Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q3 2022 Earnings Presentation
43 slides from Pareto Bank Asa's earnings presentation, 2022
Slide 1: Pareto Bank Financial Results Third Quarter 2022
PARETO BANK Financial Results Third Quarter 2022
Slide 2: Highlights, Financials, Business Areas, Outlook & Ambitions
Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: Third Quarter 2022 Highlights
THIRD QUARTER 2022 Highlights • Profit after tax NOK 133.5m (NOK 127.8m in Q3-21). • Return on equity after tax 14.0 % (13.8 %) and in line with profitability ambition. • Net interest income NOK 241.8m (NOK 210.3m). • Lending to customers grew by more than expected with NOK 816m to NOK 16,925m. • Co
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 18.1 % 18.0 % 13.8 % 14.5 % 14.0 % 127.8 133.0 133.5 15.9 % Q3-21 Q2-22 Q3-22 Q3-21 Q2-22 Q3-22 30.09.2021 30.06.2022 30.09.2022 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 241.8 225.8 210.3 0.13% 0.04% 0.06% 18.7% 19.7
Slide 5: Financials
Highlights Financials Business Areas Outlook & Ambitions 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q3-22 Q3-21 YTD-22 YTD-21 Rapidly rising interest rates. Pareto Bank is able to Net interest income 241.8 210.3 675.1 623.8 adjust lending rates quickly. Net other operating income 2.3 5.7 16.0 9.3 Total net income 244.2 216.0 691.1 633.1 Fee income of NOK 40.5m (NOK 37.7
Slide 7: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 3.8 0.3 1.2 23.0 Q3-22 10.2 0.6 241.8 8.3 7.0 Q2-22 225.8 200.0 Market Market Lending Lending Fee Surplus liquidity Deposit Deposit funding funding volume rate income and other * volume rate volume rate 7 *) Other net interest income includes fee paid t
Slide 8: Increasing Lending Income
INCREASING LENDING INCOME (NOKm) Comments • Solid increase in income on 299.7 lending to customers due to growth and higher lending 268.6 40.5 rates. 245.5 239.3 245.2 247.1 225.6 231.2 39.3 • Fee income related to 37.6 50.4 37.7 44.8 lending remains stable. 38.9 41.8 259.2 229.3 201.6 200.3 209.5 1
Slide 9: Net Interest Margin
NET INTEREST MARGIN Comments • Rate increases took effect 6.2 % 6.3 % 5.9 % 6.1 % 6.2 % in July and September. 6.0 % 5.9 % 5.9 % 5.8 % 5.7 % Latest increase takes effect 5.6 % 5.7 % 5.5 % 5.5 % 5.6 % 5.2 % 5.2 % 5.0 % in October. • Market rates increased by about 1.25 percentage points in Q3-22. • D
Slide 10: Lending Rate Adjustments
LENDING RATE ADJUSTMENTS Comments • Rapidly rising policy rates 6.3 % to fight inflation. 6.2 % 6.0 % 5.9 % 5.9 % 5.6 % • Market rates (Nibor) are 5.5 % 5.2 % forward-looking and 5.0 % increase in anticipation of rate hikes. • Pareto Bank adjusts rates on existing loans quickly. 2.3 % • Lag between
Slide 11: Impairments by Stage
IMPAIRMENTS BY STAGE Credit exposure by IFRS9 stage (NOKm) Impairments and losses by stage (NOKm) 143.9 177 4.6 964 Stage 3 122.8 0.9 % * -5m from Q2-22 55.6 31.4 % of stage 3 exposure 55.7 Write-offs Stage 2 Stage 3 4.9 % * 14.5 1.5 % of stage 2 Stage 2 +123m from Q2-22 exposure 18,418 10.8 Stage 1
Slide 12: Credit Quality
CREDIT QUALITY Historical impairments and losses (NOKm) 0.60% 50.0 0.55% 0.52% 0.51% 0.51% 0.50% 40.3 40.0 0.46% 0.45% 0.41% 0.41% 0.40% 30.0 0.37% 0.37% 0.34% 21.0 0.30% 20.0 15.5 11.1 9.6 0.20% 10.0 6.2 6.7 5.8 - 0.10% (0.1) (1.5) (3.4) (10.0) 0.00% Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21
Slide 13: Solidity and Capital Requirements
SOLIDITY AND CAPITAL REQUIREMENTS 17.7 % 18.0 % 17.2 % 31.03.2023 Future CET1 31.12.2022 requirement 16.4 % including P2G 15.2 % • Leverage ratio of 16.4 %, far above minimum requirement. • Average risk weight 96 % for lending to customers. • Lower risk weights for SME financing and higher risk weig
Slide 14: Business Areas: Focus on Ship Financing
Highlights Financials Business Areas: Focus on Ship Financing Outlook & Ambitions 14
Slide 15: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Business Areas Focus Credits Exposure Sweet spot The specialized real estate Land acquisition financing REAL developer bank for Eastern Property construction 37% NOKm 50 - 100 ESTATE Norway and larger facilities Norwegian cities. 24% 1 - 3 yrs FINANC
Slide 16: Historic Growth per Business Area
HISTORIC GROWTH PER BUSINESS AREA (NOKm) • Historically strong in real estate. 8,300 • Gaining solid foothold in corporate financing. • Building growth in ship financing. 7,300 6,300 5,300 4,300 3,300 2,300 1,300 300 Residential property financing Commercial property financing Corporate financing Sh
Slide 17: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKm) 7,910 7,668 7,267 7,251 6,932 5,745 5,549 5,060 5,076 4,856 4,732 4,732 4,589 4,665 4,576 1,888 1,882 1,389 1,431 1,266 Residential property financing Commercial property financing Corporate financing Ship financing Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 17
Slide 18: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,882m • 23 customers* and 39 vessels. Bulk 610 LTV 48 % • Average commitment size USD 7.7m with largest exposure USD 25.3m. Product 408 LTV 26 % • Corporate loans make up 39 % of the exposure, the remaining 61 % are loans to investment projects
Slide 19: Ship Financing
SHIP FINANCING Development in exposure (NOKm) 1,882 With more than 10 years of experience within ship financing, Pareto Bank is well-positioned in its target market: small and medium-sized shipowners and the Norwegian project market. 1,431 Competitive advantage is based on a specialized team with in
Slide 20: Ship Financing Credit Policy
SHIP FINANCING Credit policy • Focus on Norwegian shipowners, family offices and project finance brokers. • Ship financing is cyclical, and an in-depth understanding of relevant market drivers and risk factors is crucial. Customer competence and track record are also important factors to consider. •
Slide 21: Corporate Financing
CORPORATE FINANCING Diversified exposure Total NOK 5,745m Credit update Total NOK 5,745m • 129 consolidated corporate customers with average • Solid exposure growth of NOK 196m in Q3-22 and a total of commitment of NOK 43.1m. NOK 668m so far in 2022. • 10 consolidated securities financing customers
Slide 22: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 7,251m • 168 customers with average commitment of NOK 43m. • 38 % residential exposure in Oslo and 35 % in Viken. Land without houses 1,286 • Close follow-up of ongoing projects. Regular reporting from custom
Slide 23: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 4,576m • 93 customers with average commitment of NOK 49m. • 38 % commercial property exposure in Oslo and 19 % in Viken. • 84 % of commercial property exposure is long-term cash-flow based, while the remainder
Slide 24: Outlook & Ambitions
Highlights Financials Business Areas Outlook & Ambitions 24
Slide 25: Market Outlook: Shipping and Offshore
MARKET OUTLOOK Shipping and offshore • Dry bulk demand has softened due to weak demand from China, suspension of grain exports from Ukraine and macroeconomic headwind. Future demand is uncertain. Lower congestion may free up capacity. Downside limited by moderate fleet growth. • Tanker demand is exp
Slide 26: Market Outlook: Corporate
MARKET OUTLOOK Corporate Interest rate increases and inflation are concerns as corporate profitability comes under pressure. This may reduce demand for corporate loans in general. Increase in future deal flow is expected as medium-sized corporations may have fewer alternatives with regards to financ
Slide 27: Market Outlook: Real Estate
MARKET OUTLOOK Real estate Moderate increase in lending volume expected in Q4-22. Residential property Loan redemptions influence volume development. • Material and labour shortages, cost inflation and interest rate hikes Redemptions come primarily as a result of residential reduce the profitability
Slide 28: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term YTD ambition Pareto Bank is solid and profitable with a proven business model based on specialised sector RETURN ON competence and close customer relationships. 14.0 % 13.7 % EQUITY Long-term profitability supported by lending growth, stable net margin and portfolio qua
Slide 29: Appendix
APPENDIX (Pareto bank
Slide 30: Largest Shareholders
LARGEST SHAREHOLDERS 30 September 2022 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 3,371 shareholders. 3 Hjelleg
Slide 31: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 53.72 1.84 1.85 53.08 51.83 1.80 Q3-21 Q2-22 Q3-22 Q3-21 Q2-22 Q3-22 Price / Earnings Price / Book 7.54 1.02 6.41 5.95 0.91 0.82 Q3-21 Q2-22 Q3-22 Q3-21 Q2-22 Q3-22 31 Share price NOK 43.95
Slide 32: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q3-22 Q2-22 Q1-22 Q4-21 Q3-21 Net interest income 241.8 225.8 207.5 214.5 210.3 Net other operating income 2.3 5.4 8.2 3.0 5.7 Total net income 244.2 231.2 215.7 217.6 216.0 Total operating expenses 46.7 45.6 45.3 40.1 40.4 Operating profit before 197.5 185.6 17
Slide 33: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q3-22 Q2-22 Q1-22 Q4-21 Q3-21 Loans to credit institutions 982 1,676 1,840 907 1,766 Loans to customers 16,925 16,109 15,644 15,805 15,187 Bonds and other securities 3,710 3,711 3,795 3,106 3,014 Shareholdings in associated companies 23 23 24 23 22 Other assets 130 121
Slide 34: 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 35: Number of Customers
NUMBER OF CUSTOMERS Per business area Real Estate 261 Corporate 170 Shipping 28 Retail 10 (Mortgages) 35 Non-consolidated
Slide 36: Real Estate Financing Exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 8,342m* Geographical commercial property exposure Total NOK 3,486m* 3% 5% 4% 7% 6% 38% Oslo 13% 38% 11% Oslo Viken Viken Vestfold & Telemark Vestland Other Sweden Vestland Vestfold & Telemark Other Sweden 19% 37% 19%
Slide 37: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 9,944 Percent customer deposits of net lending to customers Senior debt 6,399 64.8 % 65.1 % 65.5 % AT1 & T2 debt 720 63.0 % 64.2 % 60.1 % 58.8 % 5,645 6,754 6,561 Other debt 954 5,645 6,038 6,399 4,770 Equity capital 3,752 Key ratios Depos
Slide 38: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,219 572 NOK 10 - 20m 1,001 113 736 NOK 5 - 10m 845 126 Floating rate retail 552 NOK 2 - 5m 1,371 725 3,527 NOK 0 - 2m 1,199 769 Floating rate corporate 3,434 - 1,000 2,000 3,000 4,000 Floating rate Fixed rate 2,461 Savi
Slide 39: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 180 200 150 153 127 250 120 95 1,650 70 1,500 58 1,270 1,000 1,000 3M 6M 12M 2Y 3Y 5Y 2023 2024 2025 2026 2027 Floating rate coupon for new bond issue per maturity (basis points over 3M Nibor) Senior Call on Subordinated Ca
Slide 40: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Liquidity is comprised of 3% cash and highly liquid bonds. • High share of government 30% & PSE’s to reduce credit spread risk and increase Government & PSEs short-term liquidity. Covered bonds • Large share of covered Senior financials bonds, mainly short
Slide 41: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,823 None / very low risk 6,880 57% 56% 52% 54% 10,730 52% Low risk 10,467 999 38% Moderate risk 36% 37% 2,026 36% 35% 114 Some risk 34 55 High risk 10% 128 8% 8% 7% 5% 42 Very high risk 24 Q3-21 Q4-21 Q1-2
Slide 42: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 3% 10% < 10 476 536 6% 5,107 26% 10 - 50 5,085 < 10 50 - 100 5,181 10 - 50 5,151 13% 50 - 100 3,236 100 - 150 100 - 150 3,169 150 - 200 1,409 200 - 250 150 - 200 2,583 > 250 200 - 250 1,109 1,155 16% >
Slide 43: ( Pareto bank
( Pareto bank