Supplementary capital issue Investor presentation November 2013
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 forwardlooking 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. 2
Outline Bank Norwegian overview Historical financials Third quarter 2013 results presentation Key investment considerations 3
Attractive investment story Focused consumer lending operation Market share gains in Norway Expansion in Sweden Steady loan yields and high margins Cost-efficient operations Stable credit quality Steady earnings growth and superior returns Strong and resilient balance sheet Deposit surplus Experienced management team 4
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q213 Q313 Highly profitable operation MNOK 70 60 50 40 30 20 10 45% 40% 35% 30% 25% 20% 15% 10% 5% Established in November 2007 offering consumer loans, credit cards and retail deposits Profitable since April 2009 Launched own credit card operation in April 2010 Expansion in Sweden in May 2013 0 0% Net income ROE 5
Steady growth 6
Market share gains in Norway Total unsecured loans Market growth and market share BNOK BNOK 70 9 9 % 60 8 8 % 50 7 6 Bank Norwegian Competitors Market share 7 % 6 % 40 5 5 % 30 4 4 % 20 3 3 % 2 2 % 10 1 1 % - 2006 2007 2008 2009 2010 2011 2012 1H13 0 2007 2008 2009 2010 2011 2012 1H13 0 % 7
Focused strategy Leading e-commerce solutions Strong online marketing capability Convenient loan application and on-boarding process Instant time-to-yes 1 hour time-to-cash Synergies with Norwegian Air Shuttle Strong brand name Large customer base Strong incentive in loyalty credit card Attractive customer terms Competitive risk-based loan pricing Attractive deposit pricing Low-cost operations Automated processes Strategy-focused and integrated systems development Self service Low-cost culture Effective and efficient risk selection Automated risk selection Advanced credit models 8
Seasoned management team 9 Erik Jensen, CEO (48) Previously, Managing Director at ya Bank, where he participated in the establishment of the business Management positions in BNbank, including Managing Director for Retail and CFO 20 years of financial services experience Employed in the bank since inception Pål Svenkerud, CFO (51) Previously, CFO at Teller Management positions at Storebrand, including Chief Risk Officer and CFO at Storebrand Bank. 25 years of financial services experience Employed in the bank since inception Merete Gillund, CIO (44) Previously, management positions at SEB Kort IT Oslo/Stockholm IT consultant developing credit card system applications 17 years of financial services experience Employed in the bank since June 2008 Tore Andresen, COO (48) Previously, Managing Director at Aktiv Kapital Norge Managing Director Lindorff Decision 27 years of financial services experience Employed in the bank since June 2009 Tore Widding, CRO (45) Previously, Credit Risk Manager at Santander Consumer Bank Chief Analyst at CreditInform and System Consultant at Super Office Norway AS 14 years of financial services experience Employed in the bank since inception Michael Myran, CMO (37) Previously, Head of Marketing at ya Bank og Forsikring, where he participated in the establishment of the business Head of Marketing at Nordenfjeldske Forsikring 12 years of financial services experience Employed in the bank since inception
Legal structure and ownership Norwegian Finans Holding ASA NR 100 % Bank Norwegian AS (issuer) BBB+ / BBB DNB / Danske Bank SHAREHOLDER # OF SHARES 1 NORWEGIAN AIR SHUTTLE 34.518.817 20,00 % 2 GOLDMAN SACHS INT. 15.937.346 9,23 % 3 APOLLO ASSET LIMITED 14.700.000 8,52 % 4 LAGUAN AS 12.871.013 7,46 % 5 BORAK AS 8.580.454 4,97 % 6 MP PENSJON PK 8.000.000 4,64 % 7 SPENCER TRADING INC 6.817.219 3,95 % 8 SKAGEN VEKST 6.571.200 3,81 % 9 TVENGE TORSTEIN INGV 5.014.635 2,91 % 10 SNEISUNGEN AS 3.720.333 2,16 % 11 KLP AKSJE NORGE VPF 2.587.000 1,50 % 12 PORTILLO HOLDING AS 2.500.000 1,45 % 13 BLYSTAD ARNE 2.203.581 1,28 % 14 VERDIPAPIRFONDET OMEGA 2.198.646 1,27 % 15 JENSEN ERIK 1.516.942 0,88 % 16 GJERSVIK KARSTEIN 1.261.437 0,73 % 17 SVINDAL AKSEL LUND 1.180.000 0,68 % 18 SVENKERUD PÅL 1.131.220 0,66 % 19 DNB LUXEMBOURG S.A. 1.090.000 0,63 % 20 ANDRESEN TORE 1.051.166 0,61 % Top 20 133.451.009 77,32 % Total 172.594.088 Management owns 3,1 % of the shares. 10
High margins Installment loan yield Credit card loan yield Risk-adjusted total loan yield Deposit costs Liquidity yield 11 Norwegian operations
Low-cost operations MNOK 12
Stable credit quality and provisions Non-performing loans to loans Installment loans Non-performing loans to loans Credit cards Loan loss provisions to average loans Installment loans Loan loss provisions to average loans Credit cards 13 Norwegian operations
Capital ratio targets take into account full counter-cyclical capital buffer Strong capital ratios amid strong loan growth BIS II standardized risk weights New target ratios 12,5% Core Tier 1 capital 14,0% Core capital 16,0% Total capital 14
Debt maturity profile 15
Outline Bank Norwegian overview Historical financials Third quarter 2013 results presentation Key investment considerations 16
Historical financials income statement Bank Norwegian AS MNOK 2009 2010 2011 2012 YTD Q3 2013 Interest income 172.7 243.9 426.0 636.6 618.0 Interest expenses 63.3 66.3 110.5 177.4 168.6 Net interest income 109.5 177.5 315.5 459.2 449.4 Commission and bank services income 4.2 17.0 41.4 60.5 65.0 Commission and bank services expenses 1.7 6.6 15.7 23.6 25.8 Gain/loss on securities and currency 5.4 0.5-0.6 1.6 6.5 Other income - - - 0.2 0.2 Net other operating income 7.9 11.0 25.2 38.6 45.9 Total income 117.4 188.5 340.7 497.8 495.3 Personnel expenses 22.0 27.6 34.2 40.6 32.3 Admin expenses 34.7 66.2 109.3 150.6 150.0 Ordinary depreciation 11.9 13.0 13.9 14.7 7.2 Other operating expenses 4.4 5.5 7.6 7.2 8.7 Total operating expenses 73.0 112.3 165.0 213.1 198.1 Provision for loan losses 25.1 26.4 38.8 56.7 56.0 Profit on ordinary activities before tax 19.3 49.8 136.9 227.9 241.2 Tax charge 5.4 14.0 38.3 63.6 67.9 Net profit after tax 13.9 35.9 98.6 164.4 173.4 17
Historical financials balance sheet Bank Norwegian AS MNOK 31.12.2009 31.12.2010 31.12.2011 31.12.2012 30.09.2013 Assets Deposits with Norges Bank 31 11 38 50 51 Loans and deposits with credit institutions 26 58 26 99 127 Loans to customers 1,191 2,039 3,136 4,457 5,727 Certificates and bonds 723 721 936 1,868 1,771 Other intangible assets 43 38 30 23 28 Deferred tax asset 21 7 1 0 0 Fixed assets 3 1 1 1 2 Other assets 29 43 53 70 80 Total assets 2,066 2,917 4,220 6,570 7,785 Liabilities and equity Deposits from customers 1,807 2,552 3,577 5,627 6,243 Debt securities issued - - 150 250 500 Other liabilities - 6 59 88 97 Accruals 9 36 26 32 199 Subordinated loan 30 30 30 30 30 Total liabilities 1,850 2,625 3,842 6,027 7,069 Paid-in capital 270 310 310 310 310 Retained earnings and other reserves -54-18 68 233 406 Total equity 216 292 378 543 716 Total liabilities and equity 2,066 2,917 4,220 6,570 7,785 18
Outline Bank Norwegian overview Historical financials Third quarter 2013 results presentation Key investment considerations 19
Third quarter 2013 earnings were 61,1 MNOK, compared with 58,0 MNOK in the second quarter Norwegian Finans Holding Group MNOK Q3 2013 Q2 2013 Interest income 221.8 206.6 15.2 7 % Interest expenses 57.6 57.2 0.4 1 % Net interest income 164.3 149.4 14.8 10 % Commission and bank services income 23.6 20.4 3.2 16 % Commission and bank services expenses 9.5 8.8 0.6 7 % Net gain/loss on securities and currency 3.6 2.6 1.0 37 % Other income 0.0 0.2-0.2 0 % Net other operating income 17.7 14.4 3.4 23 % Total income 182.0 163.8 18.2 11 % Personnel expenses 12.7 8.9 3.8 43 % General administrative expenses 56.8 50.7 6.1 12 % Ordinary depreciation 2.4 2.5-0.1-6 % Other operating expenses 3.9 2.6 1.3 51 % Total operating expenses 75.7 64.7 11.1 17 % Provision for loan losses 21.5 18.1 3.3 18 % Profit on ordinary activities before tax 84.8 81.0 3.8 5 % Tax charge 23.7 23.0 0.7 3 % Profit on ordinary activities after tax 61.1 58.0 3.1 5 % Earnings per share NOK (annualized) 1.42 1.35 Change Net interest income driven by rapid loan growth, lower deposit rates and higher asset utilization. Rise in fee income linked to higher credit card activity. Realized gain on securities. Personnel expenses impacted by seasonal accrual effect in the second quarter. Swedish start-up raises operating expenses. Stable provisioning levels. ROE 35,8 %, down from 37.3 %*. * Bank Norwegian AS 20
Swedish operations yielded a net loss of 7.2 MNOK in the third quarter Norwegian Finans Holding Group 30.9.2013 Key figures MNOK Norway Sweden Group Total income 180.2 1.8 182.0 Total operating expenses 65.1 10.7 75.7 Provision for loan losses 20.3 1.2 21.5 Profit after tax 68.3-7.2 61.1 Liquid assets 1,901 56 1,958 Net loans to customers 5,661 64 5,727 Intangible assets 19 10 29 Deposits from customers 6,243-6,243 Strong profit growth in Norway. Net loss in Sweden widened 2.8 MNOK, mainly due to higher marketing spending. 21
Strong loan growth and steady earnings growth Quarterly loan growth Quarterly earnings MNOK MNOK 600 70 500 60 400 50 40 300 30 200 20 100 10 0 Q3 12 Q4 12 Q1 13 Q213 Q313 0 Q3 12 Q4 12 Q1 13 Q213 Q313 22
Strong loan growth MNOK 9.000 Assets 8.000 7.000 6.000 5.000 4.000 3.000 156 1.882 1.083 149 1.868 1.211 105 2.061 1.331 181 2.055 1.469 178 1.771 1.632 Cash & cash equivalents Securities Credit card 1 Total gross loans up 516 MNOK, compared to 411 MNOK in the second quarter. Installment loans rose 353 MNOK and credit card loans grew 163 MNOK. 2.000 1.000 0 4.203 3.577 3.850 3.153 3.332 Q3 12 Q4 12 Q1 13 Q213 Q313 Consumer loans 2 Intangibles Other assets Installment loan run-off 241 MNOK, compared to 253 MNOK in the second quarter. MNOK 9.000 Liabilities & equity Liquid assets comprise 25 % of total assets. 8.000 7.000 Moderate deposit growth. 6.000 5.000 4.000 5.279 5.627 6.069 6.157 6.243 Deposits Deposits to loans ratio decreased from 1.18 to 1.09. 3.000 2.000 1.000 250 500 500 250 250 219 296 495 543 597 655 716 0 Q3 12 Q4 12 Q1 13 Q213 Q313 23 Bank Norwegian AS Debt securities issued Other liabilities Sub debt Equity 1 Includes sales financing 2 Includes personal lines of credit
Strong customer growth Number of customers 280.000 260.000 240.000 220.000 200.000 180.000 160.000 140.000 120.000 100.000 80.000 60.000 40.000 20.000 0 184.000 165.000 146.100 134.200 119.500 24.600 26.500 28.100 30.100 32.800 47.800 49.200 51.300 52.600 53.700 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Deposit Consumer loan Credit card Continued strong customer growth in Norway. Swedish card customers total 14.000. 24
Quarterly balance sheet Norwegian Finans Holding Group MNOK Assets Deposits with Norges Bank 30.9.13 51 1 % 30.6.13 51 1 % Change 0 0 % Loans and deposits with credit institutions 136 2 % 140 2 % -4-3 % Loans to customers 5,727 73 % 5,218 66 % 509 10 % Certificates and bonds 1,771 23 % 2,055 30 % -285-14 % Other intangible assets 28 0 % 29 0 % -0-1 % Deferred tax asset 1 0 % 1 0 % 0 11 % Fixed assets 2 0 % 2 0 % -0-7 % Other assets 80 1 % 76 1 % 4 5 % Total assets 7,795 100 % 7,570 100 % 224 3 % Liabilities and equity Deposits from customers 6,243 80 % 6,157 84 % 86 1 % Debt securities issued 500 6 % 500 4 % 0 0 % Taxes payable 68 1 % 44 1 % 24 55 % Other liabilities 30 0 % 43 0 % -13-31 % Accrued expenses and unearned income received 200 3 % 133 2 % 66 50 % Subordinated loan 30 0 % 30 0 % - 0 % Total liabilities 7,070 91 % 6,906 92 % 163 2 % Share capital 173 2 % 173 3 % - 0 % Share premium reserve 140 2 % 140 2 % -0 0 % Retained earnings and other reserves 413 5 % 352 3 % 61 17 % Total equity 725 9 % 664 8 % 61 9 % Total liabilities and equity 7,795 100 % 7,570 100 % 224 3 % 25
Stable yields and improved margins 14,0 % Margins as a % of average assets 12,0 % 10,0 % 8,0 % 6,0 % 4,0 % 10,8 % 7,5 % 6,6 % 11,2 % 11,1 % 11,2 % 8,1 % 8,0 % 8,1 % 7,0 % 7,1 % 7,2 % 11,5 % 8,4 % 7,4 % Interest income Net interest margin Risk-adjusted margin Interest expenses Stable loan yields, lower deposit costs and increased asset utilization lift margins. Value adjusted securities yield 2.62 % in the third quarter. 2,0 % 3,2 % 3,1 % 3,1 % 3,1 % 3,0 % 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 18,0 % Asset yield and cost of deposits 16,0 % 14,0 % 12,0 % 15,6 % 15,8 % 15,7 % 15,6 % 15,3 % 15,4 % 15,4 % 15,5 % 15,5 % 15,4 % 13,9 % 14,0 % 14,0 % 13,9 % 13,8 % Installment loan yield Credit card loan yield Risk-adjusted total loan yield 10,0 % 8,0 % 6,0 % 4,0 % 3,6 % 3,4 % 3,5 % 3,4 % 3,3 % Deposit costs 2,0 % 2,6 % 2,6 % 2,5 % 2,4 % 2,4 % Liquidity yield 0,0 % 26 Q3 12 Q4 12 Q1 13 Q213 Q313 Bank Norwegian AS - Norwegian operations
Operating efficiency remains high MNOK Quarterly operating expenses 80 70 60 0,45 0,40 0,35 Personnel expenses impacted by seasonal accrual effect in the second quarter. 50 40 30 20 10-44,3 38,7 31,2 32,7 28,2 2,4 3,7 3,7 2,3 2,5 8,7 4,7 5,1 6,0 6,9 5,3 6,0 6,1 7,6 7,6 11,1 10,9 11,2 8,6 12,4 Q3 12 Q4 12 Q1 13 Q213 Q313 0,30 0,25 0,20 0,15 0,10 0,05 0,00 Increased marketing spending. Other expenses hit by loan fraud in Sweden. Cost/income ratio up from 0.39 to 0.42. Cost/income in Norwegian operations stable at 0.36. Personnel IT Other Depreciation Marketing Cost/income 27 Bank Norwegian AS
Stable credit metrics Consumer loans Non-performing loans to loans Loan loss provisions to average loans 12,0 % 3,0 % 10,0 % 2,5 % 8,0 % 2,0 % 6,0 % 5,2 % 5,2 % 5,3 % 5,3 % 5,0 % 1,5 % 1,4 % 1,4 % 1,4 % 1,3 % 1,4 % 4,0 % 1,0 % 2,0 % 0,5 % 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 3,0 % Loan loss allowance to loans 100,0 % Loan loss allowance to non-performing loans 2,5 % 90,0 % 80,0 % 2,0 % 1,7 % 1,8 % 1,8 % 1,9 % 1,8 % 70,0 % 60,0 % 55,6 % 59,9 % 57,8 % 59,2 % 67,2 % 1,5 % 50,0 % 1,0 % 40,0 % 30,0 % 0,5 % 20,0 % 10,0 % 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 28 Norwegian operations
Stable credit metrics Credit card loans Non-performing loans to loans Loan loss provisions to average loans 6,0 % 3,0 % 5,0 % 2,5 % 4,0 % 3,8 % 3,9 % 4,1 % 4,1 % 3,9 % 2,0 % 3,0 % 1,5 % 1,5 % 1,5 % 1,5 % 1,5 % 1,6 % 2,0 % 1,0 % 1,0 % 0,5 % 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 3,0 % Loan loss allowance to loans 100,0 % Loan loss allowance to non-performing loans 90,0 % 2,5 % 2,0 % 2,1 % 2,1 % 2,1 % 2,0 % 1,9 % 80,0 % 70,0 % 60,0 % 61,9 % 64,1 % 63,8 % 63,9 % 70,2 % 1,5 % 50,0 % 40,0 % 1,0 % 30,0 % 0,5 % 20,0 % 10,0 % 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 29 Norwegian operations
High profitability maintained 45,0 % 3,50% 40,0 % 3,00% 35,0 % 30,0 % 2,50% 25,0 % 2,00% 20,0 % 15,0 % 10,0 % 37,4 % 38,2 % 37,8 % 37,3 % 35,8 % 1,50% 1,00% 5,0 % 0,50% 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 ROE ROA 0,00% 30 Bank Norwegian AS
High risk absorption capacity 16,0 % Capital ratios 14,0 % 12,0 % 10,0 % 12,6 % 11,9 % 13,1 % 12,4 % 12,6 % 12,0 % 13,1 % 12,5 % 13,4 % 12,8 % Solid capital generation despite strong loan growth and start-up of Swedish operations. 8,0 % RWA increased from 67 % to 70 %. 6,0 % 4,0 % Robust 12.8 % tier 1 common equity ratio. 2,0 % 0,0 % Q3 12 Q4 12 Q1 13 Q213 Q313 Tier 1 Total capital Common equity to total assets equals 9.3 %. 31 Norwegian Finans Holding-Group
Well positioned for continued earnings growth Earnings growth and strong returns Continued strong loan growth Stable margins Cost-efficient operations Stable provisions All products rolled out in Sweden Stable credit quality Resilient economies in Norway and Sweden Enhanced credit models Stable portfolio risk Strong and resilient balance sheet Strong liquidity position Strong capital generation and capital ratios Adequate equity for growth Subordinated capital issues to position the bank for impending capital requirements 32
Outline Bank Norwegian overview Historical financials Third quarter 2013 results presentation Key investment considerations 33
Key investment considerations High risk-absorption capacity through strong capital generation. Robust profitability through high net interest margin, low market risk, costefficient 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. Resilient domestic macro economic environment with stable employment, strong public finances and highly developed social security net. 34
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