BRFKREDIT INTERIM REPORT Q Published 28 April 2016

Transcription

1 BRFKREDIT INTERIM REPORT 2016 Published 28 April 2016

2 Agenda Financials 2016 Capital and Rating Credit quality and the housing market Funding Appendices 2

3 The positive trend continues Positive developments in BRFkredit Pre-tax profit was DKK 298m for This is equal to a ROE on 10.1 % p.a (compared to 2015) Core earnings before loan impairment charges rose by 3 % Core profit rose by 64 % Costs reduced with 12 % Wages reduced with 11 % Loan impairment charges at a low level Value adjustment are no longer affected by the transfer of of BRFkredit Bank assets to Jyske Bank Expectations for rest of 2016 Core earnings is expected to increase as a consequence of a growing lending portfolio Loan impairment charges are expected to continues at a low level Core profit and net profit for the period DKKm Core operations Indeks 16/15 Contribution income, etc Other net interest income 1) Net fees, charges and commission income etc Value adjustments Other income Core earnings Core expenses Core earnings before loan impairment charges etc Loan impairment charges etc Core profit Earnings from investment portfolios Pre-tax profit Tax Net profit or loss for the period ) Of which cost of capital

4 DKKm Increasing return on core capital Return on Equity of 10.1 % p.a. One joint distribution channel within the group Possible to establish customers within the group with both banking and mortgage products Funding of JB Mortgage loans Total funding of DKK 46bn Lower marginal costs to growth in lending segments Lending to commercial segment Positive growth in commercial lending since 2012 Lower operating costs Lower capital costs Decreased with DKK 100m since 2013 Decreasing requirements from rating institutes and lower SDO-requirements Impairment charges TTC Impairments on pre-crisis level Pre tax result (DKKm) and ROE p.a. (%) * Pre-tax result ROE p.a. (rhs) *Annualised 12% 10% 8% 6% 4% 2% 0% -2% -4% 4

5 Financials - selected graphs Income (DKKm) Cost/income (%) Impairment charges and reversals (DKKm) Net fees and commision income Net interest income * *Annualised New impairment charges Reversals % 60% 55% 50% 45% 40% Balance of loan impairments in % of lending 0,9% 0,8% 0,7% 0,6% 0,5% 63.0% 0.55% 56.2% Merger with Jyske Bank 0.78% 49.6% % 0.55% 42.7% -300 Q Q Q Q ,4%

6 BRFkredit Balance sheet Balance sheet stood at DKK 281bn ( 2015: DKK 268bn). An increase of 5% compared to 2015 despite transfer of banking activities Mortgage Loans stood at DKK 259bn ( 2015: DKK 231bn) Jyske Bank has granted DKK 53.5bn of mortgage loans by the end of From these DKK 46.1bn were taken on the balance by BRFkredit Summary balance sheet, end of period DKKm Bank loans Indeks 16/15 2,668 - Mortgage loans 259, , Bonds and shares etc. 11,243 27, Total Assets 280, , Payables to credit institutions and central banks 256 6,204 4 Bank deposits - 4,554 - Issued bonds at amortised cost 4,715 5, Issued bonds at fair value 1) 260, , Equity 12,014 11, Equity stood at DKK 12,014m as of 31 March The increase compared to end 2015 is due to positive results for all the last four quarters 6

7 Agenda Financials 2016 Capital and Rating Credit quality and the housing market Funding Appendices 7

8 Expected fully implemented CRD IV & Danish SIFI demands Countercyclical buffer (2.5%) 14 SIFI buffer (1.5%) Capital conservation buffer (2.5%) Pillar II (2.5%) 2.5% 1.5% 2.5% CET 1 (18.8%) 6 3.0% 4 Pillar I (8.0%) 2 4.5% 0 Expected fully phased in CRD IV ratios by 2019 Expected CET1 components required 2019 BRFkredit capital position 31 December 2015 *) he countercyclical buffer depends of the development of the Danish economy from 2016 and to 2019 The solvency need is expected to be at 17 % in 2019 (including the worst scenario of the countercyclical buffer), of which 13.5 % should be covered with core equity BRFkredit is already compliant with the fully implemented requirement 8

9 % of total lending Rating Implementation of new criteria for mortgage bonds In the new criteria implemented by S&P in 2015, the rating of the covered bond is more dependent on the issuer rating than previously The overcollateral should at least cover the S&P AAA credit risk. The need to cover the refinancing risk is dependent of the number of free notches above AAA BRFkredit cover the total OC-requirement independent of free notches Rating Standard and Poor s BRFkredit A- Outlook Stable Capital Center B AAA Capital Center E AAA Capital Center General AAA Free notches over AAA 2 New criteria for lending to commercial segment The criteria uses higher haircuts on commercial property values The implementation has led to higher OC-requirements for capital centers with a high concentration of commercial lending Types of overcollateral Overcollateral required by S&P to keep AAA is placed exclusively in AAA rated Danish mortgage bonds and in Danish government bonds Rating requirement and overcollateral 8% 7% 6% 5% 4% 3% 2% 1% 0% OC requirement for AAA S&P requirement AAA rated mortgage bonds and Danish government bonds Overcollateral 9

10 Agenda Financials 2016 Capital and Rating Credit quality and the housing market Funding Appendices 10

11 Housing market Housing prices increased with 6.4 % in 2015 and the prices on apartments increased with 10.8 % Positive trend in the market in 2016 despite slowly improvements in the Danish economy A steady growth is expected in 2016 as a consequence of a weak economic growth and tighter credit policies The housing burden is expected to remain at a low level Regional development in prices (indeks 2000 = 100) Capital Sealand South Denmark Central Jutland North Jutland Source: Federation of Danish Mortgage Banks Housing burden (indeks 2000 = 100) % 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Houses Capital Sealand South Denmark Apartments Central Jutland Source: BRFkredit Expected regional population growth ( ) North Jutland Source: Statistics Denmark 11

12 Geographical exposure East east strategy The primary geographical exposure of BRFkredit is in areas with increasing house prices and expected population growth Relatively low losses in urban areas during the financial crisis High tradebility prevent losses Through Jyske Bank the growth in the eastern part of Jutland is expected to continue Loss in 2015 for housing properties 4 % of lending Average yearly loss (% of lending) 0,8% 0,7% 0,6% 0,5% 0,4% 0,3% 0,2% 0,1% 17 % of lending 3 % of lending 47 % of lending 0,0% Copenhagen and Aarhus areas Rest of Denmark 12

13 Distribution of portfolio Mainly lending to housing properties 87 % of lending to 87 % to housing purposes Expected increase in owner-occupied lending Relatively high proportion of lending to subsidised No lending to cooperative housing with interest swaps No lending to agriculture and other primary production Distribution of property types Distribution of lending types Loans moving out of the interest curve A larger proportion are choosing F3-F5 Still a relative large proportion of loans with yearly fixing of interests rate 34% 20% F1-F2 F2-F10 As a consequence of the low 30 year fixed interest rate many borrowers have converted to this loan Floaters mainly for corporate customers 11% 35% Floater 30 years fixed rate 13

14 Credit quality Lending in 90-days arrears (per cent of lending) 2,0% 1,8% 1,6% 1,4% 1,2% 1,0% 0,8% 0,6% 0,4% 0,2% 0,0% Yearly realised losses (running year) 0,5% 0,4% 0,3% 0,2% 0,1% 0,0% Q Q Q Q Q Q Private Commercial Subsidised Q Private Commercial Subsidised Q Repossessed properties (DKKm/number) Loan-to-Value brackets (per cent of lending) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Commercial properties Private properties # Commercial properties (rhs) # Private properties (rhs) 2% 2% 2% 1% 5% 5% 4% 3% 12% 12% 12% 11% 20% 20% 20% 21% 24% 25% 25% 26% 35% 36% 37% 37% %-20% 20%-40% 40%-60% 60%-80% 80%-100% >100% Gns. LTV (h.a.) % 75% 70% 65% 60%

15 Improvement in credit policies Realised losses (%) by year of disbursment and proportion of total portfolio after year of disbursment 5,0% 4,0% 3,0% 2,0% 1,0% 30% 25% 20% 15% 10% 5% 0,0% Realised losses Proportion of total lending (rhs) 0% *Proportion of total lending is based on the last new loan (not a conversion) made by the customer Tightening of credit policies in 2008 and 2009 has led to a decreasing number of losses Full information on the customer for new lending from 2009 and better monitoring of the customer after the payment of the loan Many new customers are already known to the group Impairment charges on new customers are expected to stay low 15

16 Agenda Financials 2016 Capital and Rating Credit quality and the housing market Funding Appendices 16

17 Funding profile Bring down dependence of short term funding as a consequence of requirements from S&P and the supervisory diamond Increased margins and quotation cuts on short term funded loans (F1 og F2) Funding of short funding loans (F1 og F2) with RTL-F Bond has a legal maturity of three years, but BRFkredit will try to refinance on a yearly basis (F1) or every second year (F2) The RTL F improves S&P s refinancing benchmarks for BRFkredit: Long term funding compared to total funding needs (SFR) and liquid assets compared to short term funding needs (BLAST) Funding of short term funding loans (F1) with longer maturing bonds and derivatives only for joint funding loans Funding of F1-loans with bonds with a maturity of 3 to 5 years Funding of F1-loans longer maturing EUR bonds Interest- and currency risk fully covered by derivatives Ensure liquidity in issued bonds from BRFkredit Funding of bonds with a maturity of 2 to 10 years financed and refinanced in April Funding of F1 and floaters spread out between the other auctions Funding of loans in SDO capital center (E) 17

18 Refinancing Refinancing profile 2014 Refinancing profile % Funding with yearly refinancing 5% 7% Funding with yearly refinancing 39% Funding with refinancing within the next year 38% Funding with refinancing within the next year 7% Refinancing after more than one year Refinancing after more than one year Other funding types (Fixed rate and others) 50% Other funding types (Fixed rate and others) 30% Planlagt refinansiering Repayment date Planned refinancing (amount offered) Maturities per refinancing dates Funding Maturities per refinancing dates + 2 years (RTL F) Loan F1 F3 F5 Other October January April Rest of

19 EUR funding of DKK loans BRFkredit is the only Danish mortgage institute to issue Danish covered bonds under the joint funding agreement Funding of bank loans through bonds issued by mortgage institutes Funding of subportfolios of loans Exempt from the strict micro match of loans and funding The joint funding agreement allows BRFkredit to finance DKK mortgage loans by European market standard non callable EUR covered bond bullet structures by use of derivatives Danish legal framework (L89): soft bullet The EUR funding can be applied to existing and new loans But can only be applied to loans within the Joint Funding agreement Derivatives used to hedge risks fully: In accordance with covered bond ISDA/CSA and S&P requirements Unilateral CSA in favour of BRFkredit 19

20 Details on first EUR covered bond Investor distribution* Geographical distribution* Transaction details Issuer BRFkredit A/S Issue Ratings (exp) AAA Issue Size EUR 500m Status Danish Legislative Covered Bond Maturity Data 1 April 2021 Value Date 23 March 2016 Coupon 0.25 % Re-offer Price/Spread % / MS +20 bps ISIN XS Banks 45% Funds and AM 30% Central Banks & OI 16% Insurances &Pensions Funds 8% Others 1% *All figures are based on allocated amounts Germany and Austria 63% Nordics 28% Switzerland 3% France 2% Others 4% On the back of an order book of around EUR 1.3 bn, with close to 60 investors participating, the final spread was fixed at MS +20bps The issue currently trades around MS + 14 bps area BRFkredit is committed to building a curve in the euro covered bond market Looking at the possibility of executing second benchmark deal later in Page 20

21 The Supervisory Diamond for mortgage institutes The Supervisory Diamond takes effect as of yet not until 2020 in respect of interest-only and loans subject to refinancing BRFkredit expects to be compliant before the supervisory diamond takes effect take effect. Due to the expected lending growth in 2016 BRFkredit will not comply with the growth benchmark in the private segment. The expected growth is made by customers already known to the group. However, it is expected that BRFkredit will also comply with this benchmark in 2018 BRFkredit has already implemented initiatives to comply with the supervisory diamond BRFkredit has raised prices on loans with floating interest rates and loans with interest only schemes, and BRFkredit has lowered the prices on loans with fixed interest rate and amortization Benchmark 2016 Q Concentration risk < 100 % 84.5% 77.8% Increase in loans - Owner-occupied home and vacation homes < 15% 23.1% 25.4% - Residential rental property < 15% 8.0% 5.8% - Agriculture < 15% Other sectors < 15% 6.6% 4.3% Borrower's interest-rate risk - Residential properties < 25% 27.8% 27.0% Interest-only schemes - Owner-occupied home and vacation homes < 10% 10.0% 10.6% Loans with frequent interestrate fixing - Refinancing (annually)* < 25% 22.5% 24.0% - Refinancing (quarterly) < 12,5% 3.5% 3.9% *Last 12 months 21

22 Contact information Chief Executive Officer Carsten Tirsbæk Madsen Director, Fixed Income André Hauberg Group Treasurer Anders Lund Hansen Executive Vice President Lars Waalen Sandberg Head of Rating & IR Christian Bech-Ravn BRFkredit a/s Klampenborgvej 205 DK-2800 Kgs. Lyngby Phone: Fax:

23 Agenda Financials 2016 Capital and Rating Credit quality and the housing market Funding Appendices 23

24 Portfolio composition 2016 Portfolio by Loan to Value (LTV) Portfolio split by property category Cap B 31% 26% 21% 14% 6% 2% Cap B 40% 2% 31% 25% 2% Cap E 37% 27% 22% 11% 3% 1% Cap E 55% 16% 16% 11% 2% Total 37% 26% 21% 11% 3% 1% Total 51% 18% 18% 12% 2% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% 0%-20% 20%-40% 40%-60% 60%-80% 80%-100% >100% Average LTV by property segment Owner occupied & vacation housing Private rental housing Other properties Portfolio split by geography Subsidised housing Office & business properties Average LTV by property segment Total Kap E Kap B Owner occupied & vacation housing Subsidised housing Private rental housing Office & business properties Other properties Lending, average LTV Total lending (DKK bn) Source: Cover Pool rapport per 2016 Cap B 41% 19% 5% 17% 18% Cap E 46% 13% 7% 19% 15% Total 46% 13% 7% 19% 15% 0% 20% 40% 60% 80% 100% Greater Copenhagen area Remaining Sealand and Bornholm Northern Jutland Central Jutland Southern Jutland and Funen Outside Denmark 24

25 BRFkredit senior secured and senior debt As of 31 th March 2016 Senior secured bonds and senior debt Covered bonds legislation (SDO) require on-going monitoring of Capital Centre E BRFkredit provides additional security on a loan-by-loan basis Proceeds from the bond issues below is part of ensuring a sufficient over-collateralisation ISIN Name Issuer Type Currency volume * Maturity DK Var. BRFkredit 322.JCBE 2016 Capital Centre E SSB DKK 1, XS ,5% BRFkredit EMTN Senior 2018 BRFkredit a/s Senior debt EUR Note * Volume per 31 March 2016 as million in the currency stated 25

26 Disclaimer Disclaimer The information in this material (hereinafter the Information ) has been compiled by BRFkredit a/s (hereinafter BRFkredit ) for informational purposes only. The Information is solely based on information accessible to the public. The Information is believed to be reliable. However, BRFkredit does not guarantee the timeliness, sequence, accuracy, correctness, adequacy, or completeness of the Information or opinions contained therein. The Information does not constitute an offer to sell or the solicitation of an offer to buy any securities mentioned in the Information. BRFkredit makes no representation and gives no advice concerning the appropriate legal treatment, regulatory treatment, accounting treatment or possible tax consequences in connection with an investment in securities mentioned in the Information. Before proceeding with any such investment, investors should determine, without reliance upon BRFkredit, the economic risk and merits, as well as the legal, tax, regulatory and accounting characteristics and consequences, of such an investment and that investors are able to assume these risks. Investors should conduct their own analysis, using such assumptions as they deem appropriate in making an investment decision. BRFkredit does not accept any liability for any loss, howsoever arising, directly or indirectly from the issue of the Information or its contents including transactions made based on information therein. BRFkredit and/or other companies of the BRFkredit Group are financial institutions that trade in securities. Any company in the BRFkredit Group may buy, sell or hold positions in the securities mentioned in the Information, just as these companies may be involved in activities involving companies mentioned herein. The Information is being directed at you solely in your capacity as a relevant person for your information and may not be reproduced or redistributed or passed on to any other person or published in whole or in part, for any purpose, without the prior written consent of BRFkredit. Relevant persons are persons who have professional experience in matters relating to investments in securities mentioned in the Information and to whom the Information may be lawfully communicated. The Information may not be acted on or relied on by persons who are not relevant persons. For further information please visit General sources of information Organisation Danish name Link Association of Danish Mortgage Banks Realkreditrådet NASDAQ OMX Copenhagen A/S Nasdaq OMX København The Danish Central Bank Danmarks Nationalbank Statistics Denmark Danmarks Statistik ECBC Covered Bond Label ECBC Covered Bond Label 26