Kvika Banki Hf · OMXICE:KVIKA
Kvika Banki Hf — Debt Investor Presentation (January 2022)
39 slides from Kvika Banki Hf's debt investor presentation, January 2022
Slide 1: Debt Investor Presentation January 2022
Debt Investor Presentation January 2022
Slide 2: Iceland and the Icelandic Economy
Iceland and the Icelandic Economy
Slide 3: Economic Foundations are Strong
Economic Foundations are Strong Attributable to sound economic policies in the past decade • Pre-pandemic, government debt to GDP was at its lowest point in a decade and NIIP – lender to the world despite pandemic effects Iceland’s debt to GDP ratio is still among the lowest in Development of major
Slide 4: Post-pandemic economy is taking off
Post-pandemic economy is taking off Impact of Covid-19 milder than initially forecasted • While Iceland’s largest export sector, tourism, was hit by the pandemic, other Unemployment returning to pre-pandemic levels exports sectors remained strong, Iceland’s current account balance remains positive %
Slide 5: Covid in Iceland
Covid in Iceland Death rate in Iceland below average in 2020 and 2021 Deviation from mean cumulative deaths* per year in Iceland *Deaths per 100.000 population. Source: Icelandic National Registry, Statistics Iceland 3
Slide 6: Regulatory Environment
Regulatory Environment • The Icelandic financial system is governed by the Central Bank of Iceland and the Financial Supervisory Authority of the CBI (the FSA) • Iceland, together with Liechtenstein, Switzerland and Norway (the EFTA States), is a party to the EEA Agreement by which the EFTA States p
Slide 7: An Introduction to Kvika Banki hf.
An Introduction to Kvika Banki hf.
Slide 8: An Overview of Kvika
Diversified income across segments Net operating income by segment / Q3 and YTD 2021* An Overview of Kvika Q3 16% Diversified financial services 22% YTD* 34% €39m 43% Q3: ISK 5.9bn YTD*: ISK 15.4bn Kvika 26% €102m 25% 19% Insurance Asset Commercial Investment 15% Management Banking Banking • Private
Slide 9: Strong profits and revenue generation
Strong profits and revenue generation • TM Insurance is part of Kvika’s Return on weighted tangible equity of 36.4% 9M 2021 consolidated financial statements as of 31 March 2021 Profit before tax* Income Statement 2021 9M PBT development / ISK millions • Kvika’s profit before tax for 9M 2021 is 9M 2
Slide 10: History of Successful Buy and Build Strategy
History of Successful Buy and Build Strategy Significant value creation from successful execution of a clear strategy Buy and build strategy Phase I Phase II 2015-2020: Asset management consolidation 2019-2021: Refinancing of lending platforms Key goals: operational synergies from economies of scale
Slide 11: Kvika Today
Kvika Today Significant growth since Nasdaq listing in 2019 Market cap development Shareholder development 2,687 Shareholders 6th largest market cap as of 15 November 2021 / ISK billions From First North listing to 15 November 2021 Market median 671 3000 year end 2020: 808 317 <50,000 shares 2500 50
Slide 12: Group Management
Group Management Managing Directors and organisational chart Board of directors Internal Audit Anna Jónsdóttir CEO Deputy CEO Marinó Ármann Tryggvason Þorvaldsson Risk Management Legal Marinó Ármann Ragnar Ólöf Lilja Thomas Jensen Lilja Jensen Tryggvason Þorvaldsson Dyer Jónsdóttir Jensen CEO Deputy
Slide 13: Legal structure
Legal structure Significant subsidiaries Two of Kvika‘s four business units, as well as Kvika’s UK operations, Kvika banki hf. are operated in Bank / Regulated in Iceland independent subsidiaries, offering further risk diversification Commercial Investment TM tryggingar hf. Kvika eignastýring hf. Ba
Slide 14: Insurance
Insurance Market share Consistently profitable operations (%) / 9M 2021 • TM Insurance became a subsidiary of Kvika following a merger in Q1 2021 19% • Insurance services have proven to have a resilient business model due to 22% their naturally counter cyclical operations, as investment income is ge
Slide 15: Asset Management
Asset Management Significant external and internal growth over last 5 years • Strategic focus on building a profitable asset management operation by a combination of internal and external growth, a buy and build strategy resulting in Kvika’s asset management operations merging in a single company in
Slide 16: Commercial Banking
Commercial Banking Loan book to total assets Tailored financing and retail lending platforms Comparison to domestic banks / 30.09.21 25,7% 33,4% • Focus on solving specific needs for selected customer groups through Bank 1 Bank 2 differentiated brands 29,7% 66,6% 74,3% • Niche corporate lending and
Slide 17: Investment Banking
Investment Banking Combination of three successful business units Corporate Finance Capital Markets Kvika UK • Traditional corporate finance services, • Equity and fixed income trading in all products, • UK subsidiary launched in 2017 acquisitions, divestments and mergers, securities, ETFs, swaps, o
Slide 18: Kvika's Sustainability Journey
Kvika implemented Environmental Impact Kvika’s Sustainability Journey Reporting into its Annual ESG Reporting Kvika started working with the Icelandic Wetland Fund to bind part of its GHG emission through Reflecting the Group’s core value of long-term thinking reclamation of wetlands Kvika published
Slide 19: Sustainability Going Forward
Sustainability Going Forward Sustainability embedded in Focus areas in 2022 governance structure Kvika is dedicated to building knowledge and creating value through sustainability, by engaging its partners and stakeholders Sustainability is embedded in the Group´s governance to work together in fina
Slide 20: Capital Position and Requirements
Capital Position and Requirements • Following the merger with TM Capital positions well above regulatory requirements Insurance in 2021 the Financial Supervisory Authority of the Central CAR and solvency Solvency ratio Bank designated the Group as a 30.09.21 / ISK billions €601 million 44/28 = 1.56
Slide 21: Capital Position and Requirements
Capital Position and Requirements • The capital adequacy ratio (“CAR”) is Capital Adequacy Ratio high net of requirements calculated at a group level excluding entities which belong to the insurance sector • CET1 capital ratio is 28.8% (ISK 26.1bn) compared to regulatory 32.4% requirement of 14.0% 1
Slide 22: Assets
Assets • Total assets of ISK 234.3 billion, nearly Balance sheet growth post merger doubled since year-end 2020 driven by merger with TM Insurance and Lykill Assets Cash and financial instruments on 31st of March 2021 ISK billions €1.6bn 30.09.21 / ISK billions €554 million • Liquid assets amount to
Slide 23: Loans to Customers
Loans to Customers Risk diversification has increased significantly due to acquired portfolios Interest rates vary between loan categories and reflect Real estate development Real estate Lykill commercial vehicles Lykill vehicles the estimated loss risk at any and equipment given time, generally low
Slide 24: Loans to Customers
Loans to Customers • Change in credit quality mostly due to Change in credit quality mostly due to merger merger with Lykill (new financial assets) but improves quarter-on- Net carrying amount Gross carrying amount quarter IFRS 9 risk stage allocation / ISK billions IFRS 9 risk stage allocation / IS
Slide 25: Loans to Customers
Loans to Customers Minimum Covid effects – mostly resolved Covid effects on loan book Resources offered Kvika loan book / amount of loans in Covid moratorium of total loan book • In 2020 and 2021, Kvika (and the later acquired Lykill Financing) offered Covid related payment 30.9.2021 100% moratorium
Slide 26: Liquidity and Funding Ratios
Liquidity and Funding Ratios • HQLA assets ISK 34bn excluding Strong levels post debt repayments mandatory reserves and collateral to the Central Bank Liquidity coverage ratio (LCR) Net stable funding ratio (NSFR) 30.09.21 / ISK billions 30.09.21 / ISK billions • Liquidity coverage ratio strong at 1
Slide 27: Liabilities
Liabilities • Increase in liabilities and equity driven Healthy combination of deposits and various term debt by merger with TM Insurance and Lykill which took place on 31st of Liabilities and equity Maturity of deposits March 2021 ISK billions 30.09.21 • Kvika issued ISK 7.8 billion of senior €1.6b
Slide 28: Liabilities
Liabilities • Kvika has been an active issuer in Domestic debt funding Iceland since 2015 and will continue to focus on domestic debt issuances as a Latest domestic issuances key source of funding • ISK 27 billion of bonds outstanding at KVIKA 24 1119 KVIKA 24 1216 KVIKA 32 0112 New issuance First g
Slide 29: Preparation of First Issuance in Europe
Preparation of First Issuance in Europe Establishment of EMTN Programme Kvika has established its first EMTN programme, in preparation for entering European debt capital markets Q4 2021 As a relatively small issuer in a European EMTN preparation perspective, Kvika believes that a conservative strate
Slide 30: Kvika as a Borrower
Kvika as a Borrower A more diversified income base than traditional banks Comparison to domestic banks Net operating income by segment / 30.09.21 Cost to income Loans to Asset Liquidity 2% ratio deposits encumbrance coverage ratio 10% 50% 158% 21% 221% 225% 19% 47% 20% 140% 143% 42% 17% 38% 171% 172
Slide 31: Key Takeaways
Key Takeaways • A highly diversified financial conglomerate • Strong market position in Insurance, Asset Management and Investment Banking. Profitable Commercial Banking unit with growth opportunities • Very conservative liquidity and capital position • Well secured and diversified loan book • Low l
Slide 32: Disclaimer
Disclaimer This presentation and the information contained therein has been prepared by Kvika banki hf. on a best knowledge basis and is not under any circumstances intended for public or any general distribution without Kvika banki hf.’s consent. The presentation is for marketing purposes only. Any
Slide 33: Confidential
Confidential
Slide 34: Appendix I Iceland and the Regulatory Environment
Appendix I Iceland and the Regulatory Environment
Slide 35: Iceland
Iceland • Iceland is an island, located in the North Atlantic next to Norway, Scotland and Greenland with a population of 368,7921 • Iceland is a constitutional republic with a multi-party parliamentary system, executive power is vested in a cabinet headed by a prime minister and the president is th
Slide 36: Regulatory Environment
Regulatory Environment EU adoption due to EEA agreement Kvika’s Regulatory Environment Capital Requirements BRRD and MREL • Kvika’s operations are mainly subject to Icelandic • Kvika’s capital management framework is based • On 2 July 2014, Directive 2014/59/EU providing laws and regulations on CRD
Slide 37: Appendix II Ortus Secured Finance
Appendix II Ortus Secured Finance
Slide 38: Ortus Secured Finance at a Glance
Ortus Secured Finance at a Glance Secured lending in UK bridging market London, 19 Glasgow Members of staff across lending, sales, and Belfast credit and finance Proven and reliable principal lender with a Office locations flexible offering of competitive funding solutions €150m ISK 23bn 16.5 months
Slide 39: Strategic Rationale for Transaction
Strategic Rationale for Transaction Natural next step of 2018 acquisition of cornerstone stake 1. Efficient lending engine and highly competent management 2. Large growth potential, adding significantly to Group 3. Clear potential to leverage Group’s financial strength to team well known to Kvika ea
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