Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q3 2018 Earnings Presentation
41 slides from Jyske Bank A/S's earnings presentation, Oct 30, 2018
Slide 1: Jyske Bank Q3 2018
Jyske Bank Q3 2018 30 October 2018
Slide 2: Our targets
Our targets Q3 2018 Return on Equity • Delivering an attractive long-term return on equity of 8-12% ROE 6.9% Volume growth 2018-2020 • Total loan portfolio of DKK 350bn in Jyske Realkredit DKK 319bn Capital position 20.3% and • Long-term targets for capital ratio 17.5% and CET1 ratio 14% post-Basel
Slide 3: Q3 2018 highlights
Q3 2018 highlights CORE PROFIT AND PROFIT FOR THE PERIOD • Net profit of DKK 578m, equal to ROE 6.9% p.a. in Q3 2018 DKKm Index Index Q3 2018 Q3 2017 18/17 Q3 2018 Q2 2018 Q3/Q2 • Business volumes: ― Loan growth in all segments compared to both Q2 2018 Net interest income 1,407 1,381 102 1,407 1,439
Slide 4: ROE down compared to previous quarters
ROE down compared to previous quarters Net profit • Net profit of DKK 578m and ROE of 6.9% p.a. in Q3 2018 1,400 21% DKKm 1,200 18% 1,000 15% 800 12% 600 9% 400 6% 200 3% 0 0% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 Net Profit ROE (afte
Slide 5: Underlying development in NII stable
Underlying development in NII stable … … but dampened by decline in NII from strategic balance and risk management and other NII from mortgage activities Q3 2018 vs. Q2 2018: Development in NII 1,500 DKKm • In Q3 2018 NII is: 1,450 • Supported by: • Volume growth in all 3 segments 1,400 • 1 day more
Slide 6: Net fee income boosted by refinancing activity
Net fee income boosted by refinancing activity Fee income split by type 800 800 DKKm • Net fee income in Q3 2018 of DKK 443m – up by 2% relative to Q3 2017 and 11% relative to Q2 2018 600 600 400 400 • Securities trading etc. is “a mixed bag of goods”: • Net fee income from mortgage activities rebou
Slide 7: Value adjustments positively affected by one-off
Value adjustments positively affected by one-off Value adjustments under core income 150 DKKm • Q3 2018 has been characterized by relatively stable credit spreads for Danish mortgage bonds and marginal increases in interest rates 100 50 • Positive effect of DKK 79bm from one-off re. early redemption
Slide 8: Core expenses as expected given lower FTE
Core expenses as expected given lower FTE Q3 2018 vs. Q2 2018 Development in core expenses 1,300 DKKm • Core expenses in Q3 2018 at DKK 1,249m - up by DKK 106m compared 1,250 to Q2 2018 due to: 1,200 • Reversal of provision re. law suit in Gibraltar in Q2 2018 1,150 • Increase in employee expenses d
Slide 9: Impairment charges driven by corporate clients
Impairment charges driven by corporate clients Loan impairment charges (under core profit) • Impairment charges of DKK 104m under core profit: 500 DKKm 400 ― Increase in impairment charges primarily related to 300 corporate clients 200 100 0 • Total balance of management’s estimate of DKK 420m end o
Slide 10: Limited exposure to agriculture
Limited exposure to agriculture • Limited exposure as agriculture excl. fishing accounts for Dairy farmers, plant farming and pig farming (DKKm/%) approx. 1% of the Group’s loans and guarantees. Loans, advances and Balance of impairment Impairment ratio guarantees charges Q3 2018 Q4 2017 Q3 2018 Q4
Slide 11: Mortgages: The portfolio
Mortgages: The portfolio Distribution of lending portfolio • 87% of lending to properties with housing purposes 1% 1% ― No loans with swaps to co-operative housing Owner-occupied (51%) ― No lending to agriculture and other primary 11% production Vacation homes (3%) Cooperative (5%) 16% Private renta
Slide 12: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 500 50 1.8% Private 1.6% Commercial 400 40 1.4% Subsidised 1.2% 300 30 1.0% 0.8% 200 20 0.6% 100 10 0.4% 0.2% 0 0 0.0% Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2012 Q3 2013 Q3 2
Slide 13: Bank loans: the portfolio
Bank loans: the portfolio • Portfolio composition end of Q3 2018: Loans and guarantees by sector % ― Corporates take up larger proportion, 62% vs. 58% Loans, advances and Balance of loan Impairment end of 2017 as volume grows guarantees impairment charges Losses charges ― Private individuals at 32%
Slide 14: Investment portfolio earnings into negative territory
Investment portfolio earnings into negative territory Investment portfolio earnings, quarterly • The investment portfolio earnings continue to generate modest returns 500 DKKm 400 • Increase in investment portfolio earnings excl. Nordjyske Bank 300 from Q2 2018 to Q3 2018 200 • In June 2018, Jyske B
Slide 15: Accounting for activities involving financial instruments
Accounting for activities involving financial instruments -> Q4 2017 Strategic balance & risk Investment portfolio Jyske Markets mgmt Financial accounts Core income Investment portfolio Core income earnings Solvency Trading book Trading book Trading book Valuation Fair value/Amortized cost Fair valu
Slide 16: Capital and Liquidity
CS JYSKE BANK Capital and Liquidity
Slide 17: Strong capital position
Strong capital position Capital ratios • Capital ratio 20.3% and CET1 ratio 16.6% end of Q3 2018 vs. long-term 25 targets of 17.5% and 14% post-Basel IV implementation pct – Capital structure aligned with long-term targets 20 – Jyske Bank will aim to distribute excess capital as dividends 15 and/or
Slide 18: Future regulation
Future regulation • Long-term capital targets based on fully implemented Basel IV capital requirements: 20 Percent 2.0 – Capital ratio 17.5% and CET1 ratio 14% 18 1.7 16 – Capital ratios to remain above long-term targets given 1.0 upcoming capital requirements 14 1.5 12 2.5 10 1.0 • Basel IV 2.3 Pil
Slide 19: Liquidity is still ample
Liquidity is still ample Group liquidity buffer • Liquidity buffer DKK 69bn end of Q3 2018 (DKK 73bn end of 2017) 80 DKKbn ― 83% of the buffer - DKK 57bn - is eligible for repo 70 11% transactions at central banks (Nationalbanken or ECB) 11% 17% 60 ― Cash placements are categorized as intra-day elig
Slide 20: The Group has become a frequent EUR issuer
The Group has become a frequent EUR issuer Jyske Bank Jyske Bank redemption and call date profile DKKbn 7 • Short term ongoing activities in French CP 6 • From 2011 and year to date the Group has issued one senior unsecured (Senior Preferred (”SP”)) EUR public benchmark a 5 year (focus on 3-5 year m
Slide 21: MREL overview
MREL overview 34% MREL requirement 32% greater of Total DKK 54.8bn (30.0%) 30% MREL Surplus 28% DKK4.4bn Total DKK 50.4bn (27.6%) Total DKK 47.8bn 26% 9.0% 3.5% (DKK 6.4bn) 24% % of Group REA end of Q3 2018 (DKK 16.5bn) Mortgage 22% activities 5.9% 0.7% 20% (DKK 10.9bn) 18% 16% Total DKK 27.8bn (15.
Slide 22: Appendices
Appendices: 1) Jyske Bank in brief and business segments 2) Danish Economy Q3 2018
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. 865,000 customers • Nationwide branch network comprised of 92 personal client branches, 32 corporate br
Slide 24: Jyske Bank in brief: Group key figures
Jyske Bank in brief Jyske Bank Group key figures Shareholders' ROE after Loans and Total Profit before Net profit, equity at year- tax, average advances, Deposits, assets, Number tax, DKKm DKKm end, DKKm equity DKKbn DKKbn DKKbn of FTEs 1997 584 443 4,772 9.6% 36.6 41.5 63.1 2,671 1998 710 511 5,173
Slide 25: Banking activities
Banking activities Financials • Stable volume in bank loans 1,600 DKKm 1,400 • Increase in bank deposits – back to 2017 levels 1,200 1,000 • Minor decrease in AUM 800 • Core income increase driven by sale of property and positive one-off 600 re. value adjustments 400 200 • Stable development in core
Slide 26: Mortgage activities
Mortgage activities Financials 800 DKKm 700 • Continued growth in volume 600 • Core income boosted by increase in net fee income but still below 500 400 Q2 2018 where sale of property significantly increased core income 300 and pushed it above 2017 levels 200 100 • Decrease in core expenses 0 Q3 201
Slide 27: Leasing activities
Leasing activities Financials 160 DKKm 140 • Loan volumes continue to increase and support NII 120 100 • Stable core expenses 80 • Decrease in core profit primarily due to increased impairment 60 charges 40 20 0 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 -20 Core expenses Core income Core profit Busine
Slide 28: Danish Economy October 2018
CS JYSKE BANK Danish Economy October 2018
Slide 29: Headlines on the Danish Economy
Headlines on the Danish Economy • We expect the upturn in the Danish economy to continue in 2019 • Low interest rates, increasing house prices and job growth stimulates demand. Export competitiveness looks healthy • Gradually the pace of the upturn is likely to decline to labour supply shortages and
Slide 30: Danish economy – an upturn story
Danish economy – an upturn story • Overall the Danish financial sector’s operating environment is still improving • Small setback in growth in 2018 due to weaker export. Still, employment data is strong The upturn will continue Lending growth is slowly picking up Source: Source: 30
Slide 31: 3 kinds of stimulus support demand
3 kinds of stimulus support demand House prices recovering after burst in 08/09 Steady rise in employment Source: Source: Interest rates are at a historic low Consumption is strong, while export slows after sharp upturn Source: Source: 31
Slide 32: The labour market performance is strong
The labour market performance is strong • The labour force is increasing from foreign labour supply and a higher retirement age. Gradually lack of labour supply will become more pronounced Foreign labour accounts for +40 % of rise in employment Lack of labour supply is accelerating Source: Source: S
Slide 33: Improved asset quality – as defaults have normalized
Improved asset quality – as defaults have normalized Unemployment is declining Forced house sales below 0,2 % per year Business bankruptcies at neutral level Source: Source: Source: 33
Slide 34: 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 Household net assets (incl. h
Slide 35: House prices have continued up in all regions
House prices have continued up in all regions • Widespread recovery on housing market, especially on flats in big cities • 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
Slide 36: First signs that new lending regulation works
First signs that new lending regulation works • The new regulation seems to be turning down heat on the Copenhagen market Most recent data show peaking flat prices Demand and supply are getting closer Prices flats 45000 45000 40000 40000 Price per squaremeter 35000 35000 Price per squaremeter 30000
Slide 37: Moderate Danish price increase in European context
Moderate Danish price increase in European context European house prices the past year The development in Scandinavian houseprices Source: Source: 37
Slide 38: 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 Source: Source: And public sector debt is low This is why Denmark is AAA Source: Source: 38
Slide 39: A strong financial position
% of GDP 50 -200 0 -150 -100 -50 100 150 200 Norway Switzerlands Netherlands Japan Denmark Germany Belgium A strong financial position Sweden Austria Finland United Kingdom Italy France Slovenia Estonia USA Lithuania Latvia Slovakia Net foreign financial assets (2016) Poland Spain Portugal Cyprus Gr
Slide 40: Denmark’s financial turnaround
Denmark’s financial turnaround Denmark’s net foreign assets 1960-2017 80 80 60 60 40 40 From start 1990s: Labour 20 market pension schemes 20 60s and 70s: % of NNI % of NNI Devaluations 0 0 1982: The peg is introduced (fully in -20 effect from 1986) -20 -40 -40 -60 -60 1960 1962 1964 1966 1968 1970
Slide 41: 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,