Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q1 2024 Earnings Presentation
41 slides from Pareto Bank Asa's earnings presentation, Apr 25, 2024
Slide 1: Financial Results – First Quarter 2024
PARETO BANK Financial Results – First Quarter 2024
Slide 2: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 2
Slide 3: First Quarter 2024 Highlights
FIRST QUARTER 2024 Highlights • Profit after tax NOK 176.1m (NOK 130.9m in Q1-23). • Return on equity after tax 14.3 % (13.0 %). • Maintaining a strong net interest income of NOK 299.8m (NOK 262.5m). • Lending to customers grew by NOK 410m to NOK 18,928. Growth within offshore financing, commercial
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 176.1 18.6 % 165.0 18.2 % 13.8 % 14.3 % 17.1 % 130.9 13.0 % Q1-23 Q4-23 Q1-24 Q1-23 Q4-23 Q1-24 31.03.2023 31.12.2023 31.03.2024 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 297.3 299.8 262.5 0.23% 19.5% 0.21% 18.4% 16.5
Slide 5: Financials
Highlights Financials Business Area Update & Outlook 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q1-24 Q1-23 2023 2022 Lending margins and fees were stable throughout Net interest income 299.8 262.5 1,112.6 928.6 the quarter. Interest rate hike in mid-January. Net other operating income 2.4 -3.0 6.7 36.7 Volume growth came late in the quarter. Total net income 302.2
Slide 7: Change in Quarterly Net Interest Income
CHANGE IN QUARTERLY NET INTEREST INCOME (NOKm) 4.6 Q1-24 Q4-23 6.0 0.6 299.8 297.3 4.1 0.1 1.7 0.1 2.7 220.0 Lending Lending Fee Surplus liquidity Deposit Deposit Market Interest volume rate income and other * volume rate funding days 7 *) Other net interest income includes fee paid to Norwegian Ban
Slide 8: Interest Margins
INTEREST MARGINS Lending and deposit margin Net interest margin 6.3 % 6.2 % 6.3 % 6.2 % 6.1 % 4.6 % 4.6 % 4.6 % 5.5 % 5.5 % 5.5 % 5.2 % 4.5 % 4.5 % 5.1 % 1.1 % 0.9 % 0.7 % 0.8 % 0.7 % Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 Lending margin over Nibor Deposit margin over Nibor Net
Slide 9: Quarterly Change in Impairments
QUARTERLY CHANGE IN IMPAIRMENTS Impairments (NOKm) Impairments (NOKm) Q1-24 Q4-23 Stage 1 8.3 12.2 42.1 Stage 2 -8.7 0.9 Stage 3 15.7 -21.2 36.4 Write-offs 0 50.2 30.3 Total impairments 15.3 42.1 • Stage 1 impairments due to lending volume growth. • Adjustment of macroeconomic scenarioes increased m
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 past due, where the otherwise been a material increase in risk. debtor is considered unlikely to pay, or where there is objective evidence of a future lo
Slide 11: Profitability Protects Against Losses
PROFITABILITY PROTECTS AGAINST LOSSES Steadily increasing loss absorbing capacity 5.2 % 4.9 % 4.5 % 4.5 % 4.3 % 4.2 % 4.1 % 4.1 % 3.8 % 3.4 % 0.68% 0.42% 0.37% 0.32% 0.33% 0.24% 0.27% 0.13% 0.04% 0.13% 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD 2024 Loss ratio Loss absorbing capacity Loan loss
Slide 12: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS • Long-term capital target is a CET1 ratio of at least 16.7 %. • Pareto Bank will hold a buffer above this 18.2 % target. 16.9 % 16.7 % NFSA expectation 16.7 % Minimum requirement 15.7 % Leverage Ratio CET1 Ratio Long-term CET1 31.03.2024 31.03.2024 target 12
Slide 13: Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 13
Slide 14: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) SHIP FINANCING NOK 1,540m 7% COMMERCIAL RESIDENTIAL FINANCING NOK 3,159m 14% 37% COMMERCIAL PROPERTY RESIDENTIAL PROPERTY FINANCING FINANCING NOK 3,315m 15% NOK 8,217m 27% CORPORATE FINANCING NOK 6,072m 14
Slide 15: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKb) 8.68 8.42 8.34 8.41 8.22 6.04 6.06 6.07 5.79 5.79 3.32 3.16 3.07 3.08 2.97 3.11 2.56 2.16 2.30 1.81 1.62 1.68 1.50 1.38 1.54 Residential property financing Commercial property financing Commercial residential financing Corporate financing Ship financing Q1
Slide 16: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 8,217m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • Equity contribution of minimum 25 % on land financing. Land without houses 2,126 • Thorough analysis of al
Slide 17: Market Outlook: Residential Property
MARKET OUTLOOK Residential property Uncertain development in financing demand short term. A selective market where it is still difficult to meet pre-sale requirements. Easier for affordable housing in the outskirts of Oslo. Some signs of a more positive market sentiment. Sales in on- going projects
Slide 18: Commercial Residential & Property Financing
COMMERCIAL RESIDENTIAL & PROPERTY FINANCING Credit update Commercial res. & prop. exposure (NOKm) Total NOK 6,474m • Commercial residential includes financing of housing for rent, while commercial property is financing of non-residential commercial property (office, logisitics, retail, etc.). • Expo
Slide 19: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 3,315m • Financing of cash-flow based commercial property and development. • Equity contribution depending on underlying risk factors and entry point of the market cycle. More conservative credit practice appli
Slide 20: Market Outlook: Commercial Property
MARKET OUTLOOK Commercial property Activity in the transaction market is expected to pick up towards the end of 2024. Commercial property prices have fallen during 2023 and are expected to fall somewhat further due to a moderate increase in yields. Continued growth in rental income may compensate fo
Slide 21: Next Step in Sweden
NEXT STEP IN SWEDEN Geographical exposure (NOKm) Total NOK 22,453m Solid track record • Ten years of experience in financing real estate projects for both Norwegian and Swedish customers in Sweden. • Increase in activity, focus and dedication of employee resources during the past five years. • Large
Slide 22: Corporate Financing
CORPORATE FINANCING Exposure (NOKm) Total NOK 6,072m Credit update Total NOK 6,072m • Tailor-made financing solutions to medium-sized enterprises. • Roughly unchanged exposure in Q1-24. • Follow-up of a small number of customers (in stage 2 and 3) that are affected by lower demand, higher operationa
Slide 23: Market Outlook: Corporate
MARKET OUTLOOK Corporate Good long-term growth prospects. A specialized, customer-driven and experienced team with strong track record makes Pareto Bank an attractive partner for medium-sized businesses. Strengthened brand awareness. Still a small player in the large space for corporate lending. Dif
Slide 24: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,540m • Conservative approach focusing on corporate customers with solid balance sheets, modern high-quality assets and Offshore Subsea 427 LTV 51 % equity contribution of minimum 45 %. Bulk 277 LTV 37 % • Targeted customers are reputable Norwe
Slide 25: Market Outlook: Shipping and Offshore
MARKET OUTLOOK Shipping and offshore Conflicts in the Middle East region and disruption in the Suez canal have increased sailing distances and rate levels for several shipping segments during the last quarter. Reversal of the disruption will affect rates negatively. Moderate positive outlook for the
Slide 26: ROE and Leverage Ratio
ROE AND LEVERAGE RATIO Profitability with increasing solidity 16.0 % 15.9 % 16.0 % 15.6 % 14.8 % 15.0 % 25.0 % 14.3 % 14.6 % 14.0 % 14.0 % 14.3 % 13.8 % 12.7 % 13.0 % 12.0 % 20.0 % 18.2 % 17.1 % 16.9 % 16.3 % 16.0 % 16.5 % 10.0 % 15.7 % 14.3 % 14.6 % 13.7 % 15.0 % 8.6 % 8.0 % 12.4 % 11.7 % 11.4 % 12
Slide 27: Appendix
APPENDIX (Pareto bank
Slide 28: Largest Shareholders
LARGEST SHAREHOLDERS 31 March 2024 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 3,590 shareholders. 3 Hjellegjerd
Slide 29: The Share
THE SHARE Earnings per share (NOK) Book value per share (NOK) 2.15 61.44 2.01 1.79 59.32 54.04 Q1-23 Q4-23 Q1-24 Q1-23 Q4-23 Q1-24 29
Slide 30: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q1-24 Q4-23 Q3-23 Q2-23 Q1-23 Net interest income 299.8 297.3 281.3 271.5 262.5 Net other operating income 2.4 12.1 3.0 -5.4 -3.0 Total net income 302.2 309.4 284.3 266.1 259.5 Total operating expenses 55.6 51.1 50.4 51.4 50.5 Operating profit before 246.6 258.3
Slide 31: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q1-24 Q4-23 Q3-23 Q2-23 Q1-23 Loans to credit institutions 1,174 1,651 2,498 2,001 2,230 Loans to customers 18,928 18,518 18,260 18,344 17,707 Bonds and other securities 5,923 5,422 4,245 3,882 3,952 Shareholdings in associated companies 22 22 23 23 23 Other assets 172
Slide 32: 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 33: Number of Customers
NUMBER OF CUSTOMERS Per business area Property Financing 281 Corporate Finanicng 160 Ship Financing 14 Retail (Mortgages) 16 33 Non-consolidated.
Slide 34: Real Estate Financing Exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 11,376m* Geographical commercial property exposure Total NOK 3,315m* 10% 6% 6% 5% 7% 36% 39% Oslo 13% Oslo Akershus Vestland Vestfold & Telemark Sweden 9% Buskerud Akershus Sweden Vestfold & Telemark Other Other 15%
Slide 35: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 12,372 Percent customer deposits of net lending to customers Senior debt 7,570 64.5 % 65.4 % AT1 & T2 debt 1,149 62.8 % 60.9 % 61.0 % Other debt 411 7,570 7,756 Equity capital 4,717 7,718 7,877 7,918 Key funding and liquidity ratios 11,946
Slide 36: Liquidity Buffer
LIQUIDITY BUFFER Low credit and market risk (NOKm) Comments 20 • Cash on hand. • Highly liquid bonds. 1,724 • Low credit risk. • 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 Ot
Slide 37: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,086 103 NOK 10 - 20m 1,424 140 398 NOK 5 - 10m 904 255 Floating rate retail 223 NOK 2 - 5m 1,177 1,875 4,091 NOK 0 - 2m 1,025 2,290 Floating rate corporate 2,798 - 1,000 2,000 3,000 4,000 Floating rate Fixed rate 2,566
Slide 38: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 250 195 575 0 164 120 120 145 122 2000 85 200 1500 66 1400 1400 0 746 500 3M 6M 12M 2Y 3Y 5Y 2024 2025 2026 2027 2028 2029 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Sub
Slide 39: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 7,218 None / very low risk 8,285 53% 53% 52% 52% 50% 10,788 Low risk 11,258 37% 37% 35% 35% 34% 2,334 Moderate risk 2,380 174 Some risk 341 153 11% 10% 11% High risk 10% 9% 2 348 Very high risk 188 Q1-23 Q2-
Slide 40: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 565 3% < 10 593 19% 4,869 10 - 50 23% 5,053 4,981 50 - 100 < 10 5,418 10 - 50 3,082 50 - 100 100 - 150 11% 2,085 100 - 150 150 - 200 3,176 150 - 200 200 - 250 2,681 > 250 1,805 200 - 250 2,394 12% 24%
Slide 41: Pareto Bank
( Pareto bank