Kvika Banki Hf · OMXICE:KVIKA
Kvika Banki Hf — Investor Day (November 2021)
111 slides from Kvika Banki Hf's investor day presentation, November 2021
Slide 1: Kvika Capital Markets Day
Kvika Capital Markets Day nfl KVSKA ™
Slide 2: Strategy, Opportunities and the Future of Kvika
nl Strategy, Opportunities and the Future of Kvika Mariné Orn Tryggvason CEO
Slide 3: An Overview of Kvika
An Overview of Kvika Diversified financial services Insurance + Insurance + Investments K Offerings + TM tryggingar hf. Key (TM insurance) Brands Kvika MI Asset Management Private banking Fund management Private equity Institutional Investors Kvika eignastyring hf (Kvika Asset Management) a) Commerc
Slide 4: History of Successful Buy and Build Strategy
History of Successful Buy and Build Strategy Significant value creation from successful execution of a clear strategy Buy and Build Strategy The Beginning Phase | Phase II 1956-2015: Kvika and TM are created 2015-2020: Asset management consolidation 2019-2021: Refinancing of loan portfolios TM found
Slide 5: Buy and Build Strategy Funded through Profitable Operations
Buy and Build Strategy Funded through Profitable Operations Profitable operations create further opportunities for growth Book value of equity Nasdaq Iceland main market ‘Three key methods to deploy ISK m. 6th largest market cap as of 15 November 2021 / ISK bn. excess capital 75747 aoe + Internal gr
Slide 6: Unique Market Position
Unique Market Position Kvika can differentiate through selective product and service offering a hoNY ™ iil ew + Three large commercial banks + Strong player in its areas of operation + Established insurance providers in Iceland + General retail and corporate services + Insurance + Insurance operatio
Slide 7: Ongoing Growth Phase
Ongoing Growth Phase As demonstrated by employee growth Other domestic banks ue Kvika has been steadily to increasing the number 7 of employees Insurance companies TM o& Kvika
Slide 8: Opportunities and Strategy
Opportunities and Strategy Core strategic focus on long-term profitability ™ Insurance Maintain and strengthen TM Insurance's historically strong position while pursuing opportunities such as retail bundling and white labeling post-merger il I Asset Management Maintain and strengthen position, oppor
Slide 9: Strategy
Strategy Guide to profitable growth Purpose Vision Strategic guides Values Increase competition and simplify the customers’ finances Utilise infrastructure, financial strength amd relatively small market share in many areas Transform financial services in Iceland guided by mutual benefits Focusing o
Slide 10: Goals
Goals Measurable and in line with purpose and vision Seven measurable goals for the next 3 years
Slide 11: 1. Fintech
1. Fintech Goal 1 of 7 Increase the number of customers of fintech solutions that use three services or more by 50,000
Slide 12: 1. Fintech
1. Fintech te om “ 18% ne 33% 2% = a 6% 13% | | 14% en 17% a 55+ 4555 3545 2535 1825 #048 Value in reaching fintech platforms’ Netgiré and Aur's 100,000+ customer base through multiple service offerings Kvika had a 2% market share in banking at 6M 2021, as measured by total financial system lending,
Slide 13: 2. A Responsible Participant in the Community
2. A Responsible Participant in the Community Goal 2 of 7 Having a real and measurable effect on Iceland‘s carbon footprint and on climate issues in general
Slide 14: 2. A Responsible Participant in the Community
2. A Responsible Participant in the Community Atmosphere CO2 (parts per million) 310 1970 «1978S 19861995 «20092011 2020 The most important task of our time is to stop global warming. Either the private sector finds opportunities in the transition to a carbon neutral society or the government applie
Slide 15: 3. Kvika Securities Ltd.
3. Kvika Securities Ltd. Goal 3 of 7 UK operations will account for at least 20% of the Group's profit
Slide 16: 3. Kvika Securities Ltd.
3. Kvika Securities Ltd. + 2017-2018 Establishing a presence + 2019-2021 Building a business + 2022 onwards Growing into the future Firm yet cautious steps have been taken towards strategic phased growth in the UK since 2017. In October Kvika announced heads of terms for the purchase of a majority s
Slide 17: 4. Asset Management
4. Asset Management Goal 4 of 7 Grow asset management operations faster than the domestic market
Slide 18: 4. Asset Management
4. Asset Management Fast growing market ISK bn. = Total Investment Funds 10,115 bn. Sept 2021 = Total Deposits Pension Fund Assets 407m, Yan.2010 sa2010 912010 sa2012 91.2012 51.2013 saana sn2m4 saans saane 91206 51.2017 yaaa oa208 51.2019 ya.200 9.2000 51.2021 kvika's Asset Management operations gr
Slide 19: 5. Insurance
5. Insurance Goal 5 of 7 Be Iceland‘s most profitable insurance company and increase market share
Slide 20: 5. Insurance
5. Insurance 35 30 25 20 a 7 22% 205% \ | 25 2535 354545555565, = TM Customers a Fintech Customers 290% 65+ a% TM's combined ratio, a measure of the profitability of insurance operations, has been steadily improving YoY and is the lowest among its peers. TM Insurance has been a digital pioneer in th
Slide 21: 6. Funding
6. Funding Goal 6 of 7 Funding costs will be comparable to those of Iceland‘s other banks
Slide 22: Funding costs comparison
350 = Laan 08/20/28 = ARION 05/27/24 = ARION 03/20/23, —SLBAN 01/19/28 = LANBNN 05/30/23 © KVIKA 241119 © Kva2101 Kvika’s key sources of funding are deposits, money market instruments and bonds. A strong revenue base with diversified income streams through operations that tie up minimal equity will
Slide 23: 7. Return on Equity
7. Return on Equity Goal 7 of 7 20% Return on tangible equity
Slide 24: Three Year Goals measurable goals
Three Year Goals 7 measurable goals © Increase the number of customers of fintech solutions that use three services or more, by 50.000 © Grow Asset Management operations faster than the domestic market © 20% RoTE © Having a real and measurable effect on Iceland‘s carbon footprint and on climate issu
Slide 25: Grasping the Finsurtech Opportunity
nl Grasping the Finsurtech Opportunity Sigurour Vidarsson Insurance
Slide 26: TM Insurance
TM Insurance TM is one of the largest insurance companies in Iceland with 24% market share Return on equity has been high over a long period of time © The insurance businessmodel has demonstrated its resilience as investment income is generally countercyclical to claims activity The digital strategy
Slide 27: Key Figures for 2021 Months
Key Figures for 2021 9 Months Profit after tax* ISK 4,700m 2020: ISK 1.135m Return on equity (annualized) 34% 2020: 23.4% Employees 102 *Compa Technical results ISK 1,430m 2020: ISK 935m Combined ratio 89.1% 2020: 93.8% Customers 51.000 ¢ without the effects of Lykill financing acquisition Return on
Slide 28: TM Insurance
TM Insurance Significant player in the Icelandic insurance market TM has 24% overall market share in the Icelandic insurance market Motor (44%) and Property (23%) largest business lines Investment portfolio of ISK 34.3 bn at 9M 2021 Long track record of delivering consistently good return from inves
Slide 29: Motor Insurance Accounts for 44% of Premium Income
Motor Insurance Accounts for 44% of Premium Income Split of premium 2021 9M Marine, Hull & Cargo Personal Accident Liability 8% Property Life Motor Key figures 2020 Motor Property Personal Accident Marine, Hull & Cargo Liability Life Total Premium (ISKm) 7A19 3,863 1,994 1,224 1,219 771 16,489 Marke
Slide 30: Virtual Sales Rep for Online Insurance Sales
Virtual Sales Rep for Online Insurance Sales Automated and uncomplicated Customers can choose which policies they want with ; Abvaéa tryggingum the help of a virtual sales representative hefur pti huga? Algengar tryggingar ‘The process is completely automated as the backend works entirely automatica
Slide 31: The TM App
The TM App Overview of all of your insurance policies and what is insured and what is not Buy hull policies for cars, bikes, etc. Users can use the app to send pictures of cars for risk assessment Status of life & health underwriting process Users can report claims and get compensation paid immediat
Slide 32: Done Deal in Seconds
Done Deal in 60 Seconds Revolutionising the customer experience ° With the TM app you can file a claim for the most common household items and get reimbursed instantly Self-service with complete automation and artificial intelligence for analyzing legitimacy of receipts using Amazon web services Cus
Slide 33: The Results of Our Digital Solutions
The Results of Our Digital Solutions 52% 49% 24% 43% 4.6
Slide 34: Business Relations Strategy
Business Relations Strategy Combined strategy of internal and external business relationships ™ Customer Engagement m Q MH oeoKs audur APL Manufacturing Focus ™ Others Customer Engagement APL In most cases, TM owns the customer relationship. In some cases, white-labeling is used with selected partne
Slide 35: The Results of Our Digital Solutions
The Results of Our Digital Solutions Positive impact on TM's core business P2P Payments @ 100,000 active users Very easy to make bank transfers and split bills Large and active customer group. LifeRhealth insurance for selected groups. Home and ‘travel insurance PL IG vetgire 21,000 active users Off
Slide 36: Key Takeaways
Key Takeaways > Solid track record over a long period of time Cf) State of the art digital solutions % Big Finsure opportunities within the group @G Aim to deliver best in class RoE while focusing on healthy growth
Slide 37: Adventurous Growth on a Strong Foundation
aT Adventurous Growth ona Strong Foundation Hannes Frimann Hrélfsson Anna Rut Agustsdéttir Asset Management
Slide 38: Key Figures
Key Figures Solid foundation AuM Number of funds Growth in AuM from 2015 Credit funds ISK 512 bn. 69 361% ISK 94 bn. PB AuM increase New funds Front office employees Net fee and commission income 38% 3 36 ISK 3.8 bn. *all numbers are as of 30 September 2021 except net fee and commission income whieh
Slide 39: Asset Under Management
Asset Under Management Steady growth in AuM — CAGR of 30% since 2015 Assets under management in ISK bn. 00 sr gn 2 500 445 20% oa 29° 15% 1 00 263 10% m 12 eu) 53 69 75 am 2 36 on 5 7 7 9 uv 9 om oot 2008 2008 2007 2008 2009 Boro 2011 |_aD12BMIa. 2014 201 2016 017 move 2019 ammo 001 oN KAM. = Others
Slide 40: Asset Under Management
Asset Under Management Steady growth in AuM — CAGR of 30% since 2015 Assets under management in ISK bn. oro forme 00 sr gn 2 00 oe 400 15% 200 10% 200 100 on 5 7 7 9 9 om oot 2008 2008 2007 2008 2009 Boro 2011 |_aD12BMIa. 2014 201 2016 017 move 2019 ammo 001 oN KAM. = Others — % of total matket (igh
Slide 41: Business Units
Business Units KAM, KSL and GAMMA Kvika Asset Management Funds Broad range of funds; equity, bonds, mixed, credit, real estate. Both for retail and professional investors 45 funds ‘AUM ISK 175 bn. 11 employees Private Equity One of the most experienced managers of PE funds in Iceland having launched
Slide 42: Business Model
Business Model Diversified foundation with proven track record © Low customer consolidation © Good diversification in asset classes + Highest market share in alternative investment funds in Iceland, 27%* + High proportion of AuM in closed funds with duration up to 30 years e Private banking + 38% in
Slide 43: Financials
Financials Steady growth © Net fee and commission income from asset management has increased significantly in last few years, both in ISK and as a % of total fee and commission income of Kvika group * 65% of Kvika‘s total fee and commission income in 1H 2021 © Steady and recurring revenues: fixed, p
Slide 44: Opportunities
Opportunities Retail, cross-border sales, ESG e Being part of a growing diversified financial services Group opens up new business opportunities for KAM + Introduce the funds to retail customers by applying fintech solutions at group level * Cross selling products throughout the group; synergies for
Slide 45: Key Takeaways
Key Takeaways TF Continued growth in on-going asset management business with opportunities in retail with fintech solutions 8% Good diversification of AuM and high proportion in closed funds all Economy of scale and low capital requirements
Slide 46: Strategic Growth through Digital Services and New Brands
nt Strategic Growth through Digital Services and New Brands Magniis Ingi Einarsson Commercial Banking
Slide 47: Key Figures for 2021
Key Figures for 2021 9M Highlights Operations Balance Sheet Revenues 9M 2021 Customers 3,800 Corporates Loan book Revenues + 43,000 ISK 69.5 bn. ISK 3,778 million +39,000 Individuals ~ 30,000 borrowers Net fees and Net interest Employees commissions** income 42 fr ISK ~ 631 ISK ~ 2,170 million milli
Slide 48: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus 2009 MP Banki + MP Verdbréf receives a commercial banking licence + Offers comprehensive commercial banking services mp
Slide 49: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus MP Banki commercial banking Offers comprehensive commercial banking 2015 MP Banki and Straumur + Rethinking of Commercial banking operations + Aim to reduce unprofitable customers * Depo
Slide 50: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus Diversification of loan bookifintech MP Banki 2017 Kvika -Netgiré MP Verdbréf receives a + Kvika funds Netgité's commercial banking loanbook cence + Kvika’s first steps Offers comprehens
Slide 51: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus MP Banki commercial banking Offers comprehensive commercial banking MP Banki and Straumur Rethinking of Commercial banking oper: Aim cust Kvika -Netgird Kvika funds Netgird! loanbook Kvi
Slide 52: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus r 7 Doposits/fintoch 9 MP Banki 2017 Kvika -Netgird 2019 Kvika creates Audur - audur an innovation in Icelandic financial services rSbréf receives a + Kvika funds Netgird's vee panko + E
Slide 53: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus MP Banki Kvika -Netgiré Kvika creates Audur - audur an innovation in Icelandic financial services ertibréf receives a Kvika funds Netgiré's Deeeerrene ree + Emphasis on simplicity and @
Slide 54: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus Diversification of loan book MP Banki Kvika -Netgiré 19 Kvika creates Auaur ~ 2021 Kvika merges with TM and Lykill an innovation in Icelandic financial services audur + MP Verdbréf recei
Slide 55: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus Div 2009 MP Banki + MP Verdbréf receives a + Kvika funds Netgi ation of loan book/finteh 2017 Kvika -Netgiré commercial banking loanbook licence + Kvika’s first steps + Offers comprehens
Slide 56: Recent Developments Reflect Strategic Direction
Recent Developments Reflect Strategic Direction Increase deposits, diversification of loan book and fintech focus Diversification of loan beokifintosh Depoeite/fintoch Diversification of loan book: 2009 MP Banki 2017 Kvika -Netgir6 2019 Kvika creates AuBur ~ audur 2021 Kvika merges with TM and Lykil
Slide 57: Commercial Banking Today
Commercial Banking Today Well known brands and multiple opportunities for growth Acuna Kvika - Corporate lending + Tailor made financing solutions , often linked to transactions or projects Loan book ISK 69.5 billion Netgiré and Aur Convenient solution to transfer funds and receive payment Commercia
Slide 58: Loans to Customers
Loans to Customers Risk diversification has increased significantly with acquired portfolios Interest rates vary between loan categories and reflect the estimnated|lpes risik-atany given Real estate development Real estate Lykill commercial vehicles and Lykill vehicles time, generally lowest in vehi
Slide 59: Future Opportunities
Future Opportunities Digital services and brands are key drivers for growth Faster lending service through digitalisation Growth through strong brands Better terms with self service simplicity Utilise existing relationships to service customers across segments Loan brokerage to credit funds and othe
Slide 60: Key Takeaways
Key Takeaways © re oe. Strategic developments in recent years have resulted in deposits increasing by more than 2x and loans more than 3x from 2015 Increased diversification of loan portfolio and profitable commercial banking activities Significant opportunities in the bank's brands and digital serv
Slide 61: Innovation in Established Markets
nt Innovation in Established Markets Bjarni Eyvinds Prastarson Investment Banking
Slide 62: Investment Banking
Investment Banking Combination of five successful business units Corporate Finance + Current number of active projects: 30 + Number of paying customers LTM: 25 Proprietary Trading and Treasury + Outstanding securities: ISK 30 bn + Number of outstanding instruments Capital Markets + Member of Nasdag
Slide 63: Solid Organic Growth
Solid Organic Growth Within a rapidly growing Kvika Revenue split 2017 - 9M 2021 0% 0% 0%. 0% = 100% oe 34% 24% an% 45% 46% ™ 38% 2017 2018 2019 2020 2021 9M 1 Investment Banking ml Commercial Banking Asset Management © Insurance any) a7 (836 689 553 393346 Ccopital Markets Proprietary Trading & Tre
Slide 64: Investment Banking Units
Investment Banking Units Shared focus on revenue generation that ties up minimal capital Proprietary Trading Strategic focus + Maintait its positions as one of the largest market makers and a primary dealer for stocks and bonds on Nasdaq Iceland + Taking proprietary positions in listed securities, p
Slide 65: Revenue Generation Through Traditional Operations
Revenue Generation Through Traditional Operations Low capital requirement with a high return on equity An important part of Investment Banking’s service offering is securities financing, offered to customers through swap agreements originated in Capital Markets Swap agreements are a prime example of
Slide 66: Innovation in Established Markets
Innovation in Established Markets Kvika FX Market outside Kvika FX v Fixed fee 10 bps x No visibility in price or flow Visibility - Trade ticker x Markets makers control the market Clients can be price makers x Market risk is costly for the system v Direct flow, client to client - Kvika is a counter
Slide 67: Innovation in Established Markets
Innovation in Established Markets Orderbook EUR/ISK Equivalent to bond and equity markets Mynt Kaupordi Kau Sala Seljandi Clients place orders in a) Bid or ask 50000000 KVKA 14715. 14740 —_‘KVIKA he wacker B) Welt onoogoo kVA 4700 147.50 KMKAsoa.00000 ©) Price 0000.00 1sa00n60 | KVKA |/14580 4800] K
Slide 68: Kvika FX
Kvika FX Visibility and transparency Cumulative trades ° We aim to increase the depth and visibility in the FX 10 market 1.600 1400 1200 ° Active participation from clients — direct bid and ask in bs the market @ | i 200 | ° Less difference between buying and selling orders ae rede re a a a ° Visibi
Slide 69: Key Takeaways
Key Takeaways *&: Strong presence in key markets and solid fee generation ©) Low capital requirement and high return on equity #: Opportunities through fintech by further development of Keldan FX
Slide 70: Strong Foundations for Future Growth
nt Strong Foundations for Future Growth Iris Arna Johannsdottir Gunnar Sigurdsson Kvika Securities
Slide 71: A Brief History of KSL
A Brief History of KSL The launch of KSL in 2017 Capital Controls liberalised —~ 2017 - 2018 Phase I: Establishing a presence 4 Conservative strategy of phased growth and cost containment across three core competencies 2 _ Licenses and compliance infrastructure from day 1 to ensure scalability 3 __
Slide 72: A Brief History of KSL
A Brief History of KSL Foundations laid for growth phase Capital Controls . liberalised — 2017 - 2018 Phase I: Establishing a presence Acuisition of cammauk ~~ - 2019-2021 operations Phase II: Building a foundation 1 Growand strengthen team 2 Strengthen FCA license infrastructure 3 Completed and act
Slide 73: Leverage Strengths to Take Advantage of Opportunity Set
Leverage Strengths to Take Advantage of Opportunity Set Project selection determined by clearly articulated preferred positioning Strengths Oppurtunity set Highly experienced team with decades‘ track record transacting in UK market Large and profitable opportunity set delineated by clearly articulat
Slide 74: Success Since Launch
Success Since Launch Strong foundation been laid Asset Management 4 Investment vehicles under management * Care home sector + Realestate + Alternative credit Note: All amounts in ISK, converted at GBP/ISK = Net income ang Corporate Finance 20 bn. Value transacted + Health tech + Ecommerce + Fashion
Slide 75: A Brief History of KSL
A Brief History of KSL Attractive opportunity for growth following TM merger Capital Controls liberalised Acuisition of GAMMA UK operations Kvika merger with TM —- 2017 - 2018 Phase I: Establishing a presence —~ 2019-2021 Phase II: Building a foundation > 2022 - Phase III: Growing into the future v
Slide 76: Ortus Secured Finance at a Glance
Ortus Secured Finance at a Glance Secured lending in UK bridging market ORTL wU > Proven and reliable principal lender with a flexible offering of competitive funding solutions Highly competent team with proven track record Ortus was founded in 2013 to take advantage of large gaps left by traditiona
Slide 77: UK Bridge Lending
UK Bridge Lending Fast growing niche of alternative credit forms strong foundation from which to grow Size of UK bridge lending market, ISK bn. : ' Market Opportunity + Sizable player with ©. 2% market share in UK bridge lending market + Highlights strong market presence, yet large opportunities to
Slide 78: Keys to Success
Keys to Success Pieces in place for continued growth trajectory Highly valuable infrastructure in place Benefits of Kvika ownership Portfolio Sourcing Underwriting Funding Management Network and brand value built Highly skilled credit team with WEEE TIECEN SU comeing eu oe siegliipestiians safeguard
Slide 79: Opportunity to Substantially Enhance Profitability
Opportunity to Substantially Enhance Profitability Continued increased balance sheet lending, cautious growth and improved terms of funding Opportunity to drive profitability with ownership’ +382m+715m ++175m-263m +140m 703m 575m 492m a umeanens 7 a 2018 2019 2020 2021 EAC Bi) portfolio on balance L
Slide 80: Strategic Rationale for Transaction
Strategic Rationale for Transaction Natural next step of 2018 acquisition of cornerstone stake 1 _ Efficient lending engine and highly competent management team well known to Kvika Strong track record of high-quality origination 2013 First loan disbursed +85 bn. Amount lent since founding 0.0 kr Cap
Slide 81: Clear Strategy to Reach 20% Profit
Slide 82: Key Takeaways
Slide 83: Enhanced Competition - Finance simplified
Slide 84: Our Strategic Journey - Part One
Slide 85: Our Strategic Journey - Part Two
Slide 86: Kvika's Fintech Milestones
Slide 87: Kvika's retail services: A dramatic shift in funding, lending and number of clients
Slide 88: Netgíro & Aur
Slide 89: Auður - Savings Simplified
Slide 90: Auður's Competitive Impact
Slide 91: Aur - Bank Transfers Simplified
Slide 92: The Dominant App for P2P Payments
Slide 93: Netgíró - BNPL Simplified
Slide 94: The Leading App for BNPL
Slide 95: Low Default Rates - Enhanced Profitability
Slide 96: Strong Brands Each with their Own Differentiation
Slide 97: Three Year Goal: Increase number of clients utilising three or more products
Slide 98: Slide 98
Slide 99: Funding Future Growth
Slide 100: Kvika Today
Slide 101: History of Successful Buy and Build Strategy
Slide 102: Projects Supporting the Next Phase of Growth
Slide 103: How to Fund Future Growth?
Slide 104: Kvika as a Borrower
Slide 105: Domestic Debt Funding
Slide 106: Foreign Debt Funding
Slide 107: Funding Plan
Slide 108: 20% Return on tangible equity
Slide 109: Key Takeaways
Slide 110: Slide 110
Slide 111: Seven Measurable Goals