Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q1 2020 Earnings Presentation
42 slides from Pareto Bank Asa's earnings presentation, Apr 1, 2020
Slide 1: Pareto Bank Financial Results First Quarter 2020
PARETO BANK Financial Results First Quarter 2020
Slide 2: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 3: First Quarter 2020 Covid-19 Highlights
FIRST QUARTER 2020 COVID-19 HIGHLIGHTS Contingency plans were implemented on March 9, where most of the bank’s employees were 1 placed in home offices. Stable opeations with no major challenges. No known cases of Covid-19. A strong and supportive culture has ensured a motivated team that has perform
Slide 4: First Quarter 2020 Highlights
FIRST QUARTER 2020 HIGHLIGHTS 1 Profit after tax NOK 71.0m (NOK 99.7m). 2 Return on equity after tax 8.8 % (16.6%). Net interest income of NOK 183.9m (NOK 162.6m) due to lending growth, 3 stable lending interest income and fee income. Solid lending growth of NOK 342m (NOK 412m) to a total lending vo
Slide 5: Key Figures
KEY FIGURES Profit after tax Return on Equity CET1 ratio NOKm Excluding AT1 capital and interest Standard model 114.7 16.6% 18.5 % 99.7 15.0% 17.4 % 8.8% 15.9 % 71.0 Q1-19 Q4-19 Q1-20 Q1-19 Q4-19 Q1-20 31.03.2019 31.12.2019 31.03.2020 Net interest income (NOKm) Cost/income ratio Loss ratio NOKm Quar
Slide 6: Pareto Bank and Covid-19 (I)
PARETO BANK AND COVID-19 (I) Q1-2020 • Dialogue with all major customers since outbreak of the Covid-19 pandemic. • Performed an initial review of all commitments with focus on liquidity and short-term measures. • An increase in the numer of customers on watch list. • A good understanding of custome
Slide 7: Pareto Bank and Covid-19 (II)
PARETO BANK AND COVID-19 (II) RESIDENTIAL PROPERTY FINANCING • Review of portfolio with focus on unsold units and liquidity. • Comfortable level of pre-sale and exposure to unsold units. • One customer has been granted loan under the state-guaranteed SME loan program. • Demand for the SME loan progr
Slide 8: Flexibility from High Lending Book Turnover
FLEXIBILITY FROM HIGH LENDING BOOK TURNOVER LENDING GROWTH IN H1-2020 5,000 50% Strong pipeline combined with state- 4,500 47.0 % 4,344 45% 4,161 guaranteed SME loans to support existing 3,976 4,000 39.0 % 39.0 % 40% customers increased lending volume. 3,393 36.0 % 3,463 3,500 2,905 35.0 % 35% 3,000
Slide 9: Well-Positioned for Rough Waters
WELL-POSITONED FOR ROUGH WATERS HANDS-ON, RELIABLE AND EXPERIENCED WITH CLOSE CUSTOMER RELATIONSHIPS Review of all loans and close monitoring of credit risk. ROBUST CAPITAL POSITION TO ABSORB LOAN LOSSES Robust capital position with a leverage ratio of 16.5 %. Profitability with a ROE above 14 % for
Slide 10: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 11: Income Statement
INCOME STATEMENT P&L (NOKm) Q1-20 Q1-19 2019 Net interest income 183.9 162.6 680.5 Interest income increase due to lending growth of NOK 342 mill., healthy lending Net other operating income -16.9 6.2 11.8 margins and fee income. Total net income 167.1 168.8 692.3 Covid-19 has caused credit spreads
Slide 12: Development in Net Interest Margin
DEVELOPMENT IN NET INTEREST MARGIN Net interest margins Percent interest income including amortizations and fees over 3M Nibor; Cost of deposits of average volumes over average 3M Nibor in period 5.8 % 5.9 % 6.1 % 5.7 % 5.7 % 5.5 % 5.5 % 6.0 % 5.9 % 5.4 % 5.9 % 5.9 % 5.8 5.4 % 5.9 5.7 % 5.6 % 5.6 %
Slide 13: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME Net interest income Changes in net interest income (NOK 1,000) Q1-20 190,000 Q4-19 3.591 1.623 1.014 183,941 1,921 180,541 180,000 1.490 3,259 170,000 160,000 150,000 140,000 130,000 120,000 Lending Lending Fee Deposit Deposit Other volume rate income volume r
Slide 14: Covid-19 and IFRS 9
COVID-19 AND IFRS 9 MODEL ESTIMATES MADE UNDER GREAT UNCERTAINTY Impairments are determined based on Expected Credit Loss in accordance with IFRS 9. The consequences of Covid-19 are unknown and model estimates are therefore highly uncertain. MAIN COMPONENTS OF IFRS 9 MODEL • Classification of commit
Slide 15: Quality of Loan Portfolio
QUALITY OF LOAN PORTFOLIO Impairments and losses according to IFRS 9 Impairments and losses on loans & guarantees NOKm NOKm Impairments and losses • Model driven impairments of NOK 36.8m NOK 40.3m • Individual write-downs of NOK 3.5m • No write-offs in Q1-2020 98.4 40.3 23.7 7.7 Stage 3 58.1 Stage 2
Slide 16: Funding
FUNDING Sources Deposits & senior debt NOKm, NOKm Percent customer deposits of net lending to customers Deposits 7,622 77% 77% 74% Senior debt 5,472 71% 65% 65% 63% 62% T1 & T2 debt 470 56% 5,551 Other debt 1,075 5,207 5,604 5,624 4,915 5,279 5,472 Equity capital 3,325 5,011 4,008 Key ratios Deposit
Slide 17: Reduced Minimum CET1 Requirements
REDUCED MINIMUM CET1 REQUIREMENTS COUNTERCYCLICAL BUFFER LOWERED 15.7 % The Department of Finance lowered the countercyclical 14.2% capital buffer (CCyB) from 2.5 % to 1.0 % to support banks’ ability to give loans to customers affected by Pillar 2, 3.2 % Covid-19. Pillar 2, 3.2 % Countercyclical Buf
Slide 18: Capital
CAPITAL Core equity tier 1 ratio (CET1 ratio) Key comments 17.7 % 17.4 % * 18.5 % CET1 Min. • Profitability, capital reserves and a strong leverage 16.1 % Requirement ratio make the bank robust against potential losses 14.2 % and provide the capacity to meet customers’ needs Pillar 2 in a challengin
Slide 19: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 20: A Niche Player Financing Medium Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM SIZED ENTERPRISES BUSINESS AREAS FOCUS CREDITS / CUSTOMERS EXPOSURE SWEET SPOT The specialized real Land acquisition financing estate developer bank Property construction Real for Eastern Norway facilities 72% NOKm 50-100 estate and larger Norwegian Commercial propert
Slide 21: Exposure per Business Area
EXPOSURE PER BUSINESS AREA NOKm gross exposure 7,178 7,007 6,834 6,644 6,519 5,044 4,880 4,725 4,320 3,762 2,852 2,463 2,132 2,260 2,249 834 782 889 736 699 Residential property Commercial property Corporate Shipping Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 PAGE 21
Slide 22: Residential Property | Credit Update
RESIDENTIAL PROPERTY | CREDIT UPDATE 67% 43% Real estate credit exposure Σ = NOK 11,903m Key comments residential property NOKm of gross exposure • 169 customers with average commitment size NOK 43m. • 34 % exposure in Oslo, 54 % exposure in Viken. Land without houses 1,339 • Review of portfolio wit
Slide 23: Commercial Property | Credit Update
COMMERCIAL PROPERTY | CREDIT UPDATE 67% 29% Real estate collateral exposure Σ = NOK 11,903m Key comments commercial property NOKm of gross exposure • 125 customers and average commitment size NOK 38m. Land without houses 44 customers 1,339 • 41 % of the commercial property exposure in Oslo and 11 %
Slide 24: Corporate | Credit Update
CORPORATE | CREDIT UPDATE 17% 67% Corporate financing exposure (NOKm) Σ = NOK 2,852m Key comments NOKm of gross exposure • 107 customers, average commitment size NOK 27m, Investment loans largest exposure NOK 185m. 5% 2% Working capital • Exposure diversified on products and sectors. 18% facilities
Slide 25: Shipping | Credit Update
5% 8% SHIPPING | CREDIT UPDATE Key comments Shipping credit exposure & loan to value Σ = NOK 889m LTV * Share NOKm • 16 customers and 25 vessels. • Largest exposure USD 19.4m and average commitment Industrial 226 56% 25% size USD 5.0m. • Only shipping, no offshore exposure. Chemical 194 47% 22% • Av
Slide 26: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 27: Market Outlook and Activity
MARKET OUTLOOK AND ACTIVITY 67% IN GENERAL RESIDENTIAL PROPERTY DEVELOPMENT FINANCING • Low visibility and high uncertainty regarding the consequences of • The largest threat within development financing is a complete lack of Covid-19 and the economic development. sales of newbuilds. Projects in pro
Slide 28: Maintaining Long-Term Ambitions
MAINTAINING LONG-TERM AMBITIONS LONG-TERM OUTLOOK FOR 2020 AMBITION Long-term ambition set aside in 2020. ROE will be affected by higher RETRUN ON EQUITY impairments and loan losses due to Covid-19. The net interest rate 15.0 % margin is under pressure. Continued tight cost control and good operatio
Slide 29: Appendix
(Pareto bank
Slide 30: Largest Shareholders as of April 2020
LARGEST SHAREHOLDERS AS OF 2 APRIL 2020 # Investor 02 April 2020 • The Company has 69,851,730 # of shares % total shares outstanding after the private 1 Pareto AS 13,423,610 19.22 % placement. One class of shares 2 AF Capital Management AS 6,943,049 9.94 % 3 Hjellegjerde Invest AS 2,800,000 4.01 % w
Slide 31: The Share
THE SHARE Earnings per share Book equity per share NOK NOK 1.67 1.61 44.74 43.77 0.97 41.04 Q1-19 Q4-19 Q1-20 Q1-19 Q4-19 Q1-20 Price / Earnings Price / Book NOK, Share price 28.4 NOK, Share price 28.4 7.29x 5.99x 5.39x 0.88x 0.88x 0.63x Q1-19 Q4-19 Q1-20 Q1-19 Q4-19 Q1-20 PAGE 31
Slide 32: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q1-20 Q4-19 Q3-19 Q2-19 Q1-19 Net interest income 183.9 180.5 173.0 164.4 162.6 Net other operating income -16.9 7.6 -2.9 0.9 6.2 Total net income 167.1 188.2 170.1 165.2 168.8 Total operating expenses 33.1 36.1 32.2 34.7 35.0 Operating profit before impairments
Slide 33: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q1-20 Q4-19 Q3-19 Q2-19 Q1-19 Loans to credit institutions 1,315 924 1,004 1,785 951 Loans to customers 13,503 13,161 13,191 12,539 12,065 Bonds and other securities 3,053 3,320 3,467 3,998 3,797 Shareholdings in associated companies 23 22 35 37 37 Other assets 71 8
Slide 34: Real Estate | Exposure
REAL ESTATE | EXPOSURE 67% Geographical residential property exposure (NOKm) Σ = NOK 8,641m Geographical commercial property exposure (NOKm) Σ = NOK 3,262m NOKm of gross exposure 4% 3% 6% 5% 7% Oslo Viken 11% 41% Viken Oslo Vestfold & Telemark Sweden & Other 34% 54% Rogaland Vestfold & Telemark 12%
Slide 35: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding NOKm, estimated interest contribution including commissions, excluding front front and back-end fees over 3M Nibor or similar rate and bac
Slide 36: Number of Customers
NUMBER OF CUSTOMERS Number of customers per business area Real Estate 294 Corporate 107 Securities 74 Retail 26 (Mortgages) Shipping 16 PAGE 36
Slide 37: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 588 Floating rate retail Depositors (#) 2,919 2,285 986 2,641 Amount (NOKm) 2,615 4,984 Floating rate corporate 551 Retail Corporate 1,285 Savings with restrictions 2,672 2,933 Deposits by size Fixed rate 2,702 NOKm 1,124 > NOK 20m 1.9
Slide 38: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 224 201 150 169 120 122 1,800 88 1,400 74 1,150 200 701 400 2020 2021 2022 2023 2024 0,25 0,5 1 2 3 5 Senior Call on Subordinated Capital Years to Maturity Source: Nordic Bond Pricing PAGE 38
Slide 39: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Key comments Market value of bonds and funds comprising surplus liquidity • The bank’s liquidity is comprised of cash 2% and highly liquid bonds • High share of government & PSEs to reduce credit spread risk and increase short-term liquidity • Large share of covered
Slide 40: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 6,067 55% risk 6,619 51% 49% 49% 6,517 45% Low risk 8,060 42% 40% 40% 38% 36% 1,683 Moderate risk 1,659 57 Some risk 102 152 12% 11% High risk 9% 10% 81 7% 4 Very high risk Q1-19 Q2-19 Q3-
Slide 41: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Distribution of commitments by size NOKm Percent of NOKm 869 < 10 676 4% 15% 4,797 < 10 10 - 50 3% 5,238 10 - 50 3,979 32% 50 - 100 50 - 100 8% 4,816 100 - 150 2,120 150 - 200 100 - 150 9% 1,472 200 - 250 651 > 250 150 - 200 1,326 29% 224 200 - 250 44
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( Pareto bank