Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2016 Earnings Presentation
39 slides from Pareto Bank Asa's earnings presentation, July 2016
Slide 1: Pareto Bank Financial Results Second Quarter 2016
PARETO BANK Financial Results Second Quarter 2016
Slide 2: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK AT A GLANCE 2 BUSINESS AREAS 3 FINANCIAL HIGHLIGHTS 4 CREDIT RISK 5 FUNDING AND CAPITAL 6 AMBITIONS FOR 2016
Slide 3: Pareto Bank at a Glance
PARETO BANK AT A GLANCE 1 A leading niche player within project financing: fast, flexible and entrepreneurial 2 Focus on financing of real estate, securities & corporates and shipping & offshore 3 Return on Equity of 17.4 % in Q2-16 4 Total assets of NOK 12,873m at the end of Q2-16 5 Lending growth
Slide 4: Norway's Leading Project Bank
NORWAY’S LEADING PROJECT BANK BUSINESS AREAS PROJECTS / CREDITS AREA EXPOSURE AVG. PRINCIPAL 1. Construction financing Real NOKm estate 2. Project financing 57 % 25-50 3. Commercial property financing 1. Securities financing Securities & NOKm Corporates 2. Bridge financing 27 % 5-30 3. M&A financing
Slide 5: Solid Foundation and Strong Performance
SOLID FOUNDATION AND STRONG PERFORMANCE Result after tax (NOKm) Return on Equity (after tax) CET1 ratio * 16.5% 15.6% 16.3% 15.1 % 174.6 165.8 13.2 % 13.3% 12.1 % 11.1 % 11.5 % 122.4 111.8 8.9% 79.7 2012 2013 2014 2015 YTD-16 2012 2013 2014 2015 YTD-16 2012 2013 2014 2015 YTD-16 Net interest income
Slide 6: A Different Bank
A DIFFERENT BANK • Compact organization with 33 employees • Short decision lines, no bureaucracy and an efficient I FAST MOVER credit decision process • Frequent credit committee meetings facilitate fast time to market • Solution oriented II FLEXIBLE • 80% of the employees work with customers on a d
Slide 7: Successful Equity Issues and Listing
SUCCESSFUL EQUITY ISSUES AND LISTING 1 2 • The bank successfully raised in total NOK 203m in equity capital through four PRIVATE REPAIR issues in Q1-2016. PLACEMENT OFFERING • The objective of the capital increase was to strengthen the bank’s CET1 capital in NOK 150m NOK 47m line with the Norwegian
Slide 8: The Share
THE SHARE * Share price development since registration on NOTC in March 2014 EPS, DPS (NOK) & Dividend Yield Book equity per share (NOK) 28.01 28.80 Current price: ~NOK 29.90 4.11 3.81 24.68 3.1 % 21.58 2.73 2.4 % 2.19 0.60 0.60 0.0- % 0.0 % 2013 2014 2015 YTD-16 DPS EPS Dividend yield 2013 2014 201
Slide 9: Largest Shareholders as of 15.07.2016
LARGEST SHAREHOLDERS AS OF 15.07.2016 # Investor Country Type 15.07.2016 • The Company has 51,953,022 shares # of shares % total 1 Pareto AS NOR Corporate 7,886,940 15.18% outstanding 2 Pecunia Forvaltning AS NOR Corporate 5,195,302 10.00% • One class of shares where one share 3 Arne Helge Fredly LU
Slide 10: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK AT A GLANCE 2 BUSINESS AREAS 3 FINANCIAL HIGHLIGHTS 4 CREDIT RISK 5 FUNDING AND CAPITAL 6 AMBITIONS FOR 2016
Slide 11: Portfolio Composition | Overview
PORTFOLIO COMPOSITION | OVERVIEW * Gross credit exposure (NOKm) Σ = NOK 10,714m Gross total lending (NOKm) Σ = NOK 8,373m MAIN BUSINESS AREAS Real Estate 6,086 57% Real Estate 5,118 61% Corporates 942 9% Corporates 799 10% Real estate financing Real focused on residential Securities 1,905 18% Securi
Slide 12: Real Estate (I) | Strong Market Position
REAL ESTATE (I) | STRONG MARKET POSITION * 57% 57% Real Estate credit exposure (NOKm) Σ = NOK 6,086m Geographical residential property exposure (NOKm) ** 1% Residential property 2,925 48% Oslo West 17% Oslo North Lots 1,273 21% 23% Oslo East 1% Oslo Nordstrand Offices 555 9% Akershus South 9% Asker
Slide 13: Real Estate (II) | Policy & Strategy
REAL ESTATE (II) | POLICY & STRATEGY 57% 57% Real Estate portfolio policy Real Estate portfolio strategy • Primarily financing of projects in • Expertise and experience within all the Oslo region and other well areas of significance to a developer functioning and liquid markets • In-house legal and
Slide 14: Securities Financing
SECURITIES FINANCING * 18% 18% Total securities exposure (NOKm) Σ = NOK 1,905m Securities financing Overview Primarily listed 1,464 77% stocks** • Total exposure of NOK 1,905m • 367 customers of which only 47 have a credit facility of above NOK 10m Bonds 423 22% • Real time follow-up and any breach
Slide 15: Corporate Financing
9% CORPORATE FINANCING * 9% Total corporate finance exposure by industry (NOKm) Σ = NOK 942m Corporate financing Overview • Total exposure of NOK 942m • 30 customers with credit facilities/guarantees in the range of 10% NOK 1m to NOK 200m 2% • Exposure to a variety of industries Real estate 7% Techn
Slide 16: Shipping & Offshore (I) | Diversified Loans
13% 13% SHIPPING & OFFSHORE (I) | DIVERSIFIED LOANS * Key comments Total S&O credit exposure (NOKm) Σ = NOK 1,422m • 24 loans financing a total of 35 vessels Product 291 20% • Largest exposure is USD 13.3m; average size USD 6.7m Bulk 207 15% • Weighted average loan to value (LTV) is 62% Chemical 190
Slide 17: Shipping & Offshore (II) | Policy & Strategy
13% 13% SHIPPING & OFFSHORE (II) | POLICY & STRATEGY S&O portfolio policy S&O portfolio strategy • Minimum equity of 30%, • Thorough decision making process: but normally in the range all loans approved by the BoD of 40% to 50% • External specialists used as • Clients should be based in consultants
Slide 18: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK AT A GLANCE 2 BUSINESS AREAS 3 FINANCIAL HIGHLIGHTS 4 CREDIT RISK 5 FUNDING AND CAPITAL 6 AMBITIONS FOR 2016
Slide 19: Second Quarter Highlights
SECOND QUARTER HIGHLIGHTS Key figures Q2-16 Profit after tax (NOKm) 63.7 60.0 PROFIT NOK 63.7 I AFTER TAX (NOK 60.0m) 50.7 48.2 27.4 NET INTEREST NOK 101.3m II INCOME (NOK 83.7m) Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 RETURN ON 17.4 % III EQUITY (21.8 %) Return on Equity 21.8 % 17.8 % COST / INCOME 23.6 % 17
Slide 20: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Key comments Q2-16 Q2-15 2015 2014 • The principle of assessing financial instruments at fair value may cause Net Interest income 101.3 83.7 344.3 287.9 profits to fluctuate between quarters Total other operating income 13.0 21.6 12.4 20.0 Total net income 114.2
Slide 21: Growing Net Interest Income
GROWING NET INTEREST INCOME Net interest income (NOK 1,000) Net interest margins (vs. 3M NIBOR) 1,865 4,429 Q2-16 5.62% 5.41% 101,287 5.06% 4.93% 13,154 1,470 1,689 Q2-15 Q2-16 Q2-15 1,262 83,736 -0.49% -0.56% Lending margin Deposit margin Net margin Lending & Lending & Amorti- Invested Long-term Lo
Slide 22: Continuously Improving Operational Figures
CONTINUOUSLY IMPROVING OPERATIONAL FIGURES Active repricing: Improving net interest margins (vs. 3M NIBOR) Key comments 5.5 % 5.6 % 5.6 % 5.6 % 5.6 % • Strong net margin 5.4 % 5.5 % 5.1 % 5.2 % 5.1 % 4.7 % 4.7 % 4.9 % 5.0 % 4.8 % 4.9 % 5.0 % 5.1 % 5.0 % • High lending margin on new loans 4.6 % 4.3 %
Slide 23: Strong Balance Sheet
STRONG BALANCE SHEET BS (NOKm) Key comments Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 • High turnover rate: approximately 30% of Cash and deposits with central banks 752.0 57.0 459.2 228.3 544.2 the loan portfolio matures within a year Lending to and deposits with credit institutions 202.5 796.0 362.5 298.6 292
Slide 24: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK AT A GLANCE 2 BUSINESS AREAS 3 FINANCIAL HIGHLIGHTS 4 CREDIT RISK 5 FUNDING AND CAPITAL 6 AMBITIONS FOR 2016
Slide 25: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Q2-16 Σ = NOK 10,714m Q2-15 Σ = NOK 9,642m Key comments • 85% of the portfolio is considered to None / very low risk 47% None / very low risk 48% 4,992 4,616 have low to moderate risk Low risk 4,127 38% Low risk 3,560 37% • 1% is considered very high risk Moderate
Slide 26: Commitments by Size
COMMITMENTS BY SIZE Q2-16 Σ = NOK 10,714m Q2-15 Σ = NOK 9,642m Key comments • A conservative policy with respect to size <5 535 5% <5 557 6% • Maximum size on a single customer 10% of total capital (NOK 170m) 5 - 10 671 6% 5 - 10 788 8% • Maximum size on group / consolidated basis of 15% of total ca
Slide 27: Loan Portfolio Quality
LOAN PORTFOLIO QUALITY Net non-performing and impaired loans * Cumulative group provisions % of gross lending Nominal (NOKm) and % of gross lending 0.52% 0.51% 0.48% 43.7 0.44% 40.7 40.7 0.40% 0.41% 0.42% 0.37% 0.34% 30.7 30.7 0.31% 28.7 0.30% 26.7 0.94% 0.26% 24.7 0.47% 1.14% 0.96% 22.7 0.37% 20.7
Slide 28: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK AT A GLANCE 2 BUSINESS AREAS 3 FINANCIAL HIGHLIGHTS 4 CREDIT RISK 5 FUNDING AND CAPITAL 6 AMBITIONS FOR 2016
Slide 29: Funding (I) | Overview
FUNDING (I) | OVERVIEW * Sources (NOKm) Σ = NOK 12,873m Historical development in deposits vs. lending (NOKm) Deposits 7,429 58% 102% 98% 95% 96% Senior debt 3,529 27% 91% 90% 88% 89% 86% 85% 86% 84% 83% T1 & T2 debt 310 2% 81% 8,368 8,326 7,931 Other debt 108 1% 7,596 7,347 7,487 7,171 7,162 7,246
Slide 30: Funding (II) | Customer Deposits
FUNDING (II) | CUSTOMER DEPOSITS * Deposit allocation Fixed rate deposits (NOKm) - time to maturity (months) Σ = NOK 1,948m >25 316 mths. Depositors (#) 3,676 2,121 15 - 25 266 mths. 8 - 14 749 mths. 5-7 Amount (NOKm) 2,651 4,752 434 mths. 3-4 82 mths. 0% 20% 40% 60% 80% 100% 0-2 102 Retail Corporat
Slide 31: Funding (III) | Market Funding
FUNDING (III) | MARKET FUNDING * Market funding maturities - net of own holdings (NOKm) Credit spreads (bps) 1,325 200 110 180 1,150 160 200 140 120 673 100 1,215 473 80 950 60 673 205 40 473 20 205 0 2016 2017 2018 2019 2020 Dec-13Feb-14Apr-14 Jun-14 Aug-14Oct-14Dec-14Feb-15Apr-15 Jun-15 Aug-15Oct-
Slide 32: Surplus Liquidity
SURPLUS LIQUIDITY * Comfortable liquidity buffer (NOKm) Bond portfolio (NOKm) Σ = NOK 3,507m 5,000 Drawing facility 0% 4,500 Inv Grade Industry 4,000 15% Financials & 3,500 unrated covered Level 2 assets Covered bonds 3,000 Liquidity portfolio Government & PSEs 2,500 Level 1 covered Senior financial
Slide 33: A High Redemption Rate Gives Flexibility
A HIGH REDEMPTION RATE GIVES FLEXIBILITY Loans (drawn amount) and redemptions per year (NOKm) Key comments 53.4 % 49.2 % A high share of project loans with relatively short 41.9 % maturity results in a high natural redemption rate 7,987 which again grants the bank the following abilities: 29.5 % 7,1
Slide 34: Financial Strength and Capital Targets
FINANCIAL STRENGTH AND CAPITAL TARGETS Pareto Bank capital ratios, requirements and targets * Key comments LEVERAGE RATIO REQUIREMENTS ACTUAL TARGET • The bank’s capital target for CET1 is 15 % by end-of-year 2016 18.4 % 18.5 % 1.6 % 2.0 % • This includes fulfilment of Pillar 2 and an increased coun
Slide 35: Pillar II Requirements Fulfilled
PILAR II REQUIREMENTS FULLFILLED Pareto Bank CET1 ratios * Key comments 15.1 % 15.0 % • Pareto Bank has carried out and 13.9 % reviewed its ICAAP analysis for 2016 Mgmt Buffers Mgmt Buffers • The analysis has been carried out in cooperation with the FSA • The analysis concluded a capital requirement
Slide 36: Table of Contents
TABLE OF CONTENTS 1 PARETO BANK AT A GLANCE 2 BUSINESS AREAS 3 FINANCIAL HIGHLIGHTS 4 CREDIT RISK 5 FUNDING AND CAPITAL 6 AMBITIONS FOR 2016
Slide 37: Financial Targets and Dividend Policy
FINANCIAL TARGETS AND DIVIDEND POLICY 30.06.2016 STATUS 31.12.2016 TARGET Cost effective 16.3% > 15.0% ROE and commercially oriented bank ADEQUACY CET1 capital in CAPITAL 15.1% 15.0% * line with NFSA requirements The actual payout ratio DIVIDEND POLICY 30-50% ** 30-50% ** will depend on the growth p
Slide 38: Portfolio Goals for 2016
PORTFOLIO GOALS FOR 2016 BUSINESS AREAS MARKET STATUS GROWTH TARGETS Low interest rate and High natural repayment Net growth of Real high growth in real estate rate on loans gives approximately estate prices drives the building moderate net growth NOK 300-400m market Net growth of Securities & Poten
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(Pareto bank