17-02-2015 1

February 18, 2015

A good performance enabling Sydbank to pay a historically high dividend

2014 Annual Report

17-02-2015 2

Highlights for 2014

Key points

Profit

Income

Costs

Impairment charges

Loans and advances

Capital

Sydbank’s plan to increase profitability is generating results – ROE of 9.8% p.a.

Profit of DKK 1,052m – the best result since 2007

Core income of DKK 4,319m – 6% increase

4% increase in costs. Costs relating to DiBa resulted in increase of 8%

Impairment charges DKK 707m – at the positive end of expectations

DKK 1.9bn rise in bank loans and advances, equal to 2.9% in 2014

Dividend of DKK 7.08 per share, equal to 50% of profit for the year – all-time highDividend

CET1 ratio of 13.9% – increase of 0.5% compared with Q4 2013

17-02-2015 3

1,0361,016

9951,011

1,0551,076

1,094 1,0941,078

1,0901,101 1,101

1,0781,090

1,101 1,101

800

850

900

950

1,000

1,050

1,100

1,150

1,200

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

DKKm Core income

Realised Target 2016

Implemented measures – effect from Q1 2015• Price adjustment from Totalkredit with effect

from 1 January 2015 – projected annual effect of DKK 30m

Ongoing measures• DKKm 3bn increased volume of mortgage

loans – anticipated annual effect of DKK 40m (at 50% use).

• Increased business volume as a result of targeted advisory services.

• Possible price adjustments based on negative interest rate environment. Currently under analysis.

Difference between realised core income and target for 2016 quarterly• Q1 2014 DKK 23m• Q2 2014 DKK 14m• Q3 2014 DKK 7m• Q4 2014 DKK 7m

Strengthening of income – at the same level as in Q3

4,370

17-02-2015 4

Core income – other core income makes up for decline in net interest

• Net interest etc down by 2%

• Mortgage credit up by 36%

• Payment services up by 31%

• Other items up by 15%

Key points 2014 vs 2013

Key points Q4-14 vs Q3-14• Net interest etc down by 2%

despite rise in loans/advances

• Other items up by 3%

DKKm 12M 2014 12M 2013 Index Q4 2014 Q3 2014 Index

Net interest etc 2,521 2,568 98 631 641 98

Mortgage credit* 359 264 136 96 90 107

Payment services 219 167 131 54 57 95

Remortgaging and loan fees 127 88 144 46 33 139

Commission and brokerage 351 320 110 98 82 120

Commission etc investment funds and pooled pension plans 339 322 105 80 92 87

Asset management 174 164 106 42 45 93

Custody account fees 80 79 101 19 19 100

Other income 149 86 173 28 35 80

Total 4,319 4,058 106 1,094 1,094 100

* Set-off of loss Totalkredit 34 28 121 10 9 111

17-02-2015 5

Trading income – adversely impacted by mortgage bond market in Q4 2014

Key points:• DKK 196m recorded in 2014 vs DKK 229m in

2013• Loss of DKK 9m recorded in Q4 2014, mainly

attributable to Fixed Income department where the loss was caused by:• large drawings on callable bonds• general re-pricing of ARMs and mortgage

bonds• higher credit premium – corporate bonds• tight sector liquidity.

Trading income

DKKm Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Fixed Income 61 43 7 18 36 32 19 -29

Equities 21 13 17 19 31 26 17 9

Money Market and Foreign Exchange 4 19 7 0 19 8 17 11

Total 86 75 31 37 86 66 53 -9

8675

31 37

86

6653

-9-20

0

20

40

60

80

100

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

DKKm

17-02-2015 6

Reduction in costs – 75% of the savings have been achieved –continued focus on target – the remaining 25% is the most difficult

2,667

52

50

50

2,619

148

50

203

2,514

2,200 2,300 2,400 2,500 2,600 2,700 2,800

Cost target 2016

Savings 2015/16

Rise in costs 2016, 2%

Rise in costs 2015, 2%

Costs 2014

Savings 2014

Rise in costs 2014, 2%

DiBa Bank

Sydbank 2013

ReductionDKK 200m

75% is done

17-02-2015 7

Costs (core earnings) – savings of DKK 200m – close to target

Indeks=100

DKKm

661649

604 600

704

661

621633

675662

617 613

500

550

600

650

700

750

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q3 2014

Costs, core earnings Cost target

• Sydbank’s costs totalled DKK 2,514m in 2013

• In addition the cost base from DiBa represented DKK 203m

• Savings plan of DKK 200m compensates for DiBa effect

• The plan has been completed when costs equal 2013, plus price increases

• Q4 2013 favourably impacted by accruals• In 2014 costs are DKK 52m higher than

the target for 2016 in 2014 prices• Savings are to be considered over 12

months.

17-02-2015 8

Implemented parts of the plan have improved C/I

Indeks=100

• Focus on improved income combined with cost savings have improved profitability

• C/I is down from 0.59 in 2013 to 0.58 in 2014

• Q4 2014 is affected by negative trading income

• When the plan to increase profitability is fully implemented in 2016, C/I will decline further.

0,59 0,59 0,59 0,57

0,62

0,58

0,54

0,58

0,40

0,45

0,50

0,55

0,60

0,65

0,70

0

200

400

600

800

1.000

1.200

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

O/IDKKm Cost / Income, C/I

Costs (core earnings) Total income C/I

17-02-2015 9

Costs (core earnings) – savings of DKK 200m – different initiatives

Indeks=100

2,2312,201 2,187

2,142

2,101

2,000

2,050

2,100

2,150

2,200

2,250

Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

Employees

9794

9086

82

70

75

80

85

90

95

100

Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

Branches in Denmark

Initiatives in 2014:• Reduction in staff – 130 full-time employees• 15 branches amalgamated in Denmark• 2 branches closed in Germany• Increased focus on greater efficiency• Increased focus on costs.

Initiatives in 2015:• Efficiency improvements and automation of

processes – necessary to cut costs further. Project work has been intensified.

• Electronic document management is an important element in the automation process.

Customer behaviour:• Customers’ behaviour is changing – eg online

banking, mobile banking, SWIPP, electronic archives, ATM deposits, etc.

17-02-2015 10

Annual rise in staff costs – effect of collective agreement and payroll taxMain causes of rise in costs in 2015 and 2016

Indeks=100

1.00 1.00

1.70 1.75 1.800.00 0.40

0.500.80

1.40

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2012 2013 2014 2015 2016

Pct.

Pay rise – collective agreement Rise – payroll tax

• Total rise in staff costs, excl individual adjustments:• 2015 = 2.55%• 2016 = 3.20%

17-02-2015 11

Impairment charges decline to DKK 707m – at the positive end of expectations – despite AQR and agriculture

Special conditions in 2014:Q1: Individual impairment charges due to AQR, DKK

51mQ2: Review of retail clients and higher agricultural land

prices, total positive effect of DKK 60mQ3: Collective impairment charges related to agriculture

and adjustment of collective impairment charges due to AQR, in total DKK 49m

Q4: Collective impairment charges related to agriculture, DKK 100m

1,195

1,400

1,195

1,748 1,861

707 1.30

1.661.51

2.19

2.34

0.82 0.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

-

250

500

750

1,000

1,250

1,500

1,750

2,000

2009 2010 2011 2012 2013 2014 2015e

Pct.DKKm Impairment of loans and advances etc

Impairment Impairment ratio (right axis)

319

111 129148

268

171

8048

0

50

100

150

200

250

300

Q1 Q2 Q3 Q4

DKKm Quarterly impairment charges,with and without special conditions

With special conditions Without special conditions

17-02-2015 12

Most significant impairments in Q4 2014: collective related to agriculture

Key points Q4 2014:• DKK 100m, equal to 68% of impairments for the

quarter, represent collective impairments related to agriculture.

Key points 2014:• DKK 201m, equal to 28% of total impairments, are

attributable to agriculture• DKK 161m, equal to 23% of total impairments, are

attributable to real property.

-50

-25

0

25

50

75

100

125

150

Agriculture etc

Trade Real property

Other corporate lending

Retail clients

DKKm Impairments quarterly - individual

Q1 14 Q2 14 Q3 14 Q4 14

Breakdown of impairments 2014DKKm Q1 Q2 Q3 Q4 2014Agriculture etc 0 8 58 10 76 Trade 50 24 18 -6 86 Real property 132 95 -22 -44 161 Other corporate lending 82 0 52 53 187 Total corporate 264 127 106 13 510 Retail clients 56 -30 -19 26 33 Individual impairments 320 97 87 39 543 Collective impairments -1 14 42 109 164 Total impairments 319 111 129 148 707

17-02-2015 13

Focus on agriculture – collective impairments DKK 125m in 2014Key points• Loans are down by DKK 346m, equal to 5% of

loans and advances• Impaired loans for agriculture is up with DKK

169m, equal to 4% of loans and advances• Impairment of 17.5% of loans and advances at

year-end 2014 compared to 14.8% at year-end 2013

0

100

200

300

400

500

600

700

800

900

1,000

Pig farming Cattle farming Crop production

Other agriculture

DKKm Individually impaired loans

Q4 13 Q4 14

31st December 2014

DKKmPig

farmingCattle

farmingCrop

productionOther

agriculture TotalLoans and advances 1,853 1,845 1,381 1,222 6,301 Individual impairments 288 540 42 106 976 Collective impairments 85 40 125 Loans after impairments 1,480 1,265 1,339 1,116 5,200

Impaired loans 582 897 100 188 1,767 Impaired loans as % of loans 31.4 48.6 7.2 15.4 28.0 Impairment as % impaired loans 49.5 60.2 42.0 56.4 55.2 Impairment as % loans 20.1 31.4 3.0 8.7 17.5

31st December 2013

DKKmPig

farmingCattle

farmingCrop

productionOther

agriculture TotalLoans and advances 2,018 2,005 1,354 1,270 6,647 Individual impairments 245 581 40 115 981 Loans after impairments 1,773 1,424 1,314 1,155 5,666

Impaired loans 466 842 84 206 1,598 Impaired loans as % of loans 23.1 42.0 6.2 16.2 24.0 Impairment as % impaired loans 52.6 69.0 47.6 55.8 61.4 Impairment as % loans 12.1 29.0 3.0 9.1 14.8

17-02-2015 14

Impaired bank loans and advances – 4% down in Q4 2014Breakdown of impaired bank loans and advances

1,375 1,350 1,682 1,654 1,662 1,905 2,219 2,325 2,038 2,030

3,0264,038 4,031 4,255 4,335

4,9655,287 5,156 5,090 4,834

-1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

DKKm

Defaulted bank loans and advances Non-defaulted bank loans and advances

Individually impaired bank loans and advancesDKKm 31 Dec 2012 31 Dec 2013 31 Dec 2014Non-defaulted bank loans and advances 4,038 4,965 4,834 Defaulted bank loans and advances 1,350 1,905 2,030 Impaired bank loans and advances 5,388 6,870 6,864 Impairment charges for bank loans and advances subject to individual impairment 2,769 4,058 3,996 Impaired bank loans and advances after impairment charges 2,619 2,812 2,868 Impaired bank loans and advances as % of bank loans and advances before impairment charges 7.6 9.7 9.4 Impairment charges as % of bank loans and advances before impairment charges 3.9 5.7 5.5 Impaired as % of impaired bank loans and advances 51.4 59.1 58.2 Impairment charges as % of defaulted bank loans and advances 205.1 213.0 196.8

17-02-2015 15

Investment portfolio earnings – value adjustment of mortgage credit portfolio in Q4 2014

• Increased remortgaging activity in Q4 2014 and tight sector liquidity resulted in negative value adjustment of mortgage credit portfolio.

87

197

-7

4284

-47

44

-5-50

0

50

100

150

200

250

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

DKKm Investment portfolio earnings

Investment portfolio earnings

DKKm Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014Position-taking 62 -17 37 -7 75Liquidity generation and liquidity reserves 24 -1 6 -6 23Strategic positions 0 -27 2 10 -15Costs -2 -2 -1 -2 -7Total 84 -47 44 -5 76

17-02-2015 16

Income statement – the best annual result since 2007

• Core income up by 6%

• Costs (core earnings) up by 4%

• Impairment charges down by 62% from 234bp to 82bp

• Non-recurring items, primarily Nets and integration of DiBa

• The best result since 2017

Key points 12M 14 vs 12M 13

Key points Q3 14 vs Q2 14• Core income at the same level

• Costs (core earnings) up by 2%

• Impairment charges up by 15% from 16bp to 17bp

DKKm 12M 2014 12M 2013 Index Q4 2014 Q3 2014 Index

Core income 4.319 4.058 106 1.094 1.094 100

Trading income 196 229 86 -9 53 -

Total income 4.515 4.287 105 1.085 1.147 95

Costs, core earnings 2.619 2.514 104 633 621 102

Core earnings before impairment 1.896 1.773 107 452 526 86

Impairment of loans and advances etc 707 1.861 38 148 129 115

Core earnings 1.189 -88 - 304 397 77

Investment portfolio earnings 76 319 24 -5 44 -11

Profit before non-recurring items 1.265 231 548 299 441 68

Non-recurring items, net 64 -60 - -20 -23 -

Profit before tax 1.329 171 777 279 418 67

Tax 277 -16 - 55 104 53

Profit for the period 1.052 187 563 224 314 71

Core costs / total income, C/I 0,58 0,59 0,58 0,54

Return on equity, ROE 9,8 1,8 2,0 2,9

Earnings per share, EPS 14,3 2,5 3,1 4,3

17-02-2015 17

Rise in loans and deposits in Q4 2014

• Loans and advances rose every quarter in 2014; by a total of 2.9% in 2014

• Deposits up by DKK 0.9bn in Q4 2014. Up by DKK 3.9bn for 2014, equal to 5.6%.

DKKbn

68.1

70.0

72.0

74.073.0

73.9

67.466.6 67.2 67.7 68.0 68.5

55

60

65

70

75

Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

Deposits Loans

17-02-2015 18

Capital ratios have strengthened in 2014 – mainly as a result of the profit

Key points 2014:• Capital structure further

strengthened despite dividend distribution of DKK 536m

Key points Q4 2014:• CET1 ratio down by 0.9 in Q4 due to

investments in DLR shares and temporary rise in credit risk

DKKm 2013CRD IV

2013 Q3 2014 Q4 2014

Credit risk 51.160 47.616 47.191 49.417

Market risk 10.197 10.197 8.374 8.003

Operational risk 8.341 8.341 8.306 8.575

Other exposures incl. CVA 3.051 5.345 5.561 6.472

Risk-weighted assets 72.749 71.499 69.432 72.467

CET1 9.722 9.799 10.307 10.101

Tier 1 11.108 11.037 11.414 11.209

Total capital 11.430 11.586 11.787 11.596

CET1 ratio 13,4 13,7 14,8 13,9

Tier 1 ratio 15,3 15,4 16,4 15,5

Capital ratio 15,7 16,2 17,0 16,0

Individual solvency need 10,0 10,0 10,0 10,4

17-02-2015 19

Development in capital ratio in 2014

16.0

0.3

0.4

0.5

0.7

1.5

0.3

0.4

0.5

15.7

14.5 15.0 15.5 16.0 16.5 17.0

Capital at 31 Dec 2014

Rise – other items

Rise in credit risk

Decline in market risk

Expected dividend

Profit etc

Change in deductions

Redeemed capital, DiBa

Transition to CRD IV

Capital at 1 Jan 2014 Key points:• Change in deductions and most

important change in other items attributable to purchase of DLR shares. Total effect on capital ratio of around 0.5 percentage points.

• Rise in credit risk attributable to temporary exposure due to remortgaging guarantees to DLR. Effect of around 0.5 percentage points.

17-02-2015 20

Updated capital policy due to strong liquidity and capital

• Given the Group’s good liquidity and capital, the capital policy has been updated so that it provides constant support to the Group’s strategy and at the same time take into account Sydbank’s status as a SIFI as well as full implementation of capital regulations.

• The Group’s targets:

• CET1 ratio of around 13.5%

• Capital ratio of around 17.0%

• The Group will move closer to meeting the capital targets in the coming years. Adjustment of the Group’s capital structure to the capital targets will require subordinated capital to be issued after which share buybacks are believed to be an option.

• In 1H 2015 the Board of Directors will commence work on the first phase of the capital adjustment in which the possibility of issuing Tier 2 capital of approx DKK 750m will be reviewed.

17-02-2015 21

Outlook for 2015

• Based on the level of interest rates at the beginning of 2015, core income is expected to rise slightly due in part to a slight increase in bank loans and advances resulting from the measures implemented and despite continued fierce competition. The longer the current upward pressure on DKK and by extension the negative interest rate environment last, the greater the uncertainty of the projection.

• Unchanged or slightly rising trading income but very dependent on financial market developments.

• Unchanged costs (core earnings) despite general pay rises agreed for the financial sector of 1.75% and payroll tax increase of 0.80%.

• Lower impairment charges for loans and advances. Uncertainty surrounding price developments in the agricultural sector may however affect level of impairment charges.

17-02-2015 22

Q & A

17-02-2015 23

Additional information:

Karen Frøsig, CEO

tel +45 74 37 20 00, direktionen@sydbank.dk

Jørn Adam Møller, Chief Investor Relations Officer

tel +45 74 37 24 56, jam@sydbank.dk

Thank you

17-02-2015 24

Forward-looking statements

• This presentation contains statements concerning expectations of future developments, including future income as well as expected business events.

Such statements are by their nature uncertain and associated with risks as many factors – of which some may be beyond Sydbank’s control – may cause the actual developments to deviate materially from management’s expectations as expressed in this presentation.