Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q1 2021 Earnings Presentation
44 slides from Pareto Bank Asa's earnings presentation, 2021
Slide 1: Financial Results – First Quarter 2021
PARETO BANK Financial Results – First Quarter 2021 1
Slide 2: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: First Quarter 2021 Highlights
FIRST QUARTER 2021 Highlights • Profit after tax NOK 119.4m (NOK 71.0m). • Return on equity after tax 13.8 % (8.8 %). • Net interest income NOK 200.2m (183.9m). Driven by lending growth, fee income and low funding costs. • Lending growth and steady activity in all areas. Lending to customers climbed
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 18.5 % 14.8 % 13.8 % 16.8 % 16.8 % 126.5 119.4 8.8 % 71.0 Q1-20 Q4-20 Q1-21 Q1-20 Q4-20 Q1-21 31.03.2020 31.12.2020 31.03.2021 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 0.30% 191.0 200.2 183.9 0.04% 19.8% 20.0% 19.9%
Slide 5: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q1-21 Q1-20 2020 Lending growth, fee income and improved deposit Net interest income 200.2 183.9 746.9 margins fuel growth in net interest income. Net other operating income 4.9 -16.9 7.6 Increase in other operating income due to gains on Total net income 205.1 167.1 754.
Slide 7: Net Interest Margin
NET INTEREST MARGIN Stable net margin supported by lower funding costs Comments • Improvement in deposit 6.37% margin due to rate cut in 6.17% 6.03% 5.87% 5.73% 5.79% 5.94% Q4-20 and an increased 5.50% 5.46% 5.57% 5.62% 5.53% 5.48% 5.59% 5.37% 5.22% 5.41% 5.22% proportion of corporate and client dep
Slide 8: Annual Change in Net Interest Income
ANNUAL CHANGE IN NET INTEREST INCOME Increased net interest income in a low rate environment (NOKm) 23.8 23.3 Q1-21 200.2 10.3 Q1-20 15.1 183.9 9.5 7.7 37.4 120.0 Lending Lending Market Fee income Deposit volume Deposit rate Other * volume rate Funding 8 *) Other net interest income includes return
Slide 9: Stable Credit Quality in a Cautiously Optimistic Outlook
STABLE CREDIT QUALITY IN A CAUTIOUSLY OPTIMISTIC OUTLOOK Credit exposure by IFRS9 stage (NOKm) Impairments and losses by stage (NOKm) 191 Stage 3 NOK 191m 87.4 1,155 (+71m) 81.7 18.8 Stage 2 14.0 NOK 1,155m (+382m) 7.4 7.0 Write-offs Stage 3 Stage 2 16,866 Stage 1 Stage 1 NOK 16,866m 60.3 60.9 (-583
Slide 10: Historical Impairments and Losses
HISTORICAL IMPAIRMENTS AND LOSSES Low level of losses following model-based impairments set off a year ago (NOKm) 40.3 14.9 9.1 6.2 5.8 4.7 1.0 - (1.5) Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 10
Slide 11: Robust Capital Position
ROBUST CAPITAL POSITION Core Equity Tier 1 Ratio (CET1) Leverage Ratio (LR) • Maintaining a solid capital position through profitability, a • Leverage ratio shows real capital strength independent of risk naturally high redemption rate and controlled growth. weights. • Risk weight of 150 % on exposu
Slide 12: Continued Uncertainty Regarding Capital Requirements
CONTINUED UNCERTAINTY REGARDING CAPITAL REQUIREMENTS • According to article 128 of CRR, speculative investments in • The Ministry of Finance has announced that the real estate development for resale is to be assigned a risk implementation of CRR2 / CRD V (“bankpakken”) will be weight of 150 %. Paret
Slide 13: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas: Focus on residential development Outlook & Ambitions 13
Slide 14: A Niche Player Financing Medium Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM SIZED ENTERPRISES Business Areas Focus Credits / Customers Exposure Sweet spot The specialized real estate Land acquisition financing REAL developer bank for Eastern Property construction NOKm 50 - 100 Norway and larger facilities 70% ESTATE Norwegian cities. Commerci
Slide 15: Exposure per Business Area
EXPOSURE PER BUSINESS AREA (NOKm) 7,499 7,323 7,356 7,178 7,152 5,314 5,285 5,012 4,725 4,671 4,494 4,251 4,318 4,059 3,551 1,017 978 1,068 1,113 889 Residential property Commercial property Corporate Shipping Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 15
Slide 16: Residential Property
RESIDENTIAL PROPERTY Credit update Residential property exposure (NOKm) Total NOK 7,356m • 167 customers with average commitment of NOK 44m. • 36 % residential exposure in Oslo and 45 % in Viken. Land without 1,377 • Stable credit quality. Covid-19 has had little direct impact. houses • Projects on
Slide 17: Residential Property: Project Risk Development
RESIDENTIAL PROPERTY Project risk development Project risk Loan amount Project risk decreases as the loan amount is drawn. Construction Land acquistion Building permits Pre-sale Ground works Construction Completion Repayment contracts Counterparty risk Political risk Risk soil Construction Risk of c
Slide 18: Residential Property: Business & Credit Process
RESIDENTIAL PROPERTY Business & credit process Regulatory Construction Land acquistion Pre-sale Ground works Construction Completion permits contracts PROJECT REVIEW AND KYC. Regulatory Contract assessment. Market assessment. Site inspection. Site inspection. Hand-over to end- Customer’s assessment.
Slide 19: Residential Property Projects
Maridalsveien 8, Infill project RESIDENTIAL PROPERTY Grimelundsveien 2B, High-end project 19
Slide 20: Commercial Property
COMMERCIAL PROPERTY Credit update Commercial property exposure (NOKm) Total NOK 5,285m • 108 customers with average commitment of NOK 49m. • 36 % commercial property exposure in Oslo and 24 % in Viken. • 87 % of commercial property exposure is long-term cash-flow Commercial based, while the remainde
Slide 21: Corporate
CORPORATE Diversified exposure Total NOK 4,318m Credit update Total NOK 4,318m • 76 consolidated corporate customers with average • Stable credit quality. A few customers are still negatively commitment of NOK 51.6m. affected by Covid-19 due to continued lock down. • 19 consolidated securities finan
Slide 22: Shipping
SHIPPING Credit update Exposure (NOKm) Total NOK 1,113m • 19 customers and 34 vessels. Chemicals 261 LTV 44 % • Largest exposure USD 21.8m and average commitment size USD 6.9m. Industrial 243 LTV 44 % • Only shipping, no offshore exposure. • Average LTV of the portfolio is 43 %. Container 184 LTV 24
Slide 23: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 23
Slide 24: Steady Lending Growth and Increased Diversification
STEADY LENDING GROWTH AND INCREASED DIVERSIFICATION Lending to customers (NOKm) 15,089 14,235 14,661 13,503 13,874 13,191 13,161 12,539 11,654 12,065 10,489 10,690 10,066 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Residential property Commercial property Corporate
Slide 25: Market Outlook: Residential Property
MARKET OUTLOOK Residential property • Pareto Bank sees a good and more healthy housing market going forward. Price growth is expected to decline with increased interest rates and a change in consumer behaviour after the reopening and easing of Covid-19 restrictions. • Strong newbuild market over the
Slide 26: Market Outlook: Commercial Property
MARKET OUTLOOK Commercial property • Pareto Bank expects a stable office market in Oslo. An increase in interest rates may lead to higher yields and lower property values. • Office rents have remained relatively flat, but there are signs of somewhat lower demand. Long-term demand for office space ma
Slide 27: Market Outlook: Corporate
MARKET OUTLOOK Corporate • Improved market outlook as vaccination and • Well positioned in target market which is reopening is under way. medium sized businesses with revenue between • Strong deal flow and growth in Q1-2021. NOK 10m and NOK 500m. • Continued strong deal flow expected due to long- •
Slide 28: Market Outlook: Shipping
MARKET OUTLOOK Shipping • Most shipping segments are expected to stay healthy and rates stable due to a manageable supply side and a promising outlook for demand and utilization in most segments. • Dry bulk and container markets have benefitted from a strong global economic outlook for 2021 due to e
Slide 29: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term YTD ambition Profitability on target in Q1-2021. RETURN ON 14.0 % 13.8 % EQUITY Long term profitability supported by lending growth, stable net margin and portfolio quality. 50 % or more Unchanged dividend policy. DIVIDEND 50 % or more POLICY (Up to 25 % The Board has b
Slide 30: Appendix
APPENDIX (Pareto bank
Slide 31: Largest Shareholders
LARGEST SHAREHOLDERS 31 March 2021 Comments Name Shares % total 1 Pareto AS 13,823,610 19.79% • The Company has 69,851,730 2 AF Capital Management AS 6,943,049 9.94% shares outstanding. One class 3 Hjellegjerde Invest AS 2,800,000 4.01% of shares where each share 4 Landkreditt Utbytte 2,475,000 3.54
Slide 32: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 49.43 1.77 1.68 47.76 0.97 44.74 Q1-20 Q4-20 Q1-21 Q1-20 Q4-20 Q1-21 Price / Earnings Price / Book 7.29 7.05 0.96 5.54 0.82 0.63 Q1-20 Q4-20 Q1-21 Q1-20 Q4-20 Q1-21 32 Share price NOK 47.30
Slide 33: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q1-21 Q4-20 Q3-20 Q2-20 Q1-20 Net interest income 200.2 191.0 188.2 183.8 183.9 Net other operating income 4.9 13.7 -13.1 23.9 -16.9 Total net income 205.1 204.6 175.2 207.7 167.1 Total operating expenses 40.9 40.9 32.4 38.1 33.1 Operating profit before 164.2 16
Slide 34: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q1-21 Q4-20 Q3-20 Q2-20 Q1-20 Loans to credit institutions 273 1,081 1,938 1,610 1,315 Loans to customers 15,089 14,661 13,874 14,235 13,503 Bonds and other securities 3,235 3,612 4,395 3,703 3,053 Shareholdings in associated 26 26 23 23 23 companies Other assets 12
Slide 35: Real Estate Exposure
REAL ESTATE EXPOSURE Geographical residential property exposure Geographical commercial property exposure 3% 9% 4% 6% 4% Oslo Viken 6% 36% Viken Oslo 13% 44% Vestfold og Vestfold og Telemark Telemark Vestland Rogaland Trøndelag Vestland 14% Sweden & Other Other 36% 24% 35 NOKm of gross exposure. Tot
Slide 36: 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 Nibor or si
Slide 37: Number of Customers
NUMBER OF CUSTOMERS per business area Real Estate 275 Corporate 127 Securities 25 Shipping 21 & Offshore Retail 11 (Mortgages) 37
Slide 38: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 9,771 Percent customer deposits of net lending to customers Senior debt 4,770 74.3 % 74.0 % T1 & T2 debt 470 71.3 % 64.8 % 64.9 % 64.6 % 64.8 % 61.9 % Other debt 283 4956 5551 56.4 % 4770 5192 4935 5279 5604 Equity capital 3,453 5624 5472
Slide 39: Customer Deposits
CUSTOMER DEPOSITS Deposits by product (NOKm) Deposits by size (NOKm) 551 Floating rate retail > NOK 20m 3,163 320 3.483 654 2,672 Floating rate corporate 3,782 NOK 10 - 20m 806 185 991 986 Savings with restrictions 2,207 NOK 5 - 10m 613 121 734 2,702 Fixed rate 2,339 NOK 2 - 5m 1,491 823 2.314 688 C
Slide 40: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Credit spreads (basis points) ** 150 72 0 54 200 0 39 1,500 120 1,239 750 750 22 525 14 8 2021 2022 2023 2024 2025 Senior Call on Subordinated Capital 0,25 0,5 1 2 3 5 *) Net of own holdings 40 **) Spread over 3M Nibor
Slide 41: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Market value of bonds and funds comprising surplus liquidity. • Liquidity is comprised of cash and highly liquid bonds. • High share of government Government & PSEs 49% & PSEs to reduce credit 51% Covered bonds spread risk and increase short-term liquidity
Slide 42: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,619 None / very low risk 5,897 61% 59% 57% 54% 8,060 Low risk 49% 11,036 1,659 40% Moderate risk 36% 1,083 35% 34% 32% 102 Some risk 143 81 High risk 10% 35 9% 7% 6% 6% 4 Very high risk Q1-20 Q2-20 Q3-20 Q
Slide 43: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 676 3% < 10 11% 541 5,238 10 - 50 6% 4,927 27% 4,816 < 10 50 - 100 5,380 8% 10 - 50 1,472 50 - 100 100 - 150 2,807 100 - 150 1,326 150 - 200 150 - 200 1,524 200 - 250 > 250 446 15% 200 - 250 1,099 2,55
Slide 44: Pareto Bank
( Pareto bank