Nova Ljubljanska Banka d.d. · LJSE:NLBR
Nova Ljubljanska Banka d.d — Q3 2018 Earnings Presentation
60 slides from Nova Ljubljanska Banka d.d's earnings presentation, 2018
Slide 1: NLB Group Presentation 3Q 2018 Results
NLB Group Presentation 3Q 2018 Results
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Nova Ljubljanska banka d.d., Ljubljana (the "Company"). This presentation has been prepared solely for the purpose of informative presentation of the business conduct of the Company. This presentation has not been approved by any regulatory authority
Slide 3: NLB's Management Board
NLB’s Management Board BLAŽ BRODNJAK ARCHIBALD KREMSER Chief Executive Officer (CEO) Chief Financial Officer (CFO) Chief Marketing Officer (CMO) Led NLB’s restructuring since Jul-13 Led NLB’s restructuring since Dec-12 Over 19 years of experience in financial Over 19 years of experience in f
Slide 4: NLB Group
NLB Group From restructuring phase to growth phase Shareholder structure(1) 2008 – 2012 2012 – 2013 2013 – 2016 2016 – today By Investor type Geographical structure Western Other Recap. & Europe 4% Financial crisis Focus on Northern balance sheet Restructuring Europe 2% & weak macro growth cleanup 4
Slide 5: NLB Group – Top position across target SEE countries
NLB Group – Top position across target SEE countries Unified brand across 6 countries Leading franchise in the region based on total assets, compared to other banks present in the same countries, with network of 349 branches and 1.8m active clients in Slovenia and SEE region The only internation
Slide 6: From restructuring phase to growth phase
From restructuring phase to growth phase Enhancement of organic income Return to solid profitability Restarted dividends to shareholders Net interest income (EURm) Profit after tax (attributable to shareholders, EURm) Dividends (attributable to shareholders, EURm) NIM (%) 1.6% 2.6% 225 270.6 309 234
Slide 7: Overview of NLB Group – Key figures P/L
Overview of NLB Group Key figures – P/L Change in EUR million / % / bps 1-9 2018 1-9 2017 YoY Q3 18 Q2 18 Q3 17 Key Income statement data (in EUR million) Net operating income 369.0 365.3 1% 125.9 112.7 124.2 Net interest income 231.9 228.7 1% 80.2 76.7 80.1 Net non-interest income 137.1 136.6 0% 45
Slide 8: Overview of NLB Group – Key figures B/S
Overview of NLB Group Key figures – B/S Change Change 30 Sept 2018 31 Dec 2017 30 Sept 2017 YoY YtD Key financial position statement data (in EUR million) Total assets 12,784 12,238 12,008 6% 4% Loans to customers (gross) 7,619 7,641 7,788 -2% 0% Loans to customers (net) 7,081 6,994 6,989 1% 1% o/w
Slide 9: EC Commitments
EC Commitments Pursuant to EC decision of 10 August 2018, NLB and RoS must comply with certain commitments until specified deadlines. Risk management and credit policies commitment (minimum specified RoE on either individual loan or each client relationship): currently ceased to apply due to divestm
Slide 10: Investment highlights
Investment highlights
Slide 11: Investment highlights of NLB Group
Investment highlights of NLB Group National champion in Slovenia and among top players in targeted SEE markets 1 The largest banking and financial group in Slovenia, with unique track record in innovation 2 Leading positioning in high-growth SEE markets 3 Diversified credit portfolio, free of legacy
Slide 12: Investment highlights of NLB Group
Investment highlights of NLB Group National champion in Slovenia and among top players in targeted SEE markets The largest banking and financial group in Slovenia, with unique track record in innovation 1 108 branches(1) and 23.5%(1) market share (by total assets), supported by innovative web and
Slide 13: Dominant player in the Slovenian banking sector
1 Dominant player in the Slovenian banking sector Leading player across products in Slovenia 20.4 % Net loans to 4,514 1.9x customers(1) 2,393 2,176 1,955 1,851 EURm 24.6% 6,987 1.9x Customer 3,709 2,880 2,415 2,052 deposits(1) EURm 108 1.8x 60 57 55 52 Branch network(2) # % Market share as of Sep-1
Slide 14: Dominant player in the Slovenian banking sector – Retail banking
1 Dominant player in the Slovenian banking sector Retail banking High and stable market shares across products in Retail segment Retail net loans in Slovenia Retail deposits in Slovenia NLB market NLB market 30.2% 30.4% 30.7% 30.4% (1) share 23.9% share Δ% vs 23.5% 23.4% 23.3% 17,575 Dec-15 15,956 1
Slide 15: Dominant player in the Slovenian banking sector – Corporate banking
1 Dominant player in the Slovenian banking sector Corporate banking Leading market share across products(2) #1 in corporate and state loans #1 in corporate and state deposits #1 in guarantees and letters of credit EURbn EURbn EURm 19.0% 2.4 14.7% 1.5 26.9% 571 10.4% 1.3 11.1% 1.1 13.2% 281 Strong gr
Slide 16: Unique track record of innovation
1 Unique track record of innovation The pioneer of banking innovation in Slovenia Demonstrated success in moving to digital Mobile bank users(1) (‘000s) Online bank users(1) (‘000s) 9% 16% 25% 34% 30% 33% First Slovenian bank to launch contactless cards In 2017, ~30,000 inactive NLB Klik users syste
Slide 17: NLB Group – Leading Franchise in High Growth SEE Markets
2 NLB Group – Leading Franchise in High Growth SEE Markets NLB d.d. & 6 subsidiary banks operate in Slovenia (EU member) & 5 SEE countries (convergence to EU) Slovenia EUR Serbia RSD GDP (EURbn) 43.0 GDP (EURbn)(1) 36.8 Real GDP growth (%) 4.9 Real GDP growth (%) 1.9 Population (m) 2.1 Population (m
Slide 18: Consistent volume and revenue growth in banking subsidiaries
2 Consistent volume and revenue growth in banking subsidiaries Net interest income (EURm) Profit after tax (EURm) CAGR ’15 - 17 8% 146 137 95 125 18 4 15 108 111 14 14 24 25 23 63 5 83 17 16 8 78 15 +2.4% 11 2 17 18 43 24 -6.1% 16 1 5 5 18 18 8 17 6 14 4 40 46 50 10 41 25 13 2015 2016 2017 Q3'17 Q3'
Slide 19: Investment highlights of NLB Group
Investment highlights of NLB Group National champion in Slovenia and among top players in targeted SEE markets 1 The largest banking and financial group in Slovenia, with unique track record in innovation 2 Leading positioning in high-growth SEE markets Diversified credit portfolio, free of legacy i
Slide 20: Diversified credit portfolio
3 Diversified credit portfolio Focused on its core markets and cautious risk taking Credit portfolio(1) by segment and geography • No large concentration in any specific industry or client (Group, Sep-18) segment Institutions Kosovo Serbia (2) 6% SME 6% 5% • NLB’s lending strategy focuses on its cor
Slide 21: NLB has achieved a turnaround in asset quality
3 NLB has achieved a turnaround in asset quality Further improvements driven by active NPL management and economic recovery Gross NPL formation has been low Active workout drove gross NPL ratio Reduction of NPLs remains a key since 2014 (Group, EURm) down despite falling loan volumes focus Formation
Slide 22: NPLs fully covered by provisions and collateral
3 NPLs fully covered by provisions and collateral NPL ratio remains high in Corporate and SME segments (15.8%); 10 p.p. reduction since December 2016 Total coverage exceeds 100% across segments (Sep-18) Retail Corporate State Banks Total Group Corporate & SME NPLs by industry (Sep-18) & SME Food
Slide 23: Investment highlights of NLB Group
Investment highlights of NLB Group National champion in Slovenia and among top players in targeted SEE markets 1 The largest banking and financial group in Slovenia, with unique track record in innovation 2 Leading positioning in high-growth SEE markets 3 Diversified credit portfolio, free of legacy
Slide 24: Group refocused on profitable activities
4 Group refocused on profitable activities Core Slovenia Core members Non-core % of assets 18% 16% 30% 32% 2% (Sep 18)(1) Retail banking Corporate banking Financial markets(2) Foreign strategic markets • Assets booked under NLB d.d. or non-core subsidiaries • Largest retail banking • Market leader i
Slide 25: Strong revenue performance driven by stable NIM and resilient fee income
4 Strong revenue performance driven by stable NIM and resilient fee income Lower reinvestment rate compared to assets maturing Stable NIM (Group, %) resulting in decreasing net interest income (Group, EURm) 443 388 4.2 364 4.0 4.0 4.0 271 267 340 317 2.8 2.6 309 2.6 2.5 229 232 0.8 0.5 0.3 -42 -35 0
Slide 26: Continuous cost reduction since 2012
4 Continuous cost reduction since 2012 Operating expenses reduction (Group, EURm) …with stable costs in Q3’18 (Group, EURm) 368 % CAGR 12-17 285 287 (1)12 208 210 -32 -5% +1% 197 -27 Other(2) Wages & 21 21 1% Wages & -23 22 Non-core salaries salaries 165 -3% General EUR 82m OpEx reduction 121 122 2%
Slide 27: Double-digit increase in profit before tax since 2015
4 Double-digit increase in profit before tax since 2015 One-off items Normalising NLB Group profit before tax (Group, EURm) •1 Exceptional items: Reported PBT Normalised PBT 2018: CAGR ’15-’17 CAGR ’15-’17 • EUR 12.2m gain on sale of the NLB Nov penziski fond, Skopje 49% 43% • EUR 0.5 loss on sale o
Slide 28: Funding structure driven by stable and price insensitive deposit base
5 Funding structure driven by stable and price insensitive deposit base Deposits accounting for 96% of funding (Group, EURm) Deposit split (Group, EURm) Loans / % total Deposits 75% 74% 71% 69% Sep-18 funding as Mar-17 ratio of Sep-18 Term 10,635 10,247 10,242 10,300 9,879 36% 10,087 2.6% 9,439 280
Slide 29: Well-capitalised franchise…
5 Well-capitalised franchise… Capital position fully reflective of IFRS9 impact, with very low reliance on Well above regulatory requirements and DTAs (Group, EURm) NLB’s management target (%, Group) EURm 1,336 1,362 44 28 109 -81 nm 1,458 17.0% 0.3% 1.3% 15.9% 0.5% ~17.0% Key changes in 2019: -1.0%
Slide 30: … with a strong dividend potential
5 … with a strong dividend potential Solid dividend distribution (NLB d.d., EURm) • NLB has been paying dividends since 2015 increasing payout year on year 2015 2016 2017 • In September 2018, NLB applied for formal approval with ECB NLB d.d. profit 44 64 189 to pay-out dividends in the total amount
Slide 31: Investment highlights of NLB Group
Investment highlights of NLB Group National champion in Slovenia and among top players in targeted SEE markets 1 The largest banking and financial group in Slovenia, with unique track record in innovation 2 Leading positioning in high-growth SEE markets 3 Diversified credit portfolio, free of legacy
Slide 32: Clear strategy to address current challenges
6 Clear strategy to address current challenges Key challenges Sector and regulation Macro Social and consumer Products and technology • Regulatory interventions • Low interest rate environment • More demanding and • Product competition from new, knowledgeable clients lower-cost entrants (fintech) •
Slide 33: Medium-term objectives
6 Medium-term objectives Delivering growth, sustainable returns and attractive payout to shareholders Drivers and opportunities Medium-term targets set in 2018(1) Q3’18 Medium term Strong economic growth in Slovenia and international markets NIM 2.5% >2.7%(5) Improving macro Improved consumer co
Slide 34: Investment highlights of NLB Group
Investment highlights of NLB Group National champion in Slovenia and among top players in targeted SEE markets The largest banking and financial group in Slovenia, with unique track record in innovation 1 108 branches(1) and 23.5%(1) market share (by total assets), supported by innovative web and
Slide 35: Appendix A: IT and digital
ef Appendix A: IT and digital vo ) NLB Group
Slide 36: Medium-term objectives in IT and Digital
Medium-term objectives in IT and Digital Leverage digital and data to enhance our business model Strategic objectives Strategic initiatives 1 Risk scoring models Improve Data collection Behavioral models to inform customer Data extrapolation Data insights individualised customer offers insig
Slide 37: NLB Group synergy opportunities
NLB Group synergy opportunities Group synergies are being addressed in all functional areas IT competence center Process (System) competences Established predominantly for subsidiary banks Introduction of lean principles is underway Core banking maintenance and development operating since the
Slide 38: Appendix B: Macro Overview
Appe Macro Overview vo ) NLB Group
Slide 39: Macro Overview
Macro Overview Economic data Fiscal data Monetary data • • Positive momentum for higher lending Most countries are likely to grow at • Environment for necessary reforms around 3.5% - 4% if supported by volumes seen ahead. seen slightly improved. loose monetary conditions, fiscal • As loan to deposit
Slide 40: Macro Overview – Economic data
Macro Overview – Economic data Real GDP growth, % KEY FINDINGS: 6.0 5.0 Following a year of stagnation, the 4.0 Macedonian economy is expected to recover over the next two years, 3.0 gradually catching up with regional peers 2.0 in the SEE. % 1.0 0.0 Serbian real GDP growth also used to lag behind s
Slide 41: Macro Overview – Economic data
Macro Overview – Economic data Average inflation rate, CPI % KEY FINDINGS: 9.0 8.0 There seems to be a favourable inflation 7.0 development in all countries. Minor 6.0 pressures noted in Serbia, yet with no 5.0 material impact on the local currency. 4.0 % 3.0 CPI continues to be driven by 2.0 exogen
Slide 42: Macro Overview – Economic data
Macro Overview – Economic data Unempoyment rate, ILO KEY FINDINGS: 40.0 Despite strong growth, unemployment is 35.0 projected to stay at relatively high levels 30.0 across the whole region. 25.0 The only country with significant % 20.0 improvement is Serbia, while in BiH and 15.0 Montenegro even inc
Slide 43: Macro Overview – Economic data
Macro Overview – Economic data Current account, % GDP KEY FINDINGS: 10.0 Huge difference between countries due to 5.0 various reasons. CA deficit being covered 0.0 either by capital inflows or remittances. % -5.0 Montenegro continues to underperfom heavily in the region. -10.0 Mounting political ris
Slide 44: Macro Overview – Economic data
Macro Overview – Economic data Total reserves, import coverage in months KEY FINDINGS: 8.0 7.0 Total reserves expressed as import coverage in months remain stable and 6.0 seems sufficient. 5.0 % 4.0 Favorable trendline adds to the stability of foreign exchange rate in Serbia, 3.0 Macedonia, and BiH.
Slide 45: Macro Overview – Fiscal data
Macro Overview – Fiscal data Fiscal Balance, % GDP KEY FINDINGS: 4.0 2.0 A slight deterioration in the fiscal 0.0 performance throughout the region -2.0 expected for 2019-20. -4.0 BiH and Serbia are expected to keep % -6.0 balanced public finances, while budget -8.0 deficit will stay at relatively h
Slide 46: Macro Overview – Fiscal data
Macro Overview – Fiscal data Public Debt, % GDP KEY FINDINGS: 100.0 90.0 Public debt varies intensively between 80.0 the countries. 70.0 Slow convergence of public 60.0 endebtedness is projected. Reduction of % 50.0 public debt is expected in BiH, 40.0 Montenegro, and Serbia while an 30.0 increase i
Slide 47: Macro Overview – Monetary data
Macro Overview – Monetary data Loans growth (NFIs + Households), % KEY FINDINGS: 15.0 Encouraging prints of credit growth in 10.0 both corporate and retail segment, much 5.0 higher than in EMU. 0.0 Among SEE peers Kosovo is the leader % -5.0 with double-digit loan growth. -10.0 Serbia is lagging beh
Slide 48: Macro Overview – Monetary data
Macro Overview – Monetary data Total Loans (NBS), % GDP KEY FINDINGS: 120.0 Entire region way below EMU average 100.0 with an excellent growth potential. 80.0 Stable loan to GDP ratio in BiH, Macedonia and Serbia. % 60.0 In Slovenia and Montenegro share of 40.0 loans in GDP exhibits negative trend,
Slide 49: Macro Overview – Monetary data
Macro Overview – Monetary data Deposits growth (NFIs + Households), % KEY FINDINGS: 16.0 There are substantial differences in 14.0 deposit growth numbers. 12.0 Montenegro has the highest growth with 10.0 13.8 % and is far ahead of the rest. % 8.0 On the other end of the spectrum, Serbia 6.0 (+3.1 %)
Slide 50: Macro Overview – Monetary data
Macro Overview – Monetary data Total Deposits (NBS), % GDP 90.0 KEY FINDINGS: 80.0 Stable deposit to GDP ratio in Macedonia 70.0 and Slovenia. Growing trend in the rest of the region with highest increase in 60.0 Montenegro. % 50.0 Across the whole region the share of 40.0 deposits in GDP is lower t
Slide 51: Appendix C: Financial statements
Appendix C: Financial statements
Slide 52: Key financial data and performance – NLB Group (1/2)
Key financial data and performance NLB Group (1/2) FY’15 FY’16 FY’17 Q3’17 Q3’18 Net interest income 340 317 309 229 232 Net fee and commission income 147 146 155 115 120 Income from financial operations 4 20 27 22 12 Other Income -8 -7 -3 -1 5 Operating Income 483 476 488 365 369 Staff costs -163 -
Slide 53: Key financial data and performance – NLB Group (2/2)
Key financial data and performance NLB Group (2/2) Dec-15 Dec-16 Dec-17 Sept-18 ASSETS Cash and balances with Central Banks 1,162 1,299 1,256 1,557 Financial instruments(1) 2,973 2,863 3,045 3,278 Loans and advances to banks (net) 432 436 510 402 Loans and advances to customers 6,693 6,912 6,913 7,0
Slide 54: Key financial data and performance – NLB d.d. (1/2)
Key financial data and performance NLB d.d. (1/2) FY’15 FY’16 FY’17 Q3’17 Q3’18 Net interest income 208 175 159 116 118 Net fee and commission income 98 95 99 73 75 Income from financial operations 9 13 17 15 7 Other Income 12 29 56 48 55 Operating Income 327 313 330 252 255 Staff costs -102 -103 -1
Slide 55: Key financial data and performance – NLB d.d. (2/2)
Key financial data and performance NLB d.d (2/2) Dec-15 Dec-16 Dec-17 Sept-18 ASSETS Cash and balances with Central Banks 497 617 570 821 Financial instruments(1) 2,482 2,380 2,542 2,761 Loans and advances to banks (net) 345 408 462 380 Loans and advances to customers 4,826 4,844 4,588 4,514 Investm
Slide 56: SEE banks continuing solid performance in Q3'18
SEE banks continuing solid performance in Q3’18 Profitability improvement across all markets in SEE, with 18% pre-provision income growth y-o-y Growing credit portfolio in all markets, with aggregate deposits balance marginally up q-o-q Reversal of pool provisions represents EUR 12m of total P
Slide 57: Appendix D: Asset quality
TIN Appendix D: Asset quality vo ) NLB Group
Slide 58: Overview of asset quality metrics
Overview of asset quality metrics NLB’s prudent NPL definition includes >90dpd loans and other loans to borrowers considered “unlikely-to-pay” with delays below 90 days, with categorisation on borrower level 90dpd loans correspond to 4.5% of credit portfolio Credit portfolio to exposures bridge
Slide 59: Demonstrated impact to asset quality
Demonstrated impact to asset quality Impact on NPL ratio (Dec-13 to Sep-18, Group, EURm) NPL Comments 25.6% 7.6% ratio • Cured clients, collections and 525 collateral liquidation contributed 2,798 40% of NPL stock reduction since -133 Dec-13 40 • Sale of NPL portfolio in Q2’16 NPLs from loans grante
Slide 60: NPL cash and total coverage remain high
NPL cash and total coverage remain high at 76% and 142%, respectively, in Sep-18 Coverage for the Group (%) Corporate & SME 126% 134% 133% 136% 119% 65% 66% 72% 69% 70% 144% 142% 128% 134% 64% 123% 54% 60% 61% 63% Core Slovenia Dec-14 Dec-15 Dec-16 Dec-17 Sep-18 58% 67% 66% 54% 56% Cash coverage Col
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