Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — H1 2014 Earnings Presentation
80 slides from Jyske Bank A/s's earnings presentation, 2014
Slide 1: Jyske Bank H1 2014
Jyske Bank H1 2014
Slide 2: Agenda
Agenda • Jyske Bank in brief • Jyske Banks Performance 1968-2013 • Merger with BRFkredit • Focus in H1 2014 • H1 2014 in figures • Capital Structure • Liquidity • Credit Quality • Strategic Issues • Macro Economy & Danish Banking 2013-2015 • Danish FSA • Fact Book 2
Slide 3: Jyske Bank in brief
Jyske Bank in brief 3
Slide 4: Jyske Bank in brief
Jyske Bank in brief Jyske Bank focuses on core business Description Branch Network • Established and listed in 1967 • 2nd largest Danish bank by lending • Total lending of DKK 344bn • 149 domestic branches • Approx. 900,000 customers • Business focus is on Danish private individuals, SMEs and intern
Slide 5: Jyske Bank in brief: differentiation strategy
Jyske Bank in brief Jyske Bank has a differentiation strategy “Jyske Differences” • Jyske Bank wants to be Denmark’s most customer-oriented bank by providing high standard personal financial advice and taking a genuine interest in customers • The strategy is to position Jyske Bank as a visible and d
Slide 6: Jyske Bank performance 1968-2013
Jyske Bank performance 1968-2013 6
Slide 7: ROE on opening equity – 1968-2013
ROE on opening equity – 1968-2013 Pre-tax profit Average: (ROE on open. equity) 22% 61% 166% 145% 40% 30% 20% 10% 0% -10% -20% -30% 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 7
Slide 8: A great match
A great match February 24, 2014 8
Slide 9: Transaction highlights
Transaction highlights Combination of Jyske Bank and BRFkredit creates a leading Danish financial institution by combining the 3rd largest bank and the 4th largest mortgage-credit institution Combination of two highly complementary business models: offer a full range of products and services to all
Slide 10: Creating a leading Danish financial institution
Creating a leading Danish financial institution Firmly establishes Jyske Bank as one of the four major financial services groups in Denmark with a full product range Estimated Danish market shares1 Financial institutions Extensive distribution platforms and customer bases provide attractive oppo
Slide 11: Extended lending platform
Extended lending platform • Further diversifies loan book with good split between corporate, retail and mortgage lending • Attractive cross-selling opportunity of banking and mortgage-related products • BRFkredit primarily offers mortgages secured by properties in Denmark • Practically all BRFkredit
Slide 12: New Group balance sheet structure after merger with BRFkredit
New Group balance sheet structure* after merger with BRFkredit 12 *) Excl. deposits related to investment pools (DKK 4.9bn) and assets in investment pools (DKK 4.7bn) and other assets and liabilities of net DKK 4.7bn
Slide 13: Attractive synergy potential
Attractive synergy potential • Total run rate synergies of minimum DKK 600m per annum, of which approximately DKK 300m from cost synergies and DKK 300m from revenue synergies • The mix of synergies between cost and revenue depends on market conditions • Cost synergies expected to be achieved by 2017
Slide 14: BRFkredit and the mortgage market
BRFkredit and the mortgage market Mortgage lending by BRFkredit S&P credit ratings BRFkredit’s primary business has always been mortgage lending Rating Outlook Last change Covered bonds (SDOs) Focus on lending for housing purposes (84%) - Capital Centre E AAA Stable 17 Oct 2011 Mortgage bonds (R
Slide 15: Focus in H1 2014
Focus in H1 2014 15
Slide 16: Focus in H1 2014
Focus in H1 2014 • Pre tax result DKK 2.8bn. ROE 32.1% ann. • Special items DKK 2.1bn • Growth in bank lending due to new mortgage products (DKK 12bn), other banking products decrease • Net Interest Income under pressure: low interest rate level, margin pressure and lower reinvestment rates in the l
Slide 17: Profit before tax
Profit before tax 2,500 16% 3,000 60% 14% 2,500 50% 2,000 2,000 40% DKKm DKKm 12% 30% 1,500 1,500 10% 20% 1,000 8% 10% 500 1,000 0% 6% 0 ‐10% 4% ‐500 ‐20% 500 2% ‐1,000 ‐30% Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 0% 2009 2010 2011 2012 2013 Profit before tax ROE (pre
Slide 18: Strategic issues
Strategic issues 18
Slide 19: Market conditions
Market conditions • No volumes growth expected in 2014 – Bank loans decreasing – Mortgage financing increasing • Margin pressure increasing, especially on corporates • Significant improvement in deposit/loans ratio in most banks • Jyske Bank designated as SIFI 19
Slide 20: Strategic issues 2013-2014
Strategic issues 2013-2014 Integration of BRFkredit • Integration proceeds according to plan New product line of home loans • New loans collateralized by property offered from end 2013 to solid private customers at attractive prices compared to traditional mortgage loans; loans outstanding end of Ju
Slide 21: Strategic issues – Capital and Liquidity
Strategic issues – Capital and Liquidity Capital • Solvency ratio 16.4% • Capital buffer 6.0 percentage points • Core Tier 1 15.3% • Capital target – Solvency ratio 17.5% Core Tier I minimum 14% • Jyske Bank designated as systemic institution in Denmark among 6 institutions. At present, the group co
Slide 22: New and upcoming regulation
New and upcoming regulation Short dated ARM loans – new regulation in force Loan portfolio – refinancing intervals 100 Only affects lending with 1-2 years refinancing Other loan types Maturity extensions of 1 year is triggered in case of 80 Refinancing beyond one year Refinancing within one year
Slide 23: RTL F – pre-financed bond
RTL F – pre-financed bond BRFkredit has opened a number of new ISIN’s for the Fully pre-financed and excluded from the financing of F1 ARMs and joint funded bank loans L89 legislation (as in the ”past”) with annual interest rate adjustments − No maturity extension (shortened at successful refina
Slide 24: H1 2014 in figures
H1 2014 in figures 24
Slide 25: Loans and Deposits
Loans and Deposits 140 140 120 120 DKKbn DKKbn 100 100 80 80 60 60 40 40 20 20 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 Bank loans Bank deposits Bank loans Bank deposits Mortgage loans end Q2 2014: DKK 209 bn Total loans and advances end Q2 2
Slide 26: Net Interest Income
Net Interest Income 4,700 1,800 1,600 4,600 DKKm 1,400 DKKm 4,500 1,200 4,400 1,000 4,300 800 600 4,200 400 4,100 200 4,000 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 3,900 2009 2010 2011 2012 2013 Spar Lolland: H1 2013: DKK 140m H2 2013: DKK 73m H1 2014: DKK 156m 26
Slide 27: Return/risk-trade off (Jyske Bank ex BRF)
Return/risk-trade off (Jyske Bank ex BRF) 114 5.0% 140 6% 112 120 5% 110 DKKbn DKKbn 100 108 4% 106 80 3% 104 4.5% 60 102 2% 40 100 1% 20 98 96 0 0% Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 94 4.0% 2009 2010 2011 2012 2013 Risk weighted assets NII/RWA (rhs) Risk weighted
Slide 28: Fee and commision income
Fee and commision income 2,000 600 1,800 500 DKKm DKKm 1,600 1,400 400 1,200 300 1,000 800 200 600 100 400 200 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 600 500 DKKm 400 300 200 Totalkredit 100 0 Securities trading Money transfers and Loan man
Slide 29: Value adjustments
Value adjustments 300 800 200 DKKm 700 100 DKKm 600 0 500 400 ‐100 300 ‐200 200 ‐300 100 ‐400 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 ‐100 2009 2010 2011 2012 2013 Interest rate Sale of Nets: DKK 189m hedging/customers Redemption of hybrid capital: H1 2013: DKK 172m D
Slide 30: Gross earnings
Gross earnings 7,600 5,000 7,400 4,500 7,200 4,000 DKKm DKKm 7,000 3,500 6,800 3,000 6,600 2,500 6,400 2,000 6,200 1,500 6,000 1,000 5,800 500 5,600 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 5,400 2009 2010 2011 2012 2013 30
Slide 31: Operating expenses and employees
Operating expenses and employees 5,000 3,900 1,600 5,000 4,500 3,850 1,400 4,500 4,000 3,800 4,000 1,200 DKKm 3,500 DKKm 3,500 3,750 1,000 3,000 3,000 3,700 800 2,500 2,500 3,650 600 2,000 2,000 3,600 1,500 400 1,500 3,550 1,000 200 500 1,000 3,500 0 0 500 3,450 Q12012 Q22012 Q32012 Q42012 Q12013 Q2
Slide 32: Core earnings before loan impairment charges
Core earnings before loan impairment charges 3,500 3,500 3,000 3,000 DKKm DKKm 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 32
Slide 33: Loan impairment charges
Loan impairment charges 3,000 1,000 900 2,500 800 DKKm DKKm 700 2,000 600 500 1,500 400 300 1,000 200 100 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 33
Slide 34: Core earnings
Core earnings 2,500 2,500 2,000 DKKm DKKm 2,000 1,500 1,500 1,000 500 1,000 0 ‐500 500 ‐1,000 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 34
Slide 35: Earnings from investment portfolios
Earnings from investment portfolios 700 250 600 200 DKKm DKKm 500 150 400 100 300 200 50 100 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 35
Slide 36: Focus in H1 2014 – special items
Focus in H1 2014 – special items DKKm Bargain purchases from the merger with BRFkredit 2,360 Closing of sale of Silkeborg Data 296 Sale of Nets 189 Interest rate swaps -292 Value adjustment PRAS -93 Lack of commission payments from Totalkredit -95 Integration costs BRFkredit -47 Reassessment of prov
Slide 37: Capital Structure
Capital Structure 37
Slide 38: Capital structure
Capital structure 20 20 18 18 16 16 pct pct 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 Core Tier 1 Hybrid Tier 1 Tier 2 Core Tier 1 Hybrid Tier 1 1.4 Tier 2 • Core Tier 1 target: 14% • Capital ratio target: 17.
Slide 39: Solvency requirement and capital buffer
Solvency requirement and capital buffer 20 20 18 18 16 16 pct pct 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 2009 2010 2011 2012 2013 Solvency requirement Capital buffer Solvency requirement Capital buffer
Slide 40: On the CET1 ratio Jyske is already ready for CRD IV & Danish SIFI requirements
On the CET1 ratio Jyske is already ready for CRD IV & Danish SIFI requirements Total capital requirement by 2019 expected to be around 17 % (incl. worst case fully loaded countercyclical buffer*) - With a CET1 ratio of 13.4 % (11 % if Pillar II is filled by a high trigger coco AT1 or AT2) New capita
Slide 41: Liquidity
Liquidity 41
Slide 42: Liquidity position and run-off
DKKbn 0 10 20 30 40 50 60 70 Start of period 80 1 month 2 months 3 months 4 months 5 months 6 months 7 months 8 months 9 months 30.06.2014 10 months Liquidity position and run-off 11 months 12 months Capital market scenario: run-off of senior unsecured debt and senior secured bonds 15 months 18 mont
Slide 43: Group issuance of senior debt will be from Jyske Bank A/S only
Group issuance of senior debt will be from Jyske Bank A/S only Jyske will remain a rare but regular issuer on the EMTN market No new issuance of senior secured bonds from BRFkredit A/S as house prices have stabilized Senior unsecured activity will depend on developments in the balance sheet (funding
Slide 44: Credit quality
Credit quality 44
Slide 45: Loan impairment charges and losses
Loan impairment charges and losses 3,000 1,000 900 2,500 800 DKKm DKKm 700 2,000 600 500 1,500 400 300 1,000 200 100 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 Loan impairment charges and provisions for guarantees Losses Loan impairment cha
Slide 46: Loans and advances split by sector
Loans and advances split by sector (Jyske Bank A/S) Loans, advances and guarantees as well as loan impairment charges and provisions for guarantees by sector Loan impairment charges and Balance of loan provisions for impairment charges guarantees for the Loans, advances and and provisions for period
Slide 47: Loans and advances split by sector
Loans and advances split by sector (Jyske Bank A/S) Balance of loan Balance of loan Loan impairment Loans, advances and guarantees as well as loan impairment charges impairment charges Loss for the charges for the impairment charges and provisions for guarantees Loans, advances and provisions for Lo
Slide 48: BRFkredit - Loans and advances split by sector
BRFkredit - Loans and advances split by sector 1% 1% 0% 14% Owner-occupied (43%) Vacation homes (2%) Private rental (19%) 43% Subsidised (19%) 19% Office & business (14%) Industry (1%) Prop.for educ.etc. (1%) Other Properties (0%) 19% 2% 48
Slide 49: BRFkredit - LTV-brackets
BRFkredit - LTV-brackets 100 >100% 80 80% - 100% 60% - 80% 60 40% - 60% 20% - 40% 40 0% - 20% 20 0 Q2 2014 49
Slide 50: BRFkredit – loan refinancing
BRFkredit – loan refinancing 100 80 Other loan types 39 60 Refinancing beyond one year 30 40 Refinancing within one year 7 Annual refinancing 20 24 0 Q2 2014 50
Slide 51: Large exposures
Large exposures per cent of capital base 35% 30% 25% 20% 15% 10% 5% 0% 2009 2010 2011 2012 2013 H1 2014 Jyske Bank large exposures: > 10% : 1 7.5-10%: 3 51 5-7.5%: 0
Slide 52: Balance of loan impairment charges
Balance of loan impairment charges 5,000 6,000 4,500 5,000 4,000 DKKm DKKm 3,500 4,000 3,000 3,000 2,500 2,000 2,000 1,500 1,000 1,000 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0 2009 2010 2011 2012 2013 Balance of loan impairment charges Losses Balance of loan impa
Slide 53: Balance of loan impairment charges
Balance of loan impairment charges 4.0% 4.5% 4.0% 3.5% 3.5% 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 0.0% 2009 2010 2011 2012 2013 Per cent of bank loans and advances 53
Slide 54: Exposures by credit rating
Exposures by credit rating (Jyske Bank A/S) Corporates Retail 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 31.12.2013 30.06.2014 31.12.2013 30.06.2014 54
Slide 55: Credit quality - BRFkredit
Credit quality - BRFkredit 90-days arrears (per cent of total lending) Repossessed properties (DKKm) 0,10 2000 Private Commercial 1750 Commercial properties 0,08 Subsidised 1500 Private properties Total 0,06 1250 1000 0,04 750 0,02 500 250 0,00 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 0 2009 2009 2010 2010
Slide 56: Exposures by credit rating
Exposures by credit rating (BRFkredit A/S) Corporates and subsidised housing Retail 30% 80% 70% 25% 60% 20% 50% 15% 40% 30% 10% 20% 5% 10% 0% 0% 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 30.06.2014 31.12.2013 30.06.2014 31.12.2013 56
Slide 57: Macro Economy & Danish Banking 2014
Macro Economy & Danish Banking 2014 57
Slide 58: The Danish economy at a glance
The Danish economy at a glance Equal disposable incomes The basics OECD-ranking lowest Gini coefficient Citizens: 5.6 million (2011) Area: 43.098 sq km (0.4 % of USA) 2. Denmark Currency: Kroner (fixed exchange rate policy to the 15. Germany euro) 31. USA A welfare state Among the rich Total tax rev
Slide 59: The private sector is still in consolidation mode
The private sector is still in consolidation mode The private sector saving (especially from SME and corporates) has been record high since 2009. % of GDP % of GDP 59
Slide 60: The private sector is reluctant to borrow
The private sector is reluctant to borrow DKK, bn DKK, bn 60
Slide 61: Still, the Danish economy is improving
Still, the Danish economy is improving In Q1 2014 y/y GDP growth was 1.5 %. The best performance since 2010. Thus, the economy has gone from showing non to now moderate growth. Increased exports is the primary driver of the turnaround. Percent Percent 61
Slide 62: Sentiment has improved, except for a drop in the manufacturing index
Sentiment has improved, except for a somewhat disturbing drop in the manufacturing index 62
Slide 63: House prices increased during the past year
House prices increased during the past year House prices are up 8 % since the beginning of 2013 and prices on flats are up 22 % since eayrly 2012. Overheating of Copenhagen flat market is becoming an issue again, although still not present in our view. Index 2008=100 Index 2008=100 63
Slide 64: Cross-country differences; buying a house is cheap in real terms
Cross-country differences, although currently less pronounced.Buying a house is cheap in real terms House price increases in the capital area look less pronounced than earlier on. Continued large excess supply outside the capital area. A low ”housing burden” supports the market. Net installment for
Slide 65: Bankruptcies in the SME sector are trending downwards
After years of suffering, banktrupcies in the SME sector are trending downwards 65
Slide 66: Household defaults are also declining
With unemployment slightly declining, and interest rates being low, household defaults are also declining 25,0 25,0 20,0 20,0 15,0 15,0 10,0 10,0 5,0 5,0 0,0 0,0 00 02 04 06 08 10 12 14 Denmark Sweden UK Euro area Norway Spain Source: Reuters EcoWin 66
Slide 67: Denmark has a healthy public sector economy
Denmark has a healthy public sector economy Public debt is low and public net saving was -0.9 % of GDP in 2013 and is likely to be close to 0.0 % in 2014. However, there is a one-off positive contribution from pension tax brought forward. Without this deficits would otherwise be close to, but below
Slide 68: Competitiveness has improved
Competitiveness has improved Danish competitiveness deteriorated dramatically during the booming years. Danish production sector has been under some pressure and still is, but conditions are slightly better due to a gradual and ongoing improvement. Source: Ministry for economic affairs and the inter
Slide 69: Overall the Danish economy is structurally strong
Overall the Danish economy is structurally strong Net assets against the rest of the world (2010) 125 125 100 100 75 75 Denmarks net assets 50 50 against the rest of the world are significantly 25 25 % of GDP % of GDP higher today : around 37 % of GDP 0 0 -25 -25 -50 -50 -75 -75 -100 -100 -125 -125
Slide 70: … and Denmark is a AAA economy
… and Denmark is a AAA economy 70
Slide 71: The outlook: Moderate growth to continue, overall strong economy
The outlook: Moderate growth to continue, overall strong economy • The economy is likely to continue in its new moderate growth mode. However, this is dependend on countinued improved conditions in the European economy. • A more pronounced upturn can materialize over the next few years, but the turn
Slide 72: Jyske Bank forecasts
The Danish economy 2011-2015 2013 Real growth (%) DKKbn 2011 «2012 «-2013:«2014* =—.2015* Consumer spending 905 0.7 -0.1 0.0 14 Ls Public spending 524 -1.4 o4 0.8 12 0.9 Fixed gross investment 322 3.2 08 0.7 14 2.3 Inventory investment** 2 0.4 -03 0.2 00 0.0 Exports 1021 7.0 o4 1.2 3.0 3.0 Imports 9
Slide 73: Danish FSA
Danish FSA • Reports in 2011, 2012, 2013 and 2014 73
Slide 74: Danish FSA reports 2011, 2012, 2013 and 2014
Danish FSA reports 2011, 2012, 2013 and 2014 (Jyske Bank ex BRF) SME customers and IRB setup • Decision making material satisfactory • No ground for changing impairment charges • IRB models satisfactory IT inspection • Principles and policies meet required demands Market Risk and Compliance • Manage
Slide 75: Danish FSA reports 2011, 2012, 2013 and 2014 (BRFkredit)
Danish FSA reports 2011, 2012, 2013 and 2014 (BRFkredit) BRFkredit Market risk • Management of securities and funding satisfactory Large exposures and loans to property rental • The inspection did not give rise to changes in impairments on loans or in solvency requirements • The FSA ordered BRF to a
Slide 76: Fact Book
Fact Book 76
Slide 77: Core earnings
Core earnings CORE PROFIT AND PROFIT FOR THE The PERIOD Index Q2 Q1 Q4 Q3 Q2 year DKKm H1 2014 H1 2013 14/13 2014 2014 2013 2013 2013 2013 Net interest income 2,599 2,367 110 1,526 1,073 1,147 1,141 1,258 4,655 Net fee and commission income 775 859 90 351 424 505 367 424 1,731 Value adjustments -9 2
Slide 78: Profit/loss
Profit/loss BREAKDOWN OF THE PERIOD'S PROFIT H1 2014 H1 2013 Earnings Earnings on on Core investment Core investment DKKm earnings portfolios Reclassification Total earnings portfolios Reclassification Total Net interest income 2,599 184 0 2,783 2,367 183 0 2,550 Net fee and commission income 775 -1
Slide 79: Questions
Questions 79
Slide 80: General legal disclaimer
General legal disclaimer • This presentation and the information contained therein is furnished and has been prepared solely for information purposes by Jyske Bank A/S. It is furnished for your private information with the express understanding, which recipient acknowledges, that it is not an offer,