Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — Q2 2019 Earnings Presentation
49 slides from Jyske Bank A/s's earnings presentation, Aug 20, 2019
Slide 1: Jyske Bank Q2 2019
Jyske Bank Q2 2019 20 August 2019
Slide 2: Overview of up- and downsides
Overview of up- and downsides • ROE within range • Deposits surplus • Volume growth • Negative interest rates • Capital levels • Household deleveraging • Capital structure • Low demand on bank loans • Future regulations impact / IT investments • High propensity to save • Costs stable • Corporates lo
Slide 3: Our targets
Our targets 1H 2019 Return on Equity • Delivering a return on equity of 6-10% in 2019 ROE 6.6% Volume 2020 • Total loan portfolio of DKK 350bn in Jyske Realkredit DKK 337bn Capital position • Long-term targets for capital ratio 17.5% and CET1 ratio 14% post-Basel IV 19.8% implementation and • Buildi
Slide 4: Q2 2019 highlights
Q2 2019 highlights • Net profit of DKK 499m, equal to ROE 5.7% p.a. Core profit and profit for the period DKKm • Business volumes: Index Index • Loan growth in mortgage activities compared to both Q2 2019 Q2 2018 19/18 Q1 2019 Q2/Q1 Net interest income 1,340 1,439 93 1,324 101 Q1 2019 and Q2 2018. A
Slide 5: ROE remains under pressure
ROE remains under pressure • Net profit of DKK 499m in Q2 2019 and ROE of 5.7% Net profit 1,000 16% DKKm 750 12% 500 8% 250 4% 0 0% Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Net Profit ROE (after tax) • A decrease of 1.5 percentage points compared to Q1 2019 Q2 2019 vs.
Slide 6: NII stable
NII stable NII of DKK 1,340m compared to DKK 1,324m in Q1 2019 and DKK Q2 2019 vs. Q1 2019: Development in NII 1,439m in Q2 2018 – up by 1% compared to Q1 2019 and down by 7% 1,340 compared to Q2 2018 DKKm 1,330 • In Q2 2019 NII is: • Supported by: 1,320 • Volume growth in mortgages and leasing acti
Slide 7: Negative interest rate and expectations
Negative interest rate and expectations CITA 1 month • Overnight Index Swap rate now stands at -0.53% - negative four years in a row 1.50% 1.00% • Interest rates have been negative since 2012 except for positive interest rates in 2014 0.50% 0.00% -0.50% -1.00% Forward CITA 1 month • Forward rate CIT
Slide 8: Increasing bank deposit surplus
Increasing bank deposit surplus Bank deposits (ex. repo) Bank deposits of DKK 139.4bn in Q2 2019 compared to DKK 150 135.5bn end of 2018 – up by 3% DKKbn 140 • The increase is primarily attributable to on demand deposits from personal and private banking clients 130 120 110 100 90 2010 2011 2012 201
Slide 9: Higher underlying fee income
Higher underlying fee income • Net fee income of DKK 523m in Q2 2019 – up by 31% relative to Q2 Fee income split by type 2018 800 800 DKKm 600 600 • Underlying fee income in Q2 2019 at level only seen previously in 400 400 fourth quarter 200 200 • High refinancing activity in Q2 supports fee income
Slide 10: Flatter interest rate curve
Flatter interest rate curve OAS (vs. CIBOR6m) • Stable development in OAS in 2019 -20 -21 -22 -23 -24 bps -25 -26 -27 -28 -29 02/01/19 16/01/19 30/01/19 13/02/19 27/02/19 13/03/19 27/03/19 10/04/19 24/04/19 08/05/19 22/05/19 05/06/19 19/06/19 3 year fixed rate Interest rate curve 1.50% • Flatter int
Slide 11: Value adjustments close to zero
Value adjustments close to zero • Value adjustments under core income amounted to DKK -8m Value adjustments under core income down by DKK 201m compared to Q1 2019 due to: 250 • Flatter interest rate curve DKKm • Customers’ interest rate hedge 200 150 • Value adjustments from clients’ transactions re
Slide 12: Jyske Bank Capital Markets
Jyske Bank Capital Markets - consists of the following divisions: Capital Markets CIB Jyske Jyske Group Capital Markets Treasury Page 11/48
Slide 13: Jyske Capital – Wealth Management Division
Jyske Capital – Wealth Management Division Assets under management Growth in Asset under Management (AUM) and earnings (2015-2018) 180 • Pressure on margins more than counteracted by increased volume, i.e earnings are growing 160 • Margins flattening out in some segments 140 • Positive growth in AUM
Slide 14: Jyske Markets – Trading Division
Jyske Markets – Trading Division Customer driven transactions FX - Large player in Danish/Scandinavian market • Focus on eBusiness Danish Stocks – earnings under pressure due to lower fees (MiFID) • Limited risk taking and warehousing • Market maker on Danish funds Danish Mortgage Bonds - Very stron
Slide 15: Group Treasury
Group Treasury Banking Book (Basis income) Interest rate curve • Strategic liquidity reserve 0.60% • Consists mainly of DKK mortgage bonds 0.40% 0.20% • Strategic Interest rate risk profile 0.00% Yield • More or less neutral on overall interest rate profile 0 2 4 6 8 10 • Positive interest rate risk
Slide 16: Stable underlying development in core expenses
Stable underlying development in core expenses Q2 2019 vs. Q1 2019 Development in core expenses • Core expenses of DKK 1,256m in Q2 2019 1,300 DKKm 1,250 • Compared to Q1 2019 down by DKK 29m due to: 1,200 • Higher IT-costs in Q1 2019 1,150 • Lower employee costs 1,100 1,050 1,000 Q1 2019 Employee I
Slide 17: Loan impairment charges close to zero
Loan impairment charges close to zero Loan impairment charges (under core profit) • Impairment charges of DKK 9m under core profit: 200 ― New defaults at low levels across client segments DKKm 150 ― Few large corporates negatively affected 100 ― Reversal of impairment charges of DKK 64m re. agricult
Slide 18: Agriculture: Reversal of loan impairment charges
Agriculture: Reversal of loan impairment charges • Limited exposure as agriculture excl. fishing accounts for Dairy farmers, plant farming and pig farming (DKKm/%) approx. 1% of the Group’s loans and guarantees Loans, advances and Balance of impairment • Impairment ratios at level with end of Q4 201
Slide 19: Investment portfolio earnings down compared to previous quarters
Investment portfolio earnings down compared to previous quarters Investment portfolio earnings , quarterly 150 • The investment portfolio earnings amounted to DKK -50m in Q2 DKKm 2019 – down by DKK 39m compared to Q1 2019. Negatively 100 affected by • the flatter interest rate curve over the quarter
Slide 20: Capital and Liquidity
UF JYSKE BANK Capital and Liquidity
Slide 21: Strong capital position
Strong capital position Capital ratios • Capital ratio 19.8% and CET1 ratio 16.0% end of Q2 2019 vs. long-term 25 targets of 17.5% and 14% post-Basel IV implementation pct – Effects of Basel IV expected to be fully financed by 2022 20 – Each quarter, Jyske Bank's Supervisory Board assesses the possi
Slide 22: Liquidity continues to be plenty
Liquidity continues to be plenty Group liquidity buffer (DKKbn) • Liquidity buffer DKK 86bn end of Q2 2019 vs. DKK 64bn end of 2018 90 DKKbn ― 91% of the buffer - DKK 78bn - is eligible for repo transactions at 80 8% central banks (Nationalbanken or ECB) 70 ― Cash placements are categorized as intra
Slide 23: Increased funding costs due to MREL
Increased funding costs due to MREL 2019-2021: Acc. increase in funding costs 2019-2023 compared to 2018 • Transition period from 1 July 2019 – 1 January 2022 where 120 DKKm preferred senior issued before end of 2018 can be used to fulfill MREL requirements (”grandfathering”) 100 • Old SP issuances
Slide 24: Appendices
Appendices: 1) Jyske Bank in brief and business segments 2) Danish Economy Q2 2019
Slide 25: Jyske Bank in brief
Jyske Bank in brief • One of the four large financial institutions in Denmark and a Danish SIFI • 3 segments (Banking, Mortgage and Leasing) • Estimated market share of 12% • Danish play • Nationwide branch network comprised of 92 personal client branches, 32 corporate branches, 9 Private Banking ce
Slide 26: Jyske Bank in brief
Jyske Bank in brief Jyske Bank Group key figures Shareholders' Loans and Total Profit before Net profit, equity at year- ROE after tax, advances, Deposits, assets, Number Year tax, DKKm DKKm end, DKKm average equity DKKbn DKKbn DKKbn of FTEs 1997 584 443 4,772 9.6% 36.6 41.5 63.1 2,671 1998 710 511
Slide 27: Banking activities
Banking activities Financials • Decrease in bank loans compared to Q1 2019 partly due to 1,600 the introduction of cash pool solutions DKKm 1,400 • Increase in bank deposits 1,200 1,000 • Increase in AUM due to positive developments in financial 800 markets and inflow of funds 600 • Core profit belo
Slide 28: Mortgage activities
Mortgage activities • Continued growth in loan volume – both private Financials 800 individuals and corporate clients. Nominal volumes DKKm 700 are up 0.5%. Fair value of mortgages saw a further 600 increase due to rising bond prices 500 • High refinancing activity in Q2 2019 supports fee 400 300 in
Slide 29: Leasing activities
Leasing activities Financials 160 • Loan volumes continue to increase and support NII DKKm 140 • Stable core expenses 120 100 • Increase in core profit primarily due to reversals of 80 impairment charges and growth in loan volumes 60 40 20 0 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Core expenses Core
Slide 30: Mortgages: The portfolio
Mortgages: The portfolio Distribution of lending portfolio • 87% of lending to properties with housing purposes 2% 1% 0% Owner-occupied (51%) ― No loans with swaps to co-operative housing Vacation homes (3%) ― No lending to agriculture and other primary production 11% Cooperative (5%) Private rental
Slide 31: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 600 30 1.8% Private Number of repossessed proporties Value of repossessed proporties (DKKm) 1.6% 500 25 Commercial 1.4% Subsidised 400 20 1.2% 1.0% 300 15 0.8% 200 10 0.6% 0.4% 10
Slide 32: Bank loans: the portfolio
Bank loans: the portfolio Loans and guarantees by sector (DKKm/%) • Portfolio composition end of Q2 2019: Loans, advances and Balance of loan Impairment Losses ― Corporates take up larger proportion, 66% vs. guarantees impairment charges charges 63% end of 2018 as volume grows Q2 2019 Q4 2018 Q2 201
Slide 33: Danish Economy August 2019
qr". { JYSKE BANK Danish Economy August 2019
Slide 34: Headlines on the Danish Economy
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream Headlines on the Danish Economy • The Danish economy has been in an upturn for six years. • We expect the upturn to continue in 2019 and 2020 with gradually slower pace
Slide 35: Danish economy – still an upturn story
Danish economy – still an upturn story, • Employment data is solid The upturn will continue, but slowdown Lending growth is still subdued Source: Source: Page 34/48
Slide 36: 3 kinds of stimulus support demand
3 kinds of stimulus support demand House prices recovering after burst in 08/09 Steady rise in employment Source: Source: Interest rates are at a historic low Both domestic and foreign demand is increasing Source: Source: Page 35/48
Slide 37: Spill-over from recent Global weakness
Spill-over from recent Global weakness • There is spill-over to Denmark from weaker global economic signals. Currently, we see a neutral stance. Lower sentiment in manufacturing, but no dramatic change Source: Page 36/48
Slide 38: The labour market performance is strong
The labour market performance is strong • The labour force is increasing from foreign labour supply and a higher retirement age. Foreign labour accounts for +40 % of rise in employment Lack of labour supply has stopped accelerating Source: Source: Page 37/48
Slide 39: Improved asset quality – as defaults have normalized
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream Improved asset quality – as defaults have normalized Unemployment has declining Forced house sales below 0,2 % per year Business bankruptcies at neutral level Source: S
Slide 40: Turnaround and consolidation at the same time
Turnaround and consolidation at the same time • Low interest rates and solid real wage growth make it possible for households to consume more and save up at the same time The private sector is saving up …so household debt has declined …and household net assets are large 800 700 700 600 600 % of disp
Slide 41: The Danish economy can manage a Hard BREXIT
The Danish economy can manage a ”Hard BREXIT” • But there will be significant negative consequences for the most affected sectors. • The UK represents shy of 8 % of Danish export, and it’s the 4th largest export- market. • IMF: Hard Brexit with trade acc. to WTO-rules -> Loss of 1 % of GDP in DK (in
Slide 42: Widespread, moderate, recovery on the housing market
Widespread, moderate, recovery on the housing market • Overall house prices are rising 2-4 % y/y. • Large price increases on flats in biggest cities have stopped. Prices are decreasing slightly. • New regulation and a new housing tax model have a dampening effect in biggest cities Large differences
Slide 43: Moderate Danish price increase in European context
Moderate Danish price increase in European context European house prices the past year The development in Scandinavian houseprices Source: Source: Page 42/48
Slide 44: New Lending Regulation Works
New Lending Regulation Works • The new regulation is turning down heat on the Copenhagen market Demand and supply are getting closer Recent data show peaking flat prices Source: Source: Page 43/48
Slide 45: Denmark is a AAA economy with strong structural financial features
Denmark is a AAA economy with strong structural financial features Current account surpluses since late 90s ..imply that foreign assets are increasing Source: Source: And public sector debt is low This is why Denmark is AAA Source: Source: Page 44/48
Slide 46: A strong financial position
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream A strong financial position Net foreign financial assets (2017) 250 250 200 200 150 150 100 100 50 50 % of GDP % of GDP 0 0 -50 -50 -100 -100 -150 -150 -200 -200 Switze
Slide 47: Denmark's financial turnaround
Denmark’s financial turnaround Denmark’s net foreign assets 1960-2018 100 100 80 80 60 60 From start 1990s: Labour 40 market pension schemes 40 20 20 % of NNI % of NNI 0 0 1982: The peg is -20 introduced (fully in -20 60s and 70s: effect from 1986) -40 Devaluations -40 -60 -60 -80 -80 1960 1962 1964
Slide 48: Jyske Bank Forecasts (June 2019)
Jyske Bank Forecasts (June 2019) Danish economy 2016-2020 DKKbn Real growth (%) 2018 2016 2017 2018 2019 2020 Household spending 1049 2.1 2.1 2.3 1.4 1.4 Public spending 546 0.2 0.7 0.8 0.8 0.7 Fixed gross investment 492 7.6 4.6 5.1 0.2 3.0 Inventory investment* 12 -0.2 -0.1 0.1 0.0 0.0 Exports 1213
Slide 49: General legal disclaimer
General legal disclaimer • This presentation and the information contained therein is furnished and has been prepared solely for information purposes by Jyske Bank A/S. It is furnished for your private information with the express understanding, which recipient acknowledges, that it is not an offer,