Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q3 2021 Earnings Presentation
47 slides from Pareto Bank Asa's earnings presentation, 2021
Slide 1: Pareto Bank Financial Results – Third Quarter 2021
PARETO BANK Financial Results – Third Quarter 2021
Slide 2: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: Dividend for 2020
DIVIDEND FOR 2020 Proposed dividend of NOK 3.00 per share 3.50 60.0 % • The Board of Directors received an authorization from the AGM in March to distribute up to NOK 1.50 per share, corresponding to 25 % of 2020 profits. 3.00 50.1 % 50.0 %Dividend policy 50 % • High economic uncertainty related to
Slide 4: Value Creation
VALUE CREATION Total return since listing Stock/ Total return % Price change Annual return Index incl. dividends Pareto 263.91 % 200.83 % 18.45 % Bank 3 OSEBX 118.69 % 10.80 % Index 2.5 DNB 157.00 % 92.64 % 13.17 % 2 1.5 1 0.5 0 mars 14 mars 15 mars 16 mars 17 mars 18 mars 19 mars 20 mars 21 -0.5 DN
Slide 5: Third Quarter 2021 Highlights
THIRD QUARTER 2021 Highlights • Profit after tax NOK 127.8m (NOK 102.9m). • Return on equity after tax 13.8 % (12.2 %). • Return on equity after tax year to date 14.1 % (12.3 %), in line with profitability ambition. • Net interest income NOK 210.3m (NOK 188.2m). • Lending activity has been good. Com
Slide 6: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio *** 14.7 % 17.3 % 16.9 % 131.3 13.8 % 127.8 12.2 % 15.9 % 102.9 Q3-20 Q2-21 Q3-21 Q3-20 Q2-21 Q3-21 30.09.2020 30.06.2021 30.09.2021 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 213.3 210.3 188.2 0.04% 0.04% 18.5% 19.4%
Slide 7: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 7
Slide 8: Income Statement
INCOME STATEMENT P&L (NOKm) Q3-21 Q3-20 YTD-21 YTD-20 Growth in lending volume and lower funding costs Net interest income 210.3 188.2 623.8 556.0 resulted in an increase in net interest income compared Net other operating to previous year. 5.7 -13.1 9.3 -6.1 income Total net income 216.0 175.2 633.
Slide 9: Net Interest Margin
NET INTEREST MARGIN Comments • Increase in Nibor. 6.37% 6.32% 6.17% 6.03% 5.91% • Norges Bank hiked rates in 5.94% 5.85% 5.57% 5.62% 5.79% 5.53% 5.59% 5.66% September, with expectation of 5.37% 5.41% 5.48% 5.22% 5.22% further gradual rate hikes. • Steady interest rate income. Especially high fee inc
Slide 10: 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 lines. • Fee income is normally from 0.9 33.8 32.3 32.5 35.2 50.4 37.7 to 1.2 % of gross lending. 25.8 38.9 41.8 • Fee i
Slide 11: Annual Change in Net Interest Income
ANNUAL CHANGE IN NET INTEREST INCOME (NOKm) Q3-21 0.8 0.9 210.3 14.6 1.7 12.9 2.6 Q3-20 188.2 6.3 1.6 160.0 Market Market Lending Lending Fee Deposit Deposit funding funding Other * volume rate income volume rate volume rate 11 *) Other net interest income includes return on surplus liquidity and fe
Slide 12: Impairments by Stage
IMPAIRMENTS BY STAGE Credit exposure by IFRS9 stage (NOKm) Impairments and losses by stage (NOKm) 136 89.4 1,312 Stage 3 NOK 136m 82.7 (-63m) 25.8 36.3 Stage 2 NOK 1,312m (+547m) Write-offs 4.3 Stage 3 10.0 Stage 2 17,315 Stage 1 Stage 1 52.6 NOK 17,315m 42.4 (-554m change from Q2-21) 30.09.2021 30.
Slide 13: Credit Quality
CREDIT QUALITY Historical impairments and losses (NOKm) 40.3 9.1 6.2 5.8 6.7 4.7 - (1.5) (3.4) Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 13
Slide 14: Impairments and Reversals in Stage 1 and 2
IMPAIRMENTS AND REVERSALS IN STAGE 1 AND 2 (NOKm) • Stage 1 and 2 impairments in Q1-20 related to Covid-19 were NOK 36.8m 36.8 • These impairments were based on model parameter adjustments under a high level of uncertainty. • Over the past 6 quarters impairments of NOK 22.3m in stage 1 and 2 have be
Slide 15: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS Core Equity Tier 1 Ratio (CET1) • CET1 is satisfactory with a good buffer over minimum requirements. • CET1 takes into account proposed dividend for 2020 per 17.3 % 30.09.2021. CET1 would have been 16.9 % with no dividend 16.8 % 16.8 % 16.6 % 15.9 % for 2020. CET1 m
Slide 16: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas: Focus on corporate financing Outlook & Ambitions 16
Slide 17: 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 developer bank for Eastern Property construction REAL Norway and larger facilities 67% NOKm 50 - 100 ESTATE Norwegian cities. Commerci
Slide 18: Exposure per Business Area
EXPOSURE PER BUSINESS AREA (NOKm) 8,160 7,910 7,356 7,152 7,323 5,314 5,285 4,921 4,671 4,589 4,732 4,494 4,318 4,522 4,251 1,389 978 1,068 1,113 1,090 Residential property Commercial property Corporate Shipping Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 18
Slide 19: Corporate
CORPORATE Exposure and lending (NOKm)* Update 4,268 3,970 • Annual growth of more than 40 % since 2016. • Pareto Bank is well positioned 3,291 in target market: medium- sized businesses with revenue 2,783 between NOK 10m and NOK 2,412 500m. • Focus on corporates in the 1,934 1,892 greater Oslo area
Slide 20: Corporate
CORPORATE Customers Credit policy • 82 consolidated corporate customers with average • A good understanding of underlying business model is commitment of NOK 52.2m. crucial. Thorough credit analysis beyond standard parameters in order to understand potential as well as • 19 consolidated securities f
Slide 21: Corporate
CORPORATE Exposure per product Total NOK 4,732m Exposure per sector Total NOK 4,732m 0% 3% 3% Investment loans Real Estate 6% 16% Investment Company Working capital facilities 6% IT/Telecommunications M&A loans 2% 35% Hotel Services 3% 8% Cruise Securities financing 3% 3% Oil & Offshore Government g
Slide 22: Corporate: Recapitalisation
CORPORATE Recapitalisation Marius Mathiesen, Shortcut & Erik Skarbøvig, Pareto Bank 22
Slide 23: Corporate: Refinancing and receivables financing
CORPORATE Refinancing and receivables financing Kjetil Fennefoss, Xplora & Anders Bjørnson, Pareto Bank 23
Slide 24: Corporate: Working Capital Facility
CORPORATE Working Capital Facility Hugo Reed, Mspa.no & Erik Skarbøvig, Pareto Bank 24
Slide 25: Residential Property
RESIDENTIAL PROPERTY Credit update Residential property exposure (NOKm) Total NOK 7,910m • 158 customers with average commitment of NOK 50m. • 34 % residential exposure in Oslo and 45 % in Viken. Land without • Semi-annual stress test of the portfolio against a fall in houses 1,362 housing prices of
Slide 26: Commercial Property
COMMERCIAL PROPERTY Credit update Commercial property exposure (NOKm) Total NOK 4,589m • 100 customers with average commitment of NOK 46m. • 23 % commercial property exposure in Oslo and 27 % in Viken. • 81 % of commercial property exposure is long-term cash-flow Commercial based, while the remainde
Slide 27: Shipping
SHIPPING Credit update Exposure (NOKm) Total NOK 1,389m • 20 customers* and 39 vessels. Container 384 LTV 19 % • Largest exposure USD 27m and average commitment size USD 7.9m. Chemicals 283 LTV 43 % • Only shipping, no offshore exposure. • Average weighted LTV of the portfolio is 34 %. Product 216 L
Slide 28: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 28
Slide 29: Market Outlook: Corporate
MARKET OUTLOOK Corporate • Economic growth is expected to increase due to the reopening of the Norwegian economy. • Sales activities strengthened. Supported by increased brand awareness based on systematic inbound and outbound marketing activities. • Pareto Bank has a small share of a large corporat
Slide 30: Market Outlook: Real Estate
MARKET OUTLOOK Real estate Residential property Commercial property • Higher mortgage rates influence residential property prices. • The office market continues to be strong, driven by a The price development will be contingent on the future positive economic outlook, low interest rates and a hunt r
Slide 31: Market Outlook: Shipping
MARKET OUTLOOK Shipping • Strong container freight rates due to strong freight demand and congestion. This is expected to continue during 2022. The orderbook has picked up significantly and this will have a negative impact on the fleet utilization from 2023 and onwards. • The dry bulk market has imp
Slide 32: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term YTD ambition Profitability in line with ambition. RETURN ON 14.0 % 14.1 % EQUITY Long term profitability supported by lending growth, stable net margin and portfolio quality. The Board has proposed a dividend of NOK 3.00 DIVIDEND 50 % 50 % or more for 2020 per share of
Slide 33: Appendix
APPENDIX (Pareto bank
Slide 34: Largest Shareholders
LARGEST SHAREHOLDERS 30 September 2021 Comments Name Shares % total 1 Pareto AS 13,970,346 20.00 % • The Company has 69,851,730 2 Société Générale 6,943,049 9.94 % shares outstanding. One class of 3 Hjellegjerde Invest AS 2,800,000 4.01 % shares where each share carries 4 Landkreditt Utbytte 2,500,0
Slide 35: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 1.85 1.80 53.08 1.45 51.28 47.98 Q3-20 Q2-21 Q3-21 Q3-20 Q2-21 Q3-21 Price / Earnings Price / Book 7.54 1.01 1.02 0.81 7.04 6.73 Q3-20 Q2-21 Q3-21 Q3-20 Q2-21 Q3-21 35 Share price NOK 54.20
Slide 36: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q3-21 Q2-21 Q1-21 Q4-20 Q3-20 Net interest income 210.3 213.3 200.2 191.0 188.2 Net other operating income 5.7 -1.4 4.9 13.7 -13.1 Total net income 216.0 212.0 205.1 204.6 175.2 Total operating expenses 40.4 41.0 40.9 40.9 32.4 Operating profit before 175.6 171.
Slide 37: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q3-21 Q2-21 Q1-21 Q4-20 Q3-20 Loans to credit institutions 1,766 1,750 273 1,081 1,938 Loans to customers 15,187 15,310 15,089 14,661 13,874 Bonds and other securities 3,014 2,734 3,235 3,612 4,395 Shareholdings in associated 22 22 26 26 23 companies Other assets 11
Slide 38: Real Estate Exposure
REAL ESTATE EXPOSURE Geographical residential property exposure Total NOK 8,932m* Geographical commercial property exposure Total NOK 3,567m* 3% 2% 7% 3% 5% 9% 27% 8% Viken Viken Oslo Oslo 44% 10% Vestfold & Telemark Vestfold & Telemark Vestland Vestland Trøndelag Sweden Other Rogaland Sweden 10% Ot
Slide 39: 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 40: Number of Customers
NUMBER OF CUSTOMERS per business area Real Estate 258 Corporate 127 Securities 24 Shipping 27 & Offshore Retail 10 (Mortgages) 40
Slide 41: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 9,948 Percent customer deposits of net lending to customers Senior debt 5,645 74.0 % T1 & T2 debt 489 64.8 % 64.9 % 64.6 % 64.8 % 65.1 % 65.5 % 61.9 % Other debt 313 4956 5645 5645 56.4 % 4770 5192 4935 5604 Equity capital 3,708 5624 5472
Slide 42: Customer Deposits
CUSTOMER DEPOSITS Deposits by product (NOKm) Deposits by size (NOKm) 624 Floating rate retail > NOK 20m 3,469 268 3,737 736 3,081 Floating rate corporate 3,527 NOK 10 - 20m 889 124 1,013 1,516 Savings with restrictions 2,461 NOK 5 - 10m 763 93 855 3,310 Fixed rate 1,791 NOK 2 - 5m 1,567 646 2,212 1,
Slide 43: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 66 200 150 0 45 33 1,650 0 1,500 19 1,239 120 11 750 7 500 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 44: 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. 33% • High share of government & PSEs to reduce credit spread risk and increase short-term Government & PSEs liquidity. Covered bonds •
Slide 45: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,029 None / very low risk 62% 6,823 61% 59% 57% 57% 9,678 Low risk 10,730 1,164 Moderate risk 36% 999 35% 34% 32% 31% 224 Some risk 114 54 High risk 55 7% 6% 6% 6% 5% 18 Very high risk 42 Q3-20 Q4-20 Q1-21
Slide 46: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 600 3% < 10 12% 476 5,053 10 - 50 5,107 6% 27% 5,533 < 10 50 - 100 5,181 10 - 50 7% 1,637 50 - 100 100 - 150 3,236 100 - 150 150 - 200 1,630 150 - 200 1,409 200 - 250 > 250 688 200 - 250 17% 1,109 2,02
Slide 47: ( Pareto bank
( Pareto bank