Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2015 Earnings Presentation
45 slides from Pareto Bank Asa's earnings presentation, January 2016
Slide 1: Pareto Bank Financial Results Fourth Quarter 2015
PARETO BANK Financial Results Fourth Quarter 2015
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 7 SUMMARY
Slide 3: Pareto Bank at a Glance
PARETO BANK AT A GLANCE 1 Established in January 2008 2 A leading niche player within project financing: fast, flexible and professional 3 Focus on financing of real estate, securities & corporates as well as shipping & offshore 4 Total assets of NOK 11,140m at the end of 2015 5 To be listed on Oslo
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 58 % 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 Net interest income (NOKm) Cost/income ratio Loss ratio Result after tax (NOKm) % of gross lending 333 45.2% 0.40% 166.4 154.2 277 37.6% 218 31.5% 109.9 0.25% 26.9% 0.23% 176 23.9% 146 67.7 0.14% 0.11% 47.6 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 201
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 facilitates fast time to market • Solution oriented II FLEXIBLE • 80% of the employees work with customers on a
Slide 7: Financial Targets and Dividend Policy
FINANCIAL TARGETS AND DIVIDEND POLICY 31.12.2015 STATUS 31.12.2016 TARGET 14.8% > 15.0% ROE RATIO 13.2% 15.0% * CET1 PAYOUT POLICY 0.0% 30-50% ** GROWTH LENDING NOK 724m NOK 800m PAGE 7 Note(*): in line with requirements from the NFSA || Note(**): the actual dividend payout ratio will depend on the
Slide 8: Private Placement Allows for Profitable Growth
PRIVATE PLACEMENT ALLOWS FOR PROFITABLE GROWTH Key initiatives to strengthen the bank’s future CET1 ratio development 14.9 % • Improved net interest margin from CET1 Target 2016 = 15% CONTINUOUSLY 2.82% in Q4-12 to 5.12% in Q4-15 I IMPROVED • Cost/Income ratio from 45% in 2011 to ~1.7 % PROFITABILIT
Slide 9: The Share
THE SHARE * Share price development since registration on NOTC in March 2014 EPS, DPS (NOK) & Dividend Yield Book equity per share (NOK) Share Price (NOK) Volume (#) 3.92 28.03 4.2 % 3.63 34 800,000 24.66 21.62 33 3.1 % 19.70 32 700,000 2.59 2.4 % 1.59 31 30 600,000 29 0.60 0.60 0.60 0.60** 0.0 % 28
Slide 10: Largest Shareholders as of 25.01.2016
LARGEST SHAREHOLDERS AS OF 25.01.2016 # Investor Type 25.01.2016 # of shares % total • As of 18th January 2016, the Company 1 PARETO AS Company 6,375,000 15.00% had 42,500,000 shares outstanding 2 3 SOCIETE GENERALE SS PARIS PERESTROIKA AS Nominee Company 3,700,000 3,581,400 8.71% 8.43% • One class
Slide 11: 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 7 SUMMARY
Slide 12: Portfolio Composition | Overview
PORTFOLIO COMPOSITION | OVERVIEW * Total credit exposure (NOKm) Σ = NOK 10,282m Total lending (NOKm) Σ = NOK 7,931m MAIN BUSINESS AREAS Real Estate 5,649 55% Real Estate 4,513 57% Corporate 1,026 10% Corporate 922 12% Real estate financing Real focused on residential Securities 1,748 17% Securities
Slide 13: Real Estate (I) | Strong Market Position
REAL ESTATE (I) | STRONG MARKET POSITION * 58% Total Real Estate credit exposure (NOKm) Σ = NOK 5,649m Geographical Real Estate exposure (NOKm) Σ = NOK 5,649m Romerike 1283 23% Residential property 2,661 47% Oslo Vest 1179 21% Oslo Øst 933 17% Lots 1,170 21% Asker og Bærum 528 9% Offices 646 11% Bus
Slide 14: Real Estate (II) | Mgmt. & Terms
REAL ESTATE (II) | MGMT. & TERMS 58% Real Estate portfolio policy Real Estate portfolio management • The bank requires on average 20% • In house regulatory skills of the to 40% equity to finance a property housing market is essential for a lot purchase good credit decision process • Primarily financ
Slide 15: Securities & Corporates (I) | Solid Clients
SECURITIES & CORPORATES (I) | SOLID CLIENTS * 27% Total securities exposure (NOKm) Σ = NOK 1,748m Total corporate finance exposure by industry (NOKm) ** Σ = NOK 1,026m Primarly listed stocks 1,457 Real estate 551 54% 83% Technologhy 141 14% Primarly bonds 269 15% Cruise 86 8% Other 22 1% S&O 74 7% K
Slide 16: Securities & Corporate (II) | Mgmt. & Terms
SECURITIES & CORPORATE (II) | MGMT. & TERMS * 27% Securities financing Corporate financing Overview Overview • Total exposure of NOK 1,747.9m • Total exposure of NOK 1,025.8m • 356 customers of which only 26 have a credit facility of • 30 customers with credit facilities/guarantees in the range of a
Slide 17: Shipping & Offshore (I) | Diversified Loans
15% SHIPPING & OFFSHORE (I) | DIVERSIFIED LOANS * Key comments Total S&O credit exposure (NOKm) Σ = NOK 1,533m • 24 loans financing a total of 36 vessels Product 324 21% • Only 3 loans towards the offshore sector: approximately Bulk 221 14% ~1.8% of total credit exposure PCTC • Sole lender in all bu
Slide 18: Shipping & Offshore (II) | Mgmt. & Terms
15% SHIPPING & OFFSHORE (II) | MGMT. & TERMS S&O portfolio policy S&O portfolio management • 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 for cr
Slide 19: 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 7 SUMMARY
Slide 20: 2015 Another Solid Year
2015 ANOTHER SOLID YEAR Key figures 31.12.2015 Result after tax (NOKm) 166.4 154.2 NET NOK 345.4m I INCOME (NOK 297.1m) 109.7 67.7 47.6 RETURN ON 14.8 % II EQUITY (15.6 %) 2011 2012 2013 2014 2015 Return on Equity 15.6 % COST / INCOME 23.9 % 14.8 % III RATIO (26.9 %) 12.7 % 8.6 % 6.3 % CET1 13.2 % I
Slide 21: Fourth Quarter Highlights
FOURTH QUARTER HIGHLIGHTS Key figures 31.12.2015 Result after tax (NOKm) 56.9 47.7 NET NOK 86.6m I INCOME (NOK 67.3m) 37.4 24.7 24.4 RETURN ON 8.3 % II EQUITY (9.5 %) Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Return on Equity COST / INCOME 26.2 % 20.6 % III RATIO (49.4 %) 16.7 % 14.0 % 9.5 % 8.3 % CET1 13.2 % I
Slide 22: Annual Income Statement
ANNUAL INCOME STATEMENT P&L (NOKm) Key comments • The principle of assessing financial Q4-15 Q4-14 2015 2014 instruments at fair value may cause profits to fluctuate between quarters Interest receivable and similar income 140.7 148.2 553.0 552.8 Interest payable and similar costs 48.7 71.8 220.1 275
Slide 23: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Interest receivable and similar income 140.7 137.4 136.6 138.3 148.2 Interest payable and similar costs 48.7 51.3 57.1 62.9 71.8 Net interest income 92.0 86.1 79.5 75.4 76.4 Commissions and income from banking services 5.2 3.2 3.4 3
Slide 24: Growing Net Interest Income
GROWING NET INTEREST INCOME Net interest income (NOKm) Net interest margins 1,057 Q4 2015 5.57% 7,695 3,861 5.54% 91.995 5.12% 4.57% 1,455 Q4 2015 7,261 2,838 Q4 2014 Q4 2014 76.414 -0.45% -0.97% Lending margin Deposit margin Net margin Lending & Lending & Ammorti- Invested Long-term Long-term depos
Slide 25: Continuously Improving Operational Figures (I)
CONTINUOUSLY IMPROVING OPERATIONAL FIGURES (I) Volume increase: Growing net interest income (NOKm) Active repricing: Improving net interest margins (vs. 3M NIBOR) 92.0 5.5 % 5.6 % 5.6 % 5.6 % 5.4 % 5.1 % 5.2 % 4.9 % 5.0 % 5.0 % 5.1 % 4.7 % 4.9 % 86.1 4.7 % 4.8 % 4.6 % 4.3 % 4.3 % 4.2 % CAGR: 4.1 % 3
Slide 26: Continuously Improving Operational Figures (II)
CONTINUOUSLY IMPROVING OPERATIONAL FIGURES (II) Stabilizing cost/income ratio Comfortable loss ratio % of gross lending 0.40% 73.8 % 63.8 % 0.22% 0.25% 0.23% 45.2 % 37.6 % 34.4 % 0.14% 71.2 % 28.8 % 61.3 % 0.11% 23.9 % 0.18% 0.18% 40.2 % 35.9 % 0.11% 0.09% 29.4 % 0.00% 0.00% 22.5 % 20.8 % -0.04% 200
Slide 27: Strong Balance Sheet
STRONG BALANCE SHEET BS (NOKm) Key comments 2015 2014 2013 2012 2011 • High turnover rate: approximately 30% of the loan portfolio matures within a year Cash and deposits with central banks 459.2 215.5 100.1 100.1 0.2 Lending to and deposits with credit institutions 362.5 233.0 451.4 164.0 364.6 • C
Slide 28: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Cash and deposits with central banks 459.2 228.3 544.2 60.7 215.5 Lending to and deposits with credit institutions 362.5 298.6 292.9 406.9 233.0 Net lending to customers 7,930.6 7,486.8 7,569.2 6,842.5 7,206.8 Commercial paper and bonds
Slide 29: 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 7 SUMMARY
Slide 30: Commitments by Size & Risk Classification
COMMITMENTS BY SIZE & RISK CLASSIFICATION 2015 Σ = NOK 10,282m 2014 Σ = NOK 8,987m Key comments Very high risk 55 1% Very high risk 3 0% RISK CLASSIFICATION * • 95% of the portfolio is considered to High risk 0 High risk 0% 0 0% have low to moderate risk Some risk 338 Some risk 3% 296 3% • 1% is con
Slide 31: Loan Portfolio Quality
LOAN PORTFOLIO QUALITY Net non-performing and impaired loans * Group provisions % of gross lending Nominal (NOKm) and % of gross lending 0.51% 1.58% 40.7 0.44% 0.40% 0.41% 0.42% 0.98% 0.37% 0.34% 30.7 30.7 1.14% 28.7 0.31% 0.30% 26.7 0.26% 24.7 0.55% 0.57% 22.7 0.47% 20.7 0.37% 0.20% 18.7 0.25% 0.26
Slide 32: 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 7 SUMMARY
Slide 33: Funding (I) | Overview
FUNDING (I) | OVERVIEW * Sources (NOKm) Σ = NOK 11,140m Historical development in deposits vs. lending (NOKm) Deposits 6,455 58% 102% 98% 95% 96% Senior debt 3,018 27% 91% 90% 88% 86% 85% 86% 84% Core capital 1,191 11% 81% 80% 7,931 Subordinated debt 309 3% 7,596 7,347 7,487 7,171 7,162 7,246 7,207
Slide 34: Funding (II) | Customer Deposits
FUNDING (II) | CUSTOMER DEPOSITS * Deposit allocation Fixed rate deposits (NOKm) - time to maturity (months) Σ = NOK 1,360m >25 145 mths. Depositors (#) 3 416 2 006 15 - 25 210 mths. 8 - 14 487 mths. 5-7 Amount (NOKm) 2 211 4 244 166 mths. 3-4 156 mths. 0% 20% 40% 60% 80% 100% 0-2 196 Retail Corpora
Slide 35: Funding (III) | Market Funding
FUNDING (III) | MARKET FUNDING Market funding maturities - net of own holdings (NOKm) Credit spreads (bps) 1,164 200 180 910 160 110 140 670 120 568 100 1,164 200 80 800 60 568 470 40 20 0 2016 2017 2018 2019 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15
Slide 36: 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 PARB the following abilities: 29.5 % 7,162 7
Slide 37: Surplus Liquidity
SURPLUS LIQUIDITY * Comfortable liquidity buffer (NOKm) Bond portfolio (NOKm) Σ = NOK 2,319m 4,000 Covered bonds 1,070 46% 3,500 Drawing facility Investments 3,000 Financials & Government & PSEs 745 32% 2,500 unrated covered Level 2 assets 2,000 Liquidity portfolio Drawdown on credits Senior financi
Slide 38: 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 18.5 % 15 % by end-of-year 2016 16.7 % 2.0 % • This includes fulfilment of Pillar 2 and an 15.0 % 1.7 % 1.5 % i
Slide 39: Pillar II Leads to Increased CET1 Target
PILAR II LEADS TO INCREASED CET1 TARGET Pareto Bank CET1 ratios * Key comments 15.0 % • Pareto Bank has carried out and 14.1 % reviewed its ICAAP analysis for 2016 13.2 % • The analysis has been carried out in cooperation with the FSA • The analysis concluded a capital requirement of 14.1% • Includi
Slide 40: 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 7 SUMMARY
Slide 41: Ambitions for 2015 Have Been Reached
AMBITIONS FOR 2015 HAVE BEEN REACHED I Return on equity (ROE) after tax of ~15 % II Net lending growth of NOK 800m III Improved net interest margin IV Strengthened team in real estate and shipping PAGE 41
Slide 42: Portfolio Goals for 2016
PORTFOLIO GOALS FOR 2016 BUSINESS AREAS MARKET STATUS GROWTH TARGETS Signs of margin High natural repayment Net growth of Real pressure and increased rate on loans gives approximately estate risk-taking, but still moderate growth NOK 200-300m good deal flow Net growth of Securities & Potential custo
Slide 43: Financial Targets for 2016
FINANCIAL TARGETS FOR 2016 • Reduced credit supply from key Attractive niche market PROFITABLE GROWTH competitors 10.0% development with reduced credit supply and improved margins • Continued attractive margins and business opportunities in target segments • A scalable business model that makes ON E
Slide 44: 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 7 SUMMARY
Slide 45: Summary
SUMMARY 1 Solid performance in 2015 with attractive ROE 2 Attractive opportunities for loan growth in 2016 3 Norwegian FSA requires strengthened CET1 Equity issue of NOK 150m to strengthen CET1, establish platform for 4 continued growth and a normalized dividend policy 5 High ambitions for 2016 and