Bank Norwegian AS. EUR Credit Investor Presentation. Tine Wollebekk, CEO June 2018 Pål Svenkerud, CFO

Transcription

1 Bank Norwegian AS EUR Credit Investor Presentation Tine Wollebekk, CEO June 2018 Pål Svenkerud, CFO

2 Disclaimer This Company Presentation has been produced by Bank Norwegian AS (the Company or BN ) exclusively for information purposes and to be used at the presentation to investors. This document contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words believes, expects, predicts, intends, projects, plans, estimates, aims, foresees, anticipates, targets, and similar expressions. The forward-looking statements, contained in this Company Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are uncertain and subject to risks. A multitude of factors can cause actual events to differ significantly from any anticipated development. The Company nor any parent or any such person s officers or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does any of the foregoing accept any responsibility for the future accuracy of the opinions expressed in this Company Presentation or the actual occurrence of the forecasted developments. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, the Company or any parent or any such person s officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. By attending this Company Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own opinion of the potential future performance of the Company s business. This Company Presentation contains financial figures from Norwegian Finans Holding Group (consolidated) and Bank Norwegian AS. Presented figures and tables are labeled accordingly. 2

3 Outline 1. Bank Norwegian in brief (page 4) 2. Key financials and capital (page 17) 3. Funding structure (page 34) 4. Planned transaction (page 37) 5. Appendix (page 39) 3

4 Bank Norwegian in brief

5 Bank Norwegian - a fast growing Nordic consumer finance business Established November 2007 Offers unsecured instalment loans, credit cards in cooperation with the airline Norwegian and savings deposits in the Nordic consumer market Expansion to Sweden in May 2013 based on a cross-border license Expansion to Denmark and Finland in December FTEs, all based at the head office in Fornebu, Norway Owned 100% by Norwegian Finans Holding ASA The holding company has no other business or activity than being the holding company for Bank Norwegian AS Norwegian Finans Holding ASA listed on the Oslo Stock Exchange since June 2016 EMTN Programme established 20 April 2018 Rating Customers across Nordics Consumer lending Credit card lending Deposits BBB by S&P (neg) 1.3 million NOK 25.5bn NOK 9.6bn NOK 35.8bn CET1 ratio 16.5% Bank Norwegian AS,

6 Attractive investment story Focused consumer finance operation Long track record of robust profitability through high net interest margin, cost-efficient operations and stable credit quality Nordic footprint with 1.3 million customers Strong balance sheet Experienced management team Steady earnings growth and superior returns Strong and resilient balance sheet Favorable macroeconomic environment 6

7 Focused strategy Leading digital solutions Attractive customer terms Low-cost operations Effective and efficient risk selection Synergies with Norwegian Air Shuttle Strong online marketing capability Convenient loan application and on-boarding process Instant time-to-yes and 1 hour time-to-cash Competitive risk-based loan pricing Attractive deposit pricing Credit card awarded best affinity card 2017 in Europe, #2 in 2018 Automated processes and self service Strategy-focused and integrated systems development Low-cost culture Automated risk selection Advanced credit models Strong brand name and large customer base Strong incentive in loyalty credit card Basis for geographical expansion 7

8 Strong customer growth Total number of customers (000 s) Customers by country (000 s) Denmark Finland Sweden Norway Norway Sweden Denmark Finland Deposits Consumer loans Credit cards 8

9 Market growth and market share - Norway Total unsecured loans, Norway Market growth and market share, Norway BNOK 120 Credit cards BNOK 18 Growth 18% 100 Unsecured loans 16 Bank Norwegian Competitors 16% 14 Market share (RHS) 14% % % 8 8% % % 2% - 0 0% 9 Norway, as of Source: The financial supervisory authority of Norway Breakdown between credit cards and unsecured loans not available prior to 2015

10 Loan portfolio distribution Distribution of loans to customers Gross loans by country MNOK Credit cards 27 % Total assets NOK 45.4bn Consumer loans NOK 25.5bn Credit cards NOK 9.6bn Consumer loans 73 % Norway Sweden Denmark Finland Credit cards Consumer loans Total gross loans to customers NOK 35.1bn Norway represents 51% of loan book, Finland 23%, Sweden 16% and Denmark 10% Average instalment loan size (local currency): NO: NOK 170 thousand SE: SEK 110 thousand DK: DKK: 80 thousand FI: EUR 14 thousand 10 Bank Norwegian AS, 2018

11 Significant room for growth in all four markets Norway Sweden Total household debt market, BNOK 3, Secured Unsecured Total household debt market, BSEK 3, Secured Unsecured Market share unsecured debt 16% BN DNB Others Market share unsecured debt 4% BN Others Denmark 350 Finland Total household debt market, BDKK 2, Secured Unsecured 90 x Customers, thousand Total household debt market, BEUR Secured Unsecured Market share unsecured debt 3% BN Others Market share unsecured debt 8% BN Others 11 Sources (by country): NO: The financial supervisory authority of Norway SE: Statistiska centralbyrån (SCB), Finansmarkedsstatistik DK: Danmarks Statistik (DTS), Statistikbanken Penge og kapitalmarked FI: Bank of Finland - Consumer Credit to household

12 Consumer driven banking through digital channels Investments Rewards Travel & leisure Payment and invoice solutions Loans 1.3 million customers Insurance Credit cards Account information Savings Health services Our customers executed 2.6 transactions per second, and logged in to the app ~2 million times during 12

13 Channel strategy Market by market optimization of channel usage dependent on own brand strength Channel Competition Cost Agent + Fixed Neutral usage Strongly increasing usage N/A Increasing usage Google Variable Strong position Medium position Medium position Strong position Interest rate offering, loan value and risk profile varies across channels Brand / organic sale Free (dep. on other investments) Strong position Weak position Weak position Strong position 13

14 Profitability driven by focused high margin business model in combination with a number of key success factors Cost-effective operations Effective risk selection Attractive customer terms Closeness & understanding of customer needs Convenience driven by leading digital solutions Profitability Bank Norwegian 14

15 Relationship with Norwegian Air Shuttle Startup accelerated by synergies Lower dependencies going forward Loyalty Fees Brand Reward program Customer base Strong Norwegian brand Geographic presence 40% of volume is resale from existing customers Strong brand in its own right Customer base reached significant volume Product diversification No.1 on organic search 15

16 Bank Norwegian is well positioned in a rapidly changing ecosystem Traditional banking value chain is being disintermediated by companies seeking attractive positions Bank Norwegian has unique strengths that sets it apart from other challengers Fast growing customer base with high engagement Modern IT stack underpins low-cost operations and rapid execution Strong capital base enables expansion opportunities Optimize core business and stay relevant to remain well positioned for aggregator positions 16

17 Key financials and capital

18 Strong growth in customers, loans and deposits Customers Loans Deposits (000 s) BNOK BNOK Q Q Q Q Q Q ,316,100 customers 959,400 credit card customers Strong demographics Geographically diversified Small exposures Abundant credit data available Diversified and stable savings deposit base 18 Bank Norwegian AS. IFRS implemented in Historical figures not restated.

19 First quarter 2018 highlights Strong loan and customer growth Increased loan growth adjusted for currency impact 83,000 new customers Quarterly loan growth, MNOK Portfolio sale adjustment Profitability remains high Strong underlying earnings growth Earnings impacted by seasonal and non-recurring items Stable margins and cost effectiveness Stable provisions Quarterly earnings, MNOK Q Portfolio sale adjustment Resilient balance sheet Surplus capital position accommodates continued loan growth and initiation of dividend program Transition to IFRS 9 accretive to equity Q Bank Norwegian AS

20 First quarter 2018 loan growth development Quarterly loan growth - MNOK Norway Sweden Denmark Finland Norway Sweden Denmark Finland Installment loans Credit card Q Total gross loans increased 1,464 MNOK in 2018, compared with 2,532 MNOK in the fourth quarter Negative currency impact in the first quarter exceeded positive effect in the fourth quarter Installment loans rose 1,038 MNOK and credit card loans grew 426 MNOK Installment loan sales were 3,100 MNOK, compared with 2,898 MNOK in the previous quarter High share of recurring business 20 Bank Norwegian AS

21 Highly profitable operation MNOK Q Q Quarterly earnings 14 Q Q4 15 Quarterly earnings Q Q Steady increase in quarterly earnings driven by growth in all markets 21 Bank Norwegian AS. IFRS implemented in Historical figures not restated.

22 Resilient balance sheet - Assets MNOK Assets Cash & cash equivalents Securities Credit cards 1 * Liquid assets comprise 25% of total assets LCR 212% NSFR 142% Consumer loans* Q Intangibles and other assets 22 Bank Norwegian AS 1 Includes sales financing * Credit card and Consumer loans reported on gross basis

23 Net interest income MNOK Net interest income MNOK Interest income ,7 892,2 937, , , ,3 24,2 24,2 25,3 21,3 912,7 992, , , , Q MNOK Interest income Other interest income Interest expenses ,3 124,2 132,1 137,5 142, Q Q

24 Net commission income MNOK Net commission and bank services income MNOK Commission and bank services income ,5 140,0 120,0 100,0 80,0 80,9 93,7 104,4 121,0 119,8 53,9 60, ,3 40, ,8 43,7 20,0 0, Q MNOK 70,0 Commission and bank services expenses 63,5 65, ,0 50,0 40,0 42,0 50,0 55, ,0 20,0 10, Q , Q

25 Cost-efficient operations MNOK C/I Marketing constitutes 69 % of cost base as of Q Q Q Q Q Q Other operating expenses Marketing 25 Bank Norwegian AS. IFRS implemented in Historical figures not restated.

26 Break-down of operating expenses MNOK Quarterly operating expenses Increased marketing cost IT cost savings after systems conversion to one unified platform in 2017 leading to permanent cost savings Other expenses up due to nonrecurring item related to evaluation of strategic initiatives in Q Depreciation IT Other Personnel Marketing Bank Norwegian AS The cost/income ratio excludes net proceeds from Visa Norway

27 Resilient balance sheet - Liabilities MNOK Liabilities & equity Deposits grew 2,107 MNOK in 2018 Stable deposit base Deposits Q Debt securities issued Other liabilities Sub debt Equity & Tier 1 capital 27 Bank Norwegian AS

28 Strong credit metrics Transition to IFRS 9 results in reversal of loan loss reserve of 72.8 MNOK as of MNOK added to equity in. No income statement effect NPL levels rising from a low level due to portfolio sales and unseasoned portfolios Q Loan loss allowance Non-performing loans Gross loans Stable provisioning 28

29 Robust capital structure 25% 20% 15% 10% 5% 0% Q Q Q Q Q Q Common equity tier 1 Tier 1 capital Total capital 29 Bank Norwegian AS. IFRS implemented in Historical figures not restated.

30 Capital position development 22% 20% 18% 16% 15,0 % 17,5 % 16,4 % Capital ratios 20,7 % 20,9 % 19,9 % 19,0 % 19,2 % 18,1 % 16,6 % 17,0 % 15,7 % 16,5 % 18,5 % 20,0 % Strong 16.5% CET1 capital ratio in Bank Norwegian accounting for MNOK group contribution to Norwegian Finans Holding in the second quarter 14% 12% 10% 10,8 % 11,5 % 11,9 % 12,2 % 12,2 % Initiation of cash dividend payment of at least NOK 0.50 per share based on second quarter earnings 8% 6% 4% 2% 0% Q Common equity tier 1 Tier 1 capital Total capital Leverage ratio Minimum regulatory CET1 requirement 15.5%. Target capital ratios 16.0% CET1 capital 17.5% T1 capital 19.5% total capital Leverage ratio equals 12.2% 30 Bank Norwegian AS

31 Composition of liquidity portfolios NORWAY Sector allocations SWEDEN Sector allocations Sector Allocation Sector Allocation Financial Institutions % Financial Institutions % Sovereign States / Central Banks % Sovereign States / Central Banks % Public Sector 3.94 % Public Sector % Total % Total % Minimium investment grade 84 % rated A- or higher Total liquidity portfolio NOK 9.3bn - Norway NOK 5.8bn - Sweden NOK 1.4bn - Denmark NOK 0.8bn - Finland NOK 1.3bn Financial Institutions Sovereign States / Central Banks Public Sector Financial Institutions Sovereign States / Central Banks Public Sector DENMARK FINLAND Sector allocations Sector allocations LCR ratio 212% - Norway 345% - Sweden 127% - Denmark 216% - Finland 143% Sector Allocation Sector Allocation Financial Institutions % Financial Institutions % Sovereign States / Central Banks % Sovereign States / Central Banks % Public Sector 0.00 % Public Sector 0.00 % Total % Total % Financial Institutions Sovereign States / Central Banks Public Sector Financial Institutions Sovereign States / Central Banks Public Sector 31

32 Well positioned for continued earnings growth Earnings growth and strong returns Continued customer and loan growth Stable margins Cost-efficient operations Stable credit quality Strong Nordic economies Favorable unemployment outlook Enhanced credit modelling capacity Resilient balance sheet Strong liquidity position Adequate capital for growth Initiation of dividend program 32

33 Key investment considerations High risk-absorption capacity through strong capital generation Robust profitability through high net interest margin, low market risk, cost-efficient operations and stable credit quality Resilient balance sheet with solid deposit cover, equity level and allowance coverage Solid credit practices with effective credit risk models and bad debt collection procedures Diversified loan portfolio with small exposures per customer Loan portfolio with sound credit characteristics and attractive demographics Short loan portfolio maturity Low-cost and performance oriented culture Favorable legal environment protects creditors and supports high loan recovery rates Favorable macro economic environment with stable employment, strong public finances and highly developed social security net 33

34 Funding structure

35 Funding structure MNOK Funding composition Deposit distribution by country Denmark 9 % Finland 23 % Norway 52 % Sweden 16 % Q Deposits from customers Debt securities issued Subordinated loan Additional Tier 1 capital Total deposits NOK 35.8bn as of Bank Norwegian AS

36 Debt maturity structure as of March 31, 2018 MNOK MNOK Senior debt Annual Quarterly Subordinated debt Q4 Q4 Q4 Q Senior debt Subordinated debt Currently NOK 1,935m senior and NOK 1,110m subordinated outstanding EUR EMTN programme established in April 2018 Contemplated transaction is Bank Norwegian s inaugural EUR transaction 36

37 Planned transaction

38 Planned inaugural EUR senior unsecured transaction Issuer Issuer Rating Type Expected Issue Rating Maturity Size Coupon Documentation Law Listing Lead Managers Bank Norwegian AS BBB (negative outlook) by S&P Senior unsecured, unsubordinated BBB (S&P) 3 years expected EUR Sub-benchmark Floating/fixed The Issuer s EMTN programme dated 20 April 2018 and supplemented thereafter English law Irish Stock Exchange Danske Bank, Nordea 38

39 Appendix

40 Cooperation with Norwegain Air Shuttle The cooperation with Norwegian Air Shuttle is based on agreements regulating the use of the brand name, IP-rights, exclusive rights to issue reward credit cards and cooperations in airline ticket sales financing. The financial arrangement includes royalty fees, fee per card issued and portfolio fee. The current agreements cover Norway, Sweden, Denmark and Finland and expire Bank Norwegian is the exclusive issuer of credit cards tied to Norwegian s reward program. The credit card customers earn Cash points through airline ticket purchases and all other credit card purchases. The Cash Points are conveniently redeemable towards airline ticket purchases. Norwegian Air Shuttle has a 16.4% ownership in Norwegian Finans Holding ASA. The airline and the bank coordinate marketing activities promoting credit cards and the loyalty program The bank is able to leverage off of the airline s strong market position and brand recognition in existing and new markets. Both businesses emphasize the same operations footprint, including digital solutions, automated processes and a low-cost culture. 40

41 First quarter 2018 earnings were 411 MNOK, down 32 MNOK compared with the fourth quarter Norwegian Finans Holding Group MNOK 18 Q4 17 Change Interest income, amortised cost 1, , % Other interest income % Interest expenses % Net interest income 1, , % Commission and bank services income % Commission and bank services expenses % Net change in value on securities and currency n/m Net other operating income % Total income 1, , % Personnel expenses % General administrative expenses % Ordinary depreciation % Other operating expenses % Total operating expenses % Provision for loan losses % Profit on ordinary activities before tax % Tax charge % Profit on ordinary activities after tax % Net interest income impacted by interest days and non-recurring item in the fourth quarter Fee income down due to one-off network incentive in the fourth quarter Negative change in value on securities and fx-loss Increased marketing expenses and one-off cost related to evaluation of strategic initiatives Stable provision levels Earnings per share (NOK) MNOK 18 Q4 17 Change Profit after tax % Change in fair value for assets held for sale, after tax n/m Comprehensive income for the period % 41 * Bank Norwegian AS

42 Strong underlying performance Bank Norwegian AS Key figures Norway Sweden Denmark Finland MNOK 18 Q Q Q Q4 17 Net interest income Net other income Total income Total operating expenses Provision for loan losses Profit after tax Comprehensive income Net loans 17,196 16, ,554 5, ,312 3, ,752 7, Deposits 18,574 17, ,800 5, ,338 3, ,077 6,583 1,494 Net interest income reflects transfer pricing for internal funding No allocation of overhead expenses 42

43 Quarterly balance sheet Norwegian Finans Holding Group MNOK Change Assets Deposits with the central bank 66 0 % 66 0 % 0 0 % Loans and deposits with credit institutions 1,839 4 % 1,261 3 % % Loans to customers 33, % 32, % 1,362 4 % Certificates and bonds 9, % 8, % % Financial derivatives 49 0 % 2 0 % 47 n/m Shares and other securities 33 0 % 0 0 % 33 n/m Assets held for sale - 0 % 33 0 % -33 n/m Intangible assets % % 1 1 % Deferred tax asset 18 0 % 16 0 % 2 1 % Fixed assets 1 0 % 1 0 % % Receivables % % % Total assets 45, % 43, % 2,372 6 % Liabilities and equity Loans from credit institutions 99 0 % - 0 % 99 n/m Deposits from customers 35, % 33, % 2,107 6 % Debt securities issued 1,935 4 % 2,242 5 % % Financial derivatives 11 0 % 52 0 % % Taxes payable % % % Other liabilities % % 184 n/m Accrued expenses % % 5 3 % Subordinated loan % % 0 0 % Total liabilities 39, % 37, % 1,911 5 % Share capital % % - 0 % Share premium reserve % % - 0 % Tier 1 capital % % - 0 % Retained earnings and other reserves 4, % 3,921 9 % % Total equity 6, % 5, % % Total liabilities and equity 45, % 43, % 2,372 6 % 43

44 Top 20 shareholders SHAREHOLDER # OF SHARES 1 NORWEGIAN AIR SHUTTLE ASA 30,623, % 2 GOLDMAN SACHS & CO. NOMINEE 15,440, % 3 FOLKETRYGDFONDET 8,125, % 4 DANSKE BANK AS 7,466, % 5 BRUMM AS 6,739, % 6 GREEN 91 AS 6,313, % 7 STENSHAGEN INVEST AS 4,551, % 8 SWEDBANK ROBUR SMÅBOLAGSFOND 3,810, % 9 NORDEN JPMORGAN CHASE BANK NOMINEE 3,617, % 10 BANQUE DEGROOF PETERCAM NOMINEE 3,425, % 11 SKANDINAVISKA ENSKILDA BANKEN AB 3,000, % 12 KM AVIATRIX INVEST AS 2,690, % 13 SNEISUNGEN AS 2,676, % 14 MP PENSJON PK 2,664, % 15 GKB INVEST AS 2,640, % 16 BANQUE DEGROOF PETERCAM NOMINEE 2,540, % 17 TORSTEIN TVENGE 2,500, % 18 SONGA AS 2,083, % 19 JPMORGAN CHASE BANK NOMINEE 1,972, % 20 JPMORGAN CHASE BANK NOMINEE 1,708, % Top ,593, % Total 186,688,897 As of June 1, 2018 Management holds 1.4% of shares outstanding 44

45 Contact details Tine Wollebekk CEO Mobile: (+47) Pål Svenkerud CFO Mobile: (+47)

46 46