Kvika Banki Hf · OMXICE:KVIKA
Kvika Banki Hf — FY2022 Earnings Presentation
35 slides from Kvika Banki Hf's earnings presentation, Feb 15, 2023
Slide 1: Kvika banki hf. 12M 2022 Financial Results
Kvika banki hf. 12M 2022 Financial Results 15 February 2023
Slide 2: Q4 PBT of ISK 1,613 million and RoTE of 15.3%
Profit before tax (PBT) for 12M 2022 ISK 5,621 million with RoTE 13.1% driven by strong core income Profit after tax for 12M 2022 ISK 4,913 million, RoTE 11.4% Q4 PBT of ISK 1,613 million and RoTE of 15.3% PBT affected by irregular and one-off costs amounting to ISK 394 million Strong financial posi
Slide 3: Sustainability Policy and digital solutions
› New Sustainability Policy adopted for the group following thorough strategy work and › Digital solutions are at the core of Kvika’s business materiality mapping. The Sustainability Policy adopts 6 of the 17 UNSDGs strategy and are intertwined with Kvika’s sustainability › Efforts underway to gain
Slide 4: Purpose, vision and values
Purpose Increase competition and simplify the customers’ finances Utilise infrastructure, financial strength and relatively small market share in many areas Vision Transform financial services in Iceland guided by mutual benefits Focusing on opportunities others cannot take advantage of Rethinking t
Slide 5: Buy and build strategy
Buy and build strategy Phase I Phase II Phase III 2015-2020: Asset Management consolidation 2019-2022: Building up lending platforms 2023-: Creation of a more competitive financial institution 2015 2017 2018 2019 2019 2020 2021 2022 2022 2023 MP Banki and Kvika acquires Kvika acquires Kvika acquires
Slide 6: Fintech platform and long-term customer journeys
Kvika has assembled a core of financial brands and capabilities …to enable the realization of our vision for the into a fintech platform… future of finance Long-term customer Fintech platform journeys Ecosystems and white- labeling Personalization of products and services 6
Slide 7: Skilum debt collection company
• In 2022 Kvika launched a dedicated debt collection company, Skilum • Skilum is built on technology developed by Netgíró over the past decade, an example of opportunities arising from the group’s building blocks and infrastructure • Skilum will simplify debt collection across all companies in the K
Slide 8: Straumur greiðslumiðlun merchant portfolio
• In 2022 Kvika bought a merchant portfolio from Valitor that encompasses about 25% of the Icelandic acquiring market • Straumur greiðslumiðlun hf. was founded as a new subsidiary of Kvika bank to take over and service the merchant portfolio • Straumur's vision is to be a leading fintech company in
Slide 9: Share of population who are active Aur users
yy 5]2]3)7) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Share of population by age active Aur users 18 25 30 35 40 45 Active Aur users as share of population with permanent residence in Iceland,
Slide 10: New Revenue Streams from Aur Fintech
New Revenue Streams from Aur Fintech 16:15 t sigurbur Vidarsson— @ Following a self-funded year of innovation and development, AUR, our largest bres Toso fintech platform, plans to launch its first phase of New Service Plans this April - bag presenting its 116.000 users with a fresh approach to reta
Slide 11: Financials
Financials
Slide 12: Profit before tax and diversified income
Profit before tax (PBT) Diversified income across categories • Kvika’s profit before tax in 2022 is ISK 5,621 PBT development / ISK m. Net operating income by type / ISK m. million with a RoTE of 13.1% ’21 ’22 • Net operating income amounted to ISK 19,180 3,624 21,997 million in 2022, a 13% decrease
Slide 13: Segment highlights
› Netgíró and Aur integrated with the › Continued increase in volume in FX, › Combined ratio of 95.3% for 2022, in › Market share in retail investment › Quality and granularity of loan book commercial bank at end of Q1 2022 both in currency forward contracts line with the long-term target of 95%. fu
Slide 14: Income statement
Income statement ISK m. 12M 2022 12M 2021 • Net operating income for the period amounted to ISK 19,180 million, driven by continued growth in Net interest income 7,675 4,646 lending activities Net fees and commissions 6,408 6,828 • Stable performance in all segments making up for a loss of net finan
Slide 15: Net interest income
Net interest income (NII) Segment split • Net interest margin of 2.6% p.a. in 2022 ISK m. 12M 2022 / (%) ’21 ’22 2,338 • Net interest income is a growing part of the 5.9% 7.7% TM Insurance group’s total income, 1,855 1,911 Asset Management 1,718 Commercial Banking • Loans to customers increase year
Slide 16: Net fee and commission income
Net fee and commission income (NFC) Segment split • Net fee and commission income continues to ISK m. 12M 2022 / (%) provide a stable revenue stream with its strong ’21 ’22 TM Insurance 5.5% recurring fee base 1,684 1,642 1,829 1,686 1,733 Asset Management • Asset management is a key contributor to
Slide 17: Net premiums and claims
Net premiums and claims (NPC) Combined ratio • Continued strong performance of insurance ISK m. (%) operations with a combined ratio of 93.6% for Q4 ’21 ’22 Major claims ratio Claims ratio Expense ratio Reinsurance ratio and 95.3% for 12M 2022 1,529 101.0 99.9 • Growth in all insurance categories 1,
Slide 18: Net financial income
Net financial income (NFI) Segment split • Low total NFI in 2022 as positive income in Q1 and ISK m. 12M 2022 / ISK m. Q4 counter losses in Q2 and Q3 ’21 ’22 Asset Management Insurance UK • Kvika receives financial income through various 2,185 Commercial Banking Investment Banking operating segments
Slide 19: Core income and core income cover
• Core income is defined as net operating income excluding net financial Core income cover income, which is the revenue stream most affected by external market (%) circumstances Core income to PPA adjusted OPEX → Kvika receives NFI as a result of its banking and insurance operations, both of 200 187
Slide 20: Operating expenses (OPEX)
Operating expenses (OPEX) Segment split • Operating expenses remained stable during the year ISK m. 12M 2022 / (%) → One-off costs in Q4 of ISK 314 million due to ’21 ’22 severance, hiring- and performance bonuses 8.2% Insurance Non-cash PPA amortisation 3,949 Asset Management • Salaries and related
Slide 21: PPA amortization schedule
PPA amortization schedule • As described in Kvika’s 12M 2021 presentation, ISK m. purchase price allocation (“PPA”) in relation to Kvika’s merger with TM and Lykill was completed 500 499 in late 2021, resulting in the recognition of ISK 5.7 493 482 billion of intangible assets to be amortized 450 44
Slide 22: Assets and cash and financial instruments
Assets Cash and financial instruments • ISK 57.2 billion increase in assets since year-end 31.12.22 / ISK billions 31.12.22 / ISK billions 2021 driven by loan book growth, as well as an Liquid assets ISK 116 billion ISK 13.6 billion increase in financial instruments Cash and balances with Central Ba
Slide 23: Loan book by category
Vehicles Commercial vehicles Real estate Real estate development and equipment • Car dealers are the primary source of loan • Mostly to legal entities backed by residential and • Construction level from land to fully equipped property applications • Collateralized by commercial vehicles or various c
Slide 24: Loans to customers risk stage allocation and impairment
Loans to customers risk stage allocation Impairment loss allowance • Stage 3 loans continue to decrease between Net loan book / (%) ISK billions quarters, now 3.0% of the total loan book, down from 4.0% post Ortus acquisition at 31.3.2022 FVTPL Stage 2 Stage 1 Stage 3 → Large stage 3 position in the
Slide 25: Liquidity coverage ratio and net stable funding ratio
Liquidity coverage ratio (LCR) Net stable funding ratio (NSFR) • HQLA assets ISK 79 billion excluding mandatory 31.12.2022 / ISK billions 31.12.2022 / ISK billions reserves and collateral to the Central Bank • Liquidity coverage ratio is strong at 320%, where High quality liquid assets 79 Available
Slide 26: Liabilities and equity, maturity of deposits
Liabilities and equity Maturity of deposits • Liabilities increase by ISK 57 billion since year- ISK billions 31.12.22 / (%) end 2021, driven by growth in deposits and Debt issuance Deposits On demand 4.5% increased borrowings Borrowings Other 1-3 months 3.4% Subordinated liabilities Equity 3-12 mon
Slide 27: Development of market funding
Development of market funding Issue currency • Kvika has been an active issuer in Iceland since ISK billions 31.12.22 / ISK billions 2015 and in 2021 established an EMTN 75 2 70 70 programme and obtained a credit rating from 2 65 3 12 ISK 53 14 2 16 18.0% Moody’s Investors Service 17 15 EUR 0 2 16 3
Slide 28: Capital adequacy, CAR and solvency
Capital adequacy is calculated on a consolidated level as the solvency ratio of the financial conglomerate • Kvika has a group solvency of 1.36 and a CAR of while a consolidated capital adequacy ratio (CAR) is calculated for entities not belonging to the insurance 23.5% at the end of December 2022 s
Slide 29: PBT Outlook 2022-23
At the end of each quarter the group revises key assumptions for the next four quarters and updates • PBT Outlook for the next four quarters, Q1 2023 – previously reported outlook as required, maintaining a running four quarter guidance at each time. Q4 2023, updated to ISK 9,406 million from ISK 9,
Slide 30: Key Takeaways
Key Takeaways Diverse income streams form strong core operations » » » » » Five operating segments continue to provide a highly diverse source of income for the group Strong capital position with a proposed dividend payment of ISK 0.4 per share announced Strong financial position with significant li
Slide 31: Appendix
Appendix Additional information
Slide 32: Comparison with other banks
Net operating income / 31.12.22 Cost to income Loans to Asset Liquidity coverage Net stable funding 2% ratio deposits encumbrance ratio ratio 68% 151% 24% 320% 140% 118% 23% 100% 44% 95% Reg. min. 166% 0% 10% 100% Reg. min. 81% 42% KVIKA Other KVIKA Other KVIKA Other KVIKA Other KVIKA Other banks* b
Slide 33: Investment asset income and insurance investment assets
Investment asset income Insurance investment assets* • Subdued return on investment assets in 2022 of ISK m. 31.12.2022 / ISK m. 1.2% mainly due to difficult equity market 1,291 circumstances 972 Cash and term deposits 3,139 • Positive performance in bonds and real estate offset to a large extent by
Slide 34: Disclaimer
This presentation and the information contained therein has been prepared by Kvika banki hf. on a best knowledge basis. Any statements or assumptions are set forth by Kvika alone and not by any third party. Forward looking statements may deviate from what is presented in this presentation, e.g. due
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