Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — Q2 2016 Earnings Presentation
41 slides from Jyske Bank A/s's earnings presentation, Aug 18, 2016
Slide 1: Jyske Bank Q2 2016
Jyske Bank Q2 2016 18 August 2016
Slide 2: Q2 2016 highlights
Q2 2016 highlights • Slow recovery of Danish economy continues – Supported by private consumption and gradually increasing housing prices – Challenged by weak exports • Danish dairy and pig farmers still faced by low commodity prices • Volatile financial markets • Low/negative interest rate environm
Slide 3: Our targets
Our targets Q2 2016 • Delivering an attractive long-term return on equity – Long-term target of delivering an after tax ROE between 8-12% 10.8% • Harvesting annual synergies of DKK 600m related to the Jyske Bank/BRFkredit merger – Expected 50/50 split between earnings and cost synergies DKK 68.0bn –
Slide 4: Jyske Bank/BRFkredit merger
Jyske Bank/BRFkredit merger 4
Slide 5: Synergies harvested 18 months ahead of plan
Synergies harvested 18 months ahead of plan • Target for annual earnings and cost synergies of minimum DKK 600m achieved by end of Q2 2016 New home loan products – Full impact from Q3 2016 and onwards – 18 months earlier than 80 originally planned DKKbn 70 60 • New volume: 50 – Volume of new home lo
Slide 6: The Group's focus on property lending is a success
The Group’s focus on property lending is a success Goal is to reach a property lending balance of DKK 300bn Quarterly net new lending in BRFkredit (DKKbn) 12 • This equals a net lending growth of around DKK 10 100bn from Q1 2014 8 • The goal has been increased with gross new 6 lending of DKK 20bn to
Slide 7: Why are we successful in attracting customers?
Why are we successful in attracting customers? • Our customers can choose between two different product types: Margins on residential mortgage loans (LTV 0-80%) – Transparent classic products in BRFkredit With Fixed F5 F1 Floater* instalments – Clear and simple new products in Jyske Bank Jyske Bank
Slide 8: Increased earnings from growth in the portfolio
Increased earnings from growth in the portfolio • Growth in the lending portfolio drives average costs 18 down towards capital costs Fixed costs 16 Average lending costs per loan • Capital requirements from new customers are simple 14 12 – Low probability of default and LTV < 80 % Low capital requ
Slide 9: Working towards solving the challenges in future regulation
Working towards solving the challenges in future regulation • Increased focus on regulation in the sector • We have focused on attaining flexibility in our products, NSFR capital centers, lending documentation etc. Gearing ratio • To handle regulatory challenges we have developed new LCR BRRD BLAST
Slide 10: Our focus in the future
Our focus in the future Still a potential to grow in the mortgage market • The residential portfolio is still increasing at a stable rate • We have an acceptable success in attracting commercial customers and we still see possibilities • Still a potential for cross-selling within the Group Digitalis
Slide 11: Summing up
Summing up • Still spending considerable • Focus from the Danish FSA on the resources on regulation Supervisory diamond, which is to be implemented in 2018/20 • Important to prioritise in regards Challenges with F1 is expected to be to investments in customers and solved increasing profits Refin
Slide 12: Danish Macro Economy Q2 2016
Danish Macro Economy Q2 2016 12
Slide 13: Danish economy – a slow recovery story
Danish economy – a slow recovery story • Overall the Danish financial sector’s operating environment has improved • The improvement is also reflected in rating agencies’ outlook on the Danish banking sector: • In Jan 2016 S&P changed their Danish BICRA outlook from stable to positive • Moody’s sees
Slide 14: 3 kinds of stimulus support demand
3 kinds of stimulus support demand Highest real wage growth since 2009 House prices recovering after burst in 2008/09 Compared to Sweden and Norway – Denmark has repriced Interest rates are at a historic low Demand has increased 14
Slide 15: Improved asset quality as defaults are close to normalization
Improved asset quality as defaults are close to normalization Unemployment is moderate and declining Forced house sales below 0,2% per year Business bankruptcies close to normal Data for bankruptcies from late 2015 and into 2016 are distorted by a registration issue. Looking at active companies only
Slide 16: 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 still saving up …so household debt is declining …and household net assets are large 450 450 400 400 350 350 %
Slide 17: 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 And public sector debt is low This is why Denmark is AAA 17
Slide 18: Jyske Bank Q2 2016 results
G JYSKE BANK Jyske Bank Q2 2016 results 18
Slide 19: Q2 2016 results
Q2 2016 results • Net profit of DKK 809m (equal to after tax ROE of 10.8% p.a.) • Core income driven by CORE PROFIT AND PROFIT FOR THE PERIOD Index Index – Stable development in NII DKKm H1 2016 H1 2015 16/15 Q2 2016 Q1 2016 Q2/Q1 Net interest income 2,898 2,841 102 1,448 1,450 100 – Modest net fee
Slide 20: Continued NII stability
Continued NII stability • NII supported by continued growth in new home loans as well as growth in traditional mortgage loans Net interest income 1800 • Reclassification between NII and value adjustments: DKKm 1600 1400 – All interest income, interest expenses and value adjustments related to the 12
Slide 21: Net fee income continues at moderate level seen in Q1
Net fee income continues at moderate level seen in Q1 • Net fee income in Q2 is up by 6% compared to Q1 2016 due to Net fee income – Profit from sale of VISA Europe DKK 25m 600 DKKm – Receipt of annual commission income from DLR Kredit (recorded 500 as guarantee commission) 400 300 200 100 0 Q2 2015
Slide 22: Value adjustments benefit from volatility and lower interest rates
Value adjustments benefit from volatility and lower interest rates • Q2 2016 has been characterized by volatility linked to the British Value adjustments under core income EU referendum and falling long-term interest rates 600 DKKm 500 • Profit from sale of VISA Europe DKK 40m (DKK 65m in total of 4
Slide 23: Decreasing core expenses
Decreasing core expenses Q2 2016 vs. Q1 2016: Development in core expenses 1,400 • Overall, a satisfactory development in line with expectations DKKm 1,350 • Core expenses down by DKK 38m compared to Q1 2016 primarily 1,300 due to expenses with annual payments in Q1 for which accruals 1,250 are not
Slide 24: Net reversals
Net reversals • Net reversals under core profit in the amount of DKK 105m Loan impairment charges (under core profit) 200 DKKm 150 • Impairment charges related to agriculture DKK 92m 100 50 • End of Q2 total balance of management’s estimate of DKK 500m, of 0 which DKK 290m relate to agriculture -50
Slide 25: Limited exposure to dairy and pig farmers
Limited exposure to dairy and pig farmers • Exposure to dairy and pig farmers accounts for less than 1% of Loans, advances and Balance of loan Impairment ratio the Group’s loans and guarantees guarantees impairment charges DKKm/% Q2 2016 Q4 2015 Q2 2016 Q4 2015 Q2 2016 Q4 2015 Dairy farmers 984 1,15
Slide 26: Investment portfolio earnings back in positive territory
Investment portfolio earnings back in positive territory • Negatively affected by: Investment portfolio earnings, quarterly 200 • Value adjustments of DKK -29m related to fair value DKKm assessment of Jyske Bank’s holdings in Nordjyske Bank (Q1 150 2016: DKK -130m) 100 50 • Positively affected by: 0
Slide 27: Credit Quality
G JYSKE BANK Credit Quality 27
Slide 28: Bank loans and advances
Bank loans and advances • Portfolio composition end of Q2 2016 H1 2016 Balance of loan Loans, advances impairment Impairment – Corporates 64% and guarantees charges Losses charges – Private individuals 32% Public authorities 4% 0% 0% 0% – Public authorities 4% Agriculture, hunting, forestry and fish
Slide 29: Mortgages: The portfolio
Mortgages: The portfolio • 86 % of lending to properties with housing purposes Distribution of lending portfolio – No loans with swaps to cooporative housing – No lending to agriculture and other primary production • Increasing share of retail lending – The increase is expected to continue • Increas
Slide 30: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1.8% 600 120 Private 1.6% 500 100 Commercial 1.4% Subsidised 400 80 1.2% 1.0% 300 60 0.8% 200 40 0.6% 0.4% 100 20 0.2% 0 0 0.0% Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 Q4 Q2 Q4 Q2 Q4 Q
Slide 31: Capital and Liquidity
G JYSKE BANK Capital and Liquidity 31
Slide 32: Strong capital position
Strong capital position • Capital ratio 17.0% and CET1 ratio 15.8% end of Q2 2016 compared to Capital ratio 17.0% and 16.1% end of 2015. Change in capital ratios due to: 18 – Consolidation pct 16 – Higher RWA (growth in credit risk) 14 12 – Share buy-backs and expected dividend deducted from 10 cons
Slide 33: Capital adjustment in process
Capital adjustment in process Capital ratio • Capital ratio 17.0% and CET1 ratio 15.8% end of Q2 2016 vs. long-term 18 targets of 17.5% and 14% (based on fully implemented CRD IV pct 16 requirements as per 2020) 14 12 • Gradual capital adjustment towards targets initiated in Q3 2015. 10 8 – Majority
Slide 34: CRD IV requirements
CRD IV requirements • Total capital requirement by 2019 expected to be around 17-17.5%*** • Long term (fully loaded CRDIV) capital targets of 14% CET1 and 17.5% total capital ratio 18 0.8 2.5 16 Countercyclical 0.4 Buffer* 15.8 Combined Buffer Requirement 14 1.5 SIFI Buffer 2.5 12 Capital Conservati
Slide 35: Ample liquidity
Ample liquidity Group Liquidity buffer • Liquidity buffer DKK 71bn end of Q2 2016 (DKK 73bn end of 2015) 80 DKKbn – 88% of the buffer - DKK 63bn - is eligible for repo transactions at 70 central banks (the Danish Central Bank or the ECB) 60 50 40 30 20 10 0 31-12-13 31-12-14 31-12-15 30-06-16 Eligib
Slide 36: The Group is becoming a frequent EUR issuer
The Group is becoming a frequent EUR issuer Redemption profile outstanding bonds in EUR, SEK and NOK mid August 2016 • Ongoing access to a diversified European investor base 9 safekeeps a prudent liquidity risk and funding profile 8 7 • Extending the maturity profile especially in covered bond 6 iss
Slide 37: Business Segments
G JYSKE BANK Business Segments 37
Slide 38: Banking activities
Banking activities Pre-tax profit: • NII under pressure – lower reinvestment interest rates on SUMMARY OF INCOME STATEMENT Index Index DKKm H1 2016 H1 2015 16/15 Q2 2016 Q1 2016 Q2/Q1 liquidity portfolio place drain on NII Net interest income 1,810 1,805 100 886 924 96 • Net fee & commission income
Slide 39: Mortgage activities
Mortgage activities Pre-tax profit: SUMMARY OF INCOME STATEMENT Index Index • Contribution income steadily growing DKKm H1 2016 H1 2015 16/15 Q2 2016 Q1 2016 Q2/Q1 1 Contribution income, etc. 878 824 107 444 434 102 • Reclassification between other net interest income Other net interest income -22 -
Slide 40: Leasing activities
Leasing activities SUMMARY OF INCOME STATEMENT Pre-tax profit: Index Index DKKm H1 2016 H1 2015 16/15 Q2 2016 Q1 2016 Q2/Q1 • Solid NII based on increased business volume Net interest income 232 226 103 118 114 104 • Net fee & commission income continues to be Net fee and commission income -40 -30 1
Slide 41: General legal disclaimer
General legal disclaimer • This presentation and the information contained therein is furnished and has been prepared solely for information purposes by Jyske Bank A/S. It is furnished for your private information with the express understanding, which recipient acknowledges, that it is not an offer,