Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2022 Earnings Presentation
49 slides from Pareto Bank Asa's earnings presentation, 2023
Slide 1: Pareto Bank Financial Results – Fourth Quarter 2022
PARETO BANK Financial Results – Fourth Quarter 2022
Slide 2: Highlights
Highlights 15 Years of History Financials Business Areas Outlook & Ambitions 2
Slide 3: Beating profitability ambition in 2022
BEATING PROFITABILITY AMBITION IN 2022 Profit after tax (NOKm) Comments 555.5 504.5 • Return on equity after tax at 14.6 %, exceeding long-term 428.4 ambition. 397.6 312.6 330.8 • Strong lending growth of NOK 1,540m (NOK 1,144m). • Diversifying lending portfolio by strengthening foothold in both cor
Slide 4: Dividend for 2022
DIVIDEND FOR 2022 Proposed dividend of NOK 3.86 per share 4.50 55.0 % 50.1 % 49.4% 50.1% 4.00 45.0 % 3.50 3.00 35.9 % 35.0 % 2.50 25.0 % 2.00 3.86 3.50 1.50 3.00 15.0 % 1.00 2.00 5.0 % 0.50 0.00 -5.0 % 2019 2020 2021 2022 Dividend per Share (NOK) Payout Ratio 4
Slide 5: Fourth quarter 2022 highlights
FOURTH QUARTER 2022 Highlights • Profit after tax NOK 172.1m (NOK 126.0m in Q4-21). • Return on equity after tax 17.4 % (13.5 %). • Record-high net interest income NOK 253.5m (NOK 214.5m). • Lending to customers grew by NOK 421m to NOK 17,346m and came within residential and commercial property fina
Slide 6: Key figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 172.1 17.4 % 18.0 % 17.6 % 133.5 13.5 % 14.0 % 126.0 16.0 % Q4-21 Q3-22 Q4-22 Q4-21 Q3-22 Q4-22 31.12.2021 30.09.2022 31.12.2022 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 253.5 241.8 214.5 0.13% 0.07% 18.4% 19.1% 17.8
Slide 7: 15 Years of History
Highlights 15 Years of History Financials Business Areas Outlook & Ambitions 7
Slide 8: 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 8 *) Including securities
Slide 9: 15 years of success
15 YEARS OF SUCCESS Historical milestones Critical success factors 2007: Banking license and equity issue NOK 750m. A specialized, customer-driven team with a high level of 2008: Financing of housing projects has been an area of focus competence and a strong credit culture. since the start. 2011: En
Slide 10: 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 10
Slide 11: 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 Mar
Slide 12: Proven track record for credit quality
PROVEN TRACK RECORD FOR CREDIT QUALITY • No losses from 2008 to 2012. 2008 0.00% • Total confirmed losses limited to NOK 127.9m for a handful of 2009 0.00% commitments during 15 years of operation. 2010 0.00% 2011 0.00% • Accumulated lending amounted to approx. NOK 100 billion during the past 15 yea
Slide 13: ROE and leverage ratio
ROE AND LEVERAGE RATIO 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 % 13.7 % 15.0 % 8.6 % 8.0 % 12.4 % 11.7 % 11.4 % 12.3 % 11.9 % 10.2 % 6.0 % 6.3 % 10.0 % 4.0 % 3.0 % 5.0 % 2.0 % 1.7 %
Slide 14: Book value and dividend per share
BOOK VALUE AND DIVIDEND PER SHARE Cumulative since 2008 (NOK) 71.1 66.8 59.2 14.9 14.9 52.2 11.4 45.8 8.4 41.2 6.4 35.3 5.7 31.1 27.9 4.1 24.2 3.1 56.1 21.0 3.1 51.9 19.4 2.5 47.8 17.5 17.8 18.3 43.8 1.9 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 2011 2012 2013 2014 2015 2
Slide 15: Financials
Highlights 15 Years of History Financials Business Areas Outlook & Ambitions 15
Slide 16: Income statement
INCOME STATEMENT P&L (NOKm) Q4-22 Q4-21 2022 2021 Interest income supported by lending growth and Net interest income 253.5 214.5 928.6 838.3 increase in lending rates. Net other operating income 20.7 3.0 36.7 12.3 Total net income 274.2 217.6 965.3 850.7 Increase in interest costs. Focus on buildin
Slide 17: Quarterly change in net interest income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 12.1 1.4 33.3 1.5 20.7 2.9 Q4-22 13.1 253.5 Q3-22 241.8 23.4 200.0 Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 17 *) Other net interest income includes fee pa
Slide 18: Annual change in net interest income
ANNUAL CHANGE IN NET INTEREST INCOME (NOKm) 23.7 82.2 1.0 2.8 34.5 7.0 Q4-22 253.5 23.1 44.8 Q4-21 214.5 180.0 Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 18 *) Other net interest income includes fee paid
Slide 19: Net interest margin
NET INTEREST MARGIN Comments • Rate increases in September 6.3 % (0.5 pp), October (0.5 pp) 6.0 % 5.9 % 6.1 % 6.2 % 6.1 % 5.9 % 5.9 % 5.8 % and November (0.25 pp) 5.6 % 5.7 % 5.7 % 5.5 % 5.6 % 5.5 % supported lending margin. 5.2 % 5.0 % 4.8 % • Average market rates increased by 0.97 pp from Q3-22 to
Slide 20: Stable credit quality
STABLE CREDIT QUALITY Credit exposure by IFRS9 stage (NOKm) Accumulated impairments for stage 2 & 3 (NOKm) 600 675 Stage 2 Stage 3 Stage 1 8.8 57.4 Stage 2 Stage 3 Credit exposure Credit exposure 18,601 NOK 600m NOK 675m 20
Slide 21: Unchanged impairments
UNCHANGED IMPAIRMENTS Impairments and losses (NOKm) Impairments and losses (NOKm) 21.0 15.5 Q4-22 2022 11.1 Stage 1 2.1 24.1 9.6 Stage 2 -5.7 -3.4 Stage 3 1.7 24.4 Confirmed losses 0.7 6.7 Total impairments and losses -1.2 45.0 -1.2 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 21
Slide 22: Solidity and capital requirements
SOLIDITY AND CAPITAL REQUIREMENTS 17.7 % 31.12.2023 Future CET1 17.6 % 16.2 % requirement 16.5 % 31.03.2023 including P2G 15.7 % • Leverage ratio of 16.5 %, far above minimum requirement. • Systemic risk buffer increase of 1.5 pp delayed to year-end 2023. • Expecting a revised Pillar 2 requirement i
Slide 23: Business Areas
Highlights 15 Years of History Financials Business Areas Outlook & Ambitions 23
Slide 24: A niche player financing medium-sized enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) SHIP FINANCING NOK 1,806m 9% COMMERCIAL PROPERTY 39% RESIDENTIAL PROPERTY FINANCING 24% FINANCING NOK 4,799m NOK 7,745m 27% CORPORATE FINANCING NOK 5,429m 24
Slide 25: Quarterly exposure per business area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKm) 7,668 7,745 7,267 7,251 6,932 5,745 5,549 5,429 5,060 5,076 4,856 4,665 4,576 4,799 4,732 1,888 1,882 1,806 1,431 1,266 Residential property financing Commercial property financing Corporate financing Ship financing Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 25
Slide 26: Residential property financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 7,745m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • 165 customers with average commitment of NOK 47m. Land without houses 1,405 • 36 % residential exposure in
Slide 27: Commercial property financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 4,799m • Financing of cash flow based commercial property and development. • 87 % of commercial property exposure is cash-flow based. • 94 customers with average commitment of NOK 51m. Commercial residential 1,
Slide 28: Corporate financing
CORPORATE FINANCING Diversified exposure Total NOK 5,429m Credit update Total NOK 5,429m • Tailor-made financing solutions to medium-sized enterprises. • Conservative credit practice still in place. • 124 consolidated corporate customers with average • Follow-up on a small number of customers that a
Slide 29: Ship financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,806m • Focus on medium-sized shipowners, family offices and the investment project market. Bulk 524 LTV 48 % • Corporate loans make up 45 % of the exposure, the remaining Product 300 LTV 24 % 55 % are loans to investment projects. • 21 custome
Slide 30: Outlook & Ambitions
Highlights 15 Years of History Financials Business Areas Outlook & Ambitions 30
Slide 31: Market outlook: Real estate
MARKET OUTLOOK Real estate Residential property Project profitability hurt by material and labour shortages, cost inflation and interest rate hikes. Housing demand has softened due to lower household disposable income. Lower project activity expected in 2023. Loan redemptions may be delayed due to m
Slide 32: Market outlook: Corporate
MARKET OUTLOOK Corporate Corporate profitability under pressure due to increases in interest rates and prices. A number of enterprises are postponing investments due to rising costs and uncertain demand. In general, slightly lower corporate credit demand expected in 2023. Pareto Bank is a small play
Slide 33: Market outlook: Shipping and offshore
MARKET OUTLOOK Shipping and offshore Dry bulk demand continued to stay soft in H2-22. Future demand is uncertain. A small growth in supply is expected. The tanker markets have seen a rebound in 2022 supported by increased demand for oil products and longer transportation distances. 2023 looks strong
Slide 34: Long-term ambitions
LONG-TERM AMBITIONS ROE Dividend 14 % min. 50 % 14.6 % 14.0 % 50.1 % 49.4 % 50.1 % 13.0 % 2020 2021 2022 2020 2021 2022 34
Slide 35: Appendix
APPENDIX Pareto bank | 15%
Slide 36: Largest shareholders
LARGEST SHAREHOLDERS 31 December 2022 Name Shares % total • The Company has 69,851,730 shares outstanding. One class 1 Pareto AS 13,970,346 20.00 % of shares where each share carries one voting right. 2 Société Générale 6,943,049 9.94 % • Diversified investor base with 3,328 shareholders. 3 Hjellegj
Slide 37: The share
THE SHARE Earnings per share (NOK) Book value per share (NOK) 56.12 2.39 1.77 1.85 53.72 51.85 Q4-21 Q3-22 Q4-22 Q4-21 Q3-22 Q4-22 Price / Earnings Price / Book 8.40 1.15 5.95 0.82 0.85 5.01 Q4-21 Q3-22 Q4-22 Q4-21 Q3-22 Q4-22 37 Share price NOK 47.85
Slide 38: Quarterly income statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q4-22 Q3-22 Q2-22 Q1-22 Q4-21 Net interest income 253.5 241.8 225.8 207.5 214.5 Net other operating income 20.7 2.3 5.4 8.2 3.0 Total net income 274.2 244.2 231.2 215.7 217.6 Total operating expenses 48.9 46.7 45.6 45.3 40.1 Operating profit before 225.3 197.5 1
Slide 39: Quarterly balance sheet
QUARTERLY BALANCE SHEET (NOKm) Q4-22 Q3-22 Q2-22 Q1-22 Q4-21 Loans to credit institutions 747 982 1,676 1,840 907 Loans to customers 17,346 16,925 16,109 15,644 15,805 Bonds and other securities 4,007 3,710 3,711 3,795 3,106 Shareholdings in associated companies 23 23 23 24 23 Other assets 173 130 1
Slide 40: 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 41: Number of customers
NUMBER OF CUSTOMERS Per business area Property 259 Financing Corporate 31 Financing Ship 25 Financing Retail 13 (Mortgages) 41 Non-consolidated
Slide 42: Real estate financing exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 9,215m* Geographical commercial property exposure Total NOK 3,328m* 4% 6% 4% 6% 7% 38% Viken 13% Oslo 10% Oslo 41% Vestland Vestfold & Telemark Viken Other Sweden Vestland Vestfold & Telemark Other Sweden 15% 37% 19%
Slide 43: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 10,121 Percent customer deposits of net lending to customers Senior debt 7,183 65.1 % 65.5 % AT1 & T2 debt 721 63.0 % 64.2 % 60.1 % 6,561 58.8 % 58.3 % 5,645 6,754 Other debt 351 5,645 6,038 6,399 7,183 Equity capital 3,920 Key ratios Depo
Slide 44: Customer deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,209 530 NOK 10 - 20m 1,071 146 679 NOK 5 - 10m 839 172 Floating rate retail 429 NOK 2 - 5m 1,170 896 3,747 NOK 0 - 2m 1,088 987 Floating rate corporate 3,893 - 1,000 2,000 3,000 4,000 Floating rate Fixed rate 2,440 Savi
Slide 45: Market funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 250 201 173 200 147 150 118 99 120 89 2,000 1,650 1,260 1,270 1,000 3M 6M 12M 2Y 3Y 5Y 2023 2024 2025 2026 2027 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordinated C
Slide 46: Surplus liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Liquidity is comprised of 3% cash and highly liquid bonds. • High share of government 30% & PSE’s to reduce credit spread risk and increase Government & PSEs short-term liquidity. Covered bonds • Large share of covered Senior financials bonds, mainly short
Slide 47: Commitments by risk classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 7,347 56% None / very low risk 54% 7,063 52% 52% 53% 9,935 Low risk 10,544 38% 37% 36% 35% 35% 1,566 Moderate risk 1,860 158 Some risk 146 137 10% High risk 9% 163 8% 8% 7% 29 Very high risk 309 Q4-21 Q1-22
Slide 48: Commitments by size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 476 3% < 10 11% 547 5,107 10 - 50 5,095 9% 25% 5,181 50 - 100 < 10 4,901 10 - 50 3,236 50 - 100 100 - 150 3,439 100 - 150 10% 150 - 200 1,409 150 - 200 200 - 250 2,070 > 250 1,109 200 - 250 1,828 2,245
Slide 49: (Pareto bank |
(Pareto bank | 75