Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q1 2016 Earnings Presentation
38 slides from Jyske Bank A/S's earnings presentation, Apr 28, 2016
Slide 1: Jyske Bank Q1 2016
Jyske Bank Q1 2016 28 April 2016
Slide 2: Q1 2016 highlights
Q1 2016 highlights • Danish economy continues its slow recovery but more uncertainty as retail sales drop and exports slow down • Danish agriculture – in particular dairy and pig farmers – continues to be challenged • Volatile financial markets • Negative interest rate environment persists and is ex
Slide 3: Jyske Bank/BRFkredit merger - still ahead of plan
Jyske Bank/BRFkredit merger - still ahead of plan • Annual earnings and cost synergies of DKK 600m expected to have full annual impact by 2017 – one year earlier than originally planned and 6 New home loan products months earlier than previously announced 70 DKKbn 60 • Synergies with full year effec
Slide 4: Our targets
Our targets Q1 2016 • Delivering an attractive long-term return on equity – Long-term target of pre-tax ROE of minimum 10% 6.4% • Harvesting annual synergies of DKK 600m related to the Jyske Bank/BRFkredit merger – Expected 50/50 split between earnings and cost synergies DKK 61.7bn – DKK 100bn in lo
Slide 5: Danish Macro Economy Q1 2016
Danish Macro Economy Q1 2016 5
Slide 6: Danish economy – a slow recovery story
Danish economy – a slow recovery story • Overall the Danish financial sector’s operating environment has improved • The improvement is also reflected in rating agencies’ outlook on the Danish banking sector: • In Jan 2016 S&P changed their Danish BICRA outlook from stable to positive • Moody’s sees
Slide 7: Supported by a positive housing-consumption cycle
Supported by a positive-housing-consumption-cycle Consumer sentiment above average Higher acitivity on the housing market Household consumption is rising House prices recovering after burst in 08/09 Note: Possible cycle-breakdown in recent months with sharp drop in retail sales. Data can be volatile
Slide 8: Improved asset quality as defaults are close to normalization
Improved asset quality as defaults are close to normalization Unemployment is moderate and declining Forced house sales below 0.2% per year Interest rates are at historic low Business bankruptcies close to normal 8
Slide 9: Turnaround and consolidation at the same time
Turnaround and consolidation at the same time … made possible by low interest rates and real wage growth The private sector is still saving up …so household debt is declining …and household net assets are large 9
Slide 10: Denmark is a AAA economy with strong structural financial features
Denmark is a AAA economy with strong structural financial features Current account surpluses since late ..imply that foreign assets are increasing 90s And public sector debt is low This is why Denmark is AAA 10
Slide 11: Jyske Bank Q1 2016 results
G JYSKE BANK Jyske Bank Q1 2016 results 11
Slide 12: Q1 2016 results
Q1 2016 results • Pre-tax profit of DKK 478m (equal to ROE 6.4% p.a.) CORE PROFIT AND PROFIT FOR THE PERIOD • Core income driven by Index Index DKKm Q1 2016 Q1 2015 16/15 Q1 2016 Q4 2015 Q1/Q4 – Stable underlying development in NII. In Q1 2016 DKK 14m has Net interest income 1,437 1,440 100 1,437 1,
Slide 13: Underlying NII stable
Underlying NII stable • NII supported by continued growth in new home loans as well as growth in other mortgage loan segments, e.g. corporate Net interest income 1.800 DKKm 1.600 • NII is negatively affected by decrease in other net interest income 1.400 from mortgage activities (lower refinancing v
Slide 14: Net fee income at moderate level
Net fee income at moderate level Net fee income • Net fee income in Q1 is down by DKK 171m compared to Q4 due to 700 – Q4 seasonality in investment related fees DKKm 600 – Lower brokerage income 500 – Lower refinancing fees at BRFkredit 400 300 200 100 0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 • Sec
Slide 15: Improved credit quality has positive effect on value adjustments
Improved credit quality has positive effect on value adjustments Value adjustments under core income • Q1 2016 has been characterized by volatile financial markets and 600 value adjustments have been affected by the interest rate DKKm development in particular: 500 400 300 — Falling long-term intere
Slide 16: Core expenses fall in line with expectations
Core expenses fall in line with expectations Q4 2015 vs. Q1 2016: Development in core expenses • Core expenses down by DKK 101m compared to Q4 2015 and DKK 1.400 DKKm 41m compared to Q4 2015 adjusted for one-offs (costs of winding 1.350 up Swiss banking operations and integration costs) 1.300 • Expe
Slide 17: Net reversals ex agriculture
Net reversals ex agriculture • Loan impairment charges under core profit of DKK 172m of which agriculture accounts for DKK 228m Loan impairment charges and losses (under core profit) 500 • Management’s estimate of DKK 60m related to agriculture made in Q1 DKKm 2016 400 300 • End of Q1 2016 total bal
Slide 18: Limited exposure to dairy and pig farmers
Limited exposure to dairy and pig farmers • Exposure to dairy and pig farmers accounts for less than 1% of Loans, advances and Balance of loan Impairment ratio loans and guarantees guarantees impairment charges DKKm/% Q1 2016 Q4 2015 Q1 2016 Q4 2015 Q1 2016 Q4 2015 Dairy farmers 876 1,016 752 709 46
Slide 19: Investment portfolio earnings into negative territory
Investment portfolio earnings into negative territory Investment portfolio earnings, quarterly • Value adjustments in investment portfolio earnings negatively 250 affected by DKK 130m related to fair value assessment of Jyske DKKm 200 Bank’s holdings in Nordjyske Bank 150 100 50 0 -50 -100 -150 -200
Slide 20: Credit Quality
G JYSKE BANK Credit Quality 20
Slide 21: Geographical exposure
Geographical exposure East –East strategy Loss in 2015 for housing properties • The primary geographical exposure of BRFkredit is in areas with increasing house prices and expected population growth • Relatively low losses in urban areas during the financial crisis 4% of lending • High marketability
Slide 22: Improved credit quality
Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 2,0% 500 120 Private 1,8% Commercial 100 1,6% 400 Subsidised 1,4% 80 1,2% 300 1,0% 60 0,8% 200 40 0,6% 100 20 0,4% 0,2% 0 0 0,0% Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 20
Slide 23: Capital and Liquidity
G JYSKE BANK Capital and Liquidity 23
Slide 24: Strong capital position
Strong capital position • Capital ratio 16.7% and CET1 ratio 15.9% end of Q1 2016 compared to Capital ratio 17.0% and 16.1% end of 2015. Change in capital ratios due to: 18 pct 16 – Higher RWA (growth in credit risk) 14 – Share buy-back and expected dividend deducted from 12 consolidated capital 10
Slide 25: CRD IV requirements
CRD IV requirements • Total capital requirement by 2019 expected to be around 17-17.5 %*** • Long term (fully loaded CRDIV) capital targets of 14 % CET1 and 17.5 % total capital ratio 18 0.4 16 2.5 0.4 Requirement Combined Buffer Countercyclical Buffer* 15.9 14 1.5 SIFI Buffer 2.5 12 2.5 Capital Con
Slide 26: Ample liquidity
Ample liquidity Group Liquidity buffer • Liquidity buffer DKK 68bn end of Q1 2016 (DKK 73bn end of 2015) 80 DKKbn – 88% of the buffer - DKK 60bn - is eligible for repo transactions at 70 central banks (the Danish Central Bank or the ECB) 60 50 40 30 20 10 0 31-12-2013 31-12-2014 31-12-2015 31-03-201
Slide 27: BRFkredit funding profile
BRFkredit funding profile • Brought down dependence of short term funding as a consequence of requirements from S&P and the supervisory diamond – Increased margins and quotation cuts on short term funded loans (F1 og F2) • Funding of short funding loans (F1 og F2) with RTL-F – Bond has a legal matur
Slide 28: EUR funding of mortgage loans in DKK
EUR funding of mortgage loans in DKK • BRFkredit is the only Danish mortgage institution to issue Danish covered bonds under the joint funding agreement – Funding of bank loans through bonds issued by mortgage institutions – Funding of subportfolios of loans – Exempt from the strict micro match of l
Slide 29: Business Segments
G JYSKE BANK Business Segments 29
Slide 30: Banking activities
Banking activities Pre-tax profit: • NII under pressure (DKK 14m included related to fixed rate home loans issued at a discount) SUMMARY OF INCOME STATEMENT Index Index DKKm Q1 2016 Q1 2015 16/15 Q1 2016 Q4 2015 Q1/Q4 • Net fee & commission income down due to no performance Net interest income 924 8
Slide 31: Mortgage activities
Mortgage activities Pre-tax profit: SUMMARY OF INCOME STATEMENT Index Index • Stable contribution income DKKm Q1 2016 Q1 2015 16/15 Q1 2016 Q4 2015 Q1/Q4 Contribution income, etc. 1 434 406 107 434 432 100 • Other net interest income down due to lower Other net interest income -35 59 - -35 18 - repl
Slide 32: Leasing activities
Leasing activities SUMMARY OF INCOME STATEMENT Index Index Pre-tax profit: DKKm Q1 2016 Q1 2015 16/15 Q1 2016 Q4 2015 Q1/Q4 Net interest income 114 116 98 114 112 102 • Stable NII compared to Q1 2015 and moderate Net fee and commission income -17 -15 113 -17 -12 142 increase compared to Q4 2015 Valu
Slide 33: Non-performing loans
G JYSKE BANK Non-performing loans 33
Slide 34: Non-performing loans
Non-performing loans • At group level NPLs amounted to 4.1% of loans and advances at the end of Q1 2016 • Jyske Bank has been submitting information about non-performing loans (NPLs) since end of Q3 2014 • Jyske Bank has chosen to apply EBA’s technical standards as definition for NPLs • NPLs compris
Slide 35: NPLs – Jyske Bank Group
NPLs – Jyske Bank Group JYSKE BANK GROUP, DKKm 2016 Q1 2015 Q4 2015 Q3 2015 Q2 2015 Q1 Carrying amount 424,423 410,030 394,199 389,815 390,277 Balance of loan impairments charges and provisions for guarantees 6,939 6,713 6,762 6,778 6,717 Balance of discounts for acquired assets 1,418 1,548 1,878 2,
Slide 36: NPLs – Banking activities
NPLs – Banking activities BANKING, DKKm 2016 Q1 2015 Q4 2015 Q3 2015 Q2 2015 Q1 Carrying amount 166,513 160,563 153,733 157,978 162,778 Balance of loan impairments charges and provisions for guarantees 6,282 6,083 6,215 6,337 6,392 Balance of discounts for acquired assets 666 753 978 1,034 1,126 Gro
Slide 37: NPLs – Mortgage activities
NPLs – Mortgage activities MORTGAGE, DKKm 2016 Q1 2015 Q4 2015 Q3 2015 Q2 2015 Q1 Carrying amount 257,910 249,467 240,467 231,837 227,499 Balance of loan impairments charges and provisions for guarantees 657 630 547 441 325 Balance of discounts for acquired assets 753 795 900 1,071 1,212 Gross carry
Slide 38: 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,