Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2018 Earnings Presentation
40 slides from Pareto Bank Asa's earnings presentation, Feb 28, 2019
Slide 1: Pareto Bank Financial Results Fourth Quarter 2018
PARETO BANK Financial Results Fourth Quarter 2018 28 February 2019
Slide 2: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS 2019
Slide 3: Key Figures
KEY FIGURES Profit after tax Earnings per Share (EPS) Return on Equity (ROE) NOKm NOK, 58.6m outstanding shares Excluding AT1 capital and interest 5.28 5.55 312.6 330.8 4.08 247.3 15.9% 16.0% 15.0% 2016 2017 2018 2016 2017 2018 2016 2017 2018 Best year ever. Increase in EPS due to Continued high pro
Slide 4: Status Financial Ambitions
STATUS FINANCIAL AMBITIONS ACTUAL 2018 AMBITION 2018 NOK 1,000m - GROWTH LENDING Record high lending growth. NOK 2,205m High activity in all areas of 1,500m real estate financing. Increase in ON EQUITY RETURN net interest income. 15.0 % > 15.0 % * Individual write-downs within real estate. ADEQUACY
Slide 5: Lending Growth Surpasses Ambition
LENDING GROWTH SURPASSES AMBITION NOKm total lending 12,000 23 % 11,653 11,500 11,000 10,690 10,489 10,500 10,066 10,000 9,448 9,500 9,000 8,500 8,000 7,500 7,000 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 PAGE 5
Slide 6: Payout Ratio and Lending Growth
PAYOUT RATIO AND LENDING GROWTH Dividend per Share and Payout Ratio Lending and Return on Equity (ROE) NOK NOKm 1.20 60.00% 14000 35.0 % 1.00 1.00 11,653 1.00 50.00% 12000 30.0 % 10000 9,448 25.0 % 0.80 40.00% 8,754 0.70 8000 20.0 % 0.60 30.3 % 30.00% 6000 15.9 % 16.0 % 15.0 % 15.0 % 23.7 % 0.40 20.
Slide 7: Fourth Quarter 2018 Highlights
FOURTH QUARTER 2018 HIGHLIGHTS 1 Profit after tax NOK 81.6m (NOK 73.3m). 2 Return on equity 14.0 % (14.3 %). Quarterly write-downs of NOK 9.0m primarily due to individual write-downs 3 within real estate. 4 Record-high lending growth of NOK 963m (NOK -422m). Improvement in net interest income to NOK
Slide 8: Quarterly Key Figures
QUARTERLY KEY FIGURES Profit after tax Return on Equity CET1 ratio NOKm Excluding AT1 capital and interest Standard model 81.6 76.8 17.7 % 73.3 14.3% 14.0% 16.5 % 13.7% 16.1 % Q4-17 Q3-18 Q4-18 Q4-17 Q3-18 Q4-18 31.12.2017 30.09.2018 31.12.2018 Net interest income (NOKm) Cost/income ratio Loss ratio
Slide 9: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS 2019
Slide 10: Income Statement
INCOME STATEMENT P&L (NOKm) Q4-18 Q4-17 2018 2017 Increased lending rates and lending volumes Net Interest income 147.0 128.3 554.4 507.0 improved net interest income. Total other operating income -3.3 2.1 8.8 32.0 The bank's bond portfolio for surplus liquidity Total net income 143.7 130.3 563.2 53
Slide 11: Development in Margins
DEVELOPMENT IN MARGINS Net interest margins Percent interest income including amortizations and fees over 3M Nibor; Cost of deposits of average volumes over 3M Nibor (average of end-of-month fixings) 5.7 % 5.8 % 5.7 % 6.0 % 6.1 % 5.9 % 5.9 % 5.9 % 5.8 5.3 % 5.6 % 5.6 % 5.7 % 5.7 % 5.6 % 5.6 % 5.5 %
Slide 12: Change in Net Interest Income
CHANGE IN NET INTEREST INCOME Net interest income Changes in net interest income over 3M Nibor NOK 1,000 Q4-18 5,645 150,000 1,040 147,045 22,829 1,649 3,982 140,000 Q4-17 128,275 130,000 120,000 5,112 110,000 100,000 90,000 80,000 Lending & Lending & Provisions Invested Market Market deposit deposi
Slide 13: Write-downs and Losses
WRITE-DOWNS AND LOSSES Write-downs & losses according to IFRS 9 Key comments NOKm • Quarterly write-downs in Q4-18 of MNOK 9.0 • No write-offs in Q4-18 • Stage 1: Increase in write-downs mainly due to lending growth in Q4-18 Write-downs: 59.7 • Stage 2: Reduction in write-downs due to fewer Write-do
Slide 14: Historical Development in Write-downs, Losses and Reversals
HISTORICAL DEVELOPMENT IN WRITE-DOWNS, LOSSES AND REVERSALS Write-downs, losses & reversals on loans & guarantees NOKm IAS 39 IFRS 9 Increased group provisions Write-downs on shipping loans Write- 35.0 downs on 1.00% 31.6 real estate 30.7 30.0 0.80% 25.0 0.60% 20.0 15.7 Average write-downs and losse
Slide 15: Funding
FUNDING Sources Deposits & senior debt NOKm NOKm / Percent customer deposits of net lending to customers Deposits 7,623 86% Senior debt 5,011 78% 77% 77% 75% T1 & T2 debt 470 63% 65% 5,207 4,915 5,011 Other debt 195 2,796 3,280 3,250 Equity capital 2,308 4,008 Key ratios Deposits with liquidity rest
Slide 16: Capital
CAPITAL Core equity tier 1 ratio (CET1 ratio) Key comments on capital CET1 • A minimum CET1 ratio requirement of 15.2 % and a 17.2 % 17.7 % Target 16.1 % 15.7 % CET1 ratio target of 15.7 % as of 31.12.2018 13.2 % Pillar 2 • The Ministry of Finance has decided to increase the 3.2% Countercyclical Cap
Slide 17: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS 2019
Slide 18: A Niche Player with Focus on Norwegian Medium-Sized Enterprises
A NICHE PLAYER WITH FOCUS ON NORWEGIAN MEDIUM-SIZED ENTERPRISES • Reliably indicate how we can meet customer needs EFFICIENT AND I RELIABLE • An efficient credit process • Decision-making without uneccessary bureaucracy • We understand our customers' businesses and provide tailor-made solutions HAND
Slide 19: Project Financing for Medium-Sized Enterprises in Four Market Segments
PROJECT FINANCING FOR MEDIUM-SIZED ENTERPRISES IN FOUR MARKET SEGMENTS BUSINESS AREAS FOCUS CREDITS / CUSTOMERS EXPOSURE SWEET SPOT The specialized real Property lot financing Real estate developer bank NOKm 9,851 NOKm Building construction facilities estate for Eastern Norway and larger Norwegian c
Slide 20: Growth in Business Areas
GROWTH IN BUSINESS AREAS NOKm of gross exposure 31 % 5,750 5,811 5,847 5,014 4,454 28 % 4,004 3,135 3,271 3,157 3,247 25 % 1,895 2,016 1,781 1,949 1,561 Residential development Commercial property Corporate Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 PAGE 20
Slide 21: Real Estate | Continued High Activity
REAL ESTATE | CONTINUED HIGH ACTIVITY 67% 70% Real estate credit exposure Σ = NOK 9,851m Key comments NOKm of gross exposure • Credit exposure growth of NOK 792m in Q4-18 and primarily within commercial real estate. Property lots without houses 1,193 • Increased sales effort and strengthened competi
Slide 22: Real Estate | Residential Property Exposure
REAL ESTATE | RESIDENTIAL PROPERTY EXPOSURE 67% 70% Geographical residential property exposure (NOKm) Σ = NOK 5,847m Semi-annually stress testing against a fall in housing prices NOKm of gross exposure • The portfolio is robust against a theoretical stress test and potential loss is limited due to t
Slide 23: Corporate | Continued Strong Deal Flow
10% CORPORATE | CONTINUED STRONG DEAL FLOW 14% 9% Corporate financing exposure (NOKm) Σ = NOK 1,919m Status • Credit exposure growth of NOK 168 in Q4-18. 1% • Deal flow increasing as awareness of Pareto Bank as a 6% financial solution provider for medium-sized businesses improves. 14% • Pilot testin
Slide 24: Shipping & Offshore | Diversified Portfolio
SHIPPING & OFFSHORE | DIVERSIFIED PORTFOLIO 6% 8% Status Shipping & Offshore credit exposure & loan to value Σ = NOK 832m LTV * Share • 16 customers and a total of 25 vessels NOKm • Largest exposure is USD 12.1m and average Product 211 45% 25% commitment size is USD 5.7m Bulk 151 30% 18% Policy Indu
Slide 25: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS 2019
Slide 26: Profitability and Growth Ambitions 2019
PROFITABILITY AND GROWTH AMBITIONS 2019 RETURN ON EQUITY 15 % LENDING GROWTH NOK 1,000 – 2,000m • Focus on margins and credit quality with capacity for • Record high lending growth in Q4-18 high growth • Continued strong deal flow within real estate, increasing • Fluctuations will occur in margins,
Slide 27: Financial Ambitions 2019
FINANCIAL AMBITIONS 2019 NOK 1,000- GROWTH LENIDNG Lending growth within all business areas. 2,000m Profitability comes first! ON EQUITY Cost effective RETURN 15.0% and commercially oriented bank. ADEQUACY CAPITAL 16.2 % Well positioned for increased countercyclical capital buffer. DIVIDEND POLICY 0
Slide 28: Appendix
(Pareto bank
Slide 29: Largest Shareholders as of January 2019
LARGEST SHAREHOLDERS AS OF 3 JANUARY 2019 # Investor 3 January 2019 # of shares % total • The Company has 58,619,688 shares 1 Pareto AS 9,675,873 16.51% outstanding 2 Pecunia Forvaltning AS 6,500,000 11.09% 3 AF Capital Management AS 5,045,998 8.61% • One class of shares where each share 4 K11 Inves
Slide 30: The Share
THE SHARE Earnings per share Book equity per share NOK NOK 5.28 5.55 39.37 4.08 35.41 31.14 2016 2017 2018 2016 2017 2018 Price / Earnings Price / Book NOK, Share price 33.80 NOK, Share price 33.80 9.34x 1.22x 7.48x 1.12x 6.09x 0.86x 2016 2017 2018 2016 2017 2018 PAGE 30
Slide 31: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q4-18 Q3-18 Q2-18 Q1-18 Q4-17 Net Interest income 147.0 138.8 139.4 129.1 128.3 Total other operating income -3.3 -1.4 8.6 4.9 2.1 Total net income 143.7 137.5 148.0 134.0 130.3 Total other operating expenses 28.2 31.1 29.6 31.0 33.5 Operating result before loss
Slide 32: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q4-18 Q3-18 Q2-18 Q1-18 Q4-17 Loans to credit institutions 320 1,295 1,136 405 357 Loans to customers 11,653 10,690 10,489 10,066 9,448 Bonds and other securities 3,537 4,220 4,031 2,844 3,215 Shareholdings in associated companies 37 35 35 37 36 Other assets 60 80 6
Slide 33: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding font NOKm, estimated interest contribution including commissions, excluding font and back-end fees over 3M Nibor or similar rate and back-
Slide 34: Number of Customers
NUMBER OF CUSTOMERS Number of customers per business area Real Estate 270 Corporate 77 Securities 201 Shipping 17 & Offshore Retail 31 (Mortgages) PAGE 34
Slide 35: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 749 Floating rate retail Depositors (#) 1,922 618 571 2,531 Amount (NOKm) 2,856 4,738 Floating rate corporate 2,475 Retail Corporate 1,762 Savings with restrictions 1,215 1,110 Deposits by size Fixed rate 2,690 NOKm 916 > NOK 20m 1,329
Slide 36: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 119 91 200 70 1620 1350 49 40 950 150 35 800 400 2019 2020 2021 2022 2023 0,25 0,5 1 2 3 5 Senior Call on Subordinated Capital Years to Maturity Source: Nordic Bond Pricing PAGE 36
Slide 37: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Key comments Market value of bonds and funds comprising suprplus liquidity • The bank’s liquidity is comprised of cash and highly liquid bonds 2% 1% • High share of government & PSEs to reduce credit spread risk and increase short-term liquidity • Large share of cove
Slide 38: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 5,500 risk 5,852 48% 48% 4,771 45% 46% 45% Low risk 43% 44% 42% 42% 6,348 39% 1,234 Moderate risk 1,356 331 Some risk 307 18 High risk 10% 9% 10% 134 7% 8% 42 Very high risk Q3-17 Q1-18 Q2
Slide 39: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Commitment size per customer NOKm Percent of NOKm 969 < 10 2% 9% 6% 879 4,656 < 10 10 - 50 6% 4,575 10 - 50 3,441 50 - 100 50 - 100 33% 3,895 16% 100 - 150 620 150 - 200 100 - 150 2,266 200 - 250 1,034 > 250 150 - 200 822 28% 214 200 - 250 250 965 > 2
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(Pareto bank