Aldermore Group PLC. Investor presentation. Full Year Results 2015

Transcription

1 Aldermore Group PLC Investor presentation Full Year Results 2015

2 A year on from IPO. 1 Delivered another excellent set of financial results 2 Generating attractive and sustainable returns 3 Strong balance sheet and capital position 4 Benefit from a diversified lending, funding and distribution model 5 Confident of driving continued significant growth 1

3 2015: Another year of strong financial delivery Underlying profit before tax (1) up by 75% to 99m Underlying profit before tax ( m) (1) Net interest margin increased to 3.6% Cost/ income ratio (1) improved by 9% to 51% Cost of risk of 19bps reflects strong discipline and benign credit environment Net interest margin Underlying return on equity (1)(2) of 20.6% 3.4% 3.6% Net loans up by 28% to 6.1bn Origination of 2.6bn; up 10% on prior year Cost income ratio (%) (1) 71,000 lending customers, up 27% in year Strong capital position Fully loaded CRD IV total capital ratio of 15.1% Fully loaded CRD IV CET1 ratio of 11.8% Cost of risk (bps) (1) Excludes IPO costs of 4.1m pre-tax ( 3.4m post-tax) in 2015 and 6.0m pre-tax ( 4.6m post-tax) in 2014 (2) After AT1 coupon payment in April 2015 of 3.5m pre-tax ( 2.8m post-tax) 2

4 Driving continued double digit lending growth in 2015 Asset Finance grew by 29% to 1.3bn Net loans to customers ( bn) Strong origination of 893m; up by 21% Customer numbers up by 30% to c42, % 6.1 SME Commercial Mortgages up by 50% to 0.8bn Excellent origination of 428m; up by 42% % Direct grew by over 200%; now 26% of origination 1.0 Buy-to-Let grew by 18% to 2.4bn % Customers numbers up by 15% to c16, Robust origination of 673m; down 7% % Direct grew by 10% and is now 19% of origination % Residential Mortgages up by 42% to 1.4bn % Origination of 582m up by 4% 40% increase in customers to c10,000 Asset Finance SME Commercial Mortgages Buy-to-Let Invoice Finance Residential Mortgages 3

5 Significant opportunities for growth in focus markets Lending market in the UK is estimated to be around 530bn Consumer car finance 15% 28bn Credit cards Mortgages ( 268bn) 2015 market growth (%) 12% 9% 6% 3% Soft assets 20% Asset Finance ( 28bn) Personal loans 20bn 20bn Broker 5bn Direct 14bn Sales 9bn Broker 5bn Hard assets 80% 53bn 111bn Direct 30% Commercial Mortgages 48bn Buy-to-Let 38bn Remortgages 55bn Other 8bn First time buyers 47bn Homemovers 72bn Intermediated 70% Invoice Finance 0% Other consumer finance Aldermore s estimated market share 2015 market size ( bn) Source: Council of Mortgage Lenders (CML), British Bankers Association (BBA), Finance and Leasing Association (FLA), Asset Based Finance Association (ABFA), DeMontfort University. Aldermore estimates. Other consumer finance includes second charge mortgages, personal loans and credit cards (non-bba members), retail store and online credit, Point of sale (source: FLA). Invoice Finance figure is based on loan advances as at the end of September Overdrafts excluded. Mortgage distribution split excludes buy-to-let and commercial mortgages. For illustration purposes only, not to scale. 4

6 Aldermore is a diversified, specialist lender. Focused on large, growing customer segments which are under- or poorly served by the wider market Customer loans Asset Finance Targeted human underwriting facilitated by modern, legacy-free systems and combined with a rigorous focus on credit risk management 23% 6.1bn (1) 22% 3% Invoice Finance SME Commercial Mortgages Diversified lending portfolio provides multiple avenues to drive continued significant growth 39% 13% Buy-to-Let Residential Mortgages Dynamic online deposit franchise anchors Funding base diversified funding base 6% 3% 1% 2% Retail deposits Expanding distribution; leveraging strong intermediary relationships as well as growing direct capability 22% SME deposits Corporate deposits Delivering award-winning customer service 6.4bn (1) FLS RMBS Leveraging operating platform successfully to drive 66% Other wholesale efficiency and innovation (1) As at 31 December

7 Confident of sustained momentum across the business Diversified lending portfolio provides multiple growth levers within our current prudent risk appetite Net loans to customers ( bn) 1.3bn 6.1 Small shares of addressable markets 1.4bn 4.8 Continue to extend distribution reach and mix 1.3bn 3.4 Buy-to-Let 23bn First time buyers 33bn Ongoing investment in technology supports customer experience, innovation and broker service 0.9bn Proven ability to leverage our specialist underwriting capability into adjacent market segments

8 Asset Finance: a breadth of industry and asset expertise Portfolio split by industry (%) 18% 18% 2% 5% 1.3bn (1) 13% 8% 6% 10% Logistics Manufacturing Construction Plant hire Wholesale and retail trade Financial intermediation Agriculture Community activities Specialist and experienced credit underwriters remain at the core of our growing business Modern technology enables the team to focus their time on the key credit issues Pro-active deal maker; able to tackle complex transactions 12% 8% Utilities Other Portfolio split by asset type (%) 6% 2% 7% Plant & Machinery Industry-leading reputation for expert and responsive service underpins strong franchise Treat our brokers as an extension of our team 10% 34% Commercial Vehicles Professional Loans Consistent decisions provide clarity of appetite 1.3bn (1) Cars - used Credit approvals made in hours and not weeks 11% Cars - new IT equipment Rapid application to pay-out time Other 30% (1) As at 31 December

9 Asset Finance: Clear strategy for delivering continued growth Aldermore Asset Finance net loans ( bn) Pre-eminent Asset Finance lender for UK brokers Maintain market-leading share of growing broker-distributed market Continued investment and relentless focus on flexible and responsive service Training the next generation of UK brokers Asset finance market origination by channel ( bn) (1)(2) Direct Sales Broker Continued push into soft assets Deepening relationships with specialist brokers Further penetration of sales channel Leverage Dealer Services proposition into key industry segments of agriculture, construction, transportation and materials handling Target manufacturers with Stocking facility (1) Source: Finance and Leasing Association (FLA). Total market originations for 2015 excluding high value (deals over 20m). (2) Sales finance includes origination where the finance company has an indirect relationship with the customer through the manufacturer, dealer, supplier or distributor of the equipment and includes vendor programmes. 8

10 Award-winning, innovative and integrated Mortgages business SME Commercial Mortgages Comprehensive proposition 14% 8% 5% 3% 0.8bn 31% Shop Property development Office Warehouse One-stop shop; SME Commercial range spans property development to purchase and refinancing Seamless buy-to-let offering supported by dedicated, expert teams Residential mortgages target otherwise under- or Residential poorly served prime credit worthy customers 17% 9% 22% Other Industrial Unit Modern, legacy-free systems support targeted manual and dedicated expert underwriting Make speedy and consistent lending decisions Buy-to-Let and Residential Mortgages Able to underwrite creditworthy business that the 5% 5% 13% 6% high street banks can t 8% 35% 8% 21% Systems also support best-in-class service 9% 2.4bn 10% 1.4bn 9% 57% 13% 16% 9% 20% 13% Greater London South East Midlands East Anglia North West South West Yorkshire Other Portal provides decision in principle in 90 seconds and enables online application tracking by brokers Allow brokers direct access to underwriters Differentiated proposition will continue to deliver significant, profitable and diversified growth xbn Balance as at 31 December

11 Buy-to-Let remains a significant growth opportunity Trends in UK housing tenure (%) (1) Buy-to-let will remain a key part of the UK market Around 20% of UK households are currently living in privately rented accommodation Expected to grow by 1.1m households in 5 years Prudent underwriting approach Mortgaged Owned Outright Social Rental Private Rental UK Buy-to-Let market origination by purpose (%) (2) Average LTV at origination is c70% Minimum DSCR of 150%; stress for 2% increase in interest rates plus 1% for voids/ maintenance 100% 80% Driving continued growth at attractive margins 60% Expect overall buy-to-let market to remain resilient 40% 20% 0% 57% Remortgages Purchases Other c70% of our portfolio relates to remortgages Span all landlord types and simple to complex properties so responsive to shifting market dynamics (1) Source: English housing survey (2) Source: Council of Mortgage Lenders (CML) 10

12 Diversified mortgage strategy levers multiple growth options Aldermore Mortgages net loans ( bn) Build on existing Mortgage-wide capability Continue to capitalise on market-leading expertise and service levels for brokers Ongoing investment in technology; upgrading our mortgage operating platforms SME Commercial Buy-to-Let Residential UK Mortgage market origination ( bn) (1) SME Commercial Mortgages growth supported by ongoing office/retail construction activity Focus on commercial investment in multi-let properties rather than single high profile anchor tenants Support experienced regional property developers where planning consent already obtained Buy-to-let demand expected to remain resilient Offering responsive to changing demand dynamics Commercial Buy-to-Let Residential Government initiatives promote home ownership Significant opportunity to support first time buyers Invested in in-house advisors to drive Direct (1) Source: Council of Mortgage Lenders (CML), DeMontfort University, Aldermore estimates. 11

13 Confident of delivering continued profitable growth Another year of strong delivery Underlying profit before tax ( m) (1) Underlying profit before tax up by 75% to 99m 99 Net lending grew by 28% to 6.1bn Maintained diversified funding base, prudent risk appetite and strong capital position Clear and differentiated strategy leveraging Specialist and experienced credit underwriters supported by modern technology Our award-winning reputation for expert and responsive service Positive outlook Expect to deliver continued nominal net loan growth in line with recent run rates Confident in our ability to generate strong, sustainable returns for shareholders 2013 Net loans to customers ( bn) (1) Excludes IPO costs of 4.1m pre-tax ( 3.4m post-tax) in 2015 and 6.0m pre-tax ( 4.6m post-tax) in

14 Continued balance sheet momentum 31 December 31 December ( m) Growth % Key balance sheet items Net loans 1 6,145 4,801 28% Cash and investments % Intangible assets % Fixed and other assets (1) (2%) Total assets 7,009 5,565 26% Customer deposits (2) 2 5,742 4,459 29% Wholesale funding % Other liabilities (9%) Total liabilities 6,475 5,186 25% Ordinary shareholders' equity % AT1 capital Total equity % Total liabilities and equity 7,009 5,565 26% Key ratios Loans to deposits ratio 2 107% 108% Net loan growth ( bn) 1 1,344 1,427 Fully loaded CRD IV RWAs (3) 3,693 2,702 Fully loaded CRD IV CET1 capital Fully loaded CRD IV CET1 ratio (4) 11.8% 10.4% Leverage ratio 7.3% 6.3% Commentary 1. 1 Net loan growth of 28% to 6.1bn Net loan growth of 1.3bn represents a strong performance Diverse portfolio with significant double digit growth across all major lending lines 1. 2 Funding remains deposit-led Deposits up 29% to 5.7bn Loans to deposits ratio of 107% 1. 3 Successfully listed on LSE in March 2015 Raised 75m of gross primary equity Note: Numbers may not exactly sum / reconcile due to rounding. (1) Includes derivatives held for risk management, fair value adjustments for portfolio hedged risk, other assets, prepayments and accrued income, deferred tax and property, plant and equipment. (2) Includes corporate deposits. (3) RWA = Risk weighted assets. (4) CET1 ratio = Common equity tier 1 capital / RWAs 13

15 drives a significant improvement in profitability ( m) Growth % Key P&L items Interest income % Interest expense (102) (88) (16%) Net interest income % Net fee and other operating income (3) (2%) Net derivatives income and gains on disposal of debt securities (4) - (1) - Operating income % 3 Operating expenses (116) (99) (17%) IPO related costs (4) (6) 32% Profit before impairment losses % Impairment losses 4 (10) (10) (8%) Profit before tax % Tax 5 (16) (12) (38%) Profit after tax % Underlying profit before tax (1) % Key ratios Net interest margin 3.6% 3.4% Cost income ratio (1) 3 51% 60% Cost of risk 4 19 bps 23 bps Underlying return on equity (1)(2) % 15.1% Earnings per share 22.7 p 13.0 p Commentary 1. 1 Net interest income up by 42% to 199m Loan growth drives 32% increase in interest income to 300m Funding costs up by only 16% as we benefit from ongoing diversification 2. 2 Net fee and other income stable at 26m Growth in Asset Finance and Mortgages offsets reduction in Invoice Finance fees 2. 3 Leveraging our scaleable operating platform Operating income up 36%; expenses up 17% Cost/income ratio (1) improves by 9pts to 51% 2. 4 Rigorous focus on credit quality Cost of risk improved by 4 bps to 19 bps 2. 5 Tax charge benefits from DTA revaluation 3. 6 Underlying return on equity (1)(2) of 20.6% (1) Excludes IPO related costs of 4.1m pre-tax ( 3.4m post-tax) in 2015 and 6.0m pre-tax ( 4.6m post-tax) in 2014 (2) Return on Equity = Profit after tax minus AT1 coupon paid / average ordinary shareholder equity. AT1 coupon payment in April 2015 of 3.5m pre-tax ( 2.8m post-tax) (3) Net fees and other operating income = Fee income + Fee expense + Other operating income (4) Net derivatives income and gains on disposal of debt securities = Net income from derivatives and other financial instruments + Gains on disposal of available for sale of debt securities 14

16 Delivering strong growth at attractive risk adjusted margins Group Asset Finance Invoice Finance 5.6% 5.5% 6.4% 6.3% 4.7% 4.5% SME Commercial Mortgages Buy-to-Let Residential Mortgages 7.7% 6.5% 5.2% 5.0% 4.6% 5.6% Interest income ( m) Gross interest margin (%) (1) (1) Gross interest margin = interest income / average net loans 15

17 Funding diversification drives expected improvement in NIM Increasingly diversified funding base ( bn) (1) 97% 108% 107% Retail deposits SME deposits Corporate deposits Wholesale funding LDR (2) (%) Declining funding costs (3) Deposit-led funding strategy 5.7bn of customer deposits; up by 29% Of which SME deposits grew by 37% to 1.4bn Of which Corporate deposits exceed 150m Ongoing diversification of wholesale funding Capitalising on FLS extension for SME lending First full year of RMBS benefit; issued April % 2.1% 1.9% Drives further cost of funding benefit Cost of funds for 2015 down to 1.9% 2013 Cost of funding (%) Improving net interest margin (4) 3.0% 3.4% 3.6% Net interest margin improved to 3.6% In line with management expectations Expect net interest margin to flatten in 2016 reflecting the continued stable UK interest rate environment 2013 Net interest margin (%) (1) Numbers may not exactly sum / reconcile due to rounding (2) Loans to deposits ratio = net customer loans / customer deposits (3) Cost of funding = interest expense / average net loans. (4) Net interest margin = net interest income / average net loans. 16

18 Strong and consistent credit performance Granular Portfolio Highly secured (1) NPL ratio (%) (2) Cost of risk (bps) (3) 88% 82% Asset Finance c 31k Invoice Finance 69% 68% Group NPL ratio (%) (2) 0.43 c 125k 0.37 SME Commercial Mortgages c 494k Buy-to-Let 64% 64% 68% 68% Group cost of risk (bps) (3) c. 158k (2) 6 Residential Mortgages 75% 77% c 138k (1) % of loan book at origination constituted by secured loans for Asset Finance; prepayment percentage for Invoice Finance, average loan-to-value ratio for SME Commercial Mortgages, Buy-to-Let and Residential Mortgages. (2) Non-performing loans ratio = Individually impaired loans / average gross loans (3) Cost of risk = Impairments / average net loans Average loan balance (as at 31 Dec 2015) 17

19 Continuing to leverage scaleable operating model Cost base breakdown ( m) (1) Relative cost advantage driven by Depreciation & amortisation Provisions Other administrative expenses Modern and scaleable systems Lack of legacy costs Underlying operating expenses up by 17% as we continue to invest in the business Other admin expenses of 108m Leveraging operational efficiency Average headcount increased by 12% over 2014 Reflects investment in central functions ahead of IPO and to support growth 60% 51% Provisions include 2m FSCS charge High degree of operating leverage Cost income ratio reduced to 51% (1)(2) in 2015 despite continued investment Cost/income ratio (%) (1)(2) Making good progress towards cost/income ratio of less than 40% by the end of 2017 (1) Excludes IPO related costs of 4.1m pre-tax ( 3.4m post-tax) in 2015 and 6.0m pre-tax ( 4.6m post-tax) in 2014 (2) Cost income ratio = (Administrative expenses + depreciation) / operating income. 18

20 Maintaining a strong capital base Total capital ratio (%) (1) Strong capital ratios support growth 14.8% 15.1% Target CET 1 ratio of c11% 4.4% 3.3% AT1 and Tier 2 capital ratio Profit after tax of 78m and 75m of gross equity raised at IPO partially offset by growth in RWA leads to improvement in capital ratios 10.4% 11.8% CET1 capital ratio CET1 ratio of 11.8%; target remains c11% Leverage ratio (%) (2) 6.3% 7.3% Intend to pursue an advanced internal risk-based capital model approach Target >5% Leverage ratio of 7.3% remains well above regulatory minimum requirements Target to maintain leverage ratio > 5% (1) Total capital ratio = Total capital / risk weighted assets. (2) Leverage ratio = Tier 1 capital / total exposures. 19

21 Driving continued momentum Net loans ( bn) Net interest margin (%) % 3.4% 3.6% Cost income ratio (%) (1) Profit before tax (%) (1) 66% 11.6% 15.1% 20.6% 60% 99 51% Underlying return on equity (1)(2) (1) Excludes IPO related costs of 4.1m pre-tax ( 3.4m post-tax) in 2015, 6.0m pre-tax ( 4.6m post-tax) in 2014 (2) Includes AT1 coupon payment in April 2015 of 3.5m pre-tax ( 2.8m post-tax) 20

22 Appendices 21

23 Diversified portfolio provides multiple growth levers Business segment Market size (1) and current market share (2) Loan origination ( m) 2015 performance Asset Finance 1.3bn 28bn 3.2% % 25% 75% 75% Grew customer numbers by 30% to 42,000 Organic origination growth of 21% across both broker and direct channels Soft assets now form 7% of the portfolio Invoice Finance 0.2bn 20bn 0.8% 45 29% 35 40% 71% 60% Customer numbers remain around 1,200 Trade and construction finance gaining traction Support Asset Finance Dealer Finance proposition SME Commercial Mortgages 0.8bn 48bn (3) 0.9% % 12% 88% 74% Customer numbers grew by 38% to c1,500 Origination driven by Commercial Investment Good progress in Property Development Direct origination grew by over 200% Buy-to-Let 2.4bn 38bn 1.8% % 19% 84% 81% Grew customer numbers by 15% to c16,000 Robust origination of 673m; down 7% Direct distribution grew by 10% Residential Mortgages 1.4bn 182bn 0.3% Net loans ( bn), as at 31 December % 9% 93% 91% Direct / Sales Intermediated Customer numbers grew by 40% to c10,000 Origination supported by Help to Buy Direct origination grew by 33% (1) Based on total market origination for 2015, except Invoice Finance which represents a stock figure as at 30 September Data from: Finance & Leasing Association (Asset Finance); Asset Based Finance Association (Invoice Finance) and CML (Buy-to-Let and Residential Mortgages). (2) Market share based on 2015 origination for Asset Finance, SME Commercial Mortgages, Buy-to-Let and Residential Mortgages. Market share for Invoice Finance based on September 2015 period-end balance. (3) Market size for SME Commercial Mortgages based on H DeMontfort University study. H market origination annualised to give market size. 22

24 Benefit from ongoing diversification of funding base Source of funding Average balance ( m) Cost of funding (%) Interest expense (2) ( m) 2,552 1,782 Retail fixed deposits 2.5% 2.2% 1.9% 1.6% 0.6% 0.6% = Retail variable deposits 1,342 1, % 1.4% 1.3% 0.8% 0.6% 0.6% = SME deposits 1, % 1.4% 0.9% 0.8% 0.6% 0.6% = Corporate deposits % 1.5% 0.8% 0.9% 0.6% 0.6% = FLS (1) % 0.7% 0.1% 0.6% 0.6% = -0.1% 4 3 RMBS (4) % 1.5% = 0.9% 0.9% 0.6% 0.6% 4 3 (1) Blended monthly average of gross drawings and carrying value of repurchase transactions. 3M GBP LIBOR (3) Liability spread (2) Interest expense not provided for tier 2 instrument, corporate deposits or the negative interest expense (i.e. income) attributable to the liquid asset buffer. (3) As of 08 March 2016 (4) Issued 10 April 2014, therefore interest expense in 2014 is for 9 months only. 23

25 Diversified and prudently underwritten mortgage portfolios Geographic split (%) Indexed Loan to Value (%) (1) SME Commercial Mortgages 13% 11% 5% 12% Greater London 23% South East Midlands East Anglia 0.8bn North West South West 20% Yorkshire Other 5% 11% 53% 0-50% 24% 50-60% 19% 60-70% 3% 70-75% 1% 75-80% 0% 80+ Buy-to-Let 5% 5% Greater London 8% South East 35% Midlands 9% East Anglia 2.4bn North West 9% South West 9% 20% Yorkshire Other 22% 0-50% 22% 50-60% 30% 60-70% 13% 70-75% 9% 75-80% 2% 80-85% 2% 85%+ Residential Mortgages 10% 8% 13% 13% 6% Greater London South East 21% Midlands East Anglia 1.4bn North West South West 16% Yorkshire Other 13% 13% 0-50% 10% 50-60% 16% 60-70% Help to Buy and Family Guarantee 9% 70-75% 10% 75-80% 11% 80-85% 31% 85%+ Net loans as at 31 December 2015 (1) SME Commercial Mortgages excludes Property Development 24

26 Dynamic, online deposit franchise forms core of funding base Retail SME Balance Retail deposits ( bn) 2013 SME deposits ( bn) Product suite 20% 9% 1% 7% 14% Notice (incl. ISA Notice) <1 year ISA 11% 1 year 4.2bn (1) 2 year 3 year 13% 4 year 25% 5 year 2% 44% Notice <1 year 1.4bn (1) 1 year 54% 1% Distribution and operations 3% 22% Online Phone (2) (2) Online Phone 75% Post (2) 99% (1) Retail deposit balances breakdown by initial contract term as at 31 December (2) Based on accounts opened in Customer deposits as at 31 December

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