Strategy for Banking and Wealth Management
Trading, investment portfolio and other income, including value adjust-
ments of swaps currently offered, increased by DKK 612 million to
DKK 1,246 million (2020: DKK 634 million), partly driven by value ad-
justments and income from the sale of the Depositary Services unit to
the Bank of New York Mellon of around DKK 300 million.
The main ambition of the Banking strategy is to provide our customers
with financial security – personal and business customers alike. To re-
alise our ambition, Banking must deliver on a five-track strategy: being
customers' preferred bank, sustainable solutions, digitisation and sim-
plicity, quality and integrity as well as people who will and can make a
difference. Together the five strategy tracks are based on the Banking
organisation's strengths and Nykredit's Group strategy, Winning the
Double 2.0.
Costs
Costs were DKK 2,927 million (2020: DKK 2,727 million). The rise was
driven by increasing business volumes, performance bonus and activ-
ity in the period. The Group maintains focus on building organisational
efficiency, while investing significant resources in compliance and im-
plementation of new regulatory requirements, as well as extending the
partnership with BEC.
Being a financial mutual, we have a special obligation to put the needs
of our clients first and particularly to act responsibly in relation to the
society we are part of. Wealth Management pursues a shared strate-
gic ambition to be Denmark's responsible wealth manager. Wealth
Management must build long-term value for its clients and business
partners, and the society we are part of. Our strategy consists of
seven tracks: corporate responsibility, being customers' preferred
bank, digital customer experiences, strategic partnerships, alterna-
tives, data as well as scale.
The average number of full-time equivalent staff totalled 974 (2020:
979).
Impairment charges for loans and advances and provisions for
guarantees etc
Impairment charges for loans and advances were -0.08% (2020:
0.41%). Impairment charges and provisions came to a net reversal of
DKK 120 million (2020: a charge of DKK 579 million) driven by our
customers' good liquidity and conducive economic conditions.
Awards
Our green car loan for plug-in hybrid cars was awarded Best in Test
by the Danish Consumer Council in March 2021. The Council labelled
the green car loan for electric cars as "Recommended". In March,
Nykredit Invest won two out of three main categories at the annual
Morningstar Fund Awards. The investment fund Nykredit Invest was
awarded best manager of bonds as well as best manager of equities
and bonds. This is the fourth year running that Nykredit Invest has
won one or more main categories at the Morningstar Fund Awards. In
addition, the fund Sparindex OMX C25 was awarded best fund for
Danish equities, and Sparindex DJSI World was named best fund for
global equities. Combined, Nykredit Invest and Sparindex won four
out of eight Morningstar Awards.
Write-offs and individual impairment provisions remained low.
Impact of covid-19 on impairment charges for loans and ad-
vances
There is still substantial uncertainty about the impact of the covid-19
pandemic. Loan impairments related to covid-19 are based on stress
test calculations of three different factors. Firstly, stress simulations
have been performed for stage 1 and stage 2 personal customers and
high-attention sectors. Secondly, the property values of stage 3 cus-
tomers have been stressed to simulate a reduction in collateral val-
ues. At stage 3 we have raised the probability of an adverse scenario
for customers in vulnerable sectors.
Covid-19 response
In response to the covid-19 pandemic, Nykredit Bank has launched a
number of initiatives aimed at helping Danish families and businesses;
initiatives such as a special credit facility, payment holidays on car
loans, consumer loans and bank home loans, no-fee overdrafts as
well as a corona hotline. The initiatives will be phased out as society
returns to normal.
Provisions in 2021 related to covid-19
Of the total loan impairment provisions of DKK 577 million made in
2020 taken to cover the consequential losses arising from covid-19,
Nykredit has reassessed the portfolio, which has resulted in a charge
of DKK 49 million due to updated stress test calculations. Provisions
for loan impairment related to covid-19 subsequently amounted to
DKK 626 million including provisions of DKK 25 million with respect to
Nykredit Leasing A/S. The general macroeconomic situation is moni-
tored by Nykredit's scenario experts, who regularly assess the need
for calculation updates based on input concerning relief packages,
government aid initiatives and overall international economic trends.
Income
Total income was DKK 5,912 million in 2021 (2020: DKK 5,063 mil-
lion). Net interest income increased by DKK 63 million to DKK 1,774
million (2020: DKK 1,711 million), and net fee income increased by
DKK 159 million to a total of DKK 680 million (2020: DKK 521 million).
Growth in bank lending contributed to increasing net interest income
and net fee income. In addition, negative deposit rates to personal
customers also had a positive effect on net interest income.
Expectations for macroeconomic models
Nykredit Bank's impairment models are based on forward-looking
macroeconomic scenarios. The scenarios must reflect uncertainties
relating to the economy as well as both improved and deteriorating
outlooks. At end-2021, the scenarios were updated to reflect the cur-
rent and expected economic environment caused by the covid-19 cri-
sis and resulting market conditions. The changes are described in de-
tail in "Stage 1 and stage 2 impairments" in accounting policies on
Wealth management income came to DKK 2,324 million (2020: DKK
1,950 million), mainly due to increasing assets under management,
driven by significant growth in new client assets combined with value
gains on the existing portfolio.
Net interest from capitalisation, which includes interest on subordi-
nated debt etc, totalled an expense of DKK 41 million (2020: an ex-
pense of DKK 29 million).
Nykredit Bank – Annual Report 2021
5/119
