Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2023 Earnings Presentation
40 slides from Pareto Bank Asa's earnings presentation, 2023
Slide 1: Financial Results – Second Quarter 2023
PARETO BANK Financial Results – Second Quarter 2023
Slide 2: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 2
Slide 3: Second Quarter 2023 Highlights
SECOND QUARTER 2023 Highlights • Profit after tax NOK 154.4m (NOK 133.0m in Q2-22). • Return on equity after tax 14.8 % (14.5 %). • Record high net interest income NOK 271.5m (NOK 225.8m). • Lending to customers grew by NOK 637m to NOK 18,344m. • Lending activity was high in all business areas. Grow
Slide 4: Raising Long-Term Profitability Ambition
RAISING LONG-TERM PROFITABILITY AMBITION • Profitability ambition raised to 15 % return on equity after tax (ROE) . • Higher interest rates lead to an expansion of margin ROE between lending and deposits, as well as increased return on lending and liquidity buffer. ambition • Prospects for continued
Slide 5: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 154.4 18.1 % 14.5 % 14.8 % 17.1 % 17.2 % 133.0 130.9 13.0 % Q2-22 Q1-23 Q2-23 Q2-22 Q1-23 Q2-23 30.06.2022 31.03.2023 30.06.2023 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 262.5 271.5 225.8 0.21% 0.06% 0.07% 19.7% 19.5
Slide 6: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 6
Slide 7: Income Statement
INCOME STATEMENT P&L (NOKm) Q2-23 Q2-22 H1-23 H1-22 Increased lending rate, fee income and lending growth Net interest income 271.5 225.8 534.0 433.3 all contributed to a record strong net interest income. Net other operating income -5.4 5.4 -8.4 13.6 Lending rates increased by 0.5 percentage points
Slide 8: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 5.2 7.9 11.9 1.4 12.2 14.9 Q2-23 7.6 271.5 Q1-23 262.5 9.6 200.0 Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 8 *) Other net interest income includes fee paid
Slide 9: Interest Margins
INTEREST MARGINS Lending and deposit margin Net interest margin 6.2 % 6.1 % 6.3 % 6.1 % 6.1 % 5.5 % 5.5 % 4.6 % 4.6 % 5.2 % 4.5 % 5.0 % 4.4 % 4.8 % 4.2 % 1.4 % 1.2 % 0.9 % 0.6 % 0.7 % Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Lending margin over Nibor Deposit margin over Nibor Net
Slide 10: Quarterly Change in Impairments
QUARTERLY CHANGE IN IMPAIRMENTS Impairments (NOKm) Impairments (NOKm) Q2-23 Q1-23 Stage 1 7.5 0.2 Stage 2 -4.7 6.7 36.4 Stage 3 9.4 26.5 Write-offs 0.7 2.9 Total impairments 12.9 36.4 21.0 12.9 • Tightening of macroeconomic scenarios within real estate 9.6 increased impairments in stage 1 and 2 by N
Slide 11: Changes in Stage 2 & 3
CHANGES IN STAGE 2 & 3 Stage 2 Stage 3 • Commitments on watch list, under forbearance or where there has • Commitments which are more than 90 days overdue, where the otherwise been a material increase in risk. debtor is considered unlikely to pay, or where there is objective evidence of a future los
Slide 12: Long-Term Capital Target
LONG-TERM CAPITAL TARGET • New pillar 2 capital requirement of 3.1 %. 17.2 % Down from 3.2 % and in line with 16.7 % NFSA expectation expectations. 16.7 % 16.0 % • 1.74 % must be made up of CET1 capital. Minimum requirement 15.7 % • The NFSA expects Pareto Bank to hold a P2G buffer of at least 1.0 %
Slide 13: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 13
Slide 14: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) SHIP FINANCING NOK 1,677m 8% COMMERCIAL PROPERTY RESIDENTIAL PROPERTY 24% 41% FINANCING FINANCING NOK 5,238m NOK 8,684m 27% CORPORATE FINANCING NOK 5,789m 14
Slide 15: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKm) 8,684 8,422 7,745 7,251 6,932 5,745 5,785 5,789 5,549 5,429 5,238 4,665 4,576 4,799 4,880 1,888 1,882 1,806 1,622 1,677 Residential property financing Commercial property financing Corporate financing Ship financing Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 15
Slide 16: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 8,684m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • Exposure growth of NOK 262m in Q2-23 within land financing. Land without houses 1,790 • Equity contributio
Slide 17: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 5,238m • Commercial residential includes financing of housing for rent, while commercial property includes financing of commercial property. • Exposure growth of NOK 348m within commercial residential Commercia
Slide 18: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 5,238m • Financing of cash-flow based commercial property (87 % of exposure) and development (13 %). • More conservative credit practice applied. Equity contribution depending on analysis of the underlying risk
Slide 19: Market Outlook – Real Estate
MARKET OUTLOOK Real estate Residential property Signs of a weaker secondary housing market as higher interest rates and inflation have an effect on demand. New-build projects are put on hold. Profitability is hurt by cost inflation and interest rate hikes. Pre-sale requirements are in general more d
Slide 20: Corporate Financing
CORPORATE FINANCING Exposure (NOKm) Total NOK 5,789m Credit update Total NOK 5,789m • Tailor-made financing solutions to medium-sized enterprises. • Unchanged exposure in Q2-23. • A conservative credit practice is continued. • Follow-up of a small number of customers (in stage 2 and 3) who are affec
Slide 21: Market Outlook – Corporate
MARKET OUTLOOK Corporate Pareto Bank is an attractive partner for medium-sized businesses in the Oslo region and still a small player in the large space for medium-sized corporate lending. Corporate profitability is in general under pressure due to softer demand, inflation and higher financing costs
Slide 22: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,677m • Focus on medium-sized shipowners, family offices and the investment project market. Bulk 457 LTV 43 % • Steep repayment of loans led to a small exposure growth in Industrial 263 LTV 28 % Q2-23 despite good activity. Two new offshore loa
Slide 23: Market Outlook – Shipping and Offshore
MARKET OUTLOOK Shipping and offshore Positive outlook for the dry bulk market due to a low order book for newbuilds. Uncertainty regarding demand given macroeconomic headwinds and fragile Chinese growth. Strong tanker markets with record-low order book and increased demand from longer transportation
Slide 24: Long-Term Ambitions
LONG-TERM AMBITIONS ROE Dividend 15 % min. 50 % 14.6 % 14.0 % 50.1 % 49.4 % 50.1 % 13.0 % 2020 2021 2022 2020 2021 2022 24
Slide 25: Appendix
APPENDIX Pareto bank | 15%
Slide 26: Largest Shareholders
LARGEST SHAREHOLDERS 30 June 2023 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 3,509 shareholders. 3 Hjellegjerde
Slide 27: The Share
THE SHARE Earnings per share (NOK) Book value per share (NOK) 2.03 56.09 1.84 1.79 54.04 51.83 Q2-22 Q1-23 Q2-23 Q2-22 Q1-23 Q2-23 27
Slide 28: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q2-23 Q1-23 Q4-22 Q3-22 Q2-22 Net interest income 271.5 262.5 253.5 241.8 225.8 Net other operating income -5.4 -3.0 20.7 2.3 5.4 Total net income 266.1 259.5 274.2 244.2 231.2 Total operating expenses 51.4 50.5 48.9 46.7 45.6 Operating profit before 214.7 209.0
Slide 29: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q2-23 Q1-23 Q4-22 Q3-22 Q2-22 Loans to credit institutions 2,001 2,230 747 982 1,676 Loans to customers 18,344 17,707 17,346 16,925 16,109 Bonds and other securities 3,882 3,952 4,007 3,710 3,711 Shareholdings in associated companies 23 23 23 23 23 Other assets 218 157
Slide 30: 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 31: Number of Customers
NUMBER OF CUSTOMERS Per business area Property Financing 277 Corporate Finanicng 165 Ship Financing 22 Retail (Mortgages) 13 31 Non-consolidated
Slide 32: Real Estate Financing Exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 10,846m* Geographical commercial property exposure Total NOK 3,076m* 5% 2% 3% 7% 7% Viken 15% 9% 38% 38% Oslo Oslo Vestland Vestfold & Telemark Viken Other Sweden Sweden Vestfold & Telemark Other Vestland 15% 39% 22%
Slide 33: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 11,181 Percent customer deposits of net lending to customers Senior debt 7,877 AT1 & T2 debt 1,149 64.2 % 63.0 % 60.9 % 61.0 % 60.1 % 58.3 % 58.8 % Other debt 343 7,877 7,918 Equity capital 3,918 6,561 6,754 6,399 7,183 6,038 Key funding a
Slide 34: Liquidity Buffer
LIQUIDITY BUFFER Low credit and market risk (NOKm) Comments • Cash on hand. 110 • Highly liquid bonds. • Low credit risk. 1,979 • No interest rate or foreign exchange risk. Cash (Norges Bank & DNB) • Access to central bank Bonds issued by government & PSEs 2,678 facilities and repo market. Covered b
Slide 35: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,157 281 NOK 10 - 20m 1,240 134 623 NOK 5 - 10m 959 221 Floating rate retail 325 NOK 2 - 5m 1,150 1,394 3,936 NOK 0 - 2m 1,083 1,518 Floating rate corporate 2,685 - 1,000 2,000 3,000 4,000 Floating rate Fixed rate 2,574
Slide 36: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 221 250 201 181 200 156 120 108 575 2,000 83 1,650 1,400 1,270 900 663 3M 6M 12M 2Y 3Y 5Y 2023 2024 2025 2026 2027 2028 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subord
Slide 37: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,784 56% None / very low risk 54% 7,476 53% 53% 52% 10,757 Low risk 11,350 36% 35% 35% 35% 35% 1,392 Moderate risk 2,153 189 Some risk 154 46 10% 11% 10% High risk 9% 206 7% 29 Very high risk 153 Q2-22 Q3-2
Slide 38: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 453 3% < 10 12 % 571 5,329 10 - 50 23 % 4,886 10 % 5,160 50 - 100 < 10 5,434 10 - 50 3,233 50 - 100 100 - 150 3,793 100 - 150 9% 150 - 200 2,392 150 - 200 200 - 250 2,029 > 250 1,343 200 - 250 2,212 25
Slide 39: Capital Requirements
CAPITAL REQUIREMENTS Expected as of year-end 2023 21.60% 1.00% 18.83% 3.10% 1.00% 16.74% 1.00% 2.33% 1.74% P2G Pillar 2 Pillar 1 & Buffers 17.50% 15.50% 14.00% CET1 Ratio Core Capital Ratio Capital Ratio 39
Slide 40: (Pareto bank |
(Pareto bank | 75