Nova Ljubljanska Banka d.d. · LJSE:NLBR
Nova Ljubljanska Banka d.d — H1 2023 Earnings Presentation
69 slides from Nova Ljubljanska Banka d.d's earnings presentation, August 2023
Slide 1: NLB Group Presentation Q2 2023 and H1 2023 Results
NLB Group Presentation Q2 2023 and H1 2023 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: This is our home. A region of opportunities.
NLB Banka, Banja Luka This is our home. A region of opportunities. Market share Result after tax Total assets Active clients by total assets 14 988 215,339 20.9% (in EUR millions) (in EUR millions) NLB, Ljubljana Market share Result after tax Total assets Active clients by total assets 223.3 14,683
Slide 5: Executive Summary
Executive Summary After a strong second quarter, NLB Group confidently enters the rest of the year Q2 2023 Highlights Important Developments • Solid recurring revenues, cost discipline and resilient asset quality leading NLB Group's EUR 4 million donation to support 20 affected municipalities in to
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) 60.8 GDP (EURbn) 62.2 Population (m) 2.1 Population (m) 6.8 NBS loans as % of GDP(1) 44.6% NBS loans as % of GDP(1) 41.6% NBS deposits as
Slide 8: Regional economic growth has slowed but is expected to stay above the Eurozone
Regional economic growth has slowed but is expected to stay above the Eurozone Group‘s region continued with slow growth, and is expected to grow at rates above Eurozone average, as the demanding macro environment… Real GDP growth, % Q3 2022 Q4 2022 Q1 2023 2023 2024 The growth in Q1 of 2023 cooled
Slide 9: Regional economic growth has slowed but is expected to stay above the Eurozone
Regional economic growth has slowed but is expected to stay above the Eurozone Unemployment rates are expected to stay close to their historical lows… Unemployment rate, % 15.0 15.4 17.0 17.0 2022 2023 2024 By end of the Q1 2023, employment rate increased in most countries 14.4 14.0 14.7 14.0 13.7 1
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 International reserves as % of GDP Central Bank interest rates evolution International reserves, 2019 and Q1 2023 annualized, % GDP Deposit facility rate, 2019 (pre-Covid) – June 2023 , % 6.0% 2019 (pre-Covid) 35% 34% 5
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), 1Q 2023, % GDP Loans / Deposits, May 2023, % (1) 102.9% 95.6% 85.6% 82.9% 80.1% 75.4% 74.4% 63.6% 68.7% 54.5% 47.0% 48.3% 44.6% 41.6% Slovenia North BiH Kosovo Mo
Slide 12: Key Developments
Key Developments In 2023, the Bank changed the recognition of obligation for regulatory expenses. In the previous year, these expenses were recognised in Q2, after receiving the Bank of Slovenia’s notification, while in 2023, the Bank recognised these expenses in full already in Q1. Comparative amou
Slide 13: Key performance indicators of NLB Group
Key performance indicators of NLB Group Strong recurring revenues, cost conrtol and resilient asset quality Gross loans to customers (in EURm) in EUR millions / % / bps 1-6 2023 1-6 2022 Change YoY Q2 2023 Q1 2023 Q2 2022 Change QoQ 2% Key Incom e Statem ent Data Net operating income 511.7 358.1 43%
Slide 14: Revenues and Cost Dynamics
Revenues and Cost Dynamics Net interest income growth outpacing cost growth, coupled with the release of provisions Costs (Group, EURm) +10% Recurring net operating income (in EUR million) 240.7 218.7 +7% +6% 116.0 117.1 123.6 +43% 506.1 1-6 2022 1-6 2023 Q2 2022 Q1 2023 Q2 2023 354.1 Cost of risk(i
Slide 15: Profitability
Profitability Strong profitability with increasing contribution from Serbian market Profit a.t. – quarterly evolution (EUR million) Result before impairments and provisions by quarters (in EUR million) 120.1 122.6 146.1 124.8 90.8 107.2 91.7 65.2 69.1 77.3 136.2 155.2 100.7 95.6 81.5 2.5 2.6 13.0 6.
Slide 16: Loan dynamics
Loan dynamics Expected moderation of loan growth, however consumer and corporate loans picking up in Q2 NLB Group Slovenian banks(i)(ii) SEE banks(i) +3% +5% 6,743.4 6,944.6 6.40% 7,000 8 5,000 +1% 6 5,000 7 6,500 7 5.66% 6,000 5.50% 3,448.0 3,469.6 5 6 5,500 4.74% 6 4,000 4,000 3.84% 3,220.9 3,387.
Slide 17: Resilient Operating Income Performance
Resilient Operating Income Performance Result reflects strong underlying performance, increase of net interest income and release of provisions Net profit of NLB Group – evolution YoY (in EURm) 1.0 -1.0 -1.0 -22.0 25.5 153.6 -172.8 287.0 -29.2 242.7 1.6 66.9 1-6 2022 Net interest Net fee and Other n
Slide 18: Income Statement
Income Statement Strong operational performance increasing resilience of the NLB Group Result before impairments and provisions (Group, EURm) +94% Result before impairments and provisions amounted to EUR 270.9 million, 270.9 higher QoQ and YoY. Main drivers of yearly dynamics in recurring pre- provi
Slide 19: NLB Group's Balance sheet structure
NLB Group‘s Balance sheet structure Deposit (predominately from individuals) driven balance sheet Balance sheet structure (30 Jun 2023, in EURm) 24,701 24,701 Other assets 651 Total equity 2,645 Other liabilities Financial assets Subordinated 469 Other debt 4,554 debt securities Deposits from banks
Slide 20: Minimal risk from diversified securities portfolio with short duration
Minimal risk from diversified securities portfolio with short duration, coupled with ample cash buffers BB securities by asset class (NLB Group 30 June 2023) BB securities by rating (NLB Group, 30 June 2023) BBB NR Corporate; 0.5% 8.2% A Subordinated; 0.4% 25.4% 1% BB Agency; 3% 23.2% Government GGB
Slide 21: 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 Skopje Banja Luka Sarajevo Prishtina Podgorica NLB Group Cons
Slide 22: Business Performance
Business Performance
Slide 23: Net interest income
Net interest income Margin pick-up on the back of NII growth Net interest income of NLB Group (in EURm) Net interest margin, quarterly (in %) 4.14% 3.88% Interest income +68% 3.50% 3.46% Interest expenses 3.20% 3.14% 3.04% 380.0 2.65% 2.71% 2.27% 2.35% +70% 2.16% 1.86% +12% 1.42% 226.4 1.32% 201.0 4
Slide 24: Net non-interest income
Net non-interest income Increased consumption had positive effect on net F&C income (up 4% QoQ) Net non-interest income of the NLB Group (in EURm) 0% Net fee and commission income (in EURm) +1% 131.7 131.7 3.9 5.5 133.7 134.6 Net fee and commission income Recurring other net non-interest income -8%
Slide 25: Costs
Costs # of employees Inflation and integration of N Banka affecting costs -240 YoY Total costs (in EURm) 8,792 8,185 8,394 8,228 8,154 +10% Depreciation and amortisation 2,591 2,446 Other general and administrative expenses 2,510 2,418 2,438 240.7 Employee costs 218.7 23.5 23.3 6,064 5,525 5,375 5,2
Slide 26: Impairments and provisions
Impairments and provisions CoR -6 -38 Impairments and provisions for credit risk 17.8 Other impairments and provisions Release 12.4 29.9 Establishment 5.4 18.4 11.5 1.6 -2.4 -4.9 -6.0 -6.2 -5.3 -12.1 -3.3 -7.7 1-6 2022 1-6 2023 Q2 2022 Q1 2023 Q2 2023 • In H1, impairments and provisions for credit r
Slide 27: NLB Group Assets
NLB Group Assets Total asset growth fueled by growth in net loans to customers and cash balances Total assets of NLB Group – structure (EURm) +9% 1% +3% YtD 24,701.5 -9% 24,160.2 24,011.8 650.8 22,730.3 715.5 658.2 -7% 692.7 4,553.7 4,877.4 4,582.5 4,919.5 3% 13,431.8 13,073.0 13,137.7 12,620.2 10%
Slide 28: NLB Group Funding Structure
NLB Group Funding Structure Average cost of funding is increasing due to wholesale funding, driven by MREL requirement and deposit repricing Funding structure of the NLB Group (Group, EURm) +8% 1% Increasing average cost of funding on a Group level (quarterly data) +3% YtD 21,737.9 22,056.1 -7% 0.69
Slide 29: NLB Group Funding Driven by Deposits
NLB Group Funding Driven by Deposits Deposit interest rates are increasing Deposits from NBS (quarterly, in %) NLB Group 0.27% NLB d.d. SEE Banks 0.25% 0.30% 0.23% 0.24% 0.26% 0.12% 0.07% 0.18% 0.18% 0.10% 0.10% 0.05% 0.17% 0.09% 0.03% 0.04% 0.16% Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q1 2
Slide 30: Capital
Capital Capital position enabling growth and dividend distribution Regulatory Requirem ent, Actual NLB Group as of 30 June 2023 in EUR m illions/in % Capital requirements 2023 Regulatory Requirem ent Actual Surplus OCR 14.26% 15.26% OCR+P2G 1.00% Common Equity Tier 1 capital 1.587,69 2.181,38 593,69
Slide 31: RWA structure
RWA structure Prudent RWA management to improve capital ratios RWA structure (in EURm) RWA for credit risk increased by EUR 171.3 million YtD mainly due to ramping up lending activity in all Group Banks except in N Banka and higher RWAs / Total 63% 59% 61% 60% project finance exposures. On the other
Slide 32: NLB Wholesale Funding
NLB Wholesale Funding Wholesale funding is driven by MREL requirement and by ambition to further strengthen and optimize the capital structure Outstanding bonds: Type of the Nominal ISIN code Issue Date Maturity First call date Interest Rate Bond Value Evolution of MREL eligible funding, the MREL re
Slide 33: Asset Quality
Asset Quality
Slide 34: Asset Quality – NLB Group
Asset Quality – NLB Group Dec-21 Diversified corporate and retail credit portfolio, focused on core markets Mar-22 w/o N Banka Mar-22 Dec-22 Corporate and retail credit portfolio by segment (Group, 30 Jun 2023, % and EURm) Jun-23 4,013 3,807 3,932 3,649 Retail 3,516 3,575 3,304 consumer SME 3,025 3,
Slide 35: NLB Group Asset Quality
NLB Group Asset Quality Portfolio diversification reduces risk, no large concentration in any specific industry Corporate credit portfolio (Group, 30 Jun 2023, in EURm) Credit porfolio in EUR thousands ∆ 2Q ∆ YtD Corporate sector by industry NLB Group % 2023 2023 Accommodation and food service activ
Slide 36: NLB Group Asset Quality
NLB Group Asset Quality Industry diversification in manufacturing and trade Corporate credit portfolio (Group, 30 Jun 2023, in EUR million) Credit porfolio in EUR thousands Credit porfolio in EUR thousands ∆ 2Q ∆ YtD ∆ 2Q ∆ YtD Corporate sector by industry NLB Group % Corporate sector by industry NL
Slide 37: NLB Group Asset Quality
NLB Group Asset Quality High % of Stage 1 Credit portfolio (measured at amortized cost & FVTPL) Credit portfolio (1) by stages (Group, 30 Jun 2023, in EURm) in EUR million Credit portfolio Provisions and FV changes for credit portfolio Stage1 Stage2 Stage3 & FVTPL Stage1 Stage2 Stage3 & FVTPL Covera
Slide 38: Asset Quality – NLB Group
Asset Quality – NLB Group NPL ratio further decreased. 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% 160% 161% 2,000 110 61% 60% 98.9% 101.0% 62% 100 86.1% 86.6% 99% 101% 90 86% 42% 3
Slide 39: Asset Quality – NLB Group
Asset Quality – NLB Group Favorable trends in asset quality Cumulative net new impairments and provisions for credit risk (w/o off-balance, H1 2023, in EUR million) • In H1 2023 net release of impairments and provisions for credit risk in the amount of EUR 29.9 million, resulting in Cost of Risk of
Slide 40: Asset Quality – NLB Group
Asset Quality – NLB Group Corporate and retail credit portfolio split by interest rates Corporate and retail portfolio of NLB Group (30 Jun 2023) Corporate and retail portfolio of NLB d.d.(1) (30 Jun 2023) Corporate (incl. SME) Consumer Housing Corporate (incl. SME) Consumer Housing 24% 22% 32% 37%
Slide 41: Structure of loan portfolio by type of interest rate
Structure of loan portfolio by type of interest rate Net interest income sensitivity to higher rates remains intact Structure of loan portfolio by type of interest rate Average actual EURIBOR in loan portfolio as of June 2023, in EURm Dec.2022 Mar.2023 Jun.2023 EURIBOR 5,725 EURIBOR 1,90% 2,53% 3,32
Slide 42: ESG & Digital
ESG & Digital
Slide 43: Integration of Sustainability and ESG factors in the Business Model
Integration of Sustainability and ESG factors in the Business Model ESG 17.7 TOP 15% Highlights in H1 2023 1 RATING Low Risk Banks 2022 2 ▪ UNEP FI delivered its second response report on the implementation of the Responsible Banking Principles, highlighting positive aspects of implementing the prin
Slide 44: Sustainability Roadmap for 2023
Sustainability Roadmap for 2023 ▪ Our sustainability roadmap 2023 sets next milestones & targets for tackling environmental, social and governance considerations, and focuses on steps to achieving one most important goal – to empower all stakeholders for successful transition to low carbon, inclusiv
Slide 45: State-of-the art services & channels
State-of-the art services & channels The pioneer of banking innovation in Slovenia First Slovenian bank sending cards‘ PIN via SMS First Slovenian bank implementing Flik P2M (Person to Merchant) at all POSes First Slovenian bank enabling 24/7 opening of personal account and the only bank with full d
Slide 46: Omnichannel – future sales platform
Omnichannel – future sales platform Customer experience – to be improved and fully digital Digital to take primary role especially in transaction banking and simple products contracting NLB Group # active digital & m-bank users (in 000) ✓ Full digital experience starting with new customer digital on
Slide 47: N Banka Integration
N Banka Integration
Slide 48: Integration of N Banka into NLB is on home stretch
Integration of N Banka into NLB is on home stretch, final Dress Rehearsal planned for August to comprehensively confirm readiness Highlights of integration process • ECB application has • Client churn stabilized by • Operational stabilization of N • A comprehensive approach • First stage of data mig
Slide 49: Total integration cost will be covered by synergies by the end of 2025
Total integration cost will be covered by synergies by the end of 2025, budget realization so far basically in line with budget plan Integration Budget & Synergies Integration budget & realization (in EUR million, incl. VAT) Estimated Synergies (FYE, in EUR million) 16.7 15.6 14.0 11.2 10.5 7.2 11.7
Slide 50: Focus in Q3 2023 is on final Dress Rehearsal, Cut-over and stabilization
Focus in Q3 2023 is on final Dress Rehearsal (DR3), Cut-over and subsequent stabilization H/l integration timeline March 2022 Today Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Legal and M&A ‒ Run DD - ECB Merger processes ‒ Merger regulatory approvals, incl. ECB application submission approval execution ‒ Organization/
Slide 51: Outlook
Outlook
Slide 52: Outlook
Outlook Last Outlook Revised Outlook Last Outlook Revised Outlook for 2023 for 2023 for 2025 for 2025 KPI Regular income ~ EUR 1000 million ~ EUR 1,000 million > EUR 1,000 million > EUR 1,000 million ~ EUR 490 million ~ EUR 490 million Flat on 2023 Flat on 2023 Costs level level Cost of risk 30-40 b
Slide 53: Appendices
Appendices Appendix 1: Business Performance 54 Appendix 2: Segment Analysis 57 Appendix 3: Financial Statements 67 53
Slide 54: Appendix 1: Business Performance
Appendix 1: Business Performance
Slide 55: Net interest income evolution
Net interest income evolution YoY evolution (in EUR million) +68% 5.7 6.5 -16.0 380.0 46.9 -27.7 7.2 65.5 8.2 226.4 57.3 1-6 2022 Balances Loans to banks Loans to Loans to Loans to state Securities Deposits from Funding Other 1-6 2023 with CB corporate individuals customers QoQ evolution (in EUR mil
Slide 56: Off-balance sheet items
Off-balance sheet items Derivatives Off-balance sheet items of NLB Group – structure (in EUR million) in EUR million +2% 30 Jun 2023 31 Dec 2022 30 Jun 2022 +2% FX derivatives with customers 177.0 215.5 152.3 Interest rate derivatives with customers 456.7 396.1 634.9 6,107.0 6,106.7 6,227.2 FX deriv
Slide 57: Appendix 2: Segment Analysis
Appendix 2: Segment Analysis
Slide 58: 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 - Key corporates NLB Banka, Banja Luka Micro (N
Slide 59: Retail Banking in Slovenia
Retail Banking in Slovenia • Net interest income witnessed a substantial surge YoY (EUR 66.8 million in EUR millions consolidated higher), primarily due to the key ECB interest rate increase that positively 1-6 2023 1-6 2022 Change YoY Q2 2023 Q1 2023 Q2 2022 Change QoQ affected the segment’s income
Slide 60: Retail banking in Slovenia
Retail banking in Slovenia High and stable market shares across products Market share of net loans to individuals in the Bank Market share of deposits from individuals in the Bank 35.7% 35.6% 33.9% 34.7% 35.6% 26.2% 26.4% 26.9% 26.6% 27.1% 26.6% 26.9% 22.5% 24.4% 13.7% 14.9% 15.2% 14.5% 21.8% 10.9%
Slide 61: Corporate and Investment banking in Slovenia
Corporate and Investment banking in Slovenia in EUR millions consolidated • The net interest income showed a substantial increase YoY, 1-6 2023 1-6 2022 Change YoY Q2 2023 Q1 2023 Q2 2022 Change QoQ primarily due to the key ECB rate hike positively affecting the net interest income from clients’ dep
Slide 62: Corporate & Investment Banking in Slovenia
Corporate & Investment Banking in Slovenia High market shares across products Market share of Corporate Banking in the Bank – evolution and • The Bank cooperates with almost 10,000 loyal corporate clients and position on the market holds over 20% market share in loans and deposits. 34.4% • The Bank
Slide 63: Strategic Foreign Markets
Strategic Foreign Markets in EUR millions consolidated 1-6 2023 1-6 2022 Change YoY Q2 2023 Q1 2023 Q2 2022 Change QoQ • In the rising interest rates environment, net interest income Net interest income 196.4 137.1 59.3 43% 102.5 93.8 70.8 9% increased by EUR 59.3 million YoY due to higher volumes a
Slide 64: Financial Markets in Slovenia
Financial Markets in Slovenia in EUR millions consolidated • Net interest income was EUR 4.8 million higher YoY. The effects of the 1-6 2023 1-6 2022 Change YoY Q2 2023 Q1 2023 Q2 2022 Change QoQ rising interest rate environment in the Bank were mainly transferred from Net interest income 27.7 22.9
Slide 65: Financial markets in Slovenia
Financial markets in Slovenia Liquid assets evolution (EURm) Well diversified banking book by geography (30 June 2023) Spain Ireland Luxembourg 7,501 7,807 3% 3% 572 Finland 4% 6,767 741 4% Other 5,859 457 28% Austria 2,897 6% 5,001 583 2,935 545 2,977 Netherlands 6% 191 2,952 EUR 2.896 bn Assets 22
Slide 66: Non-Core Members
Non-Core Members in EUR millions consolidated 1-6 2023 1-6 2022 Change YoY Q2 2023 Q1 2023 Q2 2022 Change QoQ • Wind-down has remained the main objective of the non-core segment in all the non-core Net interest income 0.5 0.1 0.4 - 0.5 0.0 0.0 - portfolios, followed by subsequent reduction of Net no
Slide 67: Appendix 3: Financial Statements
Appendix 3: Financial Statements 67
Slide 68: NLB Group Income Statement
NLB Group Income Statement 1-6 1-6 (EURm) YoY Q2 2023 Q1 2023 Q2 2022 QoQ 2022 2023 Interest and similar income 256,9 440,3 71% 233,2 207,0 133,8 13% Interest and similar expense -30,5 -60,3 -98% -32,2 -28,0 -15,3 -15% Net interest income 226,4 380,0 68% 201,0 179,0 118,6 12% Fee and commission inco
Slide 69: NLB Group Statement of Financial Position
NLB Group Statement of Financial Position (EURm) 31 Dec 2022 30 Jun 2023 YtD (EURm) 31 Dec 2022 30 Jun 2023 YtD ASSETS LIABILITIES & EQUITY Cash and balances with Central Deposits from banks 106,4 107,4 1% Banks Deposits from customers 20.027,7 19.924,9 -1% and other demand deposits at - Corporates
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