Nn Group N.v. · EURONEXT:NN
Nn — Nationale-Nederlanden Bank — Debt Investor Presentation (September 2022)
56 slides from Nn's debt investor presentation, September 2022
Slide 1: Nationale-Nederlanden Bank
Nationale-Nederlanden Bank Investor Presentation - soft bullet covered bonds September 2022
Slide 2: Important Notice
IMPORTANT NOTICE IMPORTANT: You must read the following before continuing. The following applies to the investor presentation following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the investor presentation. In accessing the inv
Slide 3: Executive summary
Executive summary Nationale-Nederlanden Bank N.V. Purpose, ambition and strategy Financials at 30 June 2022¹ Funding diversification • Top 5 retail bank in the • Purpose: to help people care for • Total assets of EUR 24.3bn; • Diversified funding mix, in terms of Netherlands (based on balance what m
Slide 4: Contents
Contents 1 Strategy and business highlights 5 2 Capital, liquidity and funding 16 3 Covered bond programme 25 4 Mortgage business 34 Appendices A Mortgage loans: origination and underwriting criteria 41 B NN Bank funding programmes 44 C Dutch economy and housing market 45 D Corporate history 50 E Gl
Slide 5: 1 Strategy and business highlights
1 Strategy and business highlights 5
Slide 6: NN Bank profile
NN Bank profile • Nationale-Nederlanden Bank (‘NN Bank’) is the fifth largest Dutch retail banking franchise, based on balance sheet size • 100% subsidiary of NN Group N.V. • Significant player in Dutch residential mortgage loans and retail savings, with close to one million retail clients in the Ne
Slide 7: Parent company: NN Group
Parent company: NN Group International footprint Overview of NN Group • International financial services company, active in 11 countries, with a strong presence in a number of European countries and Japan • Around 15,000 employees, providing retirement services, pensions, insurance, banking and inve
Slide 8: NN Bank's added value to NN Group
NN Bank’s added value to NN Group NN Bank is highly strategically important for NN Group • Operating under the Nationale-Nederlanden brand since its start in 2011 • Fully-owned subsidiary of NN Group N.V. and a fellow subsidiary of the Dutch insurance entities, i.e. NN Life and NN Non-life • NN Bank
Slide 9: NN Bank key figures
NN Bank key figures 1H22 financial highlights Non-Financial KPIs at year-end 2021 Return on equity Cost/income ratio Net result Net promotor score Employee engagement Average Internal and external FTE 9.5% 55.6% EUR 49.9m +21.4 7.5 1,246 1H21: 11.1% 1H21: 50.7% 1H21: EUR 64.6m 2020: +18.9 2020: 7.7
Slide 10: Creating long-term value for our stakeholders
Creating long-term value for our stakeholders Our goals for 2022 10
Slide 11: Retail-focused business model
Retail-focused business model NN Bank is the fifth largest Dutch retail banking franchise • Providing retail customers with mortgage loans, savings and bank annuities, supplemented by retail investment and consumer loan products • National player, with coverage of all Dutch regions, operating under
Slide 12: Financially sound bank with diversified income model
Financially sound bank with diversified income model Net interest margin1 Summary profit and loss account • An increase in market interest rates led to (Amounts in EUR m) 1H22 1H21 higher client mortgage rates. However, Interest income 277 295 continued competition in the Dutch Interest expense (158
Slide 13: Long-term financial targets
Long-term financial targets Total capital ratio (transitional CRD IV) • NN Bank steers its capital on Cost/income ratio Total Capital Ratio (TCR) and meets all capital targets • NN Bank has a cost/income (C/I) ratio target of below • NN Bank currently has a Total Axis Title 55% in 2023 15,9% Capital
Slide 14: Sustainable company & society is one of four strategic priorities of NN Bank
Sustainable company & society is one of four strategic priorities of NN Bank NN Bank’s commitment to the climate agreement: Looking ahead, NN Bank will focus on two key ESG topics: • We have insight into our carbon footprint and publish it 1. Customer empowerment: • We set concrete goals and draw up
Slide 15: NN Bank enhancing sustainability & social responsibility
NN Bank enhancing sustainability & social responsibility Sustainable housing Social responsibility Partnerships • As a mortgage provider, NN Bank wants to contribute to the • NN Bank wishes to help • NN Bank and Woonnu joined the Energy Efficient Mortgage reduction of greenhouse gas emission in hous
Slide 16: 2. Capital, liquidity and funding
2. Capital, liquidity and funding 16
Slide 17: Balance sheet composition
Balance sheet composition Assets Balance sheet at 30 June 2022 (in EUR bn) • Dutch residential mortgage loans (83% of the balance sheet at 30 June 2022) 24.3 24.3 • High Quality Liquid Assets (HQLA) portfolio of EUR 1.1bn 0.1 0.6 1,0 0,3 1,1 0,2 0,1 • 32% of outstanding mortgage amounts are guarante
Slide 18: Solid capital position
Solid capital position Total capital ratio (TCR, transitional CRD IV)1 Risk weighted assets (EUR bn) Leverage ratio 18.9% 18.7% 1,5% 15.9% > 15.5% 1,4% 1,3% 17,4% 17,3% 6,0 6,1 6,4 4,0% 4,3% 14,6% 3,6% > 3,0% 2020 2021 1H22 TCR target 2020 2021 1H22 2020 2021 1H22 Regulatory CET1 Tier 2 minimum Soli
Slide 19: Conservative approach to liquidity management
Conservative approach to liquidity management Liquidity adequacy (30 June 2022) Measurement and monitoring of funding position • NSFR ratio1: o Incentive to fund NN Bank’s activities from stable sources of funding on an ongoing basis 194% 142% 130% o On 30 June 2022, NN Bank had a NSFR ratio of 142%
Slide 20: Focus funding strategy on optimisation and diversification
Focus funding strategy on optimisation and diversification Wholesale funding strategy Funding mix (as at 30 June 2022) Attract 8% 0% retail funding Retail 21% Secured Savings, deposits bank annuities Unsecured Allocate 71% Diversification newly originated 2Subordinated of wholesale mortgage loans fu
Slide 21: Minimum Required Eligible Liabilities
Minimum Required Eligible Liabilities NN Bank meeting MREL requirements Total Risk Exposure Amount (TREA)1 Leverage Ratio Exposure (LRE) • NN Bank intends to meet MREL requirements with a combination of equity, Tier 2 and senior (non) preferred 37.8% 9.3% • The Dutch National Resolution Authority (N
Slide 22: NN Bank's Green Bond Framework
NN Bank’s Green Bond Framework The NN Bank Green Bond Framework follows the ICMA Green Bond Principles (GBP) 2018 edition • Use of Proceeds • Reporting Green Buildings meeting the Use of Proceeds eligibility criteria Reporting on the allocation of net proceeds to the Eligible Green Loan Portfolio •
Slide 23: Use of Proceeds
Use of Proceeds Green Buildings that meet one of the following criteria: Definition top 15% low-carbon residential 1. For Dutch residential properties built prior to 31 December 2020: buildings in the Netherlands • Existing residential buildings in the Netherlands with an Energy CFP green buildings
Slide 24: Credit ratings
Credit ratings Credit rating reflects NN Bank’s “highly strategic importance” for NN Group NN Bank N.V. ST issuer rating, A-1 outlook positive • Short-term credit rating of A-1 by Standard & Poor’s (S&P) LT issuer rating, A- outlook positive • Long-term credit rating of A- (positive outlook) by S&P,
Slide 25: 3. Covered bond programme
3. Covered bond programme 25
Slide 26: NN Bank Soft Bullet Programme
NN Bank Soft Bullet Programme Soft Bullet Programme launched in 2020 Consent solicitation Conditional Pass-Through bonds in April 2022 • In June 2020 NN Bank established a EUR 7.5bn Soft Bullet Programme, which • On 15 March 2022 NN Bank announced it is seeking consent from was officially registered
Slide 27: NN Bank Soft Bullet covered bond features
NN Bank Soft Bullet covered bond features Robust structure Regulatory treatment for investors Issuer Nationale-Nederlanden Bank • Dutch law and Dutch Central Bank registered • Covered Bond Directive and CRR article 129 compliant Programme size EUR 10 bn • LCR eligible (level 1) • Soft bullet structu
Slide 28: Soft Bullet programme structure
Soft Bullet programme structure Indicative transaction structure Key transaction parties Originators NN Bank and NN Life2 Swap provider1 Servicing Transferor, Issuer NN Bank agreement Swap Servicer Director CBC Servicer NN Bank agreements Administrator NN Bank Administration NN Covered Bond Security
Slide 29: Soft Bullet mechanism
Soft Bullet mechanism Going concern Event diagram of a single series • Under going-concern conditions, the covered bonds (CBs) are bullet securities due on the Final Maturity Date and the Issuer will ensure the coupon and principal payments to the investors Issuer Event No Bullet • The Asset Cover T
Slide 30: Cover Pool Eligibility Criteria
Cover Pool Eligibility Criteria Eligibility Criteria ▪ Each mortgage is either a Bank Savings Mortgage Loan, Life Mortgage Loan, Investment Mortgage Loan, Linear Mortgage Loan, Annuity Mortgage Loan, Interest-only Mortgage Loan, Savings Mortgage Loan, Switch Mortgage Loan or a combination thereof ▪
Slide 31: Asset Cover Test
Asset Cover Test Asset Monitoring Agreement Calculation specification: 1. Adjusted Aggregate Asset Amount ≥ outstanding Covered Bonds ‘A’ includes: 2. First regulatory current balance amount ≥ 105% of outstanding Covered • 96.5% Asset Percentage Bonds • 80% Indexed LTV cut-off 3. Second regulatory c
Slide 32: Eligible Green Mortgage Loans in Cover Pool
Eligible Green Mortgage Loans in Cover Pool Overview eligible green mortgage loans (in EUR bn) 1 Overview Energy Label (in %s) 21,4 9% 24% 9% 8% 100% 9% 14% 5,2 4,0 27% 1,6 0,5 Energy label A A B C D E F G Mortgage portfolio Eligible Green Loan Cover Pool Soft Eligible Green Loans Green Covered Elig
Slide 33: Green Buildings Collateral Support Amount is green and relatively young
Green Buildings Collateral Support Amount is green and relatively young, other loan characteristics are similar Building years of Green Buildings Collateral Support Amount² Loan-to-value as % of Green Buildings Collateral Support Amount² 1.400 1% 9% NHG 1.200 18% <60% 1.000 13% 60% - 70% 800 70% - 8
Slide 34: 4. Mortgage business
4. Mortgage business 34
Slide 35: Long-standing history in mortgage business
Long-standing history in mortgage business Successful NN-labelled mortgage business can be traced back to 1963 • Nationale-Nederlanden was founded in 1845, and evolved as a well-known brand in the Netherlands • In 1963, Nationale-Nederlanden started originating mortgage loans (‘NN-labelled mortgage
Slide 36: Distribution and servicing of mortgage loans
Distribution and servicing of mortgage loans Distribution of newly-originated mortgage loans in 1H22 (EUR 4.9 bn) Mortgage loan portfolio serviced at 30 June 2022 (EUR 55.5bn) NN Bank 10% NN Bank 8% 2% 6% 9% NN Life 36% NN Life 36% NN Non-life + NN Belgium NN Non-life + NN Belgium 1 DRMF 48% DRMF 1
Slide 37: Amortising mortgage loans with long fixed reset tenors
Amortising mortgage loans with long fixed reset tenors Redemption types as % of NN Bank mortgage portfolio (30 June 2022)1 Majority of new mortgage origination is annuity type (average last 12 months) 3% Annuity and linear 12% Annuity and linear Bank savings and insurance savings Bank savings and in
Slide 38: Strong historical mortgage loan performance
Strong historical mortgage loan performance Trend towards lower LTV and higher (p)repayments … Weighted average current loan-to-indexed market value decreases1 • LTV cap lowered by 1%-point p.a. from 105% in 2013 to 100% in 2018 • Lower average LTV due to higher amortisation and increased house pric
Slide 39: Loan loss provisioning and stage classification
Loan loss provisioning and stage classification Loan loss provisions (LLP) Loans by stage • The decrease of EUR 9.4m in loan loss provisions for mortgages was mainly driven • NN Bank’s credit risk exposure models are used to calculate: by a sharp housing price increase in 2021 (17.5%) and a decrease
Slide 40: Appendices
Appendices 40
Slide 41: Mortgage loans: origination and underwriting process
A Mortgage loans: origination and underwriting process1 Loan origination Regular loan servicing Special loan servicing Borrower Interest rate renewals Preventive actions Client back on track Electronic archives Intermediary / own advisors Conversions Arrears Origination position Skydoo (pre-screenin
Slide 42: Mortgage loans: origination and underwriting criteria
A Mortgage loans: origination and underwriting criteria1 All mortgage production is originated via intermediary channels Intermediaries need to be licensed • NN Bank’s mortgage origination network comprises over 1,700 active • Dedicated team for initiating and maintaining contacts with intermediarie
Slide 43: Mortgage loans: origination and underwriting criteria
A Mortgage loans: origination and underwriting criteria1 Code of conduct Borrower criteria Collateral criteria • NN Bank complies with the Financial Supervision • Credit history is checked in several registers (e.g. • All properties must be located in the Act, the Mortgage Credit Directive and speci
Slide 44: NN Bank funding programmes
B NN Bank funding programmes Secured funding (collateralised by prime Dutch residential mortgage portfolios) Green Bonds Soft Bullet Covered Bond Programme Green Bond Framework • EUR 10bn programme, of which EUR 4.8bn issued • Under the Green Bond Framework NN Bank issues Green Bonds to finance and
Slide 45: Dutch economy and housing market
C Dutch economy and housing market • The Dutch economy grew with 2.6% in 2Q22 with the manufacturing and services sector serving as key contributors • Sentiment among businesses is more upbeat than among consumers, who are currently – fuelled by the sharp and sustained increase in inflation – more p
Slide 46: Dutch economy and housing market
C Dutch economy and housing market • With house prices currently still rising in the Netherlands, the Dutch outstanding mortgage debt continues to rise • Mortgage interest rates hit their historical lowest levels in 2021. Due to the record-high inflation level, capital market rates have risen sharpl
Slide 47: Dutch economy and housing market
C Dutch economy and housing market • Dutch house prices continued their increase in the first 4 months of 2022. An unprecedented y-on-y record of 21.1% was set in January. For the full year 2022, house prices are expected to climb by 16.1%, followed by a substantial lower, but still positive, (4.5%)
Slide 48: Dutch economy and housing market
C Dutch economy and housing market • House prices are currently still rising fast in the Netherlands, but it is expected that higher interest rates and a weakening economy could cool down the market for owner- occupied homes • After setting the y-o-y record in January 2022 - a 21.1% price hike, whic
Slide 49: Dutch economy and housing market
C Dutch economy and housing market • In Europe, the mortgage payment arrears have been declining over the last couple of years. The Netherlands ranks amongst the countries with the lowest levels of arrears in Europe since 2014 • There is a trend of declining public auctions since 2012 that continues
Slide 50: Corporate history: NN Group
D Corporate history NN Group 1845 - De Nederlanden established as a fire insurance company 1863 - De Nationale Levensverzekering-Bank founded as a Dutch life insurance company 1963 - The two biggest Dutch insurers at the time – De Nederlanden and De Nationale – merge to form Nationale-Nederlanden 19
Slide 51: Corporate history: NN Bank
D Corporate history NN Bank 2011 – NN Bank launched as a savings bank to take advantage of opportunities in the Dutch banking market and respond to the declining individual life insurance market 2013 – Growth accelerated via the acquisition of selected parts of ING Bank (WestlandUtrecht Bank), predo
Slide 52: Glossary
E Glossary Abbreviation Definition Abbreviation Definition ACT Asset Cover Test LLP Loan Loss Provisioning AT Amortisation Test LCR Liquidity Coverage Ratio AFM Dutch Authority for the Financial Markets LTV Loan-to-Value APE Annual Premium Equivalent MCD Mortgage Credit Directive AuM Assets under Ma
Slide 53: Contact information
F Contact information Niek Allon Rolf-Pieter ter Horst NN Bank Treasury NN Bank Treasury M: +31 6 2013 7640 M: +31 6 2184 1550 E: niek.allon@nn.nl E: rolf-pieter.ter.horst@nn.nl Sander Roling Geraldine Bakker - Grier NN Bank Treasury NN Group Investor Relations M: +31 6 1066 6854 M: +31 6 3094 0051
Slide 54: Disclaimer
Disclaimer This material has been prepared by Nationale-Nederlanden Bank N.V. (“NN warranty, either express or implied, or undertaking of any nature, is transmitted into the United States of America, its territories or possessions Bank” or the “Company”) for informational purposes only. This materia
Slide 55: Disclaimer
Disclaimer known and unknown risks, uncertainties and other important factors beyond No licence or conveyance of any rights in any intellectual property owned the Company's control that could cause the actual results, performance or by the Company is granted or implied by the recipient’s use of the
Slide 56: Slide 56
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