Growth in lending margin pressure persists

Transcription

1 Investor Presentation Growth in lending margin pressure persists 27 February 2018 Árni Ellefsen, CEO

2 Disclaimer This presentation contains statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein. Accordingly, none of BankNordik, or any of its principal shareholders or subsidiary undertakings or any of such person s officers or employees or advisers accept any liability whatsoever arising directly or indirectly from the use of this document. Annual Report 2017 Page 2

3 Overview Highlights Update on strategic initiatives Financials Banking Insurance Expenditures Impairment charges Capital ratios Long-term financial objectives Outlook 2018 Appendices Retail banking Private banking Corporate banking Insurance Annual Report 2017 Page 3

4 Highlights Results in line with guidance 2017 highlights Strengthened quality of customer relationships Improved operational efficiency by continued consolidation of back-office operations in the Faroe Islands Revised capital targets: 17% CET1 ratio, 20% total capital ratio, and 65% cost/income ratio Financial highlights Operating profit amounted to DKK 233m, up 22% compared to 2016 (DKK 191m) Operating income down 1% YoY to DKK 635m 2017 (DKK 640m) Operating costs up 1% to DKK 462m (DKK 459m) Net loan impairment charges were a reversal of DKK 60m (net reversal of DKK 12m) Non-recurring costs amounted to DKK 18m vs. DKK 12m in 2016 Profit before tax increased to DKK 235m (DKK 187m, excluding Vørður) Lending volumes up by DKK 397m to DKK 9,537m compared to year-end 2016 (DKK 9,141m) Deposits down by DKK 36m to DKK 12,632m compared to year-end 2016 (DKK 12,669m) CET1 capital ratio of 17.5% and total capital ratio of 19.7% at 31 December 2017 Annual Report 2017 Page 4

5 2017 financial results Figures in DKKm Profit & loss Key metrics Index Q Q Index Net interest income Net fee and commission income Net insurance income Other operating income Operating income Operating costs Sector costs Profit before impairment charges Impairment charges, net Operating profit Non-recurring items Market value adjustments Profit before tax, continued Profit before tax, discontinued (Vørður) Profit before tax, total Index Q Q Index Loans and advances 9,537 9, ,537 9, Deposits and other debt 12,632 12, , Operating cost / income, % Solvency ratio, % CET1 capital ratio, % Annual Report 2017 Page 5

6 Lending up 4%, while margin pressure persisted Comments Lending volumes up by DKK 397m in 2017 despite Danish corporate loans of approx. DKK 100m being wound up during the period 4% YoY growth in lending: 6% growth in lending to personal customers 1% growth in lending to corporate customers NII down YoY and QoQ due to further margin pressure and the run-off of corporate lending in Denmark in 2016 Loans and deposits DKKbn Loans Deposits 12.6 Q Q Q Q Q Q QoQ changes in net interest 0,0 income (NII) DKKm YoY changes in NII DKKm Q ,0 0,0 0, ,6 1.5 Lending Lending Deposit Deposit Liquidity volume interest volume interest mgmt Lending Lending Deposit Deposit Liquidity volume interest volume interest mgmt Sub. debt 12.3 Sub. debt Other Q Other 2017 Annual Report 2017 Page 6

7 Asset management and mortgage broking drove fee and commission income moderately higher Comments Net fee and commission income up by DKK 8m QoQ: Asset management activity increased in Q Seasonal variations also contributed higher fee income in Q Net fee and commission income up by DKK 4m YoY: Due to increase in investment and trading commission income and mortgage broking activity Dividends decreased due to less income from sector shares QoQ changes in fee and commission income DKKm YoY changes in fee and commission income DKKm Q Investment Loan, and trading guarantee, comm. insurance comm Mortgage broking services Dividends 2.8 Other fee and comm. income Q Investment Loan, and trading guarantee, comm. insurance comm. Mortgage broking services Dividends Other fee and comm. income 2017 Annual Report 2017 Page 7

8 Trygd: Net premium income up 12% in 2017 Comments Combined ratio of 84% in 2017 compared to 101% in 2016 Net premium income up by DKK 10m in 2017 compared to 2016 and up DKK 4m from Q to Q Net claims down by DKK 7m from 2016 to 2017 and down by DKK 15m from Q to Q Profit before tax of DKK 15m in 2017 relative to DKK 0m in 2016 and of DKK 3m in Q relative to a loss of DKK 15m in Q Trygd expects to continue attracting new customers and growing premium income in 2018 Premium and claims DKKm Premium income, net Profit before tax DKKm 15 Claims, net Q Q Q Q Annual Report 2017 Page 8

9 YoY expenditures close to flat Comments Operating costs were down by DKK 1m from Q to Q and up by DKK 3m from 2016 to 2017 Staff costs were up YoY in part due to severance payments Various IT projects have added to costs in 2017, most notably the MobilePay partnership agreement A variety of different expenditure items are contributing to the YoY decrease in other expenses Average number of employees (FTE) Group excl. Vörður and Trygd Trygd Vörður QoQ changes in operating costs DKKm YoY changes in operating costs DKKm Q Staff IT Marketing Other expenses Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Staff IT Marketing Advisory services Other expenses 2017 Annual Report 2017 Page 9

10 The Group continues to reverse impairment charges Low-risk portfolio structure Net impairment charges were a reversal of DKK 60m in 2017 The reversal was in particular related to corporate loans that were either repaid or reversed due to improved companyspecific conditions The private sector accounted for 66% of the loan portfolio, excluding the remaining part of the Danish corporate portfolio Net impairment charges DKKm Loans by sector - excl. Danish corporate sector No individual sector accounting for more than 5% of the loan portfolio BankNordik provides 1 st lien mortgage loans to the private sector in the Faroe Islands, obtaining a high degree of security 66% 4% DKK 9.5bn Private sector Corporate sector Public sector 30% 5% 8% DKK 2.8bn 5% 3% 4% 5% HoReCa Trade Real estate Manufacturing & mining Agri. & fishing Other Annual Report 2017 Page 10

11 Capital position considerably strengthened in 2017 Comments YoY changes in CET1 ratio CET1 and total capital ratios up by 1.5 percentage points YoY % Systemic risk buffer of 1% of all Faroese exposures took effect in January BankNordik is awaiting the individual MREL add-on, which is expected to be met solely by issuing Tier 3 capital Net income Exp. dividend RWA Tax Assets Other 2017 Capital ratio development % CET1 ratio Solvency ratio YoY changes in total capital ratio % Net income Exp. dividend RWA Tax Assets Other 2017 Annual Report 2017 Page 11

12 Long-term financial objectives 2020 financial objectives Comments The Group has re-evaluated its capital ratio targets in light of stricter capital requirements New capital ratio targets: CET 1 target of 17% (previously 13%) Total capital ratio target of 20% (previously 16.5%) The target cost/income ratio has also been revised from 62% to 65% The target return on equity of 10% remains intact In 2017, ROE was affected by: a substantial reversal of impairment charges positive market value adjustments an impairment loss on the Group s head office Progress Key metrics Return on equity Cost/income ratio CET1 capital ratio Total capital ratio 12.0% (8.1%)* *8.1% ROE excludes capital gains from Vørður 2020 target 10.1% 10% 72% 73% 65% 16.0% 17.5% 17% 18.3% 19.7% 20% Annual Report 2017 Page 12

13 Outlook for 2018 FY2018 guidance Management expects profit before impairment charges, non-recurring items, value adjustments and tax in the range of DKK m in 2018 (2017: DKK 187m)* Net profit is expected to be in the range of DKK m in 2018 (2017: DKK 189m) (*The guidance figures are provided in accordance with the upcoming changes to the adjusted income statement methodology taking effect in See the Financial Review section of the 2017 annual report for details) Annual Report 2017 Page 13

14 Questions? Árni Ellefsen, CEO Side 14

15 Appendices Group Banking Personal Banking Corporate Banking Banking, Faroe Islands Banking, Denmark Banking, Greenland Insurance, Trygd Credit quality of loan portfolio Annual Report 2017 Page 15

16 Group Income statement, Group DKKm Index 17/16 Q Q Q Q Q Net interest income Net fees, commission income & dividends Net insurance income Other operating income (less reclassification) Operating income Operating costs* Sector costs Profit before impairment charges Impairment charges Reversals of acquired OEI impairments (reclassified from Other operating income) Impairment charges, net Operating profit Impairment charges, intangible assets Non-recurring items** Profit before value adjustments and tax Market value adjustments*** Profit before tax, continuing operations Profit before tax, discontinued operations (Vörður) Profit before tax, total Operating cost/income, % Number of FTE, end of period * Comprises Staff costs, administrative expenses and amortisation, depreciation and impairment charges (less reclassification to non-recurring items). ** Reclassified from Staff costs and administrative expencses and from Amortisation, depreciation and impairment charges. *** Incl. Net income from investments accounted for under the equity method. Annual Report 2017 Page 16

17 Banking Income statement, Banking DKKm Index 17/16 Q Q Q Q Q Net interest income Net fees, commission income & dividends Other operating income Operating income Operating cost Sector costs Profit before impairment charges Impairment charges, net Operating profit Impairment charges, intangible assets Non-recurring items Profit before value adjustments and tax Market value adjustments Profit before tax Loans and advances Deposits and other debt Operating cost/income, % Number of FTE, end of period Annual Report 2017 Page 17

18 Personal Banking Income statement, Personal banking DKKm Index 17/16 Q Q Q Q Q Net interest income Net fees, commission income & dividends Other operating income Operating income Operating cost Sector costs Profit before impairment charges Impairment charges, net Operating profit Non-recurring items Profit before value adjustments and tax Market value adjustments Profit before tax Loans and advances Deposits and other debt Operating cost/income, % Number of FTE, end of period Annual Report 2017 Page 18

19 Corporate Banking Income statement, Corporate Banking DKKm Index 17/16 Q Q Q Q Q Net interest income Net fees, commission income & dividends Other operating income Operating income Operating cost Sector costs Profit before impairment charges Impairment charges, net Operating profit Non-recurring items Profit before value adjustments and tax Market value adjustments Profit before tax Loans and advances Deposits and other debt Operating cost/income, % Number of FTE, end of period Annual Report 2017 Page 19

20 Banking, Faroe Islands Income statement, Faroe Islands DKKm Index 17/16 Q Q Q Q Q Net interest income Net fees, commission income & dividends Other operating income Total Operating income Operating cost Sector costs Profit before impairment charges Impairment charges, net Operating profit Non-recurring items Profit before value adjustments and tax Market value adjustments Profit before tax Loans and advances Deposits and other debt Operating cost/income, % Number of FTE, end of period Annual Report 2017 Page 20

21 Banking, Denmark Income statement, Denmark DKKm Index 17/16 Q Q Q Q Q Net interest income Net fees, commission income & dividends Other operating income Total Operating income Operating cost Sector costs Profit before impairment charges Impairment charges, net Operating profit Impairment charges, intangible assets Non-recurring items Profit before value adjustments and tax Market value adjustments Profit before tax Loans and advances Deposits and other debt Operating cost/income, % Number of FTE, end of period Annual Report 2017 Page 21

22 Banking, Greenland Income statement, Greenland DKKm Index 17/16 Q Q Q Q Q Net interest income Net fees, commission income & dividends Other operating income Total Operating income Operating cost Sector costs Profit before impairment charges Impairment charges, net Operating profit Impairment charges, intangible assets Non-recurring items Profit before value adjustments and tax Market value adjustments Profit before tax Loans and advances Deposits and other debt Operating cost/income, % Number of FTE, end of period Annual Report 2017 Page 22

23 Insurance, Trygd Income statement, Trygd DKKm Index 17/16 Q Q Q Q Q Premium income, net of reinsurance Claims, net of reinsurance Net insurance income Net income from investment activities Operating income Operating cost Profit before tax Combined ratio Claims ratio Number of FTE, end of period Annual Report 2017 Page 23

24 Credit quality of the loan portfolio Credit classification according to the Danish FSA s method Q Q <7.5 DKKm >7.5 DKKm Total <7.5 DKKm >7.5 DKKm Total Change Portfolio without weakness Portfolio with some weakness Portfolio with weakness of which unsecured Portfolio with OIE of which unsecured impairments Portfolio without individ. classification Total Annual Report 2017 Page 24