Jyske Bank A/S · OMXCOP:JYSK

Jyske Bank A/S — FY2017 Earnings Presentation

50 slides from Jyske Bank A/S's earnings presentation, Feb 20, 2018

  1. Slide 1: Jyske Bank 2017

    Jyske Bank 2017 20 February 2018

  2. Slide 2: Our targets

    Our targets Q1-Q4 2017 • Delivering an attractive long-term return on equity of 8-12% 9.7% • Volume growth DKK 96.0bn • DKK 100bn in housing-related loans • DKK 20bn in property loans for corporate clients DKK 19.3bn • Maintaining a strong capital position 19.8% and – Long-term targets for capital r

  3. Slide 3: Highlights 2017

    Highlights 2017 Organication New client-focused organisation Jyske Bank has strong focus on new growth area Innovation + Thousands of clients have Apple Pay after one week + Jyske Bank thinks the dankort will be a thing of the past + Jyske Visa Mobil for Apple Pay Client satisfaction Teonk Penge Anb

  4. Slide 4: 2017 highlights

    2017 highlights • Net profit of DKK 3,143m, equal to ROE 9.7% CORE PROFIT AND PROFIT FOR THE PERIOD DKKm • Business volumes: Index Index 2017 2016 17/16 Q4 2017 Q3 2017 Q4/Q3 – Growth in all segments except bank loans for private Net interest income 5,674 5,748 99 1,537 1,381 111 individuals Net fee

  5. Slide 5: ROE in line with target and starting to show stability

    ROE in line with target and starting to show stability Net profit • Delivering a net profit of DKK 3,143m and ROE of 9.7% in 2017 and thus within target range of 8-12% 3,500 16% DKKm 3,000 14% 2,500 12% • Quarterly returns are becoming less volatile 10% 2,000 8% 1,500 • A decrease of 0.4 percentage

  6. Slide 6: Outlook 2018: Setting new targets

    Outlook 2018: Setting new targets

  7. Slide 7: Setting new targets

    Setting new targets Return on Equity Delivering an attractive long-term return on equity of 8-12% Volume growth 2018-2020 Total loan portfolio of DKK 350bn in Jyske Realkredit +DKK 20-25bn in housing related loans FTEs +DKK 15-20bn in property loans for corporate clients Number of FTE back to 2013-l

  8. Slide 8: Strategy – focus areas

    Strategy – focus areas Home loans: New area of growth: One brand, one product Trading/investment/ range and one process wealth management 8

  9. Slide 9: New area of growth: Trading/investment/wealth management

    New area of growth: Trading/investment/wealth management Our set-up • Through Jyske Markets, we service institutional clients with a broad range products and services within FICC (fixed income, interest rates, currencies and commodities) • Asset management via Jyske Capital, where portfolio managers

  10. Slide 10: Strategic themes

    Strategic themes Learn more about Jyske Bank’s view of strategic themes: jyskebank.dk/2018 10

  11. Slide 11: Financials 2017

    G JYSKE BANK Financials 2017

  12. Slide 12: Jyske Bank Group

    Jyske Bank Group • Continued growth in mortgages and home loans Financials • Bank loans increase by 8% and bank deposits by 4% 2,500 DKKm • Increase in AUM of 14% 2,000 1,500 • Core income increases due to Q4 seasonality in investment related fee income 1,000 • Core expenses in Q4 up due to IT-relat

  13. Slide 13: NII slightly down

    NII slightly down • NII in 2017 at level with 2016 – 3% down adjusted for approx. DKK 100m in one-off income re. end of eased terms of interest 2017 vs. 2016: Development in NII (Group) – NII supported by 5,900 DKKm 5,800 • Volume growth in all 3 segments 5,700 • Introduction of negative interest ra

  14. Slide 14: Net fee income continues at high level

    Net fee income continues at high level Net fee income • Net fee income in 2017 of DKK 1,957m 700 – Adjusted for Jyske Invest Fund Management and change in DKKm 600 recognition of DLR fees, net fee income is up by 21% 500 – Q4 seasonality increased by positive performance in financial 400 markets res

  15. Slide 15: Moderate value adjustments

    Moderate value adjustments Value adjustments under core income • Value adjustments from clients’ transactions relating to interest-rate hedging (swaps): 350 DKKm 300 — Q4 2017: a positive effect of DKK 10m primarily driven by minor 250 increase in long-term interest rates (2017: DKK 134m and 2016: 2

  16. Slide 16: Stable trend in core expenses

    Stable trend in core expenses 2017 vs. 2016: Development in core expenses • 2017 vs. 2016: 5,500 – Stable core expenses excl. one-offs 5,400 5,300 – Inflation in employee expenses off-set by general spending 5,200 5,100 DKKm restraint on other administration expenses 5,000 4,900 4,800 4,700 4,600 20

  17. Slide 17: Net reversals and improved credit quality

    Net reversals and improved credit quality Loan impairment charges (under core profit) • Net reversals of DKK 453m under core profit 0 DKKm -50 • Total balance of management’s estimate of DKK 466m end of 2017, of which DKK 75m relate to agriculture, compared to DKK 471m and DKK -100 235m respectively

  18. Slide 18: Investment portfolio earnings

    Investment portfolio earnings Investment portfolio earnings, quarterly • The effect of negative value adjustments caused “drift to par” 400 becomes more evident on investment portfolio earnings as credit DKKm 350 spreads stabilise 300 250 • Nordjyske Bank share priced at 121.5 end of Q4 2017 vs. 120

  19. Slide 19: Capital

    G JYSKE BANK Capital

  20. Slide 20: Aligned with long-term capital targets

    Aligned with long-term capital targets Capital ratios • Capital ratio 19.8% and CET1 ratio 16.4% end of 2017 vs. long-term targets of 17.5% and 14% 25 pct – Capital structure aligned with long-term targets 20 15 • Defending and securing a stable S&P rating of A- remains a key priority – S&P requirem

  21. Slide 21: Capital structure, targets and requirements

    Capital structure, targets and requirements • Long-term capital targets based on fully implemented Basel IV capital Capital ratio and CET1 ratio requirements: 20 Percent 1.8 – Capital ratio 17.5% and CET1 ratio 14% 18 1.6 16 – Capital ratios to remain above long-term targets given upcoming 14 0.5 1.

  22. Slide 22: Appendices

    Appendices: 1) Jyske Bank in brief and business segments 2) Asset Quality 3) Liquidity 4) Danish Economy Q4 5) NPLs

  23. Slide 23: 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 12% – Danish play – Approx. 810,000 customers – Nationwide branch network comprised of 95 personal client branches, 29 corporate br

  24. Slide 24: Jyske Bank in brief

    Jyske Bank in brief Jyske Bank Group key figures Profit Shareholders' ROE after Loans and Total before Net profit, equity at year- tax, average advances, Deposits, assets, Number of tax, 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

  25. Slide 25: Banking activities

    Banking activities • Increasing volume in bank loans and deposits Financials • Positive development in AUM 1,800 DKKm 1,600 • Core income close to DKK 1,500m – partly helped by one-off interest rate 1,400 1,200 income of approx. DKK 100m – but primarily due to a surge in fee income 1,000 driven by Q

  26. Slide 26: Mortgage activities

    Mortgage activities • Growth in Private and Commercial segment • Volume growth supports stability in core income – one-off NII and other NII drive up Q4 2017. Financials • Minor decline in avg. administrative margin as private individuals move into 600 DKKm 500 products with lower margins, e.g. fixe

  27. Slide 27: Leasing activities

    Leasing activities • Loan volumes continue to increase Financials 150 DKKm 130 • Core income pressured by operating leases as impairments 110 90 are incurred due to expected changes in tax rules and 70 lower residual market values on certain models 50 30 10 • Core expenses develop as expected -10 Q4

  28. Slide 28: Credit Quality

    G JYSKE BANK Credit Quality

  29. Slide 29: Mortgages: The portfolio

    Mortgages: The portfolio • 87% of lending to properties with housing purposes Distribution of lending portfolio – No loans with swaps to co-operative housing – No lending to agriculture and other primary production • Increasing share of retail lending – Primarily driven by joint funding of Jyske Ban

  30. Slide 30: Mortgages: Improved credit quality

    Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1.8% 500 50 Private 1.6% 450 45 Commercial 400 40 1.4% Subsidised 350 35 1.2% 300 30 1.0% 250 25 0.8% 200 20 0.6% 150 15 0.4% 100 10 50 5 0.2% 0 0 0.0% Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2

  31. Slide 31: House prices continue up in all regions

    House prices continue up in all regions • Lately, the Zealand Region posts the largest prices increase • There is a risk that very low interest rates may overheat local parts of the market. Especially the Copenhagen market • However, new regulation and a new housing tax model will have a dampening e

  32. Slide 32: Bank loans: the portfolio

    Bank loans: the portfolio • Portfolio composition end of Q4 2017: Balance of loan impairment Impairment – Corporates take up larger proportion, 58% vs. 53% Loans, advances and guarantees charges Losses charges Q4 2017 Q4 2016 Q4 2017 Q4 2017 Q4 2017 end of Q4 2016 as volume grows – Private individua

  33. Slide 33: Limited exposure to dairy and pig farmers

    Limited exposure to dairy and pig farmers • Decreasing impairment ratios for both dairy and pig farmers, Commodity prices 37% and 22% respectively end of Q4 2017 versus 45% and 26% end of Q4 2016 3.5 13 12.5 3.25 12 • Commodity price development: 3 11.5 DKK/kg – Pork: Prices reached a new high of 11

  34. Slide 34: Liquidity

    G JYSKE BANK Liquidity

  35. Slide 35: The Group has ample liquidity

    The Group has ample liquidity Group liquidity buffer • Liquidity buffer DKK 73bn end of 2017 (DKK 77bn end of 2016) 90 DKKbn 80 – 89% of the buffer - DKK 65bn - is eligible for repo transactions at 70 central banks (Nationalbanken or ECB) 60 – The increase in ultra-liquid assets from 2016 to 2017 is

  36. Slide 36: A frequent EUR issuer

    A frequent EUR issuer Redemption and call date profile (DKKbn) 8 Ongoing access to a diversified European investor base helps Jyske Bank maintain a prudent risk – and funding – profile 7 6 Since 2012 more than 500 different investors have bought into the 5 Group’s senior unsecured debt (senior prefe

  37. Slide 37: Danish Economy Q4

    G JYSKE BANK Danish Economy Q4

  38. Slide 38: Headlines on the Danish Economy

    Headlines on the Danish Economy • We expect the upturn in the Danish economy to continue in 2018 and 2019 • Low interest rates, increasing house prices and export market growth stimulates demand. Export competitiveness looks healthy • Gradually the pace of the upturn is likely to decline do to labou

  39. Slide 39: Danish economy – an upturn story

    Danish economy – an upturn story • Overall the Danish financial sector’s operating environment is still improving The upturn will continue The private sector is driving the 6% increase in employment 39

  40. Slide 40: 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 saving up …so household debt has declined …and household net assets are large Net assets incl. housing 800

  41. Slide 41: 3 kinds of stimulus support demand

    3 kinds of stimulus support demand House prices recovering after burst in 08/09 Spill-over from European recovery Interest rates are at a historic low Demand has increased Note: GDP declined in Q3, but is expected to rebound in Q4. Danish data are very volatile. Car sales plunged in Q3 before a cut

  42. Slide 42: Improved asset quality – as defaults have normalized

    Improved asset quality – as defaults have normalized Unemployment is relatively low Forced house sales well below 500 properties per Business bankruptcies at neutral level month (less than 0.2% per year) 42

  43. Slide 43: 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 43

  44. Slide 44: Jyske Bank forecasts

    Jyske Bank forecasts The Danish economy 2015-2019 2016 Real growth (%) DKKbn 2015 2016 2017 2018 2019 Household spending 980 1.6 2.0 1.8 1.7 1.7 Public spending 525 1.1 0.3 0.9 0.5 0.8 Fixed gross investment 422 3.1 6.0 2.0 4.9 3.6 Inventory investment* 9 -0.3 0.0 -0.1 0.0 0.0 Exports 1107 2.3 2.8 3

  45. Slide 45: Non-performing loans

    G JYSKE BANK Non-performing loans

  46. Slide 46: Non-performing loans

    Non-performing loans • At group level NPLs amounted to 2.9% of loans and advances at the end of Q4 2017 • 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 compris

  47. Slide 47: NPLs – Jyske Bank Group

    NPLs – Jyske Bank Group JYSKE BANK GROUP DKKm 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2016 Q4 Carrying amount 466.402 459.709 453.526 441.941 438.592 Balance of loan impairments charges and provisions for guarantees 5.157 5.576 5.710 5.790 5.937 Balance of discounts for acquired assets 499 582 714 782 879 G

  48. Slide 48: NPLs – Banking activities

    NPLs – Banking activities BANKING, DKKm 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2016 Q4 Carrying amount 158.273 155.435 156.366 153.146 160.159 Balance of loan impairments charges and provisions for guarantees 4.246 4.734 4.858 5.007 5.182 Balance of discounts for acquired assets 191 242 325 383 451 Gross c

  49. Slide 49: NPLs – Mortgage activities

    NPLs – Mortgage activities MORTGAGE, DKKm 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2016 Q4 Carrying amount 308.129 304.274 297.160 288.794 278.433 Balance of loan impairments charges and provisions for guarantees 911 842 851 783 755 Balance of discounts for acquired assets 308 340 389 399 428 Gross carrying

  50. Slide 50: 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,

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