Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — Q3 2019 Earnings Presentation
42 slides from Jyske Bank A/s's earnings presentation, Oct 30, 2019
Slide 1: Jyske Bank Q3 2019
Jyske Bank Q3 2019 30 October 2019
Slide 2: Our targets
Our targets Q1-Q3 2019 Return on Equity • Delivering a return on equity of approximately 6% in 2019 ROE 5.7% Volume 2020 • Total loan portfolio of DKK 350bn in Jyske Realkredit DKK 339bn Capital position • Long-term targets for capital ratio 17.5% and CET1 ratio 14% post-Basel IV 20.2% implementatio
Slide 3: Q3 2019 highlights
Q3 2019 highlights • Net profit of DKK 365m, equal to 4.0% p.a. ROE Core profit and profit for the period • Business volumes DKKm Index Index • Loan growth in mortgage activities of 6% y/y. Bank Q3 2019 Q3 2018 19/18 Q2 2019 Q3/Q2 lending remains under pressure. Net interest income 1,310 1,407 93 1,
Slide 4: ROE remains under pressure
ROE remains under pressure Net profit Q3 2019 vs. Q2 2019: Development in ROE after tax 1,000 12% 6% DKKm 5% 750 9% 4% 500 6% 3% 2% 250 3% 1% 0 0% 0% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q2 2019 Core Core Loan Investment Tax Q3 2019 income expenses impairment portf
Slide 5: Net interest income impacted by several factors
Net interest income impacted by several factors Q3 2019 vs. Q2 2019: Net interest income 1,400 DKKm Net interest income of DKK 1,310m compared to DKK 1,340m in Q2 2019 and DKK 1,407m in Q3 2018 – down by 2% and 7%, respectively 1,350 • Pressure on net interest income in Q3 2019: Growing volume of lo
Slide 6: Negative interest rates
Negative interest rates • The Danish central bank’s main policy rate has been negative for more than four years in a row • Negative deposit rates: Introducing -75bp deposit rate on retail client deposits exceeding DKK 750,000 as well as all corporate deposits from 1 December 2019, unless other terms
Slide 7: Increasing bank deposit surplus
Increasing bank deposit surplus Bank deposits (ex. repo) Bank deposits of DKK 138.2bn in Q3 2019 compared to DKK 150 135.5bn end of 2018 – up by 2% DKKbn 140 • The increase is primarily attributable to demand deposits from personal and private banking clients 130 120 110 100 90 2010 2011 2012 2013 2
Slide 8: Net fee income supported by refinancing activity
Net fee income supported by refinancing activity Fee income split by type • Net fee income of DKK 580m in Q3 2019 – up by 31% relative to 800 800 DKKm Q3 2018 600 600 • Net fee income in Q3 2019 close to level from Q4 2017 400 400 • High refinancing activity in Q3 supports fee income from 200 200 mo
Slide 9: Value adjustments at lower levels
Value adjustments at lower levels Value adjustments under core income • Value adjustments under core income amounted to DKK 250 -95m, down by DKK 87m q/q and DKK 227m y/y due to: DKKm 200 • Flatter yield curve and decreasing interest rate levels 150 • Value adjustments from clients’ transactions rel
Slide 10: Stable underlying development in core expenses
Stable underlying development in core expenses Q3 2019 vs. Q2 2019 Development in core expenses • Core expenses of DKK 1,275m in Q3 2019 – up by DKK 19m vs. Q2 2019 and DKK 26m vs. Q3 2018. Impacted by: 1,300 DKKm • Lower number of full-time employees: 1,250 • 3,672 FTE’s Q3 2019 • 3,692 FTE’s Q2 20
Slide 11: Net reversals of loan impairment charges
Net reversals of loan impairment charges • Credit quality remains solid: Net reversals of DKK 30m in Q3 2019 vs. impairment charges of DKK 9m in Q2 2019 • Impairment ratio of -1bp for Q3 2019 Loans, advances and guarantees - by IFRS 9 stages (DKKbn/%) • Accumulated impairment ratio of 1.1% Q3 2019 Q
Slide 12: Investment portfolio earnings down
Investment portfolio earnings down • The investment portfolio earnings amounted to DKK -136m in Q3 Investment portfolio earnings , quarterly 2019 – down by DKK 86m compared to Q2 2019 0 DKKm -20 • Positioning: In Q1-Q3 2019, Jyske Bank’s investment portfolio has been positioned for a steepening of t
Slide 13: Capital and Liquidity
UF JYSKE BANK Capital and Liquidity
Slide 14: Strong capital position
Strong capital position Capital ratios • Capital ratio 20.2% and CET1 ratio 16.3% end of Q3 2019 vs. long- 25 term targets of 17.5% and 14% post-Basel IV implementation pct 20 • Effects of Basel IV expected to be fully financed by 2022 • Each quarter, Jyske Bank's Supervisory Board assesses the 15 p
Slide 15: Liquidity continues to be plenty
Liquidity continues to be plenty Group liquidity buffer (DKKbn) • DKKbn Liquidity buffer DKK 80bn end of Q3 2019 vs. DKK 64bn end of 2018 80 • 89% of the buffer - DKK 71bn - is eligible for repo transactions at 8% 70 central banks (Nationalbanken or ECB) • Cash placements are categorized as intra-da
Slide 16: 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 120 DKKm preferred senior issued before end of 2018 can be used to fulfill MREL requirements (”grandfathering”) 100 • Old SP issuances
Slide 17: Appendices
Appendices 1) Jyske Bank in brief and business segments 2) Danish Economy Q3 2019
Slide 18: 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 • Nationwide branch network comprised of 92 personal client branches, 32 corporate branches, 9 Private Banking ce
Slide 19: Jyske Bank in brief
Jyske Bank in brief Jyske Bank Group key figures Shareholders' ROE after Loans and Total Profit before Net profit, equity at year- tax, average advances, Deposits, assets, Number Year tax, DKKm DKKm end, DKKm equity DKKbn DKKbn DKKbn of FTEs 1997 584 443 4,772 9.6% 36.6 41.5 63.1 2,671 1998 710 511
Slide 20: Banking activities
Banking activities Financials • Decrease in bank lending of 4% ytd., partly due to the 1,600 introduction of cash pool solutions. DKKm 1,400 • Increase in bank deposits of 2% ytd. 1,200 1,000 • Increase in AUM due to positive developments in financial 800 markets and inflow of funds 600 • Core profi
Slide 21: Mortgage activities
Mortgage activities Financials • Continued growth in loan volume – both private 600 DKKm individuals and corporate clients 500 • Nominal volumes up 2% ytd. • Mortgage lending at fair value saw a further 400 increase to 4% ytd. due to rising bond prices 300 • High refinancing activity in Q3 2019 supp
Slide 22: Leasing activities
Leasing activities Financials 160 • Loan volumes up 10% y/y, thus continuing to support DKKm 140 net interest income 120 100 • Negative value adjustments in Q3 due to the SEK 80 portfolio in Sweden being hedged in EUR 60 40 • Stable core expenses 20 0 • Impairment charges of DKK 26m in Q3 2019 compa
Slide 23: Mortgages: The portfolio
Mortgages: The portfolio Distribution of lending portfolio • 87% of lending to properties with housing purposes 1% 1% 1% 0% 1% Owner-occupied Owner-occupied(51%) (51%) 0% • No loans with swaps to co-operative housing Vacation Vacationhomes homes(3%) (3%) • No lending to agriculture and other primary
Slide 24: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1.8% 500 25 Value of repossessed proporties (DKKm) Private 450 Number of repossessed proporties 1.6% Commercial 400 20 1.4% Subsidised 350 1.2% 300 15 1.0% 250 0.8% 200 10 0.6% 15
Slide 25: Bank loans: the portfolio
Bank loans: the portfolio Loans and guarantees by sector (DKKm/%) • Portfolio composition end of Q3 2019 Loans, advances and Balance of loan Impairment • Corporates take up larger proportion, 67% vs. guarantees impairment charges Losses charges Q3 2019 Q4 2018 Q3 2019 Q4 2018 YTD Q3 2019 63% end of
Slide 26: Danish Economy October 2019
UF JYSKE BANK Danish Economy October 2019
Slide 27: Headlines on the Danish Economy
Headlines on the Danish Economy • The Danish economy has been in an upturn for seven years. • We expect the upturn to slow down gradually through 2020 due to decreasing global growth. However, so far export is still performning well despite the current economic slowdown in Europe. • Low interest rat
Slide 28: Danish economy – Upturn story with global risks
Danish economy – Upturn story with global risks • The upturn is still running, but is likely to slow down. • It has not been a credit driven upturn. No credit imbalances. The upturn will slow down through 2020 Lending growth is still subdued Note: A recent upward revision of the current account surp
Slide 29: Netherlands: 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 30: Spill-over from recent Global weakness
Spill-over from recent Global weakness • There is spill-over to Denmark from weaker global economic signals • Currently, we see a neutral stance in Danish manufacturing Spill-over to Denmark from Germany But consumers remain positive Page 29/41
Slide 31: 3 kinds of stimulus support demand
3 kinds of stimulus support demand House prices recovering after burst in 08/09 Steady rise in employment The latest data from May- August show first signs of slowdown on the labour market. Interest rates are at a historic low Both domestic and foreign demand is increasing Exports is performing desp
Slide 32: Asset quality remains solid
Asset quality remains solid Unemployment has declining Forced house sales below 0.2% per year Business bankruptcies at neutral level Page 31/41
Slide 33: 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 exports, and it’s the 4th largest export market • IMF: Hard Brexit with trade according to WTO implies a loss of 1% of GDP in DK (
Slide 34: Widespread, moderate, recovery on the housing market
Widespread, moderate, recovery on the housing market • Overall house prices are rising 2-4% y/y. • Large price increases on flats in biggest cities have stopped. Prices are decreasing slightly. • Postponement of new housing tax model from 2021 to 2024 removes a short term risk element for flat price
Slide 35: Risk of downturn in construction after big city boom
Risk of downturn in construction after big city boom • There have been an unprecedented building boom in the big cities following strong population growth due to the urbanisation trend. Completed housing units, per year, 1981-2019 2.5% Population growth, % 2.5% 8000 8000 7000 7000 2.0% 2.0% 1.5% 1.5
Slide 36: Recent building boom has been local compared to 00's
Recent building boom has been local compared to 00’s Completed housing units during 7 quarters, units in % of total stock Q2 2006 – Q4 2007 Q2 2017 – Q4 2018 Source: Danmarks Statistik Page 35/41
Slide 37: Moderate Danish price increase in European context
Moderate Danish price increase in European context European house prices the past year The development in Scandinavian houseprices Page 36/41
Slide 38: 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 90s ..imply that foreign assets are increasing And public sector debt is low This is why Denmark is AAA Page 37/41
Slide 39: A strong financial position
% of GDP 100 150 200 250 0 -50 -200 -150 -100 50 Norway Switzerlands Japan Nederlands Denmark Germany Belgium Sweden A strong financial position Austria Finland Italy United Kingdom France Estonia Lithuania USA Latvia Poland Slovakia Spain Net foreign financial assets (2018) Portugal Cyprus Greece I
Slide 40: 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 introduced (fully in -20 -20 60s and 70s: effect from 1986) -40 Devaluations -40 -60 -60 -80 -80 1960 1962 1964
Slide 41: Jyske Bank Forecasts (June 2019)
Jyske Bank Forecasts (June 2019) Danish economy 2016-2020 DKKbn Real growth (%) 2018 2016 2017 2018 2019 2020 Household spending 1049 2.1 2.1 2.3 1.4 1.4 Public spending 546 0.2 0.7 0.8 0.8 0.7 Fixed gross investment 492 7.6 4.6 5.1 0.2 3.0 Inventory investment* 12 -0.2 -0.1 0.1 0.0 0.0 Exports 1213
Slide 42: 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,