Jyske Bank A/s · OMXCOP:JYSK
Jyske Bank A/s — Q3 2014 Earnings Presentation
80 slides from Jyske Bank A/s's earnings presentation, 2014
Slide 1: Jyske Bank Q1-Q3 2014
Jyske Bank Q1-Q3 2014
Slide 2: Agenda
Agenda • Focus in Q1-Q3 2014 – Banking – Mortgage financing • Strategic Issues • Q1-Q3 2014 in figures • Up-date on merger with BRFkredit • Capital Structure • Liquidity • Credit Quality • Danish FSA • Macro Economy & Danish Banking 2013-2015 • Fact Book • Jyske Bank in brief • Jyske Banks Performan
Slide 3: Focus in Q1-Q3 2014
Focus in Q1-Q3 2014 3
Slide 4: Focus in Q1-Q3 2014
Focus in Q1-Q3 2014 • Pre tax result DKK 3.4bn (including special items of DKK 2.4bn). Corresponding to ROE 26.0% ann. • Gross income (ex special items) decreases by 1.5% compared to Q1-Q3 2013 • Net Interest Income under continued pressure due to low interest rate level, margin pressure and lower r
Slide 5: Developments in Q3 2014
Developments in Q3 2014 Banking activities • Continues to be dominated by the repatriation of loans from Totalkredit • Margins under pressure due to competition, limited economic growth and high savings propensity • Fee and commission income stable exclusive of lost commission income from Totalkredi
Slide 6: Up-date on merger with BRFkredit
Up-date on merger with BRFkredit Revenue synergies • By end of October DKK 25bn of JB home loans was granted (DKK 21bn booked by end of Q3) • JB home loans continues to be competitively priced. Mortgage institutions (including BRFkredit) have raised contribution margins • The market share of gross n
Slide 7: BRFkredit: Market share and distribution of lending
BRFkredit: Market share and distribution of lending Market share: Market share of lending activity – gross new lending • The total market share of BRFkredit stood at 8 per 50% 45.6% 45% cent 40% 36.2% • Lending activity is significantly increased. The Market 35% share as of Q3 2014 – gross new lendi
Slide 8: Core earnings
Core earnings CORE PROFIT AND PROFIT FOR THE PERIOD The Q1-Q3 Q1-Q3 Index Q3 Q2 Q1 Q4 Q3 year DKKm 2014 2013 14/13 2014 2014 2014 2013 2013 2013 Net interest income 3,887 3,342 116 1,529 1,325 1,033 1,093 1,118 4,438 Net fee and commission income 1,135 1,226 93 360 351 424 505 367 1,731 Value adjust
Slide 9: Profit before tax
Profit before tax 2,500 16% 3,000 60% 14% 2,500 50% 2,000 2,000 40% DKKm DKKm 12% 30% 1,500 1,500 10% 20% 1,000 8% 10% 500 1,000 0% 6% 0 ‐10% 4% ‐500 ‐20% 500 2% ‐1,000 ‐30% Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 0% 2009 2010 2011 2012 2013 Profit before tax R
Slide 10: Strategic issues
Strategic issues 10
Slide 11: Market conditions
Market conditions • Corporates: – Low demand for corporate credit facilities – The shift from bank loans to mortgage loans continues • Retail: Limited spending/high propensity to save • Margin pressure increasing, especially on corporates • Significant improvement in deposit/loans ratio in most bank
Slide 12: Strategic issues 2013-2014
Strategic issues 2013-2014 Integration of BRFkredit • Integration proceeds according to plan New product line of home loans • New loans collateralized by property offered from end 2013 to solid private customers at attractive prices compared to traditional mortgage loans; loans outstanding end of Q3
Slide 13: Strategic issues – Capital and Liquidity
Strategic issues – Capital and Liquidity Capital • Capital ratio 16.7% • Capital buffer 6.0 percentage points • Core Tier 1 15.7% • Capital target – Capital ratio 17.5%. Common Equity Tier I minimum 14% • Jyske Bank complies with the capital charges as off 2019 Liquidity • Liquidity reserve DKK 52bn
Slide 14: Q1-Q3 2014 in figures
Q1-Q3 2014 in figures 14
Slide 15: Loans and Deposits
Loans and Deposits 120 140 115 130 DKKbn DKKbn 110 120 105 110 100 100 95 90 90 85 80 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 80 2009 2010 2011 2012 2013 Bank loans Bank deposits Bank loans Bank deposits Mortgage loans end Q3 2014: DKK 216 bn Total loans and adva
Slide 16: Net Interest Income
Net Interest Income 4,500 1,800 4,450 1,600 4,400 DKKm DKKm 1,400 4,350 1,200 4,300 1,000 4,250 800 4,200 600 4,150 400 4,100 4,050 200 4,000 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 3,950 2009 2010 2011 2012 2013 16
Slide 17: Return/risk-trade off (Jyske Bank ex BRF)
Return/risk-trade off (Jyske Bank ex BRF) 114 5.0% 140 6% 112 120 5% 110 DKKbn DKKbn 100 108 4% 80 106 3% 104 4.5% 60 102 2% 40 100 1% 20 98 0 0% 96 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 94 4.0% 2009 2010 2011 2012 2013 Risk weighted assets NII/RWA (rhs) Risk w
Slide 18: Fee and commision income
Fee and commision income 2,000 600 1,800 500 DKKm DKKm 1,600 1,400 400 1,200 300 1,000 800 200 600 100 400 0 200 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 800 700 DKKm 600 500 400 300 200 Totalkredit 100 0 Securities trading Money transfe
Slide 19: Value adjustments
Value adjustments 800 300 700 200 DKKm DKKm 600 100 500 0 400 ‐100 300 ‐200 200 ‐300 100 0 ‐400 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 ‐100 2009 2010 2011 2012 2013 Sale of Nets: DKK 189m Redemption of hybrid capital: DKK 77m Interest rate swaps: DKK -355m (DKK
Slide 20: Core income
Core income 7,600 5,000 7,400 4,500 7,200 4,000 DKKm DKKm 7,000 3,500 6,800 3,000 6,600 2,500 6,400 2,000 6,200 1,500 6,000 1,000 5,800 500 5,600 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 5,400 2009 2010 2011 2012 2013 20
Slide 21: Core expenses and employees
Core expenses and employees 4,800 3,900 1,600 4,400 3,850 1,400 4,300 4,600 3,800 1,200 4,200 DKKm DKKm 4,400 3,750 4,100 1,000 3,700 4,000 4,200 800 3,650 3,900 4,000 600 3,600 3,800 400 3,700 3,800 3,550 200 3,600 3,500 3,600 0 3,500 3,450 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q1
Slide 22: Core profit before loan impairment charges
Core profit before loan impairment charges 3,500 3,500 3,000 3,000 DKKm DKKm 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 22
Slide 23: Loan impairment charges
Loan impairment charges 3,000 1,000 900 2,500 800 DKKm DKKm 700 2,000 600 500 1,500 400 300 1,000 200 100 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 23
Slide 24: Core profit
Core profit 2,500 2,500 2,000 DKKm DKKm 2,000 1,500 1,500 1,000 500 1,000 0 ‐500 500 ‐1,000 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 24
Slide 25: Earnings from investment portfolios
Earnings from investment portfolios 700 250 600 200 DKKm DKKm 500 150 400 100 300 200 50 100 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 25
Slide 26: Focus in Q1-Q3 2014 – special items
Focus in Q1-Q3 2014 – special items Special items Q1-Q3 DKKm 2014 Net interest income, amortisation of fair value adjustment of assets and liabilities taken over 60 Net fee and commission income, estimated lost fee income from Totalkredit -167 Value adjustments, The sale of the ownership interest in
Slide 27: Capital Structure
Capital Structure 27
Slide 28: Capital structure
Capital structure 20 20 18 18 16 16 pct pct 14 14 12 12 10 10 8 8 6 6 4 4 2 0 2 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 Core Tier 1 Hybrid Tier 1 Tier 2 Core Tier 1 Hybrid Tier 1 1.4 Tier 2 • Core Tier 1 target: 14% • Capital ratio targ
Slide 29: Solvency requirement and capital buffer
Solvency requirement and capital buffer 20 20 18 18 16 16 pct pct 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 2009 2010 2011 2012 2013 Solvency requirement Capital buffer Solvency requirement Capital buffer 29
Slide 30: On the CET1 ratio Jyske is already ready for CRD IV & Danish SIFI requirements
On the CET1 ratio Jyske is already ready for CRD IV & Danish SIFI requirements Total capital requirement by 2019 expected to be around 17 % (incl. worst case fully loaded countercyclical buffer*) - With a CET1 ratio of 13.7 % (11 % if Pillar II is filled by a high trigger coco AT1 or AT2) New capita
Slide 31: Liquidity
Liquidity 31
Slide 32: Liquidity position and run-off
DKKbn 10 20 30 40 50 60 0 Start of period 1 month 2 months 3 months 4 months 5 months 6 months 7 months 8 months 9 months 30.09.2014 10 months Liquidity position and run-off 11 months 12 months Capital market scenario: run-off of senior unsecured debt and senior secured bonds 15 months 18 months 21
Slide 33: Group issuance of senior debt will be from Jyske Bank A/S only
Group issuance of senior debt will be from Jyske Bank A/S only Jyske will remain a rare but regular issuer on the EMTN market No new issuance of senior secured bonds from BRFkredit A/S as house prices have stabilized Senior unsecured activity will depend on developments in the balance sheet (funding
Slide 34: Credit quality
Credit quality 34
Slide 35: Loan impairment charges and losses
Loan impairment charges and losses 3,000 1,000 900 2,500 800 DKKm DKKm 700 2,000 600 500 1,500 400 300 1,000 200 100 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 Loan impairment charges and provisions for guarantees Losses Loan impairm
Slide 36: Loans and advances split by sector
Loans and advances split by sector (Jyske Bank A/S) Loans, advances and guarantees as well as loan Balance of loan impairment charges and provisions for guarantees Loans, advances and impairment charges and Loan impairment charges for (DKKm) guarantees provisions for guarantees the period Loss for t
Slide 37: Loans and advances split by sector
Loans and advances split by sector (Jyske Bank A/S) Balance of loan Balance of loan Loan impairment Loans, advances and guarantees as well as loan impairment charges impairment charges Loss for the charges for the impairment charges and provisions for guarantees Loans, advances and provisions for Lo
Slide 38: Large exposures
Large exposures (per cent of capital base) 35% 30% 25% 20% 15% 10% 5% 0% 2009 2010 2011 2012 2013 Q3 2014 Jyske Bank large exposures: > 10% : 1 7.5-10%: 1 38 5-7.5%: 2
Slide 39: Balance of loan impairment charges
Balance of loan impairment charges 5,000 6,000 4,500 5,000 4,000 DKKm DKKm 3,500 4,000 3,000 3,000 2,500 2,000 2,000 1,500 1,000 1,000 0 500 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0 2009 2010 2011 2012 2013 Balance of loan impairment charges Losses Balance of lo
Slide 40: Balance of loan impairment charges
Balance of loan impairment charges (per cent of bank loans and advances) 4.0% 4.5% 4.0% 3.5% 3.5% 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 Q22014 Q32014 0.0% 2009 2010 2011 2012 2013 40
Slide 41: Exposures by credit rating
Exposures by credit rating (Jyske Bank A/S) Corporates Retail 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 31.12.2013 30.09.2014 31.12.2013 30.09.2014 41
Slide 42: BRFkredit - Portfolio composition
BRFkredit - Portfolio composition Q3 2014 Portfolio by Loan to Value (LTV) Portfolio split by property category Total 37% 25% 20% 12% 4% Total 45% 19% 19% 14% 2% Cap E 36% 26% 21% 12% 4% Cap E 51% 19% 15% 13% 2% Cap B 31% 26% 20% 14% 7% Cap B 36% 3% 34% 22% 5% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60%
Slide 43: Credit quality - BRFkredit
Credit quality - BRFkredit 90-days arrears (per cent of instalment payments) Repossessed properties (DKKm) Quarterly realised losses (per cent of instalment) Loan-to-Value brackets (per cent of lending) 43
Slide 44: Exposures by credit rating
Exposures by credit rating (BRFkredit A/S) Corporates and subsidised housing Retail 30% 80% 70% 25% 60% 20% 50% 15% 40% 30% 10% 20% 5% 10% 0% 0% 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 30.09.2014 31.12.2013 30.09.2014 31.12.2013 44
Slide 45: Danish FSA
Danish FSA • Reports in 2011, 2012, 2013 and 2014 45
Slide 46: Danish FSA reports 2011, 2012, 2013 and 2014
Danish FSA reports 2011, 2012, 2013 and 2014 (Jyske Bank ex BRF) SME customers and IRB setup • Decision making material satisfactory • No ground for changing impairment charges • IRB models satisfactory IT inspection • Principles and policies meet required demands Market Risk and Compliance • Manage
Slide 47: Danish FSA report – Stresstest and AQR
Danish FSA report – Stresstest and AQR (Jyske Bank ex BRF) • European stress test confirms solid capital position and structure – CET1 18.6% by end 2016 in the baseline scenario – CET1 13.6% by end 2016 in the stress scenario – Jyske Bank ranks 12 among the european banks in the stress test (measure
Slide 48: Danish FSA reports 2011, 2012, 2013 and 2014 (BRFkredit)
Danish FSA reports 2011, 2012, 2013 and 2014 (BRFkredit) BRFkredit Market risk • Management of securities and funding satisfactory Large exposures and loans to property rental • The inspection did not give rise to changes in impairments on loans or in solvency requirements • The FSA ordered BRF to a
Slide 49: Macro Economy & Danish Banking 2014
Macro Economy & Danish Banking 2014 49
Slide 50: The Danish economy at a glance
The Danish economy at a glance Equal disposable incomes The basics OECD-ranking lowest Gini coefficient Citizens: 5.6 million (2011) Area: 43.098 sq km (0.4 % of USA) 2. Denmark Currency: Kroner (fixed exchange rate policy to the 15. Germany euro) 31. USA A welfare state Among the rich Total tax rev
Slide 51: The private sector is still in consolidation mode
The private sector is still in consolidation mode The private sector saving has been record high since 2009. % of GDP % of GDP 51
Slide 52: The private sector is reluctant to borrow
The private sector is reluctant to borrow DKK, bn DKK, bn 52
Slide 53: The Danish economy is improving, but only slowly
The Danish economy is improving, but only slowly There has been small positive growth in the recent quarters. Export growth has been negatively effected by German softening. However, private consumption is getting a little stronger Percent Percent 53
Slide 54: Sentiment has dropped.
Sentiment has dropped. Again spillover from European troubles kick in. Consumer sentiment is still at a high level, though 54
Slide 55: House prices increased during the past year
House prices increased during the past year House prices are up 2 % over the past 12 month, while prices on flats are up 9 %. Overheating of Copenhagen flat market is becoming an issue again, although still not present in our view. Index 2008=100 Index 2008=100 55
Slide 56: Prices was up in all regions in Q2 and affordability is strong
Prices was up in all regions i Q2 and affordability is strong Index 2006 = 100 Index 2006 = 100 Indeks 2004=100 Indeks 2004=100 56
Slide 57: Bankruptcies in the SME sector are trending downwards
After years of suffering, bankruptcies in the SME sector are trending downwards 57
Slide 58: Household defaults are also declining
With unemployment slightly declining, and interest rates being low, household defaults are also declining 25,0 25,0 20,0 20,0 15,0 15,0 10,0 10,0 5,0 5,0 0,0 0,0 00 02 04 06 08 10 12 14 Denmark Sweden UK Euro area Norway Spain Source: Reuters EcoWin 58
Slide 59: Denmark has a healthy public sector economy
Denmark has a healthy public sector economy Public debt is low and public net saving was -0.7 % of GDP in 2013 and is expected to be close to that level again in 2014. There is a one-off contribution from pension tax brought forward. Without this deficits would otherwise be close to 3 % of GDP in 20
Slide 60: Competitiveness has improved
Competitiveness has improved Danish competitiveness deteriorated dramatically during the booming years. Danish production sector has been under some pressure and still is, but conditions are slightly better due to a gradual and ongoing improvement. Source: Ministry for economic affairs and the inter
Slide 61: Overall the Danish economy is structurally strong
Overall the Danish economy is structurally strong Net assets against the rest of the world (2010) 125 125 100 100 75 75 Denmarks net assets 50 50 against the rest of the world are significantly 25 25 % of GDP % of GDP higher today : 38 % of GDP 0 0 -25 -25 -50 -50 -75 -75 -100 -100 -125 -125 PT IR G
Slide 62: … and Denmark is a AAA economy
… and Denmark is a AAA economy 62
Slide 63: The outlook: Low growth to continue, overall strong economy
The outlook: Low growth to continue, overall strong economy • In the coming quarters the economy is likely to continue in a low to moderate growth mode with some improvement over time. However, this is dependend on the conditions not getting worse in the European economy. • An actual upturn can mate
Slide 64: Jyske Bank forecasts: The Danish economy 2011-2015
The Danish economy 2011-2015 2013 Real growth (%) DKKbn 2011 2012 2013 2014* 2015* Consumer spending 893 0.2 0.2 0.2 1.1 1.4 Public spending 507 -1.6 0.0 0.1 1.2 0.9 Fixed gross investment 348 2.1 0.5 0.6 2.4 2.1 Inventory investment** 5 0.6 -0.6 0.1 0.0 0.0 Exports 1026 7.3 -0.1 1.2 2.2 1.8 Imports
Slide 65: Fact Book
Fact Book 65
Slide 66: Core earnings
Core earnings CORE PROFIT AND PROFIT FOR THE PERIOD The Q1-Q3 Q1-Q3 Index Q3 Q2 Q1 Q4 Q3 year DKKm 2014 2013 14/13 2014 2014 2014 2013 2013 2013 Net interest income 3,887 3,342 116 1,529 1,325 1,033 1,093 1,118 4,438 Net fee and commission income 1,135 1,226 93 360 351 424 505 367 1,731 Value adjust
Slide 67: Profit/loss
Profit/loss BREAKDOWN OF THE PERIOD'S PROFIT First nine months of 2014 First nine months of 2013 Earnings Earnings on on Core investment Reclassifi- Core investment Reclassifi- DKKm earnings portfolios cation Total earnings portfolios cation Total Net interest income 4,140 502 0 4,642 3,508 278 0 3,
Slide 68: Jyske Bank in brief
Jyske Bank in brief 68
Slide 69: Jyske Bank in brief
Jyske Bank in brief Jyske Bank focuses on core business Description Branch Network • Established and listed in 1967 • 2nd largest Danish bank by lending • Total lending of DKK 359bn • 149 domestic branches • Approx. 900,000 customers • Business focus is on Danish private individuals, SMEs and intern
Slide 70: Jyske Bank in brief: differentiation strategy
Jyske Bank in brief Jyske Bank has a differentiation strategy “Jyske Differences” • Jyske Bank wants to be Denmark’s most customer-oriented bank by providing high standard personal financial advice and taking a genuine interest in customers • The strategy is to position Jyske Bank as a visible and d
Slide 71: ROE on opening equity – 1968-2013
ROE on opening equity – 1968-2013 Pre-tax profit Average: (ROE on open. equity) 22% 61% 166% 145% 40% 30% 20% 10% 0% -10% -20% -30% 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 71
Slide 72: A great match
A great match February 24, 2014 72
Slide 73: Transaction highlights
Transaction highlights Combination of Jyske Bank and BRFkredit creates a leading Danish financial institution by combining the 3rd largest bank and the 4th largest mortgage-credit institution Combination of two highly complementary business models: offer a full range of products and services to all
Slide 74: Creating a leading Danish financial institution
Creating a leading Danish financial institution Firmly establishes Jyske Bank as one of the four major financial services groups in Denmark with a full product range Estimated Danish market shares1 Financial institutions Extensive distribution platforms and customer bases provide attractive oppo
Slide 75: Extended lending platform
Extended lending platform • Further diversifies loan book with good split between corporate, retail and mortgage lending • Attractive cross-selling opportunity of banking and mortgage-related products • BRFkredit primarily offers mortgages secured by properties in Denmark • Practically all BRFkredit
Slide 76: New Group balance sheet structure after merger with BRFkredit
New Group balance sheet structure* after merger with BRFkredit 76 76 *) Excl. deposits related to investment pools (DKK 4.9bn) and assets in investment pools (DKK 4.7bn) and other assets and liabilities of net DKK 4.7bn
Slide 77: Attractive synergy potential
Attractive synergy potential • Total run rate synergies of minimum DKK 600m per annum, of which approximately DKK 300m from cost synergies and DKK 300m from revenue synergies • The mix of synergies between cost and revenue depends on market conditions • Cost synergies expected to be achieved by 2017
Slide 78: BRFkredit and the mortgage market
BRFkredit and the mortgage market Mortgage lending by BRFkredit S&P credit ratings BRFkredit’s primary business has always been mortgage lending Rating Outlook Last change Covered bonds (SDOs) Focus on lending for housing purposes (84%) - Capital Centre E AAA Stable 17 Oct 2011 Mortgage bonds (R
Slide 79: 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,
Slide 80: Questions
Questions 80