Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2015 Earnings Presentation
41 slides from Pareto Bank Asa's earnings presentation, 2015
Slide 1: Pareto Bank Financial Results Second Quarter 2015
PARETO BANK Financial Results Second Quarter 2015 PAGE 1
Slide 2: Pareto Bank at a Glance
PARETO BANK AT A GLANCE • A niche player with focus on real estate financing, securities Name Holding Share Pareto AS 6,375,000 15.00% financing and shipping and offshore financing Societe Generale SS (nom.) 3,700,000 8.71% • Established in January 2008 Perestroika AS 3,581,400 8.43% Indigo Invest A
Slide 3: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPITAL 4 AMBITIONS FOR 2015 PAGE 3
Slide 4: Second Quarter 2015
SEOCND QUARTER 2015 Post-tax operating profit (MNOK) 56.9 47.2 Profit after write-downs and tax 39.6 37.4 MNOK 56.9 (MNOK 39.6) 24.7 Return on equity after tax 20.6% (16.3%) Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Cost/income ratio Return on equity (after tax) 20.8% (21.5%) 20.6 % 18.8 % 16.3 % 14.0
Slide 5: Income Statement
INCOME STATEMENT (NOK 1,000) Q2 2015 Q2 2014 H1 2015 H1 2014 2014 Net interest income 79,523 65,596 154,904 128,489 277,117 Net other operating income 3,245 2,456 6,623 4,978 10,193 Net gains/losses on financial instruments 18,306 3,701 10,895 14,072 9,840 Total net income 101,073 71,754 172,423 147
Slide 6: Quarterly Profit Trends
QUARTERLY PROFIT TRENDS (NOK 1,000) Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014 Net interest income 79,523 75,381 76,413 72,215 65,596 Net other operating income 3,245 3,041 2,423 2,584 2,456 Net gains/losses on financial instruments 18,306 -7,073 -11,539 7,514 3,701 Total net income 101,073 71,349 67,2
Slide 7: Historical Trend Net Interest Income
HISTORICAL TREND NET INTEREST INCOME 79 523 76 413 +5.5% +5.8% 75 381 72 215 -1.4% +10.1% 65 596 62 892 4.3% 61 524 +2.2% +8.7% 56 623 53 426 +6.0% +15.5% 46 240 45 076 +2.6% +28.6% 35 066 +5.5% (NOK 1,000) PAGE 7
Slide 8: Change in Net Interest Income Second Quarter
CHANGE IN NET INTEREST INCOME SECOND QUARTER Q2 2015 85,000 +2,031 +9 79,523 +1,922 +4,724 80,000 +10,548 75,000 - 5,307 70,000 Q2 2014 65,596 65,000 60,000 (NOK 1,000) 55,000 50,000 45,000 40,000 35,000 Lending & Lending & Amortization & Invested Long-term Long-term deposit deposit commission surpl
Slide 9: Repricing of Loans and Deposits Improves Net Interest Margins
REPRICING OF LOANS AND DEPOSITS IMPROVES NET INTEREST MARGINS 6.0 % Q2 2015 Net interest margin between deposits and loans 4.0 % Q2 2014 increased by 0.80 percentage points over the last 12 months due to: 2.0 % • Higher margins on new credits and changes in the 0.0 % composition of the loan portfoli
Slide 10: Historical Trend Margins
HISTORICAL TREND MARGINS Margins over 3 month NIBOR 5.54% 5.60% 5.41% Lending margin 5.11% 5.15% 4.91% 4.98% 4.68% 4.71% 4.33% 4.25% Net margin 3.97% 4.93% 3.73% 4.75% 3.58% 4.57% 4.12% 4.20% 3.85% 3.65% 3.17% 3.31% 2.82% 2.82% 2.61% 2.48% 2.40% -0.49% -0.85% Deposit margin -0.97% -0.99% -0.95% -0.9
Slide 11: Historical Trend Cost/Income
HISTORICAL TREND COST/INCOME Cost/income ratio The bank has previously allocated the cost of 25.8 % profit sharing with employees entirely in the 2.1 % fourth quarter. As of 2015 this provision will be made throughout 3.6 % the year. 21.5 % 23.6 % 23.1 % NOK 3.0 million was allocated for the second
Slide 12: Assets
ASSETS (NOK 1,000) 30.06.2015 31.03.2015 31.12.2014 30.09.2014 30.06.2014 Cash and deposits with central banks 60,688 215,522 50,366 200,097 544,153 Lending to and deposits with credit institutions 292,912 406,934 232,981 617,748 185,905 Net lending to customers 7,569,250 6,842,504 7,206,847 7,346,8
Slide 13: Liabilities and Equity
LIABILITIES AND EQUITY (NOK 1,000) 30.06.2015 31.03.2015 31.12.2014 30.09.2014 30.06.2014 Deposits from credit institutions 14,629 169 1,577 153 89 Deposits from customers 6,857,044 6,702,173 7,347,522 7,038,601 6,902,028 Senior securities issued 2,635,457 2,378,942 2,351,022 2,412,371 1,856,752 Fin
Slide 14: Historical Trend Loans and Deposits
HISTORICAL TREND LOANS AND DEPOSITS 7 347 7 596 7 348 7 171 7 162 7 246 7 046 6 843 6 797 6 867 6 734 7 207 6 857 7 039 6 902 6 702 6 066 5 699 6 308 6 242 5 589 6 110 5 473 5 861 5 894 5 234 5 115 5 505 4 832 5 450 5 423 5 371 Deposit-to-loan ratio target approx. 80% by year end. 4 460 4 942 4 692
Slide 15: Key Stock Ratios
KEY STOCK RATIOS 3,63 Earnings per share (NOK) (NOK) Q2 2015 Q1 2015 2014 2013 2012 Earnings per share after tax 1.34 0.88 3.63 2.59 1.59 2,59 Dividend per share 0.00 0.0 0.60 0.60 0.60 Dividend 2.22 Payout ratio 0.0% 0.0% 16.8 % 23.2% 37.7% 1,59 Dividend yield 0.0% 0.0% 2.4 % 3.1% 4.2% Book equity
Slide 16: Largest Shareholders 30.6.2015
LARGEST SHAREHOLDERS 30.6.2015 Name Holding Share Pareto AS 6,375,000 15.00% • A total of 322 shareholders. Societe Generale SS (nom.) 3,700,000 8.71% • Top level managers in the Pareto group Perestroika AS 3,581,400 8.43% own 1,704,100 shares or 4.01% of the Indigo Invest AS 3,328,000 7.83% Geveran
Slide 17: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPTIAL 4 AMBITIONS FOR 2015 PAGE 17
Slide 18: A Project Bank
A PROJECT BANK BUSINESS AREA PROJECTS/CREDITS PRINCIPAL Financing of residential lots Real estate and housing development MNOK 25-50 financing Corporate M&A finance and securities Working capital facilities MNOK 30/MNOK 5 financing Bridging finance Securities finance Shipping & offshore Financing sh
Slide 19: A Specialist in Financing of Real Estate, Securities, and Shipping and Offshore
A SPECIALIST IN FINANCING OF REAL ESTATE, SECURITIES, AND SHIPPING AND OFFSHORE Total credit exposure MNOK 9,642 1. Real estate financing focused on residential property construction in the Oslo region Property 1.3 bill. 2. A full scale provider of securities 13.5% 5,5 mrd. financing including inves
Slide 20: A Strong Market Position Within Residential Property Construction in the Oslo Region
A STRONG MARKET POSITION WITHIN RESIDENTIAL PROPERTY CONSTRUCTION IN THE OSLO REGION • Primarily financing of regulated lots with a Credit exposure MNOK 5,514 potential for property development • Financing construction of flats or housing 5.3% 6.1% Residential property • A typical project is compose
Slide 21: Terms of Real Estate Financing
TERMS OF REAL ESTATE FINANCING FINANCING OF RESIDENTIAL DEVELOPMENT • The bank requires on average 20% to 40% equity to finance a property lot purchase. • Primarily financing of regulated lots purchased for development with a clear exit strategy. • The developer must demonstrate the ability to succe
Slide 22: A Full Scale Provider of Securities Financing
A FULL SCALE PROVIDER OF SECURITIES FINANCING STANDARD PRODUCTS • Financing of stocks on Oslo Stock Exchange with a LTV/leverage of 0% to 80% • Financing of short trades on Oslo Stock Exchange • Financing of high yield bonds mainly arranged by Pareto Securities with a LTV/leverage of around 50% • Fi
Slide 23: Building a Well-Diversified Portfolio in Shipping and Offshore
BUILDING A WELL-DIVERSIFIED PORTFOLIO IN SHIPPING AND OFFSHORE Credit exposure Kreditteksponering MNOK 1,305 • 23 loans financing a total of 32 vessels 5.7 % Offshore • Pareto Bank is the direct lender in all but 3 loans. These 0.2 bill. are syndicates or club deals 6.8 % 14.3% Ro-ro Container • 21
Slide 24: Terms of Shipping & Offshore Financing
TERMS OF SHIPPING & OFFSHORE FINANCING • Our clients are long-term owners with extensive experience and expertise in operations and maintenance. They normally have Norwegian ownership or management. • The client should be a high quality charterer with transparent books and a diversified cash flow. •
Slide 25: More on the Shipping & Offshore Portfolio
MORE ON THE SHIPPING & OFFSHORE PORTFOLIO • The number of engagements is currently relatively modest, and all commitments are followed up individually in lieu of an aggregated stress test. Each engagement is assessed by "loan-to-value" and "minimum cash". • The bank uses expertise from partners rega
Slide 26: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Credit exposure (NOK million) 30.06.2015 30.06.2014 31.12.2014 None/very low risk 4,616 4,517 4,448 None/very Low risk 3,560 3,455 3,371 low risk Low risk 48% Moderate risk 1,013 922 871 37% Some risk 286 279 296 High risk 159 2 0 Very high risk 3 6 3 Impaired loan
Slide 27: Historical Trend Losses and Write-downs
HISTORICAL TREND LOSSES AND WRITE-DOWNS Group write-downs Individual write-downs Annual write- Accumulated % of gross Annual write- % of gross (MNOK) (MNOK) downs write-downs lending downs lending 2008 0.0 0.0 0.00% 2008 0.0 0.00% 2009 0.0 0.0 0.00% 2009 0.0 0.00% 2010 0.0 0.0 0.00% 2010 0.0 0.00% 2
Slide 28: Net Non-Performing and Impaired Loans and Guarantees
NET NON-PERFORMING AND IMPAIRED LOANS AND GUARANTEES Percentage of gross lending 200.0 3.00% 2.09% 180.0 2.00% 160.0 0.55% 0.37% 0.47% 1.00% 0.26% 0.27% 0.13% 0.00% 0.07% 0.07% 140.0 MNOK 0.00% 120.0 114.4 -1.00% 100.0 -2.00% 80.0 -3.00% 60.0 37.0 34.3 -4.00% 40.0 26.9 18.4 18.4 20.0 -5.00% 9.1 5.0
Slide 29: Commitments by Size
COMMITMENTS BY SIZE Credit exposure (NOK million) 30.06.2015 30.06.2014 31.12.2014 > 100 1,035 1,212 1,101 > 75 < 100 1,707 1,106 1,031 > 50 < 75 1,914 1,670 1,875 > 25 < 50 2,087 2,204 2,090 > 10 < 20 1,548 1,732 1,576 > 5 < 10 788 702 751 <5 557 555 566 Accrued interest and amortisation 5 (0) (3)
Slide 30: Total Credit Exposure
TOTAL CREDIT EXPOSURE Undrawn Total credit exposure (NOK million) Lending Guarantees credit lines 30.06.2015 30.06.2014 31.12.2014 Real estate financing long-term 1,608.5 31.1 130.5 1,770.1 2,040.8 1,520.4 Real estate project financing 2,787.5 293.7 510.3 3,591.5 3,370.8 3,531.6 Securities financing
Slide 31: Interest Margin by Segment
INTEREST MARGIN BY SEGMENT Credit Unused Interest No. of clients Lending Interest margin Segment (NOK million) Exposure guarantees contribution Securities financing 351 1,780.0 775.5 1,004.5 30.5 3.93% Corporate financing 29 772.7 760.9 11.8 33.7 4.43% Real estate project financing 222 5,361.6 4,396
Slide 32: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPITAL 4 AMBITIONS FOR 2015 PAGE 32
Slide 33: Funding Sources
FUNDING SOURCES Funding sources MNOK 11,068 Deposits Deposits with liquidity restrictions 33% 6 857 Corporate deposits 69% Senior debt 2 635 Deposit-to-loan ratio 91% Long-term FSA liquidity ratio 134% Other debt 148 Subordinated LCR 219% debt Core capital 309 1 119 PAGE 33
Slide 34: Customer Deposits
CUSTOMER DEPOSITS Deposit allocation Fixed rate deposits – time to maturity >25 mths. Depositors 3 334 1 977 15 - 25 mths. 8 - 14 mths. MNOK 2 099 4 748 5 - 7 mths. 0% 20% 40% 60% 80% 100% 3 - 4 mths. Retail Corporate 0 500 NOK mill. Deposits by size Average deposit per customer (NOK) > 20 mill. 10
Slide 35: Market Funding
MARKET FUNDING 1,000 180 890 900 160 798 800 140 700 120 PARB 5Y 600 100 500 PARB 3Y 384 80 400 291 310 Med. savings bank 60 300 250 BBB+ 3Y 200 40 100 20 - 0 2015 2016 2017 2018 2019 >2019 des. 13 mar. 14 jun. 14 sep. 14 des. 14 mar. 15 jun. 15 Market funding maturity profile (NOK million) Lower cr
Slide 36: Surplus Liquidity
SURPLUS LIQUIDITY 4,000 Drawing 3,500 facility Investments Financials & 3,000 unrated covered Goverment & 2,500 PSEs Level 2 assets 33% Covered Liquidity bonds 2,000 portfolio Level 1 Drawdown on 50% covered credits Investment 1,500 portfplio 0.2 % 1,000 Financials Buffer for loss Industrials 17% Ca
Slide 37: Financial Strength and Capital Targets
FINACIAL STRENGTH AND CAPITAL TARGETS Pareto Bank operates at target levels ranging from 16.6 % 0.5 to 1.0 percentage points above the current 16.0 % 1.8 % 15.0 % regulatory requirements for Common Equity Tier 1 2.0 % 14.5 % (CET1) and Total Capital ratios. 1.9 % 2.0 % 1.5 % 2.0 % 1.5 % 1.5 % The ba
Slide 38: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPITAL 4 AMBITIONS FOR 2015 PAGE 38
Slide 39: Financial Ambitions
FINANCIAL AMBITIONS Return on equity after tax > 15 percent Increased dividends 2015: Net lending growth of MNOK 800 Stable credit spreads and improved deposit margins Moderate cost increase as a result of increasing the size of the real estate and shipping teams The CET1 target of 12.5 perc
Slide 40: Growth Ambitions for 2015
GROWTH AMBITIONS FOR 2015 BUSINESS AREA COMPETITORS CUSTOMERS STATUS GROWTH TARGETS Signs of margin DNB, Nordea, Real estate developers pressure and increased Net growth 56% Handelsbanken. and property investors. risk taking, but the deal approx. NOK flow is still good. 200 million Private investors
Slide 41: PAGE 41
(Pareto bank