Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2021 Earnings Presentation
46 slides from Pareto Bank Asa's earnings presentation, 2022
Slide 1: Financial Results – Fourth Quarter 2021
PARETO BANK Financial Results – Fourth Quarter 2021
Slide 2: Highlights
Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: Delivering on Financial Ambitions in 2021
DELIVERING ON FINANCIAL AMBITIONS IN 2021 Profit after tax (NOKm) Profitibility and dividend in line with ambitions 504.5 • Record high profit after tax for 2021 of NOK 504.5m (NOK 428.4m in 2020). 428.4 397.6 330.8 • Earnings per share NOK 7.09 (NOK 5.99). 312.6 247.3 • Return on equity after tax a
Slide 4: Dividend for 2021
DIVIDEND FOR 2021 Proposed dividend of NOK 3.50 per share 4.00 60.0 % 3.50 50.1 % 49.4% 50.0 % 3.00 40.0 % 2.50 35.9 % 2.00 30.3 % 30.0 % 3.50 1.50 3.00 20.0 % 1.00 2.00 1.60 12.6 % 10.0 % 0.50 0.70 0.00 0.0 % 2017 2018 2019 2020 2021 Dividend per Share (NOK) Payout Ratio 4
Slide 5: Fourth Quarter 2021 Highlights
FOURTH QUARTER 2021 Highlights • Profit after tax NOK 126.0m (NOK 126.5m). • Return on equity after tax 13.5 % (14.8 %). • Net interest income NOK 214.5m (NOK 191.0m). • Excellent cost efficiency. Cost/income ratio at 18.4 % (20.0 %). • Strong activity led to lending growth of NOK 617.7m to NOK 15,8
Slide 6: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 14.8 % 13.8 % 13.5 % 16.8 % 126.5 127.8 126.0 16.0 % 15.9 % Q4-20 Q3-21 Q4-21 Q4-20 Q3-21 Q4-21 31.12.2020 30.09.2021 31.12.2021 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 210.3 214.5 191.0 0.04% 0.07% 20.0% 18.7% 18.4
Slide 7: Financials
Highlights Financials Business Areas Outlook & Ambitions 7
Slide 8: Income Statement
INCOME STATEMENT P&L (NOKm) Q4-21 Q4-20 2021 2020 Best net interest income ever for a single quarter. Net interest income 214.5 191.0 838.3 746.9 Lending grew by NOK 618m in Q4-21 (NOK 787m), largely Net other operating income 3.0 13.7 12.3 7.6 in the end of the quarter. Total net income 217.6 204.6
Slide 9: Net Interest Margin
NET INTEREST MARGIN Comments • Increase in market rates 6.37% 6.17% 6.32% has put pressure on lending 6.03% 5.94% 5.62% 5.79% 5.59% 5.85% 5.91% 5.66% 5.76% margin and lifted deposit 5.53% 5.41% 5.48% 5.22% 5.22% 5.58% margin. • Fee income NOK 44.8m (NOK 38.9m) in Q4-21. • Increase in lending rates i
Slide 10: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 0.6 Q4-21 7.1 0.2 2.0 214.5 Q3-21 2.5 0.5 210.3 3.9 3.7 2020 180.0 Market Market Lending Lending Fee Deposit Deposit funding funding Other * volume rate income volume rate volume rate 10 *) Other net interest income includes return on surplus liquidity
Slide 11: Impairments by Stage
IMPAIRMENTS BY STAGE Credit exposure by IFRS9 stage (NOKm) Impairments and losses by stage (NOKm) Stage 3 NOK 303m 99.7 (+167m) 303 0.7 88.7 911 Stage 2 39.7 NOK 911m (-401m) 36.3 Write-offs Stage 3 12.2 Stage 2 10.0 Stage 1 17,958 Stage 1 NOK 17,958m (+643m 47.2 42.4 change from Q3-21) 31.12.2021 3
Slide 12: Credit Quality
CREDIT QUALITY Historical impairments and losses (NOKm) 40.3 11.1 9.1 6.2 5.8 6.7 4.7 - (1.5) (3.4) Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 12
Slide 13: Profitability Protects Against Losses
PROFITABILITY PROTECTS AGAINST LOSSES Loss absorbing capacity • Profitability remains strong, and is the first line of defence against losses. 4.5 % 4.3 % • Profits can absorb losses of up to 4.3 % of gross lending. 4.2 % 4.1 % 4.1 % 3.8 % • Loss ratio has largely been less than 0.3 % during the pas
Slide 14: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS Core Equity Tier 1 Ratio (CET1) • Expecting an updated pilar 2 requirement from the Norwegian FSA in the first half of 2022. • The Board of Directors will set a CET1 target when the pilar 17.3 % 2 requirement has been determined. 16.8 % 16.8 % 16.6 % 16.0 % 15.9 % C
Slide 15: Expected Changes to CET1 Requirement
EXPECTED CHANGES TO CET1 REQUIREMENT Assuming unchanged Pilar 2 requirement 17.7 % 17.2 % 0.5 % 0.5 % 14.7 % Increase in Expected countercyclical increase in 0.5 % capital buffer by countercyclical 0,5 pp as of capital buffer by 30.06.22. 9.0 % 0,5 pp during 9.5 % 2023. 6.5 % Increase in systemic ri
Slide 16: Business Areas: Focus on Ship Financing
Highlights Financials Business Areas: Focus on Ship Financing Outlook & Ambitions 16
Slide 17: A Niche Player Financing Medium Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM SIZED ENTERPRISES Business Areas Focus Credits / Customers Exposure Sweet spot The specialized real estate Land acquisition financing developer bank for Eastern Property construction REAL Norway and larger facilities NOKm 50 - 100 ESTATE Norwegian cities. Commercial p
Slide 18: Exposure per Business Area
EXPOSURE PER BUSINESS AREA (NOKm) 8,160 7,910 7,668 7,323 7,356 5,314 5,285 4,921 5,076 4,856 4,732 4,589 4,494 4,318 4,522 1,389 1,431 1,068 1,113 1,090 Residential property Commercial property Corporate Shipping Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 18
Slide 19: Shipping
SHIPPING Development in exposure (NOKm) 1600 • Annual growth of 20 % since the end of 2018. 1400 • Pareto Bank is well positioned in its target market: small and medium-sized shipowners and the Norwegian project 1200 market. 1000 • Competitive advantage: an efficient credit process, short decision l
Slide 20: Shipping
SHIPPING Credit update Exposure (NOKm) Total NOK 1,431m • 20 customers* and 37 vessels. • Largest exposure USD 36.4m and average commitment size Container 470 LTV 19 % USD 8.1m. LTV 47 % • Corporate loans make up 42 % of the exposure, the remaining Product 273 58 % are loans to investment projects.
Slide 21: Shipping
SHIPPING Credit policy • Focus on Norwegian shipowners, family offices and project finance brokers. • Shipping is cyclical, and an in-depth understanding of relevant market drivers and risk factors is crucial. Customer competence and track record are also important factors to consider. • Loan-to-val
Slide 22: Shipping
SHIPPING Niche bank & niche segment Oslo Bulk has been a customer of Pareto Bank since the bank started up ship financing in 2012. Today, Pareto Bank is one of the shipping company’s main banks. "Pareto Bank’s understanding of the MPP shipping segment has been of great value to Oslo Bulk. In a speci
Slide 23: Corporate
CORPORATE Diversified exposure Total NOK 5,076m Credit update Total NOK 5,076m • 91 consolidated corporate customers with average • Credit quality is in general good. commitment of NOK 51.7m. • A few customers hit by new Covid-19 restrictions. • 12 consolidated securities financing customers with av
Slide 24: Residential Property
RESIDENTIAL PROPERTY Credit update Residential property exposure (NOKm) Total NOK 7,668m • 157 customers with average commitment of NOK 49m. • 33 % residential exposure in Oslo and 47 % in Viken. Land without houses 1,212 • Stable credit quality. Land with houses 1,367 Building facilities 5,089 24
Slide 25: Commercial Property
COMMERCIAL PROPERTY Credit update Commercial property exposure (NOKm) Total NOK 4,856m • 98 customers with average commitment of NOK 50m. • 33 % commercial property exposure in Oslo and 26 % in Viken. • 78 % of commercial property exposure is long-term cash-flow Commercial based, while the remainder
Slide 26: Outlook & Ambitions
Highlights Financials Business Areas Outlook & Ambitions 26
Slide 27: Market Outlook: Shipping
MARKET OUTLOOK Shipping • Exceptional high container rates are expected to continue in 2022 due to high freight demand and congestion. Newbuild deliveries expected to accelerate significantly long term and reduce fleet utilization and rates. • Dry bulk fleet utilization is expected to gradually pick
Slide 28: Market Outlook: Corporate
MARKET OUTLOOK Corporate • Economic growth to continue in 2022 due to the reopening, but at a lower pace than in 2021. • Rising inflation is a general concern as corporate margins and profitability may come under pressure. • The growth potential is good as Pareto Bank has a small share of a large co
Slide 29: Market Outlook: Real Estate
MARKET OUTLOOK Real estate Residential property • Increase in interest rates, stable supply of new housing and low population growth will lead to moderate growth in residential property prices in 2022. • The Oslo market may be hit harder by higher interest rates than other cities due to the high pri
Slide 30: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term Actual ambition 2021 Profitability in line with ambition in 2021. RETURN ON 14.0 % 14.0 % The bank maintains its long-term ambition of EQUITY delivering 14 % return on equity after tax to shareholders. The Board has proposed a dividend of NOK 3.50 DIVIDEND 49.4 % per sh
Slide 31: Appendix
APPENDIX (Pareto bank
Slide 32: Largest Shareholders
LARGEST SHAREHOLDERS 31 December 2021 Name Shares % total • The Company has 69,851,730 shares outstanding. One class 1 Pareto AS 13,970,346 20.00% of shares where each share carries one voting right. 2 Société Générale 6,943,049 9.94% • Diversified investor base with 3,201 shareholders. 3 Hjellegjer
Slide 33: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 7.09 51.85 47.76 5.99 43.77 5.55 5.57 39.37 2018 2019 2020 2021 2018 2019 2020 2021 Price / Earnings Price / Book 8.39 1.15 6.93 6.56 6.09 0.86 0.88 0.82 2018 2019 2020 2021 2018 2019 2020 2021 33 Share price NOK 59.50
Slide 34: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q4-21 Q3-21 Q2-21 Q1-21 Q4-20 Net interest income 214.5 210.3 213.3 200.2 191.0 Net other operating income 3.0 5.7 -1.4 4.9 13.7 Total net income 217.6 216.0 212.0 205.1 204.6 Total operating expenses 40.1 40.4 41.0 40.9 40.9 Operating profit before 177.5 175.6
Slide 35: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q4-21 Q3-21 Q2-21 Q1-21 Q4-20 Loans to credit institutions 907 1,766 1,750 273 1,081 Loans to customers 15,805 15,187 15,310 15,089 14,661 Bonds and other securities 3,106 3,014 2,734 3,235 3,612 Shareholdings in associated companies 23 22 22 26 26 Other assets 144
Slide 36: Interest Rate and Fee Income
INTEREST RATE AND FEE INCOME Income from interest rates and fees on lending to customers (NOKm) Comments • Fee income on lending includes arrangement fees and provisions on credit lines. 32.3 32.5 50.4 37.7 44.8 33.8 35.2 38.9 41.8 • Fee income will vary with activity and lending product, and is acc
Slide 37: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding front and back-end fees over 3M NOKm, estimated interest contribution including commissions, excluding front and back-end fees over 3M Nib
Slide 38: Number of Customers
NUMBER OF CUSTOMERS Per business area Real Estate 255 Corporate 158 Shipping 35 Retail 9 (Mortgages) 38
Slide 39: Real Estate Exposure
REAL ESTATE EXPOSURE Geographical residential property exposure Total NOK 8,725m* Geographical commercial property exposure Total NOK 3,799m* 3% 2% 5% 3% 3% 3% 11% 9% 33% Viken Oslo Oslo Viken 46% Vestfold og Telemark Vestfold & Telemark 11% Vestland Vestland Trøndelag Sweden Other Rogaland Sweden O
Slide 40: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 9,948 Percent customer deposits of net lending to customers Senior debt 5,645 74.0 % T1 & T2 debt 489 64.9 % 64.6 % 64.8 % 65.1 % 65.5 % Other debt 313 4,956 5,645 5,645 60.1 % 4,935 4,770 6,038 5,192 Equity capital 3,708 Key ratios Deposi
Slide 41: Customer Deposits
CUSTOMER DEPOSITS Deposits by product (NOKm) Deposits by size (NOKm) 603 Floating rate retail > NOK 20m 3,079 527 3,606 679 3,459 Floating rate corporate 3,747 NOK 10 - 20m 733 124 856 1,850 Savings with restrictions 2,440 NOK 5 - 10m 794 79 872 2,916 Fixed rate 1,937 NOK 2 - 5m 1,493 579 2,071 613
Slide 42: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 73 200 150 51 37 1,629 1,650 1,500 24 17 18 120 750 500 3M 6M 12M 2Y 3Y 5Y 2022 2023 2024 2025 2026 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordinated Capital 42 *)
Slide 43: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Market value of bonds and funds comprising surplus liquidity. • Liquidity is comprised of cash and highly liquid 35% bonds. • High share of government Government & PSEs & PSEs to reduce credit Covered bonds spread risk and increase short-term liquidity. 65
Slide 44: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,208 None / very low risk 62% 7,347 61% 59% 57% 10,819 52% Low risk 9,935 1,040 38% Moderate risk 36% 1,566 34% 32% 31% 222 Some risk 158 35 High risk 137 8% 6% 6% 6% 5% 18 Very high risk 29 Q4-20 Q1-21 Q2-
Slide 45: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 616 2% < 10 13% 476 4,939 10 - 50 5,107 26% 7% 5,247 50 - 100 < 10 5,181 10 - 50 2,845 50 - 100 100 - 150 8% 3,236 100 - 150 150 - 200 1,869 150 - 200 200 - 250 1,409 > 250 882 200 - 250 1,109 16% 1,94
Slide 46: ( Pareto bank
( Pareto bank