Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q3 2018 Earnings Presentation
35 slides from Pareto Bank Asa's earnings presentation, 2018
Slide 1: Financial Results Third Quarter 2018
PARETO BANK Financial Results Third Quarter 2018
Slide 2: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS
Slide 3: Status Financial Ambitions
STATUS FINANCIAL AMBITIONS 30.09.2018 STATUS 2018 AMBITION NOK 1,000m - GROWTH LENDING High activity in all areas of real NOK 1,242m estate and in corporate financing. 1,500m Seeing continued growth in 2018. Continued high profitability ambition due to lending growth on 15.2 % > 15.0 % * ROE stable
Slide 4: Third Quarter 2018 Highlights
THIRD QUARTER 2018 HIGHLIGHTS 1 Profit after tax NOK 76.8m (NOK 86.0m) 2 Return on equity 13.7 % (17.5 %) 3 Lending growth year to date of NOK 1,242.0m (NOK 1,115.7m) 4 Lending growth mainly within real estate 5 Stable net interest income of NOK 138.8m (NOK 138.7m) Increased funding to meet future l
Slide 5: Key Figures
KEY FIGURES Profit after tax Return on Equity CET1 ratio NOKm Excluding AT1 capital and interest Standard model 93.2 86.0 17.0 % 79.2 76.8 17.5% 17.5% 16.6 % 16.5 % 16.2 % 15.2% 13.7% Q3-17 Q1-18 Q2-18 Q3-18 Q3-17 Q1-18 Q2-18 Q3-18 30.09.2017 31.03.2018 30.06.2018 30.09.2018 Net interest income (NOK
Slide 6: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS
Slide 7: Income Statement
INCOME STATEMENT P&L (NOKm) Stable lending margins. Lending growth came in the end of the quarter. Increased funding Q3-18 Q3-17 YTD-18 YTD-17 volume, higher market rates and temporarily Net Interest income 138.8 138.7 407.3 378.7 higher suprplus liquidity. Total other operating income -1.4 3.2 12.1
Slide 8: Lending Growth at Stable Margins
LENDING GROWTH AT STABLE MARGINS Historical development in lending and margins Net lending to customers (NOKm) 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) 14,000 6.00% 5.9 % 5.6 % 5.6 % 5.
Slide 9: 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) 5.7 % 5.8 % 5.7 % 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
Slide 10: Change in Net Interest Income
CHANGE IN NET INTEREST INCOME Net interest income Changes in net interest income over 3M Nibor NOK 1,000 150,000 Q3-17 5,470 Q3-18 10,741 138,685 138,834 140,000 390 1,280 7,114 130,000 7,278 120,000 110,000 100,000 90,000 80,000 Lending & Lending & Provisions Invested Market Market deposit deposit
Slide 11: High Quality Loan Portfolio
HIGH QUALITY LOAN PORTFOLIO Write-downs & losses according to IFRS 9 Write-downs, losses & reversals on loans & guarantees NOKm NOKm Write-downs IAS 39 IFRS 9 Write-downs & losses: 81.0 & losses: 77.2 Realised loss 30.4 related to a loan that was previously fully written-down. 42.7 Actual loss 11.8
Slide 12: Funding
FUNDING Sources Deposits & senior debt NOKm NOKm / Percent customer deposits of net lending to customers Deposits 8,221 95% 86% Senior debt 5,207 78% 77% 77% 75% T1 & T2 debt 470 63% 5,207 4,915 Other debt 193 2,763 2,796 3,280 3,250 Equity capital 2,228 4,008 Key ratios Deposits with liquidity rest
Slide 13: 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 16.5 % 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 14: Table of Contents
TABLE OF CONTENTS 1 AMBITIONS & HIGHLIGHTS 2 FINANCIALS 3 BUSINESS AREAS
Slide 15: A Niche Player with Focus on Norwegian Medium-Sized Enterprises
A NICHE PLAYER WITH FOCUS ON NORWEGIAN MEDIUM-SIZED ENTERPRISES • Reliably indicate how we can meet customer needs EFFICIENT AND I RELIABLE • An efficient credit process • Decision-making without uneccessary bureaucracy • We understand our customers' businesses and provide tailor-made solutions HAND
Slide 16: Project Financing for Medium-Sized Enterprises in Four Market Segments
PROJECT FINANCING FOR MEDIUM-SIZED ENTERPRISES IN FOUR MARKET SEGMENTS BUSINESS AREAS FOCUS CREDITS / CUSTOMERS EXPOSURE SWEET SPOT The specialized real Property lot financing Real estate developer bank NOKm 9,059 NOKm Building construction facilities estate for Eastern Norway and larger Norwegian c
Slide 17: Real Estate | Continued High Activity
REAL ESTATE | CONTINUED HIGH ACTIVITY 67% 68% Real estate credit exposure Σ = NOK 9,059m Key comments NOKm of gross exposure • Continued high activity has resulted in real estate credit exposure growth of NOK 152m in Q3-18 Property lots without houses 976 • High level of redemptions are expected in
Slide 18: Real Estate | Managing Credit Risk
REAL ESTATE | MANAGING CREDIT RISK 67% 68% ✓ 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 presold units, the remaining sales must still be sufficient to cover the bank
Slide 19: Real Estate | Residential Property Exposure
REAL ESTATE | RESIDENTIAL PROPERTY EXPOSURE 67% 68% Geographical residential property exposure (NOKm) Σ = NOK 5,811m Semi-annually stress testing against a fall in housing prices NOKm of gross exposure • The portfolio is robust against a theoretical stress test • In case of a distressed project, foc
Slide 20: Corporate | Continued Strong Deal Flow
10% CORPORATE | CONTINUED STRONG DEAL FLOW 13% 9% Corporate financing exposure (NOKm) Σ = NOK 1,781m Status • Continued strong deal flow, but redemptions flattened 1% lending growth in Q3-18 6% • Increasing awareness of Pareto Bank as a financial solution provider for medium-sized businesses 14% • P
Slide 21: Shipping & Offshore | Diversified Portfolio
SHIPPING & OFFSHORE | DIVERSIFIED PORTFOLIO 8% 8% Status Shipping & Offshore credit exposure & loan to value Σ = NOK 1,012m LTV * Share • Stabilised risk in the shipping & offshore portfolio NOKm and no impairements Product 196 53% 19% • New team in place: leader with 10 years industry experience an
Slide 22: Well-Positioned for Future Growth
WELL-POSITIONED FOR FUTURE GROWTH 1 Lending growth on stable margins and ROE ambition of 15 % or above. 2 Solid capital situation enables annual growth capacity of 10 %. Sizeable equity base means increased credit capacity making Pareto Bank more 3 attractive among larger customers. 4 Cost efficient
Slide 23: Appendix
(Pareto bank
Slide 24: Largest Shareholders as of 30 September 2018
LARGEST SHAREHOLDERS AS OF 30 SEPTEMBER 2018 # Investor 30 September 2018 # of shares % total • The Company has 58,619,688 shares 1 Pareto AS 8,921,873 15.22% outstanding 2 Pecunia Forvaltning AS 6,500,000 11.09% 3 AF Capital Management AS 5,045,998 8.61% • One class of shares where each share 4 Ind
Slide 25: The Share
THE SHARE Earnings per share Book equity per share NOK NOK 1.57 38.01 1.46 1.34 1.28 36.73 35.16 34.17 Q3-17 Q1-18 Q2-18 Q3-18 Q3-17 Q1-18 Q2-18 Q3-18 Price / Earnings Price / Book NOK, Share price 38.40 NOK, Share price 38.40 7.79x 6.90x 6.18x 6.10x 1.06x 1.05x 1.05x 1.05x Q3-17 Q1-18 Q2-18 Q3-18 Q
Slide 26: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 Net Interest income 138.8 139.4 129.1 128.3 138.7 Total other operating income -1.4 8.6 4.9 2.1 3.2 Total net income 137.5 148.0 134.0 130.3 141.9 Total other operating expenses 31.1 29.6 31.0 33.5 24.2 Operating result before losse
Slide 27: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q3-18 Q2-18 Q1-18 Q4-17 Q3-17 Loans to credit institutions 1,295 1,136 405 357 165 Loans to customers 10,690 10,489 10,066 9,448 9,870 Bonds and other securities 4,220 4,031 2,844 3,215 3,331 Shareholdings in associated companies 35 35 37 36 42 Other assets 80 62 82
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 252 Corporate 69 Securities 220 Shipping 21 & Offshore Retail 32 (Mortgages) PAGE 29
Slide 30: Customer Deposits
CUSTOMER DEPOSITS Deposits by product Deposits by type NOKm NOKm 760 Floating rate retail Depositors (#) 2,209 732 672 2,800 Amount (NOKm) 2,748 5,459 Floating rate corporate 2,341 Retail Corporate 1,738 Savings with restrictions 1,420 1,243 Deposits by size Fixed rate 2,313 NOKm 1,118 > NOK 20m 2,3
Slide 31: Market Funding
MARKET FUNDING Market funding maturities Credit spreads NOKm, net of own holdings Basis points over 3M Nibor 120 103 200 75 55 1500 1400 35 1000 150 26 675 20 400 220 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
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% 1% and highly liquid bonds • High share of government & PSEs to reduce credit spread risk and increase short-term liquidity 28% • Large share of
Slide 33: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification Historical risk classification NOKm NOKm None / very low 6,048 risk 5,610 48% 48% 4,868 45% 46% 45% 44% Low risk 42% 43% 42% 6,300 39% 1,214 Moderate risk 1,034 322 Some risk 268 148 High risk 10% 10% 9% 18 7% 8% 19 Very high risk Q2-17 Q3-17 Q1
Slide 34: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer Commitment size per customer NOKm Percent of NOKm 1,064 < 10 7% 905 13% 2% 4,811 < 10 10 - 50 4,379 6% 10 - 50 3,908 50 - 100 50 - 100 33% 3,391 100 - 150 13% 781 150 - 200 100 - 150 1,774 200 - 250 341 > 250 150 - 200 827 26% 431 200 - 250 250 1,281
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(Pareto bank