Kvika Banki Hf · OMXICE:KVIKA
Kvika Banki Hf — Investor Day (November 2024)
102 slides from Kvika Banki Hf's investor day presentation, November 2024
Slide 1: Kvika Capital Markets Day
Kvika Capital Markets Day November 2024
Slide 2: Agenda
Capital Markets Day 2024 Agenda Financials Q3 2024 Eiríkur Jensson, CFO Economic Outlook Hafsteinn Hauksson, Chief Economist Kvika – Growth, Profitability and Financial Strength • Historical Perspective – Creation of a Challenger Ármann Þorvaldsson, CEO • Infrastructure and Optimisation Anna Rut Ágú
Slide 3: Q3 2024: A Return to Target Profitability
Q3 2024: A Return to Target Profitability Q3 Highlights Strong results characterized by all business units Profit before tax, continuing operations ISK 1,813 m. performing at or above budget and operating expenses at a +2-year low Profit after tax including TM ISK 2,363 m. Auður launches savings dep
Slide 4: Financials
Financials Q3 2024 Eiríkur Jensson CFO
Slide 5: Income Statement Q3 2024
Income Statement Q3 2024 Income Statement ISK m. Q3 2024 Q3 2023 Diff. Q2 2024 Diff. • Net operating income: Increased by 47% year-over-year Net interest income 2,429 1,849 580 2,428 1 (YoY), reflecting substantial gains across all income lines Net fees and commissions 1,552 1,324 228 1,351 201 Othe
Slide 6: Income Statement 9M 2024
Income Statement 9M 2024 Income statement • Profit before tax from continuing operations: ISK 4,217 ISK m. million, a 59% year-over-year (YoY) increase. This growth is 9M 2024 9M 2023 Diff. driven by a 26% rise in net interest income, a 5% increase in Net interest income 7,183 5,690 1,493 fee and co
Slide 7: Net Interest Income
Net Interest Income Robust 26% growth year on year Net interest income Net interest margin development Q3 2023 to Q3 2024 / ISK m. ISK m. 798 403 2,429 (26) (275) 3.9% 1,849 3.8% 3.8% 3.7% • Net interest income in Q3 2024 up 31% from Q3 2023 and (319) up 26% from 9M 2023 to 9M 2024 3.2% • Increase i
Slide 8: Net Fee and Commission Income
Net Fee and Commission Income Improvement in fee and commission income for all business units Net fee and commission income Net fee and commission income Q3 2023 to Q3 2024 / ISK m. ISK m. 148 1,552 Asset Management Cards and payment s Other 70 (11) 1,324 29 Capi tal markets and corporate finance Lo
Slide 9: Other Net Operating Income
Other Net Operating Income Rebound in net financial income Other net operating income Other net operating income Q3 2023 to Q3 2024 / ISK m. Composition / ISK m. 665 Net financial income Other operating income 474 0 Profit from associates (43) 474 70 217 94 109 71 403 113 86 86 120 • Other net opera
Slide 10: Operating Expenses
Operating Expenses Efficient cost management Employee development Cost to core income Full time employees at the end of each period ISK m. / restated comparative information 276 270 249 249 83.0% 244 71.1% 72.3% 67.3% 58.9% • Salaries and related expenses decrease by 11% from Q3 2023 and other opera
Slide 11: Capital Position
Capital Position Strong capital position well above regulatory requirements Capital position and requirements Capital ratio 30.9.2024 / (%) 30.9.2024 / (%) • CAR of 23.5% at the end of September 2024, above management target 23.5% 23.1% 23.5% 20.9-22.9% 22.6% 22.1% 22.1% • CAR of 22.5% excluding una
Slide 12: Liquidity and Funding Ratios
Liquidity and Funding Ratios Continued strong liquidity position Liquidity coverage ratio (LCR) Net stable funding ratio (NSFR) 30.9.2024 / ISK bn. 30.9.2024 / ISK bn. • High Quality Liquid Assets (HQLA) ISK 88.9 bn. excluding mandatory reserves and collateral to the Central Bank High quality liquid
Slide 13: Loans to Customers
Loans to Customers Well diversified loan book Loan book development 145.9 146.7 146.0 ISK bn. 136.3 Commercial Banking Vehicles Commercial vehicles & equipment 34.6 34.8 35.4 123.7 Unsecured loans 34.5 33.5 16.2 18.1 18.1 15.5 7.3 6.7 6.8 15.5 7.7 Investment Banking 6.9 33.5 33.6 Real estate 34.6 31
Slide 14: Credit Quality
Credit Quality Increase in stage 3 loans in Q3 is due to well secured loans Loans to customers risk stage allocation Impairment loss allowance Net loan book / (%) ISK bn. Stage 1 Stage 3 Stage 1 Stage 3 Stage 2 FVTPL Stage 2 % of gross loan book • Stage 3 loans increase from 3.6% to 4.3% between qua
Slide 15: Diversified Funding Program
Diversified Funding Program Solid investment grade rating by Moody’s Development of market funding Issue currency 30.9.2024 / ISK bn. 30.9.2024 83 82 76 78 ISK 73 22.8% 14 14 14 14 GBP • Kvika is an active issuer of bonds in the public bond markets 14 9 22 13 15 34.8% in Iceland, Norway and Sweden f
Slide 16: Financial Targets
Financial Targets Target 9M 2023 Q3 2024 Return on Tangible >20% 18.1% 22.4% Equity Pre-tax Capital Adequacy Ratio 200-400 bps. 460 bps. 460 bps. (CAR) Buffer Over Requirement (basis points) Dividend Payout Ratio 25% 25% 25% Dividends and Share Buybacks as % of Profit after Tax 15
Slide 17: Macroeconomic Outlook in Key Markets
Macroeconomic Outlook in Key Markets Hafsteinn Hauksson Chief Economist
Slide 18: The Backdrop
The Backdrop Global super-cycle driven by external shocks and unprecedented government stimulus Gross Domestic Product Index, 2019=100 110 105 US 100 EZ UK 95 90 Iceland 85 80 Pandemic Stimulus 75 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: FRED, StatIce. 17
Slide 19: Large Twin Fiscal and Monetary Stimulus Aided Recovery
Large Twin Fiscal and Monetary Stimulus Aided Recovery… Government stimulus led to large demand impulse once Covid restrictions lifted Government Stimulus 2020-2021 % 2019 GDP, Cumulative 35% 30% 30% 26% 25% 22% 20% 20% 19% 18% 15% 12% 10% 5% 1% 0% UK Eurozone US Iceland Cumulative General Governmen
Slide 20: But Resulted in Inflation Once Economies Reached Capacity
…But Resulted in Inflation Once Economies Reached Capacity Demand outstripped supply in the wake of the pandemic, causing inflation surge Money Supply Growth vs. Inflation % change YoY, money growth 12 16 13 20 15 60 12 USA Eurozone UK Iceland 30 14 11 13 50 10 10 25 15 11 12 9 40 8 8 9 20 10 7 30 6
Slide 21: But Resulted in Inflation Once Economies Reached Capacity
…But Resulted in Inflation Once Economies Reached Capacity Demand outstripped supply in the wake of the pandemic, causing inflation surge Money Supply Growth vs. Inflation % change YoY, money growth lagged 18mos 12 16 13 20 15 60 12 USA Eurozone UK Iceland 30 14 11 13 50 10 10 25 15 11 12 9 40 8 8 9
Slide 22: But Resulted in Inflation Once Economies Reached Capacity
…But Resulted in Inflation Once Economies Reached Capacity Demand outstripped supply in the wake of the pandemic, causing inflation surge Money Supply Growth vs. Inflation % change YoY, money growth lagged 18mos 12 16 13 20 15 60 12 USA Eurozone UK Iceland 30 14 11 13 50 10 10 25 15 11 Inflation, rh
Slide 23: The Backdrop
The Backdrop Global super-cycle driven by external shocks and unprecedented government stimulus Gross Domestic Product Index, 2019=100 110 105 US 100 EZ UK 95 90 Iceland 85 80 Energy shock and Pandemic Stimulus global inflation 75 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: FRED, StatIce. 2
Slide 24: The Backdrop
The Backdrop Global super-cycle driven by external shocks and unprecedented government stimulus Gross Domestic Product Index, 2019=100 +12.8% 110 105 +2.8% US 100 EZ UK 95 90 Iceland 85 80 Energy shock and global inflation 75 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: FRED, StatIce. 23
Slide 25: The Backdrop
The Backdrop Global super-cycle driven by external shocks and unprecedented government stimulus Gross Domestic Product Index, 2019=100 110 What caused the divergence? 105 100 Short answer: UK Asymmetries in 95 productive capacity 90 Iceland 85 80 Energy shock and global inflation 75 2016 2017 2018 2
Slide 26: Two Factors set Iceland Apart from European Peers
Two Factors set Iceland Apart from European Peers Europe suffered pseudo-productivity loss due to terms of trade shock Energy independence Final Energy Consumption by Product % of gross inland energy consumption 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% DE DK HR HU RO RS XK LU LT LV FR FI NL NO MT
Slide 27: European Energy Price Shock Barely Registered in Iceland
European Energy Price Shock Barely Registered in Iceland Europe suffered pseudo-productivity loss due to terms of trade shock Natural Gas Price Futures Household Energy Bills $/mmBTU Electricity and gas component of CPI, Index, 2020=100 90 225 80 200 70 60 175 50 150 40 30 125 20 10 100 0 2020 2021
Slide 28: European Energy Price Shock Barely Registered in Iceland
European Energy Price Shock Barely Registered in Iceland Europe suffered pseudo-productivity loss due to terms of trade shock Real income in Iceland Real income in the UK % cumulative change % cumulative change 45% 45% 40% 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% -5% -5% 2019
Slide 29: Two Factors set Iceland Apart from European Peers
Two Factors set Iceland Apart from European Peers Europe suffered pseudo-productivity loss due to terms of trade shock, while Iceland saw large expansion of labour force Population growth to support Energy independence rapid export recovery Final Energy Consumption by Product International tourist a
Slide 30: Two Factors set Iceland Apart from European Peers
Two Factors set Iceland Apart from European Peers Europe suffered pseudo-productivity loss due to terms of trade shock, while Iceland saw large expansion of labour force Population growth to support Energy independence rapid export recovery Final Energy Consumption by Product Icelandic Population Gr
Slide 31: Two Factors set Iceland Apart from European Peers
Two Factors set Iceland Apart from European Peers Europe suffered pseudo-productivity loss due to terms of trade shock, while Iceland saw large expansion of labour force Population growth to support Energy independence rapid export recovery Final Energy Consumption by Product Population Growth 2014-
Slide 32: The Same Factors Explain Some of the Variation in Inflation
The Same Factors Explain Some of the Variation in Inflation The asymmetric impact of energy prices and owner-occupied rents explain most of the difference in headline inflation Headline Inflation Core Inflation % change in CPI % change in CPI excluding volatile components 12 12 10 10 Core inflation
Slide 33: Inflation been Stabilised in UK, Iceland has Some Way to Go
Inflation been Stabilised in UK, Iceland has Some Way to Go Bringing inflation to target more arduous when inflation expectations become disanchored Latest BoE inflation forecast (August) Latest CBI inflation forecast (August) Quarterly, % change in CPI YoY Quarterly, % change in CPI YoY 12 12% BoE
Slide 34: Inflation been Stabilised in UK, Iceland has Some Way to Go
Inflation been Stabilised in UK, Iceland has Some Way to Go Bringing inflation to target more arduous when inflation expectations become disanchored Latest BoE inflation forecast (August) Latest CBI inflation forecast (August) Quarterly, % change in CPI YoY Quarterly, % change in CPI YoY 12 12% BoE
Slide 35: Normalisation of Policy Rates Set to Continue
Normalisation of Policy Rates Set to Continue Co-ordinated global monetary loosening as inflation risks gradually subside Policy rates and forward curves % Cuts priced in 10 9 Market implied Iceland forward rate 2024 25-50bps 8 2025 125-150bps 7 2026 50-75bps 6 5 4 Cuts priced in 3 Market implied fo
Slide 36: Soft Landing Remains the Base Case for Both Economies
Soft Landing Remains the Base Case for Both Economies Both economies are reaching inflection point in the current cycle GDP Growth % change from previous year 9.0 IMF Forecast Iceland 2023 Tailwinds from tourism and large inwards net migration support growth even as restrictive monetary policy weigh
Slide 37: Soft Landing Remains the Base Case for Both Economies
Soft Landing Remains the Base Case for Both Economies Both economies are reaching inflection point in the current cycle GDP Growth % change from previous year 8.6 9.0 IMF Forecast Iceland 2023 Tailwinds from tourism and large inwards net migration support growth even as restrictive monetary policy w
Slide 38: Soft Landing Remains the Base Case for Both Economies
Soft Landing Remains the Base Case for Both Economies Both economies are reaching inflection point in the current cycle GDP Growth Average growth 2024-2026 % change from previous year % geometric average, IMF forecast 2.3% 2.3% 8.6 9.0 IMF Forecast 1.9% 5.3 5.0 1.9% 4.8 1.8% 1.7% 1.7% 1.7% 2.4 2.2 1
Slide 39: Rate Cuts in Soft Landing Regimes Historically Supportive
Rate Cuts in Soft Landing Regimes Historically Supportive Since central bank independence, market rallies have coincided with rate cuts when combined with resilient economy Icelandic equity returns when CBI cuts UK equity returns when BoE cuts Distribution of P/E multiples within indices Cumulative
Slide 40: Easing Financial Conditions Evident in DCM
Easing Financial Conditions Evident in DCM Funding conditions eased significantly in 2024, with markets exceptionally supportive of recent issuance Spread on European Issuers Spread on Icelandic bank EUR issues IG Corporate Eurobond Issuance Bps, OAS Bps, Z-spread USD bn. cumulative 250 1000 500 800
Slide 41: We expect a soft landing in key markets
We expect a soft landing in key markets, with growth set to return as inflation and rates normalise 40
Slide 42: A Historic Perspective
A Historic Perspective The creation of a challenger Ármann Þorvaldsson CEO
Slide 43: Creation of a Challenger
Creation of a Challenger Journey from establishment in 2015 driven by clear objectives Revenue Growth Cost Synergies and Increased Financial Diversification and Risk Savings Strength Reduction At each stage, Kvika has strategically Kvika has fostered a cost-conscious Kvika has significantly strength
Slide 44: Creation of a Challenger: Phase I
Creation of a Challenger Phase I: Asset Management Consolidation 2023 2024 2022 29,000 29,000 2021 27,100 50,000 50,000 2015 2016 2017 2018 2019 2020 37,600 42,700 57,323 57,323 21,593 26,015 25,338 29,444 30,106 29,323 33,988 37,339 31,259 32,479 18,876 41,749 47,894 51,480 40,961 53,251 46,380 36,
Slide 45: Creation of a Challenger: Phase II
Creation of a Challenger Phase II: Strengthening of lending operations 2023 2024 2022 29,000 29,000 2021 27,100 50,000 50,000 2015 2016 2017 2018 2019 2020 37,600 42,700 5,900 6,900 57,323 57,323 21,593 26,015 25,338 29,444 30,106 29,323 28,100 30,400 31,259 32,479 18,876 41,749 47,894 51,480 40,961
Slide 46: Creation of a Challenger: Phase III
Creation of a Challenger Phase III: Focus, rationalization and internal growth 2023 2024 2022 29,430 37,509 2021 27,100 50,415 53,505 2015 2016 2017 2018 2019 2020 37,600 42,700 8,278 6,788 5,900 6,900 57,323 48,245 21,593 26,015 25,338 29,444 30,106 29,323 28,100 30,400 31,259 32,479 36,211 18,876
Slide 47: TM Merger Has Been Very Successful
TM Merger Has Been Very Successful Successes Value Creating Doubled Kvika’s Significant cost Lack of revenue Market perception Profit instability balance sheet synergies achieved synergies At the start of merger talks on 28 The merger, which included Over ISK 1.5 bn. in annual cost Limited opportuni
Slide 48: But Not Without Challenges
..But Not Without Challenges Challenges Value Creating Doubled Kvika’s Significant cost Lack of revenue Earnings volatility Market perception balance sheet synergies achieved synergies At the start of merger talks on 28 The merger, which included Over ISK 1.5 bn. in annual cost Cross-selling opportu
Slide 49: Performance Below Expectations 2022-2023
Performance Below Expectations 2022-2023 Profit before tax and RoTE incl. TM ISK m. / (%) Following an exceptionally 40% successful year in 2021, the following years were characterized 33% by sub-target profitability due to internal and external factors 26% High inflation, rapid interest rate hikes
Slide 50: Mainly Due to Low Financial Income and High Cost
Mainly Due to Low Financial Income and High Cost Comparison of key figures, incl.TM In 2022 Net Financial Income ISK m. decreased by ISK 5,672 million from the year before 420 37 Operating Expenses increased by 3,029 ISK 2,049 million which, combined 10,487 5,672 with other factors, led to a nearly
Slide 51: Infrastructure and Optimisation
Infrastructure and Optimisation Anna Rut Ágústsdóttir COO
Slide 52: Overcoming the Obstacles of Building a Challenger
Overcoming the Obstacles of Building a Challenger Challenges Mergers & Acquisitions: Broad Product Range: Introduction of Retail Products: Rising External Risks: Complex system Extensive Adapting to new Heightened security integrations infrastructure service levels risks Integration of systems, Inve
Slide 53: Building a Scalable and Secure Infrastructure
Building a Scalable and Secure Infrastructure Key Work Streams Supporting Growth and Operational Excellence Objectives Key Work Streams Data infrastructure New Azure data warehouse Power BI reporting for structured insights Enhanced analytics and data modeling Investing in scalable infrastructure Ho
Slide 54: Robust Physical and Digital Infrastructure
Robust Physical and Digital Infrastructure Ensuring flexibility and efficiency across the entire service ecosystem Kvika Service Layer Kvika’s physical infrastructure serves Central, reusable services for seamless operations across all brands Infrastructure Data Infrastructure as the backbone of its
Slide 55: Innovative Product Development Leveraging Unified Infrastructure
Innovative Product Development Leveraging Unified Infrastructure Kvika’s shared infrastructure enables efficient, customized product offerings that meet diverse client needs Kvika employs a multi-brand strategy to cater to diverse target groups with specialized products, while leveraging a shared co
Slide 56: Optimizing IT Investments to Unlock Future Growth
Optimizing IT Investments to Unlock Future Growth IT CAPEX and OPEX to Core Income* Strategic Partnership with Moberg Of continuing operations / % of core income Moberg, a full-service digital solutions provider based in Croatia, is a key partner in Kvika’s digital Core income is defined as net inte
Slide 57: Commitment to Balancing Growth with Cost Efficiency
Commitment to Balancing Growth with Cost Efficiency Investments in infrastructure have laid the foundation for sustainable growth while driving operational efficiency FTEs Administrative expenses Cost per FTE Income per FTE Cost to core income Continuing operations ISK bn. / continuing operations IS
Slide 58: Strong and scalable infrastructure in place to support further growth
Strong and scalable infrastructure in place to support further growth 57
Slide 59: Break
ntl KV\KA Break
Slide 60: At a Crossroads
At a Crossroads Transitioning Kvika Post Sale of TM Ármann Þorvaldsson CEO
Slide 61: Significant Turnaround Achieved in 12 Months
Significant Turnaround Achieved in 12 Months Growth in all income streams while costs are reduced Profit before tax from continuing operations ISK m. Q3 2024 demonstrates a strong operational rebound for Kvika over 139 1,815 the last 12 months 289 Revenue growth driven by a significant increase in n
Slide 62: Current Market Sentiment Supports a Favourable Outlook
Current Market Sentiment Supports a Favourable Outlook Entering a period of easing inflation and rates Lowering interest rates Strong equity markets Compression in credit Declining inflation markets Improved Net Interest Margin (NIM) Increased trading volumes in Capital Current non-ISK funding costs
Slide 63: Divestment of TM will Transform Kvika's Capital Position
Divestment of TM will Transform Kvika’s Capital Position Remains contingent on Competition Authority approval Main provisions of TM purchase Purchase price CET1 capital Capital adequacy ratio (CAR) ISK bn. ISK bn. (%) agreement: 30.1 17.2% 40.7% Purchase price of ISK 28.6 billion, 28.6 1.5 3.5 63.9
Slide 64: Kvika Aims to Pay a Significant Dividend
Kvika Aims to Pay a Significant Dividend And retain capital for organic growth opportunities 1. Special dividend 2. Retained capital ISK 20 billion ISK ~10 billion Kvika aims to propose to shareholders a special dividend of ISK 20 billion, subject to the approval of the Icelandic Competition Au thor
Slide 65: Increased Room for Shareholder Distribution
Increased Room for Shareholder Distribution While maintaining a strong capital ratio in the medium term Estimated returns to shareholders Estimated CAR development ISK bn. ISK bn. ISK 30-35 bn. ~ 30.0 23.5 22.5 6.9 2020-2024 Special dividend 2025F 2026F 2027F 9M 2024 Post-dividend 2025F 2026F 2027F
Slide 66: Retained Capital Utilized for Considerable Loan Book Growth
Retained Capital Utilized for Considerable Loan Book Growth In line with market growth rate Anticipated loan book growth post-divestment 280-300 ISK bn. With increased CET1 capital and rising profits, the bank will have the capacity to nearly double its loan book over the next three years 146.0 This
Slide 67: Backed by a Strong Funding Platform
Backed by a Strong Funding Platform Strong ISK funding position Kvika has held a high liquidity position Liquidity coverage ratio Deposits % ISK bn. in recent quarters as evidenced by its high liquidity ratio and level of liquid 522% asset on balance sheet 149 434% 134 The bank also has a strong fun
Slide 68: Loan Growth Expected Across All Business Units
Loan Growth Expected Across All Business Units Increasing diversification and granularity Loan Book Breakdown 9M 2024 2027 Target Loan book expected to expand Vehicle & equipment lending 37% 20-25% considerably across the portfolio and become more diversified Consumer lending 5% 3-5% Growth in mortg
Slide 69: Business Units Will Simultaneously Pursue Growth in Fee Income
Business Units Will Simultaneously Pursue Growth in Fee Income Commercial Banking Investment Banking Asset Management UK • Lending fees to grow in line • Improved co-operation • Drive fund raising, • Harpa fund to strengthen with loan book growth between corporate lending strengthened by Kvika´s fee
Slide 70: Kvika Group Significantly Strengthened Post-Divestment
Kvika Group Significantly Strengthened Post-Divestment The sale of TM simplifies the group's Simplified operations and increased focus operations and enhances focus With the divestment of TM, Kvika significantly strengthens its financial Increased financial strength position and gains substantial ro
Slide 71: Commercial Banking
Commercial Banking Competitive edge through focus on customers Halldór Snæland Managing Director – Commercial Banking
Slide 72: A Journey To Increased Focus On Retail Banking
A Journey To Increased Focus On Retail Banking… Distinct brands driving targeted revenue streams and sustainable growth Net Operating Income - Retail Brands* ISK m. 2019: Auður – Dóttir Kviku launched 115 billion ISK deposits 3,723 3,020 2021: Netgíró acquired 2,453 >60 billion ISK 2021: Aur acquire
Slide 73: Has Resulted in a Strong Presence in the Market
...Has Resulted in a Strong Presence in the Market Across multiple brands and areas of business Total Deposits Kvika‘s Customer Age Distribution % of age group out of total customers 25% 149 bn. +80,000 21% 17% 13% 11% 9% customers Auður has a 12% market 4% share in individual savings deposits < 18
Slide 74: Kvika Offers Core Retail Banking Services
Kvika Offers Core Retail Banking Services Utilizing a multi-brand strategy to cater to diverse customer needs through targeted brands Core Banking Services Deposits Loans Payments Multi-Brand Strategy Auður offers competitive deposit products for individuals and businesses, simplifying savings Lykil
Slide 75: Where the Customer is a Key Element
...Where the Customer is a Key Element Clear product offering through product specific brands Customer-centric multi-brand strategy… Customer Centric Diversified Focused Identity Competitive Approach Market Reach for Each Brand Advantage Brand focuses on enhancing the Brands can target different cus
Slide 76: Our Strategy Leverages Existing Infrastructure
Our Strategy Leverages Existing Infrastructure Enables Kvika to capitalize on new opportunities with minimal investment Kvika Service Layer Central reusable services for seamless operations across all brands Infrastructure Data Infrastructure Digital State-of-the-art data infrastructure development
Slide 77: Auður: Low Investment - High Impact
Auður: Low Investment - High Impact Delivering Substantial Growth With Minimal Resources Development of Deposits Strategic Growth Minimal Investment 2017-2024 / ISK bn. February 2024 100 billion ISK Online deposit platform Auður Kvika leveraged existing 160 deposits significantly boosted deposits in
Slide 78: Netgíró: Successful Merger and Integration
Netgíró: Successful Merger and Integration Successful integration has driven substantial growth, efficiency, and innovation Key Milestones 1. Continued growth 13% CAGR in payment volume since 2020 2017 Partnership with Netgíró initiated to diversify Kvika's loan portfolio 2. OPEX reduction* 2021 -6.
Slide 79: Auður Expands into Mortgage Market
Auður Expands into Mortgage Market Leveraging Existing Systems and Brand for Cost-Effective Market Entry Brand Strategy Leveraging Auður’s established brand reputation to resonate with target customers Funding Strong funding and capital position for buildup of a robust mortgage portfolio Infrastruct
Slide 80: Leveraging an agile infrastructure to capitalize on market opportunities
Leveraging an agile infrastructure to capitalize on market opportunities, challenge competitors and drive profitable growth
Slide 81: Kvika UK
Kvika UK Turnaround achieved, setting the stage for sustained growth Richard Beenstock CEO Kvika Securities Jon Salisbury CEO Ortus Secured Finance
Slide 82: Kvika UK
Kvika UK Asset Credit Corporate Finance Management (via Ortus) Access to Diversified off-market revenue base UK and profit opportunities centre in the UK Asset Management License Corporate Finance Property-secured License lending Small AIFM License Benefit to Benefit to clients Group Clearly articul
Slide 83: Service Offering Built on Three Pillars
Service Offering Built on Three Pillars Asset Management Corporate Finance Credit ISK 6.7bn ISK 50bn+ ISK 37.5bn Assets under management Value transacted Property-secured loan book - Three single investment vehicles under - Building bridges between Iceland and the UK - Property secured lending in th
Slide 84: Performance Highlights Strengthened Loan Book Position and Reorganisation
Performance Highlights Strengthened Loan Book Position and Reorganisation Net operating income Highlights ISK m. 1,961 • Significant performance turnaround achieved in 2024 1,405 • Net interest income more than doubled year-on-year, driven by 1,048 1,049 strong loan book growth and a higher share of
Slide 85: An Established and Well-Regarded Lender Offering Competitive Products
London, Manchester, Glasgow and Belfast An Established and Well-Regarded Lender 100% 98% Offering Competitive Products Share of book secured against property Share of book secured as first lien Highly competent team with proven track record ISK 37.5bn ISK 250m Total Loan Book Average loan size Ortus
Slide 86: Ortus Provides First Charge Property-Secured Loans
Ortus Provides First Charge Property-Secured Loans Residential Commercial Lien Invariably first charge security Loan size £100k – £15m £100k – £15m Terms 6 – 60 months 6 – 36 months Properties such as houses and flats or specialised such as blocks of flats Properties such as commercial units and sma
Slide 87: The Loan Book has Expanded While Upholding Discipline
The Loan Book has Expanded While Upholding Discipline .. Loan book Lending rates by type ISK bn. (%) 100% 100% 100% 100% 41 33% 30 28 84% 22 94% 100% 54% 55% 54% 55% 67% 16% 6% 2021 2022 2023 2024 Q3 2021 2022 2023 2024 Q3 Loan book LTV Variable rate loans Fixed rate The loan book has grown, while t
Slide 88: Significant Potential for Further Growth Without Compromising Quality
.. and There is Still Significant Potential for Further Growth Without Compromising Quality Size of UK bridge lending market Market Opportunity ISK bn. 1,600 Market size (l. axis) 1,500 Ortus loan book (l. axis) • Temporary financing solutions offering higher 1,400 Ortus market share APR 1,300 • Gap
Slide 89: Valuable and Disciplined Infrastructure
Valuable and Disciplined Infrastructure Sourcing Underwriting Portfolio Funding management Established and reliable Highly skilled credit team Intensive post-drawdown loan Access to a diverse range of distribution network supported by robust systems monitoring/management funding channels, including
Slide 90: Significant Market Opportunity Across the Asset Classes
Significant Market Opportunity Across the Asset Classes Continue gaining market share in a • Strong growth over the past decade Credit growing market while applying the • Loan book of £229 million and zero capital losses Ortus Secured Finance rigorous credit discipline established from • Disciplined
Slide 91: Strategic Journey in Growing Assets Under Management
Strategic Journey in Growing Assets Under Management The imminent launch of Harpa Capital Partners leading the way in the short term By building a solid foundation through the sourcing and 3x AuM invested in the UK in the deployment of single-vehicle 6.7 medium term investments and securing capital
Slide 92: Harpa's Investment Arena: Lower Entry Multiples and Network Driven Transactions
Harpa’s Investment Arena is Characterised by Lower Entry Multiples and Network Driven Transactions Competitive Positioning of Private Equity Institutions Enterprise valuation £1bn+ US/Pan-European Upper-middle market Average EV/EBITDA Multiple*: - Large number of bidders and abundant liquidity - Com
Slide 93: Robust lending operations with strong growth opportunities in UK-based asset management
Robust lending operations with strong growth opportunities in UK-based asset management
Slide 94: Summary
Summary Ármann Þorvaldsson CEO
Slide 95: Financial Targets Remain Unchanged
Financial Targets Remain Unchanged.. Profitability Target: Capital Resilience: Shareholder Returns: Post-Divestment Growth and Stability Considerations: >20% 2-4% 25% Capital from divestment will RoTE CAR buffer Dividend policy drive significant growth, with returns expected to surpass the bank’s ne
Slide 96: Subject to Review as the Business Reaches Stability
..Subject to Review as the Business Reaches Stability Driver Financial Targets Key Considerations As increased capital drives growth post-divestment, the bank may stabilise at a new profitability level. A reduction in intangible assets Profitability following divestment raises the consideration of t
Slide 97: Highlights
Highlights Continued Solid Infrastructure Innovation in and Efficient Cost Return to Products and Base Profitability Services Favourable Targets in Q3 economic outlook Profitable Growth Ahead in all Business Units Record payout to shareholders Increased Financial Strength 96
Slide 98: Highlights
Highlights Return to Record payout to Favourable Increased Financial Profitability shareholders economic outlook Strength Targets in Q3 Solid Infrastructure Profitable Growth Continued and Efficient Cost Ahead in all Innovation in Base Business Units Products and Services 97
Slide 99: Highlights
Highlights Solid Infrastructure Aukapunktur 1 and Efficient Cost Base Return to Profitability Profitable Growth Increased Financial Strength Targets in Q3 Ahead in all Business Units Continued Record payout to Aukapunktur 2 Innovation in shareholders Products and Services 98
Slide 100: Q&A
UY kvika Q&A
Slide 101: Disclaimer
Disclaimer This presentation and the information contained therein has been prepared by Kvika banki hf. on a best knowledge basis at the time the presentation was prepared. It is prepared in relation only to Kvika’s Q3 Financials and this Capital Markets Day and should be read in accordance with its
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