Strong customer activity in Q1 2019 Investor presentation 2 May 2019 Árni Ellefsen, CEO
Disclaimer This presentation contains statements regarding future results, which are subject to risks and uncertainties. Consequently, actual • results may differ significantly from the results indicated or implied in these statements. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy • or completeness of the information contained herein. Accordingly, none of BankNordik, or any of its principal shareholders or subsidiary undertakings or any of such person’s officers or employees or advisers accept any liability whatsoever arising directly or indirectly from the use of this document. Page 2
Retail banking Private banking Overview Corporate banking Insurance • Highlights • Financials • Operating income • Insurance • Business volumes • Expenditures • Impairment charges • Capital ratios • Long-term financial objectives • Outlook 2019 • Appendices Page 3
Highlights in Q1 2019 ─ High customer activity but interest margins remain under pressure Q1 2019 financial highlights Net interest income down 3% to DKK 91m in Q1 2019 from DKK 94m Q1 2018 • Net fee and commission income up 9% to DKK 48m from DKK 44m in Q1 2018 • Operating income amounted to DKK 158m vs. DKK 162m in Q1 2018 • Operating costs up 4% to DKK 120m (DKK 115m) • Net impairment charges were a reversal of DKK 19m (DKK 31m) • Market value adjustments amounted to a gain of DKK 8m (loss of DKK 6m) • Profit before tax was DKK 65m (DKK 148m) • Bank lending volumes up by 4% to DKK 10.0bn (DKK 9.6bn) • Mortgage lending volumes up by 5% to DKK 12.5bn (DKK 11.9bn) • CET1 capital ratio of 17.2% and total capital ratio of 19.2% at 31 March 2019 • Page 4
Q1 2019 financial results ─ Figures in DKKm Index Q1 2019 Q1 2018 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Net interest income 97 91 94 91 92 94 93 94 Net fee and commission income 109 48 44 48 42 43 43 44 Net insurance income 71 9 12 9 13 13 6 12 Other operating income 94 11 12 11 9 10 15 12 98 Operating income 158 162 158 156 160 157 162 Operating costs 104 -120 -115 -120 -115 -111 -116 -115 Profit & loss Sector costs 0 0 0 0 0 0 0 82 Profit before impairment charges 38 47 38 42 49 42 47 Net impairment charges on loans 62 19 31 19 18 39 23 31 74 Operating profit 57 77 57 60 88 65 77 Non-recurring items 0 76 0 -10 -6 12 76 Market value adjustments 8 -6 8 -12 -3 -17 -6 44 Profit before tax 65 148 65 38 78 59 148 Index Q1 2019 Q1 2018 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 104 Loans and advances 10.0 9.6 10.0 10.0 10.0 9.7 9.6 107 Deposits and other debt 14.0 13.1 14.0 13.4 13.2 13.1 13.1 105 Mortgage credit Key metrics 12.5 11.9 12.5 12.2 12.1 11.9 11.9 Operating cost / income, % 76 71 76 73 69 73 71 Total capital ratio, % 19.2 18.9 19.2 19.8 17.6 18.5 18.9 CET1 capital ratio, % 17.2 16.7 17.2 17.7 15.5 16.3 16.7 Page 5
Net interest income under continuous pressure Comments QoQ changes in net interest income DKKm Net interest income down by DKK 1m QoQ and by DKK 3m • 94 YoY due to margin pressure 92.3 0.3 2.1 Squeezed margins continue to cause a drag on net interest • 92 income 0.9 91.0 0.3 0.0 0.0 Lending volumes up by DKK 50m QoQ and by DKK 399m • 90 YoY 88 Q4 2018 Lending Lending Deposit Deposit Liquidity Other Q1 2019 volume interest volume interest mgmt. Loans Deposits Loans and deposits YoY changes in net interest income DKKm DKKbn 15 14.0 98 14 13.4 13.2 13.1 13.1 12.6 13 3.9 96 94.3 12 7.7 94 11 92 10.0 10.0 10.0 0.5 91.0 9.7 0.0 9.6 0.1 9.5 0.0 10 90 9 88 8 Q1 2018 Lending Lending Deposit Deposit Liquidity Other Q1 2019 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 volume interest volume interest mgmt. Page 6
High customer activity driving fee and commission income Comments QoQ changes in fee and commission income DKKm 50 Net fee and commission income up by DKK 5m QoQ and • 47.9 by DKK 4 YoY 1.5 0.4 1.0 45 Strong customer activity in Q1 2019 driving fee and • 2.6 42.5 commission income higher Mortgage-lending volumes increased by DKK 239m in Q1 40 • 2019 35 Q4 2018 Investment Loan, Mortgage Other fee and Q1 2019 and trading guarantee, broking comm. comm. insurance services income comm. Mortgage lending YoY changes in fee and commission income DKKm DKKbn 13 50 47.9 0.2 1.3 2.6 0.3 45 44.0 12 12.5 12.2 40 12.1 11 11.9 11.8 11.9 35 10 Q1 2018 Investment Loan, Mortgage Other fee and Q1 2019 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 and trading guarantee, broking comm. comm. insurance services income comm. Page 7
Developments in business volume Business volume as measured by the sum of lending, guarantees and AUM DKKbn Bank lending Mortgage lending Guarantees Assets under management 35 29.6 29.4 30 28.2 27.1 4.4 4.4 4.3 3.6 25 2.7 2.8 2.6 2.5 20 12.5 12.2 11.8 15 11.9 10 5 10.0 10.0 9.5 9.1 0 2016 2017 2018 Q1 2019 Page 8
Trygd’s net premium income up by 6% YoY Comments Premium and claims DKKm Premium income, net Claims, net Combined ratio of 93% in Q1 2019 compared to 80% in Q1 � 30 2018 Net premium income up by DKK 2m YoY and by DKK 0.1m � 20 QoQ Net claims up by DKK 5m YoY and by DKK 3m QoQ 27.0 27.0 � 26.9 25.4 10 19.5 19.5 Profit before tax of DKK 2m in Q1 2019 relative to DKK 5m 16.9 � 14.6 PBT in Q1 2018 and DKK 4m in Q4 2018 Trygd expects to continue attracting new customers and 0 � Q1 2018 Q1 2019 Q4 2018 Q1 2019 growing premium income in 2019 Profit before tax DKKm 5 4 3 4.7 2 3.8 1 1.9 1.9 0 Q1 2018 Q1 2019 Q4 2018 Q1 2019 Page 9
Operating costs increased in Q1 2019 Comments QoQ changes in operating costs DKKm Operating costs up by DKK 5m YoY and by DKK 6m QoQ • 120.3 Marketing campaigns, IT expenditures and severance 120 • 4.2 114.6 2.2 1.0 4.7 payments drove costs higher in Q1 2019 vs. Q1 2018 1 110 BankNordik still targets almost zero expenditure growth in • FY2019 100 90 Q4 2018 Staff IT Marketing Other Q1 2019 expenses Average number of employees (FTE) YoY changes in operating costs DKKm 450 6 6 120.3 6 6 400 2.0 0.4 25 26 26 6 6 26 6 7 7 2.4 120 24 26 26 26 25 0.2 115.2 350 300 384 110 380 378 374 361 360 364 359 360 250 100 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2018 2019 90 Q1 2018 Staff IT Marketing Other Q1 2019 Group excl. Trygd and Skyn Trygd Skyn expenses 1) Marketing and staff costs were also high in Q4 2018 and therefore do not cause a spike in the QoQ graph to the right Page 10
BankNordik continues to reverse impairment charges Comments Net impairment charges DKKm Net impairment charges were a reversal � of DKK 19m in Q1 2019 148 85 No individual sector accounting for more � than 5% of the loan portfolio 20 Two thirds of the loan portfolio allocated -12 � -19 to personal lending -60 -111 Strong loan-to-value for housing loans � 2013 2014 2015 2016 2017 2018 Q1 2019 Loans by sector 2 LTV for housing loans 1 DKKm 5% 5% 9% 20% 31% < 40% DKK 10.4 bn 5% DKK 3.2bn 45% 64% < 80% 3% > 80% 5% 4% 34% Private sector Trade Transport & HoReCa Corporate sector Real estate Manufacturing & mining Public sector Agri. & fishing Other 1) Lending for housing accounts for DKK 5.8bn out of DKK 6.4bn in total for retail lending Page 11 2) Excluding remaining Danish corporate loans of DKK 68m as per 31 March 2019
The Group’s strong capital position maintained Comments YoY changes in CET1 ratio % CET1 down by 0.5 pp and total capital ratio • down by 0.6 pp QoQ 18 0.1 0.1 17.7%* If net income from Q1 2019 were recognised, • 0.5 0.5 the CET1 ratio would be 17.7%* and the total 0.0 capital ratio would be 19.8%* 17 17.7 At 31 March, the Group had a CET1 ratio target 17.2 • of 17% and a total capital ratio target of 20% 16 Q4 2018 Share Holding of RWA Other Q1 2019 buybacks own shares Capital ratio development CET1 ratio Solvency ratio YoY changes in total capital ratio % 19.8 19.7 19.2 18.3 17.7 20 17.5 0.1 0.1 17.2 16.8 16.0 19.8%* 14.8 13.9 0.5 0.5 0.0 11.8 19 19.8 19.2 18 2014 2015 2016 2017 2018 Q1 2019 Q4 2018 Share Holding of RWA Other Q1 2019 buybacks own shares *Capital ratios include Q1 2019 net profit before the effect of any dividends Page 12
Long-term financial objectives 2018 2019 2020 target 10.4% 2 13.8% 1 In Q1 2019, ROE was affected by: 10% Return on equity High insurance claims − High operating costs − 72% 76% 65% Large reversal of impairment charges − Cost/income ratio Outlook for 2019 Operating profit before impairment charges in − 17.7% 17.2% 17% CET 1 ratio the range of DKK 160-200m (Q1 2019: DKK 37m) Net profit at the upper end of guidance of − 19.2% 19.8% 20% Total capital ratio DKK 100-150m (Q1 2019: DKK 51m) 1) Excluding non-recurring items, ROE was 10.7% in 2018 Page 13 2) Annualised
Questions? Árni Ellefsen, CEO
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