital ratio incl. hybrid capital (%) Common Equity Tier 1 capital ratio (CET 1) (%) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 16.9 17.1 16.3 16.4 16.7 16.3 16.5 15.7 15.8 16.2 15.8 16.1 15.3 15.3 15.7 End2014 16.4 15.8 15.3 The Jyske Bank Group’s total weighted risk exposure amounted to DKK 175bn at the end of the third quarter of 2015 against DKK 176bn at end-2014. The Jyske Bank Group's total weighted risk exposure with credit risk was unchanged at DKK 138bn, corresponding to 79% of the total weighted risk exposure. The total weighted risk exposure with credit risk was affected by two opposing circumstances: lower volume within traditional bank loans and advances, reducing the risk exposure, and growth in new home loans, increasing the risk exposure. Jyske Bank has established a long-term goal of achieving a capital ratio of 17.5% and a Common Equity Tier 1 capital ratio of 14.0% when the capital adequacy rules have been fully implemented in 2020. Capital policy A share buy-back programme of up to DKK 500m will be launched and the programme is expected to be completed on 1 July 2016. Moreover, it is the intention of the Supervisory Board, at the Annual General Meeting in March 2016, to propose a motion for the distribution of ordinary dividend in the amount of about DKK 500m. As a consequence of this, the capital ratio has changed from 17.4% to 16.9% and the Common Equity Tier 1 capital ratio from 16.4% to 15.8%. See also page 5 for further details. Jyske Bank will, at the same time, explore the market for opportunities to issue subordinated capital instruments. Individual solvency requirement and capital buffer The individual solvency requirement for the Jyske Bank Group is determined as the higher one of the requirements based on the internal method, the FSA’s 8+ method as well as statutory limits. In addition to the minimum capital requirement, the individual solvency requirement is subject to the transitional provisions pertaining to AIRB institutions. At the end of the third quarter of 2015, the Jyske Bank Group calculated its individual solvency requirement to be 10.7% of the total weighted risk exposure against 10.9% at end-2014. To this must be added a SIFI requirement of 0.3% at the end of the third quarter of 2015. Compared with the actual capital base of DKK 29bn, the capital buffer amounted at the end of the third quarter of 2015 to DKK 10.3bn, corresponding to 5.9 percentage points. The capital buffer plus earnings from operations denote the maximum sustainable loss without the need for additional capital. The Jyske Bank Group’s large proportion of Common Equity Tier 1 capital cements the quality of the total capital. According to the Basel I transitional rules, the capital requirement was 9.4% against 9.2% at end-2014. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 20 of 54 Liquidity management The Group's liquidity buffer At the end of the third quarter of 2015, the Jyske Bank Group's liquidity buffer amounted to DKK 70bn against DKK 55bn at end-2014. The breakdown of the liquidity buffer by the three different internal liquidity classes is shown in the chart below. 11% 9% Eligible at the Danish Central Bank Eligible at the ECB Non Central Bank eligible securities 80% Under a stress scenario assuming that the Group is precluded from re-financing in the international financial money markets for unsecured senior debt as well as the market for so-called senior secured bonds, the Group's liquidity buffer would after a 12-month period amount to DKK 31.4bn and after a 24-month period to DKK 25.9bn. LIQUIDITY RESERVE AND RUN-OFF DKKbn End of period 3 mths. 6 mths. 9 mths. 12 mths. Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 69.8 69.0 61.5 55.1 52.4 45.6 50.2 45.4 48.2 38.1 38.4 46.7 41.9 42.4 32.0 35.1 39.5 35.6 39.7 27.7 31.4 37.5 27.4 30.3 25.2 End2014 55.1 48.2 42.4 39.7 30.3 The liquidity reserve according to S.152(1)(2) of the Danish Financial Business Act was high throughout the period. At the end of the third quarter of 2015, the liquidity ratio was 28.9%, corresponding to a liquidity surplus of 189% compared with 144% at end-2014. Liquidity Coverage Ratio Jyske Bank is a systemically important financial institution and must therefore fully meet the new Liquidity Coverage Ratio (LCR) of 100% as of 1 October 2015. As at 30 September 2015, the Group's LCR ratio was 167%. The Group's funding profile At the end of the third quarter 2015, the portfolio of traditional bank loans and advances was still more than fully funded by bank deposits. Mortgage loans were funded through issue of mortgage bonds. The run-off profile of the Group's senior debt as well as senior secured issues through BRFkredit's capital centre is illustrated by the chart below. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 21 of 54 10 DKKbn 8 6 4 2 0 Q4 2015 2016 2017 2018 Jyske Bank senior unsecured EMTN bonds & long term senior debt 2019 BRF senior secured bonds 2020 > 2020 BRF senior unsecured bonds Capital market funding At the end of the third quarter of 2015, liquidity procured under the CP programme amounted to DKK 29.3bn (EUR 3.9bn) against DKK 20.6bn (EUR 2.8bn) at end-2014. Issues of long-term senior debt under Jyske Bank’s EMTN programme as well as other long-term senior debt amounted to DKK 18.5bn against DKK 17.2bn at end-2014. Increasing interest rate volatility and long-term interest-rate levels over the first half of 2015 as well as increasing geopolitical unrest and uncertainty in the third quarter of 2015 caused - in combination with the coming into force of the LCR and the implementation in Europe of the new Bank Recovery and Resolution Directive ”BRRD” - a change in the sentiment in the capital markets. The market expects a steep increase in the supply of capital market instruments over the coming quarters, and the supply/demand dynamics have changed in the favour of investors, as a result of which the international capital markets were characterised by increasing volatility and widening credit spreads for senior debt and also, and not least, for supplementary capital in the second and third quarters. Jyske Bank took advantage of the attractive market conditions in the period up to May 2015 to be active in the private placement market and issued 2-year bonds in the amount of SEK 1bn, 5-year bonds in the amount of SEK 1.35bn and 7-year bonds in the smaller amount of EUR 10m. Furthermore, in March 2015, 3-year public benchmark bonds in the amount of EUR 500m were issued. More than 90% of the bonds was sold to foreign investors, which goes to show that Jyske Bank has built up strong access to the European investor base. In the course of the ordinary management of the run-off profile, Jyske Bank had at end-September 2015 bought back EMTN issues with a shorter time to maturity in the amount of DKK 1.3bn. The greater part of Jyske Bank's new home loan products are funded under the joint funding agreement. At the end of the third quarter of 2015, under the joint funding agreement, funding amounted to DKK 35.3bn, against DKK 14.1bn at end2014. Refinancing in mortgage activities The strongest effect from BRFkredit on the Group's liquidity risk profile is in the form of refinancing risk. To reduce this refinancing risk, refinancing has been spread out over three annual settling periods, with the intention that the individual series must be so large that they can be included in the credit institutions' liquidity buffers in connection with the LCR requirements. Moreover, in the course of 2015, BRFkredit financed and re-financed the so-called F1 loans and joint funding home loans through RTL F bonds (pre-financed bonds). Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 22 of 54 The table below gives a comprehensive overview of planned re-financing of mortgage bonds as well as a breakdown of debt outstanding by type of mortgage loan. PLANNED RE-FINANCING AND BREAKDOWN OF DEBT OUTSTANDING DKKbn Repayment Planned re-financing dates amount Funding Maturities per (amount offered) re-financing dates Jan-16 46.6 9.9 Apr-16 9.3 1.8 Oct-16 11.9 4.4 2017 31.0 30.2 2018 28.9 28.9 2019 14.1 14.1 2020 5.5 5.5 2021 0.6 0.6 2022 0.6 0.6 2023 1.3 1.3 2024 0.8 0.8 2025 0.9 0.9 Note: The table does not include fixed-rate loans. Loan Maturities per re-financing dates + 2 years (RTL F) 36.7 7.6 7.5 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 F1 36.7 6.5 7.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 F3 4.2 1.3 0.6 8.2 11.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 F5 3.2 0.0 1.9 6.7 13.7 12.0 4.7 0.0 0.0 0.0 0.0 0.0 Other 2.5 1.5 1.9 16.1 3.6 2.2 0.8 0.6 0.6 1.3 0.8 0.9 Breakdown of BRFkredit's loan portfolio by loan type 5% 39% Refinancing within one year Refinancing beyond one year Other loan types (fixed rate etc.) 56% Other information The supervisory diamond for Jyske Bank A/S The supervisory diamond defines a number of special risk areas including specified limits that financial institutions should generally not exceed. The supervisory diamond limits applicable to Jyske Bank A/S are shown below. THE SUPERVISORY DIAMOND FOR JYSKE BANK A/S Sum of large exposures < 125% of the adjusted capital base Increase in loans and advances < 20% annually Exposures to property administration and property transactions < 25% of total loans and advances Stable funding < 1 Liquidity surplus > 50% Q3 2015 0% -4% Q2 2015 0% 0% Q1 2015 0% 4% Q4 2014 0% 9% Q3 2014 0% 5% End2014 0% 9% 7% 0.67 189% 7% 0.67 174% 7% 0.71 137% 7% 0.72 129% 7% 0.72 130% 7% 0.72 129% Jyske Bank A/S meets all the benchmarks of the supervisory diamond. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 23 of 54 The supervisory diamond BRFkredit a/s The supervisory diamond defines a number of special risk areas including specified limits that financial institutions should generally not exceed. The supervisory diamond takes effect in 2018 and 2020, respectively. The supervisory diamond limits applicable to BRFkredit a/s are shown below. THE SUPERVISORY DIAMOND FOR BRFkredit a/s Concentration risk < 100% Increase in loans and advances < 15% annually in the segment: Owner-occupied homes and vacation homes Residential rental property Agriculture Other sectors Borrower's interest-rate risk < 25% Residential property Interest-only schemes < 10% Owner-occupied homes and vacation homes Loans with frequent interest-rate fixing: Refinancing (annually) < 25% Refinancing (quarterly) < 12.5% Q3 2015 77.8% Q2 2015 72.5% Q1 2015 74.6% Q4 2014 76.4% Q3 2014 - End2014 76.4% 25.4% 5.8% 4.3% 23.1% 7.0% 4.7% 17.4% 4.8% -0.4% 9.1% 4.0% 2.7% - 9.1% 4.0% 2.7% 30.7% 29.4% 28.2% 27.0% - 27.0% 10.6% 10.8% 11.3% 11.5% - 11.5% 24.0% 3.9% 26.3% 0.0% 27.5% 3.2% 27.5% 19.4% - 27.5% 19.4% As at 30 September 2015, BRFkredit a/s met the supervisory diamond's benchmarks for concentration risk and loans with short-term funding. BRFkredit did not meet the indicator for lending growth in respect of owner-occupied homes and vacation homes calculated on a 4-quarter rolling basis. BRFkredit finds that the growth that primarily stems from the client inflow following the merger with Jyske Bank does not pose any problems as loans are primarily granted to clients known to the Group, and it is not cyclical growth. On an on-going basis, BRFkredit reviews the institution's position relative to the indicators and expects to be compliant before they take effect in 2018 and 2020. Additional information For further information, please see www.jyskebank.info. Here you will find an interview with Sven A. Blomberg, Deputy Chief Executive and Managing Director, detailed financial information as well as Jyske Bank's Annual Report 2014 and Risk and Capital Management 2014, which give further information about Jyske Bank’s internal risk and capital management as well as regulatory issues, including a description of the most important risks and elements of uncertainty that may affect Jyske Bank. Also, please see www.brf.dk. BRFkredit's interim financial report for the first nine months of 2015 and detailed financial information about BRFkredit are available on that website. Contact persons: Sven A. Blomberg (+45 89 89 89 89) Birger Krøgh Nielsen (+45 89 89 64 44) Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 24 of 54 Statement by the Executive and Supervisory Boards We have today discussed and approved the Interim Financial Report of Jyske Bank A/S for the period 1 January to 30 September 2015. The consolidated Interim Financial Statements were prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, and the Parent’s Interim Financial Statements in accordance with the Danish Financial Business Act. Further, the Interim Financial Report was prepared in accordance with the additional Danish disclosure requirements for interim financial reports of listed financial companies. The Interim Financial Report is unaudited and has not been reviewed. In our opinion, the interim financial statements give a true and fair view of the Group’s and the Parent’s financial position at 30 September 2015 and also of their financial performance as well as the cash flows of the Group for the period 1 January to 30 September 2015. In our opinion, the Management’s Review gives a fair presentation of the development in the Group's and the Parent’s performance and financial position, the profit for the period and the Group’s and the Parent’s financial position as a whole as well as a description of the most material risks and elements of uncertainty that may affect the Group and the Parent. Silkeborg, 29 October 2015 EXECUTIVE BOARD ANDERS DAM Managing Director and CEO NIELS ERIK JAKOBSEN SVEN A. BLOMBERG Deputy Chief Executive and Managing Director LEIF F. LARSEN PER SKOVHUS /JENS BORUM Director, Finance SUPERVISORY BOARD SVEN BUHRKALL Chairman RINA ASMUSSEN PHILIP BARUCH JESPER HOLBØLL Employee Representative KURT BLIGAARD PEDERSEN Deputy Chairman JENS A. BORUP HAGGAI KUNISCH Employee Representative Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 OLUF ENGELL KELD NORUP MARIANNE LILLEVANG Employee Representative Page 25 of 54 INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME Note DKKm The Jyske Bank Group Q3 Q3 2014 2015 Q1-Q3 2015 Q1-Q3 2014 10,174 4,522 5,652 7,689 3,048 4,641 3,249 1,424 1,825 3,412 1,554 1,858 INCOME STATEMENT 5 6 Interest income Interest expenses Net interest income 7 Fees and commission income Fees and commission expenses Net interest and fee income 1,640 302 6,990 1,363 230 5,774 464 93 2,196 447 88 2,217 8 9 10 Value adjustments Other income Employee and administrative expenses Amortisation, depreciation and impairment charges Loan impairment charges and provisions for guarantees Pre-tax profit -77 500 3,891 308 1,085 2,129 -46 3,280 3,795 320 1,489 3,404 -399 169 1,299 108 233 326 -16 266 1,276 95 495 601 Tax Net profit or loss for the period 490 1,639 94 3,310 76 250 53 548 Attributable to: Jyske Bank A/S shareholders Non-controlling interests Total 1,639 0 1,639 3,309 1 3,310 250 0 250 548 0 548 Earnings per share for the period Earnings per share for the period, DKK Earnings per share for the period, DKK, diluted 17.26 17.26 38.59 38.59 2.63 2.63 5.76 5.76 Net profit or loss for the period Other comprehensive income: Items that can be recycled to the income statement: Foreign currency translation adjustment of international units Hedge accounting of international units Tax on hedge accounting Other comprehensive income after tax 1,639 3,310 250 548 110 -110 26 26 55 -55 13 13 -60 60 -14 -14 23 -23 5 5 Comprehensive income for the period 1,665 3,323 236 553 Attributable to: Jyske Bank A/S shareholders Non-controlling interests Total 1,665 0 1,665 3,322 1 3,323 236 0 236 553 0 553 12 11 STATEMENT OF COMPREHENSIVE INCOME Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 26 of 54 BALANCE SHEET Note 30 Sept. 2015 The Jyske Bank Group 31 Dec. 30 Sept. 2014 2014 10,752 14,154 242,355 138,190 70,240 4,623 3,973 94 4,083 818 41,781 531,063 1,850 30,882 218,864 142,935 82,459 6,878 2,972 113 3,788 495 50,443 541,679 1,066 19,505 215,998 142,640 75,176 11,267 2,712 120 3,601 319 48,736 521,140 Liabilities Due to credit institutions and central banks Deposits Issued bonds at fair value Issued bonds at amortised cost Other liabilities Provisions Subordinated debt Liabilities, total 31,947 138,753 225,944 52,556 49,647 1,629 1,354 501,830 49,885 152,693 208,539 43,413 56,628 1,605 1,355 514,118 51,761 148,103 198,099 37,750 54,576 1,667 1,354 493,310 Equity Share capital Revaluation reserve Retained profit Non-controlling interests Equity, total Total equity and liabilities 950 380 27,903 0 29,233 531,063 950 380 26,231 0 27,561 541,679 950 361 26,486 33 27,830 521,140 13,654 17,354 31,008 13,218 14,636 27,854 13,031 2,322 15,353 DKKm BALANCE SHEET 13.14 15 16 ASSETS Cash balance and demand deposits with central banks Due from credit institutions and central banks Loans and advances at fair value Loans and advances at amortised cost Bonds at fair value Bonds at amortised cost Shares, etc. Intangible assets Property, plant and equipment Tax assets Other assets Total assets EQUITY AND LIABILITIES 17 18 19 20 21 OFF-BALANCE SHEET ITEMS 22 Guarantees, etc. Other contingent liabilities, etc. Total guarantees and other contingent liabilities Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 27 of 54 STATEMENT OF CHANGES IN EQUITY The Jyske Bank Group DKKm Equity at 1 January 2015 Share capital 950 RevaluaCurrency tion translation reserve reserve 380 0 Retained profit 26,231 Noncontrolling Total interests 27,561 0 Total equity 27,561 Net profit or loss for the period Other comprehensive income: Foreign currency translation adjustment of international units Hedge accounting of international units Tax on other comprehensive income Other comprehensive income after tax 0 0 0 1,639 1,639 0 1,639 0 0 0 0 0 0 0 0 110 -110 0 0 0 0 26 26 110 -110 26 26 0 0 0 0 110 -110 26 26 Comprehensive income for the period 0 0 0 1,665 1,665 0 1,665 Acquisition of own shares Sale of own shares Transactions with shareholders 0 0 0 0 0 0 0 0 0 -1,927 1,934 7 -1,927 1,934 7 0 0 0 -1,927 1,934 7 Equity at 30 September 2015 950 380 0 27,903 29,233 0 29,233 Equity at 1 January 2014 713 361 0 16,372 17,446 33 17,479 Net profit or loss for the period Other comprehensive income: Foreign currency translation adjustment of international units Hedge accounting of international units Tax on other comprehensive income Other comprehensive income after tax 0 0 0 3,309 3,309 1 3,310 0 0 0 0 0 0 0 0 55 -55 0 0 0 0 13 13 55 -55 13 13 0 0 0 0 55 -55 13 13 Comprehensive income for the period 0 0 0 3,322 3,322 1 3,323 Capital increase Expenses relating to capital increase Acquisition of own shares Sale of own shares Adjustment of non-controlling interests Transactions with shareholders 237 0 0 0 0 237 0 0 0 0 0 0 0 0 0 0 0 0 6,794 -7 -1,063 1,068 0 6,792 7,031 -7 -1,063 1,068 0 7,029 0 0 0 0 -1 -1 7,031 -7 -1,063 1,068 -1 7,028 Equity at 30 September 2014 950 361 0 26,486 27,797 33 27,830 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 28 of 54 CAPITAL STATEMENT DKKm 30 Sept. 2015 The Jyske Bank Group 31 Dec. 30 Sept. 2014 2014 Equity Share-buyback programme Expected dividend Intangible assets Deferred tax liabilities relating to intangible assets Cautious valuation Deferred tax assets Other deductions Common Equity Tier 1 capital 29,233 -500 -500 -94 21 -314 -53 -79 27,714 27,561 0 0 -113 26 -256 -198 -64 26,956 27,830 0 0 -120 27 -262 -239 -65 27,171 Additional Tier 1 Capital after reduction Other deductions Core capital 907 -83 28,538 993 -57 27,892 993 -57 28,107 Subordinated loan capital after reduction Difference between expected loss and the carrying amount of impairment charges Collective impairment under the standardised approach Other deductions Capital base 405 722 0 -192 29,473 324 709 65 0 28,990 327 506 46 0 28,986 137,728 20,318 16,807 174,853 137,973 21,409 17,051 176,433 136,847 19,703 17,051 173,601 13,988 2,528 16,516 14,115 2,111 16,226 13,388 2,204 16,092 16.9 16.3 15.8 16.4 15.8 15.3 16.7 16.2 15.7 Weighted risk exposure involving credit risk etc. Weighted risk exposure involving market risk Weighted risk exposure involving operational risk Total weighted risk exposure Capital requirement, Pillar I Capital requirement, transitional provisions Capital requirement, total Capital ratio (%) Core Tier 1 Capital ratio (%) Common Equity Tier 1 capital ratio (%) Over the period 2008-2013, capital ratios were calculated in accordance with the CRD III (Basel II). On 30 September 2015, the total riskweighted exposure according to Basel I amounted to DKK 258,067m for the Jyske Bank Group. The capital requirement according to the transitional provisions was for 80% of the capital requirement of 8% of the total weighted risk exposure corresponding to DKK 16,516m for the Jyske Bank Group. At end-2014, the transitional provisions resulted in a capital requirement of DKK 16,226m for the Jyske Bank Group. The transitional rules applying to total weighted risk exposure will still apply in the coming years. For the determination of individual solvency requirement, please see www.jyskebank.info. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 29 of 54 SUMMARY OF CASH FLOW STATEMENT DKKm The Jyske Bank Group Q1-Q3 Q1-Q3 2014 2015 1,639 3,310 -8,691 -7,052 -7,066 -3,756 Acquisition of property, plant and equipment Acquisition of intangible assets Cash flows from investment activities -587 0 -587 -223 -49 -272 Capital increase Acquisition of own shares Sale of own shares Addition and repayment of subordinated debt Cash flows from financing activities 0 -1,927 1,934 0 7 7,031 -1,063 1,068 -309 6,727 Cash flow for the period -7,632 2,699 Cash and cash equivalents, beginning of period 32,527 16,647 Cash and cash equivalents, end of period 24,895 19,346 Cash and cash equivalents, end of period, comprise: Cash in hand, etc. Due from credit institutions and central banks Cash and cash equivalents, end of period 10,752 14,143 24,895 1,066 18,280 19,346 Net profit or loss for the period Adjustment for non-cash operating items and change in working capital Cash flows from operating activities Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 30 of 54 NOTES Note 1 The Jyske Bank Group Accounting Policies The Interim Financial Report for the period 1 January to 30 September 2015 was prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Furthermore, the Interim Financial Report was prepared in accordance with the additional Danish disclosure requirements for the interim reports of listed financial undertakings. As from 1 January 2015, the Jyske Bank Group has implemented the standards and interpretations that take effect in the EU for 2015. The implementation of these standards and interpretations did not have any material impact on recognition and measurement. Changes to segment information In 2015, the Group changed its business segments to better reflect all activities with respect to banking, mortgage finance and leasing, inclusive of investing activities relating to clients' regular transactions. The investment portfolio earnings of the legal entities will be related to the activities of the relevant entities. Comparative figures have been restated accordingly. Banking activities Banking activities cover advisory services relating to traditional financial solutions targeting personal and private banking clients as well as corporate clients and trading and investment activities targeting large corporate clients and institutional clients, including trading in interest-rate products, currencies, equities, commodities and derivatives. Investment portfolio earnings of Jyske Bank A/S are allocated to Banking activities. Mortgage activities Mortgage activities comprise financial solutions for the financing of real property carried out by BRFkredit. Mortgage activities are aimed mainly at Danish personal clients, corporate clients and subsidised housing and construction. Investment portfolio earnings of BRFkredit a/s are allocated to Mortgage activities. Leasing activities Leasing activities cover financial solutions in the form of leasing and financing within car financing as well as leasing and financing of equipment for the corporate sector. The activities primarily target Danish personal and corporate clients as well as dealer cooperation schemes and partnerships. Moreover, the accounting policies are identical to those applied to and described in detail in the Annual Report 2014. At the time of publication of this Interim Financial Report, a number of new or amended standards and interpretations had not come into force or been approved for use in the EU. In the following are set out the standards which are expected to have a material effect on the financial reporting of the Jyske Bank Group.  2 IFRS 9 on financial assets covers classification and measurement of financial assets and liabilities, impairment of financial assets as well as hedge accounting. The IASB completed the IFRS 9 in July 2014, but the standard has not been approved by the EU. Compared to the current standard, IFRS 9 will, among other things, entail earlier recognition of loan impairment charges at amortised cost, as already at the time of the first recognition, impairment charges corresponding to the expected credit loss over 12 months must be recognised. If, subsequently, the probability of loss on the loan increases materially, the expected credit loss over the term must under certain circumstances be recognised. The IFRS 9 stipulations about loan impairment charges do not cover loans and advances, including mortgage loans, that are measured at fair value, and they are not expected to imply any material changes to the process and method of valuation of loans and advances at fair value. It has not been possible to make a comprehensive assessment of the standard's effect on the Jyske Bank Group. It is expected that the standard will take effect from 1 January 2018, but it is possible to implement it before that date. Material accounting estimates Measurement of the carrying value of certain assets and liabilities requires the management's estimate of the influence of future events on the value of such assets and liabilities. Estimates of material importance to the financial reporting are, among other things, based on the impairment of loans and advances, the fair value of unlisted financial instruments and provisions already made, cf. the detailed statement in the Annual Report 2014. The estimates are based on assumptions which management finds reasonable, but which are inherently uncertain. Besides, the Group is subject to risks and uncertainties which may cause results to differ from those estimates. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 31 of 54 NOTES The Jyske Bank Group Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 3 Key figures and ratios, five quarters Summary of Income Statement Net interest income Net fee and commission income Value adjustments Other income Income Expenses Profit or loss before loan impairment charges Loan impairment charges and provisions for guarantees Pre-tax profit Tax Net profit or loss for the period Financial ratios and key figures Pre-tax profit, per share (DKK) Earnings per share for the period (DKK) Earnings per share for the period (diluted) (DKK) Core profit per share (DKK) Share price at end of period (DKK) Book value per share (DKK) Price/book value per share (DKK) Outstanding shares in circulation (‘000) Average number of shares in circulation ('000) Capital ratio (%) Core Tier 1 Capital ratio (%) Common Equity Tier 1 capital ratio (%) Pre-tax profit as a pct. of average equity Profit for the period as a pct. of av. equity Income/cost ratio (%) Interest-rate risk (%) Currency risk (%) Accumulated impairment ratio (%) Impairment ratio for the period (%) No. of full-time employees at end-period Average number of full-time employees in the period Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 1,825 371 -399 169 1,966 1,407 559 233 326 76 250 1,959 351 469 180 2,959 1,374 1,585 284 1,301 305 996 1,868 616 -147 151 2,488 1,418 1,070 568 502 109 393 1,974 626 -607 173 2,166 1,418 748 1,049 -301 -80 -221 1,858 359 -16 266 2,467 1,371 1,096 495 601 53 548 3.4 2.6 2.6 3.7 369 308 1.2 95,000 95,004 16.9 16.3 15.8 1.1 0.9 1.2 1.1 0.1 1.7 0.1 4,102 4,143 13.7 10.5 10.5 12.4 336 305 1.1 94,996 94,955 17.1 16.5 16.1 4.6 3.5 1.8 1.2 0.0 1.7 0.1 4,112 4,140 5.3 4.1 4.1 3.3 293 295 1.0 94,918 94,961 16.3 15.7 15.3 1.8 1.4 1.3 0.1 0.0 1.7 0.1 4,168 4,180 -3.2 -2.3 -2.3 -1.6 313 290 1.1 94,988 94,987 16.4 15.8 15.3 -1.1 -0.8 0.9 -0.5 0.0 1.7 0.3 4,191 4,240 6.3 5.8 5.8 5.4 319 293 1.1 94,993 94,981 16.7 16.2 15.7 2.2 2.0 1.3 -0.5 0.0 1.5 0.1 4,289 4,321 Page 32 of 54 NOTES The Jyske Bank Group Note DKKm 4 Segment information Banking activities Mortgage activities Leasing activities The Jyske Bank Group 2,757 1,215 396 147 0 4,515 3,135 1,357 173 -272 25 0 1,283 697 339 -49 11 8 68 377 121 4,453 1,339 135 180 68 6,175 3,953 1,380 586 256 2,222 361 1,019 236 1,255 21 565 52 617 -1 257 0 257 381 1,841 288 2,129 Loans and advances - of which mortgage loans - of which bank loans - of which repo loans Total assets 125,098 0 96,823 28,275 252,819 242,355 242,355 0 0 263,175 13,092 0 13,092 0 15,069 380,545 242,355 109,915 28,275 531,063 Deposits - of which bank deposits - of which repo deposits Issued bonds 138,531 125,259 13,272 47,840 0 0 0 230,660 222 222 0 0 138,753 125,481 13,272 278,500 2,894 1,106 272 2,981 0 7,253 3,377 670 51 -78 8 0 651 379 323 -22 14 7 58 380 134 3,887 1,135 208 2,996 58 8,284 3,890 3,876 272 246 -2 4,394 1,220 2,656 224 2,880 18 254 22 276 248 0 248 1,236 3,158 246 3,404 Loans and advances - of which mortgage loans - of which bank loans - of which repo loans Total assets 127,326 0 102,220 25,106 253,590 219,017 215,998 3,019 0 253,653 12,295 0 12,295 0 13,897 358,638 215,998 117,534 25,106 521,140 Deposits - of which bank deposits - of which repo deposits Issued bonds 142,818 123,191 19,627 32,378 5,041 5,041 0 203,471 244 244 0 0 148,103 128,476 19,627 235,849 Q1 - Q3 2015 Net interest income Net fee and commission income Value adjustments Other income Income from operating lease Core income Core expenses Core profit before loan impairment charges and provisions for guarantees Loan impairment charges and provisions for guarantees Core profit Investment portfolio earnings Pre-tax profit Q1 - Q3 2014 Net interest income Net fee and commission income Value adjustments Other income Income from operating lease Core income Core expenses Core profit before loan impairment charges and provisions for guarantees Loan impairment charges and provisions for guarantees Core profit Investment portfolio earnings Pre-tax profit Mortgage activities were included in the income statement as of 1 May 2014 and in the balance sheet as of the end of the second quarter 2014. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 33 of 54 NOTES Note DKKm 4 Q1-Q3 2015 The Jyske Bank Group Q1-Q3 2014 Full-time employees, end of period 3,979 22 92 9 0 0 4,102 Full-time employees, end of period 4,131 45 92 9 12 0 4,289 Segment information, cont. Revenue by country Denmark Switzerland Gibraltar Germany The Netherlands Spain Total Revenue 12,109 46 62 36 0 0 12,253 Revenue 12,050 65 55 45 11 0 12,226 Revenue is defined as interest income, fee and commission income and also other operating income. Jyske Bank has activities in the countries stated below in the form of subsidiaries or branches. The names of the subsidiaries appear from the group chart. Activities in individual countries: Denmark: The Jyske Bank Group has activities within banking and mortgage banking, trading and wealth management advice as well as leasing. Switzerland: The Jyske Bank Group has activities within banking as well as trading and wealth management advice. Gibraltar: The Jyske Bank Group has activities within banking as well as trading and wealth management advice. Germany: The Jyske Bank Group has activities within banking. The Netherlands: In 2014, the Jyske Bank Group (60% of the shares) sold its stake in the investment company Berben’s Effectenkantoor B.V. in the Netherlands; this company has activities within investment management. Spain: The Jyske Bank Group has activities within properties. DKKm 5 6 The Jyske Bank Group Q1-Q3 Q1-Q3 2014 2015 Interest income Due from credit institutions and central banks Loans and advances Contribution Bonds Derivatives, total Of which: Currency contracts Interest-rate contracts Other Interest income before offsetting of interest against own mortgage bonds Interest on own bonds, set off against interest on issued bonds Total -25 7,894 1,170 1,364 209 23 5,836 601 1,276 173 277 -68 8 10,620 446 10,174 179 -6 5 7,914 225 7,689 Interest expenses Due to credit institutions and central banks Deposits Issued bonds Subordinated debt Other Interest income before offsetting of interest against own mortgage bonds Interest on own bonds, set off against interest on issued bonds Total -56 274 4,624 20 106 4,968 446 4,522 109 524 2,583 31 26 3,273 225 3,048 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 34 of 54 NOTES Note DKKm 7 8 9 Fees and commission income Securities trading and custody services Money transfers and card payments Loan management fees Guarantee commission Other fees and commissions Total Value adjustments Loans and advances at fair value Bonds Other investment securities Currency Currency, interest-rate, share, commodity and other contracts as well as other derivatives Issued bonds Other assets and liabilities Total Other income Income on real property Profit from the sale of subsidiary Gain from a bargain purchase relating to business combinations Income from operating lease¹ Dividends, etc. Profit on investments in associates and group enterprises Other income Total The Jyske Bank Group Q1-Q3 Q1-Q3 2014 2015 982 135 223 155 145 1,640 758 136 135 141 193 1,363 -3,772 -358 246 270 259 3,803 -525 -77 1,207 115 484 200 -671 -1,449 68 -46 54 0 0 309 56 5 76 500 53 296 2,360 274 71 35 191 3,280 ¹) Expenses relating to operating lease affected the item Amortisation, depreciation and impairment charges in the amount of DKK 241m in the first nine months of 2015 against DKK 216m in the corresponding period of 2014. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 35 of 54 NOTES Note DKKm 10 The Jyske Bank Group Q1-Q3 Q1-Q3 2014 2015 Employee and administrative expenses Employee expenses Wages and salaries, etc. Pensions Social security Total 1,825 241 225 2,291 1,727 232 204 2,163 22 3 2 27 23 3 1 27 Other administrative expenses IT Other operating expenses Other administrative expenses Total 863 136 574 1,573 806 246 553 1,605 Total 3,891 3,795 23.5 -0.5 23.0 24.5 -21.7 2.8 Salaries and remuneration to management bodies Executive Board¹ Supervisory Board Shareholders' Representatives Total ¹I The Executive Board had an average of 5.0 members in the first nine months of 2015 (first nine months of 2014: an average of 5.4 members). 11 Effective tax rate Corporation tax rate in Denmark Non-taxable income and non-deductible expenses, etc. Total Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 36 of 54 NOTES Note 12 DKKm Loan impairment charges and provisions for guarantees, incl. balance of discounts Balance of loan impairment charges and provisions for guarantees incl. balance of discounts, beginning of period Loan impairment charges/provisions for the period Recognised as a loss, covered by impairment charges/provisions Discount for acquired assets in connection with business combinations Other additions of discount for acquired assets Recognised losses covered by discounts for acquired assets Recognised discount for acquired assets Other movements Balance of loan impairment charges and provisions for guarantees incl. balance of discounts, end of period The Jyske Bank Group Q1-Q3 Q1-Q3 2014 2015 8,985 835 -538 0 46 -89 -704 105 5,600 1,216 -462 2,717 0 -347 -253 98 8,640 8,569 Loan impairment charges Provisions for guarantees Balance of loan impairment charges and provisions, end of period Balance of discounts for acquired assets Balance of loan impairment charges and provisions for guarantees incl. balance of discounts, end of period 6,279 483 6,762 1,878 5,016 529 5,545 3,024 8,640 8,569 Loan impairment charges/provisions for the period Recognised as a loss, not covered by loan impairment charges/provisions Recoveries Loan impairment charges and provisions for guarantees recognised in the income statement Recognised discount for acquired assets Net effect on income statement 835 401 -151 1,216 333 -60 1,085 -704 381 1,489 253 1,236 Individual loan impairment charges, beginning of period Loan impairment charges for the period Recognised as a loss, covered by impairment charges/provisions Other movements Individual loan impairment charges, end of period 4,232 733 -528 79 4,516 3,386 786 -455 75 3,792 474 -67 -10 397 364 101 -7 458 1,570 167 26 1,763 863 338 23 1,224 Collective provisions for loss on guarantees, beginning of period Provisions for the period Collective provisions for loss on guarantees, end of period 84 2 86 80 -9 71 Impairment charges on balances due from credit institutions Individual impairment charges on balances due from credit institutions, beginning of period Loan impairment charges for the period Individual impairment charges on balances due from credit institutions, end of period 15 0 15 0 15 15 Individual provisions for loss on guarantees, beginning of period Provisions for the period Recognised as a loss, covered by provisions Individual provisions for loss on guarantees, end of period Collective loan impairment charges, beginning of period Loan impairment charges for the period Other movements Collective loan impairment charges, end of period The regulatory balance of loan impairment charges and provisions for guarantees does not include the discount balance for acquired loans and advances. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 37 of 54 NOTES Note 13 The Jyske Bank Group 31 Dec. 30 Sept. 2014 2014 DKKm 30 Sept. 2015 Loans and advances at fair value Mortgage loans, nominal value Adjustment for interest-rate risk, etc. Adjustment for credit risk¹ Mortgage loans at fair value, total 238,387 4,797 -1,431 241,753 211,355 8,474 -1,544 218,285 208,014 8,928 -1,576 215,366 Arrears and outlays, total 46 60 107 Other loans and advances 556 519 525 242,355 218,864 215,998 116,318 6,205 44,299 14,632 27,387 1,447 29,257 38 2,714 58 242,355 96,995 5,507 44,503 14,533 24,876 1,451 28,432 29 2,513 25 218,864 94,503 5,367 42,502 14,660 25,971 2,302 27,924 33 2,717 19 215,998 6,964 10,040 8,447 8,415 6,958 4,415 3,094 8,876 3,850 597 36,114 9,463 6,753 88,535 8,874 6,774 4,539 2,676 8,455 4,304 560 30,745 9,451 7,273 83,651 9,099 6,859 4,190 2,916 8,793 4,407 595 31,080 10,186 8,041 86,166 56,345 151,844 62,462 156,153 61,058 155,671 Loans and advances at fair value, total ¹Adjustment for credit risk is calculate so it allows for objective evidence whether loans and advances are impaired compared to the time of the establishment of the loans and advances. 14 15 Loans and advances at fair value broken down by property category Owner-occupied homes Vacation homes Subsidised housing (rental housing) Cooperative Housing Private rental properties (rental housing) Industrial properties Office and business properties Agricultural properties Properties for social, cultural and educational purposes Other properties Total Loans and advances at amortised cost and guarantees broken down by sector Public authorities Agriculture, hunting, forestry, fishing Manufacturing, mining, etc. Energy supply Building and construction Commerce Transport, hotels and restaurants Information and communication Finance and insurance Real property Other sectors Corporates, total Personal clients, total Total Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 38 of 54 NOTES Note DKKm 16 30 Sept. 2015 The Jyske Bank Group 31 Dec. 30 Sept. 2014 2014 Other assets Positive fair value of derivatives Assets in pooled deposits Interest and commission receivable Investments in associates Assets in temporary possession Prepayments Investment properties Other assets Total 33,521 4,457 853 335 559 344 27 1,685 41,781 40,542 4,656 1,888 753 376 281 27 1,920 50,443 38,381 4,651 2,393 737 374 282 37 1,881 48,736 Netting Positive fair value of derivatives, etc., gross Netting of positive and negative fair value Total 38,568 5,047 33,521 45,616 5,074 40,542 42,312 3,931 38,381 Deposits Demand deposits Term deposits Time deposits Special deposits Pooled deposits Total 90,825 6,371 29,539 7,522 4,496 138,753 84,287 8,265 47,090 8,161 4,890 152,693 81,277 9,211 44,526 8,325 4,764 148,103 Issued bonds at fair value Issued bonds at fair value, nominal value Adjustment to fair value Own mortgage bonds offset, fair value Total 265,229 4,643 -43,928 225,944 280,051 10,311 -81,823 208,539 235,680 9,563 -47,144 198,099 Other liabilities Set-off entry of negative bond holdings in connection with repos/reverse repos Negative fair value of derivatives, etc. Interest and commission payable Deferred income Other liabilities Total 4,614 33,801 3,171 331 7,730 49,647 3,956 41,577 4,177 311 6,607 56,628 3,376 38,831 4,801 330 7,238 54,576 Netting Negative fair value of derivatives, etc., gross Netting of positive and negative fair value Total 35,848 5,047 30,801 46,651 5,074 41,577 42,762 3,931 38,831 521 413 483 212 1,629 505 280 558 262 1,605 447 348 529 343 1,667 Netting of fair value can be attributed to clearing of derivatives through a central clearing house (CCP clearing). 17 18 19 Netting of fair value can be attributed to clearing of derivatives through a central clearing house (CCP clearing). 20 Provisions Provisions for pensions and similar liabilities Provisions for deferred tax Provisions for guarantees Other provisions Total Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 39 of 54 NOTES Note DKKm 21 The Jyske Bank Group 31 Dec. 30 Sept. 2014 2014 Subordinated debt Supplementary capital: 6.73% bond loan EUR 15m 2017-2026 Var. % bond loan EUR 10m 13.02.2023 5.65% bond loan EUR 10 m 27.03.2023 5.67% bond loan EUR 10 m 31.07.2023 Deposit account, Husejernes kreditkasse 112 75 74 74 0 112 75 74 74 0 112 75 74 74 2 335 335 337 541 452 541 452 541 452 993 993 993 Subordinated debt, nominal Hedging of interest-rate risk, fair value 1,328 26 1,328 27 1,330 24 Total 1,354 1,355 1,354 Subordinated debt included in the capital base 1,312 1,317 1,320 8,739 2,172 953 1,790 6,994 3,806 828 1,590 7,021 3,733 568 1,709 Total 13,654 13,218 13,031 Other contingent liabilities Irrevocable credit commitments Other 17,216 138 14,474 162 2,162 160 Total 17,354 14,636 2,322 Hybrid core capital: Var. % bond loan EUR 72.8m Perpetual Var. % bond loan EUR 60.7m Perpetual 22 30 Sept. 2015 Contingent liabilities Guarantees Financial guarantees Guarantee for losses on mortgage credits Registration and refinancing guarantees Other contingent liabilities Financial guarantees are primarily payment guarantees, and the risk equals that involved in credit facilities. Guarantees for losses on mortgage loans are typically provided as security for the most risky part of mortgage loans granted to personal clients and to a limited extent for loans secured on commercial real property. Guarantees for residential real property are within 80% and for commercial real property within 60%-80%, of the property value as assessed by a professional expert. Registration and refinancing guarantees are provided in connection with the registration of new and refinanced mortgages. Such guarantees involve insignificant risk. Other contingent liabilities include other forms of guarantees at varying degrees of risk, including performance guarantees. The risk involved is deemed to be less than the risk involved in, e.g., credit facilities subject to flexible drawdown. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 40 of 54 NOTES Note The Jyske Bank Group DKKm 22 Contingent liabilities, cont. Jyske Bank is also a party to a number of legal disputes arising from its business activities. Jyske Bank estimates the risk involved in each individual case and makes any necessary provisions which are recognised under contingent liabilities. Jyske Bank does not expect such liabilities to have material influence on Jyske Bank’s financial position. Due to the participation in the compulsory Deposit Guarantee Fund, the sector pays an annual contribution of 2.5 per mille of the covered net deposits. The payment into Pengeinstitutafdelingen (the financial institution fund) will continue until the assets of Pengeinstitutafdelingen exceed 1% of the total covered net deposits, which is expected to be the case at end-2015. According to Bank Package 3 and Bank Package 4, Pengeinstitutafdelingen bears the immediate losses attributable to covered net deposits and relating to the winding up of financial institutions in distress. Any losses in connection with the final winding up are covered by the Guarantee Fund's Afviklings- og Restruktureringsafdeling (settlement and restructuring fund), where Jyske Bank currently guarantees 6.81% of any losses. Participation in the statutory resolution financing arrangements (Resolution Fund) as of June 2015 entailed that credit institutions pay an annual contribution over a 10-year period to a Danish national fund with a target size totalling 1% of the covered deposits. Credit institutions are to contribute according to their relative sizes and risk in Denmark, and the first contributions to the Resolution Fund are payable at end-2015. Jyske Bank is a management company under Danish joint taxation. Therefore, according to the provisions of the Danish Company Taxation, Jyske Bank is liable as of the accounting year 2013 for corporation tax, etc. for the jointly taxed companies and as of 1 July 2012 for any liabilities to withhold tax on interest and dividends for the jointly taxed companies. 23 Shareholders On 30 April 2014, BRFholding a/s, Kgs. Lyngby, Danmark informed Jyske Bank that it owns 25.00% of the share capital. On 19 October 2012, MFS Investment Management, USA reported that it owns 5.14% of the share capital. 24 Related parties Jyske Bank is the banker of a number of related parties. Transactions between related parties are characterised as ordinary financial transactions and services of an operational nature. Transactions with related parties were executed on an arm’s length basis or at cost. Over the period, there were no unusual transactions with related parties. Please see Jyske Bank's Annual Report 2014 for a detailed description of transactions with related parties. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 41 of 54 NOTES Note 25 The Jyske Bank Group Notes on fair value Methods for measuring fair value Fair value is the price that, at the time of measurement, would be obtained by selling an asset or paid for by transferring a liability in an ordinary transaction between independent market participants. The fair value may equal the book value where book value is recognised on the basis of underlying assets and liabilities measured at fair value. For all assets listed on active markets, fair values are measured at official prices (the category "Quoted prices". Where no price is quoted, a different official price is used which is taken to reflect most closely the fair value (category: "Observable prices". Financial assets and liabilities, whose quoted prices or other official prices are not available or are not taken to reflect the fair value, are measured at fair value according to other evaluation techniques and other observable market information. In those cases where observable prices based on market information are not available or are not taken to be useful for measuring fair value, the fair value is measured by recognised techniques, including discounted future cash flows, and own expertise (category "non-observable prices").. The basis of the measurement may be recent transactions involving comparable assets or liabilities, interest rates, exchange rates, volatility, credit spreads, etc. Generally, the Group's unlisted shares are placed in this category. Generally, quoted prices and observable input are obtained in the form of interest rates and equity and bond prices, exchange rates, forward premiums, volatilities, etc. from recognised stock exchanges and providers. Specific details on methods for measuring fair value Bonds at fair value, shares, assets linked to pooled deposits, and derivatives are measured at fair value in the accounts to the effect that the carrying amounts equal fair values. Generally bonds are measured at prices quoted on a recognised stock exchange. Alternatively, prices are applied that are calculated on the basis of Jyske Bank's own measurement models based on a yield curve with a credit spread. Essentially, the calculated prices are based on observable input. Generally equities, etc. are measured at prices quoted on a recognised stock exchange. Alternatively, prices are applied that are calculated on the basis of Jyske Bank's own measurement models based on observable input, shareholders' agreements, executed transactions, etc. Unlisted equities are measured on the basis of discounted cash flow models (DCF). Derivatives are measured on the basis of the following measurement techniques.  Forward exchange transactions are measured on the basis of forward premiums as well as exchange rates obtained.  Interest-rate and currency swaps are measured on the basis of exchange rates, interest points, interpolation between these, exchange rates as well as correction of credit risk (CVA and DVA). Client margins are amortised over the remaining time to maturity. Present value calculations with discounting is applied.  Futures are measured on the basis of prices obtained in the market for stock-exchange traded futures.  Options are measured on the basis of volatilities, correlation matrices, prices of underlying assets and exercise prices. For this purpose, option models, such as Black-Scholes, are applied. Assets related to pooled deposits are measured according to the above principles. Information about differences between recognised value and measurement of fair value Loans and advances exclusive of mortgage loans are recognised at amortised cost. The difference to fair value is assumed to be fee and commission received, costs defrayed in connection with lending, plus interest-rate-dependent value adjustment calculated by comparing current market rates with market rates at the time when the loans and advances were established. Changes in credit quality are assumed to be included under impairment charges both for carrying amounts and fair values. Subordinated debt and issued bonds exclusive of issues of mortgage bonds are recognised at amortised cost supplemented with the fair value of the hedged interest-rate risk. The difference to fair value was calculated on the basis of own-issue prices obtained externally. Deposits are recognised at amortised cost. The difference to fair value is assumed to be the interest-rate dependent value adjustment calculated by comparing current market rates with market rates at the time when the deposits were made. Balances with credit institutions are recognised at amortised cost. The difference to fair value is assumed to be the interest-rate dependent value adjustment calculated by comparing current market rates with market rates at the time when the transactions were established. Changes in the credit quality of balances with credit institutions are assumed to be included under impairment charges for loans, advances, and receivables. Changes in the fair values of balances due to credit institutions because of changes in Jyske Bank’s own credit rating are not taken into account. The calculated fair values of financial assets and liabilities recognised at amortised cost are materially non-observable prices (level 3) in the fair value hierarchy. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 42 of 54 NOTES Note The Jyske Bank Group DKKm 25 Notes on fair value, cont. Information about changes in credit risk on derivatives with positive fair value. In order to allow for the credit risk on derivatives for clients without objective evidence of impairment (OEI), the fair value is adjusted (CVA). Adjustments will also be made for clients with OEI, but on an individual basis. For any given counterparty's total portfolio of derivatives, CVA is a function of the probability of the counterparty's probability of default (PD), the expected positive exposure (EPE) as well as the loss given default (LGD). Credit default swaps (CDS) spreads should be used as the primary source for the probability of default in the CVA calculation. However, the Jyske Bank Group enters primarily to derivatives transactions with unlisted Danish counterparties, for which there only to a most limited extent exist CDS or CDS proxy spreads. As CDS spreads are not available for the majority of the portfolio of derivatives counterparties, risk-neutral PDs are used instead. The risk-neutral PDs are calculated on the basis of IRB PDs that are adjusted for the observable price of risk in the market (Sharpe Ratio measured on the basis of the OMX C20 index). By using risk-neutral PDs, it is achieved that the CVA gets closer to the value it would have had if it had been calculated on the basis of market observable PDs. The calculation of CVA also allows for the expected development of the rating over time. This takes place on the basis of historical rating migrations. When determining the EPE, a model is used to establish the expected positive exposure to the counterparty's portfolio over the maturity of the derivatives. For LGD, internal estimates are used for the individual counterparty, adjusted for any collateral received as well as CSA agreements concluded. In addition to CVA, also an adjustment is made of the fair value of derivatives that have an expected future negative fair value. This takes place to allow for changes in the counterparties' credit risk against the Jyske Bank Group (debt valuation adjustment - DVA). The DVA takes place according to the same principles that apply to the CVA, yet PD for Jyske Bank is determined on the basis of Jyske Bank's external rating by Standard & Poor's. At the end of the third quarter of 2015, CVA and DVA amounted net to DKK 48m, which amount was recognised as an expense under value adjustment. 26 Fair value of financial assets and liabilities The recognised value and fair value of assets classified as held-for-trading amounted to DKK 150.1bn at the end of the third quarter of 2015 against DKK 160.4bn at end-2014. The recognised value and fair value of liabilities classified as trading portfolio amounted to DKK 63.9bn at the end of the third quarter of 2015 against DKK 79.4bn at end-2014. The recognised value and fair value of assets classified as held-to-maturity amounted to DKK 4.6bn and DKK 4.8bn, respectively, at the end of the third quarter of 2015 against DKK 6.9bn and 7.1bn, respectively, at end-2014. The Group does not hold any assets classified as available-for-sale. The table shows the fair value of financial assets and liabilities and the carrying amounts. The re-statement at fair value of financial assets and liabilities shows a total non-recognised unrealised loss of DKK 213m at the end of the third quarter of 2015 against a loss of DKK 404m at end-2014. 31 Dec. 30 Sept. 2014 2015 Carrying Fair Carrying Fair amount value FINANCIAL ASSETS amount value Cash balance and demand deposits with central banks 1,850 1,850 10,752 10,752 Due from credit institutions and central banks 30,882 30,883 14,154 14,154 Loans and advances at fair value 218,864 218,864 242,355 242,355 Loans and advances at amortised cost 142,935 143,005 138,190 138,313 Bonds at fair value 82,459 82,459 70,240 70,240 Bonds at amortised cost 6,878 7,124 4,623 4,791 Shares, etc. 2,972 2,972 3,973 3,973 Assets in pooled deposits 4,656 4,656 4,457 4,457 Derivative financial instruments 40,542 40,542 33,521 33,521 532,038 532,355 Total 522,265 522,556 FINANCIAL LIABILITIES Due to credit institutions and central banks Deposits Pooled deposits Issued bonds at fair value Issued bonds at amortised cost Subordinated debt Derivative financial instruments Total 31,947 134,257 4,496 225,944 52,556 1,354 33,801 484,355 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 31,984 134,325 4,496 225,944 53,248 1,061 33,801 484,859 49,885 147,803 4,890 208,539 43,413 1,355 41,577 497,462 49,921 147,951 4,890 208,539 44,266 1,039 41,577 498,183 Page 43 of 54 NOTES Note The Jyske Bank Group DKKm 27 The fair value hierarchy 30 September 2015 Financial assets Loans and advances at fair value Bonds at fair value Shares, etc. Assets in pooled deposits Derivative financial instruments Total Quoted prices 0 58,247 2,181 3,059 797 64,284 Observable prices 242,355 11,993 1 1,398 32,724 288,471 Nonobservable prices 0 0 1,791 0 0 1,791 Fair value total 242,355 70,240 3,973 4,457 33,521 354,546 Carrying amount 242,355 70,240 3,973 4,457 33,521 354,546 Financial liabilities Pooled deposits Issued bonds at fair value Derivative financial instruments Total 0 207,436 742 208,178 4,496 18,508 33,059 56,063 0 0 0 0 4,496 225,944 33,801 264,241 4,496 225,944 33,801 264,241 Financial assets Loans and advances at fair value Bonds at fair value Shares, etc. Assets in pooled deposits Derivative financial instruments Total 0 71,106 1,315 3,187 209 75,817 218,864 11,353 26 1,469 40,333 272,045 0 0 1,631 0 0 1,631 218,864 82,459 2,972 4,656 40,542 349,493 218,864 82,459 2,972 4,656 40,542 349,493 Financial liabilities Pooled deposits Issued bonds at fair value Derivative financial instruments Total 0 190,221 346 190,567 4,890 18,318 41,231 64,439 0 0 0 0 4,890 208,539 41,577 255,006 4,890 208,539 41,577 255,006 31 December 2014 The above table shows the fair value hierarchy for financial assets and liabilities recognised at fair value. It is the practice of the Group that if prices are not updated for two days, transfers will take place between the categories quoted prices and observable prices. No considerable transfers took place between the three categories in the first nine months of 2015, nor in 2014. NON-OBSERVABLE PRICES Fair value, beginning of period Capital gain and loss for the period reflected in the income statement under value adjustments Capital gain and loss of the period reflected in other comprehensive income Sales or redemptions Purchases and additions during the period Fair value, end of period Q1-Q3 2015 1,631 66 0 16 110 1,791 2014 1,170 430 0 581 612 1,631 Non-observable prices Non-observable prices at the end of the third quarter of 2015 referred to unlisted shares recognised at DKK 1,791m against unlisted shares recognised at DKK 1,631m at end-2014. These are primarily sector shares. Measurements associated with some uncertainty are made on the basis of the shares' book value, market trades as well as own assumptions and extrapolations, etc. In the cases where Jyske Bank calculates the fair value on the basis of the company's expected future earnings, a required rate of return of 15% p.a. before tax is applied. A change in the required rate of return of 1% will result in a change of the fair value of about DKK 30m. Capital gain and loss for the period on illiquid bonds and unlisted shares referred to assets held at the end of the third quarter of 2015. Jyske Bank finds it of little probability that the application of alternative prices in the measurement of fair value would result in a material deviation from the recognised fair value. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 44 of 54 NOTES Note The Jyske Bank Group DKKm 28 The Jyske Bank Group - overview 30 September 2015 Jyske Bank A/S Consolidated subsidiaries BRFkredit a/s, Kgs. Lyngby Investeringsselskabet af 18. maj 2015 A/S¹ Ejendomsselskabet Nørreport 26, 8000 Århus C. A/S, Aarhus Ejendomsselskabet Nørregaardsvej, 37-41, 2800 Kgs. Lyngby A/S, Kgs. Lyngby Jyske Bank (Gibraltar) Ltd. Jyske Bank (Gibraltar) Nominees Ltd. Jyske Bank (Gibraltar) Management Ltd. Jyske Bank (Gibraltar) Secretaries Ltd. Trendsetter, S.L., Spain Jyske Bank Nominees Ltd., London Jyske Bank (Schweiz) AG Inmobiliaria Saroesma S.L., Spain Jyske Finans A/S Gl. Skovridergaard A/S Sundbyvesterhus A/S Share Activ- Curcapital ity* rency 1,000 units a DKK 950,400 b DKK 1,306,480 d DKK e Ownership share (%) Voting share % Assets DKKm End2014 Liabilities DKKm end2014 Equity Earnings DKKm, DKKm end2014 2014 Profit, DKKm 2014 316,258 288,697 27,561 8,491 3,088 100 100 256,145 245,061 11,084 2,690 -287 425,000 100 100 6,256 5,369 887 183 -171 DKK 4,600 100 100 89 6 83 5 3 e a DKK GBP 2,600 26,500 100 100 100 100 6 4,412 0 3,733 6 679 0 113 0 2 d GBP 0 100 100 0 0 0 0 0 d GBP 0 100 100 0 0 0 0 0 d e d a e c e e GBP EUR GBP CHF EUR DKK DKK DKK 0 706 0 60,000 773 100,000 16,000 518 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 0 10 0 1,807 81 14,078 26 88 0 0 0 1,162 69 12,806 11 13 0 10 0 645 12 1,272 15 75 0 0 0 92 0 795 21 5 0 0 0 -1 -4 268 -1 2 All banks and mortgage credit institutions supervised by national financial supervisory authorities are subject to statutory capital requirements. Such capital requirements may limit intra-group facilities and dividend payments. ¹) in connection with the transfer of banking activities to Jyske Bank A/S, BRFkredit Bank a/s changed its name to Investeringsselskabet af 18. maj 2015 A/S. The future activities of the company will be investment and financing. * Activity: a: Bank b: Mortgage credit c: Leasing, financing and factoring d: Investment and financing e: Properties and course activities The registered offices of the companies are in Silkeborg, unless otherwise stated. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 45 of 54 JYSKE BANK A/S Note Q1-Q3 2015 Jyske Bank Q1-Q3 2014 Interest income Interest expenses Net interest income 3,684 510 3,174 4,146 936 3,210 Dividends, etc. Fees and commission income Fees and commission expenses Net interest and fee income 52 1,316 101 4,441 69 1,123 87 4,315 Value adjustments Other operating income Employee and administrative expenses Amortisation, depreciation and impairment charges Other operating expenses Loan impairment charges and provisions for guarantees Profit on investments in associates and group enterprises Pre-tax profit 150 157 2,841 44 124 597 781 1,923 207 2,872 2,881 89 240 1,409 479 3,254 Tax Net profit or loss for the period 284 1,639 -55 3,309 Net profit or loss for the period Other comprehensive income: Items that can be recycled to the income statement: Foreign currency translation adjustment of international units Hedge accounting of international units Tax on hedge accounting Other comprehensive income after tax 1,639 3,309 110 -110 26 26 55 -55 13 13 Comprehensive income for the period 1,665 3,322 DKKm INCOME STATEMENT 3 4 5 6 7.8 STATEMENT OF COMPREHENSIVE INCOME Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 46 of 54 JYSKE BANK A/S Note 30 Sep 2015 31 Dec. 2014 Jyske Bank 30 Sep 2014 ASSETS Cash balance and demand deposits with central banks Due from credit institutions and central banks Loans and advances at amortised cost Bonds at fair value Bonds at amortised cost Shares, etc. Investments in associates Equity investments in group enterprises Assets in pooled deposits Intangible assets Owner-occupied properties Other property, plant and equipment Current tax assets Deferred tax assets Assets in temporary possession Other assets Prepayments 7,635 14,365 139,098 73,661 6,038 3,683 325 14,378 4,457 50 2,040 74 876 3 44 35,173 109 646 31,665 140,780 67,348 8,300 2,679 744 13,608 4,656 58 2,006 79 257 205 57 43,095 75 568 17,354 140,224 57,721 12,691 2,415 728 13,445 4,651 61 1,957 69 94 71 55 40,874 81 Total assets 302,009 316,258 293,059 EQUITY AND LIABILITIES Debt and payables Due to credit institutions and central banks Deposits Pooled deposits Issued bonds at amortised cost Other liabilities Deferred income 44,937 129,446 4,496 46,340 45,079 17 54,834 137,938 4,890 36,682 51,785 18 43,575 133,590 4,764 30,978 49,784 18 Total debt 270,315 286,147 262,709 491 481 135 473 552 170 427 522 252 Provisions, total 1,107 1,195 1,201 Subordinated debt 1,354 1,355 1,352 950 325 1,559 26,399 950 325 1,559 24,727 950 322 807 25,718 DKKm BALANCE SHEET 7.8 9 Provisions Provisions for pensions and similar liabilities Provisions for guarantees Other provisions Equity Share capital Revaluation reserve Reserve according to the equity method Retained profit 29,233 27,561 27,797 302,009 316,258 293,059 Guarantees, etc. Other contingent liabilities 16,782 2,366 15,605 2,216 12,876 2,209 Total guarantees and other contingent liabilities 19,148 17,821 15,085 Equity, total Equity and liabilities, total OFF-BALANCE SHEET ITEMS Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 47 of 54 JYSKE BANK A/S Jyske Bank DKKm STATEMENT OF CHANGES IN EQUITY Equity at 1 January 2015 Share Revaluation capital reserve 950 325 Currency translation reserve 0 Reserve according to the equity method 1,559 Retained profit Total equity 24,727 27,561 Net profit or loss for the period Other comprehensive income Comprehensive income for the period 0 0 0 0 0 0 0 0 0 0 0 0 1,639 26 1,665 1,639 26 1,665 Acquisition of own shares Sale of own shares Transactions with shareholders 0 0 0 0 0 0 0 0 0 0 0 0 -1,927 1,934 7 -1,927 1,934 7 Equity at 30 September 2015 950 325 0 1,559 26,399 29,233 Equity at 1 January 2014 713 322 0 807 15,604 17,446 Net profit or loss for the period Other comprehensive income Comprehensive income for the period 0 0 0 0 0 0 0 0 0 0 0 0 3,309 13 3,322 3,309 13 3,322 Capital increase Expenses relating to capital increase Acquisition of own shares Sale of own shares Transactions with shareholders 237 0 0 0 237 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6,794 -7 -1,063 1,068 6,792 7,031 -7 -1,063 1,068 7,029 Equity at 30 September 2014 950 322 0 807 25,718 27,797 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 48 of 54 JYSKE BANK A/S 30 Sept. 2015 31 Dec. 2014 Jyske Bank 30 Sept. 2014 Equity Share-buyback programme Expected dividend Intangible assets Deferred tax liabilities relating to intangible assets Cautious valuation Deferred tax assets Other deductions Common Equity Tier 1 capital 29,233 -500 -500 -50 11 -242 -3 -79 27,870 27,561 0 0 -58 13 -190 -205 -64 27,057 27,797 0 0 -61 14 -201 -71 -65 27,413 Additional Tier 1 Capital after reduction Other deductions Core capital 907 -83 28,694 993 -56 27,994 993 -57 28,349 Subordinated loan capital after reduction Difference between expected loss and the carrying amount of impairment charges Other deductions Capital base 405 430 -192 29,337 324 433 0 28,751 325 518 0 29,192 101,657 21,025 11,829 134,511 100,619 20,805 12,011 133,435 98,072 15,059 12,011 125,142 10,761 0 10,761 10,675 0 10,675 10,011 0 10,011 21.8 21.3 20.7 21.5 21.0 20.3 23.3 22.7 21.9 DKKm CAPITAL STATEMENT Weighted risk exposure involving credit risk etc. Weighted risk exposure involving market risk Weighted risk exposure involving operational risk Total weighted risk exposure Capital requirement, Pillar I Capital requirement, transitional provisions Capital requirement, total Capital ratio (%) Core Tier 1 Capital ratio (%) Common Equity Tier 1 capital ratio (%) Over the period 2008-2013, capital ratios were calculated in accordance with the CRD III (Basel II). On 30 September 2015, the total weighted risk exposure according to Basel I amounted to DKK 162,203m for Jyske Bank. The capital requirement according to the transitional provisions was for 80% of the capital requirement of 8% of the total weighted risk exposure corresponding to DKK 10,381m for Jyske Bank. At end-2014, the transitional provisions resulted in a capital requirement of DKK 10,412m for Jyske Bank. The transitional rules applying to total weighted risk exposure will still apply in the coming years. For the determination of individual solvency requirement, please see www.jyskebank.info. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 49 of 54 JYSKE BANK A/S Note DKKm Q1-Q3 2015 Jyske Bank Q1-Q3 2014 9.3 5.8 1.5 21.8 20.7 13.6 29,337 134,511 1.2 0.1 3.8 0.4 3,082 3,065 24.9 14.6 1.7 23.3 22.7 14.9 29,192 125,142 0.5 0.0 3.4 0.9 3,131 3,178 -18 2,696 881 117 277 -160 8 3,684 16 3,098 899 131 137 -6 2 4,146 -25 -68 -1 15 NOTES 1 Accounting Policies The Interim Financial Report of the parent company Jyske Bank A/S for the period 1 January to 30 September 2015was prepared in accordance with the Danish Financial Business Act, including the Executive Order on Financial Reports for Credit Institutions and Stockbrokers, etc. The rules applying to recognition and measurement at Jyske Bank A/S are consistent with IFRS with the exception of the measurement of the book value of associates and group enterprises, where IFRS stipulates measurement at cost or fair value. With respect to classification and extent, the preparation for Jyske Bank A/S differs from the preparation for the Group. Please thee the full description of accounting policies in note 73 of the annual report 2014. Figures in the financial statements are in Danish kroner, rounded to the nearest million in Danish kroner. Changes to accounting policies The accounting policies are identical to those applied to and described in the financial statements 2014. Financial situation and risk information Jyske Bank A/S is affected by the financial situation and the risk factors that are described in the management's review for the Group and reference is made to this. 2 3 Financial ratios and key figures Pre-tax profit p.a. as a percentage of opening equity Profit for the period as a pct. of av. equity Income/cost ratio (%) Capital ratio (%) Common Equity Tier 1 capital ratio (CET1 %) Individual solvency requirement (%) Capital base (DKKm) Total risk exposure (DKKm) Interest-rate risk (%) Currency risk (%) Accumulated impairment ratio (%) Impairment ratio for the period (%) No. of full-time employees at end-period Average number of full-time employees in the period Interest income Due from credit institutions and central banks Loans and advances Bonds Derivatives, total Of which currency contracts Of which interest-rate contracts Other Total Of which interest income on reverse repos carried under: Due from credit institutions and central banks Loans and advances Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 50 of 54 JYSKE BANK A/S Note Q1-Q3 2015 Jyske Bank Q1-Q3 2014 Interest expenses Due to credit institutions and central banks Deposits Issued bonds Subordinated debt Total 5 249 236 20 510 123 506 276 31 936 Of which interest expenses on reverse repos carried under: Due to credit institutions and central banks Deposits -88 -58 6 7 785 120 57 152 202 1,316 649 119 44 138 173 1,123 -199 248 248 352 -7 7 -527 25 3 150 174 482 185 -493 314 -314 3 -207 63 207 DKKm NOTES 4 5 6 Fees and commission income Securities trading and custody services Money transfers and card payments Loan management fees Guarantee commission Other fees and commissions Total Value adjustments Bonds Shares, etc. Currency Currency, interest-rate, share, commodity and other contracts as well as other derivatives Assets in pooled deposits Pooled deposits Other assets Issued bonds Other liabilities Total Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 51 of 54 JYSKE BANK A/S Note DKKm Q1-Q3 2015 Jyske Bank Q1-Q3 2014 6,317 537 -476 850 -44 -237 106 5,398 1,218 -430 0 -250 -184 99 7,053 5,851 5,595 481 6,076 977 4,856 522 5,378 473 7,053 5,851 537 163 -103 597 -237 360 1,218 237 -46 1,409 184 1,225 3,892 668 -465 80 4,175 3,204 782 -423 75 3,638 468 -64 -11 393 354 105 -7 452 1,465 -71 26 1,420 854 340 24 1,218 84 4 88 79 -9 70 15 0 15 15 0 15 Notes 7 Loan impairment charges and provisions for guarantees, incl. balance of discounts Balance of loan impairment charges and provisions for guarantees incl. balance of discounts, beginning of period Loan impairment charges/provisions for the period Recognised as a loss, covered by impairment charges/provisions Discount for acquired assets in connection with business combinations Recognised losses covered by discounts for acquired assets Recognised discount for acquired assets Other movements Balance of loan impairment charges and provisions for guarantees incl. balance of discounts, end of period Loan impairment charges Provisions for guarantees Balance of loan impairment charges and provisions, end of period Balance of discounts for acquired assets Balance of loan impairment charges and provisions for guarantees incl. balance of discounts, end of period Loan impairment charges/provisions for the period Recognised as a loss, not covered by loan impairment charges/provisions Recoveries Loan impairment charges and provisions for guarantees recognised in the income statement Recognised discount for acquired assets Net effect on income statement Individual loan impairment charges, beginning of period Loan impairment charges for the period Recognised as a loss, covered by impairment charges/provisions Other movements Individual loan impairment charges, end of period Individual provisions for loss on guarantees, beginning of period Provisions for the period Recognised as a loss, covered by provisions Individual provisions for loss on guarantees, end of period Collective loan impairment charges, beginning of period Loan impairment charges for the period Other movements Collective loan impairment charges, end of period Collective provisions for loss on guarantees, beginning of period Provisions for the period Collective provisions for loss on guarantees, end of period Impairment charges on balances due from credit institutions Individual impairment charges on balances due from credit institutions, beginning of period Loan impairment charges for the period Individual impairment charges on balances due from credit institutions, end of period The regulatory balance of loan impairment charges and provisions for guarantees does not include the discount balance for acquired loans and advances. Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 52 of 54 JYSKE BANK A/S Note Jyske Bank DKKm Notes 8 Loans, advances and guarantees as well as loan impairment charges and provisions for guarantees by sector Sector Public authorities Agriculture, hunting, forestry, fishing Fishing Milk producers Plant farming Pig farming Other agriculture Manufacturing, mining, etc. Energy supply Building and construction Commerce Transport, hotels and restaurants Information and communication Finance and insurance Real property Lease of real property Buying and selling of real property Other real property Other sectors Corporate clients, individually assessed, total Corporate clients, collective impairment charges Personal clients, individually assessed Personal clients, collective impairment charges Total Loans, advances and guarantees Balance of loan impairment charges and provisions for guarantees Loan impairment charges and provisions for guarantees for the period Loss for the period 30 Sept. 2015 End2014 30 Sept. 2015 End2014 30 Sept. 2015 End2014 Q1-Q3 2015 Q1-Q3 2014 Q1-Q3 2015 Q1-Q3 2014 4% 6% 6,950 10,027 0 0 0 0 0 0 5% 1% 1% 1% 1% 1% 5% 1% 1% 1% 1% 1% 7,183 1,631 1,130 1,701 1,596 1,125 7,328 1,423 1,354 1,652 1,682 1,217 1,051 0 531 43 397 80 810 1 422 17 320 50 338 0 176 22 113 27 273 0 106 4 133 30 214 1 128 3 76 6 134 0 47 6 78 3 4% 3% 1% 5% 4% 3% 1% 4% 5,647 4,258 2,074 7,463 5,565 4,379 1,871 6,923 186 24 69 186 177 24 75 250 41 0 -4 7 65 -5 14 92 47 0 0 73 29 0 18 59 1% 2% 2,254 2,797 80 66 18 -7 11 8 0% 33% 6% 5% 0% 27% 6% 5% 505 50,993 9,942 7,353 434 41,932 9,435 8,112 37 842 1,174 953 19 755 1,256 1,006 14 96 -10 -5 11 152 149 170 1 43 68 47 8 119 122 79 1% 0% 3% 1% 0% 4% 965 1,624 4,223 742 581 6,814 79 142 159 101 149 183 -2 -3 29 -47 26 117 18 3 64 33 10 24 61% 56% 94,542 87,478 3,808 3,615 529 861 521 521 1,100 1,219 -88 268 0 0 58,880 760 737 105 227 118 146 100% 155,880 156,385 408 6,076 338 5,909 51 597 53 1,409 0 639 0 667 35% 100% 38% 54,388 Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 53 of 54 JYSKE BANK A/S DKKm 30 Sept. 2015 31 Dec. 2014 Jyske Bank 30 Sept. 2014 86,375 6,371 29,178 7,522 129,446 76,010 8,256 45,586 8,086 137,938 73,405 9,203 42,731 8,251 133,590 Notes 9 Deposits Demand deposits Term deposits Time deposits Special deposits Total Jyske Bank corporate announcement No. 11/2015, of 29 October 2015 Page 54 of 54