Kvika Banki Hf · OMXICE:KVIKA
Kvika Banki Hf — FY2023 Earnings Presentation
35 slides from Kvika Banki Hf's earnings presentation, Feb 15, 2024
Slide 1: Kvika banki hf. 12M 2023 Financial Results
Kvika banki hf. 12M 2023 Financial Results 15 February 2024
Slide 2: 12M 2023
12M 2023 Profit before tax of ISK 5,245 m. for 12M 2023, including TM Insurance which is classified as held for sale RoTE 12.1% for 12M 2023, 13.9% in Q4 Net interest income increases 13% YoY due to higher lending volumes and rates, loan book growth of over 27% in 2023 Net fee and commission income
Slide 3: Key Milestones in 2023
Key Milestones in 2023 Over 27,000 cards issued since launch Top performance of mutual funds Launch of retail banking solutions through the Aur app #1 medium term bond fund #1 short term bond fund Launch of Straumur 25% market share in #1 domestic equity fund payment facilitation UK loanbook NIM ove
Slide 4: Commercial Banking
Commercial Banking Segment highlights A year of • Stable growth in both loans (+13%) and deposits (+19%) innovation with in 2023 with notable and robust performance by Lykill efforts focused on • Continued success of Auður with close to 50% growth in launching new deposits and over 40% growth in num
Slide 5: Corporate Banking & Capital Markets
Corporate Banking & Capital Markets Segment highlights Capital Markets • Healthy lending growth of over 30% YoY, mainly gain market share driven by property backed loans in a turbulent year • FX sales up by 19% YoY due to a growing customer and Corporate base Banking loan book Largest market share i
Slide 6: Asset Management
Asset Management Segment highlights Assets under • Assets under management ISK 470 bn. at end of 2023 and increased by ISK 8 bn. during the year management remain robust in • Management fees remain stable as performance fees are challenging market affected by challenging market conditions conditions
Slide 7: UK Segment highlights
UK Segment highlights Continued • Positive developments across loan book with strong improvement in origination volumes performance with • Continued increase in net interest margin, which healthy loan book reached 4% in Q4 growth and further Portfolio remains conservatively positioned with low impro
Slide 8: Insurance
Insurance Highlights Excellent insurance • Excellent insurance service results in 2023 with a result in 2023 with a combined ratio of 93.6% combined ratio of • Insurance revenues grew by 12% YoY while claims 93.6% and strong only grew by 9% revenue growth • Net financial income improved substantiall
Slide 9: Financials
Financials Financials 12M 2023 9
Slide 10: Financial Statements Reflect TM Sale/Listing
Financial Statements Reflect TM Sale/Listing Changes as of 31.12.2023 TM Insurance is classified as held for sale in Kvika’s consolidated financial statements and comparative figures in the income statement for 2022 are restated 1 2 3 Net insurance service Assets and liabilities TM Insurance’s incom
Slide 11: Income Statement 12M 2023
Income Statement 12M 2023 Income Statement Revenue growth YoY ISK m. Net operating income by type / ISK m. 12M 2023 12M 2022 14,852 14,479 restated* Diff. 442 278 Net interest income 8,021 7,085 936 Net fees and commissions 5,916 6,414 (497) Net financial income 442 278 164 7,085 8,021 Other income
Slide 12: Income Statement Q4 2023
Income Statement Q4 2023 Income Statement Strong net interest income growth ISK m. Net operating income by type / ISK m. Q4 2023 Q4 2022 4,003 restated* Diff. Net interest income 2,331 1,678 653 3,423 Net fees and commissions 1,578 1,541 37 33 Net financial income (11) 33 (44) 2,331 Other income 105
Slide 13: Net Interest Income
Net Interest Income • Net interest income grows by 13% from 12M 2022, both due to higher rates and loan book growth Strong growth across all segments in Q4 • Loan book grows by 27.3% in 2023, split across Corporate Banking, Commercial Banking and UK • Net interest income of ISK 2,331 m. in Q4 compar
Slide 14: Net Fee and Commission Income
Net Fee and Commission Income • Net fee and commission income continues to be a stable source of income despite a decrease YoY mainly attributable to less fees from asset management Fee income gaining momentum after reaching bottom levels in Q3 • Fees grow between Q3 and Q4 2023 due to growth in Ass
Slide 15: Net Financial Income
Net Financial Income • Investment portfolio decreases significantly as TM’s assets and operations are classified as held for sale, resulting in net financial income impacting the consolidated revenue Significant decrease in investment portfolio as TM is classified as held for sale statement consider
Slide 16: TM Insurance
TM Insurance Continued strong performance • Insurance revenues grew 11.6% YoY overall, with a notable increase in life insurance revenues Combined ratio Return on investment assets (%) (%) • Continued profitable performance of insurance operations resulted in a combined ratio of 93.6% compared to 94
Slide 17: Operating Expenses
Operating Expenses • Operating expenses grow by 8.9% from Q4 2022 to Q4 2023, stabilizing í 2023 when actions are taken to increase operational efficiency Operating expenses stabilize in the second half of the year • Salaries and related expenses grow by 7.8% from Q4 2022 to Q4 2023, inflation durin
Slide 18: Capital Position
Capital Position • CAR of 22.6% at the end of December 2023, within management target Strong capital position well above regulatory requirements • Kvika aims to maintain a management buffer of 2% to 4% over current and anticipated CAR requirements • The countercyclical capital buffer in Iceland will
Slide 19: Liquidity and Funding Ratios
Liquidity and Funding Ratios • High Quality Liquid Assets (HQLA) ISK 76 bn. excluding mandatory reserves and collateral to the Central Bank Continued strong liquidity position • Liquidity coverage ratio is strong at 247%, where the regulatory minimum is 100% Liquidity coverage ratio (LCR) • Net stab
Slide 20: Credit Quality
Credit Quality • Stage 3 loans remain stable between quarters as increases witnessed in Q3 remain in stage 3 Large one-off impairment in Q4 • Average LTV of stage 3 loans is 69% (exposures larger than ISK 10 m.) • Impairment loss allowance from stage 3 loans increases Loans to customers risk stage a
Slide 21: Loans to customers
Loans to customers Lending growth 27% YoY Loan book development ISK bn. 136.3 Commercial Banking 123.7 Vehicles 118.7 Commercial vehicles & equipment 34.5 Unsecured loans 109.8 107.1 33.5 32.4 31.2 15.5 30.6 15.5 7.7 14.9 11.9 13.1 6.9 Corporate Banking & Capital 6.7 31.9 Markets 6.9 6.6 Real estate
Slide 22: Diversified Funding Program
Diversified Funding Program • Kvika has been an active issuer in Iceland since 2015 and in 2021 established an EMTN programme and obtained a credit rating from Moody’s Investors Service Solid investment grade rating by Moody’s • ISK 46 bn. of senior bonds outstanding on 31 December 2023 with 35% iss
Slide 23: Financial Targets
Financial Targets Target Q4 2023 12M 2023 Return on >20% 13.9% 12.1% Tangible Equity Pre-Tax Capital Adequacy 200-400bps 390bps 390bps Ratio (CAR) Buffer Over Requirement (basis points) Dividend 25% N/A 59% Payout Ratio Dividends and Share Buybacks as % of Profit after Tax 23
Slide 24: Outlook for 2024
Financials Outlook for 2024 12M 2023 24
Slide 25: Global Economy Headed for Soft Landing
Global Economy Headed for Soft Landing Policy easing set to start amid faster-than-expected disinflation as global economy reaches inflection point Key Forces Shaping the Outlook in 2024 1 Inflation subsiding faster than expected 2 The start of a policy easing cycle 3 Growth remains resilient Inflat
Slide 26: External Environment More Favourable for Kvika
External Environment More Favourable for Kvika The headwinds of 2023 are likely to turn to tailwinds as 2024 progresses Macroeconomic Forces Implication for Kvika Inflation › Diminishing cost pressures › Increased investor confidence positively › Improving market conditions likely to 1 subsiding fas
Slide 27: Current Business Position
Current Business Position Strong equity Well-funded Market share Mutual funds position balance sheet growth in top ranked Capital Markets Healthy and New retail New robust Only bank with diversified banking offerings payment operations loanbook facilitator abroad 27
Slide 28: The road to 20% Return on Tangible Equity (RoTE)
The road to 20% Return on Tangible Equity (RoTE) Improved efficiency Impairment levels: with cost control and capital management: Financial income: Strong focus on credit quality Continued headcount Healthier markets to control Fees and Commissions: Growth in AUM and positively impact TM´s Growth in
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Slide 30: Appendix
Appendix 30
Slide 31: Balance Sheet: Assets
• An increase of ISK 36.8 bn. in assets since year-end 2022 Balance Sheet: Assets • Loan book increase of ISK 29.2 bn. since year-end 2022 Over 30% of the balance sheet consists of liquid assets • Loan book growth in the period is mainly attributable to strong growth in corporate domestic lending As
Slide 32: Balance Sheet: Liabilities
• Liabilities increase by ISK 35.7 bn. since year-end 2022, Balance Sheet: Liabilities mainly driven by growth in deposits • Deposits increased by ISK 21.6 billion year on year driven by growth Significant growth in retail deposits in retail deposits • The Bank issued bonds in NOK and SEK under the
Slide 33: Financial Instruments: TM Insurance
• Subsidiary and revenue segment TM Insurance holds a Financial Instruments: TM Insurance significant amount of investment assets due to traditional insurance operations Additional information • TM‘s investment portfolio yielded a positive return on investment of 4.2% in Q4 and 6.4% in 2023 Investme
Slide 34: Disclaimer
Disclaimer This presentation and the information contained therein has been prepared by Kvika banki hf. on a best knowledge basis. Any statements or assumptions are set forth by Kvika alone and not by any third party. Forward looking statements may deviate from what is presented in this presentation
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