Nova Ljubljanska Banka D.d. · LJSE:NLBR
Nova Ljubljanska Banka D.d — Q1 2017 Earnings Presentation
60 slides from Nova Ljubljanska Banka D.d's earnings presentation, Jul 3, 2017
Slide 1: NLB Group Presentation − Q1 2017
NLB Group Presentation − Q1 2017
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION AND ITS CONTENTS ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN, OR TO ANY RESIDENT THEREOF, OR ANY JURISDICTION WHERE SUCH DISTRIBUTION IS UNLAWFU
Slide 3: Team
Team Nova Ljubljanska Banka (NLB) Blaž Brodnjak Archibald Kremser Chief Executive Officer (CEO) Chief Financial Officer (CFO) Chief Marketing Officer (CMO) 18+ 18+ • Responsible for Corporate and Retail Banking since December • Chief Financial Officer of NLB since July 2013 2012; CEO since February
Slide 4: Overview of NLB Group today
Overview of NLB Group today Investment highlights Key figures The largest banking and financial institution Balance sheet (EURm) Dec-15 Dec-16 Mar-16 Mar-17 Delta in Slovenia by total assets Total assets 11,822 12,039 11,931 12,090 1% 100% owned by the Republic of Slovenia Loans to customers (gr
Slide 5: Background to 2013 recapitalisation
Background to 2013 recapitalisation • Severe economic NLB Group’s NPL stock vs real GDP growth (EURm) contraction in Slovenia Recapitalisation measures Slovenia during 2009 – 2013 drove real GDP 3.3% -7.8% 1.2% 0.6% -2.7% -1.1% NLB’s NPLs to growth 1• Outstanding EUR184m unprecedented levels 3.684 s
Slide 6: Journey so far
Journey so far Transformation into a sustainably profitable client-oriented group, focused on core markets Overview Going forward Key initiatives implemented • Largest retail banking group by loans, deposits and Ongoing initiatives •1 Focus on core businesses to transform Retail banking number of b
Slide 7: Journey so far (continued)
Journey so far (continued) Transformation into a sustainably profitable client-oriented group, focused on core markets Key initiatives implemented 65% reduction of NPLs (NPL stock, EURm) Smaller and stronger balance sheet (EURm) NPL% 28.2% 25.6% 25.1% 19.3% 13.8% 12.7% •1 Focus on core businesses 14
Slide 8: Investment highlights
Investment highlights
Slide 9: Investment highlights of NLB Group
Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets The largest banking and financial group in Slovenia 1 113 branches(1) and 23.4%(1) market share (by total assets) Largest bank in Slovenia, leading provider of asset management(2) and a grow
Slide 10: Dominant player in the Slovenian banking sector
1 Dominant player in the Slovenian banking sector Market leader across products in Slovenia 23.3% Net loans to 4.796 customers(1) 2.033 1.949 1.827 1.755 EURm (3) 25.2% Customer 6.674 deposits(1) 3.651 2.776 2.158 1.746 EURm (3) 113 Branch 70 58 56 network(2) 26 # (3) % Market share as of Mar-17 Sou
Slide 11: Dominant player in the Slovenian banking sector: Retail banking
1 Dominant player in the Slovenian banking sector Retail banking Retail net loans Retail deposits Retail lending has been steadily growing since 2014, primarily driven by mortgages; (EURm) (EURm) Market household indebtedness remains low vs. Eurozone (22% of GDP as of 2015) (1) (1) 24.2% 23.9% 23.
Slide 12: Dominant player in the Slovenian banking sector: Corporate banking
1 Dominant player in the Slovenian banking sector Corporate banking Corporate net loans NLB key business(2) Corporate deleveraging post-crisis, volumes decreasing 8% on average (Market, EURm) gross loans (EURm) during 2014-16 Market Corporate credit demand demonstrated pick-up in 2016 as economi
Slide 13: NLB's countries of presence outside Slovenia represent attractive markets
2 NLB’s countries of presence outside Slovenia represent attractive markets, with significant growth potential NLB's SEE footprint outside of Slovenia covers 5 countries with EUR68.8bn GDP and 15.4m population Attractive growth markets, with 2.7% real GDP growth, EUR5k GDP/capita and 21% househo
Slide 14: Top position across target SEE countries
2 Top position across target SEE countries Unified brand across 6 markets since 2015 Leading franchise in the region based on total assets, compared to other banks present in the same countries, with network of 243 branches and 1.1m active clients(1) in SEE The only international banking group w
Slide 15: Consistent growth in International resulting in 14% RoE in FY'16
2 Consistent volume and revenue growth in International resulting in 14% RoE in FY’16… Net interest income (EURm) Operating expenses (EURm) PAT (EURm) CAGR C/I 14% 61% 54% 51% RoE 3.5% 10.5% 14.1% ratio 137 86 88 89 63 125 2 15 5 106 17 15 17 43 11 14 17 10 15 13 13 13 6 1 5 24 12 14 12 23 11 11 4 8
Slide 16: …with solid performance continuing in Q1'17
2 …with solid performance continuing in Q1’17 Operating profitability improvement across all markets in SEE, with 9% net operating income growth y-o-y Growing credit portfolio in all markets, with aggregate deposits balance marginally up q-o-q Reversal of pool provisions represents EUR12m of t
Slide 17: Investment highlights of NLB Group
Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets 1 The largest banking and financial group in Slovenia 2 Leading positioning in high-growth SEE markets with increasing contribution to group profit Return to solid profitability after restructur
Slide 18: Strong revenue performance driven by stable NIM and resilient fee income
3 Strong revenue performance driven by stable NIM and resilient fee income Net interest income reduced as a result of financial markets Marginal reduction in NIM in Q1'17 (Group, %) book re-pricing (Group, EURm) 498 4,3 4,1 443 4,0 3,9 389 2,7 2,6 (1) 2,5 330 340 317 2,5 100 90 80 75 1,3 -15 0,8 -20
Slide 19: Profitability improvement in all key business segments
3 Profitability improvement in all key business segments during FY'16, with reduction of non-core losses... Profitable, client-oriented group, focused on core markets Core segments consistently profitable, retail and international increasingly profitable (PBT, EURm) Gross % of Key metrics (FYE Dec-1
Slide 20: PBT growth continuing across segments in Q1'17
3 ...with PBT growth continuing across segments in Q1'17 Impairments and EURm Net operating income(1) Total costs(1) Profit before provisions provisions Profit before tax Q1’16 Retail 36 27 9 (1) 10 banking in -3% -10% 16% n/m 21% Slovenia 35 24 11 0 12 Q1’17 Q1’16 Corporate 21 12 10 2 11 banking in
Slide 21: Successful business transformation results in sustainable profitability
3 Successful business transformation results in sustainable profitability with 20% profit growth in 2016 Evolution of group profitability since 2014 (EURm) 2015 impact 2016 impact ROE 4.8% 6.6% 7.4% 14.4% 21.4% +10 +58 82 +23 +8 110 52 +15 +6 92 -5 -38 -7 Q1'16 Q1'17 62 -23 Key y-o-y drivers incom
Slide 22: 6% annualised cost reduction driven by network optimisation
3 6% annualised cost reduction driven by network optimisation, HQ personnel and non-personnel reductions and Non-Core Impressive cost reduction across the board (Group, EURm)… …with trend continuing in Q1’17 (Group, EURm) Cost / Income Cost / Income ratio 74.1% 60.9% 60.9% ratio 57.1% 51.5% 368 % CA
Slide 23: Double-digit increase in profit before tax since 2014
3 Double-digit increase in profit before tax since 2014 Normalising NLB Group profit before tax (Group, EURm) One-off items • Exceptional items: Q1’17: • EUR9.5m gain from sale of Petrol shares and EUR1.2m Triglav settlement 2016: 162 • EUR7.8m gain on sale of Visa Europe to Visa Inc. 131 Project •
Slide 24: Funding structure driven by deposits and wholesale markets access
4 Funding structure driven by deposits and complemented by established wholesale markets access Deposits accounting for 90% of funding (EURm) Strong retail franchise provides stable and price L/D 76% 75% 74% 74% insensitive deposits base (EURm) ratio 9.439 9.514 Mar-17 8.949 9.026 Term 41% 10.540 10
Slide 25: Well capitalised franchise with solid capital position
4 Well capitalised franchise with solid capital position… Highest quality capital (CET1) at Group and NLB d.d.(1), reaching 16.7% in Mar-17 (calculated excluding Q1’17 net profit, equivalent to 1% of RWAs) Marginal increase in credit RWAs in Q1’17, as a result of increased retail and governmenta
Slide 26: …and available options for capital optimisation
4 …and available options for capital optimisation NLB’s capital structure comprises entirely of CET1 capital Subject to regulatory and shareholder approvals, NLB could proceed to reduction of CET1 capital via distribution of retained earnings and share buybacks while raising Tier 2 debt Key cond
Slide 27: Core foreign banks represent a self-funded source of profits
4 Core foreign banks represent a self-funded source of profits, with solid capital adequacy International contributes 45% of Group profit (Q1’17) Core foreign banks self-funded by design Foreign (L/D ratio(1), Mar-17)(2) Foreign strategic strategic markets markets 45% 32% EUR2.5bn 80,1% 78,0% 77,8%
Slide 28: Investment highlights of NLB Group
Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets 1 The largest banking and financial group in Slovenia 2 Leading positioning in high-growth SEE markets with increasing contribution to group profit 3 Return to solid profitability after restruct
Slide 29: Diversified loan portfolio
5 Diversified loan portfolio Dominated by Slovenian assets, focused on core markets and cautious risk taking Credit portfolio by segment and geography • No large concentration in any specific industry or client (Group, Mar-17) segment Serbia Kosovo Institutions 4% • NLB’s lending strategy focuses on
Slide 30: NLB has driven a turnaround in asset quality
5 NLB has driven a turnaround in asset quality Further improvements driven by active NPL management and economic recovery Gross NPL formation has been low Active workout drove gross NPL ratio Reduction of NPLs remains a key since 2014 (Group, EURm) down despite falling loan volumes focus Formation /
Slide 31: Project Pine: Disposal of ca EUR500m of non-performing exposures
5 Project Pine: Disposal of ca EUR500m of non-performing exposures Slovenia Corporate Slovenia Retail • Corporate NPL loans of • Total consumer NPL Transaction overview and rationale gross book value loans of gross book value of EUR396m of EUR104m Competitive tender process, run by Perimeter inter
Slide 32: NPLs adequately covered by provisions and collateral
5 NPLs adequately covered by provisions and collateral, with limited off balance sheet non-performing exposures Total coverage exceeds 100% across segments Limited non-performing exposures from off-balance sheet items (~EUR108m) Group NPL structure (Mar-17, EURm) Corporate (Mar-17) Retail State
Slide 33: Investment highlights of NLB Group
Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets 1 The largest banking and financial group in Slovenia 2 Leading positioning in high-growth SEE markets with increasing contribution to group profit 3 Return to solid profitability after restruct
Slide 34: We have a clear strategy to address current challenges
6 We have a clear strategy to address current challenges Key trends and challenges Key priorities Focus on customer experience Omni-channel product distribution Sector and regulation Macro Partnership programmes End-to-end customer solutions • Regulatory interventions • Low interest rate envir
Slide 35: Medium-term objectives
6 Medium-term objectives Delivering growth, sustainable returns and attractive payout to shareholders Drivers Targets(1) Q1’17 Medium term Ongoing economic recovery in Slovenia and international markets NIM 2.5% >2.7% Improving macro Improved consumer confidence environment Rebound from low in
Slide 36: Investment highlights of NLB Group
Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets The largest banking and financial group in Slovenia 1 113 branches(1) and 23.4%(1) market share (by total assets) Largest bank in Slovenia, leading provider of asset management(2) and a grow
Slide 37: Appendix A
Appendix A Slovenia macro and banking backdrop
Slide 38: Slovenia: Fully integrated into European institutions
Slovenia: Fully integrated into European institutions Member of the EU and the Eurozone EUR 39.8bn 2.5% nominal GDP real GDP growth Export-driven economy with value- EUR 19k 8.1% added export goods GDP/capita vs EUR unemployment rate(2) 11k CEE average(1) Well educated labour force 79.7% -1.5%
Slide 39: Slovenian economy growing at 2.5% driven by exports and private consumption
Slovenian economy growing at 2.5% compared to 1.6% Eurozone growth, driven by exports and private consumption Real GDP growth Macro update • Slovenian economy grew by 2.5% in 2016 – stronger 3,0% 2,9% than Eurozone average of 1.6% and outperforming 2,5% 2,5% Apr-16 IMF estimate (1.9%) 2,0% 1.6% Euro
Slide 40: Strong progress with structural reforms
Strong progress with structural reforms Key reforms implemented Privatisations attracted foreign investment Measures Asset Sector Investor Date EURm Adoption of the fiscal rule requiring balanced budget over the Airlines 4K Invest Jan-16 n/a medium term(1) Fiscal Infrastructure Linetech Nov-15 n/a
Slide 41: Slovenian banking sector turnaround
Slovenian banking sector turnaround with vastly improved funding, asset quality and capital position Sector NPE ratio evolution(1) Overview of 2013 extraordinary measures • Significant contraction of economic activity since 2009 14.4% 13.4% paired with high indebtedness of corporate sector drove 11.
Slide 42: Pick-up in corporate loans lending while interest rates remained stable
The banking system has seen a pick-up in corporate loans lending while interest rates remained stable Retail and corporate loan growth (%) Resurgence of corporate loans and steady 9,3 growth in retail loans 8,9 8,9 • Corporate loans stock increased by 7.1% in February 8,6 +5.6% 2017, from its Septem
Slide 43: Appendix B
Appendix B Additional information
Slide 44: Update on EC restructuring plan commitments
Update on EC restructuring plan commitments On 11 May 2017, the European Commission announced that final approval has been granted for the Slovenian state's request for a more gradual sale of its stake in NLB Commitment Status Reduction of balance sheet Ongoing State aid: Commission authorises m
Slide 45: NLB IT highlights
NLB IT highlights Infrastructure supports business requirements with an integrated architectural approach, providing robust operations and high availability, with rigorous cost control Market leader in Slovenia, with regionally competitive mobile and e-banking solutions, and branch 1 office front-en
Slide 46: Appendix C: Asset quality
Asset quality vo } NLB Group en
Slide 47: Comprehensive Group Strategy towards NPE reduction
Comprehensive Group Strategy towards NPE reduction Solid underlying Group capabilities Key strategies A Liquidation of collateral Dedicated units Corporation collaboration with specialised real estate team (GREAM) Restructuring Task Force for to evaluate optimal strategy for complex cases reposse
Slide 48: Demonstrated impact to asset quality
Demonstrated impact to asset quality Impact on NPL ratio (Dec-13 to Mar-17, Group, EURm) 25.6% 456 12.7% Comments -84 • Cured clients, collections and 2.798 21 collateral liquidation contributed 36% of NPL NPLs from loans granted since -660 stock reduction since Dec-13 2014(1) -143 • Sale of NPL por
Slide 49: Minimised new NPL formation and high quality of new production
Minimised new NPL formation and high quality of new production Gross NPL formation (EURm) Total NPL formation (Group, EURm) Corporate and SME Front Formation Legacy 94 as % of 0 gross 2.2% 1.2% 1.4% 0.1% 60 0 loans 94 32 1 60 Core Slovenia 32 0 Front 225 0 4 2014 2015 2016 Q1'17 Legacy Front Legacy
Slide 50: NPL cash and total coverage increased to 76% and 135%
NPL cash and total coverage increased to 76% and 135%, respectively, in Mar-17 Coverage for the Group (%) Corporate & SME 126% 134% 130% 119% 65% 66% 72% 69% 134% 135% 123% 128% 54% 60% 61% 61% Core Slovenia Dec-14 Dec-15 Dec-16 Mar-17 56% 58% 59% 54% Cash coverage Collateral coverage 123% 134% 134%
Slide 51: Appendix D: Financial statements
Appendix D Financial statements
Slide 52: Key financial data and performance: NLB Group (1/2)
Key financial data and performance NLB Group (1/2) FY’14 FY’15 FY’16 Q1-16 Q1-17 Net interest income 330 340 317 80 75 Net fee and commission income 148 147 146 35 37 Income from financial operations 38 4 20 7 14 Other Income (5) (8) (7) 3 4 Operating Income 511 483 476 124 131 Staff costs (163) (16
Slide 53: Key financial data and performance: NLB Group (2/2)
Key financial data and performance NLB Group (2/2) Dec-14 Dec-15 Dec-16 Mar-17 ASSETS Cash and balances with Central Banks 1,128 1,162 1,299 1,520 Financial instruments(1) 2,529 2,578 2,778 2,631 Loans and advances to banks (net) 271 432 436 411 Loans and advances to customers 7,415 7,088 6,997 7,00
Slide 54: Key financial data and performance: NLB d.d. (1/2)
Key financial data and performance NLB d.d. (1/2) FY’14 FY’15 FY’16 Q1-16 Q1-17 Net interest income 227 208 175 46 39 Net fee and commission income 101 98 95 23 24 Income from financial operations 34 9 13 5 12 Other Income 3 (2) 0 3 4 Operating Income 364 313 284 76 80 Staff costs (102) (102) (103)
Slide 55: Key financial data and performance: NLB d.d. (2/2)
Key financial data and performance NLB d.d (2/2) Dec-14 Dec-15 Dec-16 Mar-17 ASSETS Cash and balances with Central Banks 434 497 617 888 Financial instruments(1) 2,038 2,087 2,295 2,118 Loans and advances to banks (net) 159 345 408 364 Loans and advances to customers 5,700 5,221 4,929 4,881 Investme
Slide 56: Structure of NLB Group
Structure of NLB Group NLB Group Core Slovenia sub-segments Foreign Strategic NLB d.d. Non-bank Retail(2) Markets CFO line CRO line CMO line Core foreign banks NLB Banka, Belgrade Financial markets Retail sales NLB Banka, Podgorica Investment Banking Distribution network(1) NLB Skladi and Custody NL
Slide 57: Segment profitability – Q1'17
Segment profitability – Q1’17 Contribution to NLB Group Net Operating Income Q1’17 Contribution to Core NOI (1) 1,3 131,8 Foreign Retail 18,1 45,6 112,4 Strategic banking markets in Slovenia 41% 31% 13,5 18,0 EUR112m 35,2 Financial Corporate Retail Corporate Financial Foreign Core markets Non-Core O
Slide 58: Key segment financials – Q1'17
Key segment financials – Q1’17 Core markets and activities NLB Corporate Financial Foreign Non-Core Other(3) Retail banking Group EURm in Slovenia banking in markets in Strategic Total Slovenia Slovenia markets P&L (Q1’17) Net interest income 17.2 10.0 9.6 34.9 71.7 3.7 (0.1) 75.3 Net non-interest i
Slide 59: Segment profitability – FY'16
Segment profitability – FY’16 Contribution to NLB Group Net Banking Income 2016 Contribution to Core NBI 483.9 448.2 26.3 (1) Foreign Retail 9,4 479,8 179,4 444,1 26,3 Strategic banking markets in Slovenia 40% 32% 78.9 50,2 139.8 76,8 EUR444m 137,8 Financial Corporate Retail Corporate Financial Fore
Slide 60: Key segment financials – FY'16
Key segment financials – FY’16 Core markets and activities NLB Corporate Financial Foreign Non-Core Other(3) Retail banking Group EURm in Slovenia banking in markets in Strategic Total Slovenia Slovenia markets P&L (FY’16) Net interest income 71.2 45.9 48.5 136.9 302.6 15.4 (0.7) 317.3 Net non-inter
Nova Ljubljanska Banka d.d. — Q1 2017 Earnings Presentation on 6ix