Nova Ljubljanska Banka d.d. · LJSE:NLBR
Nova Ljubljanska Banka d.d — Q3 2022 Earnings Presentation
68 slides from Nova Ljubljanska Banka d.d's earnings presentation, 2022
Slide 1: NLB Group Presentation Q3 2022 Results
NLB Group Presentation Q3 2022 Results
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Nova Ljubljanska banka d.d., Ljubljana (the "Company"). This presentation has been prepared solely for the purpose of informative presentation of the business conduct of the Company. This presentation has not been approved by any regulatory authority
Slide 3: Leading banking and financial group in SEE
Leading banking and financial group in SEE NLB Group is the leading banking and financial group Universal NLB Group is comprised of eight banks and several with headquarters and an exclusive strategic interest in banking companies for ancillary services, which support its clients our home region ~ S
Slide 4: Market share by total assets
% Market share by total assets ® customers @ Branch offices LESS _NLB Banka Podgariea*”.
Slide 5: Executive Summary
Executive Summary Strong Q3 performance supported by loan growth, higher rates and successful NPL resolution Q3 2022 Highlights Macro and General Overview • Strong quarter in terms of recurring performance, with recurring net operating income growing 12% QoQ and pre-tax result by 55% • Economic slow
Slide 6: Macro Overview
Macro Overview 6
Slide 7: NLB Group – Macro overview
NLB Group – Macro overview NLB d.d. & 7 subsidiary banks operate in Slovenia (EU member) & 5 SEE countries (convergence to EU) Slovenia EUR Serbia RSD GDP (EURbn) 52.0 GDP (EURbn) 56.6 Population (m) 2.1 Population (m) 6.9 NBS loans as % of GDP(1) 47.3% NBS loans as % of GDP(1) 45.5% NBS deposits as
Slide 8: Regional economic growth is slowing but is expected to stay above the Eurozone average
Regional economic growth is slowing but is expected to stay above the Eurozone average Real GDP growth rates in the SEE region above Eurozone average and are projected to stay that way even in the declining growth environment… Real GDP growth, % 2021 2022 2023 13,0% Based on the strong start into th
Slide 9: Fiscal response in the region addressing rising cost-of-living
Fiscal response in the region addressing rising cost-of-living Labour market is expected to continue with recovery after the pandemic-induced crisis… Unemployment rate, % By mid-2022, employment rate increased in all of 2021 2022 2023 25,4% the countries of the Group‘s region and some of 22,0%21,5%
Slide 10: NLB operates in countries with prudent monetary policy and rising interest rates
NLB operates in countries with prudent monetary policy and rising interest rates FX reserves as % of Nominal GDP Central Bank interest rates evolution FX reserves, 2019 and 2021, % Nominal GDP Deposit facility rate, 2019 (pre-Covid) – 2022 (1), % 3,5% 3,0% 2019 (pre-Covid) 2021 43% 2,5% 34% 35% 2,0%
Slide 11: Markets in which NLB operates have further growth potential
Markets in which NLB operates have further growth potential Low overall sector leverage… …with liquid banking sectors… Total Loans (NBS), Q2 2022, % GDP (1) Loans / Deposits, Q2 2022, % 99,7% 95,2% 90,1% 89,6% 85,2% 79,3% 78,2% 66,5% 68,4% 51,8% 52,2% 49,5% 47,3% 45,5% EZ Montenegro BiH North Sloven
Slide 12: Relatively low usage of natural gas in SEE economies, local currencies stable
Relatively low usage of natural gas in SEE economies, local currencies stable Low dependency on natural gas Energy mix of euro area and SEE region in 2020 Energy import dependency in 2020 (%) Euro area Montenegro Serbia Kosovo 120% Slovenia North BiH 100% 120 Macedonia 80% 100 60% 80 40% 60 20% 40 0
Slide 13: Key Developments
Key Developments
Slide 14: Key performance indicators of NLB Group
Key performance indicators of NLB Group Strong recurring performance and release of provisions Gross loans to customers (in EURm) in EUR million / % / bps Q3 2022 Q2 2022 Q3 2021 Change YoY Change QoQ +21% YtD Key Income Statement Data +12% w/o N Banka Net operating income 205,6 183,6 166,0 24% 12%
Slide 15: Revenues and Cost Dynamics
Revenues and Cost Dynamics Strong recurring income momentum and still negative CoR Costs (Group, EURm) +12% YoY N Banka contribution +6% w/o N Banka 332.6 Recurring net operating income 297.2 17.6 (in EUR million) +7% YoY -2% QoQ +19% YoY 315.0 +14% w/o N Banka 99.9 116.0 113.9 0.0 7.9 7.2 99.9 108.
Slide 16: Loan dynamics
Loan dynamics High loan growth across all markets and all segments NLB Group Slovenia(i)(ii) Strategic foreign markets(i)(iii) +18% YtD +26% YtD +10% YtD +12% w/o N Banka 5.83% 6,635.5 8 6 5.55% 6 6,800 6,600 6,400 5,000 5,000 6,200 6,000 5,621.1 7 5,800 5,600 4.90% 6 4,000 3,404.7 5 4,000 5 4.66% 5
Slide 17: Resilient Operating Income Performance
Resilient Operating Income Performance Result reflects strong underlying performance and contribution from N Banka Net profit of NLB Group – evolution YoY (in EURm) 50.8 31.6 -18.5 -35.4 -22.9 0.2 172.8 -8.2 2.0 377.8 -5.9 -2.2 2.0 0.0 182.1 172.8 6.8 -18.2 24.8 -0.3 -17.9 17.5 -17.6 205.5 33.3 -28.
Slide 18: Income Statement
Income Statement Recurring pre-provision profit is growing QoQ and YoY Result before impairments and provisions (Group, EURm) +14% YoY +11% w/o N Banka 231.1 Result before impairments and provisions EUR 231.1 million, higher QoQ and YoY, even w/o N Banka contribution, with recurring pre-provision pr
Slide 19: NLB Group's Balance sheet structure
NLB Group‘s Balance sheet structure Deposit (predominately retail) driven balance sheet Balance sheet structure (30 Sep 2022, in EURm) 23,498 23,498 Other assets 685 Total equity 2,397 Subordinated liabilities Other liabilities Financial assets Debt securities in issue 290 504 4,765 303 Bank borrowi
Slide 20: Performance indicators across SEE countries
Performance indicators across SEE countries North Slovenia Serbia Bosnia and Herzegovina Kosovo Montenegro Macedonia NLB Kom ercijalna NLB, N Banka, Banka, NLB Banka, NLB Banka, NLB Banka, NLB Banka, NLB Banka, Ljubljana Ljubljana Beograd (ii) Skopje Banja Luka Sarajevo Prishtina Podgorica NLB Group
Slide 21: Business Performance
Business Performance
Slide 22: Net interest income
Net interest income Strong loan growth contributed to significant NII growth, also margins are improving Net interest income of NLB Group (in EURm) Net interest margin, quarterly (in %) +17% YoY 3.20% +11% w/o N Banka 3.04% 2.85% 2.85% 2.83% 353.1 2.27% 18.8 2.07% 2.07% 2.16% 302.3 2.02% +11% YoY 1.
Slide 23: Net non-interest income
Net non-interest income Despite some headwinds continued strong growth of F&C income Net fee and commission income (in EURm) +18% YoY Net non-interest income of the NLB Group (in EURm) +14% YoY w/o N Banka 204.2 4.4 +7% YoY +3% w/o N Banka Net fee and commission income 172.6 N Banka net fee and comm
Slide 24: Costs
Costs # of employees Inflation and integration affecting costs -231 YoY Total costs (in EURm) 8,792 8,496 8,185 8,265 +12%YoY 2,591 2,518 2,510 2,417 +6% w/o N Banka 332.6 1.3 6,064 5,841 5,525 5,295 297.2 33.9 6.0 34.8 137 137 150 319 234 31 Dec 2020 30 Sep 2021 31 Dec 2021 30 Sep 2022 105.0 94.1 N
Slide 25: NLB Group Assets
NLB Group Assets Asset side of the balance sheet remains highly liquid Total assets of NLB Group – structure (EURm) +10% YoY +9% YtD YtD 23,497.8 22,730.3 685.3 8% 21,577.5 692.7 21,296.9 606.6 636.3 4,765.1 4,919.5 -9% 5,264.7 5,208.3 12,925.3 22% 10,587.1 12,620.2 10,267.0 (1) 5,158.7 5,145.7 5,12
Slide 26: NLB Group Funding Structure
NLB Group Funding Structure Average cost of funding remains low, but increasing due to wholesale funding, driven by MREL requirement Funding structure of the NLB Group (Group, EURm) Deposit split (Group, EURm) +11% YoY 30 Sep 2022 +9% YtD 19,151.1 19,573.1 Term YtD 17,640.8 20,596.6 17,248.6 19,903.
Slide 27: Capital
Capital Capital position enabling growth and substantial dividend distribution CET1 Tier1 Total capital 16.59% The Overall Capital Requirement (OCR) is 14.10% for the Bank on a consolidated basis, consisting of: 14.58% 14.10% 14.54% • 10.60% TSCR (8% P1R and 2.60% P2R); and 287 mEUR 2.65% Tier 2 inc
Slide 28: RWA structure
RWA structure Prudent RWA management to improve capital ratios RWA for credit risk increased by EUR 1,517 million, where EUR 858.9 million of the increase relates to N Banka. The remaining part of RWA increase in the amount of EUR 558.4 million was mainly the RWA structure (in EURm) consequence of i
Slide 29: NLB Wholesale Funding
NLB Wholesale Funding Wholesale funding is driven by MREL requirement and to further strengthen and optimize the capital MREL Stock in % (as at 30 Sep 2022) Outstanding bonds: Nominal 33.59% Type of the Bond ISIN code Issue Date Maturity First call date Interest Rate 28.69% Value Tier 2 SI0022103855
Slide 30: Asset Quality
Asset Quality
Slide 31: Asset Quality – NLB Group
Asset Quality – NLB Group Dec-21 Diversified credit portfolio, focused on core markets Mar-22 w/o N Banka Mar-22 Credit portfolio(1) by segment (Group, 30 Sep 2022, % and EURm) Sep-22 4,202 4,220 4,254 Institutions (4) 4,067 3,684 3,865 2% 3,516 3,575 SME 3,304 3,025 (2) 21% 2,881 2,862 3,195 2,770
Slide 32: Asset Quality – NLB Group
Asset Quality – NLB Group Loan portfolio split by interest rates Portfolio split by interest rates (Group, 30 Sep 2022) Portfolio split by interest rates (NLB d.d., 30 Sep 2022) Fix Fix Float Float 40% 41% 59% 60% Corporate (incl. SME) Consumer Housing Corporate (incl. SME) Consumer Housing (Group,
Slide 33: NLB Group Asset Quality
NLB Group Asset Quality Portfolio diversification reduces risk, no large concentration in any specific industry Corporate credit portfolio(1) (Group, 30 Sep 2022, in EURm) Credit porfolio in EUR thousand Credit porfolio in EUR thousand ∆ YtD ∆ YtD 2022 ∆ YtD ∆ YtD 2022 Corporate sector by industry N
Slide 34: NLB Group Asset Quality
NLB Group Asset Quality High % of Stage 1 Loan portfolio (measured at amortized cost & FVTPL) Loan portfolio by stages (Group, 30 Sep 2022, in EURm) in EUR million Credit portfolio Provisions and FV changes for credit portfolio Stage1 Stage2 Stage3 & FVTPL Stage1 Stage2 Stage3 & FVTPL Coverage Provi
Slide 35: Asset Quality – NLB Group
Asset Quality – NLB Group NPL ratio decraesed. NPLs are fully covered by provisions and collateral Gross NPL ratio within the planned framework (Group, EURm) NPL cash and collateral coverage(1) (Group, %) 148% 153% 2,000 100 90.7% 62% 62% 86.1% 86.6% 90 80 1,500 86% 28% 91% 35% 70 57.9% 56.8% 56.2%
Slide 36: Impairments and provisions
Impairments and provisions Cost of risk (-13 bps) remains negative, backed by positive contribution due to successful NPL resolution in most of NLB Group members. CoR -50 -13 N Banka 12 month expected credit losses recognised at acquisition date 25.2 Impairments and provisions for credit risk Other
Slide 37: NII sensitivity to interest rate shifts – NLB Group
NII sensitivity to interest rate shifts – NLB Group Estimated impact on NII in the next 12 months to parallel interest rate shifts NII sensitivity to -100 bps, -50 bps, +50 bps, +100 bps EURIBOR sensitive positions with positive (Group, EURm) impact on NII as of 30 September 2022 (EURm) 61.4 EURIBOR
Slide 38: ESG & Digital
ESG & Digital
Slide 39: NLB's Dive Towards a Higher Integration of Sustainability in its Business Model
NLB’s Dive Towards a Higher Integration of Sustainability in its Business Model ▪ Key priority is to address the topic of sustainable development, to accelerate the integration of ESG factors and the upcoming EU regulation and all related changes that affect its business model. Key Milestones: ▪ Gen
Slide 40: NLB Group Sustainability implementation roadmap
NLB Group Sustainability implementation roadmap Sustainability implementation focus Task/Target Deadline Status Sustainability Governance • Further development & upgrade of corporate sustainability governance. 2022 Ongoing Carbon emissions measurement • Upgrade of 2nd NLB Group Carbon footprint repo
Slide 41: State-of-the art services & channels
State-of-the art services & channels Demonstrated success in digital activation The pioneer of banking innovation in Slovenia Digital users(1) (‘000s) Mobile bank users(2) (‘000s) First Slovenian bank enabling 24/7 opening of 42% 46% 48% 53% 34% 43% 45% 51% personal account and the only bank with fu
Slide 42: N Banka Integration
N Banka Integration
Slide 43: Harmonization & Integration
Integration of N Banka into NLB on track, targeting completion of legal and technical merger in September 2023 Highlights of integration process • Submission of draft • Implemented counter • Retention measures to • Control over • Harmonization with NLB Harmonization & Integration Employees Legal and
Slide 44: Run rate synergies of > EUR 14 million from 2025
Run rate synergies of > EUR 14 million from 2025 on expected, total integration cost will be covered by synergies by the end of 2025 Integration Budget & Synergies Integration costs (in EUR million, incl. VAT) Synergies (in EUR million) Integration costs Synergies (FYE) Entity Entity 2025 and 2022 2
Slide 45: Merger approach allows for high business and IT value
Merger approach allows for high business and IT value – integration including stabilization activities expected to be finalized in Q4 2023 H/l integration timeline March 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3-Q4 ‒ Run DD Legal and M&A ‒ Merge Regulatory approvals processes ‒ Merger execution ‒ Organization/ FTE
Slide 46: Expansion of the Group's leasing activities
Expansion of the Group’s leasing activities
Slide 47: NLB Lease&Go Complementing NLB Group's product offering
NLB Lease&Go Complementing NLB Group‘s product offering NLB Group is on the path of significantly growing leasing operations on 3 of its core markets with a goal of becoming one of the leading leasing companies in the region and to become the most innovative leasing company in financing movables and
Slide 48: NLB Lease&Go Key differentiation areas
NLB Lease&Go Key differentiation areas Proven Excellence in Ditribution utilizing vendors and direct (leasing) sale, banking network and intermediaries, complemented by innovative digital channels. Funding Leasing operations to be fully funded by NLB Group‘s banking entities Digitalization Pillar of
Slide 49: NLB Lease&Go to significantly contribute to Group's product offering and income
NLB Lease&Go to significantly contribute to Group‘s product offering and income Mid-single digit % contribution to NLB Higher-margin Group loan volume products 2027 ambition EUR 1 billion total assets - 2/3 expected in Slovenia Total revenues > EUR 50 million 49
Slide 50: Outlook
Outlook
Slide 51: Outlook
Outlook Performance 2022(3) 2023 in 1-9 2022 Regular income EUR 557.2 million ~ EUR 750 million > EUR 850 million Costs(6) EUR 332.6 million(1) ~ 460 million ~ 490 million Cost of risk -13 bps Below 30 bps(4) 30-50 bps 21% Loan growth Low double-digit organic growth Mid single-digit loan growth (12%
Slide 52: Appendices
Appendices Appendix 1: Business Performance 53 Appendix 2: Segment Analysis 56 Appendix 3: Financial Statements 66 52
Slide 53: Appendix 1: Business Performance
Appendix 1: Business Performance
Slide 54: Net interest income evolution
Net interest income evolution Net interest income evolution - NLB +18% YoY 119.9 -0.1 0.5 -0.8 -0.6 1.3 8.0 7.2 101.7 1.3 1.4 1-9 2021 Balance with CB Loans to banks Loans to Loans to Loans to state Securities Deposits from Funding Other 1-9 2022 corporate individuals customers Net interest income e
Slide 55: Off-balance sheet items
Off-balance sheet items Derivatives Off-balance sheet items of NLB Group – structure (in EUR million) in EUR million 30 Sep 2022 31 Dec 2021 30 Sep 2021 +21% YtD FX derivatives w ith customers 213.5 87.4 113.7 +3% QoQ o/w NLB stand alone 259.7 102.5 124.6 Interest rate derivatives w ith customers 75
Slide 56: Appendix 2: Segment Analysis
Appendix 2: Segment Analysis
Slide 57: NLB Group key business segments
NLB Group key business segments Corporate and Retail banking in Strategic foreign Financial markets in investment banking in Non-core members Slovenia markets Slovenia Slovenia Retail (NLB & N Banka) NLB & N Banka: NLB Banka, Skopje NLB & N Banka: REAM Micro (NLB & N Banka) - Key corporates NLB Bank
Slide 58: Retail Banking in Slovenia
Retail Banking in Slovenia in EUR million consolidated • Net interest income was EUR 11.8 million higher YoY, of which EUR 6.7 Change YoY million was contributed by N Banka. The interest income of the retail o/w N Banka 1-9 2022 1-9 2021 contribution Q3 2022 Q2 2022 Q3 2021 Change QoQ segment increa
Slide 59: Retail banking in Slovenia
Retail banking in Slovenia High and stable market shares across products Market share of net loans to individuals in Slovenia Market share of deposits from individuals in Slovenia 35.7% 35.6% 33.9% 34.1% 26.2% 26.4% 26.9% 26.5% 24.4% 26.3% 16.7% 22.5% 13.7% 14.9% 15.2% 21.8% 12.6% 8.3% 7.3% 7.0% 31
Slide 60: Corporate and Investment banking in Slovenia
Corporate and Investment banking in Slovenia in EUR million consolidated • Net interest income was EUR 6.2 million higher YoY Change YoY without N Banka’s contribution. The interest income from o/w N Banka 1-9 2022 1-9 2021 contribution Q3 2022 Q2 2022 Q3 2021 Change QoQ loans in the Key, SME and Cr
Slide 61: Corporate & Investment Banking in Slovenia
Corporate & Investment Banking in Slovenia High market shares across products Market shares - evolution and position on the market • The largest bank in Slovenia with a high lending and servicing capacity for more than 10,000 corporate clients, focus on SME segment. • ESG products were included in t
Slide 62: Strategic Foreign Markets
Strategic Foreign Markets in EUR million consolidated • Net interest income was higher YoY (EUR 15.1 million), with 1-9 2022 1-9 2021 Change YoY Q3 2022 Q2 2022 Q3 2021 Change QoQ an increase recorded in all banking members, due to higher Net interest income 213.2 198.1 15.1 8% 76.1 70.8 68.1 8% vol
Slide 63: Financial Markets in Slovenia
Financial Markets in Slovenia in EUR million consolidated Change YoY • Net interest income was EUR 12.8 million higher YoY, of which o/w N Banka 1-9 2022 1-9 2021 Q3 2022 Q2 2022 Q3 2021 Change QoQ contribution EUR 4.7 million from N Banka. Excluding N Banka, net interest Net interest income 30.8 18
Slide 64: Financial markets in Slovenia
Financial markets in Slovenia Liquid assets evolution (EURm) Well diversified banking book by geography (30 Sep 2022) 6.767 6.891 Slovenia 457 526 5.859 Other 23% 5.001 583 28% 545 2.977 2.943 3.813 141 2.952 EUR 2.943 bn Assets 82 147 3.101 11% France Ireland 3% managed under 2.807 63 4% Financial
Slide 65: Non-Core Members
Non-Core Members in EUR million consolidated 1-9 2022 1-9 2021 Change YoY Q3 2022 Q2 2022 Q3 2021 Change QoQ • The segment recorded EUR 5.2 million of loss Net interest income 0.2 1.2 -1.0 -82% 0.1 0.0 0.8 200% before tax and also a decrease of the total assets Net non-interest income 2.4 5.1 -2.7 -
Slide 66: Appendix 3: Financial Statements
Appendix 3: Financial Statements 66
Slide 67: NLB Group Income Statement
NLB Group Income Statement 1-9 1-9 (EURm) YoY Q3 2022 Q2 2022 Q3 2021 QoQ 2022 2021 Interest and similar income 399,4 354,1 13% 142,6 133,8 121,0 7% Interest and similar expense -46,3 -51,8 11% -15,8 -15,3 -17,4 -4% Net interest income 353,1 302,3 17% 126,7 118,6 103,7 7% Fee and commission income 2
Slide 68: NLB Group Statement of Financial Position
NLB Group Statement of Financial Position (EURm) 30 Sep 2022 31 Dec 2021 YtD (EURm) 30 Sep 2022 31 Dec 2021 YtD ASSETS LIABILITIES & EQUITY Cash and balances with Central Deposits from banks and Banks central banks 108,3 71,8 51% and other demand deposits at Deposits from customers 19.573,1 17.640,8
Nova Ljubljanska banka d.d. — Q3 2022 Earnings Presentation on 6ix