Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2019 Earnings Presentation
40 slides from Pareto Bank Asa's earnings presentation, 2019
Slide 1: Pareto Bank Financial Results Second Quarter 2019
PARETO BANK Financial Results Second Quarter 2019
Slide 2: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 3: Private Placement Supports Profitable Growth
PRIVATE PLACEMENT SUPPORTS PROFITABLE GROWTH • Healthy pipeline in targeted market niches. • Good access to new business with ROE PRIVATE PROFITABLE of minimum 15%. • Rigged for growth without increase in PLACEMENT GROWTH cost base. • Growth ambition lifted to NOK 2bn in Q2-19: NOK 400m 2019. • Capi
Slide 4: Attractive Dividend Policy
ATTRACTIVE DIVIDEND POLICY PREDICTABLE Intention to pay minimum 25% dividend with no cap. STABLE OR INCREASING Nominally stable or increasing dividend payout each year. A policy more aligned with the banking sector in general. SUPPORTS LIQUIDITY Supports share liquidity and valuation. Broadens the i
Slide 5: Status Financial Ambitions
STATUS FINANCIAL AMBITIONS 30.06.2019 STATUS REVISED AMBITIONS FOR 2019 New business with ROE of minimum 15 %. 15.3 % * 14 % ROE ROE ambition for 2019 revised due to capital increase. Attractive markets and GROWTH LENDING NOK 887m NOK 2,000m strong pipeline. Rigged for growth. ADEQUACY Solid capital
Slide 6: Second Quarter 2019 Highlights
SECOND QUARTER 2019 HIGHLIGHTS 1 Profit after tax NOK 86.7m (NOK 93.2m). 2 Return on equity after tax 14.1 %* (17.5 %). 3 Strong net interest income of NOK 164.4m (NOK 139.4m). 4 Diversified net lending growth of NOK 475m (NOK 423m) on stable net interest rate margin. Impairments and losses amounted
Slide 7: Key Figures
KEY FIGURES Profit after tax Return on Equity CET1 ratio NOKm Excluding AT1 capital and interest Standard model 99.7 17.5% 17.8 % 93.2 16.6% 86.7 16.2 % 15.9 % 14.1% * Q2-18 Q1-19 Q2-19 Q2-18 Q1-19 Q2-19 30.06.2018 31.03.2019 30.06.2019 Net interest income (NOKm) Cost/income ratio Loss ratio NOKm Qu
Slide 8: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 9: Income Statement
INCOME STATEMENT P&L (NOKm) Q2-19 Q2-18 H1-19 H1-18 Growth in net interest income due to Net interest income 164.4 139.4 327.0 268.5 lending growth and increased lending rates. Net other operating income 0.9 8.6 7.1 13.5 Total net income 165.2 148.0 334.1 281.9 Total operating expenses 34.7 29.6 69.
Slide 10: Development in Margins
DEVELOPMENT IN MARGINS Net interest margins 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) 5.8 % 5.9 % 6.1 % 5.7 % 5.7 % 5.5% 6.0 % 5.9 % 5.4 % 5.9 5.6 % 5.7 % 5.7 % 5.6 % 5.9 % 5.6 % 5.9 % 5
Slide 11: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME Net interest income Changes in net interest income (NOK 1,000) 180,000 5,863 7,520 170,000 1,766 Q2-19 Q1-19 164,361 162,596 9,133 1,627 129 2,497 160,000 150,000 140,000 130,000 120,000 Lending Lending Fee Deposit Deposit Surplus Market volume rate income vol
Slide 12: Quality of Loan Portfolio
QUALITY OF LOAN PORTFOLIO Impairments and losses according to IFRS 9 Impairments and losses on loans & guarantees NOKm NOKm IAS 39 IFRS 9 75.6 Impairments and losses for Q2 NOK 14.9m 14.9 60.7 22.0 9.4 24.9 14.6 Write-offs Stage 3 4.0 2.3 8.7 Stage 2 1.0 1.0 8.5 Stage 1 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18
Slide 13: Funding
FUNDING Sources Deposits & senior debt NOKm, NOKm Percent customer deposits of net lending to customers Deposits 9,320 77% 77% 75% 74% Senior debt 5,551 71% 65% 63% T1 & T2 debt 527 5,551 Other debt 200 5,279 4,915 Equity capital 2,837 5,207 5,011 3,250 4,008 Key ratios Deposits with liquidity restr
Slide 14: Capital
CAPITAL Core equity tier 1 ratio (CET1 ratio) Key comments on capital CET1 • Private placement of MNOK 400 has strengthened 17.2 % 17.7 % 17.8 % Target 16.1 % 16.2 % CET1 by approx. 2.5 % in Q2-19. Pillar 2 • Subsequent offering raised MNOK 16 in new equity to 3.2 % be registered in Q3-19. Proforma
Slide 15: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 16: 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. • Tailor-made solutions based on good understanding of customers' businesses. HAN
Slide 17: 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 74% NOKm 50-100 estate and larger Norwegian Commercial propert
Slide 18: Exposure per Business Area
EXPOSURE PER BUSINESS AREA NOKm gross exposure 7,007 6,519 5,750 5,811 5,847 4,320 4,004 3,762 3,157 3,247 2,132 2,260 2,016 1,949 1,781 1,019 1,012 832 736 699 Residential property Commercial property Corporate Shipping & Offshore Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 PAGE 18
Slide 19: Real Estate | Continued High Activity
REAL ESTATE | CONTINUED HIGH ACTIVITY 67% 74% Real estate credit exposure Σ = NOK 11,327m Key comments NOKm of gross exposure • Activity in commercial property and the newbuild market holding strong in first half of 2019. Land without houses 1,535 • Growth in credit exposure of NOK 1,046m in Q2-19 w
Slide 20: Real Estate | Residential Property Exposure
REAL ESTATE | RESIDENTIAL PROPERTY EXPOSURE 67% 52% Geographical residential property exposure (NOKm) Σ = NOK 7,007m Policy NOKm of gross exposure • Presale requirement: if the price of unsold units falls by 50 % compared to the price of presold units, the 7% remaining sales must still be sufficient
Slide 21: Real Estate | Commercial Property Exposure
REAL ESTATE | COMMERCIAL PROPERTY EXPOSURE 22% 67% Geographical commercial property exposure (NOKm) Σ = NOK 3,343m Key comments NOKm of gross exposure • Average commitment size approx. NOK 35m, average maturity approx. 2 years, average loan to value (LTV) 2% approx. 70 %. 6% • Attractive model: Eien
Slide 22: Corporate | Increasing Deal Flow
CORPORATE | INCREASING DEAL FLOW 15% 67% Corporate financing exposure (NOKm) Σ = NOK 2,213m Key comments NOKm of gross exposure • Positioning Pareto Bank as a provider of tailor-made financing solutions to medium-sized enterprises. 5% 1% • Deal flow increasing as awareness of Pareto Bank as a financ
Slide 23: Corporate (II) | Pareto Driftskreditt
CORPORATE (II) | PARETO DRIFTSKREDITT • 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 24: Shipping & Offshore | Cautious Approach
SHIPPING & OFFSHORE | CAUTIOUS APPROACH 5% 8% Status Shipping & Offshore credit exposure & loan to value Σ = NOK 699m LTV * Share • Sales efforts have increased with new team in place NOKm and exposure is expected to increase in H2-19. Product 179 58% 26% • 17 customers and a total of 25 vessels. •
Slide 25: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 26: 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 27: Long Term Financial Ambitions
LONG TERM FINANCIAL AMBITIONS Cost effective. 15.0 % ROE Commercially oriented. Proven credit quality. Lending growth within all GROWTH LENDING 10 % annually business areas. Profitability comes first. Optimizing capital for 16.2 % CET1 * continued growth. Regulatory ready. DIVIDENDS Minimum 25 % div
Slide 28: Appendix
(Pareto bank
Slide 29: Largest Shareholders as of July 2019
LARGEST SHAREHOLDERS AS OF 3 JULY 2019 # Investor 03 July 2019 # of shares % total • The Company has 69,430,498 shares 1 Pareto AS 11 685 125 16.83 % outstanding after the private 2 Pecunia Forvaltning AS 5 900 000 8.50 % placement. After the subsequent 3 AF Capital Management AS 5 861 968 8.44 % of
Slide 30: The Share
THE SHARE Earnings per share Book equity per share NOK NOK 1.67 41.79* 1.57 41.04 1.45* 36.73 Q2-18 Q1-19 Q2-19 Q2-18 Q1-19 Q2-19 Price / Earnings Price / Book NOK, Share price 37.00 NOK, Share price 37.00 6.36x* 6.10x 1.05x 5.39x 0.88x 0.89x* Q2-18 Q1-19 Q2-19 Q2-18 Q1-19 Q2-19 Note (*): Key figure
Slide 31: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q2-19 Q1-19 Q4-18 Q3-18 Q2-18 Net interest income 164.4 162.6 147.0 138.8 139.4 Net other operating income 0.9 6.2 -3.3 -1.4 8.6 Total net income 165.2 168.8 143.7 137.5 148.0 Total operating expenses 34.7 35.0 28.2 31.1 29.6 Operating profit before impairments
Slide 32: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q2-19 Q1-19 Q4-18 Q3-18 Q2-18 Loans to credit institutions 1,785 951 320 1,295 1,136 Loans to customers 12,539 12,065 11,653 10,690 10,489 Bonds and other securities 3,998 3,797 3,537 4,220 4,031 Shareholdings in associated companies 37 37 37 35 35 Other assets 76 6
Slide 33: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding font NOKm, estimated interest contribution including commissions, excluding font and back-end fees over 3M Nibor or similar rate and back-
Slide 34: Number of Customers
NUMBER OF CUSTOMERS Number of customers per business area Real Estate 284 Corporate 88 Securities 159 Shipping 18 & Offshore Retail 26 (Mortgages) PAGE 34
Slide 35: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 660 Floating rate retail Depositors (#) 1,526 551 680 2,639 Amount (NOKm) 3,001 6,549 Floating rate corporate 2,886 Retail Corporate 1,395 Savings with restrictions 1,225 1,814 Deposits by size Fixed rate 2,727 NOKm 1,545 > NOK 20m 2,0
Slide 36: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 94 120 67 150 46 1500 1550 58 1055 25 975 18 14 455 200 2019 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 3
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 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 38: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 5,809 risk 6,113 49% 46% 48% 6,167 45% 45% Low risk 44% 42% 42% 42% 7,553 40% 995 Moderate risk 1,386 302 Some risk 102 18 12% High risk 10% 9% 190 7% 8% 41 Very high risk Q2-18 Q3-18 Q4-1
Slide 39: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Distribution of commitments by size NOKm Percent of NOKm 896 < 10 818 5% 17% 4,518 < 10 10 - 50 2% 5,073 10 - 50 3,484 5% 33% 50 - 100 50 - 100 3,909 100 - 150 1,153 150 - 200 100 - 150 12% 1,897 200 - 250 645 > 250 150 - 200 797 26% 631 200 - 250 224
Slide 40: PAGE 40
(Pareto bank