Strong performance in Q1 2020 - uncertain economic environment ahead Investor presentation 30 April 2020 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 dir ectly or indirectly from the use of this document. Page 2
Retail banking Corporate banking Overview Insurance • Highlights • Financials • Operating income • Insurance • Business volumes • Expenditures • Impairment charges • Capital ratios • Strategy and long-term financial objectives • Revised 2020 outlook • Appendices Page 3
Highlights in Q1 2020 ─ Strong customer activity and pressure on interest margins eased Profit & loss Operating highlights Q1 2020 Q1 2020 Q1 2019 Index Net interest income 88 84 Merger of two branches in Denmark implemented in January 104 • Net fee and commission income 54 48 113 Activity levels adapted to the COVID-19 situation from mid-March: • Net insurance income 4 9 42 Other operating income 9 11 81 No physical customer meetings – only virtual meetings • Operating income 154 151 102 A majority of the Bank’s personnel has been working from home • Operating costs -109 -120 90 Sector costs 0 0 From 1 April, no threshold for negative interest rates on corporate 186 • Profit before impairment charges 45 31 146 deposits Net impairment charges on loans -24 19 -124 Changes in customer concepts will increase income from 1 April • Operating profit 22 50 43 Non-recurring items 0 0 Investment portfolio earnings -51 15 -352 Financial highlights Q1 2020 Profit before tax -46 -30 65 Operating income up 2% and Operating costs down 10% • Key metrics Profit before impairment charges up 46% • Q1 2020 Q1 2019 Index Net impairment charges increased to DKK 24m (DKK -19m) Loans and advances • 10.0 10.0 100 Deposits and other debt 12.9 14.0 92 Investment portfolio earnings down for a loss of DKK 51m (DKK 15m) • Mortgage credit 13.0 12.5 104 Loss before tax of DKK -30m (DKK 65m profit) Operating cost / income, % 70 79 • Total capital ratio, % 23.4 19.2 CET1 capital ratio of 19.8% and total capital ratio of 23.4% • CET1 capital ratio, % 19.8 17.2 Page 4
Margin pressure eased by negative interest rates brackets Comments QoQ changes in net interest income DKKm Net interest income flat QoQ and up by DKK 4m YoY • 90 1.3 mainly due to negative interest rates on corporate business 0.7 87.6 87.4 88 Effects of negative interest rate brackets introduced on • 3.3 2.4 0.1 pension and retail deposits in December 2019 feeding 86 through from 1 March 2020 84 From 1 April, no threshold for negative interest rates on • 82 corporate deposits Lending volumes up by DKK 62m QoQ and down by DKK 80 • Q4 2019 Lending Lending Deposit Deposit Other Q1 2020 36m YoY volume interest volume interest Loans and deposits YoY changes in net interest income Loans Deposits DKKbn DKKm 90 15 14.4 14.1 14.0 0.8 13.5 13.4 14 87.6 88 12.9 13 86 12 7.2 84.1 11 0.9 10.0 10.1 10.0 10.0 10.0 9.9 84 10 3.8 9 82 0.0 8 80 7 Q1 2019 Lending Lending Deposit Deposit Other Q1 2020 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 volume interest volume interest Page 5
Fee and commission income up in Q1 2020 Comments QoQ changes in fee and commission income DKKm Net fee and commission income up by DKK 5m QoQ and 60 0.1 0.5 • up by DKK 6m YoY 3.3 54.3 55 8.2 Income from investment management operations increased • 49.0 50 during Q1 2020 45 Mortgage-lending volumes up DKK 51m QoQ and DKK • 533m YoY 40 35 Q4 2019 Investment Loan, Mortgage Other fee and Q1 2020 and trading guarantee, broking comm. comm. insurance services income comm. Mortgage lending YoY changes in fee and commission income DKKbn DKKm 60 14 1.5 2.7 2.1 54.3 55 13 5.6 50 47.9 12 45 11 13.0 13.0 12.9 12.6 40 12.5 12.2 10 35 Q1 2019 Investment Loan, Mortgage Other fee and Q1 2020 and trading guarantee, broking comm. 9 comm. insurance services income Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 comm. Page 6
Development in business volumes Business volumes as measured by the sum of lending, guarantees and AUM DKKbn Bank lending Mortgage lending Guarantees Assets under management 35 30.1 30.1 29.4 30 28.3 4.0 4.2 4.4 4.3 25 3.1 3.0 2.8 2.6 20 13.0 13.0 12.2 11.8 15 10 5 10.0 9.9 10.0 9.5 0 2017 2018 2019 Q1 2020 Page 7
Trygd: Q1 weather conditions causing high insurance claims Comments Premium and claims DKKm Premium income, net Claims, net Combined ratio of 116% in Q1 2020 compared to 93% in 40 Q1 2019 Net premium income up by DKK 3m YoY and by DKK 2m 30 QoQ 20 Net claims up by DKK 10m YoY and up by DKK 12m QoQ 30.1 30.1 29.2 29.2 28.2 27.0 Claims in Q1 driven by storm-related claims and travel 10 19.5 17.0 cancellations due to COVID-19 Result before tax was a loss of DKK 6m in Q1 2020 relative 0 Q1 2019 Q1 2020 Q4 2019 Q1 2020 to a profit of DKK 2m in Q1 2019 and a profit of DKK 4m in Q4 2019 Profit before tax Trygd expects further losses in 2020 depending on the DKKm duration of travel restrictions implied to prevent possible 5 spread of COVID-19 1.9 4.0 0 -5.5 -5.5 -5 -10 Q1 2019 Q1 2020 Q4 2019 Q1 2020 Page 8
Reduction in operating costs Comments QoQ changes in operating costs DKKm Operating costs down by DKK 11m YoY and down by • 120 DKK 8m QoQ 116.6 Decrease in staff costs due to steady fall in number of • 115 4.4 1.4 average FTEs 3.6 Decrease in marketing expenditures mainly related to 0.4 • 1.0 110 108.8 low marketing activity in Q1 2020 105 Q4 2019 Staff IT Marketing Education Other Q1 2020 expenses Average number of employees (FTE) YoY changes in operating costs DKKm 420 130 6 6 6 7 7 7 7 390 7 120.3 24 26 7 120 26 25 26 25 25 0.2 4.7 3.2 25 360 3.5 25 108.8 110 364 330 361 360 359 360 357 356 350 336 300 100 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2018 2019 2020 90 Q1 2019 Staff IT Marketing Other Q1 2020 Banking Trygd Skyn expenses Page 9
Impairment charges up due to the COVID-19 health crisis Comments Net impairment charges DKKm Net impairment charges were DKK 24m in 148 Q1 2020 85 Additional discretionary management 24 20 estimated impairment charge of 25m has been made due to the COVID-19 health crisis -12 -60 Well-diversified loan portfolio with no individual sector accounting for more than 5% -111 -105 2013 2014 2015 2016 2017 2018 2019 Q1 2020 Strong LTV ratios for housing loans LTV for housing loans 1 Gross loans by sector DKKm 5% 5% 10% 19% 34% 5% < 40% DKK 10.3 bn DKK 3.2bn 61% 48% < 80% 3% > 80% 4% 4% 34% Private sector Trade Transport & HoReCa Corporate sector Manufacturing & mining Real estate Public sector Agri. & fishing Other 1) Lending for housing accounts for DKK 5.6bn of total for retail lending of DKK 6.2bn Page 10
Cancellation of dividend strengthens capital position Comments QoQ changes in CET1 ratio % CET1 up by 1.0 pp and total capital ratio up by • 19.8 0.6 1.1 pp QoQ 20 0.7 18.8 Cancellation of proposed dividend of DKK 67m 0.2 19 • for 2019 contributes 0.6 pp to the Group’s total 18 capital ratio 17 Regularly monitoring the development and • consequences of the COVID-19 situation 16 regarding the possibilities of paying dividend for 15 the 2019 financial year. Q4 2019 Net result REA Cancellation of dividend Q1 2020 Capital ratio development CET1 ratio Solvency ratio QoQ changes in total capital ratio % 23.4 22.3 19.7 19.8 19.8 18.8 24 18.3 23.4 17.7 0.6 17.5 16.8 16.0 0.8 23 13.9 0.2 22.3 22 21 20 19 2015 2016 2017 2018 2019 Q1 2020 Q4 2019 Net result REA Cancellation of Q1 2020 dividend Page 11
Revised 2020 outlook Previous FY2020 guidance was for profit after tax of DKK 100-150m On March 20, management suspended this guidance due to the uncertainty surrounding the COVID-19 situation The original FY 2020 guidance reduced by DKK 70m due to the COVID-19 situation An increase in travel insurance claims until the end of august 2020 by DKK 25m An increase in impairment charges (of which DKK 25m were recognised in Q1 2020) by DKK 40m Losses from the investment portfolio expected to increase by DKK 15m The expectations set out above have a combined before tax effect of DKK 80m (approx. after tax effect of DKK 70m ) New FY2020 guidance is for net profit after tax of DKK 30-80m Page 12
Questions? Árni Ellefsen, CEO
Appendices Net profit • Group • Banking • Personal Banking • Corporate Banking • Banking, Faroe Islands • Banking, Denmark • Banking, Greenland • Insurance, Trygd • Development in business volumes • Credit quality of loan portfolio Page 14
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