Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — FY2016 Earnings Presentation
52 slides from Jyske Bank A/s's earnings presentation, Feb 21, 2017
Slide 1: Jyske Bank 2016
Jyske Bank 2016 21 February 2017
Slide 2: Our targets
Our targets 2016 • Delivering an attractive long-term return on equity of 8-12% 10.3% • Volume growth of DKK 100bn in housing-related loans and DKK 20bn in property loans for DKK 80.0 corporate clients and DKK 12.4bn • Harvesting annual synergies of DKK 600m related to the Jyske Bank/BRFkredit merge
Slide 3: Jyske Bank in brief
Jyske Bank in brief • One of the four large financial institutions in Denmark and a Danish SIFI – 3 segments (Banking, Mortgage and Leasing) – Estimated market share of 10-11% – Danish play – Approx. 890,000 customers – Nationwide branch network comprised of 95 personal client branches, 30 corporate
Slide 4: Jyske Bank in brief
Jyske Bank in brief Jyske Bank Group key figures Profit Net Shareholders' ROE after tax, Loans and Total before tax, profit, equity at year- opening advances, Deposits, assets, Number of DKKm DKKm end, DKKm equity DKKbn DKKbn DKKbn FTEs 1997 584 443 4,772 11.5% 36.6 41.5 63.1 2,671 1998 710 511 5,17
Slide 5: 2016 highlights
2016 highlights • Danish economy – Economic upturn driven by private consumption supported by rising house prices, low interest rates and increases in real wages. However, exports remain soft and investments low – Negative interest rate environment is expected to continue • Jyske Bank delivers a net
Slide 6: Jyske Bank Group
Jyske Bank Group • Growth in mortgages and home loans continues at high pace • Stabilization of bank loans and bank deposits on the rise Financials • Positive development in AUM due to inflow of new funds and positive 2,500 DKKm returns 2,000 1,500 • Core income under pressure, strong finish due to
Slide 7: Strong finish lifts ROE into mid-target range
Strong finish lifts ROE into mid-target range Net profit • Delivering a net profit of DKK 1,202m in Q4 and DKK 3,116m in 3,500 21% 2016 DKKm 3,000 18% 2,500 15% • ROE of 16.0% p.a. in Q4 and 10.3% in 2016 2,000 12% 1,500 9% 1,000 6% 500 3% 0 0% 2012 2013 2014 2015 2016 Profit for the year ROE (after
Slide 8: Banking activities
Banking activities Financials • Stabilization of bank loans and bank deposits on the rise 1,800 • Positive development in AUM due to inflow of new funds and DKKm 1,600 1,400 positive returns 1,200 1,000 800 • Core income under pressure, strong finish due to Q4 seasonality 600 in net fee income 400 2
Slide 9: Mortgage activities
Mortgage activities Financials • Growth in all lending segments - most significant in Private 600 segment but also significant growth in Commercial segment DKKm 500 400 • Core income steadily growing as volume grows 300 • Core expenses as expected 200 100 • Overall, low level of impairment charges –
Slide 10: Leasing activities
Leasing activities Financials • Gradually increasing loan volumes 150 DKKm • Stable development in core income based on increased 100 business volume • Core expenses develop as expected 50 • Impairment charges at a low level - Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Core expenses Core income Core pr
Slide 11: Improved investment portfolio earnings
Improved investment portfolio earnings • Improved investment portfolio earnings driven by: Investment portfolio earnings, quarterly 400 DKKm – Value adjustments of DKK 50m related to fair value 300 assessment of Jyske Bank’s holdings in Nordjyske Bank 200 (2016: DKK -40m) – Positive value adjustment
Slide 12: 2017 focus areas
2017 focus areas • Growth strategy: – An expected growth of DKK 10-15bn in new home loans • Pricing: – Full effect of negative deposits rates on demand deposits from corporates – As per Feruary 1st 2017 the Group no longer waives or offers to discount fees on transfers of mortgages – Restructuring p
Slide 13: Adjusting to long-term capital targets
Adjusting to long-term capital targets Capital ratio • Capital ratio 18.3% and CET1 ratio 16.5% end of Q4 2016 vs. long-term 20 targets of 17.5% and 14% pct 15 10 • Gradual adjustment of the capital structure towards targets (3.5 pp.) – Process initiated in Q3 2015 5 – Majority of adjustment expecte
Slide 14: Growth strategy: mortgage lending and home loans
Growth strategy: mortgage lending and home loans 14
Slide 15: Strategic focus on mortgage lending is a success
Strategic focus on mortgage lending is a success Development in mortgage lending • The Group’s mortgage loan volumes have grown 180 by more than DKK 80bn since early 2014 DKKbn 160 140 – Primarily in Private segment due to the new home 120 loan products 100 80 – Commercial and Subsidised have grown
Slide 16: Increasing profitability
Increasing profitability 18 Fixed costs • Growth in the lending portfolio drives marginal operating 16 Average lending costs per loan costs down towards capital costs 14 12 10 • Growth in the portfolio creates larger issuances and lower 8 funding costs 6 – LCR compliant proportion of issuances has i
Slide 17: Why are we succesful in attracting customers?
Why are we succesful in attracting customers? Margins on home loans incl. quotation cut1) (LTV 0-80%) • A broad product range comprised of two different product types: With Fixed F5 F1 Floater2) instalments – Transparent traditional mortgage products in BRFkredit Jyske Bank 0.61 0.79 1.00 0.703) – C
Slide 18: Political agreement on mortgages – not a game changer
Political agreement on mortgages – not a game changer • Political agreement on home loans reached in January Focus on margins in the mortgage 2017: market is more intense than ever – Notice period for changes in fees and margins is prolonged to 6 months – No fees and 50% reduction in quotation cut i
Slide 19: Reducing risk and earnings volatility
Reducing risk and earnings volatility • At end of 2016 low risk mortgage loans make up 66% of the Losses and impairment charges 1985-2015 Group’s loan portfolio 3.0 – Historically, losses and impairment charges on mortgages are 2.5 Mortgage (PIT) Banks (PIT) significantly lower than on bank loans: 1
Slide 20: Digitalisation of the mortgage market
Digitalisation of the mortgage market • The mortgage market will become more digitalised over the coming years • The Group must develop a platform for the digital customers 1,778,532 properties • Within the last year the Group has launched new products, new funding sources, new web design, and a new
Slide 21: Capital
G JYSKE BANK Capital 21
Slide 22: Strong capital position
Strong capital position • Capital ratio 18.3% and CET1 ratio 16.5% end of 2016 compared to Capital ratio and CET1 17.0% and 16.1% end of 2015. Change in capital ratios due to: 20 – Strengthening of retained earnings 18 0.6 1.2 16 2.5 16.5 – Higher REA (primarily volume growth in property related loa
Slide 23: Credit Quality
G JYSKE BANK Credit Quality 23
Slide 24: Net reversals
Net reversals • Net reversals of DKK 149m under core profit – Impairment charges on agriculture of DKK 292m Loan impairment charges (under core profit) – Net reversals of DKK 293m in Q4 2016 alone 200 DKKm 100 • End of 2016 total balance of management’s estimate of DKK 471m, of 0 which DKK 235m rela
Slide 25: Limited exposure to dairy and pig farmers
Limited exposure to dairy and pig farmers • Exposure to dairy and pig farmers accounts for less than 1% of Loans, advances and Balance of loan Impairment ratio the Group’s loans and guarantees guarantees impairment charges DKKm/% 2016 2015 2016 2015 2016 2015 Dairy farmers 889 1,154 722 710 45% 38%
Slide 26: Appendices
Appendices: 1) Danish Economy 2) Jyske Bank Q4 2016 results 3) Credit Quality 4) Liquidity 5) Business segments 6) NPLs 26
Slide 27: Danish Economy
G JYSKE BANK Danish Economy 27
Slide 28: Danish economy – a slow recovery story
Danish economy – a slow recovery story • Overall the Danish financial sector’s operating environment is slowly improving • The improvement is also reflected in rating agencies’ outlook on the Danish banking sector: • In Jan 2016 S&P changed their Danish BICRA outlook from stable to positive • Moody’
Slide 29: 3 kinds of stimulus support demand
3 kinds of stimulus support demand Highest real wage growth since 2009 House prices recovering after burst in 2008/09 Compared to Sweden and Norway – Denmark has repriced Interest rates are at a historic low Demand has increased 29
Slide 30: Improved asset quality as defaults are close to normalization
Improved asset quality as defaults are close to normalization Unemployment is relatively low Forced house sales below 0.2% per year Business bankruptcies closer to normal Data for bankruptcies from late 2015 and into 2016 are distorted by a registration issue. Looking at active companies only gives
Slide 31: Turnaround and consolidation at the same time
Turnaround and consolidation at the same time Low interest rates and solid real wage growth make it possible for households to consume more and save up at the same time The private sector is still saving up …so household debt is declining …and household net assets are large Net Financial Wealth-to-I
Slide 32: Denmark is a AAA economy with strong structural financial features
Denmark is a AAA economy with strong structural financial features Current account surpluses since late 90s ..imply that foreign assets are increasing And public sector debt is low This is why Denmark is AAA 32
Slide 33: House prices have increased in all regions in 2016
House prices have increased in all regions in 2016 Large price increases in the Copenhagen area, especially on flats There is a risk that very low interest rates may overheat local parts of the market However, a new housing tax model is likely to have a dampening effect House prices are up in all re
Slide 34: Jyske Bank Q4 2016 results
G JYSKE BANK Jyske Bank Q4 2016 results 34
Slide 35: Q4 2016 results
Q4 2016 results • Net profit of DKK 1,202m (equal to after tax ROE of 16.0% p.a.) CORE PROFIT AND PROFIT FOR THE PERIOD Index Index DKKm 2016 2015 16/15 Q4 2016 Q3 2016 Q4/Q3 • Core income driven by Net interest income 5,748 5,886 98 1,457 1,393 105 – Higher NII due to one-off related to accrual of
Slide 36: Continuation of underlying NII trend
Continuation of underlying NII trend • Underlying trend continues in Q4: Net interest income – NII from home loans and mortgages as well as leasing activities compensate for 1,800 DKKm 1,600 the top-line pressure experienced in banking activities 1,400 • One-off of DKK 50m related to change in accru
Slide 37: A strong finish for net fee income
A strong finish for net fee income Net fee income • Net fee income in Q4 is at level with Q4 2015 and up by 38% compared to Q3 500 2016. The increase is driven by: DKKm – Banking activities: Seasonality in fees for safe custody services and 400 other investment related fees 300 – Mortgage activities
Slide 38: Value adjustments driven by rising long term interest rates
Value adjustments driven by rising long term interest rates • Value adjustments from clients’ transactions relating to interest-rate Value adjustments under core income hedging (swaps): 300 • DKKm 250 — Q4 2016: a positive effect of DKK 171m primarily driven by rising 200 long-term interest rates (Q
Slide 39: Core expenses in line with expectations
Core expenses in line with expectations Q4 2016 vs. Q3 2016: Development in core expenses 1,400 • Overall, development in line with expectations DKKm 1,350 1,300 • Core expenses in Q4 2016 up by DKK 60m compared to Q3 2016 1,250 primarily due to costs for MobilePay, other provisions etc. 1,200 1,150
Slide 40: Credit Quality
G JYSKE BANK Credit Quality 40
Slide 41: Bank loans, advances and guarantees
Bank loans, advances and guarantees • Portfolio composition end of 2016 Q1-Q4 2016 Balance of loan Loans, advances impairment Impairment – Corporates 63% and guarantees charges Losses charges – Private individuals 33% Public authorities 4% 0% 0% 0% – Public authorities 4% Agriculture, hunting, fores
Slide 42: Mortgages: The portfolio
Mortgages: The portfolio • 87% of lending to properties with housing purposes – No loans with swaps to co-operative housing Distribution of lending portfolio – No lending to agriculture and other primary production • Increasing share of retail lending – Primarily driven by joint funding of Jyske Ban
Slide 43: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1.8% 450 70 Private 400 1.6% 60 Commercial 350 1.4% Subsidised 50 1.2% 300 250 40 1.0% 0.8% 200 30 0.6% 150 20 0.4% 100 50 10 0.2% 0.0% 0 0 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q4 2013 Q
Slide 44: Liquidity
G JYSKE BANK Liquidity 44
Slide 45: Ample liquidity
Ample liquidity • Liquidity buffer DKK 77bn end of 2016 (DKK 73bn end of 2015) Group Liquidity buffer – 90% of the buffer - DKK 69bn - is eligible for repo transactions at 90 DKKbn central banks (the Danish Central Bank or the ECB) 80 70 60 50 40 30 20 10 0 31-12-13 31-12-14 31-12-15 30-12-16 Eligib
Slide 46: The Group is becoming a frequent EUR issuer
The Group is becoming a frequent EUR issuer • Ongoing access to a diversified European investor base Redemption profile safekeeps a low liquidity risk and funding profile 10 8 • Future issuance volumes of senior debt will depend on MREL requirement 6 DKKbn – From 2017 and onwards focus will most lik
Slide 47: Non-performing loans
G JYSKE BANK Non-performing loans 47
Slide 48: Non-performing loans
Non-performing loans • At group level NPLs amounted to 3.7% of loans and advances at the end of 2016 • Jyske Bank has been submitting information about non-performing loans (NPLs) since end of Q3 2014 • Jyske Bank has chosen to apply EBA’s technical standards as definition for NPLs • NPLs comprise e
Slide 49: NPLs – Jyske Bank Group
NPLs – Jyske Bank Group JYSKE BANK GROUP DKKm 2016 Q4 2016 Q3 2016 Q2 2016 Q1 2015 Q4 Carrying amount 438,592 431,025 422,592 424,423 410,030 Balance of loan impairments charges and provisions for guarantees 5,937 6,497 6,715 6,939 6,713 Balance of discounts for acquired assets 879 1,144 1,236 1,418
Slide 50: NPLs – Banking activities
NPLs – Banking activities BANKING, DKKm 2016 Q4 2016 Q3 2016 Q2 2016 Q1 2015 Q4 Carrying amount 160,159 155,758 153,600 166,513 160,563 Balance of loan impairments charges and provisions for guarantees 5,182 5,723 5,980 6,282 6,083 Balance of discounts for acquired assets 451 523 553 666 753 Gross c
Slide 51: NPLs – Mortgage activities
NPLs – Mortgage activities MORTGAGE, DKKm 2016 Q4 2016 Q3 2016 Q2 2016 Q1 2015 Q4 Carrying amount 278,433 275,267 268,992 257,910 249,467 Balance of loan impairments charges and provisions for guarantees 755 774 735 657 630 Balance of discounts for acquired assets 428 621 683 753 795 Gross carrying
Slide 52: General legal disclaimer
General legal disclaimer • This presentation and the information contained therein is furnished and has been prepared solely for information purposes by Jyske Bank A/S. It is furnished for your private information with the express understanding, which recipient acknowledges, that it is not an offer,