Danske Bank considers the management of risk and capital to be one of its core competencies and a key factor in providing a stable, high return to shareholders. Danske Bank therefore aims at implementing "best in class" solutions in all aspects of risk and capital management.
Interactive reportingThe
interactive accounts for 2007 are intended to inform shareholders and other interested parties of the Group's risk and capital management policies and practices, including its risk management organisation and methodology.
Capital management and value creationDanske Bank regards capital management to be a key driver in creating shareholder value. This can be illustrated is showing how sensitive return on equity (ROE) is to the following five variables:
- Net interest income margin
- Fees
- Costs
- Lending volume
- Core capital target
The sensitivity can be estimated by a simulation of Danske Bank's reported financial results for 2007. In 2007, Danske Bank reported a return on equity, which was above 15% (calculated on opening balance 2007). The table below shows by how much the five variables would have to change (in isolation) in order to increase the return on equity by 1 or 2 percentage points.
What does it take to increase return on equity by 1 or 2 percentage points?
| NII margin* |
+0.36%-point |
+0.69%-point |
| Fees |
+17% |
+34% |
| Costs |
-7% |
-14% |
| Lending volume* |
+37% |
+70% |
| Core capital target |
-0.5%-point |
-0.96%-point |
*Bank lending in Denmark only
The results from the simulation highlight that active capital management, cross selling and cost containment are important factors for creating value to shareholders.
Last updated/revised on October 29, 2008