JYSKE REALKREDIT H1 REPORT Published 30 th of October 2018

Transcription

1 JYSKE REALKREDIT H1 REPORT 218 Published 3 th of October 218

2 The positive trend in earnings continues Result in Q1-Q3 218 affected by impelentation of IFRS 9 guidelines Pre-tax profit was DKK 786m for Q1-Q3 218 Q1-Q3 218 (compared to Q1-Q3 217) Core earnings before loan impairment charges rose by 38 % Result affected by loan impairment charges Due to implementation of IFRS 9 guidelines Core profit (before IFRS9) increased by 5 % Core expenses reduced by 15 % Expectations for rest of 218 The increase in the portfolio is expected to continue Core earnings are expected to be at the same level as in 217 Core profit and net profit for the period DKKm Core operations Administration margin, etc. 1,412 1,4 11 Other net interest income 1) Net fees, charges and commission income etc Value adjustments Other income Core earnings 1,789 1, Core expenses Core earnings before loan impairment charges etc. Q1-Q3 218 Q1-Q , Loan impairment charges etc Core profit 1, Earnings from investment portfolios Pre-tax profit before IFRS 9-implementation 1, IFRS 9 regulation of impairments early Pre-tax profit Index 18/17 Tax Net profit or loss for the period

3 Financials - selected graphs Income (DKKm) Cost/income (%) 2,5 2, Net fees and commision income Net interest income 6% 55% 56.2% 1,5 5% 49.6% 1, 45% 4% 41.4% 39.9% Q1-Q3 218* *Anualised Impairment charges and reversals (DKKm) 6 New impairment charges IFRS9 Reversals % 3%.8%.7% 3.7% Q1-Q3 218 Balance of loan impairments in % of lending.71 % Q2 217 Q3 217 Q4 217 Q1 218 Q2 218 Q %.5%.4%.3%.57 %.48%.42 %.4 %.35%* Q3 218 *Before IFRS 9 3

4 Continued growth in mortgage lending Net growth in mortgage lending of more than 5 % over four years Net growth primarily in residential segment Total mortgage lending (DKKbn) Commercial and subsidised lending growing with DKK 36bn (DKK 28bn in housing properties) since beginning of 214 Growth in the portfolio creates larger issuances and lower funding costs The proportion of level 1B series is increased Same mortgage funding price as larger competitors in the DKK market Q3 218 Market share of mortgage market (%) 5% 4% 3% 2% 1% % Private Commercial Subsidised Total mortgage lending Net lending (ytd) 4

5 DKKbn % of lending Dkkbn Strong growth in commercial lending Trend with high demand for property investments continues in 218 European real estate investments Strong economy and stable Danish property market attracts international investors to Denmark Strong professional domestic and international long-term investors in the Danish commercial real estate market International investors diversify lending Jyske Bank and Jyske Realkredit takes approx. 25% of property investment market Investors are now also investing in properties outside the larger cities Strong Jyske Realkredit and Jyske Bank sales force covering entire Denmark Growth in commercial lending Source: Catella Research 1% 8% 6% % 2% 1.5 % Q3 218 Growth in DKKbn Growth in DKKbn (anualised) Growth in % (rhs) 5

6 Mortgage strategies Target of total mortgage loans of DKK 35bn in 22 Private segment: The most competetive prices on the mortgage market One product line in the group We offer the broadest variety of products in the industry Product characteristics (capped floaters, 5 days notice, repay at par) Change your mortgage loan without changing your bank Most attractive prices are offered to both full-line clients and mortgage-only clients Commercial segment: Strategy targets selected commercial banking clients - Banking relationship used as lever 6

7 % of RWA Expected fully implemented CRD IV & Danish SIFI demands 2% 15% Countercyclical buffer (1.%)* SIFI buffer (1.5%) 1% Capital conservation buffer (2.5%) Pillar II (2.%) % CET 1 (21.3%) 2.5% 5% Pillar I (8.%) 2.% 4.5% % Expected fully phased in CRD IV Expected CET1 components required BRFkredit capital position 3 ratios by September 218 *) Countercyclical buffer is expected to be 1 % form Q3 219 The solvency need is expected to be at 15. % at the end of 219, of which 11.5 % should be covered with core equity Jyske Realkredit is already compliant with the fully implemented requirement Growth not constrained by capital requirements 7

8 % of RWA Debt buffer for Danish mortgage institutes MREL-debtbuffer to be implemented gradually from 216 to 22 25% Debtbuffer must be covered by CET1, AT1, AT2 or senior (unsecured) debt 2% Debtbuffer (2 % of lending) For capital instruments to be compliant with the debt buffer, the following must apply: 15% Countercyclical buffer (1.%)* Original time to maturity at least two years Appropriate maturity diversification 1% CRD The Danish FSA can decide that the debt buffer should be covered fully or partly with bail-inable debt instruments 5% Solvency ratio (14.%) Jyske Realkredit fulfils the debtbuffer at Q2 218 with CET1 % Fully implemented in 22 *) Countercyclical buffer is expected to be 1. % form Q

9 DKKbn % of lending % of total lending Rating Jyske Bank and Jyske Realkredit issuer rating put on positive outlook by S&P in Q1 218 Nominel OC-requirements on same level as in 214 despite growth of mortgege loans of DKK 95bn Improvement in credit quality and composition of cover pool Rating Standard and Poor s Jyske Realkredit A- Outlook Positive Capital Center B AAA Capital Center E AAA Capital Center General AAA Free notches over AAA 2 AAA rating requirement Rating requirement and overcollateral 14 7% 7% % 5% 4% 6% 5% 4% 3% 2% 1% OC requirement for AAA AAA rated mortgage bonds and Danish government bonds 214 Q3 215 Q3 216 Q3 217 Q3 218 Q3 DKKbn % of lending (rhs) 3% % S&P requirement Overcollateral 9

10 % of disposable income DKKbn Index 2=1 Index 2=1 % of GDP % of GDP Household finances The private sector is still saving up Savings at a higher level than before the financial crisis Household debt is declining Interests are still very low The housing burden is also at a very low level Private sector financial savings 12% 12% 1% 1% 8% 8% 6% 6% 4% 4% 2% 2% % % -2% -2% -4% -4% -6% -6% Households Debt share of disposable income and total 35% 3 32% 25 29% 2 26% 15 23% 1 2% 5 17% Debt share of disp. income Total debt (rhs) Source: OECD.Stat and Statistikbanken Housing burden Source: OECD.Stat House fixed interest House ARM IO Apartment fixed interest Apartment ARM IO Source: Jyske Realkredit 1

11 Percent Percent Index 27=1 Index 27=1 Danish housing market Increasing house prices after the financial crisis Compared to Sweden and Norway Denmark has repriced Increasing prices in urban areas and staggering/declining prices in non-urban areas Fast recovery in large cities (Copenhagen, Aarhus) The trend is expected to continue Development in house prices (indeks 27 = 1) Denmark Norway Sweden Source: OECD.Stat Regional house prices in Denmark (indeks 2=1) Expected population growth Capital Sealand South Denmark Central Jutland North Jutland Source: Finance Denmark Source: Statistics Denmark 11

12 Danish FSA measures to limit certain products FSA measure Limit the proportion of customers with debt-to-income above 4 and ARM or interest-only loans Still uncertain how the measure will be implemented Illustrative example of lending rules and guidances from the Danish FSA DTI 5 4 Positive net wealth after 25 % decrease in house prices Positive net wealth after 1 % decrease in house prices 5 % cash downpayment Loan with 4 % interest rate and no IO No ARM loans with interest reset < 5 years No combination of interest only and ARM Supervisory diamond Interest only loans < 1% ARM loans < 25 % 6 % LTV 12

13 Portfolio 87 % of lending to properties with housing purposes No loans to cooperative housing with swaps No lending to agriculture and other primary production Increasing share of private lending The increase is expected to continue Increase in share of fixed rate mortgages and decreasing share of F1 and F2 Lending portfiolio Development in lending portfolio 1% 8% 35% 32% 31% 31% 31% 9% 88% 1% 8% Development in loan types 6% 6% 9% 5% 4% 1% 11% 3% 4% 5% 23% 21,% 17,9% 17% 15% 52% 5% 6% 4% 2% 19% 18% 17% 17% 16% 46% 5% 52% 52% 53% 86% 84% 82% 6% 4% 2% 38% 36,6% 35,7% 34% 35% 28% 32,7% 34,2% 35% 34% 48% 46% 44% 42% % Q3 214 Q3 215 Q3 216 Q3 217 Q % Private Subsidised Commercial Housing purposes (rhs) % 4% Q3 214 Q3 215 Q3 216 Q3 217 Q3 218 Fixed F3 - F1 F1 - F2 Capped Floater Non Capped Floater Interest only (rhs) 13

14 Geographical exposure East east strategy Proportion of lending to proportion of population (residential) The primary portfolio is focused around largest cities - areas with increasing housing prices and expected population growth High tradability prevent losses Relatively low losses in urban areas during the financial crisis 4 % of lending,8%,7%,6%,5%,4%,3%,2%,1% Average yearly residential loss (% of lending) 2 % of lending 51 % of lending,% Q3 Copenhagen and Aarhus areas Rest of Denmark 218* *Change in Loss/impairment model Q

15 Credit quality Lending in 9-days arrears (per cent of lending) 1.8% Private 1.6% Commercial 1.4% Subsidised 1.2% 1.%.8%.6%.4%.2%.% Q2 212 Q2 213 Q2 214 Q2 215 Q2 216 Q2 217 Q2 218 Yearly realised losses (running year).5% Private Commercial.4% Subsidised.3%.2% Repossessed properties (DKKm/number) Q3 214 Q3 215 Q3 216 Q3 217 Q3 218 Commercial properties Private properties # Commercial properties (rhs) # Private properties (rhs) Loan-to-Value brackets (per cent of lending) 1% 2% 1% 1% 1% 5% 3% 2% 2% 1% 11% 11% 1% 9% 9% 13% 8% 21% 21% 21% 21% 7% 2% 6% 26% 27% 28% 28% 5% 25% 4% % 67% 65% 63% 61%.1%.% -.1% Q2 212 Q2 213 Q2 214 Q2 215 Q2 216 Q2 217 Q % 2% 1% % 35% 37% 38% 38% 4% Q3 214 Q3 215 Q3 216 Q3 217 Q3 218 %-2% 2%-4% 4%-6% 6%-8% 8%-1% >1% Avg. LTV (rhs.) 59% 57% 55% 15

16 Refinancing and liquidity Decrease dependence on short term funding due to S&P and the supervisory diamond Increased margins and quotation cuts on short term funded loans (F1 og F2) Funding of short term funding loans (F1) with longer maturing bonds and derivatives Funding of F1-loans with bonds with a maturity of 3 to 5 years Funding of F1-loans with EUR covered bonds Ensure liquidity in issued bonds from BRFkredit Funding of bonds with a maturity of 2 to 1 years financed and refinanced in April and F1 and floaters at other refinancing dates Refinancing profile Q1 214 Refinancing profile Q % Annual refinancing 4% 1% Annual refinancing 39% Refinancing within one year 36% Refinancing within one year 7% Refinancing beyond one year Refinancing beyond one year 3% Other loan types (fixed rate etc.) 49% Other loan types (fixed rate etc.) 16

17 The Supervisory Diamond for mortgage institutes The Supervisory Diamond takes effect as of yet not until 22 in respect of interest-only and loans subject to refinancing At the end q3 218 Jyske Realkredit was compliant with all the benchmarks in the supervisory diamond Jyske Realkredit has implemented initiatives to comply with the supervisory diamond Prolonged the funding with EUR covered bonds and derivatives Introduced floater loans with a cap on the interest rate Benchmark Q3 218 Q3 217 Concentration risk < 1 % 47.1% 57.% Increase in loans - Owner-occupied home and vacation homes < 15% 4.9% 13.8% - Residential rental property < 15% 11.6% 7.1% - Agriculture < 15% - Other sectors < 15% 3.7% 4.7% Borrower's interest-rate risk - Residential properties Interest-only schemes - Owner-occupied home and vacation homes Loans with frequent interest-rate fixing < 25% 19.6% 2.8% < 1% 7.4% 7.9% - Refinancing (annually)* < 25% 16.3% 24.9% - Refinancing (quarterly) < 12.5% 6.5% 7.% *Last 12 months 17

18 Contact information Chief Executive Officer Lars Waalen Sandberg lwa@brf.dk Group Mortgage Funding Anders Lund Hansen alh@brf.dk Head of Rating & IR Christian Bech-Ravn crv@brf.dk Jyske Realkredit A/S Klampenborgvej 25 DK-28 Kgs. Lyngby Phone: Fax: investors@brf.dk 18

19 Agenda Appendices 19

20 Digital strategies Danish Competition Authority report on competition on Danish mortgage market: From the borrowers point of view the mortgage lending market is complex and many borrowers have difficulties navigating on the market Making lending more user friendly Best loan Introduction of first app for mortgage loans - available to all mortgage holders regardless of mortgage provider loan surveillance 24/7 Pop-up message when attractive to convert 216 Ejendom: Classensgade 17, København Ø Best loan 2. Including bankloans and house prices Best Home A search engine to people considering buying a new home Making searching for a new home individual, interactive and social

21 Portfolio composition Portfolio by Loan to Value (LTV) Portfolio split by property category Cap B 38% 28% 18% 11% 3% 1% Cap B 65% 3% 13% 15% 5% Cap E 38% 29% 22% 9% 1% Cap E 56% 11% 14% 11% 7% Total 4% 28% 21% 9% 1% Total 53% 16% 13% 11% 7% % 2% 4% 6% 8% 1% %-2% 2%-4% 4%-6% 6%-8% 8%-1% >1% Average LTV by property segment Average LTV by property segment Owner occupied & vacation housing Total 64% Cap E 64% Cap B 59% Subsidised housing 45% 42% 3% Private rental housing 64% 64% 66% Office & business properties 56% 57% 44% Other properties 51% 5% 71% Lending, average LTV 6% 6% 58% Total lending (DKK bn) % 2% 4% 6% 8% 1% Owner occupied & vacation housing Subsidised housing Private rental housing Office & business properties Other properties Portfolio split by geography Cap B Cap E Total 31% 25% 46% 12% 46% 12% 5% 7% 7% 21% 17% 2% 14% 2% 14% % 2% 4% 6% 8% 1% Greater Copenhagen area Remaining Sealand and Bornholm Northern Jutland Central Jutland Southern Jutland and Funen Outside Denmark 21

22 EUR funding of DKK loans BRFkredit is the only Danish mortgage institute to issue Danish covered bonds under the joint funding agreement Funding of bank loans through bonds issued by mortgage institutes Funding of subportfolios of loans Exempt from the strict micro match of loans and funding The joint funding agreement allows BRFkredit to finance DKK mortgage loans by European market standard non callable EUR covered bond bullet structures by use of derivatives Danish legal framework (L89): soft bullet The EUR funding can be applied to existing and new loans But are only applied to loans within the Joint Funding agreement Derivatives used to hedge risks fully: In accordance with covered bond ISDA/CSA and S&P requirements Unilateral CSA in favour of BRFkredit 22

23 Spread (bps) Spread (bps) Details on EUR covered bonds BRFkredit EUR covered bond issuances* Investor distribution** Geographical distribution** XS XS XS XS Years to maturity Spread at issue Current spread *Pricing indications from October Banks 44% Funds & AM 34% Cantral Banks & OI 9% Insurance and Pension Funds 1 % Other 3% **Figures are based on allocated amounts German and Austria 53% Nordics 32% Benelux 6% France 2% UK / Irleand 2% Asia 2% Other 3% Three first successful EUR covered bond issuances in 216 and one issue in 217 Large interest from a vide variety of investor from different countries Good secondary performance relative to peers 23

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