Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q1 2023 Earnings Presentation
41 slides from Pareto Bank Asa's earnings presentation, Apr 26, 2023
Slide 1: Financial Results – First Quarter 2023
PARETO BANK Financial Results – First Quarter 2023
Slide 2: Highlights, Financials, Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 2
Slide 3: First Quarter 2023 Highlights
FIRST QUARTER 2023 Highlights • Profit after tax NOK 130.9m (NOK 116.9m in Q1-22). • Return on equity after tax 13.0 % (12.8 %). • Record high net interest income NOK 262.5m (NOK 207.5m). • Lending to customers grew by NOK 362m to NOK 17,707m and came within corporate financing and financing of resi
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 172.1 17.4 % 17.5 % 17.1 % 130.9 12.8 % 13.0 % 16.4 % 116.9 Q1-22 Q4-22 Q1-23 Q1-22 Q4-22 Q1-23 31.03.2022 31.12.2022 31.03.2023 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 253.5 262.5 0.21% 207.5 0.10% 21.0% 19.5% 17.8
Slide 5: Financials
Highlights Financials Business Area Update & Outlook 5
Slide 6: Income Statement
INCOME STATEMENT P&L (NOKm) Q1-23 Q1-22 2022 2021 Improved lending margin and lending growth. Net interest income 262.5 207.5 928.6 838.3 Increased interest costs due to deposit growth. Net other operating income -3.0 8.2 36.7 12.3 Valuation of financial instruments negatively affected by Total net
Slide 7: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME (NOKm) 11.3 1.6 2.8 23.4 Q1-23 16.1 Q4-22 3.3 262.5 253.5 2.0 7.1 200.0 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
Slide 8: Lending and Deposit Margin
LENDING AND DEPOSIT MARGIN Comments • Full implementation of three 6.3 % 6.2 % 6.3 % rate increases in Q4-22 and 6.1 % 6.1 % 5.9 % 5.9 % 5.9 % an increase of 0.25 pp in 5.7 % 5.8 % 5.7 % 5.6 % 5.6 % 5.5 % 5.5 % 5.2 % January 2023. 5.0 % 4.8 % • Increase in volume of fixed- rate deposits lowers depos
Slide 9: Net Interest Margin
NET INTEREST MARGIN Comments • Combined margin. • Net interest income divided 4.59% by average total assets. 4.56% 4.43% 4.42% • Income from lending and 4.25% 4.25% surpluss liquidity. 4.17% 4.20% 4.06% • Costs from deposits, issued bonds and other financing sources. Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2
Slide 10: 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 loss
Slide 11: Quarterly Change in Impairments
QUARTERLY CHANGE IN IMPAIRMENTS Impairments (NOKm) Impairments (NOKm) 36.4 Q1-23 Q4-22 Stage 1 0.2 2.1 21.0 Stage 2 6.7 -5.7 15.5 Stage 3 26.5 1.7 9.6 Write-offs 2.9 0.7 Total impairments 36.4 -1.2 -1.2 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 11
Slide 12: Financing
FINANCING Diversified funding sources (NOKm) Customer deposits • Customer deposits, senior bonds and equity including • Retail deposits for savings. subordinate capital. • Corporate deposits are composed of operational funds, surplus liquidity and client accounts accross a variety of industries. • 1
Slide 13: Liquidity Buffer
LIQUIDITY BUFFER Low credit and market risk (NOKm) Comments • Cash on hand. 110 • Highly liquid bonds. • Low credit risk. 2,026 • No interest rate or foreign exchange risk. Cash (Norges Bank & DNB) • Access to central bank Bonds issued by government & PSEs 2,733 facilities and repo market. Covered b
Slide 14: Solidity and Capital
SOLIDITY AND CAPITAL 17.1 % 16.3 % • Leverage ratio of 16.3 %. • Estimated target CET1 year-end 2023 is CET1 requirement 16.2 % 17.7 %, depending on pillar 2 and P2G. LR (incl. P2G) requirement 3.0 % • Issued new AT1 bond to refinance existing Expected CET1 requirement at 31.12.2023 17.7 % bond as w
Slide 15: Business Area Update & Outlook
Highlights Financials Business Area Update & Outlook 15
Slide 16: A Niche Player Financing Medium-Sized Enterprises
A NICHE PLAYER FINANCING MEDIUM-SIZED ENTERPRISES Exposure (NOKm) SHIP FINANCING NOK 1,622m 8% COMMERCIAL PROPERTY RESIDENTIAL PROPERTY 23% 40% FINANCING FINANCING NOK 4,880m NOK 8,422m 28% CORPORATE FINANCING NOK 5,785m 16
Slide 17: Quarterly Exposure per Business Area
QUARTERLY EXPOSURE PER BUSINESS AREA (NOKm) 8,422 7,745 7,267 7,251 6,932 5,745 5,785 5,549 5,429 5,060 4,880 4,665 4,576 4,799 4,732 1,888 1,882 1,806 1,622 1,266 Residential property financing Commercial property financing Corporate financing Ship financing Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 17
Slide 18: Residential Property Financing
RESIDENTIAL PROPERTY FINANCING Credit update Residential property exposure (NOKm) Total NOK 8,422m • The specialized real estate developer bank for Eastern Norway and larger Norwegian cities. • 171 customers with average commitment of NOK 49m. Land without houses 1,504 • 35 % residential exposure in
Slide 19: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Commercial property exposure (NOKm) Total NOK 4,880m • 95 customers with average commitment of NOK 51m. • 36 % commercial property exposure in Oslo and 23 % in Vestland. • Commercial residential includes financing of housing for rent, Commercial residential 1,814 while
Slide 20: Commercial Property Financing
COMMERCIAL PROPERTY FINANCING Credit update Commercial property exposure (NOKm) Total NOK 4,880m • Financing of cash-flow based commercial property (84 % of exposure) and development (16 %). • Equity contribution of minimum 20 % and depending on analysis of the underlying risk factors and entry poin
Slide 21: Market Outlook
MARKET OUTLOOK Real estate Residential property Continued strong secondary housing market. New-build project profitability hurt by cost inflation, interest rate hikes and low demand. Higher than expected deal flow and volume growth in Q1-23 despite expectations of lower project activity and financin
Slide 22: Corporate Financing
CORPORATE FINANCING Diversified exposure Total NOK 5,785m Credit update Total NOK 5,785m • Tailor-made financing solutions to medium-sized enterprises. • A conservative credit practice is continued. • 142 consolidated corporate customers with average • Follow-up of a small number of customers (stage
Slide 23: Market Outlook
MARKET OUTLOOK Corporate Corporate profitability is under pressure due to reduced demand, inflation and higher financing costs. Weaker cash positions and postponement of investments. Pareto Bank is an attractive partner for medium sized businesses in the Oslo region and still a small player in the l
Slide 24: Ship Financing
SHIP FINANCING Credit update Exposure (NOKm) Total NOK 1,622m • Focus on medium-sized shipowners, family offices and the investment project market. Bulk 513 LTV 45 % • Corporate loans make up 39 % of the exposure, the remaining Industrial 292 LTV 31 % 61 % are loans to investment projects. • 18 cust
Slide 25: Market Outlook
MARKET OUTLOOK Shipping and offshore Positive outlook for dry bulk market due to low orderbook and demand growth supported by China’s post-Covid “reopening.” Strong tanker markets with record low orderbook and increased demand for oil products and longer transportation distances. Soft container mark
Slide 26: ROE and Leverage Ratio
ROE AND LEVERAGE RATIO Profitability with increasing solidity 16.0 % 15.9 % 16.0 % 15.6 % 14.8 % 15.0 % 25.0 % 14.3 % 14.6 % 14.0 % 14.0 % 13.0 % 13.0 % 12.7 % 12.0 % 20.0 % 18.2 % 16.3 % 16.0 % 16.5 % 16.3 % 10.0 % 15.7 % 14.3 % 14.6 % 13.7 % 15.0 % 8.6 % 8.0 % 12.4 % 11.7 % 11.4 % 12.3 % 11.9 % 10
Slide 27: Long-Term Ambitions
LONG-TERM AMBITIONS ROE Dividend 14 % min. 50 % 14.6 % 14.0 % 50.1 % 49.4 % 50.1 % 13.0 % 2021 2022 YTD 2023 2020 2021 2022 27
Slide 28: Appendix
APPENDIX (Pareto bank | 15%
Slide 29: Largest Shareholders
LARGEST SHAREHOLDERS 31 March 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 3,466 shareholders. 3 Hjellegjerd
Slide 30: The Share
THE SHARE Earnings per share (NOK) Book value per share (NOK) 56.12 2.39 54.04 1.79 1.64 49.98 Q1-22 Q4-22 Q1-23 Q1-22 Q4-22 Q1-23 Price / Earnings Price / Book 1.31 10.04 0.98 7.41 0.85 5.01 Q1-22 Q4-22 Q1-23 Q1-22 Q4-22 Q1-23 30 Share price NOK 53.2
Slide 31: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q1-23 Q4-22 Q3-22 Q2-22 Q1-22 Net interest income 262.5 253.5 241.8 225.8 207.5 Net other operating income -3.0 20.7 2.3 5.4 8.2 Total net income 259.5 274.2 244.2 231.2 215.7 Total operating expenses 50.5 48.9 46.7 45.6 45.3 Operating profit before 209.0 225.3
Slide 32: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET (NOKm) Q1-23 Q4-22 Q3-22 Q2-22 Q1-22 Loans to credit institutions 2,230 747 982 1,676 1,840 Loans to customers 17,707 17,346 16,925 16,109 15,644 Bonds and other securities 3,952 4,007 3,710 3,711 3,795 Shareholdings in associated companies 23 23 23 23 24 Other assets 157 173
Slide 33: 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 34: Number of Customers
NUMBER OF CUSTOMERS Per business area Property 266 Financing Corporate 170 Financing Ship 22 Financing Retail 13 (Mortgages) 34 Non-consolidated
Slide 35: Real Estate Financing Exposure
REAL ESTATE FINANCING EXPOSURE Geographical residential property exposure Total NOK 10,236m* Geographical commercial property exposure Total NOK 3,065m* 4% 2% 4% 7% 8% 15% Viken 36% 8% Oslo 40% Oslo Vestland Vestfold & Telemark Viken Other Sweden Vestland Vestfold & Telemark Other Sweden 16% 36% 23%
Slide 36: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 10,777 Percent customer deposits of net lending to customers Senior debt 7,918 65.5 % AT1 & T2 debt 972 64.2 % 63.0 % 60.9 % 60.1 % 58.8 % 58.3 % 6,561 7,918 Other debt 6,038 6,754 6,399 7,183 627 5,645 Equity capital 3,775 Key ratios Depo
Slide 37: Customer Deposits
CUSTOMER DEPOSITS Deposits by size (NOKm) Deposits by product (NOKm) > NOK 20m 3,540 281 NOK 10 - 20m 1,140 148 643 NOK 5 - 10m 849 196 Floating rate retail 398 NOK 2 - 5m 1,231 1,132 3,916 NOK 0 - 2m 1,039 1,195 Floating rate corporate 4,091 - 1,000 2,000 3,000 4,000 5,000 Floating rate Fixed rate
Slide 38: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Cost of new market funding 250 209 180 200 155 120 119 93 300 2,000 77 1,650 101 1,400 1,270 900 703 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 Sub
Slide 39: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 6,905 56% None / very low risk 54% 7,218 52% 53% 52% 9,831 Low risk 10,788 37% 36% 35% 35% 35% 1,462 Moderate risk 2,334 191 Some risk 174 51 10% 11% High risk 9% 153 8% 7% 29 Very high risk 348 Q1-22 Q2-22
Slide 40: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 494 3% < 10 12 % 565 5,235 10 - 50 4,869 23 % 8% 4,975 50 - 100 < 10 4,981 10 - 50 2,815 50 - 100 100 - 150 3,082 100 - 150 150 - 200 1,873 15 % 150 - 200 200 - 250 3,176 > 250 1,294 200 - 250 1,805 24
Slide 41: (Pareto bank | 75%,
(Pareto bank | 75%,