Sampo Oyj · OMXHEX:SAMPO
Sampo Oyj — Investor Presentation (August 2006)
24 slides from Sampo Oyj's investor presentation, Aug 18, 2006
Slide 1: New Capital Management & Funding Initiatives
New Capital Management & Funding Initiatives From ”Originate & Hold” –strategy to ”Originate & Redistribute” -strategy
Slide 2: Agenda
AGENDA • Market Actions • Motivation • Case: Synthetic SME Securitization – Sea Fort Securities • Case: Covered Bonds • Future ? 2
Slide 3: Market Actions
Market Actions
Slide 4: Market actions
Market actions • Capital Structure -efficiency • Sampo Bank: Innovative and Non-Innovative Tier 1 capital • If: Hybrids • Sampo Life: Internal Hybrid • Risk Profile Structure • Sale of Export & Project Finance portfolio (1.3 billion EUR 2002) • Covered Bond issue (1 billion EUR September 2005) • Syn
Slide 5: Motivation
Motivation
Slide 6: Challenges
Challenges Usual features in business models,… • Financial institutions serve their customers in their home-markets • Growth is embedded feature in business (economics of scale) • Stable deposit bases and lending growth ,… and their implications • Dependency on market based funding • Accumulation of
Slide 7: ALM-area solutions
ALM-area solutions • Utilizing assets in Funding • Covered Bonds / Housing Loans • Covered Bonds / Public Sector Loans • Optimizing Credit Risk Capital by divesting part of the originated risk to the markets • Sale of Diversified portfolios • Sale of Single-name credit risks • Concentrating purely o
Slide 8: Case: Corporate Loan Securitization Capital Management Tool
Case: Corporate Loan Securitization Capital Management Tool
Slide 9: Idea
Idea • Credit Risk Concentrations and capital need are managed by repackaging and selling part of the corporate portfolio risk to investors looking for diversifying assets 9
Slide 10: Motivation
Motivation • Immediate effects: • Decrease of Credit Risk Concentrations • Release of Capital • Long term effects • Decrease of Annual P/L volatility • Supports Sampo Bank ratings and relative price of debt • New business build by providing credit risk products to investors in asset class with rarit
Slide 11: Transaction
Transaction Sea Fort Securities + Super Senior Swap
Slide 12: Reference Portfolio (not final)
Reference Portfolio (not final) Summary as of 10 May 2006 Number of Reference Obligations 1,019 Number of Reference Entities 608 Number of Reference Entity Groups 543 Reference Portfolio Notional Amount 1,000,000,000 Average Reference Obligation Notional Amount with 1,644,737 respect to a Reference
Slide 13: Reference Portfolio Criteria "Rules of the Fund"
Reference Portfolio Criteria ”Rules of the Fund” •Each Reference Obligation must meet the •During the first 3 years of the transaction, any following criteria at the time it is added to the maturing loans may be replenished by Sampo, Reference Portfolio subject to the following replenishment conditi
Slide 14: Credit Protection Payment Procedure
Credit Protection Payment Procedure Credit Event • The CDS Calculation Agent will notify the issuer upon the occurrence of a Credit Event Occurs • The two Credit Events are (a) Failure to Pay, and (b) Bankruptcy Credit Event • Delivered by the CDS Calculation Agent to the Issuer Notice • Within 90 d
Slide 15: Transaction structure
Transaction structure Credit Protection Amounts Super Senior Swap Counterparty Super senior swap Spread Sampo Bank plc Loan Portfolio Sea Fort Securities €[1] billion p.l.c. (“Issuer”) Interest and Credit Protection repayment of principal Amounts Class A Notes Class B Notes Noteholders Class C Notes
Slide 16: Transaction Pricing
Transaction Pricing Class Rating Class Balance % of Transaction Expected Indicative Spread Range Average Life Super Senior Tranche UR € 820,000,000 82.00 % 5.0 0.070 % 0.070 % Junior Super Senior Tranche AAA € 35,000,000 3.50 % 5.0 0.350 % 0.350 % Class A AAA € 41,500,000 4.15 % 5.0 0.16 % 0.16 % Cl
Slide 17: Transaction Implications
Transaction Implications • Change in expected annual income 3,3 MEUR • Capital relief @ 7% Tier 1 target 56 MEUR • Cost of Capital around 6% in Basel I • Cost of Capital under B2 will be slightly higher, but well below 10% 17
Slide 18: Case Covered bonds Funding Tool
Case Covered bonds Funding Tool
Slide 19: Idea
Idea • Low risk housing loans in Sampo Banks balance sheet are utilized as a ”raw material” in funding 19
Slide 20: Motivation
Motivation • In normal market conditions lower price of funding • Covered Bonds have better Rating than respective rating for Sampo Bank senior debt (AAA vs. A1) • Margin in first issue was Euribor - 0.01%, that is about 0.10%- 0.15% lower than Sampo Bank´s (A/A1) respective price • Annual P/L effec
Slide 21: Issuance Capacity
Issuance Capacity • Covered bond program - EUR 5,000,000,000 • First Issue (EUR 1,000,000,000, 09/2005 -09/2010) • Expected annual issues 750 -1,000 million euros • Expected Issue Maturitys 5 years 21
Slide 22: Future ?
Future ?
Slide 23: Potential transactions
Potential transactions • Covered bonds backed by below asset classes • Finnish Housing loans • Baltic Housing loans • Public Sector loans • Corporate Sector • Decreasing largest single name risk concentrations and investing released capital in diversifying assets => more efficient ”large” corporatio
Slide 24: Business Model - Originate & Redistribute
Business Model - Originate & Redistribute • Excellent business line services (solutions, distibution, pricing) combined with efficient processes create profitable growth • With portfolio management actions risks (FX, interest rate, liquidity & credit) and capital are kept at levels chosen. New busin