Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Investor Presentation (August 2023)
56 slides from Pareto Bank Asa's investor presentation, Aug 22, 2023
Slide 1: Pareto Bank Company Presentation
PARETO BANK Company Presentation 22 August 2023
Slide 2: Disclaimer and Important Information (I/II)
DISCLAIMER AND IMPORTANT INFORMATION (I/II) THIS PRESENTATION AND ITS CONTENTS IS NOT FOR DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES OF AMERICA AND THE DISTRI
Slide 3: Disclaimer and Important Information (II/II)
DISCLAIMER AND IMPORTANT INFORMATION (II/II) The distribution of this Presentation by the Company in certain jurisdictions is restricted by law. Accordingly, this Presentation may not be distributed or published in any jurisdiction except under circumstances that will result in compliance with any a
Slide 4: Risk Factors (I)
RISK FACTORS (I) An investment in the shares (the “Shares”) of Pareto Bank ASA (the "Bank") involves risk. Prospective investors Shareholders outside of Norway should carefully consider the risks outlined in this Section, as well as the information contained elsewhere in the The Shares are priced in
Slide 5: Risk Factors (II)
RISK FACTORS (II) Development in national and local economic conditions Also, errors in or changes to the Bank’s models and systems used to assess the credit risk may also affect the perceived credit quality profile of the Bank's customers and hence the assessment of the Bank's financial condition.
Slide 6: Risk Factors (III)
RISK FACTORS (III) In the case of turbulence in capital markets and/or if the Bank develops weaker than expected, the liquidity risk can be These rules entail that the Norwegian competent authorities may decide inter alia that the Bank's regulatory capital, significant. This may also be caused by su
Slide 7: Risk Factors (IV)
RISK FACTORS (IV) The countercyclical buffer is currently at 2.5%. The level of the countercyclical buffer is to be re-assessed each Operational risk - Risk management and internal control procedures quarter, but it can only be set higher than 2.5% in extraordinary circumstances pursuant to section
Slide 8: Risk Factors (V)
RISK FACTORS (V) Employees Non-compliance with sanctions regulations and related laws could also result in adverse impacts on the bank's financial performance. The Bank`s strategy depends on the collective efforts of its highly trained employees on all levels. Competition for the best employees from
Slide 9: Private Placement of up to NOK 350m
PRIVATE PLACEMENT OF UP TO NOK 350M Background Lending volume (NOKm) & ROE • Attractive opportunities in all targeted market segments at 18 344 solid credit metrics. 17 346 15 884 PURSUE • Increased demand from larger, more professional 13 152 14 715 CONTINUED customers accelerates lending growth. 1
Slide 10: Introduction
Introduction Proven long term track record Financials and highlights Q2 2023 Business area update & outlook 10
Slide 11: Pareto Bank at a Glance
PARETO BANK AT A GLANCE Highlights ▪ Commenced operations in 2008. Key figures ▪ A pure play corporate bank targeting real estate financing, corporate financing and financing of shipping & offshore. ▪ The specialised real estate developer bank for the greater Oslo NOK 20.3bn region. Total credit NOK
Slide 12: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Business Areas Focus Credits Exposure Sweet spot The specialized real estate Land acquisition financing REAL 41% developer bank for Eastern Property construction NOK 50 – 100m ESTATE Norway and larger facilities Norwegian cities. 24% 1 - 3 yrs FINANC
Slide 13: Investment Highlights
INVESTMENT HIGHLIGHTS • Limited competition in targeted market niches and geographical areas. ATTRACTIVE I NICHE MARKETS • Attractive lending margins within target segments. • Continued profitable growth opportunities. • Solid market position built over the last 15 years. Lending volume of NOK 18.3b
Slide 14: Highly Experienced Management and Board
HIGHLY EXPERIENCED MANAGEMENT AND BOARD Stable management team since start-up Board of Directors Åsmund Skår | Chairman of the board Tiril Haug Villum | CEO 16 • Previous experience from Sparebanken NOR/Gjensidige NOR/DNB including Group • Previous experience as CFO of SEB Privatbanken Executive Vic
Slide 15: Largest Shareholders
LARGEST SHAREHOLDERS 18 August 2023 # Name Shares Percent • The Company has 69,851,730 shares outstanding. One 1 Pareto AS 13 970 346 20,00 % class of shares where each share carries one voting right. 2 Société Générale 6 943 049 9,94 % • Diversified investor base with 3,529 shareholders. 3 Hjellegj
Slide 16: Proven long term track record
Introduction Proven long term track record Financials and highlights Q2 2023 Business area update & outlook 16
Slide 17: 15 Years of Success
15 YEARS OF SUCCESS Historical milestones 2007: Banking license and equity issue NOK 750m. Critical success factors 2008: Financing of housing projects has been an area of focus A specialized, customer-driven team with a high level of since the start. competence and a strong credit culture. 2011: En
Slide 18: Lending Growth
LENDING GROWTH Per business area (NOKm) 18 000 16 000 Ship Financing 14 000 12 000 Corporate Financing * 10 000 8 000 Commercial Property Financing 6 000 4 000 Residential Property Financing 2 000 - 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 18 *) Including securities
Slide 19: Annual Profits
ANNUAL PROFITS Profit after tax (NOKm) 555,5 504,5 428,4 397,6 330,8 312,6 247,3 166,4 154,2 109,7 67,7 47,6 12,4 22,5 8,6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 19
Slide 20: Net Interest Rate Margin
NET INTEREST RATE MARGIN Comparison between Pareto Bank and DNB 5,00% 4,50% 4,00% 3,50% 3,00% 2,50% 2,00% 1,50% 1,00% 0,50% 0,00% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 -0,50% Pareto Bank Net Interest Margin Pareto Bank Impairments and Losses DNB Net Interest Marg
Slide 21: Proven Track Record for Credit Quality
PROVEN TRACK RECORD FOR CREDIT QUALITY Low confirmed losses as share of gross lending • Average ratio of annual confirmed losses 0,28% to gross lending is 0.08 % per year. 0,26% 0,24% • Total confirmed losses limited to NOK 127.9m for a handful of commitments during 15 years of operation. 0,14% • Ac
Slide 22: ROE and Leverage Ratio
ROE AND LEVERAGE RATIO ROE ambition 15 % 16,0 % 15,9 % 16,0 % 15,6 % 14,8 % 15,0 % 25,0 % 14,3 % 14,6 % 14,0 % 14,0 % 12,7 % 13,0 % 12,0 % 20,0 % 18,2 % 16,3 % 16,0 % 16,5 % 10,0 % 15,7 % 14,3 % 14,6 % 8,6 % 13,7 % 15,0 % 8,0 % 12,4 % 11,9 % 11,7 % 11,4 % 12,3 % 10,2 % 6,0 % 6,3 % 10,0 % 4,0 % 3,0 %
Slide 23: Book Value and Dividend per Share
BOOK VALUE AND DIVIDEND PER SHARE Cumulative since 2008 (NOK) Dividend policy 71,1 Min. 50 % 63,3 14,9 56,2 11,4 50,2 8,4 45,1 6,4 39,6 5,7 34,3 4,1 31,1 3,1 27,3 3,1 23,6 56,1 2,5 51,9 18,8 20,4 47,8 17,5 17,6 17,8 1,9 43,8 1,3 39,4 35,4 28,0 31,1 21,6 24,7 17,5 17,6 17,6 18,1 19,1 2008 2009 2010 2
Slide 24: Financials and highlights Q2 2023
Introduction Proven long term track record Financials and highlights Q2 2023 Business area update & outlook 24
Slide 25: Second Quarter 2023
SECOND QUARTER 2023 Highlights • Profit after tax NOK 154.4m (NOK 133.0m in Q2-22). • Return on equity after tax 14.8 % (14.5 %). • Record high net interest income NOK 271.5m (NOK 225.8m). • Lending to customers grew by NOK 637m to NOK 18,344m. • Lending activity was high in all business areas. Grow
Slide 26: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 154,4 18,1 % 14,5 % 14,8 % 17,1 % 17,2 % 133,0 130,9 13,0 % Q2-22 Q1-23 Q2-23 Q2-22 Q1-23 Q2-23 30.06.2022 31.03.2023 30.06.2023 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 262,5 271,5 225,8 0,21% 0,06% 0,07% 19,7% 19,5
Slide 27: Income Statement
INCOME STATEMENT P&L (NOKm) Q2-23 Q2-22 H1-23 H1-22 Increased lending rate, fee income and lending growth Net interest income 271.5 225.8 534.0 433.3 all contributed to a record strong net interest income. Net other operating income -5.4 5.4 -8.4 13.6 Lending rates increased by 0.5 percentage points
Slide 28: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 5,2 7,9 11,9 1,4 12,2 14,9 Q2-23 7,6 271,5 Q1-23 262,5 9,6 200,0 Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 28 *) Other net interest income includes fee paid
Slide 29: Interest Margins
INTEREST MARGINS Lending and deposit margin Net interest margin 6,2 % 6,1 % 6,3 % 6,1 % 6,1 % 5,5 % 5,5 % 4,6 % 4,6 % 5,2 % 4,5 % 5,0 % 4,4 % 4,8 % 4,2 % 1,4 % 1,2 % 0,9 % 0,6 % 0,7 % Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Lending margin over Nibor Deposit margin over Nibor Net
Slide 30: Quarterly Change in Impairments
QUARTERLY CHANGE IN IMPAIRMENTS Impairments (NOKm) Impairments (NOKm) Q2-23 Q1-23 Stage 1 7.5 0.2 Stage 2 -4.7 6.7 36,4 Stage 3 9.4 26.5 Write-offs 0.7 2.9 Total impairments 12.9 36.4 21,0 12,9 • Tightening of macroeconomic scenarios within real estate 9,6 increased impairments in stage 1 and 2 by N
Slide 31: 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 overdue, where the otherwise been a material increase in risk. debtor is considered unlikely to pay, or where there is objective evidence of a future los
Slide 32: Financing
FINANCING Diversified funding sources (NOKm) Customer deposits • Customer deposits, senior bonds and equity including • Retail deposits for savings. subordinate capital. • Corporate deposits are composed of operational funds, surplus liquidity and client accounts accross a variety of industries. • 1
Slide 33: Liquidity Buffer
LIQUIDITY BUFFER Low credit and market risk (NOKm) Comments • Cash on hand. 110 • Highly liquid bonds. • Low credit risk. 2 001 • No interest rate or foreign exchange risk. Cash (Norges Bank & DNB) • Access to central bank Bonds issued by government & PSEs 2 678 facilities and repo market. Covered b
Slide 34: Long-Term Capital Target
LONG-TERM CAPITAL TARGET Solidity and capital • New pillar 2 capital requirement of 3.1 %. 17,2 % Down from 3.2 % and in line with 16,7 % NFSA expectation expectations. 16.7 % 16,0 % • 1.74 % must be made up of CET1 capital. Minimum requirement 15.7 % • The NFSA expects Pareto Bank to hold a P2G buf
Slide 35: Business area update & outlook
Introduction Proven long term track record Financials and highlights Q2 2023 Business area update & outlook 35
Slide 36: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) Business area exposure (NOKm) Total NOK 21,389m Geographical exposure (NOKm) Total NOK 21,389m SHIP FINANCING OTHER NOK 1,677m NOK 2,180m VESTLAND 8% NOK 1,062m 10% VESTFOLD & 5% COMMERCIAL PROPERTY TELEMARK FINANCING NOK 1,361m NOK 5
Slide 37: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKm) 8 684 8 422 7 745 7 251 6 932 5 745 5 785 5 789 5 549 5 429 5 238 4 665 4 576 4 799 4 880 1 888 1 882 1 806 1 622 1 677 Residential property financing Commercial property financing Corporate financing Ship financing Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 37
Slide 38: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 8,684m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • Continued solid demand from Swedish small and medium-sized real estate developers as major Swedish banks c
Slide 39: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 5,238m • Commercial residential includes financing of housing for rent, while commercial property includes financing of commercial property. • Exposure growth of NOK 348m within commercial residential Commercia
Slide 40: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 5,238m • Financing of cash-flow based commercial property (87 % of exposure) and development (13 %). • Continued solid demand from Swedish customers within development and value-add projects. Major Swedish bank
Slide 41: Market Outlook: Real Estate
MARKET OUTLOOK Real estate Residential property Signs of a weaker secondary housing market as higher interest rates and inflation have an effect on demand. New-build projects are put on hold. Profitability is hurt by cost inflation and interest rate hikes. Pre-sale requirements are in general more d
Slide 42: Corporate Financing
CORPORATE FINANCING Exposure (NOKm) Total NOK 5,789m Credit update Total NOK 5,789m • Tailor-made financing solutions to medium-sized enterprises. • Unchanged exposure in Q2-23. • A conservative credit practice is continued. • Follow-up of a small number of customers (in stage 2 and 3) who are affec
Slide 43: Market Outlook: Corporate
MARKET OUTLOOK Corporate Pareto Bank is an attractive partner for medium-sized businesses in the Oslo region and still a small player in the large space for medium-sized corporate lending. Corporate profitability is in general under pressure due to softer demand, inflation and higher financing costs
Slide 44: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,677m • Focus on medium-sized shipowners, family offices and the investment project market. Bulk 457 LTV 43 % • Steep repayment of loans led to a small exposure growth in Industrial 263 LTV 28 % Q2-23 despite good activity. Two new offshore loa
Slide 45: Market Outlook: Shipping and Offshore
MARKET OUTLOOK Shipping and offshore Positive outlook for the dry bulk market due to a low order book for newbuilds. Uncertainty regarding demand given macroeconomic headwinds and fragile Chinese growth. Strong tanker markets with record-low order book and increased demand from longer transportation
Slide 46: Long-Term Ambitions
LONG-TERM AMBITIONS ROE Dividend 15 % min. 50 % 14,6 % 14,0 % 50,1 % 49,4 % 50,1 % 13,0 % 2020 2021 2022 2020 2021 2022 46
Slide 47: Appendix
APPENDIX Pareto bank | 15%
Slide 48: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q2-23 Q1-23 Q4-22 Q3-22 Q2-22 Net interest income 271.5 262.5 253.5 241.8 225.8 Net other operating income -5.4 -3.0 20.7 2.3 5.4 Total net income 266.1 259.5 274.2 244.2 231.2 Total operating expenses 51.4 50.5 48.9 46.7 45.6 Operating profit before 214.7 209.0
Slide 49: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q2-23 Q1-23 Q4-22 Q3-22 Q2-22 Loans to credit institutions 2,001 2,230 747 982 1,676 Loans to customers 18,344 17,707 17,346 16,925 16,109 Bonds and other securities 3,882 3,952 4,007 3,710 3,711 Shareholdings in associated companies 23 23 23 23 23 Other assets 218 157
Slide 50: 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 51: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3 157 281 NOK 10 - 20m 1 240 134 623 NOK 5 - 10m 959 221 Floating rate retail 325 NOK 2 - 5m 1 150 1 394 3 936 NOK 0 - 2m 1 083 1 518 Floating rate corporate 2 685 - 1 000 2 000 3 000 4 000 Floating rate Fixed rate 2 574
Slide 52: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 221 250 201 181 200 156 120 108 575 2 000 83 1 650 1 400 1 270 900 663 3M 6M 12M 2Y 3Y 5Y 2023 2024 2025 2026 2027 2028 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subord
Slide 53: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6 784 56% None / very low risk 54% 7 476 53% 53% 52% 10 757 Low risk 11 350 36% 35% 35% 35% 35% 1 392 Moderate risk 2 153 189 Some risk 154 46 10% 11% 10% High risk 9% 206 7% 29 Very high risk 153 Q2-22 Q3-2
Slide 54: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 453 3% < 10 12 % 571 5 329 10 - 50 23 % 4 886 10 % 5 160 50 - 100 < 10 5 434 10 - 50 3 233 50 - 100 100 - 150 3 793 100 - 150 9% 150 - 200 2 392 150 - 200 200 - 250 2 029 > 250 1 343 200 - 250 2 212 25
Slide 55: Capital Requirements
CAPITAL REQUIREMENTS Expected as of year-end 2023 21,60% 1,00% 18,83% 3,10% 1,00% 16,74% 1,00% 2,33% 1,74% P2G Pillar 2 Pillar 1 & Buffers 17,50% 15,50% 14,00% CET1 Ratio Core Capital Ratio Capital Ratio 55
Slide 56: (Pareto bank |
(Pareto bank | 75