Nordax Bank. With a vision to become a Leading Niche Bank in Northern Europe Q3 REPORT 2017 OCTOBER 25 JACOB LUNDBLAD CEO & LENNART ERLANDSON CFO

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1 Nordax Bank With a vision to become a Leading Niche Bank in Northern Europe REPORT OCTOBER 25 JACOB LUNDBLAD CEO & LENNART ERLANDSON CFO

2 Setting the future agenda CORE OPERATIONS BUSINESS DEVELOPMENT EFFICIENCY Digitalisation - On-boarding - Customer experience Increased focus on online sourcing Brand awareness Analysis to be done to selectively widen scope - Products - Geographies - Acquisitions Preparations for additional lending product within mortgage market Critical success factor Scaling up efforts in areas we control - Funding, Marketing and Opex Efficiency gains to be turned into improving competitive position 2

3 Key financial indicators 9% GROWTH in local currency 19 % RETURN ON EQUITY Finland main driver of growth Germany stable high growth rate Sweden solid development Y/Y Norway stable lending book Efficiency key to improvement Strong capital position impacts RoE Satisfied with overall growth rate given stand-still in Norway 3

4 Highlights Customer SERVICE IMPROVEMENTS Ranked as no. 3 in customer service survey in financial industry (14th place in 2015) Launched online-platform in Sweden and Norway Digital application process to be launched in Q4 Funding LEVERAGING PLATFORM 2 Bn NOK ABS issued early October - lowered funding cost Decreased need for liquidity, lowered deposit rates as a consequence Diversified funding structure - focus on trimming efficiency in structure Organisation STRENGTHENED AND FOCUSED Strengthened management team Business development function established 4

5 Financial performance vs UNDERLYING PERFORMANCE % Reported operating profit Adjustment non recurring items 0 0 Adjustment amoritzation intangibles 3 3 Adjustment FX gain/loss Adjusted operating profit REPORTED FIGURES % Net interest income Other income Total income Expenses Profit before credit losses Credit Losses Operating profit

6 Solid financial performance YTD UNDERLYING PERFORMANCE YTD % Reported operating profit Adjustment non recurring items 0-13 Adjustment amoritzation intangibles 9 10 Adjustment FX gain/loss 9-70 Adjusted operating profit REPORTED FIGURES YTD % Net interest income Other income 1 78 Total income Expenses Profit before credit losses Credit Losses Operating profit % (27.7%) 1.5% (1.4%) 14.9% (13.9%) 24.2% (23.8%) Adj. C/I ratio Credit loss level CET1 ratio Adj. RoTE 6

7 Solid portfolio growth LOAN PORTFOLIO, Bn SEK NEW LENDING VOLUMES, MSEK KEY TAKEAWAYS Portfolio growth of 9% in LCY (7% in SEK) Y/Y Portfolio growth 2% in LCY (3% in SEK) compared to Q2 All-time high level for new lending in in Finland and Germany. Slower growth in Sweden in the quarter. Norway stable. Marketing efficiency improving NIM 9.1 % YTD (9.2% YTD ) Q4 Q1 Q2 7

8 Sweden - solid growth Y/Y, lower growth Q/Q NEW LENDING, MSEK TOTAL LENDING, MSEK KEY TAKEAWAYS New lending increased 11% YTD Portfolio growth 11% Y/Y Portfolio growth 0.9% since Q2 Stable NIM 8.7% YTD (8.7% YTD ) Solid credit risk - CoR 1.4% YTD (1.2%) ,272 4,419 4,558 4,679 4,722 Q4 Q1 Q2 Q4 Q1 Q2 8

9 Norway - stable portfolio NEW LENDING, MNOK TOTAL LENDING, MNOK KEY TAKEAWAYS Lower new lending since tightening of credit underwriting Q4 Portfolio growth 1% in NOK Y/Y Stable portfolio since Q2 NIM 8.9% YTD (9.1%) CoR 1.7% YTD (1.5%) ,852 4,923 4,903 4,880 4, Q4 Q1 Q2 Q4 Q1 Q2 9

10 Finland - consistently high growth rate NEW LENDING, MEUR TOTAL LENDING, MEUR KEY TAKEAWAYS Increased new lending 53% in EUR compared to YTD New lending at all time high level in Portfolio growth in EUR 21% Y/Y Portfolio growth 7% in EUR since Q2 NIM 10.3% YTD (10.7%) Strong credit risk performance, CoR 0.5% YTD (1.2%) Q4 Q1 Q2 Q4 Q1 Q2 10

11 Germany - stable growth rate NEW LENDING, MEUR TOTAL LENDING, MEUR KEY TAKEAWAYS Improved new lending, increased 31% in EUR compared to All time high level new lending in Portfolio growth 29% Y/Y in EUR Portfolio growth 7% since Q2 in EUR NIM 9.2% YTD (9.0%) CoR 4.2% YTD (3.1%), stable performance, positively affected by changed provisioning level Q4 Q1 Q2 Q4 Q1 Q2 11

12 Strong capitalisation creates opportunities RISK EXPOSURE AMOUNT CORE TIER 1 CAPITAL KEY TAKEAWAYS TOTAL: MSEK TOTAL: MSEK 1 Review of capital deployment to ensure capital efficiency Current 14.9% CET1 ratio well above 12.0% target Above 12% 355 Approximately 200 MSEK deployed outside core operations for which strategy will be re-evaluated during Q4; NPL BOOK 913 FX HEDGE FX hedge NPL book NPL book that could provide additional hidden value above carrying value FX hedge creates volatility in P&L (but lowers volatility on capital ratios) CORE OPERATIONS 12% Core operations IFRS 9 remaining uncertainty but strong capital position with potential improvements from initiatives above Total capital ratio at 16.9% 1 Current capital net of 124 MSEK accrued dividend 12

13 Efficiency will drive growth and RoE KEY TAKEAWAYS Efficiency key to competive offering and services Digital agenda picking up speed EFFICIENCY DRIVES GROWTH CUSTOMER FOCUS STRONG CAPITAL POSITION Widening of product offering Strong capital and liquidity position creates flexibility 13

14 Appendix With a vision to become a Leading Niche Bank in Northern Europe 14 14

15 Provides large personal loans and savings to financially stable individuals Established in 2003 with a centralized platform out of Stockholm Data-driven and scientific approach to credit underwriting and marketing Target customers through 20 sourcing channels in 4 geographies Highly diversified funding 15

16 Focus on direct marketing Share of new sales 52% 20% 23% 5% DIRECT MARKETING REPEAT SALES BROKERS ONLINE AND ADVERTISING (Direct Mail, Unaddressed DM, Cooperation Partners) 16

17 Clear product utility LARGE LOANS LONG RELATIONSHIP AFFORDABLE FLEXIBLE Average loan: ~ SEK 156,000 Typical use: Consolidation/Consumption Up to 15 years pay back time and all loans are amortizing annuity loans Typical monthly payment ~ SEK 2,700 Possible to borrow more and pay back at any time without extra costs 17 17

18 Lending portfolio end of In total 13.5 bn SEK growth in local currency of 9% Y/Y SWEDEN NORWAY FINLAND GERMANY 11% 1% 21% 29% Growth LCY Growth LCY Growth LCY Growth LCY 4,272 4,722 5,192 5,023 2,201 2,

19 Diversified Funding SIMPLIFIED BALANCE SHEET 16.7Bn SEK DEPOSIT MIX STRENGTHS Liquidity Reserve Diversified Loan Portfolio 50% Deposits Bank WH EUR 32% SEK 40% Scalable Well-matched ALM (currency, duration, interest rate risk) 32% ABS & Bonds Tier 2 bonds Equity NOK 28% Strong liquidity position ASSETS LIABILITIES STRONG FUNDING AND LIQUIDITY POSITION GROUP CAPITALISATION, % On-balance sheet ABS Bank warehouse facilities Senior unsecured bonds Retail deposits 12.6 CET1 ratio 14.0 CET1 ratio 14.9 CET1 ratio SEK NOK EUR

20 Solid balance sheet BALANCE SHEET KEY TAKEAWAYS Other assets 1 Bonds Lending to credit institutions 59 1,548 1,404 Match duration of assets and liabilities to mitigate liquidity risk. Diversified funding key. 8,288 Deposits from customers 178 Other liabilities 2 Lending to the general public 13,460 1,591 Issued securities 4,217 Liabilities to credit institutions 248 Subordinated debt 1,949 Tangible equity ASSETS LIABILITIES 1 Other assets includes 7 MSEK tangible assets, 19 MSEK prepaid expenses and accrued income and 33 MSEK other assets 2 Other liabilities includes 55 MSEK current tax liability, 30 MSEK deferred tax liability, 62 MSEK accrued expenses and deferred income and 31 MSEK other liabilities 20

21 Resilient Performance Through the Cycle PROFITABILITY AND CAPITAL GENERATION HIGH LOSS ABSORPTION CAPACITY, % KEY TAKEAWAYS Tangible equity, MSEK Operating profit, MSEK 510* Credit loss level % Model proved 2008/09 Strong capital generation Resilient model and earnings in distressed times * 358* 275* 421 P&L breakeven 6.2 Flexible business model with ability to control origination Controlled credit loss level due to sophisticated and conservative underwriting ** *** * adjusted for one-offs, FX gains/losses and transaction intangibles amortisation ** Decrease in 2012 due to change in legal entity 2015 YTD Cyclical peak Breakeven *** Excluding Denmark. With Denmark 3.6% 21

22 Senior Management Team JACOB LUNDBLAD CEO With Nordax since 2004 Previous experience: Various positions in Nordax Bank, including Head of Collections, Deputy Treasurer and Controller, and Assistant Treasurer LENNART ERLANDSON CFO With Nordax since Previous experience: CFO Skandiabanken and SEB Kort OLOF MANKERT Chief Risk Officer With Nordax since 2013 Previous experience includes legal counsel at Nordax and LF Bank. Previous position at Nordax - Chief Compliance Officer. KRISTINA THAM NORDLIND Chief Legal Counsel With Nordax since 2007 Previous experience: More than 12 years experience in the financial sector as legal counsel at SBAB and advisor in foreign trade at Swedish office in CIC CHRISTINE AHLM Credit Risk Manager With Nordax since 2004 Previous experience: More than 19 years in the consumer finance sector through positions as Head of Analytics at Lindorff Decision and several risk management positions at GE Capital Bank Nordic MALIN JÖNSSON Operations Director With Nordax since Previous experience includes 15 years of experience in the financial and payment sector. RAGNHILD TELL CIO With Nordax since. 17 years of experience in IT, digital and business development, mainly within insurance industry. MALIN FRICK HR Director With Nordax since 2012 Previous experience includes HR positions at Nordax PER ALINDER Marketing director With Nordax since 2006 Previous experience includes several positions within Nordax 22

23 Board of Directors ARNE BERNROTH SYNNÖVE TRYGG MORTEN FALCH CHRISTIAN BECK Non-executive chairman Appointed in 2010/2015 Non-executive board member Appointed in 2015 Executive board member Appointed in 2004 Non-executive board member Appointed in 2003 Previous experience: Senior management positions in Nordea and Skandia Previous experience: CEO at SEB Kort Previous experience: Co-founder of Nordax, senior management positions in GE Capital and Citigroup Previous experience: Multiple board assignments including Chairman Espresso House and Banqsoft AS KATARINA BONDE JENNY ROSBERG ANDREW RICH SUSANNE HANNESTAD Non-executive board member Appointed in 2015 Non-executive board member Appointed in Non-executive board member Appointed in 2010 Non-executive board member Appointed in Previous experience: Senior management positions in the IT-industry. Multiple board assignments Previous experience: Senior management positions in Nasdaq, Kreab Gavin Anderson, Erik Penser Bankaktiebolag and Skandia Previous experience: Multiple board assignments Previous experience: Senior management positions in Nordea, Nets etc. Multiple board assignments 23

24 Ownership structure* AS OF SEPTEMBER Carnegie funds 9.7% of the capital 2. SEB Investment management* 9.2% 3. Lannebo funds* 7.8% 4. Handelsbanken funds* 7.7% 5. Allianz Global Investors 6.2% 6. Öresund Investment AB 5.8% 7. Swedbank Robur funds 5.7% 8. Vanguard 3.3% 9. TIAA-Teachers Advisors 2.6% 10. Morten Falch 2.4% Foreign Owners: 31.3% Swedish Owners: 68.7% * After Sep 30 Nordic Capital announced that they had acquired 9.96% of the capital. A call option entitles them to acquire an additional 5.04% of the shares. By that Nordic Capital is the largest shareholder in Nordax. After Sep 30 notifications were also announced that: Sampo increased ownership to 7.64% SEB IM decreased ownership to 4.73% Lannebo funds decreased ownership to 3.69% Swedbank Robur decreased ownership to 1.69% Management, Founders and Board members own approximately 9% together Source: Holdings of Modular Finance AB. Data compiled from Euroclear, Morningstar and the SFSA, among others

25 Financial Targets RETURN DIVIDEND CAPITAL Maintaining a sustainable return on average net loans through the cycle, on a 12-month rolling basis, of above 3 per cent Maintaining a pay-out ratio of approximately 40 per cent of profit after tax for the year. The dividend target is based on current regulatory capital requirements, and any future changes regarding regulatory capital requirements could affect Nordax s dividend target Maintaining a CET 1 capital ratio above 12 per cent and a total capital ratio above 14 per cent under the current capital requirements. Nordax targets maintaining a buffer of at least 1.5 percentage points above its CET 1 capital ratio and total capital ratio requirements 25

26 Nordax evolution CREATION OF NORDAX INITIAL GROWTH PHASE PROTECTING VALUE RESTART SUSTAINED GROWTH AND EXPANSION SHAREHOLDER VALUE Management and Palamon Focus on collection Restart lending Vision Capital Bank licence Listed on Nasdaq Global Compact Hej Hei Hej Moi Farvel Hallo Sweden Norway Denmark Finland Denmark Germany Warehouse facilities and ABS funding program Deposit platform Senior unsecured bond programe 26

27 Income statement GROUP Q2 Q1- Q1- All amounts in MSEK Note Operating income Interest income Interest expense Total net interest income Commission income Net profit from financial transactions Total operating income Operating expenses General administrative expenses Depreciation, amortisation and impairment of property, plant and equipment and intangible assets Other operating expenses Non-recurring items Total operating expenses Profit before credit losses Net credit losses 2, Operating profit Tax on profit for the period NET PROFIT FOR THE PERIOD/COMPREHENSIVE INCOME Attributable to: The Parent Company's shareholders Non-controlling interest Earnings per share, SEK 1,08 0,93 1,18 2,81 3,03 Diluted earnings per share, SEK 1,08 0,93 1,18 2,81 3,03 Average number of shares

28 Bridge statutory to adjusted accounts BRIDGE STATUTORY TO ADJUSTED ACCOUNTS Q2 Q1- Q1- All amounts in MSEK Total operating income statutory accounts Foreign exchange gain/loss Adjusted total operating income Total operating expenses statutory accounts Non-recurring items Amortization of acquired intangible assets Adjusted total operating expenses Marketing expenses Adjusted total operating expenses excluding marketing costs Net credit losses (as reported) Operating profit statutory accounts Non-recurring items Foreign exchange gain/loss Amortization of acquired intangible assets Adjusted operating profit Tangible equity Shareholders equity Intangible assets Adjusted return on tangible equity (last 12 months) 24,2% 25,8% 23,8% 24,2% 23,8% 28

29 Nordax customers SWEDEN NORWAY FINLAND GERMANY 30,000 SEK NORDAX AVERAGE CUSTOMER MONTHLY INCOME (National average 27,000) 39,000 NOK NORDAX AVERAGE CUSTOMER MONTHLY INCOME (National average 43,000) 3,900 EUR NORDAX AVERAGE CUSTOMER MONTHLY INCOME (National average 3,300) 3,700 EUR NORDAX AVERAGE (CO-APPLICANT) CUSTOMER MONTHLY INCOME (National average 3,100) 84% ARE OVER 40 YEARS 78% ARE OVER 40 YEARS 92% ARE OVER 40 YEARS 86% ARE OVER 40 YEARS 53% HOMEOWNERS 76% HOMEOWNERS 88% HOMEOWNERS 40% HOMEOWNERS 29 29