Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2013 Earnings Presentation
40 slides from Pareto Bank Asa's earnings presentation, 2013
Slide 1: Pareto Bank Financial Results First Half 2013
PARETO BANK Financial Results First Half 2013 SIDE 1
Slide 2: Agenda
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND LIQUIDITY 4 OUTLOOK SIDE 2
Slide 3: Second Quarter 2013
SECOND QUARTER 2013 Pre-tax operating profit (MNOK) Profit for the period 41.0 35.7 MNOK 27.0 (MNOK 12.5) 26.6 23.2 26.0 Return on equity (ROE) 12.8% (6.3%) Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Cost/income ratio Post-tax operating profit (MNOK) 27.0 28.8% (37.0%) 21.2 18.7 Common equity Tier 1 ra
Slide 4: Strong profit growth and return on equity in the second quarter of 2013
STRONG PROFIT GROWTH AND RETURN ON EQUITY IN THE SECOND QUARTER OF 2013 STRONG GROWTH IN NET INTEREST INCOME Repricing of property lending and investment credits Repricing of corporate deposits as of May 2013 LOW OPERATING EXPENCES Focus on the utilization of current resources Number of employees/fu
Slide 5: Return on equity and cost/income ratio
RETURN ON EQUITY AND COST/INCOME RATIO Return on equity Cost/income ratio 12.8 % 40.6 % 38.8 % 37.0 % 10.4 % 34.1 % 9.1 % 28.8 % 8.0 % 6.3 % Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 SIDE 5
Slide 6: Repricing of loans and deposits improves net interest margins
REPRICING OF LOANS AND DEPOSITS IMPROVES NET INTEREST MARGINS 6.0 % Q2 2013 4.0 % Q2 2012 2.0 % Net margin between deposits and loans 0.0 % increased by 0.8 percentage points over the last 12 months: -2.0 % Lending margin Deposit margin Net margin • Repricing of real estate and securities loans • Hi
Slide 7: Historical loans and deposits
HISTORICAL LOANS AND DEPOSITS 6,797 7,171 6,734 5,589 6,308 5,861 5,234 5,371 5,505 4,506 3,511 3,435 2,421 2,348 Loans Deposits SIDE 7
Slide 8: Historical net interest income
HISTORICAL NET INTEREST INCOME 53,456 + 15.8 % 46,240 45,076 33,484 35,066 32,945 33,237 25,860 17,319 14,671 SIDE 8
Slide 9: Income statement
INCOME STATEMENT (NOK 1,000) 2nd quarter 2013 2nd quarter 2012 Change NOK Change % Total interest income etc. 124 185 102 448 21 737 21 % Total interest expenses etc. 70 729 69 211 1 518 2% Net interest income 53 456 33 237 20 219 61 % Commissions and fees receivable etc. 2 006 3 413 -1 407 -41 % Co
Slide 10: Change in net interest income
CHANGE IN NET INTEREST INCOME +6,043 Q2-2013 -334 -54 +11,415 53,456 -3,342 -1,207 +7,697 Q2-2012 33,237 Lending & Lending & Amortization Invested Subordinated Long-term Fee to deposit deposit and surplus debt funding costs Guarantee margin volume commission liquidity Fund income SIDE 10
Slide 11: Operating expenses
OPERATING EXPENCES 20 60 % 360 30 18 55 % 340 338 29 Full time equivalents ((FTEs) 16 50 % 320 14 29 12 45 % 300 273 Cost/Income NOK mill. 28 NOK mill. 10 40 % 280 28 8 35 % 260 6 27 30 % 240 4 25 % 220 27 2 - 20 % 200 26 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q4 2011 Q1 2012 Q2 201
Slide 12: Non-performing and impaired commitments
NON-PERFORMING AND IMPAIRED COMMITMENTS (NOK 1,000) 30.06.2013 30.06.2012 31.12.2012 • Just one non-performing property Gross non-performing commitments 1 912 18 317 60 322 commitment where write-downs Individual write-downs 1 800 2 100 23 350 were made in 2011 and 2012 Net non-performing commitment
Slide 13: Write-downs on lending
WRITE-DOWNS ON LENDING (NOK 1,000) 30.06.2013 30.06.2012 31.12.2012 • MNOK 20 written off against a Change in individual write-downs -21 550 9 050 9 750 previous write-down of a Change in group write-downs 4 000 0 5 900 property commitment Write-offs from previous write-downs 20 000 0 0 Change in pr
Slide 14: Quarterly profit trends
QUARTERLY PROFIT TRENDS 2nd quarter 1st quarter 4th quarter 3rd quarter 2nd quarter 1st quarter (NOK 1,000) 2013 2013 2012 2012 2012 2012 Total interest income etc. 124 185 117 074 111 313 105 146 102 448 103 982 Total interest expenses etc. 70 729 70 834 66 238 70 081 69 211 68 227 Net interest inc
Slide 15: Margin trends
MARGIN TRENDS Margin over 3M NIBOR 4.68% 4.33% Lending margin 4.25% 3.97% 3.73% 3.58% 3.23% 3.17% 2.95% 2.97% 2.87% 2.82% 2.82% Net margin 2.61% 2.50% 2.40% 2.48% 2.14% 2.15% 2.23% -0.74% -0.81% -0.72% -0.74% -0.97% -1.34% -1.43% -1.50% -1.52% -1.51% Deposit margin SIDE 15
Slide 16: Assets
ASSETS (NOK 1,000) 30.06.2013 31.03.2013 31.12.2012 30.09.2012 30.06.2012 31.03.2012 Cash and deposits with central banks 300 089 63 100 075 94 121 147 Lending to and deposits with credit institutions 74 354 226 495 164 003 410 294 1 215 447 750 042 Net lending to customers 7 183 632 6 796 990 6 734
Slide 17: Liabilities and equity
LIABILITIES AND EQUITY (NOK 1,000) 30.06.2013 31.03.2013 31.12.2012 30.09.2012 30.06.2012 31.03.2012 Deposits from credit institutions 69 163 146 117 200 663 239 836 188 489 160 655 Deposits from customers 6 307 737 5 860 903 5 371 143 5 422 610 5 588 856 5 449 584 Senior securities issued 1 542 350
Slide 18: Capital adequacy ratios
CAPITAL ADEQUACY RATIOS (NOK 1,000) 30.06.2013 30.06.2012 31.12.2012 • The bank has two perpetual Total equity 857 574 799 921 811 804 subordinated bonds callable after Deduction for intangible assets -25 172 -26 719 -26 290 five years and with no incentive of Interim profits not included in common
Slide 19: New capital adequacy requirements
NEW CAPITAL ADEQUACY REQUIREMENTS • The Ministry of Finance has published a consultative document concerning the adaptation to CRD IV and 14.13% the strengthening of bank capital requirements • There is still uncertainty about the level of the 3.16% 11.58% countercyclical buffer, but a clarification
Slide 20: Historical common equity ratio
HISTORICAL COMMON EQUITY RATIO “Leverage ratio” Common equity (%) Core capital/Total assets (%) 18.50% 23.83% 12.09% 15.44% 9.73% 9.48% 8.99% 12.37% 11.07% 10.97% 10,77% 4,69 % SIDE 20
Slide 21: New requirements for common equity
NEW REQUIREMENTS FOR COMMON EQUITY 14.00% 13.00% 12.5 % 12.00% 11.07% 10.97% Improved net margin 11.00% 0-2.5 % Countercyclical buffer 10.00% 9.00% 8.00% 3.0 % Systemic risk buffer Low operating costs 7.00% 6.00% 5.00% 2.5 % Conservation buffer 4.00% High frequency of loan 3.00% maturities Minimum r
Slide 22: Largest shareholders 30.06.2013
LARGEST SHAREHOLDERS 30.06.2013 Name Shares Share Ownership Pareto AS 127 500 15.00 % • 850,000 shares with face value of Geveran Trading Co Ltd. 68 200 8.02 % NOK 600. Indigo Invest AS 66 560 7.83 % Rasmussengruppen AS Tonsenhagen Forretningssentrum AS 55 250 41 448 6.50 % 4.88 % • A total of 229 s
Slide 23: Key stock ratios
KEY STOCK RATIOS (NOK) Q2 2013 Q1 2013 2012 2011 2010 ROE 12.8% 9.1% 8.6% 6.3% 3.0% Cost/income 28.8% 38.8% 37.6% 45.2% 63.8% Return on Equity 15.0 % Earnings per share after tax 31.8 22.1 79.6 56.1 26.5 10.0 % Dividend per share 30.0 30.0 25.0 Payout ratio 0.4 0.5 0.9 5.0 % Book equity per share 1
Slide 24: Lending and credit risk
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND LIQUIDITY 4 OUTLOOK SIDE 24
Slide 25: A niche player with focus on real estate, securities and shipping financing
A NICHE PLAYER WITH FOCUS ON REAL ESTATE FINANCING, SECURITIES FINANCING, AND SHIPPING AND OFFSHORE FINANCING Total credit exposure MNOK 8,941 1. Real estate financing focused on residential property construction in the Oslo region Bonds 2. A full scale provider of securities 16.0 % Stocks and share
Slide 26: A strong market position within residential property construction in the Oslo region
A STRONG MARKET POSITION WITHIN RESIDENTIAL PROPERTY CONSTRUCTION IN THE OSLO REGION • Financing of lots with a potential for Property credit exposure MNOK 5,901 property development 15,2 % • Residential and commercial property construction financing Office 4.5 % Combination building • Financing of
Slide 27: 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 28: Building a well-diversified portfolio in shipping and offshore
BUILDING A WELL-DIVERSIFIED PORTFOLIO IN SHIPPING AND OFFSHORE Shipping & Offshore credit exposure of MNOK 613 • The project should as a rule have Norwegian ownership 12.8 % Supply • A high quality charterer with transparent books Rig and a diversified cash flow 37.3 % PCC 14.5 % • Objects built in
Slide 29: Commitments by risk classification
COMMITMENTS BY RISK CLASSIFICATION Credit exposure (NOK Mill.) 30.06.2013 31.12.2012 30.06.2012 None/very low risk 3 671.4 3 495.5 3 166.9 Credit exposure Low risk 3 937.9 3 294.7 2 865.8 Moderate risk 1 106.0 1 233.0 1 171.9 None/very Low risk Some risk 200.5 353.9 52.8 low risk 44 % Very high risk
Slide 30: Commitments by size
COMMITMENTS BY SIZE Credit exposure (NOK Mill.) 30.06.2013 31.12.2012 30.06.2012 > 50 4 243.0 4 006.4 3 250.1 >20 <50 2 491.6 2 339.9 1 980.6 >10 <20 996.1 879.6 846.0 >5 <10 652.9 649.4 645.4 >2 <5 400.2 415.8 463.5 >1 <2 97.3 91.2 93.6 <1 36.2 34.5 35.5 Accrued interest and amortisation 23.6 20.4
Slide 31: Funding and liquidity
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND LIQUIDITY 4 OUTLOOK SIDE 31
Slide 32: Funding sources
FUNDING SOURCES Deposits 6,377 Fixed rate deposits 57% Corporate deposits 56% Senior debt Deposit-to-loan ratio 88% 1,542 Long term liquidity ratio 119% Other debt 111 Subordinated Liquidity buffer index 108% debt Core capital 233 858 SIDE 32
Slide 33: Liquidity
LIQUIDITY 2,000 1,800 Drawing rights 2,000 Mill. 1,600 Invest. pf. 1,400 1,500 1,200 1,000 Liquidity 1,000 portfolio Liquidity 800 portfolio 600 500 400 Liquidity buffer 200 Cash - jun. 13 des. 13 jun. 14 des. 14 jun. 15 des. 15 jun. 16 des. 16 - Excess liquidity after Liquidity requirements: Liquid
Slide 34: Customer deposits
CUSTOMER DEPOSITS Deposit allocation Fixed rate deposits - time to maturity >25 months Depositors 3,486 1,688 14 - 26 months 7 - 14 months NOK million 2,725 3,514 4 - 7 months 3 - 4 months 0% 20 % 40 % 60 % 80 % 100 % 0 500 1,000 1,500 2,000 Retail Corporate NOK million Deposits by size (NOK million
Slide 35: Issued senior debt credit spreads
ISSUED SENIOR DEBT CREDIT SPREADS 200 Pareto Bank senior debt (Spread over 3M NIBOR) 150 PARB10 Credit spread (bps) PARB09 PARB08 100 PARB07 PARB05 50 CERT 181013 FRN PARB06 0 0 1 2 3 4 5 6 Time to maturity (years) SIDE 35
Slide 36: Securities portfolio
SECURITIES PORTFOLIO Government & PSEs Covered bonds LIQUIDITY PORTFOLIO • Investment grade portfolio with a high percentage of covered bonds and AAA Underwriting bonds of new issues • Size approx. 1,537 million including cash and cash equivalents (1,166 MNOK in Investment securities) portfolio • Di
Slide 37: Outlook
1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND LIQUIDITY 4 OUTLOOK SIDE 37
Slide 38: Where is Pareto Bank now?
WHERE IS PARETO BANK NOW? • Pareto Bank has established itself as a niche bank in the Norwegian market • The bank's return on equity is on par with other Norwegian banks • The bank sees the market as attractive, offering many opportunities • The high repayment rate gives the bank considerable flexib
Slide 39: Outlook
OUTLOOK Exploiting a good market. Return on equity after tax 11.0 % Selective lending policy. 8.6 % 6.1 % Reduction in funding costs. 3.0 % 1.7 % Cost effectiveness. 2009 2010 2011 2012 1st half 2014 2013 Continued high credit quality. SIDE 39
Slide 40: SIDE 40
(Pareto bank