Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2017 Earnings Presentation
37 slides from Pareto Bank Asa's earnings presentation, 2018
Slide 1: Financial Results Fourth Quarter 2017
PARETO BANK Financial Results Fourth Quarter 2017
Slide 2: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS AND FINANCIALS 2 BUSINESS AREAS 3 AMBITIONS FOR 2018
Slide 3: 2017 Highlights
2017 HIGHLIGHTS 1 Record profit after tax of NOK 312.6m (NOK 247.3m for 2016). 2 Lending growth on high margins, cost efficiency and low write-downs and losses. Targeted net lending growth of NOK 1,000m was reached by the end of Q3-17 due to 3 attractive business opportunities within real estate fin
Slide 4: On Target in 2017
ON TARGET IN 2017 31.12.2017 STATUS 31.12.2017 TARGET High growth within residential GROWTH LENDING property development. NOK 694m ~NOK 1,000m Sales activity within corporate financing materializes in growth. Lending growth on high margins 15.9 % > 13.0 % * ROE and cost efficiency yield high returns
Slide 5: Status Portfolio Goals 2017
STATUS PORTFOLIO GOALS 2017 BUSINESS AREAS STATUS ACTUAL 2017 TARGETS 2017 Entering 2018 with strong deal flow, but possible Real slowdown in residential NOK 939m NOK 600m estate property development going forward. Securities: Securities: Securities & Increasing deal flow in - NOK 305m - NOK 300m co
Slide 6: Overview Portfolio Composition
OVERVIEW PORTFOLIO COMPOSITION Gross credit exposure (NOKm) ∑ = NOK 11,850m Gross total lending (NOKm) ∑ = NOK 9,448m MAIN BUSINESS AREAS Real Estate 7,713 65 % Real Estate 6,425 68 % Corporates 1,461 12 % Corporates 1,121 12 % Real estate financing Real focused on residential estate property constr
Slide 7: Pareto Bank Adapts to a More Difficult Residential Property Development Market
PARETO BANK ADAPTS TO A MORE DIFFICULT RESIDENTIAL PROPERTY DEVELOPMENT MARKET 67% ✓ Focus on a high level of presale, adequate liquidity buffers and 20 % to 40 % equity contribution. ✓ Presale requirement: if the price of unsold units falls by 50 % compared to the price of presold units, the sales
Slide 8: Income Statement
INCOME STATEMENT P&L (NOKm) Key comments Q4-17 Q4-16 2017 2016 • Lending growth on a net interest margin of 5.5 %. Net Interest income 128.3 117.3 507.0 415.9 Total other operating income 2.1 9.0 32.0 42.0 • Due to a strong deal flow within residential Total net income 130.3 126.4 539.0 457.9 proper
Slide 9: Growing Net Interest Income
GROWING NET INTEREST INCOME Net interest income (NOK 1,000) Key comments • Increased net interest income due to a combination of higher lending volumes and margins in the course of 2017 • Reduced deposit rates and improved market funding rates contributed to better net margins • Net interest margin
Slide 10: Strong Margins
STRONG MARGINS Continuously improving net interest margins (vs. 3M NIBOR) * Key comments • The bank maintains margins on lending 6.1 % 6.0 % 5.9 % 5.9 % 5.8 % 5.5 % 5.6 % 5.4 % 5.6 % 5.6 % 5.5 % 5.6 % 5.7 % 5.7 % 5.4 % 5.6 % 5.6 % 5.5 % • Fee income driven by real estate financing 5.1 % 5.3 % 4.9 %
Slide 11: Loan Portfolio Quality
LOAN PORTFOLIO QUALITY Net non-performing and impaired loans * % of gross lending 1.58 % 1.44 % 1.23 % 1.31 % 1.15 % 1.10 % Non-performing 0.96 % 0.94 % 0.94 % 0.71 % Impaired 0.57 % 0.48 % 0.51 % 0.29 % 0.14 % 0.18 % 0.13 % 0.00 % 0.07 % 0.07 % 0.03 % Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
Slide 12: Group Provisions
GROUP PROVISIONS Cumulative group provisions % of gross lending 0.51 % 0.52 % 0.51 % 0.51 % 0.50 % 0.50 % 0.48 % 0.50 % 0.48 % 0.42 % 0.40 % 0.41 % 0.37 % Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Group provisions (NOKm) 26.7 28.7 30.7 30.7 40.7 40.7 43.7 45.7 45.
Slide 13: Funding | Overview
FUNDING | OVERVIEW Sources (NOKm) ∑ = NOK 13,104m Historical development in deposits vs. lending (NOKm) 54 % 25 % 2% 3% 16 % Key ratios Deposits with liquidity restrictions 41 % Corporate deposits 71 % Deposit-to-loan ratio 75 % Long-term NFSA liquidity ratio 127 % LCR 135 % PAGE 13
Slide 14: Capital Requirements
CAPITAL REQUIREMENTS Core equity tier 1 ratio (CET1 ratio) Key comments on capital 17.7 % • The NFSA has given the bank a pillar 2 requirement of 17.2 % CET1 Target 15.7 % 3.2 % of risk weighted assets. 13.2 % Pillar 2 • The bank’s minimum CET1 ratio requirement is 15.2 % 12.1 % 3.2% as of 31.12.201
Slide 15: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS AND FINANCIALS 2 BUSINESS AREAS 3 AMBITIONS FOR 2018
Slide 16: Norway's Leading Project Bank
NORWAY’S LEADING PROJECT BANK BUSINESS AREAS PROJECTS / CREDITS AREA EXPOSURE AVG. PRINCIPAL Property lot financing Real NOKm estate Building construction facilities 65 % 30 Commercial property financing M&A loans Corporate & Bridge loans NOKm Securities Investment loans 24 % 5-30 Securities financi
Slide 17: Real Estate | Real Estate Exposure
REAL ESTATE | REAL ESTATE EXPOSURE 67% 65 % Real estate credit exposure (NOKm) Σ = NOK 7,713m Description of real estate credit exposure • A split between financing of residential property development (75 %) and commercial property (25 %) • A large majority of the property development projects are c
Slide 18: Real Estate | Residential Property Exposure
REAL ESTATE | RESIDENTIAL PROPERTY EXPOSURE 67% 65 % A diversified portfolio Geographical residential property exposure (NOKm) Σ = NOK 5,791m • The residential property exposure is diversified by geographic area, project type and size Oslo West • The portfolio is made up of 150 different addresses w
Slide 19: Real Estate | Market and Strategy
REAL ESTATE | MARKET AND STRATEGY 67% 65 % Market observations • A differentiated market in Oslo: demand for small apartments (50 square meters or less) is low due to regulation (boliglånsforskriften) and high supply • Continued demand for small houses (småhus) is supporting the level of sales and p
Slide 20: Corporates | Increasing Deal Flow
10% CORPORATES | INCREASING DEAL FLOW 12 % 9% Status Products Total exposure of NOK 1,461m within a variety of industries. INVESTMENT LOANS 57 customers with credit facilities in the range of NOK 0.2m Financing of investments for a client who backs the to NOK 150m. investment with a financially soli
Slide 21: Corporates | Market and Strategy
10% CORPORATES | MARKET AND STRATEGY 12 % 9% Market observations 1,621 • Limited competition within corporate financing for small and medium- 500 sized Norwegian enterprises (SMEs) • The larger banks allocate capital to private customers, large corporates and large transactions, and the bond market
Slide 22: Shipping & Offshore | Diversified Portfolio
SHIPPING & OFFSHORE | DIVERSIFIED PORTFOLIO 10% Status Total S&O credit exposure & Loan to value (NOKm) * Σ = NOK 1,138m LTV * Share • A diversified portfolio where a single segment will Product 233 52% 20% normally not exceed 25% of the total S&O exposure Bulk • 22 customers and a total of 34 vesse
Slide 23: Shipping & Offshore | Market and Strategy
SHIPPING & OFFSHORE | MARKET AND STRATEGY 9% 13% Market observations • Few banks are currently supporting clients and offering financing in Pareto Bank’s targeted loan size segment. Right time to increase profitability. • Several shipping markets look promising. • Growth ambition in 2018 is subject
Slide 24: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS AND FINANCIALS 2 BUSINESS AREAS 3 AMBITIONS FOR 2018
Slide 25: Solid Foundation and Strong Performance
SOLID FOUNDATION AND STRONG PERFORMANCE Result after tax (NOKm) Return on Equity * CET1 ratio ** 312.6 16.5 % 15.6 % 15.9 % 15.9 % 247.3 13.3 % 165.8 174.6 122.4 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Net interest income (NOKm) Cost/income ratio Loss ratio *** % of gross lending 0.4 % 507
Slide 26: Financial Targets 2018
FINANCIAL TARGETS 2018 NET LENDING GROWTH Profitable net lending growth. ~NOK 700m Growth ambition is subject to attractive market opportunities. ON EQUITY Cost effective RETURN > 13.0% and commercially oriented bank. ADEQUACY CAPITAL 15.7 % CET1 ratio target of 15.7 % versus NFSA requirement of 15.
Slide 27: Appendix
(Pareto bank
Slide 28: Largest Shareholders as of 02.01.2018
LARGEST SHAREHOLDERS AS OF 02.01.2018 # Investor 02 January 2018 # of shares % total • The Company has 58,619,688 shares 1 Pareto AS 8,921,873 15.22 % outstanding 2 Pecunia Forvaltning AS 5,861,859 10.00 % 3 Saga Tankers ASA 5,052,547 8.62 % • One class of shares where each 4 Apollo Capital Manageme
Slide 29: The Share
THE SHARE Share price development since March 2014** EPS, DPS (NOK) & Dividend Yield * Book equity per share (NOK) * Share Price (NOK) Volume (#) 45 2,500,000 Price as of 31.12.17: NOK 39.50 40 2,000,000 35 1,500,000 30 1,000,000 Price / Earnings * Price / Book * 25 9.3x 500,000 20 7.5x 7.0x 6.6x 15
Slide 30: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Key comments Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 • The principle of assessing financial instruments Net Interest income 128.3 138.7 124.6 115.4 117.3 at fair value may cause profits to fluctuate between quarters Total other operating income 2.1 3.2 7.8 18.9 9.0 Total
Slide 31: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Key comments • Net lending fell by NOK 422m in Q4-17 Q4-17 Q3-17 Q2-17 Q1-17 Q4-16 Loans to credit institutions 357 165 350 884 804 • Adjusted lending growth of NOK 207m (-NOK Loans to customers 9,448 9,870 9,544 8,973 8,754 422m + NOK629m in syndicated (avlastede)
Slide 32: Funding | Customer Deposits
FUNDING | CUSTOMER DEPOSITS Deposits by product ∑ = NOK 7,069m Deposits by type ∑ = NOK 7,069m 980 Floating rate retail 749 2,573 Floating rate corporate 2,531 1,684 Savings with restrictions 1,762 Deposits by size (NOKm) ∑ = NOK 7,069m 1,766 Fixed rate 1,110 620 Client accounts 916 7,623 Total 7,06
Slide 33: Funding | Market Funding
FUNDING | MARKET FUNDING Market funding maturities - net of own holdings (NOKm) * Credit spreads (bps) • The bank has seven loans outstanding with maturities up to five • The bank sends out target bid/offer spreads to brokers regularly years • Pareto Bank’s focus is on continuously improving investo
Slide 34: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio (NOKm) ∑ = NOK 3,215m Key comments • The bank’s liquidity is comprised of cash and highly liquid bonds • High share of government & PSEs to reduce credit spread risk and increase short-term liquidity • Large share of covered bonds, mainly short to medium maturities •
Slide 35: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Q4-17 ∑ = NOK 11,896m Q4-16 ∑ = NOK 11,488m Key comments 46 % 47 % • 86 % of the portfolio is considered to have low to none/very low risk risk 40 % 37 % 12 % • NOK 60m classified as high or very high 10 % risk 3% 2% 0% 0% 0% 2% PAGE 35
Slide 36: Commitments by Size
COMMITMENTS BY SIZE Q4-17 ∑ = NOK 11,896m Q4-16 ∑ = NOK 11,488m Key comments • A conservative policy with respect to size 4% 5% • Maximum size on a single customer 10 % of total capital (NOK 227m) 5% 6% • Maximum size on group / consolidated basis 15 % of total capital (NOK 340m) 19 % 16 % 23 % 25 %
Slide 37: PAGE 37
(Pareto bank