Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q3 2019 Earnings Presentation
38 slides from Pareto Bank Asa's earnings presentation, 2019
Slide 1: Pareto Bank Financial Results Third Quarter 2019
PARETO BANK Financial Results Third Quarter 2019
Slide 2: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 3: Status Financial Ambitions
STATUS FINANCIAL AMBITIONS STATUS YTD 30.09.2019 AMBITIONS FOR 2019 Profitability requirement for new business is 15 %. 14.0 % 14.0 % ROE Higher capital base creating a temporary drag on ROE. Growth on track. GROWTH LENDING NOK 1,539m NOK 2,000m Attractive markets and healthy pipeline. ADEQUACY Soli
Slide 4: Third Quarter 2019 Highlights
THIRD QUARTER 2019 HIGHLIGHTS 1 Profit after tax NOK 96.5m (NOK 76.8m). Return on equity after tax 12.9 % (13.7%). Higher capital base creating a temporary drag on 2 return on equity. Net interest income of NOK 173.0m (NOK 138.8m) due to increased lending 3 volume and a stable net interest margin. 4
Slide 5: Key Figures
KEY FIGURES Profit after tax Return on Equity CET1 ratio NOKm Excluding AT1 capital and interest Standard model 17.8 % 17.8 % 96.5 86.7 16.5 % 76.8 13.7% 13.0% * 12.9% Q3-18 Q2-19 Q3-19 Q3-18 Q2-19 Q3-19 30.09.2018 30.06.2019 30.09.2019 Net interest income (NOKm) Cost/income ratio Loss ratio NOKm Qu
Slide 6: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 7: Income Statement
INCOME STATEMENT P&L (NOKm) Q3-19 Q3-18 YTD-19 YTD-18 Growth in net interest income due to lending Net interest income 173.0 138.8 499.9 407.3 growth and a stable net margin. Lending Net other operating income -2.9 -1.4 4.2 12.1 margin was flat to slightly lower while Total net income 170.1 137.5 50
Slide 8: 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 5.7 % 5.8 % 5.7 % 5.9 % 6.1 % 5.5% 5.4% 6.0 % 5.9 % 5.9 5.6 % 5.7 % 5.7 % 5.6 % 5.9 % 5.6 % 5.9 % 5.7 5.6 % %
Slide 9: Quarterly Change in Net Interest Income
QUARTERLY CHANGE IN NET INTEREST INCOME Net interest income Changes in net interest income (NOK 1,000) 190,000 7,375 Q3-19 180,000 172,984 Q2-19 6,171 1,677 370 422 170,000 2,453 164,361 160,000 150,000 140,000 130,000 120,000 Lending Lending Fee Deposit Deposit Other volume rate income volume rate
Slide 10: 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 IAS 39 IFRS 9 NOK 9.1m 62.8 14.9 53.7 8.6 11.9 9.4 9.1 14.6 Write-offs 10.8 Stage 3 4.0 8.7 2.3 Stage 2 1.0 1.0 Stage 1 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-
Slide 11: Funding
FUNDING Sources Deposits & senior debt NOKm, NOKm Percent customer deposits of net lending to customers Deposits 8,545 77% 77% 74% Senior debt 5,604 71% 65% 65% 63% T1 & T2 debt 470 5,551 Other debt 202 5,207 5,279 5,604 4,915 Equity capital 2,942 5,011 4,008 Key ratios Deposits with liquidity restr
Slide 12: Capital
CAPITAL Core equity tier 1 ratio (CET1 ratio) Key comments CET1 • Strong capitalization following private placement. 17.2 % 17.7 % 17.8 % Target 16.1 % 16.2 % • CRR/CRD IV expected to come into force in the second Pillar 2 half of 2019. 3.2 % • Revised estimate of effect of the "SME-discount": profo
Slide 13: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 14: Increasing Awareness of Pareto Bank
INCREASING AWARENESS OF PARETO BANK Systematically building awareness of Pareto Bank as a supplier of tailor-made financial solutions to target customers in the greater Oslo region and larger cities. The bank targets medium-sized projects, transactions and enterprises. • tETT Outbound marketing to i
Slide 15: Customer Values
CUSTOMER VALUES EFFICIENT RELIABLE HANDS-ON PERSONAL COMMERCIAL SPECIALIZED PAGE 15
Slide 16: 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 74% NOKm 50-100 estate and larger Norwegian Commercial propert
Slide 17: Exposure per Business Area
EXPOSURE PER BUSINESS AREA NOKm gross exposure 7,007 6,834 6,519 5,811 5,847 4,880 4,320 4,004 3,762 3,247 2,260 2,249 2,132 1,949 1,781 1,012 832 736 699 834 Residential property Commercial property Corporate Shipping Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 PAGE 17
Slide 18: Real Estate | Status
REAL ESTATE | STATUS 67% 74% Real estate credit exposure Σ = NOK 11,714m Key comments NOKm of gross exposure • Increased exposure to commercial property of NOK 561m and reduced exposure to residential property Land without houses 1,695 development of NOK 173. • Growth in commercial property exposure
Slide 19: Real Estate | Residential Property Exposure
REAL ESTATE | RESIDENTIAL PROPERTY EXPOSURE 67% 50% Geographical residential property exposure (NOKm) Σ = NOK 6,834m Stress test against fall in housing prices NOKm of gross exposure • Residential property exposure is stress-tested semi- annually against a fall in housing prices of 10 to 40 %. 6% •
Slide 20: Real Estate | Commercial Property Exposure
REAL ESTATE | COMMERCIAL PROPERTY EXPOSURE 24% 67% Geographical commercial property exposure (NOKm) Σ = NOK 3,810m Key comments NOKm of gross exposure • Average commitment size approx. NOK 35m, average maturity approx. 2 years, average loan to value (LTV) 2% approx. 70 %. 7% • Bridge loans with clea
Slide 21: Corporate | Increasing Deal Flow
CORPORATE | INCREASING DEAL FLOW 14% 67% Corporate financing exposure (NOKm) Σ = NOK 2,249m Key comments NOKm of gross exposure • Deal flow increasing as awareness of Pareto Bank as a financial solution provider for medium-sized 6% 3% businesses improves. Policy 16% Investment loans Working capital
Slide 22: Shipping | Turning Point
5% 8% SHIPPING | TURNING POINT Status Shipping credit exposure & loan to value Σ = NOK 834m LTV * Share • Three new loans in Q3-19 (bulk, chemical and NOKm industrial/multipurpose) and two repayments (product and container). Industrial 211 51% 25% • 17 customers and a total of 25 vessels. • Largest
Slide 23: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS 4 PROFITABLE GROWTH
Slide 24: Pareto Bank Is Well-Positioned
PARETO BANK IS WELL-POSITIONED PLATFORM FOR GROWTH A robust platform for further profitable lending growth. Capital, competence and capacity in place to profitably develop all business areas going forward. REGULATORY READY Solid capitalisation. Ready to meet potential changes in capital requirements
Slide 25: Long Term Financial Ambitions
LONG TERM FINANCIAL AMBITIONS Commercially oriented. 15.0 % ROE Proven credit quality. Cost effective. Lending growth within all GROWTH LENDING 10 % annually business areas. Profitability comes first. Platform for growth. 16.2 % CET1 * Regulatory ready. DIVIDENDS Minimum 25 % dividend, > 25 % no cap
Slide 26: Appendix
(Pareto bank
Slide 27: Largest Shareholders as of October 2019
LARGEST SHAREHOLDERS AS OF 1 OCTOBER 2019 # Investor 01 October 2019 • The Company has 69,851,730 shares # of shares % total outstanding after the private 1 Pareto AS 12,289,610 17.59 % placement. One class of shares where 2 Pecunia Forvaltning AS 5,900,000 8.45 % each share carries one voting right
Slide 28: The Share
THE SHARE Earnings per share Book equity per share NOK NOK 1.34 42.16 40.85 * 1.28 1.23* 38.01 Q3-18 Q2-19 Q3-19 Q3-18 Q2-19 Q3-19 Price / Earnings Price / Book NOK, Share price 37.50 NOK, Share price 37.50 7.79x 7.53x* 1.05x 7.01x 0.91x* 0.89x Q3-18 Q2-19 Q3-19 Q3-18 Q2-19 Q3-19 Note (*): Key figur
Slide 29: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q3-19 Q2-19 Q1-19 Q4-18 Q3-18 Net interest income 173.0 164.4 162.6 147.0 138.8 Net other operating income -2.9 0.9 6.2 -3.3 -1.4 Total net income 170.1 165.2 168.8 143.7 137.5 Total operating expenses 32.2 34.7 35.0 28.2 31.1 Operating profit before impairments
Slide 30: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q3-19 Q2-19 Q1-19 Q4-18 Q3-18 Loans to credit institutions 1,004 1,785 951 320 1,295 Loans to customers 13,191 12,539 12,065 11,653 10,690 Bonds and other securities 3,467 3,998 3,797 3,537 4,220 Shareholdings in associated companies 35 37 37 37 35 Other assets 66 7
Slide 31: 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 32: Number of Customers
NUMBER OF CUSTOMERS Number of customers per business area Real Estate 285 Corporate 94 Securities 152 Shipping 16 Retail 29 (Mortgages) PAGE 32
Slide 33: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 672 Floating rate retail Depositors (#) 1,408 502 646 2,341 Amount (NOKm) 2,885 5,637 Floating rate corporate 2,441 Retail Corporate 1,420 Savings with restrictions 1,188 2,313 Deposits by size Fixed rate 2,826 NOKm 1,462 > NOK 20m 2.2
Slide 34: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 0 91 150 61 0 0 1800 41 1375 1125 200 851 50 21 12 300 7 130 2019 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 P
Slide 35: 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 36: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 5,610 55% risk 5,960 49% 48% 6,300 45% 45% Low risk 42% 8,665 42% 42% 40% 38% 1,034 Moderate risk 1,081 268 Some risk 25 18 12% High risk 10% 9% 110 8% 7% 10 Very high risk Q3-18 Q4-18 Q1-
Slide 37: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Distribution of commitments by size NOKm Percent of NOKm 905 < 10 833 5% 17% 4,379 < 10 10 - 50 5,158 10 - 50 4% 3,391 33% 50 - 100 50 - 100 3,686 6% 100 - 150 1,774 150 - 200 100 - 150 1,877 12% 200 - 250 827 > 250 150 - 200 994 23% 250 200 - 250 649
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(Pareto bank