Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q1 2017 Earnings Presentation
49 slides from Jyske Bank A/S's earnings presentation, May 2, 2017
Slide 1: Jyske Bank Q1 2017
G JYSKE BANK Jyske Bank Q1 2017 2 May 2017
Slide 2: Our targets
Our targets Q1 2017 • Delivering an attractive long-term return on equity of 8-12% 12.3% • Volume growth DKK 84.3bn • DKK 100bn in housing-related loans • DKK 20bn in property loans for corporate clients DKK 13.6bn • Maintaining a strong capital position 17.6% and – Long-term targets for capital rat
Slide 3: Jyske Bank in brief
Jyske Bank in brief • One of the four large financial institutions in Denmark and a Danish SIFI – 3 segments (Banking, Mortgage and Leasing) – Estimated market share of 10-11% – Danish play – Approx. 890,000 customers – Nationwide branch network comprised of 95 personal client branches, 30 corporate
Slide 4: Jyske Bank Group key figures
Jyske Bank in brief Jyske Bank Group key figures Profit Net Shareholders' ROE after tax, Loans and Total before tax, profit, equity at year- opening advances, Deposits, assets, Number of DKKm DKKm end, DKKm equity DKKbn DKKbn DKKbn FTEs 1997 584 443 4,772 11.5% 36.6 41.5 63.1 2,671 1998 710 511 5,17
Slide 5: Q1 2017 highlights
Q1 2017 highlights • Jyske Bank delivers a net profit of DKK 976m, equal to ROE 12.3% p.a. – Continued growth in new home loans, total volume of DKK 84.3bn end of Q1 (end-2016: DKK 79.5bn), stable volume in traditional bank loans and deposits have ceased to increase – Core income at level with high
Slide 6: A strong start to the year
A strong start to the year • Delivering a net profit of DKK 976m and ROE of 12.3% p.a. in Q1 Net profit 2017 1,400 21% DKKm 1,200 18% 1,000 15% • A decrease of 3.4 percentage points compared to Q4 2016, given 800 12% that improved core income and investment portfolio earnings only 600 9% provide par
Slide 7: Jyske Bank Group
Jyske Bank Group • Growth in mortgages and home loans continues at slightly lower pace • Bank loans continue to stabilise and bank deposits decrease Financials 2,500 • Positive development in AUM due to positive returns and net inflow of DKKm 2,000 funds 1,500 • Core income increases due to strong n
Slide 8: Continued pressure on NII
Continued pressure on NII Q1 2017 vs. Q4 2016: Development in NII • Underlying trend continues in Q1: 1,500 DKKm – NII from growth in home loans and mortgages as well as leasing activities 1,450 partially compensate for the top-line pressure experienced in banking 1,400 activities 1,350 1,300 • Nega
Slide 9: Tailwind from financial markets results in strong net fee income
Tailwind from financial markets results in strong net fee income Net fee income • Net fee income in Q1 2017 only second to levels seen in Q4 and up 500 by 38% compared to Q1 2016. The increase can be attributed to: DKKm – Banking activities: Primarily investment related fee income, 400 secondarily l
Slide 10: Underlying trend in core expenses stable
Underlying trend in core expenses stable Q1 2017 vs. Q4 2016: Development in core expenses • Underlying development in core expenses stable 1,400 DKKm 1,350 1,300 • Core expenses in Q1 2017 up by DKK 55m compared to Q4 1,250 1,200 2016: 1,150 • Both quarters affected by one-offs. In Q1 2017, one-off
Slide 11: Banking activities
Banking activities Financials • Stabilisation of bank loans and bank deposits 1,800 DKKm • Positive development in AUM due to positive returns and net inflow 1,600 1,400 of funds 1,200 1,000 800 • Core income at level with Q4 2016 due to strong net fee income 600 and value adjustments 400 200 • Core
Slide 12: Mortgage activities
Mortgage activities • Growth in all lending segments - most significant in Private and Financials 600 Commercial segment DKKm 500 400 • Core income stable – NII grows as volume grows, net fee income 300 lower in Q1 2017 than Q4 2016 200 • Core expenses as expected 100 - • Increased impairments on ha
Slide 13: Leasing activities
Leasing activities Financials • Gradually increasing loan volumes 150 DKKm 130 110 • Adjusted for one-off in NII Q4 2016, stable development 90 in core income 70 • Core expenses develop as expected 50 30 10 • Impairment charges at continued low level -10 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Core
Slide 14: Strong investment portfolio earnings
Strong investment portfolio earnings Investment portfolio earnings, quarterly • Investment portfolio earnings driven by: 400 DKKm 300 – Positive value adjustments on portfolio of Danish mortgage bonds driven by narrowing of credit spreads (OAS) 200 – Positive effect of approx. DKK 100m from Jyske Ba
Slide 15: Capital
G JYSKE BANK Capital 15
Slide 16: Adjusting to long-term capital targets
Adjusting to long-term capital targets Capital ratios • Capital ratio 17.6% and CET1 ratio 15.8% end of Q1 2017 vs. long-term targets of 17.5% and 14% 20 pct – Tier 2 capital issued as per value date April 5th to be included in 15 capital base in Q2 – Capital ratio of 19.4% and CET1 ratio of 16.3% i
Slide 17: Strong capital position
Strong capital position Capital ratio and CET1 ratio • Capital ratio 17.6% and CET1 ratio 15.8% end of Q1 2017 compared to 20 18.3% and 16.5% end of 2016. Changes in capital ratios due to: 18 0.6 – Current profit no longer included in capital base 1.2 16 2.5 15.8 – Proposed extraordinary dividend de
Slide 18: Credit Quality
G JYSKE BANK Credit Quality 18
Slide 19: Net reversals
Net reversals • Net reversals of DKK 45m under core profit Loan impairment charges (under core profit) – Of which agriculture DKK 6m 200 DKKm 100 • Total balance of management’s estimate of DKK 465m end of Q1 2017, 0 of which DKK 185m relate to agriculture, compared to DKK 471m and -100 DKK 235m res
Slide 20: Limited exposure to dairy and pig farmers
Limited exposure to dairy and pig farmers • Exposure to dairy and pig farmers accounts for less than 1% of Commodity prices the Group’s loans and guarantees 3.5 13 3.25 12.5 • Commodity price development: 12 3 – Pork: Prices peaked at 10.8 DKK/kg in Q3 2016. Current 11.5 DKK/kg DKK/kg prices are clo
Slide 21: Reducing risk and earnings volatility
Reducing risk and earnings volatility 21
Slide 22: "A great match" – growth, profitability and risk profile
”A great match” – growth, profitability and risk profile Development in mortgage lending In February 2014, the merger between Jyske Bank and BRFkredit was announced under the headline “A great match”. Part of the rationale 160 DKKbn was: 140 – High growth potential 120 – Revenue and cost synergies 1
Slide 23: Transformed risk profile reduces risk and earnings volatility
Transformed risk profile reduces risk and earnings volatility De-risked profile: • From 100% bank loans to more than 2/3 mortgage loans. Low risk mortgage Total loans, advances and guarantees by loan type loans make up 68% of the Group’s loan portfolio at end of Q1 2017: 500 DKKbn – Fully collateral
Slide 24: Growth in home loans continues to improve quality of portfolio
Growth in home loans continues to improve quality of portfolio Jyske Bank home loan portfolio by product type • Majority of clients known by Jyske Bank. Volume primarily stems 100% from repatriation of loans previously referred to Totalkredit 90% • 85% in credit rating class 1-5 compared to overall
Slide 25: Mortgages: The portfolio
Mortgages: The portfolio • 87% of lending to properties with housing purposes Distribution of lending portfolio – No loans with swaps to co-operative housing – No lending to agriculture and other primary production • Increasing share of retail lending – Primarily driven by joint funding of Jyske Ban
Slide 26: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 1.8% 500 50 Private 450 45 1.6% Commercial 400 40 1.4% Subsidised 350 35 1.2% 1.0% 300 30 0.8% 250 25 200 20 0.6% 150 15 0.4% 100 10 0.2% 50 5 0.0% Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 0
Slide 27: Bank loans: the portfolio
Bank loans: the portfolio Q1 2017 Balance of loan • Portfolio composition end of Q1 2017 Loans, advances impairment Impairment – Corporates 56% and guarantees charges Losses charges – Private individuals 39% Public authorities 5.2% 0.0% 0.0% 0.0% – Public authorities 5% Agriculture, hunting, forestr
Slide 28: Improved credit quality
Improved credit quality • Only minor changes between customer segments in bank loan portfolio Bank loans excl. repo loans the past 3 years 180 DKKbn 160 • Improved credit quality within segments: 140 120 – Retail: 66% in STY 1-5 rating classes end of 2016 vs. 63% end of 100 2013 80 60 – Commercial:
Slide 29: Appendices
Appendices: 1) Danish Economy 2) Jyske Bank Q1 2017 results 3) Liquidity 4) Business segments 5) NPLs 29
Slide 30: Danish Economy
G JYSKE BANK Danish Economy 30
Slide 31: Danish economy – a slow recovery story
Danish economy – a slow recovery story • Overall the Danish financial sector’s operating environment is slowly improving The slow upturn is set to continue over the next years, The private sector is driving the 4% increase in but of course depending on the global economy employment 31
Slide 32: 3 kinds of stimulus support demand
3 kinds of stimulus support demand Real wage growth House prices recovering after burst in 2008/09 Compared to Sweden and Norway – Denmark has repriced Interest rates are at a historic low Demand has increased 32
Slide 33: Improved asset quality as defaults are close to normalization
Improved asset quality as defaults are close to normalization Unemployment is relatively low Forced house sales below 0.2% per year Business bankruptcies closer to normal Data for bankruptcies from late 2015 and into 2016 are distorted by a registration issue. Looking at active companies only gives
Slide 34: Turnaround and consolidation at the same time
Turnaround and consolidation at the same time Low interest rates and solid real wage growth make it possible for households to consume more and save up at the same time The private sector is still saving up …so household debt is declining …and household net assets are large Net Financial Wealth-to-I
Slide 35: Denmark is a AAA economy with strong structural financial features
Denmark is a AAA economy with strong structural financial features Current account surpluses since late 90s ..imply that foreign assets are increasing And public sector debt is low This is why Denmark is AAA 35
Slide 36: House prices have increased in all regions in 2016
House prices have increased in all regions in 2016 Large price increases on flats in the four largest cities There is a risk that very low interest rates may overheat local parts of the market However, a new housing tax model is likely to have a dampening effect House prices are up in all regions Re
Slide 37: A strong financial position
% of GDP -200 -150 -100 -50 100 150 200 0 50 Norway Switzerlands Netherlands Japan Belgium Denmark Germany Sweden Austria A strong financial position United Kingdom Finland France Italy Slovenia Estonia USA Lithuania Slovakia Latvia Net foreign financial assets (2015/2016) Poland Spain Portugal Cypr
Slide 38: Jyske Bank Q1 2017 results
G JYSKE BANK Jyske Bank Q1 2017 results 38
Slide 39: Q1 2017 results
Q1 2017 results CORE PROFIT AND PROFIT FOR THE PERIOD • Net profit of DKK 976m (corresponding to ROE of 12.3% p.a.) Index Index DKKm Q1 2017 Q1 2016 17/16 Q1 2017 Q4 2016 Q1/Q4 Net interest income 1,370 1,450 94 1,370 1,457 94 • Core income driven by: Net fee and commission income 447 324 138 447 50
Slide 40: Value adjustments driven by narrowing of credit spreads and increasing long term interest rates
Value adjustments driven by narrowing of credit spreads and increasing long term interest rates • Positive value adjustments on Danish mortgage bonds driven by Value adjustments under core income narrowing of credit spreads (OAS) 350 DKKm 300 • Value adjustments from clients’ transactions relating t
Slide 41: Liquidity
G JYSKE BANK Liquidity Al
Slide 42: Ample liquidity
Ample liquidity Group Liquidity buffer • Liquidity buffer DKK 72bn end of Q1 2017 (DKK 77bn end of 2016) 90 DKKbn 80 – 90% of the buffer - DKK 65bn - is eligible for repo transactions at 70 central banks (the Danish Central Bank or the ECB) 60 50 40 30 20 10 0 31-12-15 30-12-16 31-03-17 Eligible at
Slide 43: A frequent EUR issuer
A frequent EUR issuer On going access to a diversified European investor base helps Jyske Redemption profile 9 Bank maintain a prudent risk – and funding – profile 8 7 • Jyske Bank: 6 – Short term ongoing activities in French CP 5 DKKbn – At least one senior unsecured EUR public benchmark a year 4 (
Slide 44: Non-performing loans
G JYSKE BANK Non-performing loans 44
Slide 45: Non-performing loans
Non-performing loans • At group level NPLs amounted to 3.5% of loans and advances at the end of Q1 2017 • Jyske Bank has been submitting information about non-performing loans (NPLs) since end of Q3 2014 • Jyske Bank has chosen to apply EBA’s technical standards as definition for NPLs • NPLs compris
Slide 46: NPLs – Jyske Bank Group
NPLs – Jyske Bank Group JYSKE BANK GROUP DKKm 2017 Q1 2016 Q4 2016 Q3 2016 Q2 2016 Q1 Carrying amount 441,941 438,592 426,124 422,554 424,423 Balance of loan impairments charges and provisions for guarantees 5,790 5,937 6,497 6,715 6,939 Balance of discounts for acquired assets 782 879 1,144 1,236 1
Slide 47: NPLs – Banking activities
NPLs – Banking activities BANKING, DKKm 2017 Q1 2016 Q4 2016 Q3 2016 Q2 2016 Q1 Carrying amount 153,146 160,159 150,857 153,562 166,513 Balance of loan impairments charges and provisions for guarantees 5,007 5,182 5,723 5,980 6,282 Balance of discounts for acquired assets 383 451 523 553 666 Gross c
Slide 48: NPLs – Mortgage activities
NPLs – Mortgage activities MORTGAGE, DKKm 2017 Q1 2016 Q4 2016 Q3 2016 Q2 2016 Q1 Carrying amount 288,794 278,433 275,267 268,992 257,910 Balance of loan impairments charges and provisions for guarantees 783 755 774 735 657 Balance of discounts for acquired assets 399 428 621 683 753 Gross carrying
Slide 49: General legal disclaimer
General legal disclaimer • This presentation and the information contained therein is furnished and has been prepared solely for information purposes by Jyske Bank A/S. It is furnished for your private information with the express understanding, which recipient acknowledges, that it is not an offer,