Bank Norwegian AS. Company Presentation September, Pål Svenkerud, CFO

Transcription

1 Bank Norwegian AS Company Presentation September, 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 forwardlooking 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 31) 4. Appendix (page 34) 3

4 Bank Norwegian in brief

5 Bank Norwegian a leading 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 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 Current market capitalization of NOK 19.0 billion Rating Customers across Nordics Consumer lending Credit card lending Deposits BBB by S&P (neg) 1.4 million NOK 26.5bn NOK 10.4bn NOK 37.7bn CET1 ratio 17.1% Total CET1 requirement 15.5%* Total captial ratio 20.5% Bank Norwegian AS, Q *increasing to 15.56% in March 2019 and 15.64% in September 2019 due to increased countercyclical buffer requirement in Sweden and Denmark 5

6 Attractive investment story Focused consumer finance operation Long track record of robust profitability and cost-efficient operations Stable credit quality Nordic footprint with 1.4 million customers Strong balance sheet, CET1 ratio of 17,1% Experienced management team Steady earnings growth Superior returns Strong and resilient balance sheet Geographical diversification 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 Continued solid customer growth App logins, thousand Customers, thousand Customers, thousand Norway Sweden Denmark Finland Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 App logins Credit cards Instalment loans Deposits 8

9 Market growth and market share - Norway BNOK Total unsecured loans, Norway Market growth and market share, Norway BNOK Growth BNOK Norway, as of Source: The financial supervisory authority of Norway Breakdown between credit cards and unsecured loans not available prior to

10 Loan portfolio distribution Distribution of loans to customers Gross loans by country MNOK Credit cards 28 % 12,181 Total assets NOK 47.3bn Instalment loans NOK 26.5bn Credit cards NOK 10.4bn Instalment loans 72 % 6,112 3,933 7,147 3,204 2, ,586 Norway Sweden Denmark Finland Credit cards Instalment loans Total gross loans to customers NOK 36.9bn Norway represents 50% of loan book, Finland 24%, Sweden 16% and Denmark 10% Average instalment loan size (local currency): NO: NOK 180 thousand SE: SEK 110 thousand DK: DKK: 90 thousand FI: EUR 14 thousand Bank Norwegian AS Q

11 Significant room for growth in all four markets Norway Sweden Total household debt market, BNOK Secured Unsecured Total household debt market, BSEK 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 Secured Unsecured 90 x Customers, thousand Total household debt market, BEUR Secured Unsecured Market share unsecured debt 3% BN Market share 8% Others unsecured debt BN Others 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 11

12 Consumer driven banking through digital channels Investments Rewards Travel & leisure Payment and invoice solutions Loans 1.4 million customers Insurance Credit cards Account information Savings Health services Our customers executed 2.6 transactions per second, and logged in to the app ~3.5 million times during Q2 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 Growth in customers, loans and deposits Customers Loans Deposits (000 s) BNOK BNOK Q1 12 Q4 12 Q3 13 Q2 14 Q1 15 Q4 15 Q3 16 Q2 17 Q Q1 12 Q4 12 Q3 13 Q2 14 Q1 15 Q4 15 Q3 16 Q2 17 Q Q1 12 Q4 12 Q3 13 Q2 14 Q1 15 Q4 15 Q3 16 Q2 17 Q1 18 1,392,600 customers 1,018,300 credit card customers Bank Norwegian AS. IFRS implemented in Historical figures not restated. Strong demographics Geographically diversified Small exposures Abundant credit data available Diversified and stable savings deposit base 18

19 Second quarter 2018 highlights Strong profitability Resilient balance sheet High customer growth and engagement Main events during quarter Strong earnings growth Stable yields and margins Continued cost efficiency Stable provisions Further geographical diversification of loan book Stable credit metrics Surplus capital position Strong customer growth 1 million App logins per month 300,000 transactions per day NAS agreement extended Redesigned app improves sales and customer experience Expanded insurance offering Earnings, MNOK 400 Q2 17 Q3 17 Q4 17 Loan growth, MNOK Q2 17 Profitability Bank Norwegian AS Q Q4 17 4,3% 4,4% 4,2% Portfolio sale adjustment Q Q Q2 18 Portfolio sale adjustment ROA Q2 18 ROE 3,7% 4,2% 39,1% 39,2% 36,4% 31,1% 33,8% Q2 17 Q3 17 Q4 17 Q1 18 Q

20 Strong quarterly loan growth Quarterly loan growth, MNOK Instalment loans Credit card Norway Sweden Denmark Finland Norway Sweden Denmark Q1 18 Q2 18 Quarterly loan growth, local currency Finland Total gross loans increased MNOK 1,830, compared with MNOK 1,464 in the first quarter Currency adjusted loan growth was MNOK 2,189 compared with MNOK 2,090 in the first quarter Instalment loans rose MNOK 1,011 and credit card loans grew MNOK 819 Instalment loan sales were MNOK 2,921, compared with MNOK 3,100 in the previous quarter Instalment loan run-off was MNOK 1,661, compared with MNOK 1,639 in the first quarter High share of recurring business Instalment loans Credit card Norway Sweden Denmark Finland Norway Sweden Denmark Finland Q1 18 Q

21 Highly profitable operations MNOK Steady increase in quarterly earnings driven by growth in all markets Bank Norwegian AS. IFRS implemented in Historical figures not restated. 21

22 Resilient balance sheet Assets, BNOK Cash and cash equivalents Securities Credit cards 1 Liquid assets comprise 24% of total assets LCR 220% and NSFR 142% Deposits grew MNOK 1,917 Stable deposit base Q Q Q Q1 18 Q2 18 Instalment loans Intangibles and other assets Deposits to loans ratio 1.06 Total common equity to total assets equals 12.3% Liabilities and equity, BNOK Deposits from customers Q Q Q4 17 Q1 18 Q2 18 Debt securities issued Other liabilities Sub debt Equity and tier 1 capital Bank Norwegian AS 1 Includes sales financing 22

23 Stable yields and margins Margins as a % of average assets 12% 10% 8% 11.0% 9.7% 8.0% 10.7% 9.4% 8.0% 10.9% 9.6% 7.7% 10.8% 9.5% 7.6% 10.8% 9.4% 7.4% Interest income Net interest margin Risk-adjusted margin Instalment loan yield bolstered by accrual adjustment item and seasonal increase in interest collection from past due loans Continued attractive risk-adjusted margin reflecting limited credit losses 6% 4% 2% 1.3% 1.3% 1.3% 1.3% 1.3% Interest expenses 0% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Asset yield and cost of deposits 16% 14% 12% 10% 14.6% 12.9% 12.0% 14.5% 12.6% 12.1% 14.7% 12.8% 11.7% 14.4% 12.9% 11.5% 14.6% 12.6% 11.3% Instalment loan yield Credit card loan yield Risk-adjusted total loan yield 8% 6% 4% 1.8% 1.4% 2% 1.1% 0% Q % 1.0% Q % 1.6% 1.4% 1.0% Q % 1.5% 0.9% Q % 1.5% 0.9% Q2 18 Debt securities cost Deposit costs Liquidity yield 23

24 Highly profitable operations increasing efficiency MNOK Marketing constitutes 71 % of cost base as of Q Bank Norwegian AS. IFRS implemented in Historical figures not restated. 24

25 High operating efficiency Quarterly operating expenses, MNOK Q Q Q Q Q2 18 0,35 0,30 0,25 0,20 0,15 0,10 0,05 0,00 Lower spending on digital marketing Lower personnel expenses due to seasonal accrual effect Other expenses down as non-recurring item in the first quarter is partially offset by increased activity in the second quarter Cost income at 0.26 Marketing Personnel Other IT Depreciation Cost/income Bank Norwegian AS 25

26 Strong credit metrics Non-performing loans to loans 1) Loan loss provisions to average loans 2) 12% 10% 8% 6% 4% 2% 4.1% IAS % 5.7% 7.1% IFRS 9 8.1% 5% 4% 3% 2% 1% 2.3% IAS % 2.7% IFRS 9 2.4% 2.6% NPL levels rising as expected from a low base due to portfolio sales and unseasoned portfolios Provisions impacted by cut-off effects in the first quarter, model correction and seasonal factors in Sweden besides additional provisions in Finland Solid allowance levels 0% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 0% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Loan loss allowance to loans 3) Loan loss allowance to non-performing loans 4) 6% 5% 4% 3% 2% 1% 2.4% IAS % 3.0% IFRS 9 3.5% 3.9% 100% 80% 60% 40% 20% 69.0% IAS % 56.8% 50.0% IFRS % 0% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 0% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 1) Gross loans Stage 3 (less performing loans) to gross loans 2) Change in ECL to average gross loans 3) ECL to gross loans 4) ECL to gross loans Stage 3 (less performing loans) 26

27 Robust capital structure Capital ratios 22% 20.7% 20.9% 20.5% 19.9% 20.0% 20% 19.0% 19.2% 19.0% 18.1% 18.5% 18% 17.0% 17.1% 16.6% 16.5% 16% 15.7% 14% 11.9% 12.2% 12.2% 12.5% 12% 11.5% 10% 8% 6% 4% 2% 0% Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Common equity tier 1 Tier 1 capital Total capital Leverage ratio Min. CET1 = 15.5% Strong 17.1% CET1 capital ratio in the bank accounting for MNOK in group contribution 17.7% CET1 capital ratio on a consolidated basis Minimum regulatory CET1 requirement 15.5%, increasing to 15.56% in March 2019 and 15.64% in September 2019 due to increased countercyclical buffer requirement in Sweden and Denmark Target capital ratios, share buy backs and dividends under review based on regulatory dialog Leverage ratio equals 12.5% Bank Norwegian bases its calculation of capital requirement on the standardized approach for credit risk and the standardized approach for operational risk. The bank changed from the basic indicator approach to the standardized approach for calculating the capital requirement for operational risk in the third quarter of The bank has no trading portfolio or exposure requiring the bank to include a capital requirement for market risk. The bank is a part of group 3, which means that the Financial Supervisory Authority of Norway will conduct a SREP every three years. In 2017, the Financial Supervisory Authority of Norway set a Pillar 2 requirement of 4.2% for the bank. Bank Norwegian AS. 27

28 Composition of liquidity portfolios NORWAY SWEDEN Sector allocations Sector allocations Sector Allocation Sector Allocation Financial Institutions % Financial Institutions % Sovereign States / Central Banks % Sovereign States / Central Banks % Public Sector % Public Sector % Total % Total % Minimium investment grade 87 % rated A- or higher Total liquidity portfolio NOK 9.4bn - Norway NOK 5.8bn - Sweden NOK 1.4bn - Denmark NOK 0.7bn - Finland NOK 1.5bn Financial Institutions Sovereign States / Central Banks Public Sector Financial Institutions Sovereign States / Central Banks Public Sector DENMARK FINLAND LCR ratio 220% - Norway 324% - Sweden 128% - Denmark 189% - Finland 151% Sector allocations Sector allocations 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 28

29 Well positioned for further growth through a two-tier strategy Continued strong earnings and return Continued customer and loan growth Stable margins and cost-efficient operations Favorable conditions for core growth Favorable macro economic outlook Strong customer engagement, trust and brand awareness Improved risk selection tools for optimized pricing Opportunities from industry transformation Lean operation with a focused selection of own on-balance sheet products Deep customer insight from fully digitalized customer journey and frequent interactions Industry-leading services from third parties in addition to own products Explore AISP and PISP positions 29

30 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 30

31 Funding structure

32 Funding structure Funding composition Deposit distribution by country MNOK Finland 25 % Finland 25 % Denmark 9 % Denmark 9 % Sweden 16 % Norway 50 % Norway 50 % Sweden 16 % Total deposits NOK 37.7bn as of Q Bank Norwegian AS. 32

33 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q Perp Debt maturity structure as of June 30, 2018 MNOK MNOK Senior debt Annual Quarterly Subordinated debt Currently MNOK 1,805 senior debt and MNOK 1,110 subordinated debt (Additional Tier 1 and Tier 2 capital) outstanding EUR EMTN program established in April 2018 Subordinated capital is callable in Q4 2018, but the Tier 2 bond issue has a maturity date in 2023, and the Additional Tier 1 bond issue has a perpetual tenor Senior unsecured Sub. debt - call Sub. debt - maturity 33

34 Appendix

35 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. 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. 35

36 Second quarter 2018 earnings were MNOK 483, up MNOK 72 compared with the first quarter Norwegian Finans Holding Group MNOK Q2 18 Q1 18 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 driven by strong loan growth Fee income up due to network and insurance incentives Gains on currency and shares exceeded negative change in value on fixed income securities Operating expenses down due to seasonally lower personnel expense, lower digital marketing spending and non-recurring item in the first quarter Stable provision level ROE* was 33.8% Earnings per share (NOK) MNOK Q2 18 Q1 18 Change Profit after tax % Change in fair value for assets held for sale, after tax % Comprehensive income for the period % * Bank Norwegian AS 36

37 Strong performance overall Bank Norwegian AS Key figures Norway Sweden Denmark Finland MNOK Q2 18 Q1 18 Q2 18 Q1 18 Q2 18 Q1 18 Q2 18 Q1 18 Net interest income Net other income Total income Total operating expenses Provision for loan losses Profit after tax Comprehensive income Provisions in Sweden down due to cutoff effects in the first quarter, model correction and seasonal factors Provisions in Finland includes a discretionary additional provision of MNOK 57.3 Net loans 17,855 17, ,705 5, ,525 3, ,350 7, Deposits 18,898 18, ,976 5, ,466 3, ,366 8,077 1,289 Net interest income reflects transfer pricing for internal funding No allocation of overhead expenses 37

38 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 2,323 5 % 1,839 4 % % Loans to customers 35, % 33, % 1,621 5 % Certificates and bonds 9, % 9, % 97 1 % Financial derivatives 44 0 % 49 0 % % Shares and other securities 37 0 % 33 0 % 4 13 % Assets available for sale - 0 % - 0 % - 0 % Intangible assets % % -1-1 % Deferred tax asset 11 0 % 18 0 % % Fixed assets 1 0 % 1 0 % % Receivables % % % Total assets 47, % 45, % 2,179 5 % Liabilities and equity Loans from credit institutions 85 0 % 99 0 % % Deposits from customers 37, % 35, % 1,917 5 % Debt securities issued 1,808 4 % 1,935 4 % % Financial derivatives 2 0 % 11 0 % % Taxes payable % % % Other liabilities 91 0 % % % Accrued expenses % % % Subordinated loan % % -0 0 % Total liabilities 40, % 39, % 1,698 4 % Share capital % % - 0 % Share premium % % 6 0 % Tier 1 capital % % - 0 % Retained earnings and other reserves 4, % 4, % % Total equity 6, % 6, % % Total liabilities and equity 47, % 45, % 2,179 5 % 38

39 Top 20 shareholders SHAREHOLDER # OF SHARES 1 NORWEGIAN AIR SHUTTLE ASA 30,623,739 2 GOLDMAN SACHS & CO. NOMINEE 15,481,173 3 FOLKETRYGDFONDET 15,466,859 4 BRUMM AS 6,739,432 5 GREEN 91 AS 6,313,434 6 DANSKE BANK AS 6,248,999 7 STENSHAGEN INVEST AS 4,551,416 8 SWEDBANK ROBUR SMÅBOLAGSFOND 3,810,961 9 NORDEN BANQUE DEGROOF PETERCAM NOMINEE 3,400, SNEISUNGEN AS 2,676, MP PENSJON PK 2,646, GKB INVEST AS 2,640, KM AVIATRIX INVEST AS 2,590, BANQUE DEGROOF PETERCAM NOMINEE 2,571, TORSTEIN TVENGE 2,500, JPMORGAN CHASE BANK NOMINEE 2,246, SONGA AS 2,083, VERDIPAPIRFONDET PARETO INVESTMENT 1,634, JPMORGAN CHASE BANK NOMINEE 1,630, DIRECTMARKETING INVEST AS 1,500,000 Top ,357,315 Total 186,751,856 Management holds 1.4% of shares outstanding As of August 13,

40 Contact details Pål Svenkerud CFO Mobile: (+47)

41 41