Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2022 Earnings Presentation
43 slides from Pareto Bank Asa's earnings presentation, Aug 25, 2022
Slide 1: Pareto Bank Financial Results Second Quarter 2022
PARETO BANK Financial Results Second Quarter 2022
Slide 2: Agenda
Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: Second Quarter 2022 Highlights
SECOND QUARTER 2022 Highlights • Profit after tax NOK 133.0m (NOK 131.3m in Q2-21). • Return on equity after tax 14.5 % (14.7 %). • Net interest income NOK 225.8m (NOK 213.3m). • Lending to customers grew by NOK 465m to NOK 16,109m. • Corporate lending grew by NOK 600m and ship financing by NOK 623m
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 18.1 % 14.7 % 14.5 % 131.3 133.0 16.9 % 12.8 % 16.4 % 116.9 Q2-21 Q1-22 Q2-22 Q2-21 Q1-22 Q2-22 30.06.2021 31.03.2022 30.06.2022 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 225.8 213.3 207.5 0.10% 0.06% 21.0% 19.7% 19.4
Slide 5: Agenda
Highlights Financials Business Areas Outlook & Ambitions 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q2-22 Q2-21 H1-22 H1-21 Net interest income driven by lending growth and higher rates. Net interest income 225.8 213.3 433.3 413.5 Cost of market funding has increased. Little change in cost of Net other operating income 5.4 -1.4 13.6 3.6 deposits. Total net income 231.2
Slide 7: Net Interest Margin
NET INTEREST MARGIN Comments • Lending margin improved 6.37% 6.17% 6.32% 5.91% by changes to lending rates 6.03% 5.94% 6.11% 5.59% 5.85% 5.66% 5.76% 5.71% in Q2-21. 5.41% 5.48% 5.50% 5.22% 5.58% 5.18% • Moderate growth in fee income. • Deposit rates have increased less than market rates, strengtheni
Slide 8: Rapid Interest Rate Increase
RAPID INTEREST RATE INCREASE Comments 3.5 • Rates on existing loans increased in February and April. 3 • Norges Bank is expected to raise rates rapidly in the second 2.5 half of 2022. Nibor has increased sharply due to rate hike expectations. 2 • Pareto Bank announced a new rate increase which takes
Slide 9: Annual Change in Net Interest Income
ANNUAL CHANGE IN NET INTEREST INCOME (NOKm) 23.9 11.1 0.6 Q2-22 0.0 10.2 225.8 10.3 4.9 Q2-21 213.3 15.3 180.0 Market Market Surplus Lending Lending Fee Deposit Deposit funding funding Liquidity and volume rate income volume rate volume rate Other * 9 *) Other net interest income includes fee paid t
Slide 10: Impairments by Stage
IMPAIRMENTS BY STAGE Credit exposure by IFRS9 stage (NOKm) Impairments and losses by stage (NOKm) Stage 3 NOK 182m 123.5 (-53m) 182 113.9 0.7 841 Stage 2 NOK 841m 55.7 (-169m) 49.8 Write-offs Stage 3 Stage 2 10.8 18,174 13.5 Stage 1 Stage 1 NOK 18,174m (+951m 56.4 50.6 change from Q1-22) 30.06.2022
Slide 11: Credit Quality
CREDIT QUALITY Historical impairments and losses (NOKm) 15.5 11.1 9.6 6.7 6.2 5.8 - (1.5) (3.4) Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 11
Slide 12: Profitability Protects Against Losses
PROFITABILITY PROTECTS AGAINST LOSSES Loss absorbing capacity 4.5 % 4.4 % 4.3 % 4.2 % 4.1 % 4.1 % 3.8 % 3.4 % 0.42% 0.37% 0.24% 0.32% 0.13% 0.13% 0.16% 0.04% 2015 2016 2017 2018 2019 2020 2021 YTD 2022 Loss ratio Loss absorbing capacity Loan loss absorbing capacity: annualized profit excl. impairmen
Slide 13: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS Core Equity Tier 1 Ratio (CET1) 18.1 % • EU’s Banking Package (CRD 5/CRR 2) 16.6 % implemented in Norway on 1 June. 16.0 % 16.4 % 15.9 % CET1 requirement including P2G • CET1 increase due to implementation of lower 15.2 % risk weights for small and medium-sized ente
Slide 14: Capital Targets
CAPITAL TARGETS 17.2 % 0.5% 15.2 % Increase in 0.5% systemic risk buffer by 1.5 pp as of 31.12.2022. Pillar 2 and P2G 9.0% to be determined 7.0% Increase in by the NFSA countercyclical capital buffer by 0.5 pp as of 31.12.2022. 3.2% 3.2% 4.5% 4.5% H1-22 H2-22 Pillar 1 Pillar 2 Capital buffers Pillar
Slide 15: Agenda
Highlights Financials Business Areas Outlook & Ambitions 15
Slide 16: A Niche Player Financing Medium Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM SIZED ENTERPRISES Business Areas Focus Credits Exposure Sweet spot The specialized real estate Land acquisition financing developer bank for Eastern Property construction REAL Norway and larger facilities NOKm 50 - 100 ESTATE Norwegian cities. Commercial property 61%
Slide 17: Exposure per Business Area
EXPOSURE PER BUSINESS AREA (NOKm) 8,160 7,910 7,668 7,267 6,932 5,549 4,921 5,060 5,076 4,856 4,732 4,732 4,589 4,665 4,522 1,888 1,389 1,431 1,266 1,090 Residential property Commercial property Corporate Shipping Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 17
Slide 18: Residential Property
RESIDENTIAL PROPERTY Credit update Residential property exposure (NOKm) Total NOK 6,932m • 162 customers with average commitment of NOK 43m. • 41 % residential exposure in Oslo and 39 % in Viken. Land without houses 1,076 • Close follow-up of ongoing projects. Regular reporting from customers, third
Slide 19: Commercial Property
COMMERCIAL PROPERTY Credit update Commercial property exposure (NOKm) Total NOK 4,665m • 98 customers with average commitment of NOK 48m. • 37 % commercial property exposure in Oslo and 16 % in Viken. • 83 % of commercial property exposure is long-term cash-flow based, while the remainder is develop
Slide 20: Corporate
CORPORATE Diversified exposure Total NOK 5,549m Credit update Total NOK 5,549m • 126 consolidated corporate customers with average • Solid growth in Q2-22 after a soft start to the year. commitment of NOK 42.2m. • Stable credit quality. • 11 consolidated securities financing customers with average c
Slide 21: Shipping
SHIPPING Credit update Exposure (NOKm) Total NOK 1,888m • 21 customers* and 43 vessels. Container • Largest exposure of USD 37.2m and average commitment size 433 LTV 21 % of USD 9.2m. Bulk 432 LTV 40 % • Corporate loans make up 47 % of the exposure, while 53 % are loans to investment projects. Produ
Slide 22: Agenda
Highlights Financials Business Areas Outlook & Ambitions 22
Slide 23: Market Outlook: Real Estate
MARKET OUTLOOK Real estate Housing prices have increased in H1-22. Residential property projects Residential property are completed as planned in Oslo and surrounding areas. Uncertainty related to the economic development may, however, lead to lower • Material and labour shortages, cost inflation an
Slide 24: Market Outlook: Corporate
MARKET OUTLOOK Corporate Solid growth in Q2-22 after a soft start to the year. Deal flow at all time high in Q2-22. Growth expected to continue in H2-22. Sales activities and deal flow are supported by increased brand awareness and knowledge about Pareto Bank’s offering to medium- sized enterprises.
Slide 25: Market Outlook: Shipping
MARKET OUTLOOK Shipping High lending growth in Q2-22. Good deal flow and disbursement of several credits coming in Q3-22. However, loan redemptions will lead to a relatively flat lending volume. Continued positive market outlook for most shipping segments. Container charter rates to remain at high l
Slide 26: Sustainability
SUSTAINABILITY Internal sustainability task force with representatives from the management team. Sustainability work is supervised by the Board of Directors. Sustainability policy adopted by the Board in H2-21. Pareto Bank’s long-term goal is responsible lending. An ESG score has been developed and
Slide 27: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term YTD ambition Pareto Bank is solid, profitable, and has a proven business model based on specialised sector RETURN ON competence and close customer relationships. 14.0 % 13.6 % EQUITY Long-term profitability supported by lending growth, stable net margin and portfolio qu
Slide 28: Appendix
APPENDIX (Pareto bank
Slide 29: Largest Shareholders
LARGEST SHAREHOLDERS 30 June 2022 Name Shares % total • The Company has 69,851,730 shares outstanding. One class 1 Pareto AS 13,970,346 20.00 % of shares where each share carries one voting right. 2 Société Générale 6,943,049 9.94 % • Diversified investor base with 3,334 shareholders. 3 Hjellegjerde
Slide 30: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 51.83 1.85 1.84 51.28 1.64 49.98 Q2-21 Q1-22 Q2-22 Q2-21 Q1-22 Q2-22 Price / Earnings Price / Book 1.31 10.04 1.01 0.91 7.04 6.41 Q2-21 Q1-22 Q2-22 Q2-21 Q1-22 Q2-22 30 Share price NOK 47.25
Slide 31: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q2-22 Q1-22 Q4-21 Q3-21 Q2-21 Net interest income 225.8 207.5 214.5 210.3 213.3 Net other operating income 5.4 8.2 3.0 5.7 -1.4 Total net income 231.2 215.7 217.6 216.0 212.0 Total operating expenses 45.6 45.3 40.1 40.4 41.0 Operating profit before 185.6 170.4 1
Slide 32: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q2-22 Q1-22 Q4-21 Q3-21 Q2-21 Loans to credit institutions 1,676 1,840 907 1,766 1,750 Loans to customers 16,109 15,644 15,805 15,187 15,310 Bonds and other securities 3,711 3,795 3,106 3,014 2,734 Shareholdings in associated companies 23 24 23 22 22 Other assets 12
Slide 33: Interest Rate and Fee Income
INTEREST RATE AND FEE INCOME Income from interest rates and fees on lending to customers (NOKm) Comments • Fee income on lending includes arrangement fees and provisions on credit 39.3 lines. 44.8 37.6 50.4 37.7 35.2 38.9 41.8 • Fee income will vary with activity and lending product, and is accrued
Slide 34: 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 over 3M Nib
Slide 35: Number of Customers
NUMBER OF CUSTOMERS Per business area Real Estate 260 Corporate 169 Shipping 30 Retail 10 (Mortgages) 35 Non-consolidated
Slide 36: Real Estate Exposure
REAL ESTATE EXPOSURE Geographical residential property exposure Total NOK 7,889m* Geographical commercial property exposure Total NOK 3,709m* 5% 8% 3% 4% 9% 10% Oslo 37% Oslo 40% Viken Vestland 12% Vestfold og Telemark Viken Vestland Sweden Sweden Vestfold & Telemark Other Other 16% 39% 18% 36 *) Re
Slide 37: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 10,341 Percent customer deposits of net lending to customers Senior debt 6,561 AT1 & T2 debt 720 64.8 % 65.1 % 65.5 % 64.6 % 63.0 % 64.2 % 60.1 % Other debt 396 4,770 5,645 5,645 6,754 6,561 6,038 4,935 Equity capital 3,620 Key ratios Depo
Slide 38: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,802 589 NOK 10 - 20m 1,000 129 688 NOK 5 - 10m 835 101 Floating rate retail 623 NOK 2 - 5m 1,390 595 3,504 NOK 0 - 2m 1,289 607 Floating rate corporate 3,936 - 1 000 2 000 3 000 4 000 5 000 Floating rate Fixed rate 2,36
Slide 39: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 200 155 150 119 250 91 120 1,650 61 1,500 1,320 43 34 1,000 1,000 3M 6M 12M 2Y 3Y 5Y 108 2022 2023 2024 2025 2026 2027 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordi
Slide 40: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Market value of bonds and 3% funds comprising surplus liquidity. 25% • Liquidity is comprised of cash and highly liquid bonds. Government & PSEs • High share of government Covered bonds & PSEs to reduce credit Senior financials spread risk and increase sho
Slide 41: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 5,827 None / very low risk 62% 6,784 57% 56% 11,686 52% 52% Low risk 10,757 1,138 38% Moderate risk 36% 37% 1,392 36% 31% 129 Some risk 189 35 High risk 46 8% 8% 7% 6% 5% 18 Very high risk 29 Q2-21 Q3-21 Q4-
Slide 42: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 485 7% 2% < 10 453 7% 4 948 10 - 50 5 329 28% 5 264 50 - 100 < 10 5 160 12% 10 - 50 2 883 50 - 100 100 - 150 3 233 100 - 150 150 - 200 1 457 150 - 200 200 - 250 2 392 > 250 1 325 200 - 250 1 343 17% 2
Slide 43: ( Pareto bank
( Pareto bank