Kvika Banki Hf · OMXICE:KVIKA
Kvika Banki Hf — Q1 2023 Earnings Presentation
30 slides from Kvika Banki Hf's earnings presentation, May 11, 2023
Slide 1: Kvika banki hf. 3M 2023 Financial Results
Kvika banki hf. 3M 2023 Financial Results 11 May 2023
Slide 2: Profit before tax for 3M 2023 ISK 1,412 million with RoTE 13.1%
Profit before tax (PBT) for 3M 2023 ISK 1,412 million with RoTE 13.1% driven by strong core income Profit after tax for 3M 2023 ISK 1,167 million Strong financial position with consolidated solvency of 1.34 and LCR of 327% Well above regulatory requirements, NSFR of 144% at 31.3.2023 Total deposit g
Slide 3: Corporate lending reallocated to Corporate Banking & Capital Markets segment
On 1 January 2023 corporate lending activities were reallocated from the Commercial Banking segment to the Investment Banking segment, consequently, re- named Corporate Banking & Capital Markets. The changes are made to support a sharper focus in both segments, enabling Commercial Banking to provide
Slide 4: Core beliefs, purpose, vision and values
Core beliefs Purpose Increase competition and simplify customers’ finances Utilize infrastructure, financial strength and relatively small market share in many areas Long-term customer journeys Vision Transformed financial services in Iceland guided by mutual benefits Focusing on opportunities other
Slide 5: Kvika is an umbrella and multi-brand house for brands that are heroes
Back office & support Corporate Finance & Capital Markets Kvika is an umbrella and Commercial multi-brand house Banking for brands that are heroes in what they do and disrupt on all fronts Parent company 5
Slide 6: Kvika's new payment facilitator fintech, Straumur, has gone live
Kvika’s new payment facilitator Launch of new Aur awaiting go fintech, Straumur, has gone live live approval from Apple Pay and processed it’s first transactions in early May New banking, insurance and social finance features have been Developed from scratch in just a rigorously tested and are ready
Slide 7: Profit before tax and diversified income across categories
Profit before tax (PBT) Diversified income across categories • Net operating income amounted to ISK 5,212 PBT development / ISK m. Net operating income by type / ISK m. million in Q1, a 5.4% increase from Q1 2022 ’22 ‘23 5,212 despite net financial income not fully rebounding, 1,841 4,943 218 reflec
Slide 8: Healthy loan book growth in Q1, especially strong growth in Lykill vehicle financing
› Healthy loan book growth in Q1, › Loan book growth of 15% in Q1, › Combined ratio of 99.7%, a decrease › Assets under management grew by ISK › Loan book contracted slightly as especially strong growth in Lykill proportion of property backed loans from 101% in 3M 2022 5 billion since year end 2022
Slide 9: Net interest income (NII)
Net interest income (NII) Segment split • Net interest income grows significantly year-on- ISK m. 3M 2023 / (%) year mainly due to loan book growth and rising 6.8% ‘22 ‘23 Insurance 11.9% interest rates which increase the group’s interest 2,255 2,338 Asset Management income from fixed income securit
Slide 10: Net fee and commission income (NFC)
Net fee and commission income (NFC) Segment split • Net fee and commission income continues to ISK m. 3M 2023 / (%) provide a stable revenue stream with its strong ‘22 ‘23 2.1% recurring fee base TM Insurance 6.8% 1,642 1,588 1,576 1,686 Asset Management • NFC lower YoY mainly due to lower performan
Slide 11: Net insurance service income, combined ratio and claims composition
Net insurance service income (NIS) Combined ratio • Continued strong performance of insurance ISK m. (%) operations with a combined ratio of 99.7% for Q1 ‘22* ‘23 Major claims ratio Claims ratio Expense ratio Reinsurance ratio • Claims and reinsurance ratios stable between 1,360 101.0 99.9 99.7 quar
Slide 12: Net financial income (NFI)
Net financial income (NFI) Segment split • Financial income continues to rebound despite ISK m. 3M 2023 / ISK m. continued challenges in the economy ‘22 ‘23 Asset Management Insurance UK • TM’s investment operations return ISK 317 million in 808 Commercial Banking Corporate Banking & CM financial in
Slide 13: Core income and core income cover
• Core income is defined as net operating income excluding net financial Core income cover income, which is the revenue stream most affected by external market (%) circumstances Core income to PPA adjusted OPEX → Kvika receives NFI as a result of its banking and insurance operations, both of 188% wh
Slide 14: Total consolidated operating expenses
Total consolidated operating expenses Operating expenses • Operating expenses increase YoY mainly due to ISK m. 3M 2023 / (%) increased salary expenses, attributable to collective ’22 23 Non-cash PPA amortisation Salaries and related exp. bargaining and retroactive wage increases, allocation 8.7% Ot
Slide 15: Income statement and pre-tax profit bridge
Income statement ISK m. 3M 2023 3M 2022* Pre-tax profit (loss) bridge Net interest income 2,255 1,571 3M 2022 to 3M 2023 / ISK m. Net fees and commissions 250 1,588 1,642 Net insurance service income* 684 1,002 752 Net financial income (55) 218 808 Income from associates - - 0 (589) Other income (21
Slide 16: Assets and cash and financial instruments
Assets Cash and financial instruments • Modest ISK 12.8 billion increase in assets since 31.3.23 / ISK billions 31.3.23 / ISK billions year-end 2022 Liquid assets ISK 120 billion • Loan book increases by ISK 2.7 billion since year- Cash and balances with Central Bank Intangible assets 36.4 Cash and
Slide 17: Loan book by category: vehicles, commercial vehicles, real estate, development
Vehicles Commercial vehicles Real estate Real estate development and equipment • Car dealers are the primary source of loan • Mostly to legal entities backed by residential and • Construction level from land to fully equipped property applications • Collateralized by commercial vehicles or various c
Slide 18: Loans to customers risk stage allocation and impairment loss allowance
Loans to customers risk stage allocation Impairment loss allowance • Stage 3 loans continue to decrease between Net loan book / (%) ISK billions quarters, now 2.2% of the net loan book, down from 4.0% post Ortus acquisition at 31.3.2022 FVTPL Stage 2 Stage 1 Stage 3 → Large stage 3 position in the U
Slide 19: Liquidity coverage ratio, NSFR and HQLA
Liquidity coverage ratio (LCR) Net stable funding ratio (NSFR) • HQLA assets ISK 76 billion excluding mandatory 31.3.2023 / ISK billions 31.3.2023 / ISK billions reserves and collateral to the Central Bank • Liquidity coverage ratio is strong at 327%, where High quality liquid assets 76 Available st
Slide 20: Liabilities and equity, maturity of deposits, loans to deposits
Liabilities and equity Maturity of deposits • Liabilities increase by ISK 14 billion since year- ISK billions 31.03.23 / (%) end 2022, driven by unsettled transactions and Debt issuance Other On demand 5.2% growth in deposits Borrowings Equity 1-3 months 3.4% Subordinated liabilities 3-12 months 11.
Slide 21: Development of market funding and rating
Development of market funding Issue currency • Kvika has been an active issuer in Iceland since ISK billions 31.3.23 / ISK billions 2015 and in 2021 established an EMTN 75 2 70 70 programme and obtained a credit rating from 2 65 3 65 12 ISK 14 2 16 2 18.9% Moody’s Investors Service 17 15 14 EUR 3 13
Slide 22: Capital adequacy and solvency
Capital adequacy is calculated on a consolidated level as the solvency ratio of the financial conglomerate • Kvika has a group solvency of 1.34 and a CAR of while a consolidated capital adequacy ratio (CAR) is calculated for entities not belonging to the insurance 23.6% at the end of March 2023 sect
Slide 23: PBT outlook for the next four quarters
At the end of each quarter the group revises key assumptions for the next four quarters and updates • PBT Outlook for the next four quarters, Q2 2023 – previously reported outlook as required, maintaining a running four quarter guidance at each time. Q1 2024, updated to ISK 9,365 million from ISK 9,
Slide 24: Key Takeaways
Key Takeaways Diverse income streams form strong core operations S> _ Five operating segments continue to provide a highly diverse source of income for the group and core revenue remains strong >> Investment in infrastructure to support growth through both new and existing products and services S> S
Slide 25: Appendix
Appendix Additional information
Slide 26: Investment asset income and insurance investment assets
Investment asset income Insurance investment assets* • Return on investment assets in Q1 2023 of 1.8% ISK m. 31.3.2023 / ISK m. with positive returns in all asset classes apart from 972 real estate 607 Cash and term deposits 3,067 • Cash and liquidity funds amount to ISK 3.1 billion at the end of Ma
Slide 27: Impact on Consolidated Financial Statements (IFRS 17)
IFRS 17: Insurance Contracts came into effect on 1 January 2023, changing the financial reporting of insurance companies. For Kvika, this means that the Q1 2023 quarterly report is prepared in accordance with IFRS 17 and comparative figures are restated accordingly. The goal of IFRS 17 is to ensure
Slide 28: Latest outlook to actual, excluding NFI
Latest outlook to actual, excluding NFI Development • All segments forecast operating income and operating expenses separately, which are consolidated into a group budget • An exemption to the budgeting process is the forecast of net financial income, which is based on assumptions of an estimated re
Slide 29: Disclaimer
This presentation and the information contained therein has been prepared by Kvika banki hf. on a best knowledge basis. Any statements or assumptions are set forth by Kvika alone and not by any third party. Forward looking statements may deviate from what is presented in this presentation, e.g. due
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