Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — Q1 2019 Earnings Presentation
45 slides from Jyske Bank A/s's earnings presentation, May 8, 2019
Slide 1: Jyske Bank Q1 2019
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Slide 2: Our targets
Our targets Q1 2019 Return on Equity • Delivering a return on equity of 6-10% in 2019 ROE 7.3% Volume 2020 • Total loan portfolio of DKK 350bn in Jyske Realkredit DKK 333bn Capital position • Long-term targets for capital ratio 17.5% and CET1 ratio 14% post-Basel IV 20.1% implementation and • Buildi
Slide 3: Q1 2019 highlights
Q1 2019 highlights • Net profit of DKK 610m, equal to ROE 7.3% p.a. Core profit and profit for the period DKKm • Business volumes: Index Index ― Compared to Q4 2018 loan growth in mortgage and Q4 2018 Q1 2019 Q1 2018 19/18 Q1 2019 Q1/Q4 leasing activities Net interest income 1,324 1,407 94 1,324 1,3
Slide 4: ROE in line with guidance
ROE in line with guidance Net profit 1,000 15% • Net profit in Q1 2019 of DKK 610m and ROE of 7.3% DKKm 900 800 12% 700 600 9% 500 400 6% 300 200 3% 100 0 0% Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Net Profit ROE (after tax) • An increase of 1.3 percentage points comp
Slide 5: NII in headwind
NII in headwind NII of DKK 1,324m compared to DKK 1,371m in Q4 2018 and DKK Q1 2019 vs. Q4 2018: Development in NII 1,407m in Q1 2018 – down 3% and 6% respectively 1,400 DKKm 1,350 • Compared to Q4 2018 NII is supported by loan growth in mortgage and leasing activities but pressured by: 1,300 • 2 da
Slide 6: Solid underlying fee income
Solid underlying fee income Fee income split by type • Net fee income in Q1 2019 of DKK 463m – down by 8% relative to Q1 800 800 DKKm 2018 600 600 • Underlying fee income in Q1 2019 at level only seen previously in 400 400 fourth quarters (when excluding performance related fees) but dampened by inc
Slide 7: Value adjustments boosted by financial markets
Value adjustments boosted by financial markets • Value adjustments under core income amounted to DKK 193m – Value adjustments under core income up by DKK 242m compared to Q4 2018 due to: 250 DKKm 200 • Positive development in the financial markets • Narrowing of credit spreads which affected the val
Slide 8: Stable underlying development in core expenses
Stable underlying development in core expenses Q1 2019 vs. Q1 2018: Development in core expenses (Group) • Core expenses in Q1 2019 at DKK 1,285m DKKm 1,350 1,300 • Compared to Q1 2018 up by DKK 13m due to: 1,250 1,200 • Higher IT-related costs 1,150 • Lower number of FTEs 1,100 1,050 1,000 Q1 2018
Slide 9: Back to net reversals
Back to net reversals • Net reversals of DKK -16m under core profit: Loan impairment charges (under core profit) ― New defaults at low levels across client segments 500 DKKm ― In Q1 2019 impairment charges of DKK 140m re. 400 agriculture – primarily related to management estimate 300 covering fur fa
Slide 10: Agriculture: increase in impairment charges needed
Agriculture: increase in impairment charges needed • 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 ratios at a higher level end of
Slide 11: Investment portfolio earnings close to zero
Investment portfolio earnings close to zero Investment portfolio earnings, quarterly • The investment portfolio earnings continue to generate modest 500 returns DKKm • Q1 2019 at the same level of Q4 2018 at DKK -11m 400 • Investment portfolio earnings for the first quarter of 2019 300 were positive
Slide 12: Capital and Liquidity
UF JYSKE BANK Capital and Liquidity
Slide 13: Strong capital position
Strong capital position Capital ratios • Capital ratio 20.1% and CET1 ratio 16.6% end of Q1 2019 vs. long- 25 pct term targets of 17.5% and 14% post-Basel IV implementation – Capital structure almost aligned with long-term targets incl. 20 expected effect of Basel IV 15 – After each quarter, Jyske B
Slide 14: Future regulation
Future regulation • Long-term capital targets based on fully implemented Basel Expected fully phased-in capital ratios IV capital requirements: 20 Percent 2.0 – Capital ratio 17.5% and CET1 ratio 14% 18 1.5 – Capital ratios to remain above long-term targets given 16 1.0 upcoming capital requirements
Slide 15: Liquidity continues to be plenty
Liquidity continues to be plenty Group liquidity buffer (DKKbn) • Liquidity buffer DKK 79bn end of Q1 2019 (DKK 64bn end of 2018) 80 ― 92% of the buffer - DKK 73bn - is eligible for repo 8% transactions at central banks (Nationalbanken or ECB) 70 ― Cash placements are categorized as intra-day eligib
Slide 16: 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 • Short term ongoing activities in French CP 12 DKKbn • From 2011 to 2017, the Group issued at least one senior 10 unsecured (preferred senior) EUR public benchmark a year (focus on 3-5 year maturities)
Slide 17: MREL overview
MREL overview 32% Total DKK 58.6bn (31%) % of Group REA end of Q1 2019 30% 28% Total DKK 52.6bn (27.8%) 8.2% Total DKK 50.2bn 26% 3.5% (DKK 15.6bn) (DKK 6.7bn) 24% Mortgage activities 22% 2.6% loss absorption + 6.3% recapitalisation (DKK 5bn) 20% (DKK 12bn) 2.0% 18% 1.5% 16% Total DKK 29.9bn (15.8%)
Slide 18: Increased funding costs due to MREL
Increased funding costs due to MREL 2019-2021: Acc. increase in funding costs 2019-2023 compared to 2018 • Transition period from 1 July 2019 – 1 January 2022 where preferred senior issued before end of 2018 can be used to 120 DKKm fulfill MREL requirements (”grandfathering”) 100 • Old SP issuances
Slide 19: Appendices
Appendices: 1) Jyske Bank in brief and business segments 2) Danish Economy Q1 2019
Slide 20: 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 21: Jyske Bank in brief
Jyske Bank in brief Jyske Bank Group key figures Shareholders' Loans and Total Profit before Net profit, equity at year- ROE after tax, advances, Deposits, assets, Number of tax, DKKm DKKm end, DKKm average equity DKKbn DKKbn DKKbn FTEs 1997 584 443 4,772 9.6% 36.6 41.5 63.1 2,671 1998 710 511 5,173
Slide 22: New intra-group agreements
New intra-group agreements • A new intra-group settlement model has been brought into effect, starting 1 January, 2019: • Jyske Realkredit will now pay a fee to JB for distribution • Jyske Realkredit will have the right to off-set the potential losses in the commission • New agreement has no P/L eff
Slide 23: Banking activities
Banking activities Financials 1,600 • Continued growth in bank loans compared to Q1 2018 DKKm 1,400 but stable development compared to Q4 2018 1,200 • Increase in bank deposits 1,000 • Increase in AUM due to positive developments in 800 financial markets and inflow of funds 600 400 • Core profit bel
Slide 24: Mortgage activities
Mortgage activities Financials 800 • Continued growth in volume – both home loans and DKKm 700 mortgages for corporate clients. Nominal volumes are 600 up 1.1%. Fair value of mortgages saw a further 500 400 increase due to rising bond prices 300 200 • New agreement with JB lowers core income as well
Slide 25: Leasing activities
Leasing activities Financials 160 • Loan volumes continue to increase and support NII DKKm 140 • Stable core expenses 120 • Increase in core profit primarily due to reversals of 100 impairment charges 80 60 40 20 0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Core expenses Core income Core profit Impairm
Slide 26: Mortgages: The portfolio
Mortgages: The portfolio Distribution of lending portfolio • 87% of lending to properties with housing purposes 1% 1% 0% ― No loans with swaps to co-operative housing Owner-occupied (51%) ― No lending to agriculture and other primary production 11% Vacation homes (2%) Cooperative (5%) • Continued in
Slide 27: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1.8% 500 30 Private Value of repossessed proporties (DKKm) Number of repossessed proporties 1.6% Commercial 400 24 1.4% Subsidised 1.2% 300 18 1.0% 0.8% 200 12 0.6% 0.4% 100 6 0.2
Slide 28: Bank loans: the portfolio
Bank loans: the portfolio • Portfolio composition end of Q1 2019: Loans and guarantees by sector (DKKm/%) ― Corporates take up larger proportion, 65% vs. Loans, advances Balance of loan Impairment 63% end of 2018 as volume grows and guaranteesimpairment charges Losses charges ― Private individuals a
Slide 29: Danish Economy May 2019
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Slide 30: Headlines on the Danish Economy
Headlines on the Danish Economy • The Danish economy has been in an upturn for six years • We expect the upturn to continue in 2019 and 2020 with gradually slower pace if global growth decreases • Low interest rates, increasing house prices and job growth continue to stimulate doemstic demand. Expor
Slide 31: Danish economy – still an upturn story
Danish economy – still an upturn story • Overall the Danish financial sector’s operating environment is still improving • Employment data is solid The upturn will continue, but slowdown Lending growth is still picking up slowly Source: Source: Page 30/44
Slide 32: 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 Both domestic and foreign demand is increasing Source: Source: Page 31/44
Slide 33: Spill-over from recent European weakness
Spill-over from recent European weakness • There is spill-over to Denmark from weaker economic signals out of Europe. But we still see a tilt to the positive side Lower sentiment in manufacturing, but no dramatic change Source: Page 32/44
Slide 34: 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. Foreign labour accounts for +40% of rise in employment Lack of labour supply has stopped accelerating Source: Source: Page 33/44
Slide 35: Improved asset quality – as defaults have normalized
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream Improved asset quality – as defaults have normalized Unemployment has declining Forced house sales below 0.2% per year Business bankruptcies at neutral level Source: So
Slide 36: 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 800 700 700 600 600 % of disp
Slide 37: The Danish economy can manage a Hard BREXIT
The Danish economy can manage a ”Hard BREXIT” • But there will be significant negative consequences for the most affected sectors • The UK represents shy of 8% of Danish export, and it’s the 4th largest export market • IMF: Hard Brexit with trade acc. to WTO-rules -> Loss of 1% of GDP in DK (in 2030
Slide 38: Widespread, moderate, recovery on the housing market
Widespread, moderate, recovery on the housing market • Large price increases on flats in biggest cities have stopped • New regulation and a new housing tax model have a dampening effect in biggest cities Large differences on the housing market Real house prices are up since 2012 But housing costs ar
Slide 39: Moderate Danish price increase in European context
Moderate Danish price increase in European context European house prices the past year The development in Scandinavian house prices Source: Source: Page 38/44
Slide 40: New Lending Regulation Works
New Lending Regulation Works • The new regulation is turning down heat on the Copenhagen market Demand and supply are getting closer Recent data show peaking flat prices Source: Source: Page 39/44
Slide 41: Denmark is a AAA economy
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: Page 40/44
Slide 42: A strong financial position
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream A strong financial position Net foreign financial assets (2017) 250 250 200 200 150 150 100 100 50 50 % of GDP % of GDP 0 0 -50 -50 -100 -100 -150 -150 -200 -200 Switze
Slide 43: Denmark’s financial turnaround
Denmark’s financial turnaround Denmark’s net foreign assets 1960-2018 100 100 80 80 60 60 From start 1990s: Labour 40 market pension schemes 40 20 20 % of NNI % of NNI 0 0 1982: The peg is -20 introduced (fully in -20 60s and 70s: effect from 1986) -40 Devaluations -40 -60 -60 -80 -80 1960 1962 1964
Slide 44: Jyske Bank Forecasts (March 2019)
Jyske Bank Forecasts (March 2019) Danish economy 2016- DKKbn Real growth (%) 2020 2018 2016 2017 2018 2019 2020 Consumer spending 1050 2.1 2.1 2.3 1.3 1.5 Public spending 546 0.2 0.7 0.5 0.6 0.4 Fixed gross investment 490 7.6 4.6 5.0 0.1 4.0 Inventory investment* 12 -0.1 -0.1 0.1 0.0 0.0 Exports 121
Slide 45: 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,