Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — FY2019 Earnings Presentation
45 slides from Jyske Bank A/s's earnings presentation, Feb 25, 2020
Slide 1: Jyske Bank 2019
Jyske Bank 2019 25 February 2020
Slide 2: Highlights 2019
Highlights 2019 “Gs vy JYSKE BANK Negative interest rates and wave of Satisfied clients and good products mortgage refinancing + According to a Voxmeter survey, we had the </ We were the first one to introduce 10:year most satisfied personal clients among the mortgage loans witha negative interest D
Slide 3: Financial highlights 2019
Financial highlights 2019 Core profit and profit for the period Net profit of DKK 2,440m, equal to 7.1% return on equity in 2019 DKKm Index Index Business volumes 2019 2018 19/18 Q4 2019 Q3 2019 Q4/Q3 Net interest income 5,152 5,505 94 1,270 1,279 99 • Lending (excl. repo) up 1% y/y, as growth in mo
Slide 4: Net interest income under pressure
Net interest income under pressure Q4 2019 vs. Q4 2018: Net interest income down 5% y/y Net interest income Q4 2019 vs. Q4 2018 • Lending growth in mortgage and leasing activities counteracted by 1,350 pressure on bank lending volumes. 1,340 • Pressure on margins in banking, mortgage and leasing act
Slide 5: Negative interest rates: Lower for longer
Negative interest rates: Lower for longer Negative interest rates: The Danish central bank’s main policy rate has been negative for more than five years in a row. Bank deposits (ex. repo) 150 DKKbn High propensity to save and low investment demand: Bank deposit surplus rose 8% in 2019 to DKK 27bn. 1
Slide 6: Business volumes
Business volumes Q4 2019 vs. Q4 2018: Assets under management • Assets under management up 21% y/y due to a positive 180 development on financial markets and a positive net inflow. 160 • Bank lending down 6% due to low demand and high propensity to save. Leasing up 9% from positive structural trend.
Slide 7: Net fee income showing strong momentum
Net fee income showing strong momentum Q4 2019 vs. Q4 2018: Net fee income up 22% y/y Net fee and commission income Q4 2019 vs Q4 2018 • Very high remortgaging activity. 700 DKKm • Performance-related fee income of DKK 33m. • Net inflow of assets under management, which was up 21% y/y. 650 Q4 2019 v
Slide 8: Value adjustments boosted by steepened yield curve
Value adjustments boosted by steepened yield curve Q4 2019 vs. Q4 2018: Value adjustments up DKK 301m y/y Value adjustments under core income • Higher contribution from strategic balance and risk management 300 (liquidity portfolio of approx. DKK 41bn, primarily consisting of Danish mortgage bonds).
Slide 9: Continued reduction of headcount
Continued reduction of headcount Q4 2019 vs. Q4 2018: Costs down 2% y/y • Number of FTE’s 3% lower y/y. Costs Q4 2019 vs. Q4 2018 • Yearly increase in salaries prescribed by collective agreement (+2%). 1,350 • Higher payroll tax (15.0% vs. 14.5%). 1,300 • Positive one-off of DKK 65m in Q4 2018 and p
Slide 10: Reversal of impairment charges
Reversal of impairment charges Q4 2019 vs. Q4 2018: Impairment charges down DKK 93m y/y Loan impairment charges • Cost of risk of -5bp, down 7bp y/y. 40 DKKm • Management’s estimate up, partly due to sector-wide letter of information from the Danish FSA. 20 • DKK 589m (DKK 180m relating to agricultu
Slide 11: Turbulent year for investment portfolio earnings
Turbulent year for investment portfolio earnings Q4 2019 vs. Q4 2018: Investment portfolio earnings up DKK 155m y/y Investment portfolio earnings (quarterly) • Positive impact from being positioned for steepening of the yield curve 200 in Q4 2019. DKKm 150 • FX positions also impacted investment por
Slide 12: 2020 outlook
2020 outlook Lending growth Moderate Total income Lower than 2019 level Expenses Flat (underlying) vs. 2019 level Impairment charges Low level Net profit DKK 1.8-2.2bn CET1 ratio 15-17% Capital ratio 20-22% 12
Slide 13: Capital and Liquidity
(> JYSKE BANK wad Capital and Liquidity 13
Slide 14: Solid capital position and distribution
Solid capital position and distribution Capital ratio of 21.5% and CET1 ratio of 17.4% Q4 2019 vs. targets of 20- Capital ratios 22% and 15-17% for the next 2-3 years, respectively 25% • Higher earnings, lower bank lending, sale of DLR Kredit shares impacted capital position positively in Q4 2019. 2
Slide 15: Capital and NPS issuance entails NII headwind
Capital and NPS issuance entails NII headwind Minimum Requirement for own funds and Eligible Liabilities (MREL) Group liquidity buffer 70 DKKbn • Preferred senior issued before 2018 with residual maturity above 1 year are MREL-eligible until the end of 2021 and will gradually be replaced with non- 6
Slide 16: Appendices
Appendices 1) Jyske Bank in brief and business segments 2) Danish Economy Q4 2019 16
Slide 17: Jyske Bank in brief
Jyske Bank in brief One of the largest financial institutions in Denmark Payout ratio 100% • Founded in 1967 by a merger of four local banks, now a Danish SIFI. 90% 80% • Three complementary segments: The third largest bank in Denmark, 70% the fourth largest mortgage credit institute and one of the
Slide 18: Jyske Bank in brief
Jyske Bank in brief Jyske Bank Group key figures Shareholders' ROE after Loans and Total Profit before Net profit, equity at year- tax, average advances, Deposits, assets, Number Year tax, DKKm DKKm end, DKKm equity DKKbn DKKbn DKKbn of FTEs 1997 584 443 4,772 9.6% 36.6 41.5 63.1 2,671 1998 710 511
Slide 19: Banking activities
Banking activities Q4 2019 vs. Q4 2018: Profit before tax up DKK 727m y/y Financials (Banking) 1,800 • Significantly higher value adjustments and investment portfolio earnings DKKm from a positive development in financial markets. 1,600 • Positive effect from elevated remortgaing activity and higher
Slide 20: Mortgage activities
Mortgage activities Q4 2019 vs. Q4 2018: Profit before tax down DKK 149m y/y • Negatively affected by new intra-group settlement model and new intra- Financials group service model between Jyske Bank A/S and Jyske Realkredit. 600 DKKm • Higher management’s estimate in Q4 2019 impacted impairment 500
Slide 21: Leasing activities
Leasing activities Q4 2019 vs. Q4 2018: Profit before tax up DKK 52m y/y Financials (Leasing) • 9% higher lending volumes partly counteracted by margin pressure. 160 DKKm • Net reversal of impairments in Q4 2019. 140 120 Q4 2019 vs. Q3 2019: Profit before tax up DKK 48m q/q 100 • Lending up close to
Slide 22: Mortgages: The portfolio
Mortgages: The portfolio Lending portfolio split 87% of lending to properties with housing purposes. 1% 2% 0% Owner-occupied (51%) • No loans with swaps to co-operative housing. Vacation homes (2%) • No lending to agriculture and other primary production. 11% Cooperative (4%) Continued increase in l
Slide 23: Mortgages: Strong credit quality
Mortgages: Strong credit quality Lending in 90-days arrears Repossessed properties 1.4% 500 30 Value of repossessed proporties (DKKm) Number of repossessed proporties Private 450 1.2% 25 Commercial 400 1.0% 350 Subsidised 20 300 0.8% 250 15 0.6% 200 10 0.4% 150 100 0.2% 5 50 0.0% 0 0 Q4 2013 Q4 2014
Slide 24: Bank loans: The portfolio
Bank loans: The portfolio Loans and guarantees by sector (DKKm/%) Portfolio composition end of Q4 2019 Loans, advances and Balance of loan Impairment Losses guarantees impairment charges charges • Corporates take up larger proportion, 66% vs. 63% end of Q4 2019 Q4 2018 Q4 2019 Q4 2018 YTD Q4 2019 20
Slide 25: Sustainability and Jyske Bank
Sustainability and Jyske Bank Sustainability is ingrained in Jyske Bank’s vision “We have an ambition of running our business responsibly and in a way that promotes sustainability.” – Jyske Bank’s vision: To make a difference. Signatory of UN’s Principles for Responsible Banking Jyske Bank is also a
Slide 26: Danish Economy February 2020
Danish Economy February 2020 26
Slide 27: Headlines on the Danish Economy
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream Headlines on the Danish Economy • The Danish economy has been in an upturn for seven years. • The upturn slowed down slightly in 2019. We expect further, modest slow do
Slide 28: Denmark is a AAA Economy with Strong Structural Financial Features
Denmark is a AAA Economy with Strong Structural Financial Features Current account surpluses since late 90s ..imply that foreign assets are increasing Current account Denmarks net foreign assets 10 10 100 100 % of GDP, sum over 4 quarters 80 80 8 8 % of GDP, sum over 4 quarters 60 60 6 6 % of GDP 40
Slide 29: A Strong Financial Position
% of GDP Source: Datastream and IMF 100 150 200 250 -50 0 -200 -150 -100 50 Norway Switzerlands Nederlands Denmark Japan Germany Belgium Sweden A Strong Financial Position Austria Finland Italy United Kingdom France Estonia Lithuania USA Latvia Poland Net foreign financial assets (2018) Slovakia Spa
Slide 30: Danish Economy – an Upturn Story with Global Risks
Danish Economy – an Upturn Story with Global Risks • The upturn will slow down, but we do not expect a real downturn. • It has not been a credit driven upturn. No credit imbalances. The upturn will slow down, but not to a downturn Danish GDP growth in comparison Annual GDP-growth GDP-level 4 4 125 1
Slide 31: Weak Credit Growth in Denmark During the Upturn
Weak Credit Growth in Denmark During the Upturn . • Overall credit growth of 2 %/year since 2008. • Main growth driver is mortgage loans. Households Coporates/SME's 25% 25% 30% 30% 20% 20% 20% 20% 15% 15% 10% 10% Y/Y Y/Y 10% 10% 0% 0% 5% 5% -10% -10% 0% 0% -5% -5% -20% -20% 04 06 08 10 12 14 16 18 2
Slide 32: The Danish Growth Drivers
The Danish Growth Drivers Private consumption and Exports are upturn drivers Composition of Danish GDP 2018 8% 8% Contribution to GDP growth Contribution to GDP growth 150% Share of GDP 6% 6% GDP 4% 4% 125% Private Consumption 46.6% 2% 2% 100% Exports 0% 0% 75% Imports -2% -2% 55.6% 50% 100.0% -4% -
Slide 33: Turnaround and consolidation at the same time
Turnaround and consolidation at the same time • Low interest rates and solid real wage growth make it possible for households to consume more and save up at the same time. The private sector is saving up …so household debt has declined …and household net assets are large Private sector financial sav
Slide 34: Spill-over from global weakness, but now stabilization
Spill-over from global weakness, but now stabilization Spill-over-effect from Germany to Denmark But consumer confidence remains neutral Business Confidence Consumer confidence 20 20 20 105 10 15 15 100 0 10 10 -10 95 5 5 Index Index Index 0 0 Index -20 90 -30 -5 -5 85 -40 -10 -10 80 -15 -15 -50 06
Slide 35: Three kinds of stimuli still support demand
Three kinds of stimuli still support demand House prices recovering after burst in 08/09 (Lower, but still) solid rise in employment House prices Employment, Wageworkers 110 110 10 10 100 100 5 5 1.000 Persons Index 2007=100 Index 2007=100 90 90 1.000 Persons 0 0 80 80 -5 -5 70 70 -10 -10 60 60 -15
Slide 36: Largest Danish export markets
Largest Danish export markets • Danish export markets: 52 % to EU incl. UK, 12 % to USA, 8 % to BRIC countries. • Trade negotiations after Brexit is now important for Danish exporters to the UK. • Brexit can still result in significant negative consequences for the most affected sectors. • Brexit is
Slide 37: Denmark’s exports to UK: Focus on food products
Denmark’s exports to UK: Focus on food products • Denmark’s exports to the UK correspond to 8% of total exports. 0.7%-point of the 8% consists of food products. • Pork is the largest export to the UK among food products with a proportion of 36%. • Approximately 15% of Denmark’s total exports of pork
Slide 38: Asset quality remains solid
Asset quality remains solid Unemployment has declined Forced house sales below 0.2 % Business bankruptcies at neutral level per year Unemployment rate (harmonized) Forced sales (properties) Bankruptcies 14 14 600 600 300 300 12 12 500 500 Properties per month 250 250 Monthly level 10 10 Properties p
Slide 39: Moderate Danish price increases in an European context
Moderate Danish price increases in an European context European house prices the past year The development in Scandinavian houseprices House price increase Q318-Q319 House prices 15 15 450 450 400 400 10 10 350 350 Index 1996=100 Percent Index 1996=100 Percent 300 300 5 5 250 250 200 200 0 0 UK 150
Slide 40: Widespread, moderate recovery on the housing market
Widespread, moderate recovery on the housing market • Overall house prices are rising 2-4 % y/y. • Large price increases on flats in biggest cities have stopped. • Postponement of new housing tax model from 2021 to 2024 removes a short term risk element for flat prices. New model will lead to higher
Slide 41: Copenhagen apartments remain a small part of the market
Copenhagen apartments remain a small part of the market Prices for flats per m2 in EUR 16,000 EUR Ownership structure – Type of homes – 14,000 Public Danish housing stock Danish housing stock Rental 12,000 2% 10,000 Private Other Rental 8,000 2% 13% 6,000 4,000 Social 2,000 Appartments housing 20% 3
Slide 42: Construction boom
Construction boom • There has been an unprecedented building boom in the big cities following strong population growth driven by the urbanisation trend. Completed housing units, per year, 1981-2019 Population growth, % 2.5% 2.5% 30 30 2.0% 2.0% 25 25 1.5% 1.5% 20 20 1.0% 1.0% 1.000 units 1.000 units
Slide 43: Recent building boom has been local compared to 00’s
Recent building boom has been local compared to 00’s Completed housing units during 7 quarters, units in % of total stock Q2 2006 – Q4 2007 Q2 2017 – Q4 2018 Source: Danmarks Statistik 43
Slide 44: Denmark’s financial turnaround
Denmark’s financial turnaround Denmark’s net foreign assets 1960-2018 100 100 80 80 From start 1990s: Labour 60 market pension schemes 60 40 40 20 20 % of NNI % of NNI 0 0 1982: The peg is -20 introduced (fully in -20 60s and 70s: effect from 1986) -40 Devaluations -40 -60 -60 -80 -80 1960 1962 1964
Slide 45: Jyske Bank forecasts (December 2019)
Jyske Bank forecasts (December 2019) Danish economy 2016-2020 DKKbn Real growth (%) 2018 2017 2018 2019 2020 2021 Consumer spending 1048 1,6 2,6 1,3 1,3 1,3 Public spending 547 1,0 0,4 0,1 0,9 0,6 Fixed gross investment 495 3,0 5,4 -1,0 0,9 2,1 Inventory investment* 21 -0,1 0,3 0,0 0,0 0,0 Exports 1