Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — FY2018 Earnings Presentation
49 slides from Jyske Bank A/S's earnings presentation, Feb 26, 2019
Slide 1: Jyske Bank 2018
Jyske Bank 2018 26 February 2019
Slide 2: Our targets
Our targets 2018 Return on Equity • Delivering an attractive long-term return on equity of 8-12% excl. IFRS 9 related effects ROE 8.6% • Considering the current market conditions in 2019, Jyske Bank aims to deliver a ROE on avg. equity of 6-10% after tax Volume 2020 DKK 326bn • Total loan portfolio
Slide 3: Highlights 2018
Highlights 2018 New payment solutions: VISA mobil, Apple Pay and Google Pay A solution no matter which phone or device the clients wish to use In 2018, the solutions were also made avail- able for non-clients through a simple online account-opening procedure The best home loan products In 2018, BRFk
Slide 4: Strategy – foundation and focus areas
Strategy – foundation and focus areas Relationship bank in a digital world Continuous improvement of competitive strength Continued growth within investment, trading and wealth Sustainable business models for the Jyske Bank Group 4
Slide 5: Sustainable business models – also in the future
Sustainable business models – also in the future • Global targets for a joint sustainable development have been defined – The Paris Climate Change Agreement – The UN 2030 Agenda for Sustainable Development • Future EU rules (”Sustainable Finance”) is a reflection that the role of the financial secto
Slide 6: Corporate social responsibility
Corporate social responsibility • Being one of the largest financial groups in Denmark, Jyske Bank has, as a business enterprise, an obligation to society • In all respects, Jyske Bank attempts to run a responsible, orderly and proper business in accordance with the Group’s values and with regard to
Slide 7: Financials
{3 JYSKE BANK Financials 2018
Slide 8: 2018 highlights
2018 highlights • Net profit of DKK 2,500m, equal to ROE 7.6% ― Excl. IFRS9 effects net profit of DKK 2.8bn and ROE of 8.6% Core profit and profit for the period DKKm Index Index Business volumes: 2018 2017 18/17 Q4 2018 Q3 2018 Q4/Q3 ― Compared to 2017 loan growth in all segments except for Net int
Slide 9: ROE remains under pressure
ROE remains under pressure Net profit 3,500 14% • Net profit in 2018 of DKK 2,500m and ROE of 7.6% DKKm 3,000 12% • Excl. effect of IFRS 9 net profit of DKK 2,817m corresponding to ROE of 8.6% in 2018 2,500 10% 2,000 8% 1,500 6% 1,000 4% 500 2% 0 0% 2014 2015 2016 2017 2018 Profit ROE (after tax) Ro
Slide 10: Underlying development in NII stable …
Underlying development in NII stable … Q4 2018 vs. Q3 2018: Development in NII … but overshadowed by decline in NII from strategic balance and risk management and trading activities 1,450 DKKm 1,400 1,350 • In Q4 2018 NII is: 1,300 • Supported by: 1,250 • Loan growth in mortgage and leasing activiti
Slide 11: Net fee income dampened by financial markets
Net fee income dampened by financial markets • Net fee income in Q4 2018 of DKK 506m – up by 14% relative to Q3 2018 Fee income split by type and down by 22% relative to Q4 2017 800 800 DKKm • Q4 seasonality in investment related fee income negatively 600 600 affected by the development in financial
Slide 12: Value adjustments back in negative territory
Value adjustments back in negative territory Value adjustments under core income • Value adjustments under core income amounted to DKK -49m – down by 150 DKK 181m compared to Q3 2018 due to: DKKm 100 • DKK 79m in one-offs in Q3 2018 re. early redemption of issued bonds and effects of implementation
Slide 13: Core expenses reduced by one-offs in Q4 2018
Core expenses reduced by one-offs in Q4 2018 Q4 2018 vs. Q3 2018 Development in core expenses (Group) 1,300 DKKm • Core expenses in Q4 2018 at DKK 1,232m – down by DKK 17m 1,250 compared to Q3 2018 due to: 1,200 • Lower number of FTEs 1,150 • One-offs in Q4 2018 – DKK 65m reduction re. employee cost
Slide 14: Impairment charges driven by corporates
Impairment charges driven by corporates • Net impairment charges of DKK 468m under core profit: Loan impairment charges (under core profit) ― Excl. IFRS 9 effects DKK 61m 500 ― Underlying development primarily driven by corporate clients DKKm 400 ― In general, fewer reversals than in 2017 – most sig
Slide 15: Asset quality - Group level
Asset quality - Group level Portfolio by types (total portfolio excl. repo loans) • Overall, growth in loan volume of 3% 100% 4% 4% ― Excl. repo loans growth in loan volume of 4% 90% 26% 24% ― Growth driven by loans for corporate clients, primarily 80% mortgage loans 70% 60% 50% • Development in loa
Slide 16: Limited exposure to agriculture
Limited exposure to agriculture Agriculture excl. fishing (DKKm/%) Loans, advances and Balance of impairment • Limited exposure as agriculture excl. fishing accounts for approx. 1% Impairment ratio guarantees charges of the Group’s loans and guarantees 2018 2017 2018 2017 2018 2017 • Impairment rati
Slide 17: Investment portfolio earnings close to zero
Investment portfolio earnings close to zero Investment portfolio earnings , quarterly • The investment portfolio earnings continue to generate modest returns 500 • Q4 2018 slightly better than Q3 2018 but still adversely affected DKKm 400 by widening of credit spreads and pull-to-par effects 300 200
Slide 18: Capital and Liquidity
{3 JYSKE BANK Capital and Liquidity
Slide 19: Strong capital position
Strong capital position Capital ratios • Capital ratio 20.0% and CET1 ratio 16.4% end of 2018 vs. long-term targets of 17.5% and 14% post-Basel IV implementation 25 pct – Capital structure almost aligned with long-term targets incl. 20 expected effect of Basel IV – Excess capital inclusive of growth
Slide 20: Future regulation
Future regulation Expected fully phased-in capital ratios • Long-term capital targets based on fully implemented Basel IV capital requirements: 20 Percent 0.0 – Capital ratio 17.5% and CET1 ratio 14% 18 1.6 – Capital ratios to remain above long-term targets given 16 1.0 upcoming capital requirements
Slide 21: Liquidity is still ample
Liquidity is still ample Group liquidity buffer • Liquidity buffer DKK 64bn end of 2018 (DKK 73bn end of 2017) 80 DKKbn ― 91% of the buffer - DKK 58bn - is eligible for repo 70 11% transactions at central banks (Nationalbanken or ECB) 60 9% ― Cash placements are categorized as intra-day eligible 50
Slide 22: The Group has become a frequent EUR issuer
The Group has become a frequent EUR issuer Jyske Bank redemption and call date profile 12 DKKbn Jyske Bank • Short term ongoing activities in French CP 10 8 • From 2011 and 2018 the Group issued one senior unsecured (Preferred Senior) EUR public benchmark a year (focus on 3-5 year 6 maturities) 4 •
Slide 23: MREL overview
MREL overview Total DKK 58.7bn (31.2 %) 32% 30% 28% Total DKK 52.1bn (27.7%) 8.5% Total DKK 48bn 26% 3.5% (DKK 16bn) (DKK 6.6bn) Mortgage 24% activities % of Group REA end of Q4 2018 22% loss absorption + 2.6% 6.2% 20% recapitalisation 2.0% (DKK 11.8bn) 18% 1.6% 16% Total DKK 29.8bn (15.8 %) 14% 5.0
Slide 24: Appendices
Appendices: 1) Jyske Bank in brief and business segments 2) Asset Quality 3) Danish Economy Q4 2018
Slide 25: 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 12% • Danish play • Approx. 865,000 customers • Nationwide branch network comprised of 92 personal client branches, 32 corporate br
Slide 26: Jyske Bank in brief – key figures
Jyske Bank in brief Jyske Bank Group key figures Profit Shareholders' ROE after Loans and Total before tax, Net profit, equity at year- tax, average advances, Deposits, assets, Number DKKm DKKm end, DKKm equity DKKbn DKKbn DKKbn of FTEs 1997 584 443 4,772 9.6% 36.6 41.5 63.1 2,671 1998 710 511 5,173
Slide 27: Banking activities
Banking activities Financials 1,600 DKKm 1,400 • Continued growth in bank loans compared to 2017 but stable 1,200 development compared to Q3 2018 1,000 • Minor decrease in bank deposits 800 600 • Decrease in AUM due to negative returns 400 200 • Lower core income and stable core expenses 0 • Impairm
Slide 28: Mortgage activities
Mortgage activities Financials 600 DKKm 500 • Continued growth in volume – both home loans and mortgages for 400 corporate clients 300 • Core income stable compared to Q3 2018 level 200 100 • Stable development in core expenses 0 • Growth in core profit due to reversal of impairments in Q4 2018 Q4 2
Slide 29: Leasing activities
Leasing activities Financials (Leasing) 160 DKKm 140 120 • Loan volumes continue to increase and support NII 100 • Stable core expenses 80 60 • Decrease in core profit primarily due to impairment charges and 40 lower income from operational leases 20 0 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Core ex
Slide 30: Mortgages: The portfolio
Mortgages: The portfolio Distribution of lending portfolio • 87% of lending to properties with housing purposes 1% 1% 0% ― No loans with swaps to co-operative housing Owner-occupied (51%) ― No lending to agriculture and other primary 11% production Vacation homes (3%) Cooperative (5%) 15% Private re
Slide 31: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 500 50 1.8% Value of repossessed proporties (DKKm) Private Number of repossessed proporties 1.6% Commercial 400 40 1.4% Subsidised 1.2% 300 30 1.0% 0.8% 200 20 0.6% 0.4% 100 10 0.
Slide 32: Bank loans: the portfolio
Bank loans: the portfolio Loans and guarantees by sector • Portfolio composition end of Q4 2018: % ― Corporates take up larger proportion, 63% vs. 58% Loans, advances and Balance of loan Losses Impairment end of 2017 as volume grows guarantees impairment charges charges Q4 2018 Q4 2017 Q4 2018 Q4 20
Slide 33: Danish Economy February 2019
Danish Economy February 2019
Slide 34: Headlines on the Danish Economy
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream Headlines on the Danish Economy • We expect the upturn in the Danish economy to continue in 2019 • Low interest rates, increasing house prices and job growth stimulates
Slide 35: Danish economy – an upturn story
Danish economy – an upturn story • Overall the Danish financial sector’s operating environment is still improving • Small setback in growth in 2018 due to weaker export. Still, employment data is solid The upturn will continue, but slowdown Lending growth is still picking up slowly Source: Source: 3
Slide 36: 3 kinds of stimulus support demand
3 kinds of stimulus support demand House prices recovering after burst in 08/09 Steady rise in employment Source: Source: Interest rates are at a historic low Consumption is solid, while export slows after sharp upturn Source: Source: 36
Slide 37: Spill-over from recent European weakness
Spill-over from recent European weakness • There is spill-over to Denmark from weaker economic signals out of Europe. But no significant change in positive overall picture. Lower sentiment in manufacturing, but no dramatic change Business confidence 20 105 10 100 0 95 Index Index -10 90 -20 85 -30 8
Slide 38: The labour market performance is strong
The labour market performance is strong • The labour force is increasing from foreign labour supply and a higher retirement age. Foreign labour accounts for +40 % of rise in employment Lack of labour supply has stopped accelerating Source: Source: 38
Slide 39: Improved asset quality as defaults have normalized
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream Improved asset quality as defaults have normalized Unemployment is declining Forced house sales below 0.2% per year Business bankruptcies at neutral level Source: Sourc
Slide 40: 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 800 700 700 600 600 % of disp
Slide 41: House prices have continued up in all regions
House prices have continued up in all regions • Widespread, moderate, recovery on housing market • Large price increases on flats in biggest cities have stopped • New regulation and a new housing tax model will have a dampening effect in biggest cities Large differences on the housing market Real ho
Slide 42: New lending regulation works
New lending regulation works • The new regulation is turning down heat on the Copenhagen market Demand and supply are getting closer Most recent data show peaking flat prices Source: Source: 42
Slide 43: Moderate Danish price increase in European context
Moderate Danish price increase in European context European house prices the past year The development in Scandinavian houseprices Source: Source: 43
Slide 44: Denmark is a AAA economy
Denmark is a AAA economy with strong structural financial features Current account surpluses since late 90s ..imply that foreign assets are increasing Source: Source: And public sector debt is low This is why Denmark is AAA Source: Source: 44
Slide 45: A strong financial position
Unemployment rate (harmonized) 8 8 7 7 6 6 Percent Percent 5 5 4 4 3 3 00 02 04 06 08 10 12 14 16 Kilde: Thomson Reuters Datastream A strong financial position Net foreign financial assets (2017) 250 250 200 200 150 150 100 100 50 50 % of GDP % of GDP 0 0 -50 -50 -100 -100 -150 -150 -200 -200 Switze
Slide 46: Denmark's economic turnaround
Denmark’s economic turnaround Denmark’s net foreign assets 1960-2018 100 100 80 80 60 60 From start 1990s: Labour 40 market pension schemes 40 20 20 % of NNI % of NNI 0 0 1982: The peg is introduced (fully in -20 -20 60s and 70s: effect from 1986) -40 Devaluations -40 -60 -60 -80 -80 1960 1962 1964
Slide 47: Jyske Bank Forecasts as per December 2018
Jyske Bank Forecasts as per December 2018 Danish economy 2016-2020 DKKbn Real growth (%) 2017 2016 2017 2018 2019 2020 Private spending 1,017 2.1 2.1 2.3 1.8 1.6 Public spending 536 0.2 0.7 0.4 0.4 0.4 Fixed gross investment 462 7.6 4.6 4.6 1.9 4.4 Inventory investment* 14 -0.1 -0.1 0.0 0.0 0.0 Expo
Slide 48: The Danish economy at a glance
The Danish economy at a glance The basics Citizens: 5.8 million (2019) Area: 43.098 sq km (0.4 % of USA) Currency: Kroner (fixed exchange rate policy to the euro) Flexible labour market Unemployment (latest) Denmark 5.1 % Euro Area 7,9 % Among the rich USA 4.1 % Denmark 8th richest country in the OE
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,