PARETO BANK. Financial Results First quarter 2014 SIDE 1

Transcription

1 PARETO BANK Financial Results First quarter 2014 SIDE 1

2 SIDE 2 1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND LIQUIDITY

3 FIRST QUARTER 2014 Profit after write-downs and tax MNOK 42,8 (MNOK 18,7) Return on equity after tax 18,2 % (8,9 %) Cost/income ratio 20,6 % (38,8 %) Common Equity Tier 1 ratio (standard method) 11,5 % (10,5 %) SIDE 3

4 HISTORICAL DEVELOPMENT OF KEY FIGURES Post-tax operating profit (NOK million) Common Equity Tier 1 ratio 18,7 27,0 30,6 33,3 42,8 10,5 % 11,0 % 11,5 % 11,5 % 11,5 % Q Q Q Q Q Q Q Q Q Q Return on equity (after tax) Cost/income ratio (%) 9,1 % 12,8 % 14,7 % 14,8 % 18,2 % 38,8 % 28,8 % 24,4 % 35,1 % 20,6 % Q Q Q Q Q Q Q Q Q Q SIDE 4

5 STRONG GROWTH AND HIGH RETURN ON EQUITY CONTINUED GOOD GROWTH IN NET INTEREST INCOME Higher net interest margin as a result of lending growth with good interest rate margins as well as repricing of customer loans and deposits. HIGH OTHER OPERATING INCOME High net gains on financial instruments at fair value. LOWER OPERATING COSTS Cost reduction measures and more efficient resource utilization. HIGH CREDIT QUALITY AND LOW DEFAULT RATE Increased collective write-down on loans. SIDE 5

6 INCOME STATEMENT FIRST QUARTER 2014 (NOK 1 000) 1st quarter st quarter Net interest income Net other operating income Total net income Total operating expenses Operating profit before impairment losses Impairment losses on loans and guarantees Operating profit before tax Taxes Profit for the period SIDE 6

7 REPRICING OF LOANS AND DEPOSITS IMPROVES NET INTEREST MARGINS 6,0 % 4,0 % Q Q ,0 % 0,0 % -2,0 % Lending margin Deposit margin Net margin Margin over 3M NIBOR (NOK million) 1st quarter st quarter 2013 Change Average lending Average deposits Net margin between deposits and loans increased by 1.0 percentage point over the last 12 months: Repricing of real estate and securities loans Higher margins on new lending Repricing of deposits Lower credit spreads on renewals of fixed-rate deposits and on new fixed rate deposits Lending margin 5,0 % 4.3 % 0,7 % Deposit margin -1,1 % -1,5 % 0,4 % Net margin 3,8 % 2,8 % 1,0 % SIDE 7

8 (NOK 1 000) CHANGE IN NET INTEREST INCOME FIRST QUARTER Q Q Lending & deposit margin Lending & deposit volume Amortization & commission income Invested surplus liquidity Long-term funding costs SIDE 8

9 HISTORICAL TREND NET INTEREST INCOME ,6 % ,6 % ,5 % ,0 % ,7 % ,2 % ,5 % (NOK 1 000) SIDE 9

10 HISTORICAL TREND MARGINS Margins over 3M NIBOR 3,23% 2,50% 2,95% 2,87% 2,97% 2,14% 2,15% 2,23% 3,58% 2,61% 3,73% 3,97% 2,40% 2,48% 4,33% 4,25% 2,82% 2,82% 4,68% 4,71% 3,17% 3,31% 4,91% 4,98% 3,65% 3,85% Lending margin Net margin -0,74% -0,81% -0,72% -0,74% -0,97% -1,34% -1,50% -1,52% -1,43% -1,51% -1,40% -1,26% -1,13% Deposit margin SIDE 10

11 NON-PERFORMING AND IMPAIRED COMMITMENTS (NOK 1 000) Gross non-performing commitments Individual write-downs Net non-performing commitments Write-down degree 0,0 % 25,85 % 4,16 % Non-performing commitments as % of total lending 0,13 % 0,99 % 0,27 % The Bank had per quarter-end two loans in default of payment, none of which are considered impaired. No otherwise impaired commitments. No individual writedowns. SIDE 11

12 WRITE-DOWNS ON LENDING Losses in the period (NOK 1 000) Change in individual write-downs Change in group write-downs Actual losses against previous write-downs Write-downs and write-offs on loans and guarantees Individual write-downs (NOK 1 000) Individual write-downs Write-offs from previous write-downs Recovery from previous write-downs Indiviual write-downs per Group write-downs (NOK 1 000) Group write-downs Change in group write-downs Group write-downs In the first quarter of 2014, the bank posted NOK 0,2 million in losses on a smaller real estate commitment and reversed MNOK 0,6 in individual impairments. After this, the bank has no individual write- downs. Group write-downs increased by MNOK 2,0 in first quarter. Aggregate volume of write-downs at quarter-end amounted to MNOK 20,7 corresponding to 0,30 % of gross loans. SIDE 12

13 QUARTERLY PROFIT TRENDS (NOK 1 000) 1st quarter th quarter rd quarter nd quarter st quarter 2013 Net interest income Net other operating income Total net income Total operating expenses Profit before losses on loans and guarantees Losses on loans and guarantees Pre-tax profit Taxes Profit for the period SIDE 13

14 HISTORICAL TREND LOANS AND DEPOSITS Loans Deposits SIDE 14

15 ASSETS (NOK 1 000) Cash and deposits with central banks Lending to and deposits with credit institutions Net lending to customers Commercial paper and bonds Shares and other securities Financial derivatives Intangible assets Deferred tax assets Fixed assets Other assets Prepaid costs and retained earnings Total assets Net loans to customers decreased by MNOK 295 in the first quarter of Lower growth rate as a result of adaptation to the new liquidity and capital requirements. High turnover rate of credits: Approximately 30 % of the loan portfolio matures within a year. SIDE 15

16 LIABILITIES AND EQUITY (NOK 1 000) Deposits from credit institutions Deposits from customers Senior securities issued Financial derivatives Other liabilities Accrued costs and prepaid income Subordinated loan capital Total liabilities Share capital Share premium reserve Total equity Total liabilities and equity Increase in customer deposits of MNOK 132 in the first quarter of Adjustment of deposit terms to improve the deposit margin and meet new liquidity requirements. SIDE 16

17 CAPITAL ADEQUACY REQUIREMENTS Pareto Bank operates at target levels ranging from 0,5 to 1,0 percentage points above the current regulatory requirements for Common Equity Tier 1 (CET1) and Total Capital ratios By the end of 2014, target operating levels for the CET1 ratio range from 11,5 % to 12,0 %, whereas the target levels for the Total Capital ratio range from 15,0 % to 15,5 % 14,6 % 3,1 % 12,5 % 3,5 % 15,5 % 3,5 % 14,5 % 3,5 % The Bank adapts to higher capital requirements through moderate loan growth and through a moderate dividend 11,5 % 9,0 % 12,0 % 11,0 % The Bank has a high percentage of short credits that facilitates a relatively quick adjustment to the new capital requirements by reducing risk-weighted assets Capital ratio Regulatory requirements Target levels Regulatory requirements Core capital Hybrid capital (T1) SIDE 17

18 NEW REQUIREMENTS FOR COMMON EQUITY 14,00% 12,00% 10,00% 11,1 % 11,5 % 11,0 % 1,0 % Countercyclical buffer Improved net margin and flat operating costs 8,00% 3,0 % Systemic risk buffer Moderate dividend payment 6,00% 4,00% 2,5 % Conservation buffer Moderate lending growth 2,00% 0,00% Financial statement Financial statement ,5 % Capital requirements Minimum requirements for common equity Total lending NOK 7.3 billion at year-end 2014 SIDE 18

19 CAPITAL ADEQUACY The bank has two perpetual subordinated bonds callable after five years and with no incentive of repayment The size of risk-weighted assets is calculated using the standard method and is not internal ratings based (IRB) The bank s capital requirements would have been lower had an average of Norwegian IRB banks' risk weights been applied (NOK 1 000) Equity Dividend Deduction of intangible assets Interim results exempted from the core capital Total Common Equity Tier 1 Captial Subordinated debt (Additional Tier 1 Capital) Total Tier 1 capital Capital requirements for credit and counterparty risk Capital requirements for operational risk Deductions for impairment losses on loans and provisions for warranty obligations Capital requirements Surplus capital Total capital adequacy ratio 14,55 % 13,60 % 14,65 % Total Tier 1 capital ratio 14,55 % 13,60 % 14,65 % Common Equity Tier 1 capital ratio 11,45 % 10,46 % 11,52 % SIDE 19

20 HISTORICAL TREND CAPITAL RATIOS Leverage ratio Core capital/total assets (%) Common Equity Tier 1 ratio (%) 12,09% 9,73% 9,48% 9,79% 10,09% 15,44% 12,37% 11,07% 11,53% 11,45% 13,70 % 6,28 % *) DNB Bank ASA SIDE 20

21 KEY STOCK RATIOS (NOK) 1st quarter Earnings per share after tax 50,4 129,3 79,6 56,1 26,5 Dividend per share 30,0 30,0 30,0 25,0 Payout ratio 0,23 0,38 0,53 0,94 Dividend yield 3,1% 4,2 % Book equity per share 1.134, ,1 985,1 935,5 904,5 P/E 5,1x 7,5x 8,9x P/BV 0,90x 0,90x 0,72x Share price Number of shares Earnings per share (NOK Dividend 129,3 79,6 56,1 26,5 14,5 50, Q The Pareto Bank shares were listed on NOTC 7 March 2014 SIDE 21

22 LARGEST SHAREHOLDERS Name Holding Share Pareto AS ,00 % Geveran Trading Co Ltd ,02 % Indigo Invest AS ,83 % Rasmussengruppen AS ,50 % DNB ASA ,52 % Pecunia Forvaltning AS ,38 % Tonsenhagen Forretningssentrum AS ,70 % Ojada AS ,61 % OBOS Forretningsbygg AS ,40 % Larre Eiendom 2 AS ,18 % Tove Reistads Stiftelse ,00 % Eiendomsutvikling Kristiansand AS ,88 % Sphinx Investment Corp ,64 % Artel Holding AS ,61 % Hodne Kapital AS ,50 % Profond AS ,41 % Castel AS ,19 % Kolberg Motors AS ,02 % Ola Rustad AS ,00 % Helland AS ,84 % Andre ,78 % Sum ,00 % A total of 238 shareholders. Top-level managers in the Pareto group own shares, or 3,87 % of bank shares shares with face value of NOK 600. SIDE 22

23 SIDE 23 1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND LIQUIDITY

24 A NICHE PLAYER WITH FOCUS ON REAL ESTATE FINANCING, SECURITIES FINANCING, AND SHIPPING AND OFFSHORE FINANCING 1. Real estate financing focused on residential property construction in the Oslo region 2. A full scale provider of securities financing including investment services 3. Gradually building a diversified shipping and offshore portfolio Total credit exposure MNOK ,8 % 62,8 % 4,1 % 8,4 % 5,3 % Bonds Stocks and shares Property Mortgages/credit Shipping og offshore Other company financing Other SIDE 24

25 A STRONG MARKET POSITION WITHIN RESIDENTIAL PROPERTY CONSTRUCTION IN THE OSLO REGION Primarily financing of regulated lots with a potential for property development Financing of residential and commercial property construction Financing of projects for renovation and conversion of commercial property to residential units A typical project is composed of lot financing and a building construction facility in the range of MNOK for the construction of 4-8 homes in the greater Oslo area Property credit exposure MNOK ,4 % 5,1 % 11,6 % 44,0 % 9,6 % 8,3 % Office Combination buildings Commercial Residential property Lots Other SIDE 25

26 TERMS OF REAL ESTATE FINANCING FINANCING OF RESIDENTIAL DEVELOPMENT The bank requires on average 20 % to 40 % equity to finance a property lot purchase. Primarily financing of regulated lots purchased for development with a clear exit strategy. The developer must demonstrate the ability to successfully complete projects and have experience with residential development. Projects stress tested: if the price of unsold units falls by 50 % compared to pre-sold units, the sales amount must still be sufficient to cover the bank credit. Primarily financing of projects in the Oslo region and other well-functioning and liquid markets. FINANCING OF COMMERCIAL PROPERTY The bank requires equity of 20 % to 40 %. Long leases with financially sound tenants. Primarily financing of properties in the Oslo region and other well-functioning and liquid markets. SIDE 26

27 A FULL SCALE PROVIDER OF SECURITIES FINANCING STANDARD PRODUCTS Financing of stocks on Oslo Stock Exchange with a LTV/leverage of 0 % to 80 % Financing of short trades on Oslo Stock Exchange Financing of high yield bonds mainly arranged by Pareto Securities with a LTV/leverage of around 50 % Financing of funds (stocks, bonds etc.) OTHER MORE SPECIALIZED PRODUCTS: Forwards Total return swaps Guarantees in favor of Oslo Stock Exchange for companies in a mandatory offer position INCREASED FOCUS ON FINANCING CORPORATE PROJECTS IN COOPERATION WITH PARETO SECURITIES: Bridge financing to customers in the process of issuing market debt Bridge and long term financing to private equity firms Bridge financing to investors taking part in an equity issue SIDE 27

28 BUILDING A WELL-DIVERSIFIED PORTFOLIO IN SHIPPING AND OFFSHORE The project should as a rule have Norwegian ownership A high quality charterer with transparent books and a diversified cash flow Objects built in renowned shipyards, with liquid second-hand markets and well-proven designs Equity requirement 60 % to 30 % Shipping & Offshore credit exposure of MNOK ,4 % Offshore 22,1 % Rig 16,0 % Ro-ro Container Product 11,9 % 19,1 % Bulk Other Individual commitment size MUSD 5 to MUSD 20 7,3 % 13,2 % SIDE 28

29 COMMITMENTS BY RISK CLASSIFICATION (NOK million) Credit exposure None/very low risk Low risk Moderate risk Some risk Very high risk Non-performing loans Accrued interest and amortisation Total exposure None/very low risk Low risk Moderate risk Some risk High risk Very high risk Non-performing loans None/very low risk 48 % Low risk 40 % Some risk 2 % Moderate risk 10 % SIDE 29

30 COMMITMENTS BY SIZE (NOK million) Credit exposure > >20 < >10 < >5 < >2 < >1 < < Accrued interest and amortisation Total exposure > 50 > 20 < 50 > 10 < 20 > 5 < 10 > 2 < 5 > 1 < 2 < 1 SIDE 30

31 OUR MARKETS IN 2014 MODERATE LENDING GROWTH AND A YEAR END TOTAL LENDING TARGET OF MNOK REAL ESTATE: WE FOCUS ON PROJECT FINANCING Uncertain market prospects for residential development and a high redemption rate means the bank will see a virtually unchanged net exposure in 2014 The bank plans to further develop its position in real estate project financing on its own and in cooperation with other institutions SECURITIES: TURNING TOWARD CORPORATE FINANCING Seeing potential in corporate finance transactions such as bridge financing and private equity financing SHIPPING & OFFSHORE: GRADUALLY BUILDING THE PORTFOLIO Room for growth in a market where there is still limited competition Good opportunities to fund projects with high equity ratio and high profitability SIDE 31

32 SIDE 32 1 FINANCIAL STATEMENT 2 LENDING AND CREDIT RISK 3 FUNDING AND LIQUIDITY

33 FUNDING SOURCES Deposits Fixed rate deposits 49 % Corporate deposits 60 % Senior dept Deposits-to-loan ratio 91 % Other dept 141 Subordinated dept 234 Core capital 964 Long term liquidity ratio Liquidity buffer index 131 % 231 % SIDE 33

34 CUSTOMER DEPOSITS Deposit allocation Fixed rate deposits time to maturity Depositors NOK million % 20 % 40 % 60 % 80 % 100 % Retail Commercial >25 months months 8-14 months 5-7 months 3-4 months NOK million Deposits by size > 20 NOKm NOKm 5-10 NOKm 2-5 NOKm 0-2 NOKm Floating rate deposits Fixed rate deposits NOK million Average deposit per customer (NOK) Total 1,2 mill. Commercial 2,1 mill. Retail 0,7 mill. SIDE 34

35 SURPLUS LIQUIDITY Drawing rights Invest. pf Liquidity portfolio Cash Drawdown on credits Buffer for loss of depsits Underwriting of new issues 1% Government & PSEs 16% Investment portfolio 9% Bank/finance 19% Covered bonds 55% 0 Excess liquidity after hair cuts Liquidity requirement: Buffer for losses of deposits and drawdowns on credit lines The bond portfolio consists of a liquidity portfolio of mainly AAA securities, an investment portfolio (maximum limit NOK 420 million) and a portfolio of contingent drawings (maximum limit of NOK 100 million) SIDE 35

36 MARKET FINANCING , >2018 Market funding maturity profile (NOK million) Pareto Bank has issued seven senior unsecured bonds and two subordinated bonds per The bonds are listed on the Nordic ABM and the Oslo Stock Exchange. SIDE 36

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