Nova Ljubljanska Banka d.d. · LJSE:NLBR
Nova Ljubljanska Banka d.d — Q1 2019 Earnings Presentation
73 slides from Nova Ljubljanska Banka d.d's earnings presentation, 2019
Slide 1: NLB Group Presentation 1Q 2019 Results
NLB Group Presentation 1Q 2019 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: Key performance indicators of NLB Group
Key performance indicators of NLB Group Medium-term targets set in 2018(1) YE 17 YE 18 Q1 19 Medium term Net interest margin(2) 2.57% 2.56% 2.56% >2.7% Loans to deposits ratio 70.8% 68.3% 68.0% <95% Total capital ratio 15.9% 16.7% 16.6% ~16.25% Cost-income ratio 58.4% 58.5% 51.6% ~50% Cost of risk(3
Slide 4: NLB Group – performance indicators across SEE countries
NLB Group – performance indicators across SEE countries Slovenia North Bosnia and Herzegovina Kosovo Montenegro Serbia NLB Group Macedonia NLB d.d., NLB Banka NLB Banka NLB Banka NLB Banka NLB Banka NLB Banka Ljubljana Skopje Banja Luka Sarajevo Prishtina Podgorica Beograd Consolidated Data on stand
Slide 5: Income Statement
Income Statement Result after tax of NLB Group – evolution YoY (EURm) 0% In Q1 2019, NLB Group generated EUR 57.9 million 0,8 of profit after tax: 1,7 0.4 • Higher net interest income, mainly due to loan 4,3 3,4 volume growth and lower interest expenses; 57.9 • Higher net fee and commission income,
Slide 6: Balance sheet structure – NLB Group
Balance sheet structure – NLB Group Simple client business driven balance sheet (31 Mar 2019, in EUR million) 13,066 13,066 Other assets 496 Total equity 1,727 Other liabilities 321 State deposits Financial assets Corporate Bank borrowings 3.8% 3,608 deposits 342 21.1% State loans 4.7% 10,676 Cash e
Slide 7: Business Performance
Business Performance vo ) NLB Group
Slide 8: Net interest income & net interest margin
Net interest income & net interest margin Net interest income increased YoY but remains under pressure Solid interest income growth YoY Stable net interest margin(1) (Group, %) 3.81% 3.81% 3.84% 3.85% +6% -2% 3.71% 79.4 81.0 79.4 75.0 75.0 2.52% 2.53% 2.54% 2.56% 2.56% 1.86% 1.87% 1.88% 1.89% 1.92%
Slide 9: Net interest income drivers – NLB d.d.
(1) Net interest income drivers – NLB d.d. Interest income / Environment Volume (in EUR billion) Yields and rates expenses(2) (in EUR million) Gross loans Loan yields Interest income • Increasing retail loan Corporate loans balances -6% 0% Retail loans -8% • Decrease in interest income 5.1 3.9% 3.9%
Slide 10: Net interest income drivers – Strategic foreign markets
Net interest income drivers – Strategic foreign markets Interest income / Macro-environment Volume (in EUR billion) Yields and rates expense(1) (in EUR million) Gross loans Loan yields Interest income Corporate loans • Volumes growing at 10% pa Retail loans +2% on average in last 3 full +12% years,
Slide 11: Net non-interest income – NLB Group
Net non-interest income – NLB Group Good performance in Fee and Commissions Net non-interest income (Group, EURm) Net fee and commission income growing YoY +26% (Group, EURm) -2% 54.4 55.4 54.4 55.4 1.5 +3.1% 0.5 1.5 0.5 12.2 12.2 43.3 161.0 155.4 12.3 0.0 12.3 147.1 145.7 1.1 1.1 3.1 39,0 2.7 0.1 2
Slide 12: Costs – NLB Group
Costs – NLB Group Cost lower by 1% YoY Operating expenses (Group, EURm) Employees and branches evolution – stronger rationalisation in tougher Slovenia market (#) -12% -1% 78.3 # of employees 6,7 69.4 69.0 69.4 69.0 -19% 6,8 7,7 6,8 7,7 7,208 6,912 6,448 6,372 6,175 28,4 6,029 5,887 5,828 22,3 21,2
Slide 13: Impairments and provisions for credit risk & cost of risk
Impairments and provisions for credit risk & cost of risk Cost of risk remained negative Cost of risk (Group, bps) In Q1 2019, the Group established EUR 0.6 million of net impairments and provisions while in Q1 2018 EUR 2.8 million net impairments and provisions were released. Impairments and provis
Slide 14: Assets and Liabilities
Assets and Liabilities
Slide 15: NLB Group Assets
NLB Group Assets Well diversified loan book, strong liquidity position Total assets of NLB Group – structure (EURm) Credit portfolio by segment (31 Mar 2019) 2.5% Institutions +2.6% State 3% SME 13,066 14% 23% 12,740 12,425 1.698 1.707 1.895 20% 19% Corporates Retail consumer 7.264 7.148 6.935 21% R
Slide 16: NLB Group Assets – Loan portfolio
NLB Group Assets – Loan portfolio Balanced loan portfolio with loan growth in most of banks Gross loans to non-banks by strategic member – contribution (EURm) +1% 4,583 4,607 31 Dec 2018 Gross loan growth in most subsidiaries banks, 31 Mar 2019 especially in NLB Banka Prishtina, NLB Banka -1% Beogra
Slide 17: NLB Group Liabilities and Equity
NLB Group Liabilities and Equity Funding structure driven by stable and price insensitive deposit base Deposits accounting for 82% of funding (Group, EURm) Deposit split (Group, EURm) +2.5% % total +2.6% funding as +3.6% of Mar 2019 31 Mar 2019 +2.0% 13,066 12,740 12,425 10,464 10,676 1.727 13.2% 9,
Slide 18: NLB Group Liabilities
NLB Group Liabilities Deposit growth; interest rates decreasing Deposits from customers by strategic member – contribution (EURm) +3% 7,210 31 Dec 2018 7,026 31 Mar 2019 Deposit growth across most of the markets, -2% despite low interest rate environment. 1.076 1.054 +4% +2% NLB d.d. charges 0.03% m
Slide 19: Capital - NLB Group
Capital - NLB Group CET 1 Capital slightly up YtD NLB Group capital ratios (%) Capital structure and ratios NLB Group 16,7% 16,6% 31.3.2019 31.12.2018 Change YtD (in EUR million) 14,75% Common Equity Tier 1 capital 1,460.1 1,453.4 6.7 0.5% 13,38% Additional Tier 1 capital 0.0 0.0 0.0 Tier 1 capital
Slide 20: Capital evolution and requirements
Capital evolution and requirements Strong capital position Capital position fully reflective of IFRS9 impact (Group, EURm) Well above applicable regulatory requirement and the EU average (as published by EBA (2)) EURm 1,362 1,453 7 nm 1,460 14.75% nm 13.38% Key changes in 2019: -0,1% 1.0% 1.9% • P2R
Slide 21: Solid dividend distribution
Solid dividend distribution (NLB d.d., EURm) 2015 2016 2017 2018 NLB d.d. profit 44 64 189 165 o/w dividends from subsidiaries, associates and 14 29 58 50 joint ventures to NLB d.d. NLB Group profit after tax 92 110 225 204 NLB Group dividend to shareholder 44 64 271 142.6(2) (paid in year after) Im
Slide 22: Asset Quality
Asset Quality
Slide 23: Asset quality – NLB Group
Asset quality – NLB Group Diversified credit portfolio, focused on core markets and cautious risk taking Credit portfolio(1) by currency and rate type (Group, 31 Mar 2019) Other BAM 5% MKD 6% • No large concentration in any specific industry or 7% client segment EUR 9.2bn Floating 50% EUR 9.2bn 50%
Slide 24: Asset quality – NLB Group
Asset quality – NLB Group Diversified credit portfolio, focused on core markets and cautious risk taking Credit portfolio(1) by segment (Group, Mar-19, EURm) Dec-15 Dec-16 Institutions (2) 301 Dec-17 State SME 28% 27% 1.251 2.077 24% Dec-18 23% 23% 21% 21% 21% 21% 20% 19% 20% 20% Mar-19 19% 19% 19%
Slide 25: Asset quality – NLB Group
Asset quality – NLB Group NPLs fully covered by provisions and collateral NPL by geography (Group, Mar-19) NPL cash coverage(1) (Group, %) Serbia Kosovo 11% 2% 77% 77% 77% 79% 72% Slovenia 69% 69% 12% 15% 12% 14% 31% 7% 9% 6% N. Montenegro 21% Other 63% 62% 63% 65% 62% 65% 65% 2% Croatia 10% B&H 13%
Slide 26: Asset quality – NLB Group
Asset quality – NLB Group New NPL formation very low, successfull legacy resolution Active workout drove gross NPL ratio down Gross NPL formation has been low since 2015 (Group, in EURm) (Group, EURm) 77.5% 77.1% 78.6% 4.000 76.1% 80 Formation / 3.684 72.2% gross loans 1.2% 1.4% 0.7% 0.7% 0.1% 69.7%
Slide 27: Asset quality – NLB Group
Asset quality – NLB Group High % of Stage 1 Loan portfolio (Valued at amortized cost) Stage portfolio at amortized costs (Group, Mar-19) 85,5% 86,3% 87,2% 88,0% 85,3% Stage 1 loans represent 88% of loan portfolio valued at amortized cost. Due to NPL reduction Strategy the share of Stage 3 loans is d
Slide 28: Strategy & IT
Strategy & IT
Slide 29: Track record of innovation
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) First Slovenian bank to launch contactless ATMs 9% 16% 27% 31% 34% 30% 35% 35% 203 179 219 (2) 226 230 200 204 First Slovenian
Slide 30: Clear strategy to address current challenges
Clear strategy to address current challenges Key challenges Sector and regulation Macro Clients Technology • Regulatory interventions • Low interest rate environment • More demanding and • Competition from fintechs knowledgeable clients • Further complexity of new • Potential political and • Enhance
Slide 31: 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 32: 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 33: Outlook
Outlook
Slide 34: Outlook 2019
Outlook 2019 ✓ Real GDP growth: most countries are likely to grow at around 3% - 4% if supported by loose monetary conditions, fiscal easing and solid domestic demand Macro outlook & ✓ Public debt in all markets below EU average ✓ Low household indebtedness and solid savings performance risk factors
Slide 35: Appendixes
Appendixes Appendix 1: Segment Analysis 36 Appendix 2: Macro Overview 55 Appendix 3: EC committments 69 Appendix 4: Financial statements 71
Slide 36: Appendix 1: Segment Analysis
CS ae Appendix 1 Segment Analysis @ NLB Group
Slide 37: NLB Group business segments
NLB Group business segments Corporate and Retail banking in investment Strategic foreign Financial markets Non-core Slovenia banking in markets in Slovenia members Slovenia Retail Key corporates NLB Banka, Skopje Treasury activities Non-core members NLB Skladi SME corporates NLB Banka, Banja Luka Tr
Slide 38: Estimated effects of segments methodology changes
Estimated effects of segments metodology changes From 2019, the new methodology for monitoring the business segment operations has been in use, due to the changes in the market segmentation criteria and the treatment of legal entities in the Bank, the release of EC commitments related to disinvestme
Slide 39: Retail banking in Slovenia
Retail banking in Slovenia in EUR million consolidated Retail banking in Slovenia • The segment recorded EUR 43.0 million of net operating income. The comparison 1-3 2019 1-3 2018 Change YoY* shows EUR 6.6 million increase YoY, of Net interest income 23.0 18.2 4.8 which approximately EUR 2 million i
Slide 40: Retail banking in Slovenia
Retail banking in Slovenia High and stable market shares across products Market share of net loans to individuals in Slovenia Market share of deposits from individuals in Slovenia 34,8% 35,2% 35,5% 35,7% 26,3% 25,1% 25,2% 25,3% 24,9% 22,7% 16,0% 14,9% 22,3% 22,2% 22,0% 21,6% 18,8% 16,0% 14,7% 14,6%
Slide 41: Corporate and Investment banking in Slovenia
Corporate and Investment banking in Slovenia Corporate and Investment banking in in EUR million consolidated • The segment recorded EUR 26.3 million of Slovenia net operating income, EUR 8.4 million 1-3 2019 1-3 2018 Change YoY* increase YoY, of which approximately EUR Net interest income 10.8 9.6 1
Slide 42: Corporate banking in Slovenia
Corporate banking in Slovenia High market shares across products(1) #1 in corporate and state loans #1 in corporate and state deposits #1 in guarantees and letters of credit NLB 17,7% NLB 15,0% NLB 24,2% NKBM 11,4% Unicredit 11,5% Unicredit 18,0% Unicredit 9,1% NKBM 9,1% Abanka 11,1% Intesa 8,8% Sbe
Slide 43: Strategic foreign markets
Strategic foreign markets in EUR million consolidated Strategic foreign markets • The segment recorded EUR 50.7 million of net operating income. In Q1 2018 the 1-3 2019 1-3 2018 Change YoY* result was positively affected by the sale of Net interest income 38.6 35.5 3.1 NLB Nov Penziski Fond, Skopje
Slide 44: SEE banks continuing solid performance
SEE banks continuing solid performance ✓ 8% growth of net interest income YoY ✓ Net non-interest income on the same level YoY, if non-recurring income from the sale of NLB Nov Penziski Fond, Skopje in Q1 2018 is excluded ✓ Growing credit portfolio in most markets, with aggregate deposits balance mar
Slide 45: NLB Banka Skopje
NLB Banka Skopje NLB Banka AD Skopje "on stand alone basis" Key financial indicators Change Balance sheet Change 1-3 2019 1-3 2018 YoY in 000 EUR 31 Mar 2019 31 Dec 2018 YtD ROE a.t. 14.8% 39.2% -24.5 p.p. Total assets 1,336,123 1,350,054 -13,931 -1.0% Interest margin* 3.84% 3.99% -0.2 p.p. Loans to
Slide 46: NLB Banka Banja Luka
NLB Banka Banja Luka NLB Banka A.D., Banja Luka "on stand alone basis" Key financial indicators Change Balance sheet Change 1-3 2019 1-3 2018 YoY in 000 EUR 31 Mar 2019 31 Dec 2018 YtD ROE a.t. 25.9% 23.5% 2.4 p.p. Total assets 753,027 720,509 32,518 4.5% Interest margin* 2.67% 2.61% 0.1 p.p. Loans
Slide 47: NLB Banka Sarajevo
NLB Banka Sarajevo NLB Banka d.d., Sarajevo "on stand alone basis" Key financial indicators Change Balance sheet Change 1-3 2019 1-3 2018 YoY in 000 EUR 31 Mar 2019 31 Dec 2018 YtD ROE a.t. 13.5% 16.5% -3.0 p.p. Total assets 601,320 592,166 9,154 1.5% Interest margin* 3.02% 3.26% -0.2 p.p. Loans to
Slide 48: NLB Banka Prishtina
NLB Banka Prishtina NLB Banka sh.a., Prishtine "on stand alone basis" Key financial indicators Change Balance sheet Change 1-3 2019 1-3 2018 YoY in 000 EUR 31 Mar 2019 31 Dec 2018 YtD ROE a.t. 25.8% 20.9% 4.9 p.p. Total assets 691,186 668,127 23,059 3.5% Interest margin* 4.43% 4.26% 0.2 p.p. Loans t
Slide 49: NLB Banka Podgorica
NLB Banka Podgorica NLB Banka a.d., Podgorica "on stand alone basis" Key financial indicators Change Balance sheet Change 1-3 2019 1-3 2018 YoY in 000 EUR 31 Mar 2019 31 Dec 2018 YtD ROE a.t. -2.8% 16.3% -19.1 p.p. Total assets 494,201 489,283 4,918 1.0% Interest margin* 4.22% 3.89% 0.3 p.p. Loans t
Slide 50: NLB Banka Beograd
NLB Banka Beograd NLB Banka a.d., Beograd "on stand alone basis" Key financial indicators Change Balance sheet Change 1-3 2019 1-3 2018 YoY in 000 EUR 31 Mar 2019 31 Dec 2018 YtD ROE a.t. 6.2% 9.0% -2.9 p.p. Total assets 498,510 484,492 14,018 2.9% Interest margin* 4.21% 5.43% -1.2 p.p. Loans to cus
Slide 51: Financial markets in Slovenia
Financial markets in Slovenia(1) in million EUR Financial markets in Slovenia consolidated 1-3 2019 1-3 2018 Change YoY Net interest income 6.0 8.6 -2.6 Net non-interest income 2.1 -0.1 2.2 Total net operating income 8.1 8.5 -0.4 Total costs -1.7 -1.6 -0.1 Result before impairments and provisions 6.
Slide 52: Financial markets in Slovenia
Financial markets in Slovenia Strong liquidity position The volume of ECB eligible credit claims decreased due to the modification in ECB eligibility criterion adopted on Liquid assets evolution (EURm) 7 February 2018 in Well diversified banking book by geography (31 March 2019) ECB Guideline (EU) 2
Slide 53: Non-core members
Non-core members in EUR million consolidated Non-core members • The segment recorded EUR 1.9 million decrease of net operating income, partially 1-3 2019 1-3 2018 Change YoY* due to transfer of NLB Non-core part to Net interest income 1.0 3.1 -2.1 Corporate (approximately EUR -1.9 million) Net non-i
Slide 54: Other
Other(1) in EUR million Other consolidated 1-3 2019 1-3 2018 Change Total net operating income 2.1 -0.1 2.2 Total costs -2.2 -1.9 -0.3 Result before impairments and provisions -0.1 -2.0 1.9 o/w non-recurring items 0.2 Impairments and provisions 0.0 -0.2 0.2 Result before tax -0.1 -2.2 2.1 • The segm
Slide 55: Appendix 2: Macro Overview
Appendix 2: Macro Overview vo ) NLB Group
Slide 56: NLB Group – Macro overview
NLB Group – Macro overview NLB d.d. & 6 subsidiary banks operate in Slovenia (EU member) & 5 SEE countries (convergence to EU) Slovenia EUR Serbia RSD GDP (EURbn) 45.9 GDP (EURbn) 42.8 Real GDP growth (%) 4.5 Real GDP growth (%) 4.3 Population (m) 2.1 Population (m) 7.0 Household indebtedness(1) 21.
Slide 57: Macro Overview
Macro Overview Economic data Fiscal data Monetary data • Most countries are likely to grow at • Environment for necessary reforms • Positive momentum for higher lending around 3% if supported by loose seen slightly improved. volumes seen ahead. monetary conditions, fiscal easing and solid domestic d
Slide 58: Macro Overview – Economic data
Macro Overview – Economic data Real GDP growth, % 6 KEY FINDINGS: 5 Highest YoY increase of economic growth was registered by North Macedonia, 4 growing from 0.2% to 2.7% in 2018, followed 3 by Serbia (from 2% to 4.3% in 2018). % 2 Five countries with above 3% growth of GDP in 2018. 1 0 Growth is li
Slide 59: Macro Overview – Economic data
Macro Overview – Economic data Average inflation rate, % 4 KEY FINDINGS: 3 There seems to be a favourable inflation development in all countries. Minor 2 pressures noted in Serbia, yet with no material impact on the local currency. % 1 CPI continues to be driven by exogenous 0 factors, nonetheless r
Slide 60: Macro Overview – Economic data
Macro Overview – Economic data Unemployment rate, % KEY FINDINGS: 40 Despite strong growth, unemployment is projected to stay at relatively high levels 35 across the whole region, with the exception of Slovenia. 30 25 In 2018, the biggest improvement was recorded by BiH, North Macedonia, % 20 Sloven
Slide 61: Macro Overview – Economic data
Macro Overview – Economic data Current account, % GDP 10 KEY FINDINGS: 5 Huge difference between countries due to various reasons. Trade deficit is being 0 covered either by capital inflows or remittances. % -5 Montenegro continues to underperform heavily in the region. -10 In general, no large redu
Slide 62: Macro Overview – Economic data
Macro Overview – Economic data International reserves, import coverage in months 9 KEY FINDINGS: 8 7 International reserves expressed as import coverage in months remain stable and seem 6 sufficient. Months 5 Favourable trendline adds to the stability of 4 foreign exchange rate in Serbia, North 3 Ma
Slide 63: Macro Overview – Fiscal data
Macro Overview – Fiscal data Fiscal Balance, % GDP 4 2 KEY FINDINGS: 0 A slight deterioration in the fiscal performance throughout most of the region -2 expected for 2019-20. % -4 BiH and Slovenia are expected to keep balanced public finances, while budget -6 deficit will stay at relatively high lev
Slide 64: Macro Overview – Fiscal data
Macro Overview – Fiscal data Public Debt, % GDP 100 KEY FINDINGS: 90 80 Public debt varies intensively between the countries. 70 60 Slow convergence of public indebtedness is projected. Reduction of public debt is % 50 expected in BiH, Serbia, Montenegro and 40 Slovenia, while an increase is forecas
Slide 65: Macro Overview – Monetary data
Macro Overview – Monetary data Loans growth (NFC + Households), % 15 KEY FINDINGS: 10 Encouraging levels of credit growth in both corporate and retail segment, much higher 5 than in EMU. Kosovo (10.9%), Serbia (9.5%) and % 0 Montenegro (9.1%) leading the credit growth in the region. -5 In Serbia and
Slide 66: Macro Overview – Monetary data
Macro Overview – Monetary data Total Loans (NBS), % GDP KEY FINDINGS: 100 90 Entire region below EMU average with growth potential. 80 Stable loan to GDP ratio in BiH and North 70 Macedonia. % 60 In Montenegro, the negative trend stabilized last year. In Slovenia, the ratio is continuing 50 to fall.
Slide 67: Macro Overview – Monetary data
Macro Overview – Monetary data Deposits growth (NFC + Households), % KEY FINDINGS: 18 There are substantial differences in deposit 16 growth numbers. 14 Serbia (14.9%) is far ahead of the rest and 12 leads the deposit growth in the region in 2018, followed by strong growth of other 10 countries in t
Slide 68: Macro Overview – Monetary data
Macro Overview – Monetary data Total Deposits (NBS), % GDP 90 KEY FINDINGS: 80 Slightly falling, but stable deposit to GDP ratio 70 in Montenegro and Slovenia. % Growing trend in the rest of the region with 60 the highest increase in BiH and Kosovo. Across the whole region the share of deposits 50 i
Slide 69: Appendix 3: EC commitments
Appendix 3: EC committments vo ) NLB Group
Slide 70: 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 71: Appendix 4: Financial statements
Appendix 4: Financial statements
Slide 72: NLB Group Income Statement
NLB Group Income Statement 1-3 1-3 (EURm) YoY Q1 2019 Q4 2018 Q1 2018 QoQ 2019 2018 Interest and similar income 90.4 86.9 4% 90.4 92.1 86.9 -2% Interest and similar expense -11.1 -11.9 7% -11.1 -11.1 -11.9 0% Net interest income 79.4 75.0 6% 79.4 81.0 75.0 -2% Fee and commission income 53.8 51.6 4%
Slide 73: NLB Group Statement of Financial Position
NLB Group Statement of Financial Position (EURm) 31 Mar 2019 31 Dec 2018 YtD ASSETS Cash and balances with Central Banks 1,589.0 1,588.3 0% Financial instruments 3,608.0 3,399.2 6% o/w Trading Book 38.4 63.6 -40% o/w Non-trading Book 3,569.6 3,335.6 7% Loans and advances to banks (net) 108.9 118.7 -
Nova Ljubljanska banka d.d. — Q1 2019 Earnings Presentation on 6ix