BRFKREDIT INTERIM REPORT Q Published 28 April 2016

BRFKREDIT

INTERIM REPORT Q1 2016

Agenda



Financials Q1 2016



Capital and Rating



Credit quality and the housing market



Funding

The positive trend continues

Positive developments in BRFkredit

 Pre-tax profit was DKK 298m for Q1 2016. This is equal to a ROE on 10.1 % p.a.

Q1 2016 (compared to Q1 2015)

 Core earnings before loan impairment charges

rose by 3 %

 Core profit rose by 64 %  Costs reduced with 12 %

 Wages reduced with 11 %

 Loan impairment charges at a low level  Value adjustment are no longer affected by the

transfer of of BRFkredit Bank assets to Jyske Bank

Expectations for rest of 2016

 Core earnings is expected to increase as a consequence of a growing lending portfolio  Loan impairment charges are expected to

continues at a low level

Core profit and net profit for the period

DKKm Q1 2016 Q1 2015 Indeks 16/15 Core operations

Contribution income, etc. 434 402 107

Other net interest income 1) _{-22 8 -}

Net fees, charges and commission income

etc. 36 61 59

Value adjustments 16 13 123

Other income 12 5 240

Core earnings 475 494 96

Core expenses 203 231 88

Core earnings before loan impairment

charges etc. 272 263 103

Loan impairment charges etc. -35 76 -

Core profit 307 187 164

Earnings from investment portfolios -9 56 -

Pre-tax profit 298 244 122

Tax 65 56 116

Net profit or loss for the period 233 187 125

Increasing return on core capital

Pre tax result (DKKm) and ROE p.a. (%)

Return on Equity of 10.1 % p.a.

 One joint distribution channel within the group  Possible to establish customers within the group with both

banking and mortgage products  Funding of JB Mortgage loans

 Total funding of DKK 46bn

 Lower marginal costs to growth in lending segments

 Lending to commercial segment

 Positive growth in commercial lending since 2012

 Lower operating costs  Lower capital costs

 Decreased with DKK 100m since 2013

 Decreasing requirements from rating institutes and

lower SDO-requirements

 Impairment charges TTC

 Impairments on pre-crisis level

-4% -2% 0% 2% 4% 6% 8% 10% 12% -600 -400 -200 0 200 400 600 800 1000 1200 1400 2012 2013 2014 2015 Q1 2016* DKK m

Pre-tax result ROE p.a. (rhs)

Financials - selected graphs

Income (DKKm) Cost/income (%)

Balance of loan impairments in % of lending Impairment charges and reversals (DKKm)

0.55% 0.78% 0.60% 0.55% 0,4% 0,5% 0,6% 0,7% 0,8% 0,9% 2013 2014 2015 Q1 2016 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2013 2014 2015 Q1 2016*

Net fees and commision income Net interest income

59 76 -28 -27 82 -35 -300 -200 -100 0 100 200 300 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 New impairment charges

Reversals Merger with Jyske Bank

63.0% 56.2% 49.6% 42.7% 40% 45% 50% 55% 60% 65% 2013 2014 2015 Q1 2016 *Annualised

BRFkredit – Balance sheet

 Balancesheet stood at DKK 281bn (Q1 2015: DKK 268bn). An increase of 5% compared to Q1 2015 despite transfer of banking activities

 Mortgage Loans stood at DKK 259bn (Q1 2015: DKK 231bn)

 Jyske Bank has granted DKK 53.5bn of mortgage loans by the end of Q1 2016. From these DKK 46.1bn were taken on the balance by BRFkredit

 Equity stood at DKK 12,014m as of 31 March 2016. The increase compared to end Q1 2015 is due to positive results for all the last four quarters

Summary balance sheet, end of period

DKKm Q1 2016 Q1 2015 Indeks 16/15 Bank loans _- 2,668 - Mortgage loans 259,331 230,614 112

Bonds and shares etc. 11,243 27,135 41

Total Assets 280,687 267,954 105

Payables to credit institutions and central

banks 256 6,204 4

Bank deposits - 4,554 -

Issued bonds at amortised cost 4,715 5,178 91

Issued bonds at fair value 1) _{260,799 237,555 110}

Agenda



Financials Q1 2016



Capital and Rating



Credit quality and the housing market



Funding

Expected fully implemented CRD IV

& Danish SIFI demands

*) he countercyclical buffer depends of the development of the Danish economy from 2016 and to 2019

 The solvency need is expected to be at 17 % in 2019 (including the worst scenario of the countercyclical buffer), of which 13.5 % should be covered with core equity

 BRFkredit is already compliant with the fully implemented requirement Pillar I (8.0%)

4.5%

CET 1 (18.8%) Pillar II (2.5%)

3.0% Capital conservation buffer

(2.5%) 2.5% SIFI buffer (1.5%) 1.5% Countercyclical buffer (2.5%) 2.5% 0 2 4 6 8 10 12 14 16 18 20

Rating

 In the new criteria implemented by S&P in 2015, the rating of the covered bond is more dependent on the issuer rating than previously

 The overcollateral should at least cover the S&P AAA credit risk. The need to cover the refinancing risk is dependent of the number of free notches above AAA  BRFkredit cover the total OC-requirement independent

of free notches

New criteria for lending to commercial segment

 The criteria uses higher haircuts on commercial property values

 The implementation has led to higher OC-requirements for capital centers with a high concentration of

commercial lending

Types of overcollateral

 Overcollateral required by S&P to keep AAA is placed exclusively in AAA rated Danish mortgage bonds and in Danish government bonds

Rating Standard and Poor’s

BRFkredit

A-Outlook Stable

Capital Center B AAA

Capital Center E AAA

Capital Center General AAA

Free notches over AAA 2

Rating requirement and overcollateral

OC requirement for AAA AAA rated mortgage bonds and Danish government bonds 0% 1% 2% 3% 4% 5% 6% 7% 8%

S&P requirement Overcollateral

% o f to ta l le n d in g

Agenda



Financials Q1 2016



Capital and Rating



Credit quality and the housing market



Funding

 Housing prices increased with 6.4 % in 2015 and the prices on apartments increased with 10.8 %

 Positive trend in the market in 2016 despite slowly improvements in the Danish economy

 A steady growth is expected in 2016 as a consequence of a weak economic growth and tighter credit policies  The housing burden is expected to remain at a low level

Source: BRFkredit 100 120 140 160 180 200 220 240 260 2000 2002 2004 2006 2008 2010 2012 2014 Capital Sealand South Denmark Central Jutland North Jutland

Source: Federation of Danish Mortgage Banks Source: Statistics Denmark

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Capital Sealand South Denmark Central Jutland North Jutland

Housing market

Housing burden (indeks 2000 = 100)

Expected regional population growth (2016 – 2040) Regional development in prices (indeks 2000 = 100)

Geographical exposure

 The primary geographical exposure of BRFkredit is in areas with increasing house prices and expected population growth

 Relatively low losses in urban areas during the financial crisis

 High tradebility prevent losses

 Through Jyske Bank the growth in the eastern part of Jutland is expected to continue

Loss in 2015 for housing properties

Average yearly loss (% of lending)

47 % of lending 17 % of lending 4 % of lending 3 % of lending 0,0% 0,1% 0,2% 0,3% 0,4% 0,5% 0,6% 0,7% 0,8% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Copenhagen and Aarhus areas Rest of Denmark

Distribution of portfolio

Distribution of property types

Distribution of lending types

Mainly lending to housing properties

 87 % of lending to 87 % to housing purposes  Expected increase in owner-occupied lending  Relatively high proportion of lending to subsidised  No lending to cooperative housing with interest swaps  No lending to agriculture and other primary production

Loans moving out of the interest curve

 A larger proportion are choosing F3-F5

 Still a relative large proportion of loans with yearly fixing of interests rate

 As a consequence of the low 30 year fixed interest rate many borrowers have converted to this loan

 Floaters mainly for corporate customers

20% 35% 11% 34% F1-F2 F2-F10 Floater

Credit quality

Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number)

Loan-to-Value brackets (per cent of lending) Yearly realised losses (running year)

0,0% 0,1% 0,2% 0,3% 0,4% 0,5% Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Private Commercial Subsidised 0,0% 0,2% 0,4% 0,6% 0,8% 1,0% 1,2% 1,4% 1,6% 1,8% 2,0% Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Private Commercial Subsidised 35% 36% 37% 37% 24% 25% 25% 26% 20% 20% 20% 21% 12% 12% 12% 11% 5% 5% 4% 3% 2% 2% 2% 1% 60% 65% 70% 75% 80% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 2013 Q1 2014 Q1 2015 Q1 2016 0%-20% 20%-40% 40%-60% 60%-80% 80%-100% >100% Gns. LTV (h.a.) 0 20 40 60 80 100 120 0 100 200 300 400 500 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Commercial properties Private properties # Commercial properties (rhs) # Private properties (rhs)

Improvement in credit policies

 Tightening of credit policies in 2008 and 2009 has led to a decreasing number of losses

 Full information on the customer for new lending from 2009 and better monitoring of the customer after the payment of the loan

 Many ”new” customers are already known to the group

 Impairment charges on new customers are expected to stay low

*Proportion of total lending is based on the last new loan (not a conversion) made by the customer

Realised losses (%) by year of disbursment and proportion of total portfolio after year of disbursment

0% 5% 10% 15% 20% 25% 30% 0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Realised losses Proportion of total lending (rhs)

Agenda



Financials Q1 2016



Capital and Rating



Credit quality and the housing market



Funding

Side

Funding profile

17

Bring down dependence of short term funding as a consequence of requirements from S&P and

the supervisory diamond

 Increased margins and quotation cuts on short term funded loans (F1 og F2)

Funding of short funding loans (F1 og F2) with RTL-F

 Bond has a legal maturity of three years, but BRFkredit will try to refinance on a yearly basis (F1) or every second year (F2)

 The RTL F improves S&P’s refinancing benchmarks for BRFkredit: Long term funding compared to total funding needs (SFR) and liquid assets compared to short term funding needs (BLAST)

Funding of short term funding loans (F1) with longer maturing bonds and derivatives – only for

joint funding loans

 Funding of F1-loans with bonds with a maturity of 3 to 5 years  Funding of F1-loans longer maturing EUR bonds

 Interest- and currency risk fully covered by derivatives

Ensure liquidity in issued bonds from BRFkredit

 Funding of bonds with a maturity of 2 to 10 years financed and refinanced in April  Funding of F1 and floaters spread out between the other auctions

Refinancing

Maturities per refinancing

dates + 2 years (RTL F) F1 F3 F5 Other

October 2016 11.0 5.2 5.8 5.6 0.6 1.8 3.0 January 2017 34.5 21.7 12.8 25.6 2.3 2.0 4.5 April 2017 12.6 4.9 7.7 7.3 3.6 1.1 0.6 Rest of 2017 22.1 21.8 0.3 0.0 2.1 3.4 16.6 2018 31.7 30.8 0.9 0.4 13.4 13.5 4.4 2019 - 2025 47.2 47.2 0.0 9.5 5.6 22.0 10.0 Planlagt refinansiering Refinancing profile Q1 2016 5% 7% 50% 38%

Funding with yearly refinancing

Funding with

refinancing within the next year

Refinancing after more than one year

Other funding types (Fixed rate and others) 24%

7%

30% 39%

Funding with yearly refinancing

Funding with

refinancing within the next year

Refinancing after more than one year

Other funding types (Fixed rate and others) Refinancing profile Q1 2014



BRFkredit is the only Danish mortgage institute to issue Danish covered bonds under the joint funding

agreement

 Funding of bank loans through bonds issued by mortgage institutes  Funding of subportfolios of loans

 Exempt from the strict micro match of loans and funding



The joint funding agreement allows BRFkredit to finance DKK mortgage loans by European market

standard non callable EUR covered bond bullet structures – by use of derivatives



Danish legal framework (L89): soft bullet



The EUR funding can be applied to existing and new loans

 But can only be applied to loans within the Joint Funding agreement



Derivatives used to hedge risks fully:

 In accordance with covered bond ISDA/CSA and S&P requirements  Unilateral CSA in favour of BRFkredit



On the back of an order book of around EUR 1.3 bn, with close to 60 investors

participating, the final spread was fixed at MS +20bps



The issue currently trades around MS + 14 bps area



BRFkredit is committed to building a curve in the euro covered bond market



Looking at the possibility of executing second benchmark deal later in 2016

Germany and Austria 63% Nordics 28%

Switzerland 3% France 2% Others 4%

Investor distribution* Geographical distribution* Transaction details

Issuer BRFkredit A/S

Issue Ratings (exp) AAA Issue Size EUR 500m

Status Danish Legislative Covered Bond Maturity Data 1 April 2021

Value Date 23 March 2016

Coupon 0.25 %

Re-offer Price/Spread 99.851 % / MS +20 bps

ISIN XS1385173734

*All figures are based on allocated amounts

Details on first EUR covered bond

Banks 45%

Funds and AM 30% Central Banks & OI 16%

Insurances &Pensions Funds 8% Others 1%

The Supervisory Diamond for mortgage institutes

Benchmark Q1 2016 Q3 2015

Concentration risk < 100 % 84.5% 77.8%

Increase in loans

- Owner-occupied home and

vacation homes < 15% 23.1% 25.4% - Residential rental property < 15% 8.0% 5.8% - Agriculture < 15% - - - Other sectors < 15% 6.6% 4.3%

Borrower's interest-rate risk

- Residential properties < 25% 27.8% 27.0%

Interest-only schemes

- Owner-occupied home and

vacation homes < 10% 10.0% 10.6%

Loans with frequent

interest-rate fixing

- Refinancing (annually)* < 25% 22.5% 24.0% - Refinancing (quarterly) < 12,5% 3.5% 3.9% *Last 12 months

 The Supervisory Diamond takes effect as of 2018 - yet not until 2020 in respect of interest-only and loans subject to refinancing

 BRFkredit expects to be compliant before the supervisory diamond takes effect take effect.

 Due to the expected lending growth in 2016 BRFkredit will not comply with the growth benchmark in the private segment. The expected growth is made by customers already known to the group. However, it is expected that BRFkredit will also comply with this benchmark in 2018

 BRFkredit has already implemented initiatives to comply with the supervisory diamond

 BRFkredit has raised prices on loans with floating interest rates and loans with interest only schemes, and

 BRFkredit has lowered the prices on loans with fixed interest rate and amortization

Contact information

Chief Executive Officer

Carsten Tirsbæk Madsen +45 45 26 28 71

[email protected]

Director, Fixed Income

André Hauberg +45 45 26 29 18 [email protected]

Group Treasurer

Anders Lund Hansen +45 45 26 22 80 [email protected]

Executive Vice President

Lars Waalen Sandberg +45 45 26 27 01

[email protected]

Head of Rating & IR

Christian Bech-Ravn +45 45 26 20 82 [email protected]

Agenda



Financials Q1 2016



Capital and Rating



Credit quality and the housing market



Funding

Portfolio composition

Q1 2016

Portfolio by Loan to Value (LTV)

Average LTV by property segment

Portfolio split by property category

Portfolio split by geography

Average LTV

by property segment Total Kap E Kap B

Owner occupied & vacation housing 67.3 67.1 71.0

Subsidised housing 46.4 45.4 33.4

Private rental housing 70.1 69.2 77.1

Office & business properties 63.2 61.7 70.7

Other properties 56.0 57.9 51.7 Lending, average LTV 63.3 63.2 71.7 Total lending (DKK bn) 254.6 220.3 21.7 37% 37% 31% 26% 27% 26% 21% 22% 21% 11% 11% 14% 3% 3% 6% 1% 1% 2% 0% 20% 40% 60% 80% 100% Total Cap E Cap B 0%-20% 20%-40% 40%-60% 60%-80% 80%-100% >100% 51% 55% 40% 18% 16% 2% 18% 16% 31% 12% 11% 25% 2% 2% 2% 0% 20% 40% 60% 80% 100% Total Cap E Cap B

Owner occupied & vacation housing Subsidised housing Private rental housing Office & business properties Other properties 46% 46% 41% 13% 13% 19% 7% 7% 5% 19% 19% 17% 15% 15% 18% 0% 20% 40% 60% 80% 100% Total Cap E Cap B

Greater Copenhagen area Remaining Sealand and Bornholm Northern Jutland Central Jutland

BRFkredit senior secured and senior debt

As of 31

_{March 2016}

Senior secured bonds and senior debt

 Covered bonds legislation (SDO) require on-going monitoring of Capital Centre E  BRFkredit provides additional security on a loan-by-loan basis

 Proceeds from the bond issues below is part of ensuring a sufficient over-collateralisation

ISIN Name Issuer Type Currency volume * Maturity

DK0009374522 Var. BRFkredit 322.JCBE 2016 Capital Centre E SSB DKK 1,000 01-04-2016

XS0882166282 2,5% BRFkredit EMTN Senior 2018 BRFkredit a/s Senior debt EUR 500 31-01-2018

Disclaimer

Disclaimer

The information in this material (hereinafter the “Information”) has been compiled by BRFkredit a/s (hereinafter “BRFkredit”) for informational purposes only. The Information is solely based on information accessible to the public. The Information is believed to be reliable. However, BRFkredit does not guarantee the timeliness, sequence, accuracy, correctness, adequacy, or completeness of the Information or opinions contained therein. The Information does not constitute an offer to sell or the solicitation of an offer to buy any securities mentioned in the Information. BRFkredit makes no representation and gives no advice concerning the appropriate legal treatment, regulatory treatment, accounting treatment or possible tax consequences in connection with an investment in securities mentioned in the Information. Before

proceeding with any such investment, investors should determine, without reliance upon BRFkredit, the economic risk and merits, as well as the legal, tax, regulatory and accounting characteristics and consequences, of such an investment and that investors are able to assume these risks. Investors should conduct their own analysis, using such assumptions as they deem appropriate in making an investment decision. BRFkredit does not accept any liability for any loss, howsoever arising, directly or indirectly from the issue of the Information or its contents including transactions made based on information therein. BRFkredit and/or other companies of the BRFkredit Group are financial institutions that trade in securities. Any company in the BRFkredit Group may buy, sell or hold positions in the securities mentioned in the Information, just as these companies may be involved in activities involving companies mentioned herein. The Information is being directed at you solely in your capacity as a relevant person for your information and may not be reproduced or redistributed or passed on to any other person or published in whole or in part, for any purpose, without the prior written consent of BRFkredit. Relevant persons are persons who have professional

experience in matters relating to investments in securities mentioned in the Information and to whom the Information may be lawfully communicated. The Information may not be acted on or relied on by persons who are not relevant persons.

For further information please visit

www.brf.dk/investors

General sources of information

Organisation Danish name Link

Association of Danish Mortgage Banks Realkreditrådet www.realkreditraadet.dk

NASDAQ OMX Copenhagen A/S Nasdaq OMX København www.nasdaqomxnordic.com

The Danish Central Bank Danmarks Nationalbank www.nationalbanken.dk

Statistics Denmark Danmarks Statistik www.dst.dk