Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q1 2022 Earnings Presentation
44 slides from Pareto Bank Asa's earnings presentation, 2022
Slide 1: Pareto Bank Financial Results First Quarter 2022
PARETO BANK Financial Results First Quarter 2022
Slide 2: Highlights
Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: First Quarter 2022 Highlights
FIRST QUARTER 2022 Highlights • Profit after tax NOK 116.9m (NOK 119.4m in Q1-21). • Return on equity after tax 12.8 % (13.8 %). • Net interest income NOK 207.5m (NOK 200.2m). • Lending to customers was down by NOK 161m to NOK 15,644m due to redemptions. Fluctuations in lending volume is natural for
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 13.8 % 13.5 % 16.8 % 126.0 12.8 % 16.4 % 119.4 116.9 16.0 % Q1-21 Q4-21 Q1-22 Q1-21 Q4-21 Q1-22 31.03.2021 31.12.2021 31.03.2022 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 214.5 207.5 200.2 0.07% 0.10% 21.0% 0.04% 19.9
Slide 5: War in Ukraine: How is Pareto Bank affected?
WAR IN UKRAINE How is Pareto Bank affected? • Pareto Bank’s operations are Norwegian-based. No exposure to Russia, Belarus or Ukraine. • The war in Ukraine may lead to challenges in ongoing residential property projects. A review of projects with respect to delivery problems, delays and/or cost incr
Slide 6: Financials
Highlights Financials Business Areas Outlook & Ambitions 6
Slide 7: Income Statement
INCOME STATEMENT P&L (NOKm) Q1-22 Q1-21 2021 2020 Net interest income driven year on year by increased Net interest income 207.5 200.2 838.3 746.9 lending volume and higher lending rates. Net other operating income 8.2 4.9 12.3 7.6 Higher cost of market funding. Total net income 215.7 205.1 850.7 75
Slide 8: Net Interest Margin
NET INTEREST MARGIN Comments • Higher market rates and 6.37% 6.17% 6.32% expectation of future rate 6.03% 5.94% 5.91% 5.79% 5.59% 5.85% 5.66% 5.76% 5.71% hikes. 5.41% 5.48% 5.53% 5.22% 5.58% 5.18% • Pressure on lending margin. • Relatively lower fee income compared to 2021. • Improving deposit margi
Slide 9: Rising Interest Rates
RISING INTEREST RATES Comments • The central bank plans to hike rates three more times in 2022. Increased rates on existing loans • The market expects a more rapid rate rise as inflation expectations take hold. • Approximately 75 % of Pareto Bank’s lending is priced on floating rates. • Rate increas
Slide 10: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 3,1 6.0 Q4-21 214.5 7.2 0.2 1.0 Q1-22 3.8 207.5 2.8 2020 6.9 180.0 Market Market Surplus Lending Lending Fee Deposit Deposit funding funding Liquidity and volume rate income volume rate volume rate Other * 10 *) Other net interest income includes fee pa
Slide 11: Impairments by Stage
IMPAIRMENTS BY STAGE Credit exposure by IFRS9 stage (NOKm) Impairments and losses by stage (NOKm) 234 Stage 3 1,010 NOK 234m (-69m) 114.6 0.7 99.1 Stage 2 NOK 1,010m (+99m) 49.8 Write-offs 39.7 Stage 3 17,223 Stage 2 13.5 Stage 1 12.2 Stage 1 NOK 17,223m (-735m 47.2 50.6 change from Q4-21) 31.03.202
Slide 12: Credit Quality
CREDIT QUALITY Historical impairments and losses (NOKm) 40.3 15.5 11.1 6.2 5.8 6.7 - (1.5) (3.4) Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 12
Slide 13: Profitability Protects Against Losses
PROFITABILITY PROTECTS AGAINST LOSSES Loss absorbing capacity 4.5 % 4.4 % 4.3 % 4.2 % 4.1 % 4.1 % 3.8 % 3.4 % 0.42% 0.37% 0.24% 0.32% 0.13% 0.04% 0.13% 0.10% 2015 2016 2017 2018 2019 2020 2021 YTD 2022 Loss ratio Loss absorbing capacity Loan loss absorbing capacity: annualized profit excl. impairmen
Slide 14: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS Core Equity Tier 1 Ratio (CET1) • Continued strong capitalization. 16.8 % 16.8 % 16.6 % 15.9 % 16.0 % 16.4 % • Strengthened Additional Tier 1 and Tier 2 CET1 min. requirement capital ratios after subordinated bond issue. 14.2 % • Strong leverage ratio of 15.9 %. Ris
Slide 15: Pilar 2
PILAR 2 • The Norwegian FSA (Finanstilsynet) is expected to determine a preliminary Pilar 2 capital requirement for Pareto Bank towards the end of 2022. • The Pilar 2 requirement is expected to be set according to new guidelines in line with CRD V / CRR 2. • For the short-term, Pareto Bank targets p
Slide 16: Capital Targets
CAPITAL TARGETS During 2022 17.2 % 0.5 % 15.2 % Increase in 0.5 % systemic risk buffer by 1.5 pp Increase in as of 31.12.2022. countercyclical 9.0 % capital buffer by 7.0 % Increase in 0.5 pp as of countercyclical 30.06.2022. capital buffer by 0.5 pp as of 31.12.2022. 3.2 % 3.2 % 4.5 % 4.5 % H1-22 H
Slide 17: Business Areas: Focus on commercial property
Highlights Financials Business Areas: Focus on commercial property Outlook & Ambitions 17
Slide 18: 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 19: Exposure per Business Area
EXPOSURE PER BUSINESS AREA (NOKm) 8,160 7,910 7,668 7,356 7,267 5,285 4,921 5,060 5,076 4,856 4,732 4,732 4,589 4,522 4,318 1,389 1,431 1,266 1,113 1,090 Residential property Commercial property Corporate Shipping Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 19
Slide 20: Commercial Property
COMMERCIAL PROPERTY Credit update Commercial property exposure (NOKm) Total NOK 5,060m • 101 customers with average commitment of NOK 50m. • 30 % commercial property exposure in Oslo and 26 % in Viken. • 78 % of commercial property exposure is long-term cash-flow Commercial based, while the remainde
Slide 21: Commercial Property: Credit Policy and Focus
COMMERCIAL PROPERTY Credit policy and focus • Pareto Bank offer other tailored financing solutions with a clear exit for professional and loyal customers. • Focus on attractive properties with good locations and solid cashflows. Third party valuations are normally requested. • Cashflow, tenant compo
Slide 22: Commercial Property: Paradis 1972
COMMERCIAL PROPERTY Paradis 1972 • Pareto Bank financed the acquisition and development/renovation of Lagårdsveien 78-80 in Stavanger. • The owner Brødrene Jensen AS developed a concept “Paradis1972” based on the history of the property in order that attracted interest from several tenants. • The pr
Slide 23: Residential Property
RESIDENTIAL PROPERTY Credit update Residential property exposure (NOKm) Total NOK 7,267m • 163 customers with average commitment of NOK 45m. • 35 % residential exposure in Oslo and 44 % in Viken. Land without houses 1,154 • The Planning and Building Authority of Oslo (PBE) submitted a proposal for a
Slide 24: Corporate
CORPORATE Diversified exposure Total NOK 4,732m Credit update Total NOK 4,732m • 117 consolidated corporate customers with average • Lending volum affected by a few large redemptions. commitment of NOK 38.5m. Fluctuations in lending volume is natural for a project bank. • 11 consolidated securities
Slide 25: Shipping
SHIPPING Credit update Exposure (NOKm) Total NOK 1,266m • 19 customers* and 39 vessels. • Largest exposure of USD 26.4m and average commitment size Container 311 LTV 17 % of USD 7.7m. LTV 45 % • Corporate loans make up 46 % of the exposure, the remaining Product 310 54 % are loans to investment proj
Slide 26: Outlook & Ambitions
Highlights Financials Business Areas Outlook & Ambitions 26
Slide 27: Outlook
OUTLOOK Mixed picture • Good start to the year and several new credits granted within ship financing leading to volume growth going forward. Positive market outlook for most shipping segments due to global GDP growth and low supply growth. • Activity is picking up after a soft start on corporate fin
Slide 28: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term YTD ambition Unchanged long-term profitability ambition. RETURN ON 14.0 % 12.8 % Long-term profitability supported by lending EQUITY growth, stable net margin and portfolio quality. DIVIDEND 50 % or more 50 % or more Unchanged dividend policy. POLICY 28
Slide 29: Appendix
APPENDIX (Pareto bank
Slide 30: Largest Shareholders
LARGEST SHAREHOLDERS 31 March 2022 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 3,362 shareholders. 3 HJELLEGJERD
Slide 31: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 1.77 51.85 1.68 49.98 1.64 49.43 Q1-21 Q4-21 Q1-22 Q1-21 Q4-21 Q1-22 Price / Earnings Price / Book 1.31 10.04 1.15 8.40 0.96 7.05 Q1-21 Q4-21 Q1-22 Q1-21 Q4-21 Q1-22 31 Share price NOK 65.70
Slide 32: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q1-22 Q4-21 Q3-21 Q2-21 Q1-21 Net interest income 207.5 214.5 210.3 213.3 200.2 Net other operating income 8.2 3.0 5.7 -1.4 4.9 Total net income 215.7 217.6 216.0 212.0 205.1 Total operating expenses 45.3 40.1 40.4 41.0 40.9 Operating profit before 170.4 177.5 1
Slide 33: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q1-22 Q4-21 Q3-21 Q2-21 Q1-21 Loans to credit institutions 1,840 907 1,766 1,750 273 Loans to customers 15,644 15,805 15,187 15,310 15,089 Bonds and other securities 3,795 3,106 3,014 2,734 3,235 Shareholdings in associated companies 24 23 22 22 26 Other assets 159
Slide 34: 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. 44.8 37.6 32.3 32.5 50.4 37.7 35.2 38.9 41.8 • Fee income will vary with activity and lending product, and is acc
Slide 35: 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 36: Number of Customers
NUMBER OF CUSTOMERS Per business area Real Estate 264 Corporate 155 Shipping 28 Retail 10 (Mortgages) 36
Slide 37: Real Estate Exposure
REAL ESTATE EXPOSURE Geographical residential property exposure Total NOK 8,202m* Geographical commercial property exposure Total NOK 4,125m* 4% 8% 4% 3% 10% 30% 11% Viken Oslo 43% Oslo Viken Vestfold og Telemark 11% Vestland Vestland Sweden Sweden Vestfold & Telemark Other Other 16% 35% 26% 37 *) R
Slide 38: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 9,863 Percent customer deposits of net lending to customers Senior debt 6,754 74.0 % T1 & T2 debt 720 64.6 % 64.8 % 65.1 % 65.5 % 63.0 % Other debt 633 4,956 5,645 5,645 60.1 % 4,935 4,770 6,754 6,038 Equity capital 3,491 Key ratios Deposi
Slide 39: Customer Deposits
CUSTOMER DEPOSITS Deposits by product (NOKm) Deposits by size (NOKm) 654 Floating rate retail > NOK 20m 3,284 597 3,881 643 3,782 Floating rate corporate 3,916 NOK 10 - 20m 817 175 992 2,207 Savings with restrictions 2,351 NOK 5 - 10m 864 116 980 2,339 Fixed rate 2,153 NOK 2 - 5m 1,389 605 1,994 766
Slide 40: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 112 200 150 84 65 250 120 1,650 42 1,500 1,350 31 25 1,000 1,000 261 3M 6M 12M 2Y 3Y 5Y 2022 2023 2024 2025 2026 2027 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordin
Slide 41: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Market value of bonds and funds comprising surplus liquidity. • Liquidity is comprised of 32% cash and highly liquid bonds. • High share of government Government & PSEs & PSEs to reduce credit Covered bonds spread risk and increase short-term liquidity. •
Slide 42: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 5,897 None / very low risk 62% 6,905 61% 57% 11,036 53% 52% Low risk 9,831 1,083 38% Moderate risk 36% 38% 1,462 32% 31% 143 Some risk 191 35 High risk 51 8% 8% 6% 6% 5% 18 Very high risk 29 Q1-21 Q2-21 Q3-2
Slide 43: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 541 3% < 10 10% 494 4,927 10 - 50 7% 5,235 28% 5,380 50 - 100 < 10 4,975 10 - 50 10% 2,807 50 - 100 100 - 150 2,815 100 - 150 150 - 200 1,524 150 - 200 200 - 250 1,873 > 250 1,099 200 - 250 15% 1,294 1
Slide 44: ( Pareto bank
( Pareto bank