Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2021 Earnings Presentation
43 slides from Pareto Bank Asa's earnings presentation, 2021
Slide 1: Financial Results – Second Quarter 2021
PARETO BANK Financial Results – Second Quarter 2021 1
Slide 2: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: Second Quarter 2021 Highlights
SECOND QUARTER 2021 Highlights • Profit after tax NOK 131.3m (NOK 127.9m). • Return on equity after tax 14.7 % (15.7 %). • Activity in all areas. Profitable lending growth. High credit quality. • Net interest income NOK 213.3m (NOK 183.8m). Healthy lending margins and lending-related fee income. • L
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 15.7 % 17.5 % 14.7 % 16.9 % 131.3 13.8 % 16.8 % 127.9 119.4 Q2-20 Q1-21 Q2-21 Q2-20 Q1-21 Q2-21 30.06.2020 31.03.2021 30.06.2021 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 213.3 200.2 183.8 0.04% 18.4% 19.9% 19.4% 0.00
Slide 5: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q2-21 Q2-20 H1-21 H1-20 Activity remained high in the second quarter. Lending Net interest income 213.3 183.8 413.5 367.7 margins improved with good lending-related fee Net other operating income. Funding costs fell due to lower market rates, -1.4 23.9 3.6 7.0 income impr
Slide 7: Net Interest Margin
NET INTEREST MARGIN Improved lending margins Comments • Stable pricing. 6.37% 6.32% 6.17% 6.03% 5.94% 5.85% • Higher lending-related fee 5.79% 5.50% 5.46% 5.57% 5.37% 5.62% 5.53% 5.41% 5.48% 5.59% income compared to last 5.22% 5.22% year. • Lower Nibor rates. • Rate cut in PM deposits to take effect
Slide 8: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME Improved fee income (NOKm) 1.6 Q2-21 8.6 1.0 0.9 213.3 2.4 1.8 2.2 Q1-21 3.9 200.2 160.0 Market Market Lending Lending Fee Deposit Deposit funding funding Other * volume rate income volume rate volume rate 8 *) Other net interest income includes return on surp
Slide 9: Gradually Reversing Model Based Impairments
GRADUALLY REVERSING MODEL BASED IMPAIRMENTS Credit exposure by IFRS9 stage (NOKm) Impairments and losses by stage (NOKm) 205 Stage 3 786 NOK 205m 86.8 (+47m) 83.4 18.8 Stage 2 NOK 786m 25.8 (-65m) 7.0 Write-offs 4.3 Stage 3 17,842 Stage 2 Stage 1 Stage 1 NOK 17,842m 60.9 (+639m 52.6 change from Q1-2
Slide 10: Credit Quality During Covid
CREDIT QUALITY DURING COVID Historical impairments and losses (NOKm) 40.3 14.9 9.1 6.2 4.7 5.2 - (1.5) (3.4) Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 10
Slide 11: Clarification on Risk Weighting
CLARIFICATION ON RISK WEIGHTING Core Equity Tier 1 Ratio (CET1) • Clarification on risk weighting of real estate project financing from the Department of Finance and the NFSA. • Commitments with legally binding presale of above 50 % are 17.5 % 17.3 % classified as corporate exposure and thereby give
Slide 12: Changes in Capital Buffer Requirements
CHANGES IN CAPITAL BUFFER REQUIREMENTS (percentage of risk-weighted assets) • The systemic risk capital buffer will increase by 1.5 percentage points at year-end 2022 for banks using the standardized approach. • The Department of Finance has announced an increase in the 2.5 % countercyclical capital
Slide 13: Profitability Protects Against Losses
PROFITABILITY PROTECTS AGAINST LOSSES Loss absorbing capacity • Pareto Bank has remained profitable during the Covid- pandemic. 4.5 % 4.4 % 4.2 % 4.1 % • Profits can absorb losses of up to 4.4 % of gross lending. 4.1 % 3.8 % Loss ratio has largely been under 0.3 % in the past years. 3.4 % 3.0 % • Go
Slide 14: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 14
Slide 15: 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 Land acquisition financing REAL developer bank for Eastern Property construction NOKm 50 - 100 Norway and larger facilities 70% ESTATE Norwegian cities. Commerci
Slide 16: Exposure per Business Area
EXPOSURE PER BUSINESS AREA (NOKm) 8,160 7,499 7,356 7,152 7,323 5,314 5,285 5,012 4,921 4,671 4,494 4,318 4,522 4,251 4,059 1,017 978 1,068 1,113 1,090 Residential property Commercial property Corporate Shipping Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 16
Slide 17: Steady Lending Growth and Increased Diversification
STEADY LENDING GROWTH AND INCREASED DIVERSIFICATION Lending to customers (NOKm) 15,310 15,089 14,661 14,235 13,874 7% 13,503 13,191 13,161 12,539 22 % 30 % 40 % Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Residential property Commercial property Corporate Shipping 17
Slide 18: Residential Property
RESIDENTIAL PROPERTY Credit update Residential property exposure (NOKm) Total NOK 8,160m • 160 customers with average commitment of NOK 51m. • 30 % residential exposure in Oslo and 50 % in Viken. Land without 1,298 • Increase in construction costs, particularly for lumber and steel, houses is a gene
Slide 19: Commercial Property
COMMERCIAL PROPERTY Credit update Commercial property exposure (NOKm) Total NOK 4,921m • 103 customers with average commitment of NOK 48m. • 32 % commercial property exposure in Oslo and 25 % in Viken. • 85 % of commercial property exposure is long-term cash-flow Commercial based, while the remainde
Slide 20: Corporate
CORPORATE Diversified exposure Total NOK 4,522m Credit update Total NOK 4,522m • 77 consolidated corporate customers with average • Improved credit quality for customers earlier hit by Covid-19 commitment of NOK 52.8m. due to reopening. • 19 consolidated securities financing customers with average •
Slide 21: Shipping
SHIPPING Credit update Exposure (NOKm) Total NOK 1,090m • 22 customers and 35 vessels. Chemicals 289 LTV 47 % • Largest exposure USD 12.1m and average commitment size USD 5.5m. Container 229 LTV 26 % • Only shipping, no offshore exposure. • Average LTV of the portfolio is 38 %. Bulk 174 LTV 31 % • S
Slide 22: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 22
Slide 23: A Return to Normal
A RETURN TO NORMAL • High vaccination coverage and lower infection rates have allowed Norway to begin a return to normal. • Economic growth is expected to increase in the second half of 2021. • Spread of the delta variant of the Covid-19 virus could threaten the reopening and positive economic outlo
Slide 24: Market Outlook: Real Estate
MARKET OUTLOOK Real estate Residential property Commercial property • Expectations of higher mortgage rates may influence • The office market continues to be strong, driven by a residential property prices. A more balanced market is positive economic outlook and low interest rates. This expected. Th
Slide 25: Market Outlook: Corporate
MARKET OUTLOOK Corporate • Strong deal flow and continued growth in Q2-2021. • Well positioned in target market: medium sized • Steady deal flow to continue. H2-2021 lending businesses with revenue between NOK 10m and growth expected to be in line with H1-2021. NOK 500m. • Sales actitivities and tea
Slide 26: Market Outlook: Shipping
MARKET OUTLOOK Shipping • Dry bulk and container markets have benefitted in particular from a strong global economic outlook for 2021 due to economic stimulus in 2020. • Other shipping segments have also developed positively, but tanker markets are still weak due to lower oil demand. Further easing
Slide 27: Sustainability
SUSTAINABILITY Internal sustainability task force with representatives from the management team. Sustainability work supervised by the Board. Responsible lending is a priority. ESG is adressed in all credit memos. Developing tools to systematically assess ESG factors on SAMMEN both customer level an
Slide 28: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term YTD ambition Healthy profitability in H1-2021. RETURN ON 14.0 % 14.2 % EQUITY Long term profitability supported by lending growth, stable net margin and portfolio quality. The Board has an authorization to distribute up to DIVIDEND Up to 25 % NOK 1.50 per share of the 2
Slide 29: Appendix
APPENDIX (Pareto bank
Slide 30: Largest Shareholders
LARGEST SHAREHOLDERS 30 June 2021 Comments Name Shares % total 1 Pareto AS 13,823,610 19.79 % • The Company has 69,851,730 2 Société Générale 6,943,049 9.94 % shares outstanding. One class 3 Hjellegjerde Invest AS 2,800,000 4.01 % of shares where each share 4 Landkreditt Utbytte 2,549,945 3.65 % car
Slide 31: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 51.28 1.85 1.79 49.43 1.68 46.54 Q2-20 Q1-21 Q2-21 Q2-20 Q1-21 Q2-21 Price / Earnings Price / Book 7.05 7.04 1.01 0.96 4.49 0.69 Q2-20 Q1-21 Q2-21 Q2-20 Q1-21 Q2-21 31 Share price NOK 52.00
Slide 32: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q2-21 Q1-21 Q4-20 Q3-20 Q2-20 Net interest income 213.3 200.2 191.0 188.2 183.8 Net other operating income -1.4 4.9 13.7 -13.1 23.9 Total net income 212.0 205.1 204.6 175.2 207.7 Total operating expenses 41.0 40.9 40.9 32.4 38.1 Operating profit before 171.0 164
Slide 33: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q2-21 Q1-21 Q4-20 Q3-20 Q2-20 Loans to credit institutions 1,750 273 1,081 1,938 1,610 Loans to customers 15,310 15,089 14,661 13,874 14,235 Bonds and other securities 2,734 3,235 3,612 4,395 3,703 Shareholdings in associated 22 26 26 23 23 companies Other assets 10
Slide 34: Real Estate Exposure
REAL ESTATE EXPOSURE Geographical residential property exposure Geographical commercial property exposure 4% 9% 3% 5% 9% Oslo Viken 7% 32% Viken Oslo Vestfold og 10% Vestfold og 48% Telemark Telemark Vestland Sweden Trøndelag Rogaland Sweden & Other 14% 32% Other 25% 34 NOKm of gross exposure. Total
Slide 35: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding front and back-end fees over 3M NOKm, estimated interest contribution including commissions, excluding front and back-end fees Nibor or si
Slide 36: Number of Customers
NUMBER OF CUSTOMERS per business area Real Estate 263 Corporate 130 Securities 24 Shipping 23 & Offshore Retail 10 (Mortgages) 36
Slide 37: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 9,960 Percent customer deposits of net lending to customers Senior debt 5,645 74.3 % 74.0 % T1 & T2 debt 488 64.8 % 64.9 % 64.6 % 64.8 % 65.1 % 61.9 % Other debt 245 4956 5645 5551 56.4 % 4770 5192 4935 5604 Equity capital 3,582 5624 5472
Slide 38: Customer Deposits
CUSTOMER DEPOSITS Deposits by product (NOKm) Deposits by size (NOKm) 583 Floating rate retail > NOK 20m 3,312 268 3.580 688 2,819 Floating rate corporate 3,504 NOK 10 - 20m 799 191 990 1,155 Savings with restrictions 2,366 NOK 5 - 10m 787 99 887 3,253 Fixed rate 2,050 NOK 2 - 5m 1,531 738 2.269 1,40
Slide 39: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 71 200 150 0 52 36 1,650 0 1,500 1,239 20 120 11 750 6 500 19 3M 6M 12M 2Y 3Y 5Y 2021 2022 2023 2024 2025 2026 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordinated Ca
Slide 40: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Market value of bonds and funds comprising surplus liquidity. • Liquidity is comprised of cash and highly liquid bonds. 40% • High share of government Government & PSEs & PSEs to reduce credit Covered bonds spread risk and increase short-term liquidity. 60
Slide 41: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,329 None / very low risk 62% 5,827 61% 59% 57% 54% 9,623 Low risk 11,686 1,524 Moderate risk 36% 1,138 35% 34% 32% 31% 184 Some risk 129 77 High risk 35 9% 7% 6% 6% 6% 4 Very high risk Q2-20 Q3-20 Q4-20 Q1
Slide 42: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 583 3% < 10 485 13% 5,435 10 - 50 4,948 7% 26% 4,892 < 10 50 - 100 5,264 10 - 50 1,926 50 - 100 100 - 150 8% 2,883 100 - 150 1,482 150 - 200 150 - 200 1,457 200 - 250 > 250 875 200 - 250 1,325 15% 2,54
Slide 43: ( Pareto bank
( Pareto bank