Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q2 2017 Earnings Presentation
49 slides from Jyske Bank A/S's earnings presentation, Aug 22, 2017
Slide 1: Jyske Bank Q2 2017
Jyske Bank Q2 2017 22 August 2017
Slide 2: Our targets
Our targets Q2 2017 • Delivering an attractive long-term return on equity of 8-12% 8.0% • Volume growth DKK 88.0bn • DKK 100bn in housing-related loans • DKK 20bn in property loans for corporate clients DKK 15.8bn • Maintaining a strong capital position 19.4% and – Long-term targets for capital rati
Slide 3: 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 11% – Danish play – Approx. 890,000 customers – Nationwide branch network comprised of 95 personal client branches, 30 corporate br
Slide 4: Jyske Bank in brief
Jyske Bank in brief Jyske Bank Group key figures Profit Net Shareholders' ROE after tax, Loans and Total before tax, profit, equity at year- opening advances, Deposits, assets, Number of DKKm DKKm end, DKKm equity DKKbn DKKbn DKKbn FTEs 1997 584 443 4,772 11.5% 36.6 41.5 63.1 2,671 1998 710 511 5,17
Slide 5: Q2 2017 highlights
Q2 2017 highlights • Jyske Bank delivers a net profit of DKK 639m, equal to ROE 8.0% p.a. – Continued growth in new home loans, total volume of DKK 88.0bn end of Q2 (end-2016: DKK 79.5bn), increasing volume in traditional bank loans and bank deposits – Core income above DKK 2bn. Stable NII compared
Slide 6: Less tail wind from financial markets, lower ROE
Less tail wind from financial markets, lower ROE • Delivering a net profit of DKK 639m and ROE of 8.0% p.a. in Q2 Net profit 2017 1,400 21% DKKm 1,200 18% 1,000 15% • A decrease of 4.3 percentage points compared to Q1 2017 due to 800 12% primarily: 600 9% 400 6% – Lower value adjustments and investm
Slide 7: Jyske Bank Group
Jyske Bank Group • Growth in mortgages and home loans continues at slightly lower pace Financials • Bank loans increase by 2% compared to Q1. Bank deposits up 1% 2,500 DKKm • Positive development in AUM 2,000 1,500 • Core income decreases as value adjustments become more moderate 1,000 • Core expens
Slide 8: NII: Signs of stabilization
NII: Signs of stabilization • Small positive variance when comparing Q2 to Q1 2017: Q2 2017 vs. Q1 2017: Development in NII 1,450 – NII supported by DKKm • Growth in home loans and mortgages as well as leasing 1,400 activities • 1 day more in Q2 than Q1 1,350 • Changes in amortization period for up-
Slide 9: Net fee income continues at high level
Net fee income continues at high level • Net fee income in Q2 2017 of DKK 420m – down from DKK 447m in Net fee income Q1 2017 but still more than 20% up compared to Q2 2016. The 500 DKKm improved performance can be attributed to: 400 – Banking activities: Primarily investment related fee income, sec
Slide 10: Stable trend in core expenses excl. one-offs
Stable trend in core expenses excl. one-offs Q2 2017 vs. Q1 2017: Development in core expenses • Underlying development in core expenses stable 1,500 DKKm 1,450 1,400 1,350 • Core expenses in Q2 2017 at level with Q1 2017: 1,300 1,250 • Both quarters affected by one-offs. In Q2 2017, one-offs of DKK
Slide 11: Banking activities
Banking activities • Increasing volume in bank loans and stable bank deposits Financials • Positive development in AUM 1,800 DKKm 1,600 1,400 • Core income at level with Q2 2016 but lower than previous quarters 1,200 1,000 as value adjustments become more moderate 800 • Core expenses remain at high
Slide 12: Mortgage activities
Mortgage activities • Growth in all lending segments - most significant in Private and Financials 600 Commercial segment DKKm 500 400 • Core income stable – NII grows as volume grows, net fee income 300 significantly higher than Q2 2016 but lower than Q1 2017 200 • Core expenses as expected incl. on
Slide 13: Leasing activities
Leasing activities Financials • Loan volumes continue to increase 150 DKKm 130 • Core income lower due to adjustment of residual values 110 90 on operating leases 70 • Core expenses develop as expected 50 30 10 • Minor increase in impairment charges, however still at -10 Q2 2016 Q3 2016 Q4 2016 Q1 2
Slide 14: Investment portfolio earnings at more moderate level
Investment portfolio earnings at more moderate level Investment portfolio earnings, quarterly • More moderate investment portfolio earnings after 3 quarters’ 400 elevated earnings DKKm 350 300 – Nordjyske Bank share priced at 115 end of Q2, equal to 250 the price end of Q1. Thus, no value adjustment
Slide 15: Capital Markets' activities
Capital Markets’ activities 15
Slide 16: Capital Markets' activities
Capital Markets’ activities • Capital Markets is the only business unit in Jyske Bank that is actively engaged in taking on and hedging of various market risks – Market risks embedded in other business units’ business models are constantly monitored and hedged though Capital markets • Three objectiv
Slide 17: Strategic ALM and risk management
Strategic ALM and risk management • Strategic ALM and risk management is comprised of a liquidity bond portfolio as well as derivatives used for hedging purposes STRATEGIC ALM AND RISK MANAGEMENT DKKm Q2 2017 Q1 2017 Q4 2016 Q3 2016 Q2 2016 – Overall, limited interest rate risk Net interest income 6
Slide 18: Capital
G JYSKE BANK Capital 18
Slide 19: Adjusting to long-term capital targets
Adjusting to long-term capital targets • Capital ratio 19.4% and CET1 ratio 16.5% end of Q2 2017 vs. long-term Capital ratios targets of 17.5% and 14%. Increase due to inclusion of Tier 2 capital issued 25 early April and current profit pct 20 • Gradual adjustment of the capital structure towards ta
Slide 20: Strong capital position
Strong capital position Capital ratio and CET1 ratio • Capital ratio 19.4% and CET1 ratio 16.5% end of Q2 2017 compared to 20 18.3% and 16.5% end of 2016. Changes in capital ratios due to: 1.8 18 1.1 – Deduction of ordinary and extraordinary dividends as well as share 16 2.5 16.5 buy-backs 14 1.5 –
Slide 21: Credit Quality
G JYSKE BANK Credit Quality 21
Slide 22: Net reversals
Net reversals Loan impairment charges (under core profit) • Net reversals of DKK 75m under core profit 100 – Of which reversals on agriculture DKK 81m DKKm 50 0 -50 • Total balance of management’s estimate of DKK 488m end of Q2 2017, -100 of which DKK 120m relate to agriculture, compared to DKK 471m
Slide 23: Reversals on agriculture
Reversals on agriculture • Decreasing impairment ratios for both dairy and pig farmers, Commodity prices 43% and 24% respectively end of Q2 2017 versus 45% and 26% end of Q4 2016 3.5 13 12.5 3.25 12 • Commodity price development: 3 11.5 DKK/kg – Pork: Prices reached a new high of 11.6 DKK/kg in June
Slide 24: Growth in home loans continues to improve quality of portfolio
Growth in home loans continues to improve quality of portfolio • The majority of loans were granted to existing clients of Jyske Bank home loan portfolio by product type the bank. Volume primarily stems from repatriation of 100% 90% loans previously referred to Totalkredit 80% 70% 60% • 85% in credi
Slide 25: 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 – No lending to agriculture and other primary production • Increasing share of retail lending – Primarily driven by joint funding of Jyske Ban
Slide 26: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1,8% 600 50 Private 45 1,6% Commercial 500 40 1,4% Subsidised 35 1,2% 400 30 1,0% 300 25 0,8% 20 0,6% 200 15 0,4% 10 100 0,2% 5 0,0% 0 0 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q2 2014 Q
Slide 27: Bank loans: the portfolio
Bank loans: the portfolio • Portfolio composition end of Q2 2017: Balance of loan – Corporates take up larger proportion, 58% vs. 53% Loans, advances and guarantees impairment charges Losses Impairment charges end of Q4 2016 as volume grows Q2 2017 Q4 2016 Q2 2017 Q2 2017 Q2 2017 – Private individua
Slide 28: Bank loans: Improved credit quality
Bank loans: Improved credit quality • Only minor changes between customer segments in bank loan portfolio the past 3 years Bank loans excl. repo loans 180 DKKbn • Improved credit quality within segments: 160 140 – Retail: 66% in STY 1-5 rating classes end of 2016 vs. 63% end of 120 2013 100 80 – Com
Slide 29: Appendices
Appendices: 1) Danish Economy 2) Jyske Bank Q2 2017 results 3) Liquidity 4) NPLs 29
Slide 30: Danish Economy
G JYSKE BANK Danish Economy 30
Slide 31: Danish Economy Summary
Danish Economy Summary • The upturn in the Danish economy is expected to continue • GDP-growth is equal to the Euro-area in recent years • Employment is up 5% since 2012 • Low interest rates, increasing house prices and export market growth stimulates demand. Export competitiveness looks healthy • T
Slide 32: Danish economy – an upturn story
Danish economy – an upturn story • Overall the Danish financial sector’s operating environment is improving The upturn is set to continue over the next years The private sector is driving the 4% increase in employment 32
Slide 33: 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 Interest rates are at a historic low Demand has increased 33
Slide 34: Improved asset quality as defaults have normalized
Improved asset quality as defaults have normalized Unemployment is relatively low Forced house sales well below 500 properties Business bankruptcies are back to normal per month (less than 0.2% per year) 34
Slide 35: 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 Net Financial Wealth-to-Income,
Slide 36: 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 And public sector debt is low This is why Denmark is AAA 36
Slide 37: Lately more modest increase in house prices
Lately more modest increase in house prices The Copenhagen area is still in front There is a risk that very low interest rates may overheat local parts of the market However, the new housing tax model can possibly have a dampening effect House prices increased 0.5% in Q1 Real house prices are up sin
Slide 38: Jyske Bank Q2 2017 results
G JYSKE BANK Jyske Bank Q2 2017 results 38
Slide 39: Q2 2017 results
Q2 2017 results • Net profit of DKK 639m (corresponding to ROE of 8.0% p.a.) CORE PROFIT AND PROFIT FOR THE PERIOD Index Index DKKm Q2 2017 Q2 2016 17/16 Q2 2017 Q1 2017 Q2/Q1 • Core income driven by: Net interest income 1,386 1,448 96 1,386 1,370 101 – NII supported by growth strategy and negative
Slide 40: Value adjustments become more moderate
Value adjustments become more moderate • Value adjustments at a level with less impact from clients’ Value adjustments under core income transactions relating to interest rate hedging (swaps) and lower bond 350 holdings dampening the P&L effect of narrowing of OAS spreads (credit DKKm 300 spreads on
Slide 41: Liquidity
G JYSKE BANK Liquidity Al
Slide 42: Ample liquidity
Ample liquidity Group Liquidity buffer • Liquidity buffer DKK 72bn end of Q2 2017 (DKK 77bn end of 2016) 90 DKKbn – 89% of the buffer - DKK 64bn - is eligible for repo transactions at 80 central banks (Nationalbanken or ECB) 70 60 – Cash placements are categorized as eligible at Nationalbanken or 50
Slide 43: A frequent EUR issuer
A frequent EUR issuer Ongoing access to a diversified European investor base helps Jyske Redemption profile 9 Bank maintain a prudent risk – and funding – profile 8 7 • Jyske Bank: 6 5 DKKbn – Short term ongoing activities in French CP 4 – At least one senior unsecured EUR public benchmark per 3 yea
Slide 44: Non-performing loans
G JYSKE BANK Non-performing loans 44
Slide 45: Non-performing loans
Non-performing loans • At group level NPLs amounted to 3.2% of loans and advances at the end of Q2 2017 • Jyske Bank has been submitting information about non-performing loans (NPLs) since end of Q3 2014 • Jyske Bank has chosen to apply EBA’s technical standards as definition for NPLs • NPLs compris
Slide 46: NPLs – Jyske Bank Group
NPLs – Jyske Bank Group JYSKE BANK GROUP DKKm 2017 Q2 2017 Q1 2016 Q4 2016 Q3 2016 Q2 Carrying amount 453,526 441,941 438,592 426,124 422,554 Balance of loan impairments charges and provisions for guarantees 5,710 5,790 5,937 6,497 6,715 Balance of discounts for acquired assets 714 782 879 1,144 1,2
Slide 47: NPLs – Banking activities
NPLs – Banking activities BANKING, DKKm 2017 Q2 2017 Q1 2016 Q4 2016 Q3 2016 Q2 Carrying amount 156,366 153,146 160,159 150,857 153,562 Balance of loan impairments charges and provisions for guarantees 4,858 5,007 5,182 5,723 5,980 Balance of discounts for acquired assets 325 383 451 523 553 Gross c
Slide 48: NPLs – Mortgage activities
NPLs – Mortgage activities MORTGAGE, DKKm 2017 Q2 2017 Q1 2016 Q4 2016 Q3 2016 Q2 Carrying amount 297,160 288,794 278,433 275,267 268,992 Balance of loan impairments charges and provisions for guarantees 851 783 755 774 735 Balance of discounts for acquired assets 389 399 428 621 683 Gross carrying
Slide 49: 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,