Financial Markets and Institutions. Case Aktia - JUSSI LAITINEN, CEO

Transcription

1 Financial Markets and Institutions Case Aktia - JUSSI LAITINEN, CEO

2 CEO Jussi Laitinen, Aktia Bank plc Curriculum Vitae Personal information: Born 1956 in Helsinki, Finland M.Sc. (Econ), from Hanken School of Economics, Helsinki 1978 (-83) Language skills: - Finnish, mother tongue - Swedish, fluent - English, fluent - French, lousy Present employment, CEO at Aktia Bank Plc starting in Finishing this job, latest by 3/2017 2

3 My presentation : - I will pretend that you are equity investors, whom I am meeting for the first time and my purpose is to put Aktia Bank Plc on your radarscreen. That means that, being a Finnish mid-cap company = European microcap company, liquidity in our share doesn t allow any large investor to take a short term approach in owning our share! You have to be patient both buying and selling our share. 3

4 My presentation I will also try to explain some terms which are very specific to the financial industry which mean a lot to people who either work in our industry or analyse it. 4

5 Aktia in numbers 4th biggest retail Bank in Finland Banking, Insurance and Asset Mgmt services 900 employees, 45 branches 42,000 shareholders 300,000 customers 20,000 SMEs 130,000 Netbank and Mobile bank users Aktia creditand prepaid cards 5

6 Overview Strongly capitalised (CET1: 19.7%), retail bank with a solid liquidity and funding position Focus on households, SMEs and institutional investors in growth areas of Finland Balance sheet EUR 9,7bn of which mortgages EUR 4,7bn Prudent lending policy and low loan losses Market cap ~EUR 580m, 42,000 shareholders Credit ratings Moody's: A3 / P-2, pos S&P: A- / A-2, neg Covered Bonds: Aaa 6

7 Aktia was formed in 1991 Sjundeå Sparbank Helsingfors Sparbank Hangö Sparbank Sibbo Sparbank Ingå Sparbank Bromarf Sparbank Karis-Pojo Sparbank Tenala Sparbank 7

8 Aktia s history Helsinki Savings Bank is founded Helsinki Savings Banks and other savings banks found the first Mutual Fund company in Finland (Sp- Rahasto) : Aktia Savings Bank is founded through a merger of 8 Savings Banks 1992: Aktia Mutual Fund company is founded Vaasan Savings Bank and Porvoon Savings Banks are merged into Aktia 1993: Aktia acquires Sp-Rahasto Ltd 1995: First larger equity issue 1996: Aktia becomes central financial Credit Institute to Savings Banks and POP Banks (1997) 1997: Aktia Mutual Fund Ltd is founded Net bank is launched : Aktia decides to remain independent and co-operation with Pohjola is ended Aktia Real Estate Mortgage Bank is founded 2005: Aktia Real Estate Agency and Aktia Card & Finance are founded 2007: Aktia acquires Veritas Life Insurance Ltd 2008: Aktia acquires Kaupthing s Asset Mgmt. business in Finland 2009: Veritas Mutual Non-life Insurance company is merged into Aktia Aktia is listed on the Nasdaq OMX Helsinki Stock Exchange : Aktia sells 66% of Non-life Insurance Co to Folksam Non-life and Pension Insurance Co Veritas 2013: Aktia announces ending services as Central Financial Credit Institute and the build-up of a new core banking system starts 2014: Aktia acquires the Savings Banks Vöyrin Säästöpankki and Saaristosäästöpankki 2014: Aktia Invest is merged into Aktia Asset Mgmt 2015 Ends services as Central Financial Credit institute Aktia Bank is granted permission to implement IRBA for household exposures 8

9 Corporate governance ANNUAL GENERAL MEETING Nomination committee 3 largest shareholders + Chairman of Supervisory Board BOARD OF SUPERVISORS 29 members Board of Supervisors presiding officers 7 members BOARD OF DIRECTORS INTERNAL AUDIT RISK COMMITTEE AUDIT COMMITTEE COMPENSATION AND CORP GOV COMMITTEE EXTERNAL AUDIT CEO EXECUTIVE COMMITTEE 9

10 Share capital and ownership 31 July 2016 The 20 largest shareholders Series A shares Series R shares Shares total Shares % Votes, % Stiftelsen Tre Smeder 1,291,925 4,606,804 5,898, Veritas Pension Insurance Company Ltd. 3,627,469 2,154,397 5,781, Svenska litteratursällskapet i Finland r.f. 4,864, ,229 5,653, Sampo Plc (Mandatum Life, Sampo plc) 3,814,057-3,814, Oy Hammaren & Co AB 1,905, ,000 2,855, Åbo Akademi University Foundation 1,595, ,000 2,346, Aktia foundation in Porvoo 1,312, ,348 1,968, Life Annuity Institution Hereditas - 1,646,106 1,646, Aktia foundation in Vaasa 978, ,262 1,525, Nordea (Nordea Life, Fennia fund, Nordea Bank plc) 1,361,946-1,361, Aktia foundation Espoo-Kauniainen - 1,338,708 1,338, Savings Bank foundation in Kirkkonummi 844, ,350 1,302, Aktia foundation in Vantaa 28,541 1,222,000 1,250, Savings Bank foundation in Karis-Pojo 787, ,675 1,181, Föreningen Konstsamfundet rf 1,176,173-1,176, Varma Mutual Pension Insurance Company 1,175,000-1,175, Savings Bank foundation in Inkoo 412, , , Savings Bank foundation in Sipoo 464, , , Vöyri Savings Banks Aktia foundation 615,460 10, , Aktia Savings Bank foundation in Maalahti 361, , , The 20 largest shareholders 26,615,855 16,285,732 42,901, Other 20,090,868 3,586,356 23,677, Total 46,706,723 19,872,088 66,578,

11 Strategy - Growth 2018 Three year plan Aktia s objective is to double the annual number of new primary customers before the end of In 2016, the objective is an increase of 3,000 new customers (2015; 1,300) During 1-3/2016 new private and corporate primary customers; 735 Develop and increase range of services for SMEs Conscious aim to increase credits to corporates and to housing associations Improve offer to institutional customers to longterm, comprehensive solutions 11

12 Customer service demands have changed Single Channel Multi Channel Omni Channel 12

13 Future: Aktia + partners Customer Smart savers Needs Needs Needs Needs Needs Needs Partner s offering Needs Needs Needs Needs Needs Partner s offering Aktia s offering Aktia Business of trust Agile Light S P I L PLUG- IN PLUG- IN PLUG- IN PLUG- IN PARTN ER PLUG- IN 13

14 Interim report 1 January 30 June FINANCIAL PERFORMANCE 2 CAPITAL ADEQUACY 3 BALANCE SHEET 4 OUTLOOK AND TARGETS 14

15 1-6/2016: Challenging market early in the year Operating profit was EUR 37.0 (36.7) million. Net commission income decreased 4% to EUR 39.6 (41.3) million and NII decreased by 2% to EUR 48.7 (49.8) million. Operating expenses increased 3% to EUR 73.3 (71.5) million. Write-downs on credits and other commitments amounted to EUR -0.2 (+0.4) million. Profit amounted to EUR 29.9 (29.5) million. Earnings per share (EPS) was EUR 0.45 (0.45). CET1 was 19.7 (20.7)% Outlook 2016 (unchanged) : Aktia s operating profit for 2016 is expected to reach an approximately similar level as in

16 EUR million Operating profit for the quarter excl. Visa / / / / /

17 EUR Earnings per share 1-6/ excl. Visa / /2016 Earnings per share, EPS Total earnings per share 17

18 32,5 1-3/09 39,4 12,2 14,6 11,4 8,6 9,5 8,7 9,5 4-6/09 40,5 7-9/09 39, / 09 38,5 1-3/10 38,2 4-6/10 36,6 7-9/ / 10 34,2 1-3/ / / / /12 29,7 4-6/ /12 29, / 12 30,1 1-3/13 28,3 4-6/13 26,9 7-9/13 27, / 13 25,4 1-3/14 25,9 4-6/14 26,1 7-9/ / 14 25,5 1-3/15 24,3 4-6/15 23,8 7-9/15 23, / 15 24,6 1-3/16 24,1 4-6/16 Net interest income (NII) EUR million 7,9 8,3 7,7 7,3 7, , ,6 7,4 6,2 5,3 5,8 5,3 5, ,1 2,4 1,8 0,4 0,8-0,2 5,8 11,3 18,7 12,9 14,8 15,1 15,9 14, , , ,6 14,8 12,8 13, , ,9 15, ,1 10, ,1 10,8 9,4 9,1 8, ,8 7,8 7,7 8, , , ,6 11,2 10,2 11,5 12, ,6 14,1 14,3 14,4 14,815,3 Borrowing and lending Hedging of interest rate risk Other 18

19 EUR million Commission income decreased 4% Borrowing Off-balance sheet guarantees and other commitments Other commission income 1 % 1 % 0 % 6 % 2 % Legal services 13 % Insurance brokerage 48 % Lending 9 % Real Estate services 6 % Payments Cards 14 % 0 1-6/ /2016 Mutual funds, AM and brokerage 19

20 EUR million Income, increased by 18% from previous quarter +2% % % % Net interest income Net commission income Net income from life insurance Other operating income Group total 1-6/ /

21 EUR million Expenses, IT-expenses increased (EUR million) +3% % % +11% +1% Personnel 1-6/ /2015 IT expenses Depreciations Other operating Group expenses total 21

22 Aktia Group Cost-Income ratio 105,4 106, /

23 EUR million Non-performing loans more than 90 days overdue , , , ,40 % 20 0,20 0 3/ / / / 20123/ / / / 20133/ / / / 20143/ / / / 20153/ / ,00 Over 90 days overdue Percentage of stock incl commitments 23

24 Asset Management & Life Insurance Assets under Management (EUR million) Change % Aktia Fund Management 3,892 3,764 3% Aktia Asset Management 6,197 6,011 3% Aktia Life Insurance % Eliminations -4,801-4,655 3% Total 5,962 5,788 3% 24

25 Life Insurance, premiums written EUR million Interest-linked savings + pension Risk insurance Unit-linked savings + pension Unit-linked Aktia Profile / /

26 Expense ratio for life insurance, % /

27 Interim Report 1 January 30 June FINANCIAL PERFORMANCE 2 CAPITAL ADEQUACY 3 BALANCE SHEET AND OWNERS 4 OUTLOOK AND TARGETS 27

28 Capital adequacy The Financial Supervisory Authority granted Aktia Bank Group permission to apply internal risk classification (IRBA) to the calculation of capital requirement for retail exposures as per 31 March 2015 A total of 59 (58)% of the Bank Group s exposures are calculated according to the IRB approach The average risk weight for retail exposures with real estate collateral is 16% (STD 35%). The CET1 % is temporarily -1.2 percentage points lower due to Aktia REMB solution Common Equity Tier 1 % IRBA IRBA STD Tier 1 capital ratio % Capital Adequacy % Average for Finnish Banks 2015 Aktia 12/2015 Aktia 1-6/

29 Loan book (1,000 million) vs. CET 1 (%) Loan book CET1, % /2016 Basel II , Basel III 2013, CET1%

30 What are the Basel III, II and I Basel I is the round of deliberations by central bankers from around the world, and in 1988, the Basel Committee on Banking Supervision (BCBS) in Basel, Switzerland, published a set of minimum capital requirements for banks. This is also known as the 1988 Basel Accord, and was enforced by law in the Group of Ten (G-10) countries in A new set of rules known as Basel II was later developed with the intent to supersede the Basel I accords. However they were criticized by some for allowing banks to take on additional types of risk, which was considered part of the cause of the US subprime financial crisis that started in Basel III was developed in response to the financial crisis; it does not supersede either Basel I or II but focuses on different issues primarily related to the risk of a bank run

31 Basel III Capital requirements Capital elements Common Equity Tier 1 (CET1) Equity and retained earnings Additional Tier 1 (AT1) Perpetual instruments which have write-down mechanisms to absorb losses Tier 2 Other subordinated instruments with maturity Requirements O-SII Buffer 0-2 % Countercyclical Capital Buffer % = 4.5 %+ 2.5 % For more see: CET1 AT1 Tier

32 Capital requirement for credit risk Capital requirement for credit risk is based on risk weights The higher the credit risk, higher the risk weight is Basel III framework includes two alternative methods for calculating risk weights The Standardised Approach: All similar exposures have the same risk weight The Internal Ratings Based Approach: Risk weight is based on bank s internal risk estimates (EAD, PD, LGD) IRBA parameters: Exposure At Default (EAD) = Loan amount ( ) Probability of Default (PD) = How likely the counterparty will default, i.e. is not be able to pay back the loan, during the next 12 months (%) Loss Given Default (LGD) = How much losses bank suffers in case of a default (%) For more see:

33 Difference in standard method and IRB method for household exposures Customer Transaction Riskweights Standard method Advanced IRBmethod PD LGD EAD Riskweighted capital (RWA) * 8% 1 1 Capital requirement grows over time to 10,5% with Basel III. Capital requirement

34 Risk weights for mortgage loans IRBA RW is a function of PD and LGD LGD 30 % Standard RW 35 % LGD 15 % LGD 10 %

35 * 2008, 2009, 2011 * 2009 * 2009 * 2009 * 2011 Aktia Core Tier 1 before IRBA approval end of ,2 21,0 20,4 15 % 16,9 16,3 15,7 15,1 14,8 14,6 14, ,9 5 0 Swedbank POP Bankerna SHB Sparbankerna SEB Nordea OP-Pohjola Genomsnitt i Finland Core Tier 1 %, * New equity issue Aktia S-banken Ålandsbanken 35

36 * 2008, 2009, 2011 * 2009 * 2009 * 2009 * 2011 Aktia Core Tier 1 after regulatory approval of IRBA ( ) ,6 21,1 21,0 20, ,9 16,6 15,9 15,6 14,3 13, ,2 5 0 Aktia SHB POP Bankerna Swedbank Sparbankerna SEB Genomsnitt i Finland 2014 Nordea S-banken Pohjola Ålandsbanken 36

37 Aktia Life insurance Solvency ratio Solvency ratio = Solvency capital/solvency capital requirement (SCR) 23.3% 22.3% Solvency ratio according to Solvency II

38 Interest-linked insurance decreased, unit-linked increased (EUR million) / / 2016 Risk Insurer's technical provisions Unit-linked technical provisions Interest-bearing technical provisions Aktia Profile technical provisions 38

39 Solvency I and Solvency II The solvency ratio of an insurance company is the size of its capital relative to all risks it has taken Different countries all had their own regulatory rules on how much capital was needed need for harmonization in the EU Solvency I is the name given to changes to the EU's insurer solvency regime made in 2002 and implemented good first step but didn t address certain risks enough (especially interest rate risk of liabilities) need for more comprehensive rules Solvency II is an EU legislative program to be implemented in all 28 Member States, including the UK. It introduces a new, harmonized EU-wide insurance regulatory regime. The legislation replaces 14 existing EU insurance directives. Solvency II started

40 Continued convergence towards Solvency II Life Insurance Company s investment portfolio EUR 618 million ( ; EUR 609 million) Return on investments 3.6 (0.1)% Duration 4.6 (4.6) years 28.2% 13 % (13%) 0% (0%) 29 % (24%) Government and gov guaranteed bonds Covered bonds 15 % (16%) Financial sector excl. CB % (14%) 30 % (30%) Corporate bonds Real estate Alternative investments 40

41 Interim report 1 January 30 June FINANCIAL PERFORMANCE 2 CAPITAL ADEQUACY 3 BALANCE SHEET 4 OUTLOOK AND TARGETS 41

42 Balance & Equity Total Assets EUR 9,7 bn (-2%) Decline in assets due to phasing-out of Aktia REMB Lending to public EUR 6.0 bn (+2%) Growth in Aktia s own loan book of EUR +271 million since year-end Loan book stock through REMB decreased EUR -140 million Treasury s Liquidity portfolio EUR 1.9 bn Total portfolio EUR -435 million since year-end Borrowing from public EUR 4,2 bn (+8%) Despite lowered interest rates Increase mainly from corporates and institutions Bond issues EUR 2.5 bn (-17%) No issues planned for 2016 Aktia REMB Covered bonds EUR 480 million fell into maturity in June Aktia Life Insurance unit linked stock EUR 672 million (+1%) Volatile capital market and lower volumes, down in January recovery during spring Equity EUR 609 million ( : EUR 615 million) Fund at fair value; EUR 81 million (EUR 75m) Holding in Visa Inc. in Fund at fair value 42

43 Credit and deposit stocks 30 June 2016 Credits EUR 5,987 (5,856) million Deposits EUR 4,235 (3,922) million 8 % 5 % 1 % Households 7 % 1 % SME 19 % Non-profit and public organisations 86 % Housing companies 73 % 43

44 Loan book development ,833 1,003 4,423 1,290 4,771 1,915 1,912 1,599 1,649 1, ,993 5,149 5,289 5,153 5,353 5,043 5, / 2016 Loans brokered by Aktia Loans brokered by POP and Savings Banks 44

45 Equity per share (NAV) EUR/share

46 Net dividend Alternative strategy 30% 25% 28% 26% 24% 20% 15% 16% 14% 14% 10% 10% 7% 5% 2% 0% Handelsbanken Aktia Nordea Swedbank DNB SEB Ålandsbanken Sydbank Danske 46

47 Interim report 1 January - 30 June FINANCIAL PERFORMANCE 2 CAPITAL ADEQUACY 3 BALANCE SHEET 4 OUTLOOK AND TARGETS 47

48 Cooperation between Aktia and R-kioski continues and expands The cooperation started in December 2015 with a Christmas campaign of PrePaid cards and the R-kioski convenience stores sold four times as many cards as Aktia s other distribution channels The cooperations was expanded in June, when invoice payment services were transferred to Aktia Consumers may pay bills with bar code in the R-kioski convenience stores against a fee of EUR 3 The R-kioski is an alternative distribution channel for Aktia s standardised products and services also in the future 48

49 Aktia Finance Ltd started operations 1 July 2016 Aktia acquired Elisa Rahoitus Oy (Elisa Lompakko) 1 July 2016, and Aktia Finance Ltd was formed Aktia Finance Ltd will offer further improved mobile services to Aktia s customers in the future Elisa Lompakko and Aktia s card app will be combined into a new application Aktia Wallet The acquisition provides Aktia with new customer contacts Present Elisa Lompakko users Cooperation with the student card organisation Frank Oy; students may apply for both the student card and Aktia s MasterCard Gold card 49

50 Financial objectives 2018 Growth Double the number of new customers Profitability ROE 9% Cost-to-income ratio down by -10% Capital adequacy Tier 1 capital ratio 15% Dividend pay-outs Dividend pay-out 50 % of profits for the year 50

51 Outcome of financial objectives 1-6/ / 2015 Change % Objectives for 2018 C/I ratio % -10% ROE % % 9 % p.a. CET1 % percentage points 15% 51

52 Outlook for 2016 (unchanged) The continued low interest rates have a negative impact on Aktia s net interest income, and the increased uncertainty on the capital markets makes it challenging to reach the same level of growth in commission income as in Write-downs on credits are expected to remain low in Aktia s operating profit for 2016 is expected to reach an approximately similar level as in

53 CEO Jussi Laitinen, Aktia Bank plc Curriculum Vitae Personal information: Born 1956 in Helsinki, Finland Graduated M.Sc. (Econ), from Hanken School of Economics, Helsinki 1978 and 1983 Language skills: - Finnish, mother tongue - Swedish, fluent - English, fluent - French, lousy Present employment, CEO at Aktia Bank Plc starting in 2008, ending 3/2017 by latest 53

54 Curriculum Vitae Jussi Laitinen Work Experience before Aktia: Mutual Pension Insurance Company Ilmarinen Chief Investment Officer Nordea Bank Ltd (former Merita and Union Bank of Finland) Executive Vice President, responsible for several divisions within the bank, lastly Head of Large Corporate Division,Finland Spontel Ltd Chief Financial Officer Pk Banken Finland Ltd Executive Vice President Wärtsilä Ltd Cash Manager Postipankki UK Ltd, London Foreign Exchange Trader Postipankki Helsinki Foreign Exchange Trader 54

55 We see a person in every customer