Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Investor Presentation (June 2019)
42 slides from Pareto Bank Asa's investor presentation, Jun 5, 2019
Slide 1: Pareto Bank Company presentation
PARETO BANK Company presentation 5 June 2019
Slide 2: Important Information
IMPORTANT INFORMATION By reading this presentation (the “Presentation”), or attending any meeting or oral presentation held in relation thereto, you (the “Recipient”) agree to be bound by the following terms, conditions and limitations. The Presentation is for information purposes only and does not
Slide 3: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK OVERVIEW 2 BUSINESS AREAS 3 Q1-19 FINANCIALS 4 APPENDIX
Slide 4: Pareto Bank at a Glance
PARETO BANK AT A GLANCE Net profit (NOKm) & ROE Commenced operations in 2008. 351 331 313 247 Pure play corporate bank targeting real estate financing, corporate financing and financing of shipping & offshore. 154 166 110 68 16.6 % 15.6 % 14.8 % 15.9 % 16.0 % 15.0 % 12.7 % The specialised real estat
Slide 5: Company Highlights
COMPANY HIGHLIGHTS • Limited competition in targeted market niches and geographical areas. ATTRACTIVE I NICHE MARKETS • Strong margins within target segments. • Continued growth opportunities. • Solid market position built over the last 11 years – lending volume of NOK 12bn. STRONG FINANCIAL II PERF
Slide 6: Continued Profitable Growth
CONTINUED PROFITABLE GROWTH Background Lending volume (NOKm) & ROE • Attractive target market with high economic 11 653 12 065 activity – strong loan growth in the greater 9 448 Oslo region. 8 754 7 931 7 207 • Healthy pipeline in targeted market niches and 15.6 % 15.9 % 16.0 % 16.6 % PROFITABLE sol
Slide 7: 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 estate developer bank • Land acquisition financing Real for Eastern Norway • Property construction facilities 71 NOKm 50-100 estate and larger Norwegian • Commercial
Slide 8: Highly Experienced Management and Board
HIGHLY EXPERIENCED MANAGEMENT AND BOARD Stable management team since start-up Board of Directors Years with Tiril Haug Villum | CEO Pareto Bank Åsmund Skår | Chairman of the board • Previous experience as CFO of SEB • Master’s degree from the Norwegian School of Economics (NHH) Privatbanken and from
Slide 9: Creating Customer Value
CREATING CUSTOMER VALUE • Efficient credit process – short time to market. EFFICIENT AND I RELIABLE • Decision-making without unnecessary bureaucracy. • Flexible and solution oriented – focus on meeting customer needs. • We understand our customers' businesses and provide tailor-made solutions. HAND
Slide 10: Solid Foundation and Strong Performance
SOLID FOUNDATION AND STRONG PERFORMANCE Net interest income (NOKm) Cost/income ratio Loss ratio Profit after tax (NOKm) % of average net loans 351 588 331 554 313 507 247 416 26.9% 333 23.9% 251 425 21.6% 20.9% 21.3% 20.7% 0.40% 166 277 0.37% 154 0.11% 0.13% 0.04% 100 163 0.01% 2014 2015 2016 2017 2
Slide 11: Long Term Financial Ambitions
LONG TERM FINANCIAL AMBITIONS Cost effective and 15.0 % ROE commercially oriented. Proven credit quality. Lending growth within all GROWTH LENDING business areas. Significant 10 % annually short-term pipeline. Profitability comes first. Active capital management 16.2 % CET1 * and high focus on profi
Slide 12: Dividend Policy
DIVIDEND POLICY Dividend per Share and Payout Ratio Lending and Return on Equity (ROE) NOK NOKm 1.80 1.60 60.00% 14000 35.0 % 1.60 11 653 50.00% 12000 30.0 % 1.40 9 448 10000 8 754 25.0 % 1.20 1.00 40.00% 1.00 8000 20.0 % 30.3 % 0.70 30.00% 0.80 6000 15.9 % 16.0 % 15.0 % 15.0 % 23.7 % 0.60 20.00% 40
Slide 13: Large & Concentrated Corporate Loan Market
LARGE & CONCENTRATED CORPORATE LOAN MARKET The Norwegian corporate loan market is NOK ~1,300bn The corporate loan market is concentrated * Transportation/ tourism 399 408 3% 89.0 % 86.0 % Others 81.0 % 81.0 % 80.0 % Primary sector 9% 4% 72.0 % 68.0 % Service industry 4% Retail Commercial 5% property
Slide 14: Attractive Position in Underserved Region
ATTRACTIVE POSITION IN UNDERSERVED REGION Greater Oslo region dominated by large Nordic banks Main focus on the Oslo region, in addition to other large citities Capital region Large Nordic banks Customer Regional savings size banks Local savings banks Rural regions • Pareto Bank has established a st
Slide 15: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK OVERVIEW 2 BUSINESS AREAS 3 Q1-19 FINANCIALS 4 APPENDIX
Slide 16: Lending per Business Area
LENDING PER BUSINESS AREA NOKm gross exposure 6 519 5 750 5 811 5 847 5 014 4 004 3 762 3 271 3 157 3 247 3 149 3 165 3 219 3 072 2 915 933 945 967 795 706 Residential property Commercial property Corporate Shipping & Offshore Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 PAGE 16
Slide 17: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Number of customers per business area Estimated annualized margins including NOKm, estimated interest contribution including commissions, excluding font and back-end fees commissions, excluding font a
Slide 18: Real Estate (I) | Continued High Activity
REAL ESTATE (I) | CONTINUED HIGH ACTIVITY 67% 71 % Real estate credit exposure Σ = NOK 10,281m Key comments NOKm of gross exposure • Growth in credit exposure of NOK 430m in Q1-19. Land without houses 1 479 • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities.
Slide 19: Real Estate (II) | Residential Property
REAL ESTATE (II) | RESIDENTIAL PROPERTY 45 67% % Geographical residential property exposure (NOKm) Σ = NOK 6,519m Policy NOKm of gross exposure • Presale requirement: if the price of unsold units falls by 50 % compared to the price of presold units, the 9% remaining sales must still be sufficient to
Slide 20: Real Estate (III) | Commercial Property
REAL ESTATE (III) | COMMERCIAL PROPERTY 19 % 67% Geographical commercial property exposure (NOKm) Σ = NOK 2,717m Key comments NOKm of gross exposure • Average commitment size NOK 37m, average maturity 2 years, average loan to value (LTV) 70 %. 2% • Attractive model: Eiendomskreditt first priority li
Slide 21: Corporate (I) | Increasing Deal Flow
10% CORPORATE (I) | INCREASING DEAL FLOW 15% 9% Corporate financing exposure (NOKm) Σ = NOK 2,112m Key comments • Positioning Pareto Bank as a provider of tailor-made 1% financing solutions to medium-sized enterprises. 6% • Deal flow increasing as awareness of Pareto Bank as a financial solution pro
Slide 22: Corporate (II) | Receivables Financing
CORPORATE (II) | RECEIVABLES FINANCING • Pareto Bank has recently launched “Pareto Driftskreditt” - a credit facility EASY TO USE based on receivables as collateral. Online on-boarding • Pareto Driftskreditt is a first step to widen product offering to medium sized process. businesses within working
Slide 23: Shipping & Offshore | Cautious Approach
SHIPPING & OFFSHORE | CAUTIOUS APPROACH 5% 8% Status Shipping & Offshore credit exposure & loan to value Σ = NOK 736m LTV * Share • New team in place in 2018/2019 – increased sales NOKm effort. 27% Product 201 66% • 16 customers and a total of 24 vessels. • Largest exposure is USD 11.7m and average
Slide 24: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK OVERVIEW 2 BUSINESS AREAS 3 Q1-19 FINANCIALS 4 APPENDIX
Slide 25: Growing Income Statement
GROWING INCOME STATEMENT P&L (NOKm) Key comments Q1-19 Q1-18 2018 • Increased average lending volume throughout the Net Interest income 162.6 129.1 554.4 quarter, full effect of repricing in previous quarter Total other operating income 6.2 4.9 8.8 and fee income resulted in record net interest inco
Slide 26: Strengthened Net Interest Margin
STRENGTHENED NET INTEREST MARGIN Net interest margins Key comments Percent interest income including amortizations and fees over 3M Nibor; Cost of deposits of average volumes over 3M Nibor (average of end-of-month fixings) • Improved margins in 5.9 % residential and commercial 6.0 % 6.1 % 5.7 % 5.8
Slide 27: Change in Net Interest Income
CHANGE IN NET INTEREST INCOME Net interest income Changes in net interest income over 3M Nibor NOK 1,000 180 000 Q1-19 170 000 706 1 099 24 513 162 596 160 000 3 095 150 000 Q1-18 12 941 140 000 129 092 130 000 120 000 2 660 110 000 100 000 90 000 80 000 Lending & Provisions Lending & Invested Marke
Slide 28: Quality of Loan Portfolio
QUALITY OF LOAN PORTFOLIO Write-downs & losses according to IFRS 9 Write-downs, losses & reversals on loans & guarantees NOKm NOKm Write-downs IAS 39 IFRS 9 Write-downs & losses: 59.7 & losses: 60.7 25.0 24.9 9.4 Stage 3 5.8 8.5 Stage 2 4.4 4.0 2.3 1.0 1.0 Stage 1 -2.7 -5.9 28.9 27.3 31.12.2018 31.0
Slide 29: Funding
FUNDING Sources Deposits & senior debt NOKm, NOKm Percent customer deposits of net lending to customers Deposits 8 599 78% 75% 77% 77% 71% Senior debt 5 279 65% 63% T1 & T2 debt 470 Other debt 164 5 279 5 207 5 011 Equity capital 2 406 3 280 4 915 3 250 4 008 Key ratios Deposits with liquidity restr
Slide 30: Capital
CAPITAL Core equity tier 1 ratio (CET1 ratio) Key comments on capital CET1 • CET1 target increasing from 15.7 % in 2018 to 16.2 % 17.2 % 17.7 % Target 16.1 % 15.9 % 16.2 % as of the end of 2019. Pillar 2 • The bank's management buffer is 0.5 %. The bank will 3.2 % evaluate this level if there are ch
Slide 31: Proven Platform | Expansion to Continue
PROVEN PLATFORM | EXPANSION TO CONTINUE 2018-2019: Expansion Accelerating growth. Strengthens 2013-2017: Growth position in commercial real estate 2007-2012: Start-up Develops a strong market position within residential and corporate finance. Launches Focus on real estate and securities financing. R
Slide 32: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK OVERVIEW 2 BUSINESS AREAS 3 Q1-19 FINANCIALS 4 APPENDIX
Slide 33: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q1-19 Q4-18 Q3-18 Q2-18 Q1-18 Net Interest income 162.6 147.0 138.8 139.4 129.1 Total other operating income 6.2 -3.3 -1.4 8.6 4.9 Total net income 168.8 143.7 137.5 148.0 134.0 Total other operating expenses 35.0 28.2 31.1 29.6 31.0 Operating result before loss
Slide 34: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q1-19 Q4-18 Q3-18 Q2-18 Q1-18 Loans to credit institutions 951 320 1,295 1,136 405 Loans to customers 12,065 11,653 10,690 10,489 10,066 Bonds and other securities 3,797 3,537 4,220 4,031 2,844 Shareholdings in associated companies 37 37 35 35 37 Other assets 69 60
Slide 35: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 765 Floating rate retail Depositors (#) 1 774 620 588 2 272 Amount (NOKm) 3 013 5 559 Floating rate corporate 2 641 Retail Corporate 1 495 Savings with restrictions 1 285 1 032 Deposits by size Fixed rate 2 933 NOKm 765 > NOK 20m 2,067
Slide 36: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 101 72 150 1620 53 1237 1300 200 32 800 22 18 434 2019 2020 2021 2022 2023 0,25 0,5 1 2 3 5 Senior Call on Subordinated Capital Years to Maturity Source: Nordic Bond Pricing PAGE 36
Slide 37: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Key comments Market value of bonds and funds comprising suprplus liquidity • The bank’s liquidity is comprised of cash and highly liquid bonds • High share of government & PSEs to 5% reduce credit spread risk and increase short-term liquidity • Large share of covered
Slide 38: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 5 713 48% 46% 45% 45% 45% risk 6 067 44% 43% 42% 42% 42% 5 438 Low risk 6 517 1 185 Moderate risk 1 683 254 Some risk 57 12% 18 9% 10% High risk 7% 8% 152 40 Very high risk Q1-18 Q2-18 Q3-
Slide 39: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Distribution of commitments by size NOKm Percent of NOKm 948 < 10 6% 869 14 % 2% < 10 4 173 10 - 50 4 797 4% 10 - 50 3 945 50 - 100 50 - 100 32 % 3 979 100 - 150 15 % 712 150 - 200 100 - 150 2 120 200 - 250 864 > 250 150 - 200 651 27 % 452 200 - 250 2
Slide 40: Housing Prices Have Stabilized
HOUSING PRICES HAVE STABILIZED House prices (new), indexed House prices (secondary), indexed 140.0 140.0 130.0 130.0 120.0 120.0 110.0 110.0 100.0 100.0 90.0 90.0 80.0 80.0 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q1-15 Q1-16 Q1-17 Q1-18 Q
Slide 41: Largest Shareholders as of 3 June 2019
LARGEST SHAREHOLDERS AS OF 3 JUNE 2019 # Investor Type 03.06.2019 # of shares % total • As of 3 June 2019, the Company had 1 PARETO AS Comp. 9,675,873 16.51% 58,619,688 shares outstanding 2 3 PECUNIA FORVALTNING AS AF CAPITAL MANAGEMENT AS Comp. Comp. 5,900,000 5,861,968 10.06% 10.00% • One class of
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(Pareto bank