Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q3 2015 Earnings Presentation
43 slides from Pareto Bank Asa's earnings presentation, 2015
Slide 1: Pareto Bank Financial Results Third Quarter 2015
PARETO BANK Financial Results Third Quarter 2015 SIDE 1
Slide 2: Pareto Bank at a Glance
PARETO BANK AT A GLANCE • A niche player with focus on real estate financing, Name Holding Share Pareto AS 6,375,000 15.00% securities financing and shipping and offshore Societe Generale SS (nom.) 3,700,000 8.71% financing Perestroika AS 3,581,400 8.43% Indigo Invest AS 3,328,000 7.83% Geveran Trad
Slide 3: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPITAL 4 AMBITIONS FOR 2015 SIDE 3
Slide 4: Third Quarter 2015
THIRD QUARTER 2015 Post-tax operating profit (MNOK) 56.9 47.2 47.7 Profit after write-downs and tax 37.4 MNOK 47.7 (MNOK 47.2) 24.7 Return on equity after tax 16.7% (18.8%) Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Cost/income ratio Return on equity (after tax) 24.2% (18.9%) 20.6 % 18.8 % 16.7 % 14.0
Slide 5: Income Statement
INCOME STATEMENT 1.1 – 30.09 1.1 – 30.09 (NOK 1,000) Q3 2015 Q3 2014 2015 2014 2014 Net interest income 86,075 72,215 240,979 200,703 277,117 Net other operating income 3,067 2,584 9,691 7,563 10,193 Net gains/losses on financial instruments -2,809 7,514 8,087 21,587 9,840 Total net income 86,333 82
Slide 6: Quarterly Profit Trends
QUARTERLY PROFIT TRENDS (NOK 1,000) Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 Net interest income 86,075 79,523 75,381 76,413 72,215 Net other operating income 3,067 3,245 3,041 2,423 2,584 Net gains/losses on financial instruments -2,809 18,306 -7,073 -11,539 7,514 Total net income 86,333 101,073 71,
Slide 7: Historical Trend Net Interest Income
HISTORICAL TREND NET INTEREST INCOME 86 075 79 523 +8,2 % 76 413 +5,5 % 75 381 +5,8 % 72 215 -1,4 % 65 596 +10,1 % 62 892 4,3 % 61 524 +2,2 % 56 623 +8,7 % 53 426 +6,0 % +15,5 % 45 076 46 240 +28,6 % +2,6 35 066 +5,5 % (NOK 1,000) SIDE 7
Slide 8: Change in Net Interest Income
CHANGE IN NET INTEREST INCOME Q3 2015 90.000 +1,822 +4,522 86,075 +1,180 85.000 +10,663 - 390 80.000 -3,937 Q3 2014 75.000 72,215 70.000 (NOK 1,000) 65.000 60.000 55.000 50.000 Lending & Lending & Amortization & Invested Long-term Long-term deposit deposit commission surplus funding funding margin v
Slide 9: Repricing of Loans and Deposits Improves Net Interest Margins
REPRICING OF LOANS AND DEPOSITS IMPROVES NET INTEREST MARGINS 6.0 % Q3 2015 Net interest margin between deposits and loans 4.0 % increased by 0.79 percentage points over the last Q3 2014 12 months due to: 2.0 % 0.0 % • Reduced interest rates on deposits • Lower credit spreads on renewals of fixed-ra
Slide 10: Historical Trend Margins
HISTORICAL TREND MARGINS Margins over 3 month NIBOR 5.54% 5.60% 5.55% 5.11% 5.15% 5.41% Lending margin 4.91% 4.98% 4.68% 4.71% 4.33% 4.25% 5.02% Net margin 3.97% 4.93% 3.73% 4.75% 3.58% 4.57% 4.12% 4.20% 3.85% 3.65% 3.17% 3.31% 2.82% 2.82% 2.61% 2.48% 2.40% -0.49% -0.53% Deposit margin -0.97% -0.99%
Slide 11: Historical Trend Cost/Income
HISTORICAL TREND COST/INCOME Cost/income ratio 25.8 % The bank has previously allocated the cost of profit sharing with employees entirely in the 2.1 % fourth quarter. 4.1 % As of 2015 this provision will be made throughout 3.6 % the year. 21.5 % 23.6 % 23.1 % NOK 3.5 million was allocated for the t
Slide 12: Assets
ASSETS (NOK 1,000) 30.09.2015 30.06.2015 31.03.2015 31.12.2014 30.09.2014 Cash and deposits with central banks 228,269 544,153 60,688 215,522 50,366 Lending to and deposits with credit institutions 298,562 292,912 406,934 232,981 617,748 Net lending to customers 7,486,810 7,569,250 6,842,504 7,206,8
Slide 13: Liabilities and Equity
LIABILITIES AND EQUITY (NOK 1,000) 30.09.2015 30.06.2015 31.03.2015 31.12.2014 30.09.2014 Deposits from credit institutions 169 14,629 169 1,577 153 Deposits from customers 6,430,768 6,857,044 6,702,173 7,347,522 7,038,601 Senior securities issued 2,713,614 2,635,457 2,378,942 2,351,022 2,412,371 Fi
Slide 14: Historical Trend Loans and Deposits
HISTORICAL TREND LOANS AND DEPOSITS 7 347 7 596 7 348 7 487 7 171 7 162 7 246 7 046 6 843 6 797 6 867 6 734 7 207 6 857 7 039 6 902 6 702 6 066 6 431 5 699 6 308 6 242 5 589 6 110 5 473 5 861 5 894 5 234 5 115 5 505 4 832 5 450 5 423 5 371 Deposit-to-loan ratio target approx. 4 460 80% by year end.
Slide 15: Key Stock Ratios
KEY STOCK RATIOS 3.63 1.1-30.09 Earning per share (NOK) 3.34 (NOK) 2015 2014 2013 2012 Earnings per share after tax 3.34 3.63 2.59 1.59 2.59 Dividend per share 0.00 0.60 0.60 0.60 Dividend Payout ratio 0.0% 16.8% 23.2% 37.7% 1.59 Dividend yield 0.0% 2.4% 3.1% 4.2% Book equity per share 27.45 24.66 2
Slide 16: Largest Shareholders 30.9.2015
LARGEST SHAREHOLDERS 30.9.2015 Name Holding Share Pareto AS 6,375,000 15.00% • A total of 340 shareholders. Societe Generale SS (nom.) 3,700,000 8.71% Perestroika AS 3,581,400 8.43% • Top level managers in the Pareto group Indigo Invest AS 3,328,000 7.83% own 968,550 shares or 2.28% of the bank Geve
Slide 17: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPTIAL 4 AMBITIONS FOR 2015 SIDE 17
Slide 18: A Project Bank
A PROJECT BANK BUSINESS AREA PROJECTS/CREDITS PRINCIPAL Financing of residential lots Real estate MNOK 25-50 and housing development financing Corporate M&A finance and securities Working capital facilities MNOK 30/MNOK 5 financing Bridging finance Securities finance Shipping & offshore Financing sh
Slide 19: Portfolio Composition pr. 30.9.2015
PORTFOLIO COMPOSITION PR. 30.9.2015 Total credit exposure NOK 9,693 million 1. Real estate financing focused on residential property construction in the Oslo region Property MNOK 1 452 MNOK 5 100 2. A full scale provider of securities 15.0 % Mortgages/credit 52.6 % financing including investment ser
Slide 20: A Strong Market Position within Residential Property Construction in the Oslo Region
A STRONG MARKET POSITION WITHIN RESIDENTIAL PROPERTY CONSTRUCTION IN THE OSLO REGION • Primarily financing of regulated lots with a Credit exposure NOK 5,445 million potential for property development 5.7 % • Financing construction of flats or housing 7.3 % Residential property Lots • A typical proj
Slide 21: Terms of Real Estate Financing
TERMS OF REAL ESTATE FINANCING FINANCING OF RESIDENTIAL DEVELOPMENT • The bank requires on average 20% to 40% equity to finance a property lot purchase. • Primarily financing of regulated lots purchased for development with a clear exit strategy. • The developer must demonstrate the ability to succe
Slide 22: A Full Scale Provider of Securities Financing
A FULL SCALE PROVIDER OF SECURITIES FINANCING STANDARD PRODUCTS • Financing of stocks on Oslo Stock Exchange with a LTV/leverage of 0% to 80% • Financing of short trades on Oslo Stock Exchange • Financing of high yield bonds mainly arranged by Pareto Securities with a LTV/leverage of around 50% • Fi
Slide 23: Building a Well-Diversified Portfolio in Shipping and Offshore
BUILDING A WELL-DIVERSIFIED PORTFOLIO IN SHIPPING AND OFFSHORE Credit exposure NOK 1,452 million • 23 loans financing a total of 34 vessels 3.3 % 5.4 % FPSO • Pareto Bank is the direct lender in all but 3 loans. These 9.2 % are syndicates or club deals 6.5 % AHTS PSV 7.2 % • 23 loans with 1st priori
Slide 24: Terms of Shipping & Offshore Financing
TERMS OF SHIPPING & OFFSHORE FINANCING • Our clients are long-term owners with extensive experience and expertise in operations and maintenance. They normally have Norwegian ownership or management. • The client should be a high quality charterer with transparent books and a diversified cash flow. •
Slide 25: More on the Shipping & Offshore Portfolio
MORE ON THE SHIPPING & OFFSHORE PORTFOLIO • The number of engagements is currently relatively modest, and all commitments are followed up individually in lieu of an aggregated stress test. Each engagement is assessed by "loan-to-value" and "minimum cash". • The bank uses expertise from partners rega
Slide 26: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION (NOK million) Credit exposure 30.09.2015 30.09.2014 31.12.2014 None/very low risk 4,659 4,685 4,448 None/very Low risk low risk 3,341 3,303 3,371 Low risk 47.9 % Moderate risk 1,431 923 871 36.9 % Some risk 215 305 296 High risk 49 48 0 Impaired Very high risk 3 23
Slide 27: Historical Trend Losses and Write-downs
HISTORICAL TREND LOSSES AND WRITE-DOWNS Group write-downs Individual write-downs Annual write- Accumulated % of gross Annual write- % of gross (NOK million) (NOK million) downs write-downs lending downs lending 2008 0.0 0.0 0.00% 2008 0.0 0.00% 2009 0.0 0.0 0.00% 2009 0.0 0.00% 2010 0.0 0.0 0.00% 20
Slide 28: Net Non-Performing and Impaired Loans and Guarantees
NET NON-PERFORMING AND IMPAIRED LOANS AND GUARANTEES Percentage of gross lending 200.0 3.00% 2.09% 180.0 2.00% 160.0 0.55% 0.57% 0.37% 0.47% 1.00% 0.26% 0.27% 0.13% 0.00% 0.07% 0.07% 140.0 NOK million 0.00% 120.0 114.4 -1.00% 100.0 -2.00% 80.0 -3.00% 60.0 42.5 37.0 34.3 -4.00% 40.0 26.9 18.4 18.4 20
Slide 29: Commitments by Size
COMMITMENTS BY SIZE Credit exposure (NOK million) 30.09.2015 30.09.2014 31.12.2014 > 100 1,720 1,128 1,101 > 75 < 100 1,433 1,180 1,031 > 50 < 75 1,642 1,605 1,875 > 25 < 50 2,149 2,569 2,090 > 10 < 20 1,443 1,482 1,576 > 5 < 10 763 760 751 <5 547 561 566 Accrued interest and amortisation (4) 2 (3)
Slide 30: Total Credit Exposure
TOTAL CREDIT EXPOSURE Undrawn Total credit exposure (NOK million) Lending Guarantees credit lines 30.09.2015 30.09.2014 31.12.2014 Real estate financing long-term 1,542.7 112.8 82.6 1,738.0 2,144.2 1,520.4 Real estate project financing 2,576.9 250.2 534.8 3,361.9 3,364.9 3,531.6 Securities financing
Slide 31: Interest Margin by Segment
INTEREST MARGIN BY SEGMENT Credit Unused Interest Segment (NOK million) No. of clients exposure Lending guarantees contribution Interest margin Securities financing 353 1,900.4 860.7 1 039.7 35.3 4.10% Corporate financing 28 895.9 779.2 116.6 36.6 4.70% Real estate project financing 212 5,099.9 4,11
Slide 32: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPITAL 4 AMBITIONS FOR 2015 SIDE 32
Slide 33: Funding Sources
FUNDING SOURCES Funding sources 10,870 MNOK Deposits with Deposits 34% liquidity restrictions 6,431 Corporate deposits 69% Senior debt 2,714 Deposit-to-loan ratio 85% Long-term FSA liquidity ratio 130% Other debt 249 Subordinated 169% debt LCR Core capital 309 1,167 SIDE 33
Slide 34: Customer Deposits
CUSTOMER DEPOSITS Deposit allocation Fixed rate deposits – time to maturity >25 mths. Depositors 3 323 1 984 15 - 25 mths. 8 - 14 mths. NOK million 2 015 4 411 5 - 7 mths. 0% 20% 40% 60% 80% 100% 3 - 4 mths. Retail Corporate 0 500 NOK mill. Deposits by size Average deposit per customer (NOK) > 20 mi
Slide 35: Market Funding
MARKET FUNDING 1.000 180 879 900 160 800 743 140 700 120 PARB 5Y 600 100 500 80 PARB 3Y 420 400 364 310 60 291 Medium savings bank 300 40 BBB+ 3Y 200 20 100 0 - 2015 2016 2017 2018 2019 >2019 Market funding maturity profile (NOK million) Credit spreads Pareto Bank has issued 1 short time paper, 6 se
Slide 36: Surplus Liquidity
SURPLUS LIQUIDITY 4.000 Drawing 3.500 facility Investments 3.000 Financials & unrated Government Covered 2.500 covered & PSEs bonds 29% 51% Level 2 assets 2.000 Liquidity portfolio Drawdown on credits Investment 1.500 Level 1 portfolio covered 0.1 % Senior 1.000 financials Buffer for loss of deposit
Slide 37: Financial Strength and Capital Targets
FINACIAL STRENGTH AND CAPITAL TARGETS End of June 2016, the countercyclical capital buffer 16.8 % 16.0 % requirement increases by 0.5 percentage points to 1.5 1.8 % 15.0 % per cent. 2.0 % 14.5 % 1.9 % 2.0 % 1.5 % 2.0 % According to a new circular from the Norwegian FSA, the 1.5 % 1.5 % new pillar 2
Slide 38: Financial Statement, Lending and Credit Risk, Funding and Capital, Ambitions
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND CAPITAL 4 AMBITIONS FOR 2015 SIDE 38
Slide 39: Strengthening Core Capital
STRENGTHENING CORE CAPITAL In 2016, the countercyclical capital buffer requirement will be Core capital Core capital (MNOK) ratio ROE increased by 0.5 percentage points to 1.5 per cent. 30.09.2015 1,108.9 13.17% 17.1% According to a new circular from the Norwegian FSA, the new pillar 2 31.12.2014 99
Slide 40: Reassessing Capital Targets
REASSESSING CAPITAL TARGETS Conservation buffer, Pillar 1 4.5 % CET1 2.5% + Buffer requirements 7.0 % Systemic risk = Sum Pillar 1 11.5 % buffer, CET1 3% + Pillar 2 x.x % Countercyclical = Sum Pillar 2 xx.x % buffer, CET1 1.5% Pillar 2, CET1 3% The CET1 target of 12.5 percent will be reassessed as a
Slide 41: Long Term Financial Ambitions
LONG TERM FINANCIAL AMBITIONS Return on equity after tax > 15 percent Increased dividends 2015: Net lending growth of MNOK 800 Stable credit spreads and improved deposit margins Moderate cost increase as a result of increasing the size of the real estate and shipping teams The bank's capital t
Slide 42: Status Growth Ambitions for 2015
STATUS GROWTH AMBITIONS FOR 2015 BUSINESS AREA COMPETITORS CUSTOMERS MARKET GROWTH TARGETS STATUS Still good deal flow, Real estate but a high natural Net growth REAL ESTATE DNB, Nordea, developers rate of redemptions approx. NOK 200 MNOK -114 FINANCING Handelsbanken. and property of building loans.
Slide 43: SIDE 43
(Pareto bank