Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q3 2016 Earnings Presentation
49 slides from Jyske Bank A/S's earnings presentation, Oct 27, 2016
Slide 1: Jyske Bank Q3 2016
Jyske Bank Q3 2016 27 October 2016
Slide 2: Jyske Bank
Jyske Bank • One of the four large financial institutions in Denmark – estimated market share of 10% and a Danish SIFI – Danish play – Approx. 890,000 customers – Nationwide branch network of 99 branches • 3 segments: – Banking: Retail and commercial, asset management, private banking and customer d
Slide 3: Our targets
Our targets Q3 2016 • Delivering an attractive long-term return on equity – Long-term target of delivering an after tax ROE between 8-12% 9.6% • DKK 100bn in housing-related loans from Jyske Bank branch network and DKK 20bn in DKK 73.9bn mortgage loans for corporates and DKK 11.2bn • Harvesting annu
Slide 4: Financial performance 1997- Q3 2016
Financial performance 1997- Q3 2016 Jyske Bank Group key figures ROE after Equity, tax p.a., Net end of opening Loans and Total Number DKKbn profit year equity advances Deposits assets of FTEs 1997 0.4 4,772 11.5% 36.6 41.5 63.1 2.671 1998 0.5 5,173 10.7% 39.7 43.8 76.9 2.772 1999 0.9 5,391 17.3% 49
Slide 5: Q3 2016 highlights
Q3 2016 highlights • Danish economy – Slow recovery continues – Negative interest rate environment persists and is expected to continue – Danish dairy and pig farmers still facing low commodity prices • Jyske Bank delivers a net profit of DKK 721m, equal to after tax ROE 9.6% p.a. – NII supported fr
Slide 6: Headlines on Danish Economy
Headlines on Danish Economy • We expect the slow recovery in the Danish economy to continue • Employment is up almost 4 % since 2012 • Low interest rates, real wage growth and increasing house prices stimulate demand • Export growth is moderate in line with moderate growth in the global economy • Th
Slide 7: Business volumes
Business volumes Business volumes • Traditional bank loans show signs of stabilization 300 – Corporates: lower draw-down on overdraft facilities in Q3 DKKbn 250 – Private individuals: gradual shift from high to low margin products 200 – Leasing: continued growth through new sales 150 100 • Bank depo
Slide 8: Delivering ROE within target range
Delivering ROE within target range Net profit • Delivering a net profit of DKK 721m in Q3 and DKK 1,914m YTD 900 18% DKKm 800 16% • After tax ROE of 9.6% p.a. in Q3 and 8.5% p.a. YTD 700 14% 600 12% 500 10% 400 8% 300 6% 200 4% 100 2% 0 0% Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Net profit ROE (afte
Slide 9: Strong capital position
Strong capital position • Capital ratio 17.8% and CET1 ratio 15.9% end of Q3 2016 compared to Capital ratio and CET1 17.0% and 16.1% end of 2015. Change in capital ratios due to: 20 – Consolidation 18 0.7 – Higher REA (primarily volume growth in property related loans) 1.2 16 2.5 15.9 – Share buy-ba
Slide 10: Capital adjustment in process
Capital adjustment in process Capital ratio • Capital ratio 17.8% and CET1 ratio 15.9% end of Q3 2016 vs. long-term 20 targets of 17.5% and 14% (based on fully implemented CRD IV pct requirements as per 2020) 15 • Gradual capital adjustment towards targets initiated in Q3 2015. 10 – Majority of adju
Slide 11: Jyske Bank/BRFkredit growth case
Jyske Bank/BRFkredit growth case 11
Slide 12: Growth in home loans and mortgages continues
Growth in home loans and mortgages continues Quarterly net new lending in BRFkredit (DKKbn) • Growth in volume: – The group’s mortgage volumes have grown by more than DKK 80bn since 12 early 2014 10 – Volume of new home loan products DKK 73.9bn of which DKK 72.7bn was 8 booked by end of Q3. The majo
Slide 13: Portfolio characteristics – Jyske Bank home loans
Portfolio characteristics – Jyske Bank home loans • Majority of home loans granted are LVT 0-80% Jyske Bank home loan portfolio by product type 100% 90% • More than 85% in credit rating class 1-5 compared to overall average of 80% 70% approx. 65% for bank loans for the retail segment (Risk and Capit
Slide 14: Profitable growth
Profitable growth 18 • Jyske Bank home loans are profitable on a stand-alone basis as: Fixed costs 16 Average lending costs per loan – Growth in the lending portfolio drives average costs down towards 14 capital costs 12 – Capital requirements are relatively low due to residential clients 10 with lo
Slide 15: Credit Quality
G JYSKE BANK Credit Quality 15
Slide 16: Net reversals exclusive of agriculture
Net reversals exclusive of agriculture • Impairment charges under core profit in the amount of DKK 77m of Loan impairment charges (under core profit) which DKK 112m relate to agriculture 200 DKKm 150 100 • End of Q3 total balance of management’s estimate of DKK 547m, of 50 which DKK 295m relate to a
Slide 17: Limited exposure to dairy and pig farmers
Limited exposure to dairy and pig farmers • Exposure to dairy and pig farmers accounts for less than 1% of Loans, advances and Balance of loan Impairment ratio the Group’s loans and guarantees guarantees impairment charges DKKm/% Q3 2016 Q4 2015 Q3 2016 Q4 2015 Q3 2016 Q4 2015 Dairy farmers 941 1,15
Slide 18: Appendices
Appendices: 1) Danish Macro Economy Q3 2016 2) Jyske Bank Q3 2016 results 3) Credit Quality 4) Liquidity 5) Business segments 6) NPLs 18
Slide 19: Danish Macro Economy Q3 2016
Danish Macro Economy Q3 2016 19
Slide 20: Danish economy – a slow recovery story
Danish economy – a slow recovery story • Overall the Danish financial sector’s operating environment is slowly improving • The improvement is also reflected in rating agencies’ outlook on the Danish banking sector: • In Jan 2016 S&P changed their Danish BICRA outlook from stable to positive • Moody’
Slide 21: 3 kinds of stimulus support demand
3 kinds of stimulus support demand Highest real wage growth since 2009 House prices recovering after burst in 2008/09 Compared to Sweden and Norway – Denmark has repriced Interest rates are at a historic low Demand has increased 21
Slide 22: Improved asset quality as defaults are close to normalization
Improved asset quality as defaults are close to normalization Unemployment is relatively low Forced house sales below 0.2% per year Business bankruptcies closer to normal Data for bankruptcies from late 2015 and into 2016 are distorted by a registration issue. Looking at active companies only gives
Slide 23: 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 still saving up …so household debt is declining …and household net assets are large 450 Household net financi
Slide 24: Denmark is a AAA economy with strong structural financial features
Denmark is a AAA economy with strong structural financial features Current account surpluses since late 90s ..imply that foreign assets are increasing And public sector debt is low This is why Denmark is AAA 24
Slide 25: House prices have increased in all regions in 2016
House prices have increased in all regions in 2016 Large price increases in the Copenhagen area, especially on flats There is a risk that very low interest rates may overheat local parts of the market However, a new housing tax model is likely to have a dampening effect House prices are up in all re
Slide 26: Jyske Bank Q3 2016 results
G JYSKE BANK Jyske Bank Q3 2016 results 26
Slide 27: Q3 2016 results
Q3 2016 results • Net profit of DKK 721m (equal to after tax ROE of 9.6% p.a.) • Core income driven by CORE PROFIT AND PROFIT FOR THE PERIOD Q1-Q3 Q1-Q3 Index Index – NII lower due to one-off related to accrual of up-front fees and DKKm 2016 2015 16/15 Q3 2016 Q2 2016 Q3/Q2 reduced holdings of high
Slide 28: Underlying NII trend intact in spite of set-back
Underlying NII trend intact in spite of set-back • Q3 represents a continuation of the underlying trend: NII from home loans and mortgages as well as leasing activities compensate for the top-line pressure experienced in banking activities Net interest income 1,800 DKKm 1,600 • Set-back compared to
Slide 29: Refinancing activities drive up net fee income
Refinancing activities drive up net fee income Net fee income • Net fee income in Q3 is up by 6% compared to Q2 2016 (+14% if Q2 2016 500 is adjusted for profit from sale of VISA Europe of DKK 25m) DKKm 400 300 200 100 0 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 -100 • Securities trading etc.: Banking
Slide 30: Value adjustments benefit from rising stock markets
Value adjustments benefit from rising stock markets • Positive value adjustments on equities due to rising stock Value adjustments under core income markets 300 DKKm • Long-term interest rates slightly down in Q3 leading to positive 200 value adjustments on bond holdings 100 0 -100 • Clients’ transa
Slide 31: Decreasing core expenses
Decreasing core expenses Q3 2016 vs. Q2 2016: Development in core expenses • Overall, a satisfactory development in line with expectations 1,300 DKKm 1,250 • Core expenses in Q3 2016 up by DKK 45m compared to Q2 2016 primarily due to: 1,200 – Salary increase of 1.8% (collective agreement July 1st) –
Slide 32: Improved investment portfolio earnings
Improved investment portfolio earnings Investment portfolio earnings, quarterly • Improved investment portfolio earnings driven by: 300 DKKm 250 – Value adjustments of DKK 70m related to fair value 200 assessment of Jyske Bank’s holdings in Nordjyske Bank (Q1- 150 Q3 2016: DKK -89m) 100 – Positive v
Slide 33: Credit Quality
G JYSKE BANK Credit Quality 33
Slide 34: Bank loans and advances
Bank loans and advances • Portfolio composition end of Q3 2016 Q1-Q3 2016 Balance of loan Loans, advances impairment Impairment – Corporates 62% and guarantees charges Losses charges – Private individuals 34% Public authorities 4% 0% 0% 0% – Public authorities 4% Agriculture, hunting, forestry and f
Slide 35: Mortgages: The portfolio
Mortgages: The portfolio • 87% of lending to properties with housing purposes – No loans with swaps to co-operative housing Distribution of lending portfolio – No lending to agriculture and other primary production • Increasing share of retail lending – Primarily driven by joint funding of Jyske Ban
Slide 36: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1.8% 500 100 Private 450 90 1.6% Commercial 400 80 1.4% 350 70 Subsidised 1.2% 300 60 1.0% 250 50 200 40 0.8% 150 30 0.6% 100 20 0.4% 50 10 0 0 0.2% Q3 2013 Q3 2014 Q3 2015 Q3 201
Slide 37: Liquidity
G JYSKE BANK Liquidity 37
Slide 38: Ample liquidity
Ample liquidity Group Liquidity buffer • Liquidity buffer DKK 74bn end of Q3 2016 (DKK 73bn end of 2015) 80 DKKbn – 88% of the buffer - DKK 66bn - is eligible for repo transactions at 70 central banks (the Danish Central Bank or the ECB) 60 50 40 30 20 10 0 31-12-13 31-12-14 31-12-15 30-09-16 Eligib
Slide 39: The Group is becoming a frequent EUR issuer
The Group is becoming a frequent EUR issuer Redemption profile • Ongoing access to a diversified European investor base 9 safekeeps a low liquidity risk and funding profile 8 7 6 • Future issuance volumes of senior debt will depend on 5 MREL requirement. Clarification from the Danish FSA DKKbn expec
Slide 40: Business Segments
G JYSKE BANK Business Segments 40
Slide 41: Banking activities
Banking activities Profit: • NII under pressure: Home loans continue to support but SUMMARY OF INCOME STATEMENT Index Index DKKm negative impact from one-off related to accruals of up- Q1-Q3 2016 Q1-Q3 2015 16/15 Q3 2016 Q2 2016 Q3/Q2 Net interest income 2,648 2,757 96 838 886 95 front fees and redu
Slide 42: Mortgage activities
Mortgage activities Profit: SUMMARY OF INCOME STATEMENT Index Index • Contribution income steadily growing DKKm Q1-Q3 2016 Q1-Q3 2015 16/15 Q3 2016 Q2 2016 Q3/Q2 Contribution income, etc. 1 1,329 1,255 106 451 444 102 • Net fee & commission income increases due to Other net interest income -38 -32 1
Slide 43: Leasing activities
Leasing activities SUMMARY OF INCOME STATEMENT Profit: Index Index DKKm Q1-Q3 2016 Q1-Q3 2015 16/15 Q3 2016 Q2 2016 Q3/Q2 • Solid NII based on increased business volume Net interest income 352 339 104 120 118 102 Net fee and commission income -61 -49 124 -21 -23 91 • Core expenses develop as expecte
Slide 44: Non-performing loans
G JYSKE BANK Non-performing loans 44
Slide 45: Non-performing loans
Non-performing loans • At group level NPLs amounted to 3.6% of loans and advances at the end of Q3 2016 • Jyske Bank has been submitting information about non-performing loans (NPLs) since end of Q3 2014 • Jyske Bank has chosen to apply EBA’s technical standards as definition for NPLs • NPLs compris
Slide 46: NPLs – Jyske Bank Group
NPLs – Jyske Bank Group JYSKE BANK GROUP DKKm 2016 Q3 2016 Q2 2016 Q1 2015 Q4 2015 Q3 Carrying amount 431,025 422,592 424,423 410,030 394,199 Balance of loan impairments charges and provisions for guarantees 6,497 6,715 6,939 6,713 6,762 Balance of discounts for acquired assets 1,144 1,236 1,418 1,5
Slide 47: NPLs – Banking activities
NPLs – Banking activities BANKING, DKKm 2016 Q3 2016 Q2 2016 Q1 2015 Q4 2015 Q3 Carrying amount 155,758 153,600 166,513 160,563 153,733 Balance of loan impairments charges and provisions for guarantees 5,723 5,980 6,282 6,083 6,215 Balance of discounts for acquired assets 523 553 666 753 978 Gross c
Slide 48: NPLs – Mortgage activities
NPLs – Mortgage activities MORTGAGE, DKKm 2016 Q3 2016 Q2 2016 Q1 2015 Q4 2015 Q3 Carrying amount 275,267 268,992 257,910 249,467 240,467 Balance of loan impairments charges and provisions for guarantees 774 735 657 630 547 Balance of discounts for acquired assets 621 683 753 795 900 Gross carrying
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,