Pareto Bank Asa · OSL:PARB
Pareto Bank Asa — Q4 2020 Earnings Presentation
46 slides from Pareto Bank Asa's earnings presentation, 2021
Slide 1: Financial Results – Fourth Quarter 2020
PARETO BANK Financial Results – Fourth Quarter 2020
Slide 2: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 2
Slide 3: Fourth Quarter 2020 Highlights
FOURTH QUARTER 2020 Highlights • Profit after tax NOK 126.5m (NOK 114.7m). • Return on equity after tax 14.8 % (15.0 %). • Net interest income NOK 191.0m (180.5m). Margin pressure from higher market rates is balanced by fee income and lower deposit rates. • Lending growth and steady activity in all
Slide 4: Key Figures
KEY FIGURES Profit after tax (NOKm) Return on Equity * CET1 ratio 15.0 % 14.8 % 17.4 % 17.3 % 16.8 % 126.5 12.2 % 114.7 102.9 Q4-19 Q3-20 Q4-20 Q4-19 Q3-20 Q4-20 31.12.2019 30.09.2020 31.12.2020 Net interest income (NOKm) Cost/Income ratio Loss ratio ** 180.5 188.2 191.0 0.04% 0.04% 19.2% 18.5% 20.0
Slide 5: Outstanding Performance in a Challenging Year
OUTSTANDING PERFORMANCE IN A CHALLENGING YEAR Profit after tax (NOKm) Record high profits despite challenges of 2020 397.6 428.4 • Profit after tax for 2020 was NOK 428.4m (NOK 397.6m) beating previous years. 330.8 312.6 247.3 • Earnings per share NOK 5.99 (NOK 5.57). • 2020 saw a global pandemic an
Slide 6: Cautious Approach to Dividend for 2020
CAUTIOUS APPROACH TO DIVIDEND FOR 2020 Dividend per share and pay-out ratio • Continued economic uncertainty due to Covid-19. 2.50 60.00% • European and Norwegian authorities have encouraged banks to be cautious and to not make pay-outs that reduce lending capacity. 50.00% 2.00 • The Norwegian Minis
Slide 7: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 7
Slide 8: Income Statement
INCOME STATEMENT P&L (NOKm) Q4-20 Q4-19 2020 2019 Growth in net interest income in Q4-20 due to increased Net interest income 191.0 180.5 746.9 680.5 lending fees and rate cut on deposits. Net other operating income 13.7 7.6 7.6 11.8 Total net income 204.6 188.2 754.5 692.3 Increased other operating
Slide 9: Adjusting to Market Rates
ADJUSTING TO MARKET RATES Development in net interest margin Comments • Lending margin under 6.37% pressure from increase in 6.17% 6.03% 5.87% 5.73% 5.79% Nibor, but supported by 5.50% 5.46% 5.57% 5.62% 5.53% 5.48% 5.37% 5.22% 5.41% 5.22% lending fee income. • Deposit rate cut with effect in start o
Slide 10: Lower Funding Costs
LOWER FUNDING COSTS Quarterly change in net interest income (NOKm) Q4-20 Q3-20 3.0 0.0 191.0 188.2 10.4 3.8 2.8 2.3 9.3 120.0 Lending Lending Market Fee income Deposit volume Deposit rate Other * volume rate Funding 10 *) Other net interest income includes return on surplus liquidity and fee paid to
Slide 11: Positive Outlook Under Uncertainty
POSITIVE OUTLOOK UNDER UNCERTAINTY IFRS 9 model-based write-downs Credit exposure by stage and change from Q3-20 (NOKm) • Despite a positive outlook with start-up of vaccination, continued growth and healthy activity in real estate markets, 119 Stage 3 uncertainty is still increased due to increase
Slide 12: Impairments and Losses
IMPAIRMENTS AND LOSSES Impairments and losses according to IFRS 9 (NOKm) • Increase of impairments in stage 1 due to lending growth, and reduction in stage 2 due to redemptions. 83.8 82.3 • Small changes in individual impairments and write-downs. No 12.1 14.0 direct link to Covid-19. 14.4 7.4 • Tota
Slide 13: Development Portfolio Quality
DEVELOPMENT PORTFOLIO QUALITY Historical impairments and losses (NOKm) 40.3 14.9 9.4 9.1 6.2 4.7 1.0 (0.1) (1.5) Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 13
Slide 14: Robust Capital Position
ROBUST CAPITAL POSITION Core Equity Tier 1 Ratio (CET1) Leverage Ratio (LR) • Solid capitalization above minimum requirements. • Leverage ratio shows the bank’s real capital strength • Increased risk weight reduces CET1 ratio, though underlying independent of risk weights. credit risk in the lending
Slide 15: Maintaining Growth Capacity While Adapting to Changing Capital Requirements
MAINTAINING GROWTH CAPACITY WHILE ADAPTING TO CHANGING CAPITAL REQUIREMENTS • Pareto Bank is well-capitalized with capacity for lending • Many potential regulatory changes ahead. growth in all markets in line with previous years. • Pareto Bank will go through a supervisory review and • Increased ris
Slide 16: Profitability Protects Against Losses
PROFITABILITY PROTECTS AGAINST LOSSES Loss absorbing capacity • Loss absorbing capacity measures the amount of losses Pareto Bank can absorb by its profits alone. 4.5 % • Profitability continues to build capital and protect against 4.2 % 4.1 % 4.1 % future potential impairments and losses. 3.8 % 3.4
Slide 17: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 17
Slide 18: 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 estate Land acquisition financing REAL developer bank for Eastern Property construction NOKm 50 - 100 Norway and larger facilities 69% ESTATE Norwegian cities. Commerci
Slide 19: Exposure per Business Area
EXPOSURE PER BUSINESS AREA (NOKm) 7,499 7,323 7,178 7,152 6,644 5,314 5,044 5,012 4,725 4,671 4,494 4,251 4,059 3,551 3,316 1,017 978 1,068 782 889 Residential property Commercial property Corporate Shipping Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 19
Slide 20: Residential Property
RESIDENTIAL PROPERTY Credit update Residential property exposure (NOKm) Total NOK 7,323m • 174 customers with average commitment of NOK 42m. • 36 % residential exposure in Oslo and 49 % in Viken. Land without 1,444 • Stable credit quality. Covid-19 has had little direct impact. houses • Projects on
Slide 21: Commercial Property
COMMERCIAL PROPERTY Credit update Commercial property exposure (NOKm) Total NOK 5,314m • 112 customers with average commitment of NOK 47m. • 37 % commercial property exposure in Oslo and 22 % in Viken. • 72 % of commercial property exposure is to long-term cash- Commercial flow based commitments, wh
Slide 22: Corporate
CORPORATE Diversified exposure Total NOK 4,494m Credit update Total NOK 4,494m • 68 consolidated corporate customers with average • Limited exposure to industries directly affected by Covid-19. commitment of NOK 59.4m. • Stable credit quality with no new demand under the state- • 56 consolidated sec
Slide 23: Shipping
SHIPPING Credit update Exposure (NOKm) Total NOK 1,068m • 20 customers and 36 vessels. Chemicals 295 LTV 43 % • Largest exposure USD 22.7m and average commitment size USD 5.9m. Industrial 288 LTV 47 % • Only shipping, no offshore exposure. Product 148 LTV 57 % • Average LTV of the portfolio is 47 %.
Slide 24: Table of Contents
TABLE OF CONTENTS Highlights Financials Business Areas Outlook & Ambitions 24
Slide 25: Outlook
OUTLOOK • Pareto Bank is well positioned in target markets. • A commercially oriented organisation combined with strong collaboration skills secure high customer focus. Quality, efficiency and reliability are guiding stars. • Good deal flow expected in all markets. Sales activities supported by inbo
Slide 26: Market Outlook: Residential Property
MARKET OUTLOOK Residential property • A continued strong housing market drives the newbuild market. New projects are successfully launched. Pre-sale requirements are currently easily met and building facilities opened. • A significant demand for newbuilds in the Greater Oslo area due to population g
Slide 27: Market Outlook: Commercial Property
MARKET OUTLOOK Commercial property • The office market in the greater Oslo area held up surprisingly well in 2020. Property values were supported by low interest rates, while rents remained relatively flat. Long-term demand for office space may fall due to change in need for office space, but the pi
Slide 28: Market Outlook: Corporate
MARKET OUTLOOK Corporate • Improved market outlook as vaccination of • Well positioned in target market which is Covid-19 is under way. medium sized business with revenue between • Pareto Bank has a cautious approach to NOK 10m and NOK 500m. industries that have been hit hard by Covid-19. • Focus on
Slide 29: Market Outlook: Shipping
MARKET OUTLOOK Shipping • Most shipping segments were hit hard in Q2-20 due to Covid-19. All segments have seen a positive development since summer 2020 except for the tanker market which is affected by low economic activity. • Given fewer Covid-19 restrictions due to vaccination, a robust economic
Slide 30: Long-Term Ambitions
LONG-TERM AMBITIONS Long-term ambition Actual 2020 Profitability in 2020 has been affected by model driven impairments due to Covid-19. RETURN ON 14.0 % 13.0 % EQUITY Long term profitability supported by lending growth, stable net margin and portfolio quality. Up to 25 % The Board will ask the gener
Slide 31: Consistent Value Creation
CONSISTENT VALUE CREATION 2.5 2 1.5 1 Stock % change Total Annual total return * return * Pareto 97.37 % 138.76 % 13.61 % Bank 0.5 OSEBX 74.94 % 74.95 % 8.54 % Index DNB 52.73 % 94.08 % 10.21 % Period from 7 March 2014 to 31 December 2020 0 mar. 14 mar. 15 mar. 16 mar. 17 mar. 18 mar. 19 mar. 20 PAR
Slide 32: Appendix
APPENDIX (Pareto bank
Slide 33: Largest Shareholders
LARGEST SHAREHOLDERS 31 December 2020 Comments Name Shares % total 1 Pareto AS 13,623,610 19.50 % • The Company has 69,851,730 2 AF Capital Management AS 6,943,049 9.94 % shares outstanding. One class 3 Hjellegjerde Invest AS 2,800,000 4.01 % of shares where each share 4 Landkreditt Utbytte 2,400,00
Slide 34: The Share
THE SHARE Earnings per share (NOK) Book equity per share (NOK) 5.99 47.76 43.77 39.37 35.41 5.55 5.57 5.28 2017 2018 2019 2020 2017 2018 2019 2020 Price / Earnings Price / Book 7.48 1.12 6.93 6.56 6.09 0.88 0.86 0.82 2017 2018 2019 2020 2017 2018 2019 2020 34 Share price NOK 39.30
Slide 35: Quarterly Income Statement
QUARTERLY INCOME STATEMENT P&L (NOKm) Q4-20 Q3-20 Q2-20 Q1-20 Q4-19 Net interest income 191.0 188.2 183.8 183.9 180.5 Net other operating income 13.7 -13.1 23.9 -16.9 7.6 Total net income 204.6 175.2 207.7 167.1 188.2 Total operating expenses 40.9 32.4 38.1 33.1 36.1 Operating profit before 163.7 14
Slide 36: Quarterly Balance Sheet
QUARTERLY BALANCE SHEET BS (NOKm) Q4-20 Q3-20 Q2-20 Q1-20 Q4-19 Loans to credit institutions 1,081 1,938 1,610 1,315 924 Loans to customers 14,661 13,874 14,235 13,503 13,161 Bonds and other securities 3,612 4,395 3,703 3,053 3,320 Shareholdings in associated 26 23 23 23 22 companies Other assets 98
Slide 37: Real Estate Exposure
REAL ESTATE EXPOSURE Geographical residential property exposure Geographical commercial property exposure 4% 5% 4% 4% 5% Oslo 6% Viken 13% 37% Viken Oslo 44% Rogaland Vestfold og Telemark Vestland Vestfold og Telemark Trøndelag 19% Vestland Sweden & Other 38% Other 22% 37 NOKm of gross exposure. Tot
Slide 38: 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 Nibor or si
Slide 39: Number of Customers
NUMBER OF CUSTOMERS per business area Real Estate 286 Corporate 177 Retail 14 (Mortgages) Shipping 20 & Offshore 39
Slide 40: Funding
FUNDING Sources (NOKm) Deposits & senior debt NOKm, Deposits 9,473 Percent customer deposits of net lending to customers Senior debt 4,935 74.3 % 74.0 % T1 & T2 debt 470 71.3 % 65.4 % 64.8 % 64.9 % 64.6 % 61.9 % Other debt 1,264 4956 5551 56.4 % 5192 4935 5279 5604 Equity capital 3,336 5624 5011 547
Slide 41: Customer Deposits
CUSTOMER DEPOSITS Deposits by product (NOKm) Deposits by size (NOKm) 632 Floating rate retail > NOK 20m 2,277 550 2,826 603 2,808 Floating rate corporate 3,459 NOK 10 - 20m 779 239 1,019 1,124 Savings with restrictions 1,850 NOK 5 - 10m 773 207 980 2,737 Fixed rate 2,916 NOK 2 - 5m 1,396 952 2,348 8
Slide 42: Market Funding
MARKET FUNDING Market funding maturities (NOKm) * Credit spreads (basis points) ** 84 150 66 51 200 120 1,500 1,239 33 690 750 750 24 19 2021 2022 2023 2024 2025 Senior Call on Subordinated Capital 0,25 0,5 1 2 3 5 *) Net of own holdings 42 **) Spread over 3M Nibor
Slide 43: Surplus Liquidity
SURPLUS LIQUIDITY Bond portfolio Comments • Market value of bonds and funds comprising surplus 15% liquidity. • Liquidity is comprised of 31% cash and highly liquid bonds. Government & PSEs • High share of government Covered bonds & PSEs to reduce credit spread risk and increase Senior financials sh
Slide 44: Commitments by Risk Classification
COMMITMENTS BY RISK CLASSIFICATION Risk classification (NOKm) Historical risk classification 5,811 None / very low risk 6,208 59% 57% 54% 8,230 51% Low risk 49% 10,819 1,726 40% Moderate risk 36% 36% 1,040 35% 34% 130 Some risk 222 81 11% High risk 10% 35 9% 7% 6% 4 Very high risk Q4-19 Q1-20 Q2-20
Slide 45: Commitments by Size
COMMITMENTS BY SIZE Commitment size per customer (NOKm) Distribution of commitments by size (NOKm) 748 3% < 10 11% 616 5,459 10 - 50 5% 4,939 27% 4,333 < 10 50 - 100 5,247 10% 10 - 50 1,656 50 - 100 100 - 150 2,845 100 - 150 829 150 - 200 150 - 200 1,869 200 - 250 > 250 693 15% 200 - 250 882 2,265 >
Slide 46: ( Pareto bank
( Pareto bank