Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2024 Earnings Presentation
40 slides from Pareto Bank Asa's earnings presentation, Jul 19, 2024
Slide 1: Financial Results – Second Quarter 2024
PARETO BANK Financial Results – Second Quarter 2024
Slide 2: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 2
Slide 3: Second Quarter 2024 Highlights
SECOND QUARTER 2024 Highlights • Profit after tax NOK 178.2m (NOK 154.4m in Q2-23). • Return on equity after tax 14.2 % (14.8 %). • Steady net interest income of NOK 303.0m (NOK 271.5m). • Activity picked up at the end of the quarter. Improved activity in residential development and good deal flow i
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 176.1 178.2 18.2 % 17.9 % 154.4 14.8 % 14.3 % 14.2 % 17.2 % Q2-23 Q1-24 Q2-24 Q2-23 Q1-24 Q2-24 30.06.2023 31.03.2024 30.06.2024 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 299.8 303.0 271.5 19.3% 18.4% 17.8% 0.14% 0.07
Slide 5: Financials
Highlights Financials Business Area Update & Outlook 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q2-24 Q2-23 H1-24 H1-23 Marginal increase in lending margin. Net interest income 303.0 271.5 602.8 534.0 Stable average lending volume. Volume picked up Net other operating income 12.5 -5.4 14.9 -8.4 strongly at the end of the quarter. Total net income 315.5 266.1 617.7 5
Slide 7: Change in Quarterly Net Interest Income
CHANGE IN QUARTERLY NET INTEREST INCOME (NOKm) 7.4 0.0 Q2-24 Q1-24 1.0 3.7 1.9 303.0 299.8 5.9 0 4.9 220.0 Lending Lending Fee Surplus liquidity Deposit Deposit Market Interest volume rate income and other * volume rate funding days 7 *) Other net interest income includes fee paid to Norwegian Banks
Slide 8: Interest Margins
INTEREST MARGINS Lending and deposit margin Net interest margin 6.1 % 6.2 % 6.3 % 6.2 % 6.2 % 5.7 % 4.6 % 4.6 % 4.6 % 5.5 % 5.5 % 5.2 % 4.5 % 4.5 % 5.1 % 1.1 % 0.9 % 0.8 % 0.7 % 0.6 % Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 Lending margin Deposit margin Combined lending and depos
Slide 9: Quarterly Change in Impairments
QUARTERLY CHANGE IN IMPAIRMENTS Impairments (NOKm) Impairments (NOKm) Q2-24 Q1-24 Stage 1 -3.0 8.3 42.1 Stage 2 0.1 -8.7 Stage 3 26.7 15.7 Write-offs 2.2 0 30.3 Total impairments 26.0 15.3 26.0 • Reduction of model-based impairments by NOK 2.9m came primarily from adjustments in macroeconomic scenar
Slide 10: Changes in Stage 2 & 3
CHANGES IN STAGE 2 & 3 Stage 2 Stage 3 • Commitments on watch list, under forbearance or where there has • Commitments which are more than 90 days past due, where the otherwise been a material increase in risk. debtor is considered unlikely to pay, or where there is objective evidence of a future lo
Slide 11: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS • Long-term capital target is a CET1 ratio of at least 16.7 %. • Pareto Bank will hold a buffer above this 17.9 % 17.1 % target. 16.7 % NFSA expectation 16.7 % Minimum • CRR3 is expected to have a moderately requirement 15.7 % positive impact on Pareto Bank's CET1 r
Slide 12: Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 12
Slide 13: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) SHIP FINANCING NOK 1,808m 8% COMMERCIAL RESIDENTIAL FINANCING NOK 3,199m 13% 39% COMMERCIAL PROPERTY RESIDENTIAL PROPERTY FINANCING FINANCING 14% NOK 3,238m NOK 9,237m 27% CORPORATE FINANCING NOK 6,338m 13
Slide 14: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKb) 9.24 8.68 8.34 8.41 8.22 6.34 6.04 6.06 6.07 5.79 3.32 3.24 3.16 3.20 3.08 2.97 3.11 2.56 2.16 2.30 1.68 1.50 1.81 1.38 1.54 Residential property financing Commercial property financing Commercial residential financing Corporate financing Ship financing Q2
Slide 15: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 9,237m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • Equity contribution of minimum 25 % on land financing. Land without houses 2,201 • Thorough analysis of al
Slide 16: Market Outlook: Residential Property
MARKET OUTLOOK Residential property A more positive sentiment in the new-build market. Sales in ongoing projects are gradually picking up, and it is somewhat easier to meet pre-sale requirements. Activity and demand for financing have improved. The interest rate has peaked. Unemployment is low and p
Slide 17: Commercial Residential & Property Financing
COMMERCIAL RESIDENTIAL & PROPERTY FINANCING Credit update Commercial res. & prop. exposure (NOKm) Total NOK 6,436m • Commercial residential includes financing of housing for rent or sale, while commercial property is financing of non- residential commercial property (office, logisitics, retail, etc.
Slide 18: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 3,238m • Financing of cash-flow based commercial property and development. • Equity contribution depending on underlying risk factors and entry point of the market cycle. More conservative credit practice conti
Slide 19: Market Outlook: Commercial Property
MARKET OUTLOOK Commercial property Commercial property prices seem to be stabilizing after a fall in 2023. Nevertheless, price development is uncertain. There is still a gap between sellers' and buyers' price expectations and interest rates remain high. Continued demand and growth in rental income c
Slide 20: Next Step in Sweden
NEXT STEP IN SWEDEN Exposure in Sweden (NOKm) Total NOK 2,151m Solid track record and market rationale • Ten years of experience in financing real estate projects for both Norwegian and Swedish customers in Sweden. Large network of clients and partners established. • Attractive niche of medium-sized
Slide 21: Corporate Financing
CORPORATE FINANCING Exposure (NOKm) Total NOK 6,338m Credit update Total NOK 6,338m • Tailor-made financing solutions to medium-sized enterprises. • Exposure growth of NOK 266m in Q2-24. • Stable credit quality. 4% 21% 16% Real Estate Investment Company Investment Loans 40% IT/Telecommunications Cor
Slide 22: Market Outlook: Corporate
MARKET OUTLOOK Corporate A specialized, customer-driven and experienced team with strong track record makes Pareto Bank an attractive partner for medium-sized businesses. Differences in activity and profitability across industries are met with a selective credit practice. Strong deal flow in Q2-24 i
Slide 23: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,808m • Conservative approach focusing on corporate customers with solid balance sheets, modern high-quality assets and Offshore Subsea 490 LTV 51 % equity contribution of minimum 45 %. Offshore Accommodation 267 LTV 5 %* • Targeted customers a
Slide 24: Market Outlook: Shipping and Offshore
MARKET OUTLOOK Shipping and offshore Healthy outlook for the dry bulk market due to low supply growth. Uncertainty on demand side as Chinese growth and global economic growth soften. Strong tanker markets backed by modest supply growth, continued strong end-user demand and increased trade growth. Th
Slide 25: Total Return
TOTAL RETURN Price Annual Equity Total Return 400 Change Return Pareto 350 206 % 373 % 16,3 % Bank 300 OSEBX 161 % 161 % 9,7 % Index 250 DNB 91 % 223 % 12,0 % 200 150 100 50 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -50 OSEBX DNB PARB 25
Slide 26: Appendix
APPENDIX (Pareto bank
Slide 27: Largest Shareholders
LARGEST SHAREHOLDERS 30 June 2024 Name Shares % Total • The Company has 76,782,423 shares outstanding. One class 1 Pareto AS 15,356,484 20.00 % of shares where each share carries one voting right. 2 Société Générale 6,943,049 9.04 % • Diversified investor base with 3,618 shareholders. 3 AWC AS 4,712
Slide 28: The Share
THE SHARE Earnings per share (NOK) Book value per share (NOK) 2.15 2.15 61.44 2.03 59.67 56.09 Q2-23 Q1-24 Q2-24 Q2-23 Q1-24 Q2-24 28
Slide 29: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q2-24 Q1-24 Q4-23 Q3-23 Q2-23 Net interest income 303.0 299.8 297.3 281.3 271.5 Net other operating income 12.5 2.4 12.1 3.0 -5.4 Total net income 315.5 302.2 309.4 284.3 266.1 Total operating expenses 56.3 55.6 51.1 50.4 51.4 Operating profit before 259.3 246.6
Slide 30: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q2-24 Q1-24 Q4-23 Q3-23 Q2-23 Loans to credit institutions 1,432 1,174 1,651 2,498 2,001 Loans to customers 19,585 18,928 18,518 18,260 18,344 Bonds and other securities 5,331 5,923 5,422 4,245 3,882 Shareholdings in associated companies 22 22 22 23 23 Other assets 213
Slide 31: 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 32: Number of Customers
NUMBER OF CUSTOMERS Per business area Property Financing 283 Corporate Finanicng 156 Ship Financing 14 Retail (Mortgages) 14 32 Non-consolidated.
Slide 33: Real Estate Financing Exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 12,436m* Geographical commercial property exposure Total NOK 3,238m* 10% 9% 4% 5% 6% 35% 40% Oslo 14% Oslo Akershus Sweden Vestfold Vestland 7% Sweden Akershus Østfold Telemark Other Other 18% 32% 20% 33 *) Residenti
Slide 34: Liquidity Buffer
LIQUIDITY BUFFER Low credit and market risk (NOKm) Comments • Cash on hand. 91 • Highly liquid bonds. 1,413 • Low credit risk. • No interest rate or foreign exchange risk. Cash (Norges Bank & DNB) • Access to central bank Bonds issued by government & PSEs facilities and repo market. Covered bonds Se
Slide 35: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 13,004 Percent customer deposits of net lending to customers Senior debt 7,366 65.4 % 66.4 % AT1 & T2 debt 1,250 64.5 % 62.8 % 61.0 % Other debt 381 7,366 7,570 7,756 Equity capital 4,582 7,718 7,877 Key funding and liquidity ratios • Depo
Slide 36: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,835 103 NOK 10 - 20m 1,170 179 325 NOK 5 - 10m 904 275 Floating rate retail 193 NOK 2 - 5m 1,120 1,960 2,685 NOK 0 - 2m 961 2,383 Floating rate corporate 2,989 - 1,000 2,000 3,000 4,000 5,000 Floating rate Fixed rate 3,
Slide 37: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 250 143 575 112 120 120 92 0 300 69 2000 46 1400 1400 1305 30 1000 0 233 3M 6M 12M 2Y 3Y 5Y 2024 2025 2026 2027 2028 2029 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subo
Slide 38: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 7,476 None / very low risk 9,447 53% 53% 52% 50% 47% 11,350 Low risk 11,235 40% 37% 37% 35% 34% 2,153 Moderate risk 2,829 154 Some risk 259 206 12% High risk 10% 10% 11% 9% 3 153 Very high risk 181 Q2-23 Q3-
Slide 39: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 571 2% < 10 546 23% 4,886 21% 10 - 50 5,138 5,434 50 - 100 < 10 5,100 10 - 50 3,793 50 - 100 100 - 150 2,119 100 - 150 9% 150 - 200 2,029 150 - 200 200 - 250 3,399 > 250 2,212 200 - 250 21% 2,192 2,568
Slide 40: Pareto Bank
( Pareto bank