Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q1 2018 Earnings Presentation
39 slides from Jyske Bank A/S's earnings presentation, May 9, 2018
Slide 1: Jyske Bank Q1 2018
G JYSKE BANK Jyske Bank Q1 2018 9 May 2018
Slide 2: Our targets
Our targets Q1 2018 Return on Equity • Delivering an attractive long-term return on equity of 8-12% ROE 7.4% Volume growth 2018-2020 • Total loan portfolio of DKK 350bn in Jyske Realkredit +DKK 20-25bn in housing related loans DKK 309bn +DKK 15-20bn in property loans for corporate clients Full Time
Slide 3: Q1 2018 highlights
Q1 2018 highlights • Net profit of DKK 610m, equal to ROE 7.4% p.a. – Excl. effect of IFRS 9 net profit of DKK 927m CORE PROFIT AND PROFIT FOR THE PERIOD Index Index corresponding to ROE of 11.4% DKKm Q1 2018 Q1 2017 18/17 Q1 2018 Q4 2017 Q1/Q4 Net interest income 1,407 1,370 103 1,407 1,537 92 Net
Slide 4: ROE impacted by turbulent financial markets
ROE impacted by turbulent financial markets Net profit and ROE • Net profit of DKK 610m and ROE of 7.4% p.a. in Q1 2018 3,000 60% • Excl. effect of IFRS 9 net profit of DKK 927m corresponding to DKKm 2,500 50% ROE of 11.4% 2,000 40% 1,500 30% 1,000 20% 500 10% 0 0% -500 -10% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
Slide 5: NII slightly up y/y
NII slightly up y/y • Adjusted for one-off interest income in Q4 2017 NII in Q1 2018 is slightly Q1 2018 vs. Q4 2017: Development in NII down compared to Q4 2017 – primarily due to 2 days less in Q1 than Q4 1,550 DKKm 1,500 • Overall NII is: 1,450 1,400 – Supported by 1,350 • Volume growth in all 3
Slide 6: Net fee income continues at high level
Net fee income continues at high level Net fee income • Net fee income in Q1 2018 of DKK 506m 700 DKKm – Adjusted for Jyske Invest Fund Management and change in 600 recognition of DLR fees (implemented in Q4 2017), net fee income is 500 up by 4% compared to Q1 2017 400 300 • The improved performance
Slide 7: Value adjustments adversely affected
Value adjustments adversely affected Value adjustments under core income 350 300 • Widening of yield spreads and increasing interest rates affected the DKKm 250 value adjustments of the Group's bond portfolio adversely, and on the 200 whole, value adjustments amounted to DKK -68m against DKK 346m in
Slide 8: Stable core expenses
Stable core expenses Q1 2018 vs. Q4 2017: Development in core expenses • Stable underlying core expenses – Q1 2018 down by 1% compared to 1,400 DKKm Q1 2017 when adjusted for one-offs in Q1 2017 1,350 • Annual re-occurring salary increase stipulated by collective 1,300 1,250 agreement and increase i
Slide 9: Net reversals excl. IFRS 9 effects
Net reversals excl. IFRS 9 effects Loan impairment charges (under core profit) • Impairment charges of DKK 308m under core profit: 400 – Implementation of IFRS 9 DKK 407m DKKm 300 – Underlying development in credit quality DKK -99m 200 100 • Total balance of management’s estimate of DKK 290m end of
Slide 10: IFRS 9 implementation highlights
IFRS 9 implementation highlights • The balance of impairment charges was increased by DKK 1,035m compared to the estimate of DKK 1,000m-1,200m • Core profit was effected by DKK -407m • Equity was effected by DKK -628m before tax ROE 7.4% The balance of impairment charges broken down by stage after t
Slide 11: Nordjyske Bank drives increase in investment portfolio earnings
Nordjyske Bank drives increase in investment portfolio earnings Investment portfolio earnings, quarterly 450 • Nordjyske Bank share priced at 166 end of Q1, up from 121.5 end DKKm 400 of Q4. Thus, positive value adjustments and dividend of DKK 350 356m (Q4 2017: DKK +11 m) 300 250 200 • Excluding No
Slide 12: Capital and Liquidity
G JYSKE BANK Capital and Liquidity
Slide 13: Aligned with long-term capital targets
Aligned with long-term capital targets • Capital ratio 20.0% and CET1 ratio 16.5% end of Q1 2018 vs. long-term Capital ratios targets of 17.5% and 14% post-Basel IV implementation 25 – Capital structure well aligned with long-term targets pct – Jyske Bank will on an on-going basis seek to make the c
Slide 14: Upcoming regulation
Upcoming regulation • Long-term capital targets based on fully implemented Basel IV capital requirements: 20 Percent – Capital ratio 17.5% and CET1 ratio 14% 18 1,8 1,7 – Capital ratios to remain above long-term targets given upcoming 16 capital requirements 14 0,5 1,5 12 2,5 10 0,5 • Basel IV 2,2 P
Slide 15: The Group has ample liquidity
The Group has ample liquidity Group liquidity buffer • Liquidity buffer DKK 64bn end of Q1 2018 (DKK 73bn end of 2017) 80 DKKbn – 86% of the buffer - DKK 55bn - is eligible for repo transactions at 70 central banks (Nationalbanken or ECB) 60 – Cash placements are categorized as eligible at Nationalb
Slide 16: A frequent EUR issuer
A frequent EUR issuer Redemption profile and call date profile 7 Ongoing access to a diversified European investor base helps Jyske Bank maintain a prudent risk- and funding– profile 6 5 Since 2012 more than 500 different investors have bought into the Group’s senior unsecured debt, capital (Tier 2
Slide 17: Appendices
Appendices: 1) Jyske Bank in brief and business segments 2) Credit quality 3) Danish Economy Q1 2018
Slide 18: Jyske Bank in brief
Jyske Bank in brief • One of the four large financial institutions in Denmark and a Danish SIFI – 3 segments (Banking, Mortgage and Leasing) – Estimated market share of 12% – Danish play – Approx. 865,000 customers – Nationwide branch network comprised of 92 personal client branches, 32 corporate br
Slide 19: Jyske Bank in brief
Jyske Bank in brief Net Shareholders' ROE after Loans and Total Profit before profit, equity at year- tax, average advances, Deposits assets, Number of tax, DKKm DKKm end, DKKm equity DKKbn , DKKbn DKKbn FTEs 1997 584 443 4,772 9.6% 36.6 41.5 63.1 2,671 1998 710 511 5,173 10.3% 39.7 43.8 76.9 2,772
Slide 20: Banking activities
Banking activities Financials 1,800 • Increasing volume in bank loans DKKm 1,600 • Drop in bank deposits – still above average 2017 levels 1,400 1,200 • Development in AUM adversely affected by increasing volatility and falling 1,000 prices for most asset classes 800 • Negative value adjustments pri
Slide 21: Mortgage activities
Mortgage activities Financials • Growth at slower pace in Q1 2018 – driven by corporate client segment 600 DKKm • Volume growth supports stability in core income 500 • Negative value adjustments due to investment losses on the portfolio of 400 securities as well as a fair value adjustment of mortgag
Slide 22: Leasing activities
Leasing activities Financials • Loan volumes continue to increase 140 • Stable development in core income based on increased business DKKm 120 volume 100 • Increase in core expenses due to increasing support costs and 80 severance payments 60 • Impairment charges adversely affected by further impair
Slide 23: Credit Quality
G JYSKE BANK Credit Quality
Slide 24: Mortgages: The portfolio
Mortgages: The portfolio • 87% of lending to properties with housing purposes Distribution of lending portfolio – No loans with swaps to co-operative housing 1% 1% 0% – No lending to agriculture and other primary 11% Owner-occupied (50%) production Vacation homes (3%) Cooperative (5%) • Growth in le
Slide 25: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 500 50 1.8% Private 450 45 1.6% Commercial 400 40 1.4% Subsidised 350 35 1.2% 300 30 1.0% 250 25 0.8% 200 20 0.6% 150 15 0.4% 100 10 0.2% 50 5 0 0 0.0% Q1 2014 Q1 2015 Q1 2016 Q1
Slide 26: Bank loans: the portfolio
Bank loans: the portfolio Loans, advances and guarantees (%) – by sector • Portfolio composition end of Q1 2018: Balance of loan – Corporates take up larger proportion, 59% vs. 58% Loans, advances impairment Impairment end of 2017 and 53% end 2016 as volume grows and guarantees charges Losses charge
Slide 27: Agriculture: Commodity prices drop
Agriculture: Commodity prices drop • Impairments ratios at level with end 2017 Commodity prices 3.5 13 • Commodity price development: 12.5 3.25 – Pork: Prices continue down after a new high of 11.6 12 DKK/kg in June 2017. Reached a new low of 8.5 in 3 11.5 DKK/kg DKK/kg January 2.75 11 – Milk: After
Slide 28: Danish Economy May 2018
G JYSKE BANK Danish Economy May 2018
Slide 29: Headlines on the Danish Economy
Headlines on the Danish Economy • We expect the upturn in the Danish economy to continue in 2018 and 2019 • Low interest rates, increasing house prices and export market growth stimulates demand. Export competitiveness looks healthy • Gradually the pace of the upturn is likely to decline due to labo
Slide 30: Danish economy – an upturn story
Danish economy – an upturn story • Overall the Danish financial sector’s operating environment is still improving The upturn will continue The private sector is driving the 6% increase in employment Source: Thomson Reuters Datastream and Jyske Bank forecasts Source: Thomson Reuters Datastream 30
Slide 31: Turnaround and consolidation at the same time
Turnaround and consolidation at the same time • Low interest rates and solid real wage growth make it possible for households to consume more and save up at the same time The private sector is saving up …so household debt has declined …and household net assets are large 800 Net assets incl. housing
Slide 32: 3 kinds of stimulus support demand
3 kinds of stimulus support demand House prices recovering after burst in 08/09 Spill-over from European recovery Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream Interest rates are at a historic low Demand has increased Source: Thomson Reuters Datastream Source: Thomson Reuters
Slide 33: Improved asset quality – as defaults have normalized
Improved asset quality – as defaults have normalized Unemployment is low and declining Forced house sales well below 500 properties per Business bankruptcies at neutral level month (less than 0.2% per year) Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream Source: Thomson Reuters
Slide 34: There are Large Differences in the Housing Market
There are Large Differences in the Housing Market • Prices on flats have increased more than house prices • Monthly data shows a slowdown in Q4 2017. Typical year-end setback • New pick-up in January and February Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream 34
Slide 35: Housing costs are at a moderate level
Housing costs are at a moderate level • Housing costs are at a moderate level. Increasing on flats • There is a risk that very low interest rates may overheat local parts of the market especially the Copenhagen market • However, new regulation and a new housing tax model will have a dampening effect
Slide 36: Copenhagen price increases lower than in bubble years
Copenhagen prices increases lower than in bubble years Flats in Copenhagen price-index 1999-2006 vs. 2010-2017 300 300 Index 1999/2010 = 100 Index 1999/2010 =100 250 250 200 200 150 150 100 100 50 50 1999Q2/2010Q2 2000Q1/2011Q1 2000Q4/2011Q4 2001Q3/2012Q3 2002Q2/2013Q2 2003Q1/2014Q1 2003Q4/2014Q4 20
Slide 37: Denmark is a AAA economy with strong structural financial features
Denmark is a AAA economy with strong structural financial features Current account surpluses since late 90s ..imply that foreign assets are increasing Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream and Statistics Denmark And public sector debt is low This is why Denmark is AAA
Slide 38: Jyske Bank forecasts
Jyske Bank forecasts The Danish Economy 2015-2019 bn. DKK. Real growth (%) 2017 2015 2016 2017 2018 2019 Household spending 1007 1.6 2.0 1.5 1.7 1.7 Public spending 536 1.1 0.3 1.1 1.0 0.5 Fixed gross investment 436 3.1 6.0 2.5 4.4 3.5 Inventory investment* 11 -0.3 0.0 0.1 0.0 0.0 Exports 1183 2.3 2
Slide 39: General legal disclaimer
General legal disclaimer • This presentation and the information contained therein is furnished and has been prepared solely for information purposes by Jyske Bank A/S. It is furnished for your private information with the express understanding, which recipient acknowledges, that it is not an offer,