RNS No 6794r
DEN DANSKE BANK AS
27th February 1998
PART 2
Den Danske Bank Den Danske Bank
Group
Profit and Loss Account for 1997 1996 1997 1996
the accounting year DKr m DKr m DKr m DKr m
Interest income, etc.
Interest from credit institutions, etc 3,748 3,145 4,650 3,831
Interest on loans and advances, etc 17,741 14,643 12,272 10,564
Interest on bonds, etc 7,104 6,892 6,604 6,594
Other interest income, etc 244 -435 303 -369
Total 28,837 24,245 23,829 20,620
Interest expenses, etc.
Interest to credit institutions 6,525 6,009 6,380 5,854
Interest on deposits, etc 8,431 6,783 8,156 6,747
Interest on issued bonds, etc 4,814 3,404 1,587 905
Interest on subordinated debt, etc 1,205 786 1,183 786
Other interest expenses, etc 13 12 6 4
Total 20,988 16,994 17,312 14,296
Net interest income 7,849 7,251 6,517 6,324
Dividends from shares, etc
and other holdings
Dividend from shares, etc 151 127 145 124
Dividend from holdings in associate
undertakings and other signifcant holdings - - - -
Total 151 127 145 124
Fee and commission income, etc
Guarantee commission 303 275 419 380
Fee and other commission income, etc 2,560 2,055 2,233 1,981
Total 2,863 2,330 2,652 2,361
Fees and commissions paid
Guarantee commission paid - - 9 7
Fees and other commissions paid 429 313 381 302
Total 429 313 390 309
Net interest and fee income 10,434 9,395 8,924 8,500
Market value adjustments of securities
and foreign exchange income, etc
Market value adjustment of bonds, etc -295 567 -238 524
Market value adjustment of shares, etc 2,796 1,466 2,745 1,431
Market value adjustment of mortgages, etc 78 140 70 136
Foreign exchange income 530 330 469 316
Market value adjustment of derivative
financial instruments -887 -22 -945 -23
Adjustment for pooled pension fund
deposits -1,403 -747 -1,354 -722
Total 819 1,734 747 1,662
Other operating income 287 190 195 160
Profit on financial operations 11,540 11,319 9,866 10,322
Den Danske Bank
Group Den Danske Bank
1997 1996 1997 1996
DKr m DKr m DKr m DKr m
Note
Staff costs, etc., and administrative
expenses
Salaries and remuneration of Board of
Directors, Executive Board and
Advisory Board 43 28 18 17
Staff costs
Wages and salaries 3,527 3,293 2,945 3,045
Pension costs 362 341 308 320
Financial services employer tax, etc 356 293 287 281
Other administrative expenses 1,258 920 1,237 1,001
Total 5,546 4,875 4,795 4,664
Depreciation of tangiable aassets
Depreciation of land and buildings 29 27 24 25
Depreciation of machinery
and equipment 457 407 386 338
Total 486 434 410 363
Other operating expenses 874 866 1,026 855
Provisions for bad and doubtful
debts (net) 614 637 547 581
Value adjustments of holdings in associated
and subsidiary undertakings, etc.
Value adjustment of holdings in associated
undertakings and other significant
holdings 24 199 42 194
Value adjustment of holdings in subsidiary
undertakings 782 690 1,459 1,281
Total 806 889 1,501 1,475
Profit on ordinary operations 4,826 5,396 4,589 5,304
3 Extraordinary income 53 70 53 47
4 Extraordinary expenses 245 824 144 819
Profit before taxation 4,634 4,642 4,498 4,532
Taxation (minus denotes an income)
Estimated tax charge on
the profit for the year 379 391 275 280
Deferred taxes 147 596 119 600
Adjustment to prior-year tax charge -97 2 -97 2
Total 429 989 297 882
Net profit for the year 4,205 3,653 4,201 3,650
Attributable to minority interests 4 3
Attributable to shareholders of
Den Danske Bank 4,201 3,650
Den Danske Bank
Group Den Danske Bank
1997 1996 1997 1996
Note Balance Sheet at December 31 DKr m DKr m DKr m DKr m
Assets
Cash in hand and demand deposits
with central banks, etc. 2,662 7,879 2,555 7,877
Treasury bills and other bills eligible
for refinancing with central banks - - - -
6 Due from credit institutions, etc.
Deposits at notice with
central banks 15,072 9,143 15,072 9,143
Due from other credit institutions 40,908 52,248 69,211 74,590
Total 55,980 61,391 84,283 83,733
6 Loans and advances
Overdraft facilities 38,090 33,025 35,696 33,302
5 Other loans and advances 252,649 199,475 166,013 136,229
Total 290,739 232,500 201,709 169,531
Bonds, etc.
Bonds, etc. 121,880 107,193 113,831 104,222
Own bonds, etc. 3,067 2,909 697 628
Total 124,947 110,102 114,528 104,850
Shares, etc. 10,735 7,216 10,468 7,036
Holdings in associated undertakings and
other significant holdings
Holdings in credit institutions - 91 - 91
Holdings in other institutions 758 678 610 512
Total 758 769 610 603
Holdings in subsidiary undertakings
Holdings in credit institutions - - 5,221 3,644
Holdings in other undertakings 8,515 7,978 9,347 8,811
Total 8,515 7,978 14,568 12,455
Intangible assets - - - -
Tangible assets
Land and buildings 3,854 3,624 3,327 3,496
Machinery and equipment, etc. 383 477 265 275
Total 4,237 4,101 3,592 3,771
Own shares 502 247 494 244
Other assets 2,189 2,026 1,681 1,527
Prepayments and accrued income 25,494 17,545 25,217 17,514
9 Total assets 526,758 451,754 459,705 409,186
DEN DANSKE BANK
GROUP DEN DANSKE BANK
1997 1996 1997 1996
DKR DKR DKR DKR
M M M M
Note
Liabilities
Due to credit
institutions 4,488 5,392 4,488 5,392
Due to other credit
institutions 134,062 125,247 135,844 126,118
Total 138,550 130,639 140,332 131,510
Deposits
Deposits on demand 88,908 71,331 76,407 69,561
Deposits at notice 2,635 4,752 2,634 4,752
Time deposits 100,984 89,535 99,689 88,334
Special deposits 32,633 30,280 32,194 29,896
Total 225,160 195,898 210,914 192,543
Issued bonds, etc 78,603 53,986 27,557 15,495
Other liabilities 11,591 12,032 10,048 11,507
Accruals and deferred
income 25,455 17,957 24,015 16,946
7 Provisions for costs
Provisions for pensions and
similar commitments 194 101 131 101
Provisions for deferred
taxes 1,086 926 1,000 881
Other provisions
for costs 190 956 189 956
Total 1,470 1,983 1,320 1,938
Subordinated debt 18,390 13,380 17,994 13,377
8 Shareholders' equity
Share capital 5,293 5,293 5,293 5,293
Non-distributable reserve relating
to subsidiaries - - - 293
Revaluation reserve 200 202 200 202
Profit brought forward
Brought forward from
prior years 18,794 17,602 18,784 17,596
Brought from net profit
for the year 3,252 2,782 3,248 2,486
Total 22,046 22,384 22,032 20,082
Total shareholders'
equity 27,539 25,879 27,525 25,870
Attributable to minority
interests 14 9
Attributable to shareholders of
Den Danske Bank 27,525 25,870
9 Total liabilities 526,758 451,754 459,705 409,186
DEN DANSKE BANK
GROUP DEN DANSKE BANK
1997 1996 1997 1996
Note Off-balance DKR DKR DKR DKR
sheet items M M M M
Guarantees, etc.
Guarantees 42,540 33,592 75,387 61,653
Acceptances and
endorsements, etc. 8,447 7,585 8,436 7,585
Total 50,987 41,177 83,823 69,238
Other commitments
Forward purchases
of assets 2,070,402 1,949,926 2,058,654 1,943,535
Irrevocable loan
commitments 88,667 61,983 85,671 61,077
Other commitments 650 1,379 648 1,372
Total 2,159,719 2,013,288 2,144.973 2,005,984
Total off-balance
sheet items 2,210,706 2,054,465 2,228,796 2,075.222
Movements in the capital of
Den Danske Bank in 1997 Non-
(DKr m) distributable Total
reserve Revaluation Profit share-
Share relating to brought holders'
capital subsidiaries reserve forward equity
Beginning
of year 5,293 293 202 20,082 25,870
Appropriation from
the amount to be
allocated 3,248 3,248
Transfers -293 293 -
Disposal of assets -2 -2
Goodwill fully written off
at the time of acquisition -1,591 -1,591
End of year 5,293 - 200 22,032 27,525
DEN DANSKE BANK
GROUP DEN DANSKE BANK
1997 1996 1997 1996
DKR DKR DKR DKR
M M M M
Note Notes
1 Fee and commission
income, etc
Guarantee
commission 303 275 419 380
Securitics and
custody commission 1,189 835 961 784
Commission from
international
business 218 215 217 215
Remortgaging and
loan fees 422 329 398 320
Other commission 731 676 657 662
Total 2,863 2,330 2,652 2,361
2 Market value adjustments
Market value adjustment
of derivate financial
instruments comprise:
Forward securities
transactions 22 24 -27 18
Forward exchange
transactions 126 -25 124 -25
Swap agreements -803 243 -810 250
Options -72 -110 -73 -112
Forward rate
agreements -117 -26 -117 -26
Other financial
derivaties -41 -128 -42 -128
Total -887 -22 -945 -23
3 Extraordinary income
Profit on sale
of property 18 36 18 36
Profit on sale of
machinery and
equipment 7 8 7 7
Reversal of amount
held in reserve in
relation to one-year
pension grants 25 - 25 -
Reimbursed, labour
market tax - 17 - -
Other extraordinary
income 3 9 3 4
Total 53 70 53 47
4 Extraordinary expenses
Expenses and provisions
for early-retirement
pensions, salaries
during period of notice and
severance payments,
etc. 72 265 66 265
Amount held in reserve
in relation to one-year
pension grants - 200 - 200
Provisions for costs and
investment related to
information technology,
including Emu and Year 2000
IT preparations - 100 - 100
Write-down of property 75 174 7 174
Loss on sale of
property 16 2 4 2
Leasehold improvements,
etc., fully written down
in the frst year of
the lease 32 45 31 45
Costs of increasing the
Banks capital base 34 24 34 25
Contributions to deposit
protection funds 15 4 - 3
Other extraordinary
expenses 1 10 2 5
Total 245 824 144 819
5 Other loans and advances
Leased buildings 1,044 896 - -
Leased machinery
and equipment 5,489 4,758 247 146
Other lease assets 140 130 140 130
Total leases 6,673 5,784 387 276
Mortgages credit
loans 47,730 37,033 - -
Other mortgages 1,497 1,201 1,468 1,191
Other loans and
advances through
foreign units 120,588 89,568 88,092 69,345
Other loans and
advances 76,161 65,889 76,066 65,417
Total 252,649 199,475 166,013 136,229
DEN DANSKE BANK DEN DANSKE BANK
GROUP
1997 1996 1997 1996
DKR M DKR M DKR M DKR M
6 Loan, advances and guarantees
granted by Den Danske Bank Group
Accumulated provisions at December 31
Accumulated provisions against loans,
advances and guarantees 9,435 9,527
Accumulated Provisions against amounts due
from credit institutions, etc. 1,530 913
------ ------
Total accumulated provisions 10,965 10,440
------ ------
Accumulated provisions against loans, advances
and guarantees as a percentage of loan advances
and guarantees at December 31 3.21 3.48
Non-accrual loans and advances to cunmners and
non-accrual amounts due from credit hutitutions
at December 31 3,302 2,950
7 Provisions for costs
Pensions
Value of unconditional pension
commitments 194 101 131 101
------ ------ ------ ------
Deferred taxes 1,086 926 1,000 881
------ ------ ------ ------
Deferred taxes of Den Danske Bank relate to Danish taxation of the jointly
taxed companies including insurance Subsidiaries. Deferred taxes of Den Danske
Bank Group also comprise deferred foreign taxes as well as deferred taxes of
subsidiaries that are not jointly taxed with the Parent Company.
In previous years provisions for deferred taxes were posted at net present value
calculated on the basis of estimated payment dates. In line with the trend in
international accounting practice, the Group has chosen to change its method of
calculation to the effect that provisions for deferred taxes are made at the
applicable rate of corporation tax, irrespective of when the taxes are due. The
change has led to a rise in provisions for deferred taxes of DKr250m.
In addition to the provisions for deferred taxes in the Balance Sheet, further
deferred taxes of DKr383m relate to shares in subsidiaries held for less than
three years.
Other provisions for costs
Amount held in reserve in relation to one-year
pension grants - 450 - 450
Provisions for costs and investment related to
information technology 145 250 145 250
Provisions for early-retirement pensions, salaries
during period of notice, and severance payments,
etc. 45 256 44 256
--- --- --- ---
Total 190 956 189 956
--- --- --- ---
Den Danske Den
Bank Group Danske Bank
1997 1996 1997 1996
DKr m DKr m DKr m DKr m
8 Capital base as percentage of risk-weighted
items (solvency ratio)
Capital base:
Core capital, less statutory deduction for own
shares 26,837 25,430 26,831 25,424
------ ------ ------ ------
Eligible subordinated debt and revaluation
reserve 16,192 11,728 16,192 11,728
Statutory deduction for subsidiary insurance
companies -4,832 -4,568 -4,832 -4,568
Other statutory deductions -99 -121 -99 -121
------ ------ ------ ------
Supplementary capital and subordinated loan
capital, less statutory deductions 11,261 7,039 11,261 7,039
------ ------ ------ ------
Total capital base, including subordinated
loan capital, less statutory deductions 38,098 32,469 38,092 32,463
------ ------ ------ ------
Weighted items not included in trading
portfolio 246,271 211,935 196,636 177,759
Weighted items below the line 67,254 55,335 89,179 74,989
Weighted items with counterparty risk
not included in trading portfolio 443 347 452 360
Weighted items with market risk, etc. 58,625 63,123 57,039 62,275
------- ------- ------- -------
Total weighted items 372,593 330,740 343,306 315,383
------- ------- ------- -------
Solvency ratio (%) 10.23 9.82 11.10 10.29
- based on core capital alone 7.20 7.69 7.82 8.06
Solvency ratio according to the "haircut
method" (%) 10.64 10.25 11.71 10.86
The solvency ratio is subject to a
statutory minimum requirement of (%) 8.00 8.00 8.00 8.00
9 Market value adjustment
Den Danske Bank Group continuously evaluates the hedging of the interest rate
risk on the Group's portfolio of fixed rate and liabilities. The portfolio
of assets and the liabilities are hedged in full or in part by means of
derivative financial instruments so that, for each currency, the interest rate
risk an the hedged portfolio of assets and the liabilities corresponds to the
interest rate risk, for each currency, on the derivative financial instruments
employed for hedging them.
Under Danish accounting regulations, part of the Group's fixed rate assets
(loans and advances as well as unlisted securities) may not be revalued in the
Accounts to a market value in excess of cost. For some of these assets, the
interest rate risk has been hedged by derivative financial instrumennts. Under
Danish accounting regulations, value adjustment of the derivative financial
instruments employed for hedging these assets is not allowed. Therefore, the
Group did not at the end of 1997 expense DKr937m market value adjustment of
these derivative financial instruments, corresponding to the income which market
value adjustment of the assets hedged would have generated. At the end of 1996,
the corresponding amount was DKr1,202m.
The interest rate risk on the Group's fixed rate liabilities, which, under
Danish accounting regulations, are not value adjusted, is hedged by derivative
financial instruments in respect of long-term liabilities. The Group is not
allowed to make adjustment of these derivative financial instruments employed
for hedging purposes. Therefore, the Group did not at the end of 1997 carry to
income DKr1,053m market value adjustment of these derivative financial
instruments corresponding to the expenses which market value adjustment of the
liabilities hedged would have generated. At the end of 1996, the corresponding
amount was DKr900m.
1997
DKr m
Nominal/
Purchase Book Market Notional
price value value amount
Den Danske Bank Group
Assets
Loans and advances 17,683 17,683 18,394 17,683
Bonds 9,900 9,900 10,126 9,870
Total assets 27,583 27,583 28,520 27,553
Derivative financial instruments
hedging interest rate risks
Swaps - - 937 27,229
Liabilities
Deposits - 3,005 3,223 3,005
Issued bonds, etc - 2,974 3,190 2,974
Subordinated debt - 8,526 9,145 8,526
Total liabilities - 14,505 15,558 14,505
Derivative financial instruments
hedging interest rate risks
Swaps - - 1,053 14,505
1996
DKr m
Nominal/
Book Market Notional
value value amount
Den Danske Bank Group
Assets
Loans and advances 16,694 17,614 16,694
Bonds 9,105 9,387 9,520
Total assets 25,799 27,001 26,214
Derivative financial instruments
hedging interest rate risks
Swaps - 1,202 25,584
Liabilities
Deposits 4,645 4,983 4,645
Issued bonds, etc 2,855 3,062 2,855
Subordinated debt 4,863 5,218 4,863
Total liabilities 12,363 13,263 12,363
Derivative financial instruments
hedging interest rate risks
Swaps - 900 12,382
Danske Kredit's fixed rate loans are covered through the issue of mortgage
credit bonds, which are not value adjusted. In accordance with a ruling given
by the Danish Financial Supervisory Authority, fixed rate mortgage credit loans
are not value adjusted either. Therefore fixed rate assets and liabilities
listed above do nor include fixed rate mortgage credit loans and mortgage credit
bonds issued.
1997
DKr m
Nominal/
Purchase Book Market Notional
price value value amount
Den Danske Bank Group
Assets
Loans and advances 11,342 11,342 11,795 11,342
Bonds 9,900 9,900 10,126 9,870
Total assets 21,242 21,242 21,921 21,212
Derivative financial instruments
hedging interest rate risks
Swaps - - 680 20,888
Liabilities
Deposits - 3,005 3,223 3,005
Issued bonds, etc - 2,974 3,190 2,974
Subordinated debt - 8,526 9,145 8,526
Total liabilities - 14,505 15,558 14,505
Derivative financial instruments
hedging interest rate risks
Swaps - - 1,053 14,505
1996
DKr m
Nominal/
Book Market Notional
value value amount
Den Danske Bank Group
Assets
Loans and advances 11,422 12,030 11,422
Bonds 9,105 9,387 9,520
Total assets 20,527 21,417 20,942
Derivative financial instruments
hedging interest rate risks
Swaps - 890 20,527
Liabilities
Deposits 4,645 4,983 4,645
Issued bonds, etc 2,855 3,062 2,855
Subordinated debt 4,863 5,218 4,863
Total liabilities 12,363 13,263 12,363
Derivative financial instruments
hedging interest rate risks
Swaps - 900 12,382
10. Contingent liabilities
Owing to its size and business volume Den Danske Bank Group is continually a
party to various lawsuits.
Legal proceedings have, for intstance, been initiated against the Bank as a
result of the so-called tax stripping cases raised against certain customers
of the Bank. Moreover, some investors who subscribed for shares when Hafnia
Holding A/S carried out a share issue in July 1992 or who bought shares in the
summer of 1992 have brought actions for damages against the Bank, among others,
totalling DKr120m. The Bank has signed declarations lifting, for the future,
the time-bar applicable to claims in respect of the Hafnia issue for an
additional amount of DKr23m.
The outcome of the cases pending is not expected to have a material effect on
the financial position of Den Danske Bank Group.
The Group's pension commitments are covered by payments made to insurance
companies, pension funds, etc. In a few cases, however, the Group may,
following an acruarial calculation, be ordered to make further payments. Certain
foreign pension commitments are not covered, but provisions are made on the
basis of an actuarial calculation.
The Bank is registered jointly with all significant Danish subsidiaries in
rclation to financial services employer tax and VAT for which it is jointly
and severally liable.
11. The Danish Financial Supervisory Authority Ratio System
The ratio required by the Danish Financial Supervisory
Authority from Den Danske Bank Group are shown below.
Den Danske Bank
Group
1997 1996
% %
1. Solvency and capital
1.1 Solvency ratio 10.23 9.82
1.2 Solvency ratio based on core capital, tier 1 7.20 7.69
capital
1.3 Supplementary capital utilisation ratio 60.34 46.12
1.4 Weighted items subject to market risk, etc./ 15.73 19.09
total weighted items
2. Earnings
2.1 Core earnings before provisions/shareholders' 16.79 16.19
equity, beginning of year
2.2 Core earnings/shareholders' equity, beginning 14.42 13.44
of year
2.2.a Core earnings (adjusted)/shareholders' equity, 12.97 14.85
beginning of year
2.3 Profit on ordinary operations/shareholders' 18.65 23.36
equity, beginning of year
2.4 Operating expenses/operating income 61.38 62.28
2.4.a Operating expenses/operating income (adjusted) 63.50 60.29
3. Market risk
3.1 Interest rate risk/core capital less statutory 2.95 3.31
deduction
3.2 Foreign exchange risk/core capital less
statutory deduction
Exchange rate indicator 1/core capital less 7.51 5.41
statutory deduction
Exchange rate indicator 2/core capital less 0.09 0.05
statutory deduction
4. Liquidity
4.1 Loans and advances + provisions/deposits 133.10 123.24
4.2 Excess cover relative to the provisions of s.28
of the Danish Banking Act
a. 15% 162.07 181.95
b. 10% 152.60 167.84
5. Buildings
5.1 Land and buildings/shareholders' equity 14.00 14.00
5.2 Properties of which the Bank has taken possession 0.59 0.65
/shareholders' equity
5.3 Interests in property not used for credit 2.61 3.13
institution activities/capital base
6. Credit risk
6.1.1 Outstanding amounts with reduced interest/loans 0.84 1.13
and advances, guarantees and provisions*
6.1.2 Provisions against outstanding amounts with 77.70 86.54
reduced interest in relation to total outstanding
amounts with reduced interest*
6.2.1 A-provisions/loans and advances, guarantees and 2.09 2.56
provisions
6.2.2 B-provisions/loans and advances, guarantees and 0.60 0.80
provisions
6.2 Total provisions/loans and advances, guarantees 2.69 3.36
and provisions
6.3 Provisions, corporate customers/loans and advances 2.69 3.41
guarantees and provisions, corporate customers*
6.4 Provisions, personal customers/loans and advances 5.24 6.12
guarantees and provisions, personal customers*
6.5 Provisions (net)/loans and advances, guarantees 0.02 0.12
and provisions
6.6 Loans and advances/shareholders equity 1,055.73 898.42
6.7 Provisions taken earlier now written off/ 92.51 93.58
write-offs for the year
6.8 Write-offs for the year as % of provisions, 7.63 5.92
beginning of year
* Ratios are calculated for Den Danske Bank - not for Den Danske Bank Group
END
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