Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q2 2018 Earnings Presentation
35 slides from Pareto Bank Asa's earnings presentation, 2018
Slide 1: Pareto Bank Financial Results Second Quarter 2018
PARETO BANK Financial Results Second Quarter 2018
Slide 2: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS AND FINANCIALS 2 BUSINESS AREAS 3 AMBITIONS FOR 2018
Slide 3: Second Quarter 2018 Highlights
SECOND QUARTER 2018 HIGHLIGHTS 1 Profit after tax NOK 93.2m (NOK 75.0m) 2 Return on equity 17.5 % (15.9 %) 3 Strong net interest income of NOK 139.4m (NOK 124.6m) 4 Quarterly lending growth of NOK 423.4m (NOK 570.5m) 5 Lending growth within both real estate and corporate financing PAGE 3
Slide 4: Raised Profitability and Growth Ambitions
RAISED PROFITABILITY AND GROWTH AMBITIONS RETURN ON EQUITY > 15 % LENDING GROWTH NOK 1,000 – 1,500m • Profitability ambition lifted to > 15 % • Lending growth ambition lifted to NOK 1,000m to 1,500m for 2018 • Stable lending margins • Continued lending growth in 2018 within real estate • High lendin
Slide 5: Income Statement
INCOME STATEMENT P&L (NOKm) Q2-18 Q2-17 H1-18 H1-17 Strong interest income due to lending Net Interest income 139.4 124.6 268.5 240.0 growth in the second quarter Total other operating income 8.6 7.8 13.5 26.7 Total net income 148.0 132.5 281.9 266.7 NOK 10.0m set off for employee bonus Total other
Slide 6: Growing Net Interest Income
GROWING NET INTEREST INCOME Net interest income NOK 1,000 150,000 Q2-18 3,343 14,640 5,607 139,402 140,000 2,904 Q2-17 130,000 236 6,144 124,624 120,000 110,000 100,000 90,000 80,000 Lending & Lending & Provisions Invested Long-term Long-term deposit deposit and amort- surplus funding costs: funding
Slide 7: Stable Margins
STABLE MARGINS Net interest margins Percent interest income including amortizations and fees over 3M Nibor; Cost of deposits of average volumes over 3M Nibor (average of end-of-month fixings) 6.0 % 6.1 % 5.9 % 5.9 % 5.9 % 5.8 5.6 % 5.6 % 5.6 % 5.7 % 5.7 % 5.6 % 5.6 % 5.5 % 5.7 5.6 % % 5.7 % % 5.4 %
Slide 8: High Quality Loan Portfolio
HIGH QUALITY LOAN PORTFOLIO Loss allowances according to IFRS 9 Individual losses, write-downs and reversals on loans & guarantees NOKm NOKm IAS 39 IFRS 9 82.9 77.1 38.6 42.7 11.8 Stage 3 Stage 2 5.4 17.6 4.4 19.5 Stage 1 1.8 2.3 1.0 10.3 -2.7 -5.9 24.9 24.2 31.03.2018 30.06.2018 Q3-16 Q4-16 Q1-17 Q
Slide 9: Funding
FUNDING Sources Deposits & senior debt NOKm NOKm / Percent customer deposits of net lending to customers Deposits 8,062 95% 87% 86% Senior debt 4,915 78% 77% 75% T1 & T2 debt 470 63% 4,915 Other debt 152 2,763 2,796 2,886 3,280 3,250 Equity capital 2,153 4,008 Key ratios Deposits with liquidity rest
Slide 10: Capital
CAPITAL Core equity tier 1 ratio (CET1 ratio) Key comments on capital CET1 • The bank’s minimum CET1 ratio requirement is 15.2 % 17.2 % 17.7 % Target 16.2 % 15.7 % • The board has set a CET1 ratio target of 15.7 % as of 13.2 % Pillar 2 31.12.2018 3.2% • As a project bank, Pareto Bank will have varia
Slide 11: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS AND FINANCIALS 2 BUSINESS AREAS 3 AMBITIONS FOR 2018
Slide 12: Norway's Leading Project Bank
NORWAY’S LEADING PROJECT BANK BUSINESS AREAS PROJECTS / CREDITS EXPOSURE AVG. PRINCIPAL Property lot financing Real NOKm 8,907 NOKm Building construction facilities estate Commercial property financing 67 % 40 M&A loans Bridge loans NOKm 2,016 NOKm Corporates Investment loans 15 % 30 Working capital
Slide 13: Growth in Real Estate & Corporate
GROWTH IN REAL ESTATE & CORPORATE NOKm of gross exposure 29 % 5,750 5,014 4,454 1% 3,135 3,271 3,157 29 % 1,895 2,016 1,561 Residential development Commercial property Corporate financing 31/12/2017 31/03/2018 30/06/2018 PAGE 13
Slide 14: Real Estate | Continued High Activity
REAL ESTATE | CONTINUED HIGH ACTIVITY 67% 67% Real estate credit exposure Key comments NOKm of gross exposure • Continued strong deal flow has resulted in real estate credit exposure growth of NOK 622m in Q2-18 Property lots without houses 977 • Growth mainly within residential property development
Slide 15: Real Estate | Managing Credit Risk
REAL ESTATE | MANAGING CREDIT RISK 67% 67% ✓ Housing market correction has bottomed out more quickly than expected ✓ Pareto Bank maintains its focus on presale, liquidity buffers and equity contribution ✓ Presale requirement: if the price of unsold units falls by 50 % compared to the price of presol
Slide 16: Corporates | Continued Strong Deal Flow
10% CORPORATES | CONTINUED STRONG DEAL FLOW 15% 9% Strategy 1% • Focus on corporate transactions (M&A, MBO, LBO) and 5% tailor-made solutions to fit client needs 12% • Focus on SMEs with revenue between NOK 20m to Investment loans NOK 500m Working capital facilities • No specific sector or industry
Slide 17: Corporates | SME Product Pilot
CORPORATES | SME PRODUCT PILOT New digital approach Status • “Fleksibel Driftskreditt” is a credit facility based on • Automatic and digital factoring pledge in place receivables as collateral • Product pilot testing on customers has started • Easy to use, flexible and with transparent pricing • Foc
Slide 18: Shipping & Offshore | Diversified Portfolio
SHIPPING & OFFSHORE | DIVERSIFIED PORTFOLIO 8% 8% Policy Total S&O credit exposure & Loan to value LTV * Share • Target LTV of 50 % and increased profitability NOKm • Norwegian ship owners, majority shareholders and Product 214 55% 21% family offices Bulk 185 49% 18% • Strong balance sheets and high
Slide 19: Table of Contents
TABLE OF CONTENTS 1 HIGHLIGHTS AND FINANCIALS 2 BUSINESS AREAS 3 AMBITIONS FOR 2018
Slide 20: Raised Financial Ambitions
RAISED FINANCIAL AMBITIONS 30.06.2018 STATUS 2018 AMBITION NOK 1,000m - GROWTH LENDING High activity in all areas of real NOK 1,042m estate and in corporate financing. 1,500m Seeing continued growth in 2018. Increased profitability ambition due to lending growth on 16.2 % > 15.0 % * ROE stable margi
Slide 21: Strong Performance
STRONG PERFORMANCE Profit after tax Return on Equity CET1 ratio NOKm Excluding AT1 capital and interest Standard model 93.2 79.2 17.0 % 75.0 17.5% 16.2 % 16.0 % 15.9% 15.2% Q2-17 Q1-18 Q2-18 Q2-17 Q1-18 Q2-18 30.06.2017 31.03.2018 30.06.2018 Net interest income (NOKm) Cost/income ratio Loss ratio NO
Slide 22: Solid Growth & High Profitability
SOLID GROWTH & HIGH PROFTIABILITY STRONG • Net lending growth NOK 1,042m YTD on a stable net interest margin of 5.7 % LENDING • Real estate activity holding up with lending growth of NOK 945m YTD GROWTH • Strong deal flow in corporate finance and lending growth of NOK 321m YTD STABLE • Return on equ
Slide 23: Appendix
(Pareto bank
Slide 24: Largest Shareholders as of July 2018
LARGEST SHAREHOLDERS AS OF 1 JULY 2018 # Investor 1 July 2018 # of shares % total • The Company has 58,619,688 shares 1 Pareto AS 8,921,873 15.22% outstanding 2 Pecunia Forvaltning AS 8,246,549 14.07% 3 Apollo Capital Management 5,545,998 9.46% • One class of shares where each 4 Indigo Invest AS 4,3
Slide 25: The Share
THE SHARE Earnings per share Book equity per share NOK NOK 36.73 1.57 1.27 1.34 35.16 32.71 Q2-17 Q1-18 Q2-18 Q2-17 Q1-18 Q2-18 Price / Earnings Price / Book NOK, Share price 38.40 NOK, Share price 38.40 7.04x 6.90x 1.09x 1.05x 1.05x 6.10x Q2-17 Q1-18 Q2-18 Q2-17 Q1-18 Q2-18 PAGE 25
Slide 26: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Net Interest income 139.4 129.1 128.3 138.7 124.6 Total other operating income 8.6 4.9 2.1 3.2 7.8 Total net income 148.0 134.0 130.3 141.9 132.5 Total other operating expenses 29.6 31.0 33.5 24.2 26.8 Operating result before losses
Slide 27: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q2-18 Q1-18 Q4-17 Q3-17 Q2-17 Loans to credit institutions 1,136 405 357 165 350 Loans to customers 10,489 10,066 9,448 9,870 9,544 Bonds and other securities 4,047 2,802 3,174 3,331 3,309 Shareholdings in associated companies 35 37 36 42 40 Other assets 46 124 90 6
Slide 28: Margins and Interest Contribution
MARGINS AND INTEREST CONTRIBUTION Margins per business area Interest contribution per business area Estimated annualized margins including commissions, excluding font NOKm, estimated interest contribution including commissions, excluding font and back-end fees over 3M Nibor or similar rate and back-
Slide 29: Number of Customers
NUMBER OF CUSTOMERS Number of customers per business area Real Estate 246 Corporates 71 Securities 226 Shipping 21 & Offshore Retail 32 (Mortgages) PAGE 29
Slide 30: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 923 Floating rate retail Depositors (#) 2,504 932 660 2,757 Amount (NOKm) 2,411 5,652 Floating rate corporate 2,639 Retail Corporate 1,792 Savings with restrictions 1,395 1,348 Deposits by size Fixed rate 1,814 NOKm 1,331 > NOK 20m 2,5
Slide 31: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 120 106 200 77 58 1500 1400 38 1000 30 25 500 500 150 2018 2019 2020 2021 2022 2023 0,25 0,5 1 2 3 5 Senior Call on Subordinated Capital Years to Maturity Source: Nordic Bond Pricing PAGE 31
Slide 32: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Key comments Market value of bonds and funds comprising suprplus liquidity • The bank’s liquidity is comprised of cash 2% and highly liquid bonds 1% • High share of government & PSEs to reduce credit spread risk and increase short-term liquidity • Large share of cove
Slide 33: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 5,558 risk 5,809 48% 5,268 45% 46% 45% 44% Low risk 42% 42% 43% 6,167 40% 39% 1,247 Moderate risk 995 207 Some risk 302 13% 0 High risk 10% 10% 9% 18 7% 148 Very high risk Q1-17 Q2-17 Q3-1
Slide 34: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Commitment size per customer NOKm Percent of NOKm 1,148 < 10 7% 896 15% 4,768 < 10 10 - 50 4,518 5% 10 - 50 3,607 50 - 100 50 - 100 5% 3,484 34% 100 - 150 629 8% 150 - 200 100 - 150 1,153 200 - 250 796 > 250 150 - 200 645 26% 214 200 - 250 631 1,267 >
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(Pareto bank