Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q3 2023 Earnings Presentation
40 slides from Pareto Bank Asa's earnings presentation, 2023
Slide 1: Financial Results – Third Quarter 2023
PARETO BANK Financial Results – Third Quarter 2023
Slide 2: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 2
Slide 3: Third Quarter 2023 Highlights
THIRD QUARTER 2023 Highlights • Profit after tax NOK 155.2m (NOK 133.5m in Q3-22). • Return on equity after tax 13.9 %* (14.0 %). • Record high net interest income NOK 281.3m (NOK 241.8m) due to increase in lending rates. • Impairments of NOK 30.3m (NOK 12.1m). Model-based impairments were NOK 9.1m
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 18.7 % 154.4 155.2 18.0 % 14.8 % 17.2 % 133.5 14.0 % 13.9 % Q3-22 Q2-23 Q3-23 Q3-22 Q2-23 Q3-23 * 30.09.2022 30.06.2023 30.09.2023 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 271.5 281.3 241.8 0.17% 0.13% 0.07% 19.1% 19
Slide 5: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q3-23 Q3-22 YTD-23 YTD-22 Lending rates increased by up to 0.75 pp in Q3-23. Net interest income 281.3 241.8 815.3 675.1 Lending volume relatively unchanged. Increased return Net other operating income 3.0 2.3 -5.3 16.0 on liquidity reserve due to higher market rates. Tot
Slide 7: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 11.1 34.9 0.1 2.1 3.3 15.9 Q3-23 281.3 Q2-23 0.8 20.0 271.5 220.0 Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 7 *) Other net interest income includes fee paid
Slide 8: Interest Margins
INTEREST MARGINS Lending and deposit margin Net interest margin 6.2 % 6.1 % 6.3 % 6.1 % 6.2 % 5.5 % 4.6 % 4.6 % 5.2 % 5.1 % 4.5 % 4.5 % 5.0 % 4.4 % 4.8 % 1.4 % 1.2 % 1.1 % 0.9 % 0.7 % Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Lending margin over Nibor Deposit margin over Nibor Net
Slide 9: Quarterly Change in Impairments
QUARTERLY CHANGE IN IMPAIRMENTS Impairments (NOKm) Impairments (NOKm) Q3-23 Q2-23 Stage 1 -1.2 7.5 Stage 2 10.3 -4.7 36.4 Stage 3 19.5 9.4 30.3 Write-offs 1.7 0.7 Total impairments 30.3 12.9 21.0 12.9 • Total model-based impairments in stage 1 and 2 were NOK 9.1m. • Credit quality confirmed by an an
Slide 10: Changes in Stage 2 & 3
CHANGES IN STAGE 2 & 3 Stage 2 Stage 3 • Commitments on watch list, under forbearance or where there has • Commitments which are more than 90 days overdue, where the otherwise been a material increase in risk. debtor is considered unlikely to pay, or where there is objective evidence of a future los
Slide 11: Long-Term Capital Target
LONG-TERM CAPITAL TARGET • Private placement of NOK 350m completed 18.7 % in August with payment in September. • New core equity added approx. 1.6 pp to the bank’s CET1 ratio, all else equal. 17.0 % 16.7 % NFSA expectation 16.7 % • Capital, liquidity and administrative capacity for profitable lendin
Slide 12: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 12
Slide 13: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) SHIP FINANCING NOK 1,502m 7% COMMERCIAL RESIDENTIAL FINANCING NOK 2,298m 11% 39% COMMERCIAL PROPERTY 14% RESIDENTIAL PROPERTY FINANCING FINANCING NOK 2,972m NOK 8,339m 29% CORPORATE FINANCING NOK 6,039m 13
Slide 14: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKb) 8.68 8.42 8.34 7.75 7.25 6.04 5.75 5.79 5.79 5.43 3.49 3.33 3.07 3.08 2.97 2.16 2.30 1.81 1.88 1.81 1.47 1.62 1.68 1.50 1.09 Residential property financing Commercial property financing Commercial residential financing Corporate financing Ship financing Q3
Slide 15: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 8,339m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • Equity contribution of minimum 25 % on land financing. Land without houses 1,734 • Thorough analysis of al
Slide 16: Commercial Residential & Property Financing
COMMERCIAL RESIDENTIAL & PROPERTY FINANCING Credit update Commercial res. & prop. exposure (NOKm) Total NOK 5,270m • Commercial residential includes financing of housing for rent, while commercial property includes financing of commercial property. • Exposure growth of NOK 136m within commercial res
Slide 17: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 2,972m • Financing of cash-flow based commercial property (91 % of exposure) and development (10 %). • Equity contribution depending on underlying risk factors and entry point of the market cycle. More conserva
Slide 18: Market Outlook – Residential Property
MARKET OUTLOOK Residential property The housing market is increasingly affected by higher interest rates and build-up of supply. Lower price growth for second- hand housing. New-build projects are being put on hold. Pre-sale requirements are difficult to meet. Demand for new-builds is hurt by uncert
Slide 19: Market Outlook – Commercial Property
MARKET OUTLOOK Commercial property Continued low activity in the transaction market. Increase in interest rates leads to higher yields and lower property values. Uncertain valuations. Higher financing costs and more restrictive banks. Low risk appetite. Unchanged volume in Q4-23. 19
Slide 20: Corporate Financing
CORPORATE FINANCING Exposure (NOKm) Total NOK 6,039m Credit update Total NOK 6,039m • Tailor-made financing solutions to medium-sized enterprises. • Exposure growth in Q3-23. Limited sales activity in Q2-23 due to internal capital restrictions. • A conservative credit practice is continued. • Follow
Slide 21: Market Outlook – Corporate
MARKET OUTLOOK Corporate Pareto Bank is an attractive partner for medium-sized businesses in the Oslo region and still a small player in the large space for corporate lending. Corporate profitability is in general under pressure due to softer demand, inflation and higher financing costs. Deal flow i
Slide 22: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,502m • Focus on reputable Norwegian shipowners, family offices and the investment project market. Bulk 388 LTV 49 % • Corporate loans make up 52 % of the exposure and investment Industrial 234 LTV 28 % projects. LPG 165 LTV 30 % • Average comm
Slide 23: Market Outlook – Shipping and Offshore
MARKET OUTLOOK Shipping and offshore Positive outlook for the dry bulk market due to a low order book for newbuilds. Uncertainty regarding demand given macroeconomic headwinds and fragile Chinese growth. Strong tanker markets with record-low order books and continued strong end-user demand. Inventor
Slide 24: Long-Term Ambitions
LONG-TERM AMBITIONS ROE Dividend 15 % min. 50 % 14.6 % 14.0 % 50.1 % 49.4 % 50.1 % 13.7 % 13.0 % 2020 2021 2022 YTD 2023* 2020 2021 2022 24 *) 14.0 % excluding new equity raised in private placement in August 2023
Slide 25: Appendix
APPENDIX Pareto bank | 15%
Slide 26: Largest Shareholders
LARGEST SHAREHOLDERS 30 September 2023 Name Shares % total • The Company has 76,782,423 shares outstanding. One class 1 Pareto AS 15,356,484 20.00 % of shares where each share carries one voting right. 2 Société Générale 6,943,049 9.04 % • Diversified investor base with 3,583 shareholders. 3 Hellegj
Slide 27: The Share
THE SHARE Earnings per share (NOK) Book value per share (NOK) 2.03 57.36 1.85 1.89 56.09 53.72 Q3-22 Q2-23 Q3-23* Q3-22 Q2-23 Q3-23 27 *) Kr 2.08 excluding new equity raised in private placement in August 2023.
Slide 28: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q3-23 Q2-23 Q1-23 Q4-22 Q3-22 Net interest income 281.3 271.5 262.5 253.5 241.8 Net other operating income 3.0 -5.4 -3.0 20.7 2.3 Total net income 284.3 266.1 259.5 274.2 244.2 Total operating expenses 50.4 51.4 50.5 48.9 46.7 Operating profit before 233.9 214.7
Slide 29: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q3-23 Q2-23 Q1-23 Q4-22 Q3-22 Loans to credit institutions 2,498 2,001 2,230 747 982 Loans to customers 18,260 18,344 17,707 17,346 16,925 Bonds and other securities 4,245 3,882 3,952 4,007 3,710 Shareholdings in associated companies 23 23 23 23 23 Other assets 164 218
Slide 30: 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 over 3M Nib
Slide 31: Number of Customers
NUMBER OF CUSTOMERS Per business area Property Financing 268 Corporate Finanicng 162 Ship Financing 20 Retail (Mortgages) 17 31 Non-consolidated
Slide 32: Real Estate Financing Exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 10,637m* Geographical commercial property exposure Total NOK 2,972m* 4% 3% 4% 7% 6% 8% 34% Oslo 15% Oslo Viken Vestland 44% Vestfold & Telemark Viken Other Sweden Sweden Vestfold & Telemark Other Innlandet 16% 35% 25
Slide 33: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 11,473 Percent customer deposits of net lending to customers Senior debt 7,718 AT1 & T2 debt 1,149 62.8 % 60.9 % 61.0 % 58.8 % 58.3 % Other debt 445 7,877 7,718 7,918 Equity capital 4,404 7,183 6,399 Key funding and liquidity ratios • Depo
Slide 34: Liquidity Buffer
LIQUIDITY BUFFER Low credit and market risk (NOKm) Comments 111 • Cash on hand. • Highly liquid bonds. • Low credit risk. 2,131 • No interest rate or foreign exchange risk. Cash (Norges Bank & DNB) • Access to central bank Bonds issued by government & PSEs facilities and repo market. Covered bonds 3
Slide 35: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,354 23 NOK 10 - 20m 1,605 119 552 NOK 5 - 10m 983 211 Floating rate retail 300 NOK 2 - 5m 1,224 1,336 3,434 NOK 0 - 2m 1,103 1,462 Floating rate corporate 2,711 - 1,000 2,000 3,000 4,000 Floating rate Fixed rate 2,966 S
Slide 36: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 250 216 190 200 575 170 120 139 2,000 95 1,650 72 1,400 1,400 1,270 3M 6M 12M 2Y 3Y 5Y 2024 2025 2026 2027 2028 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordinated C
Slide 37: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,880 None / very low risk 54% 7,327 53% 53% 53% 52% 10,467 Low risk 11,239 35% 35% 35% 35% 34% 2,026 Moderate risk 2,057 34 Some risk 501 128 10% 11% 10% High risk 9% 10% 2 24 Very high risk 241 Q3-22 Q4-22
Slide 38: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 536 3% < 10 585 15 % 5,085 10 - 50 4,923 23 % 5,151 50 - 100 7% < 10 5,523 10 - 50 3,169 50 - 100 100 - 150 3,660 100 - 150 9% 150 - 200 2,583 150 - 200 200 - 250 1,875 > 250 1,155 200 - 250 1,509 1,88
Slide 39: Capital Requirements
CAPITAL REQUIREMENTS Expected as of year-end 2023 21.60% 1.00% 18.83% 3.10% 1.00% 16.74% 1.00% 2.33% 1.74% P2G Pillar 2 Pillar 1 & Buffers 17.50% 15.50% 14.00% CET1 Ratio Core Capital Ratio Capital Ratio 39
Slide 40: (Pareto bank |
(Pareto bank | 75