Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2019 Earnings Presentation
45 slides from Pareto Bank Asa's earnings presentation, 2020
Slide 1: Pareto Bank Financial Results Fourth Quarter 2019
PARETO BANK Financial Results Fourth Quarter 2019
Slide 2: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 3: Record High Profit After Tax
RECORD HIGH PROFIT AFTER TAX Profit after tax Earnings per Share (EPS) NOKm NOK, 69.85m outstanding shares 5.55 5.57 397.6 5.28 330.8 312.6 4.08 3.92 247.3 166.4 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 * Consistently delivering Best year ever. earnings to shareholders. PAGE 3 Note (*): Par
Slide 4: Financial Ambitions 2019
FINANCIAL AMBITIONS 2019 ACTUAL AMBITIONS RETURN ON Profitability first. EQUITY 14.3 % 14.0 % Higher capital base creating a temporary drag on ROE in 2019. Healthy growth. GROWTH LENDING NOK 1,508m NOK 2,000m Project redemptions affecting growth between quarters. ADEQUACY CAPITAL Solid capitalisatio
Slide 5: Attractive Dividend
ATTRACTIVE DIVIDEND Dividend per Share and Pay-out Ratio The Board of Directors has proposed a dividend for 2019 of NOK NOK 2.80 per share, which corresponds to a pay-out ratio of 50 %. 3.00 2.80 60.00% 2.50 50.0 % 50.00% In line with the intention to pay minimum 25 % dividend per year with no cap.
Slide 6: Fourth Quarter 2019 Highlights
FOURTH QUARTER 2019 HIGHLIGHTS 1 Profit after tax NOK 114.7m (NOK 81.6m). 2 Return on equity after tax 15.0 % (14.0%). Net interest income of NOK 180.5m (NOK 147.0m) due to high lending volume, 3 stable net interest margin and good fee income. Lending volume of NOK 13.161m (NOK 11.653m). Large proje
Slide 7: Quarterly Key Figures
QUARTERLY KEY FIGURES Profit after tax Return on Equity CET1 ratio NOKm Excluding AT1 capital and interest Standard model 114.7 17.8 % 17.4 % 96.5 15.0% 16.1 % 81.6 14.0% 12.9% Q4-18 Q3-19 Q4-19 Q4-18 Q3-19 Q4-19 31.12.2018 30.09.2019 31.12.2019 Net interest income (NOKm) Cost/income ratio Loss rati
Slide 8: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 9: Income Statement
INCOME STATEMENT P&L (NOKm) Q4-19 Q4-18 2019 2018 High average lending volume and increased Net interest income 180.5 147.0 680.5 554.4 fee income in Q4-19. Reduced Guarantee Net other operating income 7.6 -3.3 11.8 8.8 Fund fee increased interest income by NOK Total net income 188.2 143.7 692.3 563
Slide 10: Maintaining Stable Net Margin
MAINTAINING STABLE NET MARGIN Net interest margins Percent interest income including amortizations and fees over 3M Nibor; Cost of deposits of average volumes over average 3M Nibor in period 5.8 % 5.7 % 5.9 % 6.1 % 5.7 % 6.0 % 5.9 % 5.9 5.5% 5.7 % 5.6 % 5.9 % 5.6 % 5.9 % 5.7 5.6 % % 5.8 5.7 % % 5.7
Slide 11: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME Net interest income Changes in net interest income (NOK 1,000) Q4-19 190,000 7.955 1.080 180,541 Q3-19 5,077 180,000 172,984 1,035 381 170,000 5.139 160,000 150,000 140,000 130,000 120,000 Lending Lending Fee Deposit Deposit Other volume rate income volume rat
Slide 12: Industry Leading Operational Efficiency
INDUSTRY LEADING OPERATIONAL EFFICIENCY COST / INCOME RATIO ~20 % 10.00 40.00% 37.6 % 8.8 Large average commitment size, high 9.00 8.6 8.4 35.00% capacity per FTE and efficient operations. 8.00 31.5 % 7.4 30.00% 7.00 26.9 % 5.6 5.8 25.00% 6.00 23.2 % HANDS-ON 5.00 4.2 21.6 % 20.9 % 21.3 % 20.00% 19.
Slide 13: Quality of Loan Portfolio
QUALITY OF LOAN PORTFOLIO Impairments and losses according to IFRS 9 Impairments and losses on loans & guarantees NOKm NOKm Impairments and losses NOK 4.7m 58.9 14.9 0.7 54.2 9.4 9.1 11.9 20.2 Write-offs 4.0 4.7 10.8 2.7 Stage 3 Stage 2 1.0 Stage 1 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 35.
Slide 14: Funding
FUNDING Sources Deposits & senior debt NOKm, NOKm Percent customer deposits of net lending to customers Deposits 8,150 77% 77% 74% Senior debt 5,624 71% 65% 65% 63% 62% T1 & T2 debt 470 5,551 Other debt 210 5,207 5,604 5,624 4,915 5,279 Equity capital 3,057 5,011 4,008 Key ratios Deposits with liqui
Slide 15: Capital
CAPITAL Core equity tier 1 ratio (CET1 ratio) Key comments CET1 • CRR/CRD IV has come into force. 17.2 % 17.7 % 17.4 % Target 16.1 % 16.2 % • Effect of the SME-discount is 0.2 % as of 31.12.2019. Pillar 2 3.2 % • Uncertainty regarding increased systemic risk buffer has been removed. The buffer requi
Slide 16: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 17: A Niche Player Financing Medium Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM SIZED ENTERPRISES BUSINESS AREAS FOCUS CREDITS / CUSTOMERS EXPOSURE SWEET SPOT The specialized real Land acquisition financing estate developer bank Property construction Real for Eastern Norway facilities 73% NOKm 50-100 estate and larger Norwegian Commercial propert
Slide 18: Exposure per Business Area
EXPOSURE PER BUSINESS AREA NOKm gross exposure 7,007 6,834 6,519 6,644 5,847 4,880 5,044 4,320 4,004 3,762 2,463 2,249 2,132 2,260 1,949 832 736 834 782 699 Residential property Commercial property Corporate Shipping Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 PAGE 18
Slide 19: Real Estate | Exposure
REAL ESTATE | EXPOSURE 67% 73% Real estate credit exposure* Σ = NOK 11,687m Comment NOKm of gross exposure • 283 customers of which 156 within residential property. Land without houses 1,272 51 customers • Average commitment size of NOK 40m. • Some real estate commitments have been Land with houses
Slide 20: Real Estate | Status and Activity
REAL ESTATE | STATUS AND ACTIVITY 67% 73% Residential property development • Balanced housing market and good sales in Oslo. • Activity in the professional market is good as developers are positioning themselves for new projects. • Higher construction costs may delay project start-ups in the Oslo re
Slide 21: Residential Property | Project Risk Development
RESIDENTIAL PROPERTY | PROJECT RISK DEVELOPMENT Project risk Loan amount Project risk decreases as the loan amount is drawn. Land Building Construction Ground Pre-sale Construction Completion Repayment acquistion permits contracts works Counterparty risk Political risk Risk soil Construction Risk of
Slide 22: Residential Property | Business & Credit Process
RESIDENTIAL PROPERTY | BUSINESS & CREDIT PROCESS Land Regulatory Construction Ground Pre-sale Construction Completion acquisition permits contracts works PROJECT REVIEW AND KYC. Regulatory Contract Market Site inspection. Site inspection. Handover to Customer’s track assessment. assessment. assessme
Slide 23: Customer Values
CUSTOMER VALUES EFFICIENT RELIABLE HANDS-ON PERSONAL COMMERCIAL SPECIALIZED PAGE 23
Slide 24: Residential Property | Project Examples
RESIDENTIAL PROPERTY | PROJECT EXAMPLES MASS-MARKET HOUSING HIGH-END HOUSING FAMILY HOUSING SPG og Bakke AS Glomar Eiendom AS Location Holding AS Berger Hage, Skårer Dr. Holms vei 4 Skådalsveien 15 Diversified portfolio with respect to location, project type and developers. 190 different projects. 4
Slide 25: PAGE 25
Boligprosjektet Saltbrygga i Larvik startet som en ambisigs idé hos Alfa Fiendom. Etter forste byggetrinn har allerede prosjektet blitt en referanse for hvordan bomiljeer kan utvikies. Eier og daglig leder i Alfa Eiendom, Thore Liverad, har som mal skape seeregne bolig- og nazringseiendommer, slik a
Slide 26: Corporate | Increasing Deal Flow
CORPORATE | INCREASING DEAL FLOW 15% 67% Corporate financing exposure (NOKm) Σ = NOK 2,463m Key comments NOKm of gross exposure • Deal flow increasing as awareness of Pareto Bank as a financial solution provider for medium-sized 5% 2% businesses improves. Policy 18% Investment loans Working capital
Slide 27: Shipping | Room for Growth
5% 8% SHIPPING | ROOM FOR GROWTH Status Shipping credit exposure & loan to value Σ = NOK 782m LTV* Share • 16 customers and a total of 25 vessels. NOKm • Largest exposure is USD 20.2m and average Industrial 197 53% 25% commitment size of outstanding loans is USD 5.2m. • Room for growth. Underserved
Slide 28: Table of Contents
TABLE OF CONTENTS 1 STATUS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 AMBITIONS
Slide 29: Long-Term Profitability Ambition
LONG-TERM PROFITABILITY AMBITION RETURN ON EQUITY AFTER TAX (ROE) 15 %3,000.0 30.00% 2,711 • Require new business to meet profitability 2,500.0 25.00% ambition of 15 % ROE. 2,165 1,933 • Credit quality before growth. 2,000.0 20.00% 1,502 • Focus on lending margins and fees. 1,500.0 15.6 % 14.8 % 15.
Slide 30: Target Level Capitalisation
TARGET LEVEL CAPITALISATION CORE EQUITY TIER 1 (CET1) 17.7 % BY 31.12.2022 Capitalisation to meet regulatory requirements and cover relevant risks. 17.7% 16.2 % Pillar 2, PHASING IN SYSTEMIC RISK BUFFER Pillar 2, 3.2% 3.2% Phasing in a 1.5 percentage point increase in the systemic risk buffer over t
Slide 31: Long-Term Ambitions
LONG-TERM AMBITIONS RETRUN ON EQUITY 15.0 % Profitability first. ADEQUACY Phasing in systemic risk CAPITAL 17.7 % buffer increase by 31.12.2022. Minimum 25 % dividend. DIVIDEND POLICY > 25 % Policy under revision in Q1-20. PAGE 31 Definitions of key figures and other alternative performance measures
Slide 32: Appendix
(Pareto bank
Slide 33: Largest Shareholders as of January 2020
LARGEST SHAREHOLDERS AS OF 3 JANUARY 2020 # Investor 3 January 2020 • The Company has 69,851,730 shares # of shares % total outstanding after the private 1 Pareto AS 13,423,610 19.2 % 2 AF Capital Management AS 5,861,968 8.4 % placement. One class of shares where 3 Hjellegjerde Invest AS 2,600,000 3
Slide 34: The Share
THE SHARE Earnings per share Book equity per share NOK NOK 5.28 5.55 5.57 43.77 39.37 4.08 35.41 31.14 2016 2017 2018 2019 2016 2017 2018 2019 Price / Earnings Price / Book NOK, Share price 38.60* NOK, Share price 38.60* 9.34x 1.22x 7.48x 1.12x 6.93x 6.09x 0.86x 0.88x 2016 2017 2018 2019 2016 2017 2
Slide 35: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q4-19 Q3-19 Q2-19 Q1-19 Q4-18 Net interest income 180.5 173.0 164.4 162.6 147.0 Net other operating income 7.6 -2.9 0.9 6.2 -3.3 Total net income 188.2 170.1 165.2 168.8 143.7 Total operating expenses 36.1 32.2 34.7 35.0 28.2 Operating profit before impairments
Slide 36: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q4-19 Q3-19 Q2-19 Q1-19 Q4-18 Loans to credit institutions 924 1,004 1,785 951 320 Loans to customers 13,161 13,191 12,539 12,065 11,653 Bonds and other securities 3,320 3,467 3,998 3,797 3,537 Shareholdings in associated companies 22 35 37 37 37 Other assets 83 66
Slide 37: Real Estate | Exposure
REAL ESTATE | EXPOSURE 67% 73% Geographical residential property exposure (NOKm) Σ = NOK 8,143m Geographical commercial property exposure (NOKm) Σ = NOK 3,544m NOKm of gross exposure 8% 8% 3% 10% 9% Oslo Oslo & Akershus 38% 3% Romerike Stavanger & Vestlandet Follo & Østfold 48% Buskerud & Vestfold B
Slide 38: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding NOKm, estimated interest contribution including commissions, excluding front front and back-end fees over 3M Nibor or similar rate and bac
Slide 39: Number of Customers
NUMBER OF CUSTOMERS Number of customers per business area Real Estate 283 Corporate 97 Securities 122 Shipping 16 Retail 28 (Mortgages) PAGE 39
Slide 40: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 593 Floating rate retail Depositors (#) 1,145 454 632 2,446 Amount (NOKm) 2,765 5,359 Floating rate corporate 2,808 Retail Corporate 1,215 Savings with restrictions 1,124 2,691 Deposits by size Fixed rate 2,737 NOKm 649 > NOK 20m 2.138
Slide 41: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 88 150 63 120 1,800 42 1,375 1,175 23 25 200 21 851 400 2020 2021 2022 2023 2024 0,25 0,5 1 2 3 5 Senior Call on Subordinated Capital Years to Maturity Source: Nordic Bond Pricing PAGE 41
Slide 42: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Key comments Market value of bonds and funds comprising surplus liquidity • The bank’s liquidity is comprised of cash 1% and highly liquid bonds • High share of government & PSEs to reduce credit spread risk and increase short-term liquidity 35% • Large share of cove
Slide 43: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 5,852 55% risk 5,811 51% 49% 6,348 45% 45% Low risk 8,230 42% 42% 40% 38% 36% 1,356 Moderate risk 1,726 307 Some risk 130 134 12% 11% High risk 10% 9% 81 7% 11 Very high risk Q4-18 Q1-19 Q
Slide 44: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Distribution of commitments by size NOKm Percent of NOKm 879 < 10 748 5% 14% 4,575 < 10 10 - 50 5,459 4% 10 - 50 3,895 5% 34% 50 - 100 50 - 100 4,333 100 - 150 2,266 11% 150 - 200 100 - 150 1,656 200 - 250 822 > 250 150 - 200 829 27% 250 200 - 250 693
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(Pareto bank