Nordax A Leading Niche Bank in Northern Europe Q1 REPORT 2017 APRIL 26

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1 Nordax A Leading Niche Bank in Northern Europe REPORT APRIL 26

2 88 MSEK NET PROFIT (93 MSEK) 0.80 SEK EARNINGS PER SHARE (0.84 SEK) 14% 14.3% LOAN PORTFOLIO GROWTH CET 1 RATIO (14.0% ) 2

3 131 MSEK ADJUSTED OPERATING PROFIT (32% increase) 11% LOAN PORTFOLIO GROWTH (constant currencies) 26.5% ADJUSTED COST/INCOME RATIO 12 Month rolling (28.6%) 25% ADJUSTED RETURN ON TANGIBLE EQUITY 12 Month rolling 3

4 SUSTAINABLE GROWTH DIGITAL EVOLUTION DIVESTING LOW PERFORMING LOANS REGULATORY FRAMEWORK 4

5 Lending portfolio end of In total 12.9 bn SEK, end of March SWEDEN NORWAY FINLAND GERMANY 10% 9% 13% 31% Growth LCY Growth LCY Growth LCY Growth LCY 4,134 4,558 4,414 5,099 2,011 2,

6 Nordax s customers SWEDEN NORWAY FINLAND GERMANY 30,000 SEK NORDAX AVERAGE CUSTOMER MONTHLY INCOME (National average 27,000) 39,000 NOK NORDAX AVERAGE CUSTOMER MONTHLY INCOME (National average 43,000) 3,900 EUR NORDAX AVERAGE CUSTOMER MONTHLY INCOME (National average 3,300) 3,700 EUR NORDAX AVERAGE (CO-APPLICANT) CUSTOMER MONTHLY INCOME (National average 3,100) 84% ARE OVER 40 YEARS 78% ARE OVER 40 YEARS 92% ARE OVER 40 YEARS 86% ARE OVER 40 YEARS 53% HOMEOWNERS 76% HOMEOWNERS 88% HOMEOWNERS 40% HOMEOWNERS 66

7 Profit growth driven by growth and improved efficiency ADJUSTED OPERATING PROFIT, MSEK KEY TAKEAWAYS Solid development with 32% increase year over year 510 Seasonally lower results in - mainly due to higher loan loss level Key enablers for performance - Growing portfolio - Stable margins - Stable credit loss level - Improved efficiency

8 Solid portfolio growth LOAN PORTFOLIO, Bn SEK NEW LENDING VOLUMES, MSEK KEY TAKEAWAYS Strong portfolio growth of 14% in SEK and 11% in LCY Y/Y 10.8 Annualised growth rate of 7% in LCY Q/Q Stable new lending, increasing all markets except Norway

9 Continued topline growth ADJUSTED TOTAL OPERATING INCOME, MSEK NET INTEREST MARGIN (NIM), % KEY TAKEAWAYS Adjusted total operating income up 15% Y/Y with growing portfolio Stable NIM development

10 Improved efficiency through digital evolution ADJUSTED COST TO INCOME RATIO, %, 12 MONTH ROLLING KEY TAKEAWAYS Continued investments in digitalisation that will enable further efficiency improvements and improve customer offering Scalable platform - operational costs on same level as last year with 14% higher loan portfolio Adjusted C/I ratio (excluding marketing costs) improved by 2.1%-points to 26.5% Y/Y

11 Solid credit risk performance CREDIT LOSS LEVEL, % KEY TAKEAWAYS Credit loss level stable Y/Y and seasonally higher compared to Normal variation between segments Agreement to start selling part of forward flow to Lindorff from Credit loss level continues to be placed well below through the cycle ambition of 2%

12 Sweden - strong development in new lending NEW LENDING, MSEK TOTAL LENDING, MSEK KEY TAKEAWAYS ,419 4,558 New lending increased 15% Y/Y 4,134 4,199 4,272 Growth in portfolio 10% Y/Y Stable margins Continued low credit loss level NET INTEREST MARGIN, % CREDIT LOSS LEVEL, %

13 Norway - lower new lending levels NEW LENDING, MNOK TOTAL LENDING, MNOK KEY TAKEAWAYS ,504 4,666 4,852 4,923 4,903 New lending decreased by 25% in NOK 368 Growth in portfolio 9% Y/Y Lower new lending in - elevated risk level in application flow from brokers continues - tightened underwriting in broker channel from - media focus affects behaviour Margins and credit loss levels stable NET INTEREST MARGIN, % CREDIT LOSS LEVEL, % Regulatory focus in - Implementation of debt register - Marketing regulations - Increased capital requirements for high growth Norwegian consumer banks

14 Finland - solid growth and performance NEW LENDING, MEUR TOTAL LENDING, MEUR KEY TAKEAWAYS Increased new lending 24% Y/Y Increased portfolio growth 13% Y/Y NIM stable over time Continued strong credit performance NET INTEREST MARGIN, % CREDIT LOSS LEVEL, %

15 Germany - increased new lending and stable growth NEW LENDING, MEUR TOTAL LENDING, MEUR KEY TAKEAWAYS Improved new lending, increase 22% Y/Y Portfolio growth 31% Y/Y in EUR Stable NIM over time Stable credit loss levels, still conservative provision levels compared to other markets NET INTEREST MARGIN, % CREDIT LOSS LEVEL, %

16 Solid capital generation improves capital position CAPITALISATION, % KEY TAKEAWAYS Strong capital position with a CET1 of 14.3%, improvement with 30 bp in CET1 buffer of 230 bps to capital target and 500 bps to capital requirements Dividend policy 40% Pillar 2 Buffer 3 Countercyclical Buffer 2 Capital Conservation Buffer Max T2 Max AT T T Leverage ratio 10.8% LCR 477% and NSFR 128% CET CET Min Capital requirement Min CET1 9.3 Required Buffers & Buckets Required Capital by type Capital Structure Capital Structure 1. Of which minimum 4,5% CET1 2. Nordax requirements 3. Pillar 2 Buffer 65% CET1, 15% AT1, 20% T2 16

17 Highlights of performance trends GROWTH IN LENDING AND MARGIN LOW CREDIT LOSS LEVEL, % OPERATING LEVERAGE STRONG PROFIT GROWTH Loan portfolio, Bn SEK Net interest margin, % month rolling Adjusted C/I-ratio, %, 12 month rolling Adjusted operating profit, MSEK

18 Appendix APRIL 26, 18

19 Provides large personal loans and savings to financially stable individuals Established in 2003 with a centralized platform out of Stockholm Data-driven and scientific approach to credit underwriting and marketing Target customers through 20 sourcing channels in 4 geographies Highly diversified funding 19

20 Focus on direct distributed personal loans Share of new sales 52% 20% 23% 5% DIRECT MARKETING REPEAT SALES BROKERS ONLINE AND ADVERTISING (Direct Mail, Unaddressed DM, Cooperation Partners) 20

21 Clear product utility LARGE LOANS LONG RELATIONSHIP AFFORDABLE FLEXIBLE Average loan: ~ SEK 156,000 Typical use: Consolidation/Consumption Up to 15 years pay back time and all loans are amortizing annuity loans Typical monthly payment ~ SEK 2,700 Possible to borrow more and pay back at any time without extra costs 20 21

22 Product Utility KEY TAKEAWAYS SENSITIVITY TO INTEREST RATE AND DURATION The monthly instalment has a low sensitivity to changes of the interest rate due to the long durations. Reveals clear product utility, enables affordable loans of satisfactory size to meet the customer need Assuming SEK 165,000 loan with annuity amortisation Interest Rate 9% 10% 11% 12% 13% 14% 15% 7Y 2,655 2,739 2,825 2,913 3,002 3,092 3,184 8Y 2,417 2,504 2,592 2,682 2,773 2,866 2,961 9Y 2,235 2,323 2,413 2,505 2,599 2,695 2,793 Duration 10Y 2,090 2,180 2,273 2,367 2,464 2,562 2,662 11Y 1,974 2,066 2,160 2,257 2,356 2,456 2,559 12Y 1,878 1,972 2,068 2,167 2,268 2,371 2,476 13Y 1,798 1,894 1,992 2,093 2,196 2,302 2,409 Illustrative Nordax loan 22

23 Resilient Performance Through the Cycle PROFITABILITY AND CAPITAL GENERATION HIGH LOSS ABSORPTION CAPACITY, % KEY TAKEAWAYS Tangible equity, MSEK Operating profit, MSEK 510* Credit loss level % Model proved 2008/09 Strong capital generation Resilient model and earnings in distressed times * 392* 358* P&L breakeven 6.2 Flexible business model with ability to control origination Controlled credit loss level due to underwriting ** *** * adjusted for one-offs, FX gains/losses and transaction intangibles amortisation Cyclical peak Breakeven *** Excluding Denmark. With Denmark 3.6% ** Decrease in in 2012 due to change in legal entity 23

24 Diversified Funding SIMPLIFIED BALANCE SHEET 16.3Bn SEK DEPOSIT MIX STRENGTHS Liquidity Reserve Diversified Loan Portfolio 47% 40% Deposits Bank WH ABS & Bonds Tier 2 bonds EUR 23% NOK 32% SEK 45% Scalable Well-matched ALM (currency, duration, interest rate risk) Strong liquidity position Equity ASSETS LIABILITIES STRONG FUNDING AND LIQUIDITY POSITION GROUP CAPITALISATION, % On-balance sheet ABS Bank warehouse facilities Senior unsecured bonds Retail deposits 12.6 CET1 ratio 14.0 CET1 ratio 14.3 CET1 ratio SEK NOK EUR

25 Solid balance sheet BALANCE SHEET KEY TAKEAWAYS Other assets 1 Bonds 61 1,711 Match duration of assets and liabilities to mitigate liquidity risk. Lending to credit institutions 1,306 Diversified funding key. 7,782 Deposits from customers 161 Other liabilities 2 Lending to the general public 12,902 2,709 Issued securities 3,184 Liabilities to credit institutions 247 Subordinated debt 1,897 Tangible equity ASSETS LIABILITIES 1 Other assets includes 8 MSEK tangible assets, 24 MSEK prepaid expenses and accrued income and 29 MSEK other assets 2 Other liabilities includes 32 MSEK current tax liability, 30 MSEK deferred tax liability, 76 MSEK accrued expenses and deferred income and 23 MSEK other liabilities 25

26 Low and Stable Cost of Risk Model Tested Through the Crisis %, CoR (1) CoR Continuing CoR (i.e. excluding Denmark) 1. Defined as loan losses to average loans 26

27 Ownership structure AS OF MARCH Carnegie funds 9.8% of the capital 2. SEB Investment management 9.4% 3. Swedbank Robur funds 9.1% 4. Lannebo funds 6.9% 5. Handelsbanken funds 5.6% 6. JP Morgan Asset Management 5.5% 7. Öresund 5.3% 8. Allianz Global Investors 3.3% 9. Vanguard 3.0% 10. Morten Falch 2.4% Management, Founders and Board members own more than 10% together. Source: Source: Holdings of Modular Finance AB. Data compiled from Euroclear, Morningstar and the Swedish Financial Supervisory Authority, among others. Foreign owners: 28.1% Swedish owners: 71.9% 27

28 Board of Directors ARNE BERNROTH SYNNÖVE TRYGG MORTEN FALCH CHRISTIAN BECK Non-executive chairman Appointed in 2010/2015 Non-executive board member Appointed in 2015 Executive board member Appointed in 2004 Non-executive board member Appointed in 2003 Previous experience: Senior management positions in Nordea and Skandia Previous experience: CEO at SEB Kort Previous experience: Co-founder of Nordax, senior management positions in GE Capital and Citigroup Previous experience: Multiple board assignments including Chairman Espresso House and Banqsoft AS KATARINA BONDE JENNY ROSBERG ANDREW RICH Non-executive board member Appointed in 2015 Non-executive board member Appointed in Non-executive board member Appointed in 2010 Previous experience: Senior management positions in the IT-industry. Multiple board assignments Previous experience: Senior management positions in Nasdaq, Kreab Gavin Anderson, Erik Penser Bankaktiebolag and Skandia Previous experience: Multiple board assignments 28

29 Financial Targets RETURN DIVIDEND CAPITAL Maintaining a sustainable return on average net loans through the cycle, on a 12-month rolling basis, of above 3 per cent Maintaining a pay-out ratio of approximately 40 per cent of profit after tax for the year. The dividend target is based on current regulatory capital requirements, and any future changes regarding regulatory capital requirements could affect Nordax s dividend target Maintaining a CET 1 capital ratio above 12 per cent and a total capital ratio above 14 per cent under the current capital requirements. Nordax targets maintaining a buffer of at least 1.5 percentage points above its CET 1 capital ratio and total capital ratio requirements 29

30 Nordax evolution CREATION OF NORDAX INITIAL GROWTH PHASE PROTECTING VALUE RESTART SUSTAINED GROWTH AND EXPANSION SHAREHOLDER VALUE Management and Palamon Focus on collection Restart lending Vision Capital Bank licence Listed on Nasdaq Global Compact Hej Hei Hej Moi Farvel Hallo Sweden Norway Denmark Finland Denmark Germany Warehouse facilities and ABS funding program Deposit platform Senior unsecured bond programe 30

31 Income statement GROUP All amounts in MSEK Note Operating income Interest income Interest expense Total net interest income Commission income Net profit from financial transactions Other operating income Total operating income Operating expenses General administrative expenses Depreciation, amortisation and impairment of property, plant and equipment and intangible assets Other operating expenses Non-recurring items 7, Total operating expenses Profit before credit losses Net credit losses 2, Operating profit Tax on profit for the period NET PROFIT FOR THE PERIOD/COMPREHENSIVE INCOME Attributable to: The Parent Company's shareholders Non-controlling interest Earnings per share, SEK 0,80 0,99 0,84 Diluted earnings per share, SEK 0,80 0,99 0,84 Average number of shares 110,802, ,845, ,945,598 31

32 Bridge statutory to adjusted accounts BRIDGE STATUTORY TO ADJUSTED ACCOUNTS All amounts in MSEK Total operating income statutory accounts Foreign exchange gain/loss Adjusted total operating income Total operating expenses statutory accounts Non-recurring items Amortization of acquired intangible assets Adjusted total operating expenses Marketing expenses Adjusted total operating expenses excluding marketing costs Net credit losses (as reported) Operating profit statutory accounts Non-recurring items Foreign exchange gain/loss Amortization of acquired intangible assets Adjusted operating profit Tangible equity 1,897 1,815 1,510 Shareholders equity 2,201 2,120 1,826 Intangible assets Adjusted return on tangible equity (last 12 months) 24.7% 24.6% 22.9% 32

33 Disclaimer DISCLAIMER The information contained in this presentation (the Information ) contains forward-looking statements. All statements other than statements of historical fact included in the Information are forward-looking statements. Forward-looking statements give Nordax Group AB (publ) s (the Company ) current expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. These statements may include, without limitation, any statements preceded by, followed by or including words such as target, believe, expect, aim, intend, may, anticipate, estimate, plan, project, will, can have, likely, should, would, could and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company s control that could cause the Company s actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which it will operate in the future. The Information, including but not limited to forward-looking statements, applies only as of the date of this document and is not intended to give any assurances as to future results. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to the Information, including any financial data or forward-looking statements, and will not publicly release any revisions it may make to the Information that may result from any change in the Company s expectations, any change in events, conditions or circumstances on which these forward-looking statements are based, or other events or circumstances arising after the date of this document. Nothing in this presentation constitutes investment advice and this presentation shall not constitute an offer to sell or the solicitation of an offer to buy any securities or otherwise to engage in any investment activity. 33