Danish Small Cap Bank Seminar

Transcription

1 Danish Small Cap Bank Seminar Lasse Nyby, CEO Danske Bank, 16 March 2009

2 Hot topics in banking nowadays Asset quality Capitalization Liquidity VS 2

3 20 A Year of Extremes Core business is still satisfactory Highly satisfactory customer intake High growth in NII Recession Business climate worsening impairment of loans etc. on the rise Sour bond-market climate, especially for mortgage-credit bonds affects market value adjustments and investment income Large contributions to sector targeted solutions DDKm Result Profit before tax - analysis Core income Costs Impairments Investment of loans and income advances, etc. 124 Mio. kr Indeks Core income Costs Core earnings before impairment Impairments of loans and advances, etc Core earnings Investment income Totalkredit Profit/loss on ordinary activities Sector Fund Profit before tax Sector Fund Result 20 3

4 Q4 - Core income remains satisfactory, other lines suffer Realized Realized Realized DKK million Q1 - Q3 20 Q Net interest income 1, ,502 Net income from fees, charges and commissions Dividends on shares, etc Market-value adjustments Other operating income Profit/loss on equity inv Core income 1, ,957 Operating costs, depreciation and 1, ,380 amortization Core earnings before impairment Impairment of loans and advances, etc Core earnings Earnings from investment portfolios Totalkredit Profit/loss on ordinary operations The Danish Banking Sector Emergency Fund Profit/loss before tax

5 20 A challenging but not altogether depressing year Hike in interest margin Growth in NII Improved liquidity Quality in commitments remains high Sector consolidation Shift from organic growth to acquisition Organizational changes (small branches close/merge) Lower income from fees etc. Lower trading income Loss on investment portfolios Modest growth in bank loans Impairment of loans 5

6 Impairment of loans etc. DKK mill. Nedskrivninger Impairment og and nedskrivningsprocent impairment ratio Impairment of loans and advances, etc. of DKK 236 million profit impact DKK 347m down on 2007 Mio. kr Pct. 2,50 Excluding loss on guarantee regarding pension pool 4 (DKK 28m), the impairment ratio was 0.4 pct ,5 Non-performing loans remained at a low level despite the increase compared with , , Nedskrivningssaldo Impairment balance Y/Y: YOY: pct. pct. 2 Impairment Nedskrivningssaldo balance relative i to forhold lending til and udlån guarantees og garantier 100 Udlån Non-performing med rentestop loans Y/Y: YOY: 78 pct. 78 pct. 25 Cover-ratio ratio Mio. kr Pct. 1,0 1,0 0,9 0,9 1,2 Mio. kr Q4 07 Q1 Q2 Q3 Q4 0 Q4 07 Q1 Q2 Q3 Q4 0 Q4 07 Q1 Q2 Q3 Q4 0 Q4 07 Q1 Q2 Q3 Q4 6

7 Impairment of loans etc. DKK 156m of profit impact attributable to corporate customers, DKK 52m to personal customers Groups of impairment losses: DKK 21m Carried to income on previously written-off claims remains at a high level, but down DKK 18m compared with 2007 Of the total individual impairment losses (DKK 523m), only DKK 49m is attributable to customers in insolvent liquidation or in suspension of payments Impairment (DKK mill.) New provisions reg. individual impairment Reversal of individual impairment Indiv. impairment, net New provisions for groups of impairment losses 7 21 Reversal of groups of impairment losses 0 0 Groups of impairment losses, net 7 21 Interest on impairment Losses without prior provisions Carried to income, previously written off Total profit impact Breakdown of impairment (DKK mill.) Individual provisions Groups of provisions Total Individual impairment (DKK mill.) Insolvent liquidation 7 23 Debt collection and suspension of payments 3 26 Other financial difficulties Individual impairment Impairment account Q4 Q1 Q2 Q3 Q4 (DKK million) Allowance account

8 Quality in commitments Internal limit on customer commitments: 10 per cent of shareholder equity (5 per cent unsecured portion) Average size of commitment is DKK Firm central monitoring (credit quality dept.) - all new commitments (household > DKK / corporate > DKK ) reviewed IRB Project in place 20: Marginally negative trend in credit quality 8

9 Diversified risk exposure In general, very good diversification Low exposure to commercial real estate Very few impairments related to property management, sales and renting Exposure to farming higher than sector average but steadily decreasing - Spar Nord Bank: DKK 4bn - Finans Nord: DKK 1.5bn Sustained high solidity among customers in farming Investment credits reduced by approx. DKK 3bn. in 20 9

10 Financial credit risks conservative exposure 10

11 Rating unchanged in 20 outlook stable Moody s rating: Bank Financial Strength: C Bank Deposits (long): A1 Bank Deposits (short): P-1 Outlook: Stable Rating Rationale: Spar Nord s importance to the regional market (Northern Jutland) Strong customer relations Stable financial performance Geographical diversification Possible future challenges: Fierce competition + funding pressure Following the rating by Moody s, Spar Nord established an EMTN Program in the spring of 20. Due to the un-benign climate, however, no major issues have been made. Benchmark issue is expected to take place in H

12 Solvency Core capital ratio ex. hybrid core capital is 9,7 pct. and well above internal target of 8.0 pct. Solvency ratio stood at 11,3 pct. (internal target: 11 %). RWA reduced by DKK 4bn as a result of Basel II Acquisition of branches from Roskilde Bank reduces solvency ratio by.6 30 % YTD Annual growth in Risk-weighted assets * * Comparable base 12

13 The Credit Package state-funded capital injection We expect to apply for the maximum injection of hybrid tier-1 capital 3 pp raise in tier-1 ratio approx. DKK 1.3 bn Objective 1: Materializing the potential for business growth created with recent years geographical expansion Objective 2: An insurance against the effects of an unexpectedly serious deterioration of business climate Rationale: Under the given circumstances state-funded capital injection is a competitive way to secure adequate capital for our growth 13

14 Liquidity long term Strategic target: Deposits, core capital, subordinated debt and senior loans must exceed loans and advances Markedly improved through out the last year 20-growth in bank deposits: 24 percent 14

15 The Danish State Gurantee Spar Nord s share of the Sector Fund s contribution is approx. 2,25 per cent Minimum payment during the two-year period is approx. DKK 340m 2 x annual commission Maximum payment during a two-year period is approx. DKK 780m 2 x annual commission + loss guarantee + additional comission Each time DKK 1bn is lost in a Danish bank taken over by Finansiel Stabilitet, Spar Nord contributes with DKK 22,5m For Spar Nord Bank the state guarantee is expected to: Facilitate the access to funding and reduce funding costs Have a positive effect on interest income 15

16 Prime pricing cing power expected to be sustainable DKK Mio. mill. kr. 500 Net Nettorenteindtægter interest income DKK Mio. mill. kr Nettorenteindtægter interest income Q4 07 Q1 Q2 Q3 Q Pct. 5,5 5,0 Interest Rentemarginal in i DKK DKK (3 (3 mth. mdr. sliding glidende average) gns) Netto interest renteindtægters income relative andel to af core basisindtægter income 4,5 4,0 3, % 77% 3,0 Q4 07 Q1 Q2 Q3 Q4 16

17 Growth parameters 24 new local banks outside the North Jutland Region 15 established by organic growth 9 established by acquisition Great potential in new local banks already established Further market potential in local areas ability to outperform peers in terms of customer intake and volume growth Further potential for sector consolidation Leasing activities Establishment in Sweden Compared to banking, leasing is more resistant to changes in economic climate 17

18 Investing in growth The investment in organic growth since 2002 amounts to DKK 607m Since 2002, Spar Nord has opened 17 new branches and the subsidiary, SN Finans Nord AB, in Sweden. Business expansion intensified in 2006 and From profits will be boosted by new branches DDKm Cost / core income Costs Core income DDKb 8,0 6,0 4,0 2,0 0,0 0,7 1,7 Business volume 3,3 5,6 New Branches Year Month Herning 2002 November Vejle 2003 August Odense 2003 September Horsens 2004 May Fredericia 2005 December Kolding 2005 November Silkeborg 2006 May Næstved 2006 May Jebjerg 2006 July (Acquisition) Skive 2006 July (Acquisition) Finans Nord Sverige 2006 October Middelfart 2006 December Risskov 2006 December Slagelse 2007 March Køge 2007 March Ikast 2007 March Randers 2007 October Esbjerg 2007 December 7,

19 Outlook earnings from new branches DDKm 120 Cost earnings before impairments New branches Note: Retail branches organic growth 19

20 Acquisition of 7 branches from Roskilde Bank October customers 100 employees Loans: DKK 2.4bn Guarantees: DKK 0.8bn Deposits: DKK 1.6bn Expected earnings 2009: DKK 60-70m Spar Nord perspectives: Strengthened position in Zealand Payment of DKK 183m for goodwill and customer rights January customers 80 employees (goal end of 2009) Loans: DKK 1.4bn Guarantees: DKK 0.6bn Deposits: DKK 1.6bn Expected earnings 2009: DKK 35m Spar Nord perspectives: Strengthened position in Zealand Payment of DKK 123m for goodwill and customer rights spar nord Helsingør spar nord Slagelse spar nord Holbæk spar nord Roskilde spar nord Næstved spar nord Køge spar nord København 20

21 Outlook for 2009 Core earnings before impairment and contribution to Sector Fund: DKK m Sustained growth in net interest income Rising interest margin Growth in deposits and lending Downside: funding costs are expected to go up, as the margins connected with refinancing will be rising Slight decline in net earnings from fees, charges and commissions Downturn in customer activities in 2009 Market-value adjustments expected to normalize, i.e. become an income item 21

22 Outlook for 2009 Focus on costs Total number of employees expected to fall Growth outside North Jutland (incl. Roskilde ) Effects from branch mergers begin to materialize in old areas Growth in costs adjusted for Roskilde Bank and extraordinary 20 VAT-income: 5 pct. (gross: 12 pct.) Impairment of loans at bp Credit quality of loan book still high But business trends are adverse Guidance more uncertain than usual Contribution to Sector Fund >DKK 170m NB: The 2009 forecast takes into account extra financing costs in respect of hybrid core capital if the Bank's application to the Danish Government is granted 22

23 Rough times ahead Further hike in interest margin Further growth in NII Improved liquidity Further sector consolidation Focus on costs Contribution to state guarantee Recession Impairments and losses begin to show Refinancing Tier 2 capital 23

24 Key messages Well-diversified low-risk operation Asset quality among the very best Prudent monitoring of credit quality Firm focus on retail banking (personal customers and SME) Profitable expansion strategy in the long run! Unique business model inspired by franchise philosophy 24

25 Disclaimer Certain statements made in this presentation are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, expressed or implied, by the forward looking statements. Factors that might cause forward looking statements to differ materially from actual results include, among other things, regulatory and economic factors. Spar Nord Bank assumes no responsibility to update any of the forward looking statements contained herein. No representation or warranty, express or implied, is made or given by or on behalf of Spar Nord Bank or its directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation. None of Spar Nord Bank or any of its directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Spar Nord Bank, nor shall it or any part of it nor the fact of its distribution from the basis of, or be relied on in connection with, any contract or investment decision. [Insert current date] 25