Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q1 2014 Earnings Presentation
70 slides from Jyske Bank A/S's earnings presentation, 2014
Slide 1: Jyske Bank Q1 2014
Jyske Bank Q1 2014
Slide 2: Agenda
Agenda • Jyske Bank in brief • Jyske Banks Performance 1968-2013 • Merger with BRFkredit • Focus in Q1 2014 • Q1 2014 in figures • Capital Structure • Liquidity • Credit Quality • Strategic Issues • Macro Economy & Danish Banking 2013-2015 • Danish FSA • Fact Book 2
Slide 3: Jyske Bank in brief
Jyske Bank in brief 3
Slide 4: Jyske Bank in brief
Jyske Bank in brief Jyske Bank focuses on core business Description Branch Network • Established and listed in 1967 • 2nd largest Danish bank by lending • Total lending of approx. DKK 131bn • 138 domestic branches • Approx. 740,000 customers • Business focus is on Danish private individuals, SMEs an
Slide 5: Jyske Bank in brief: differentiation strategy
Jyske Bank in brief Jyske Bank has a differentiation strategy “Jyske Differences” • Jyske Bank wants to be Denmark’s most customer-oriented bank by providing high standard personal financial advice and taking a genuine interest in customers • The strategy is to position Jyske Bank as a visible and d
Slide 6: Jyske Bank performance 1968-2013
Jyske Bank performance 1968-2013 6
Slide 7: ROE on opening equity – 1968-2013
ROE on opening equity – 1968-2013 Pre-tax profit Average: (ROE on open. equity) 22% 61% 166% 145% 40% 30% 20% 10% 0% -10% -20% -30% 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 7
Slide 8: A great match
A great match February 24, 2014 8
Slide 9: Transaction highlights
Transaction highlights Combination of Jyske Bank and BRFkredit creates a leading Danish financial institution by combining the 3rd largest bank and the 4th largest mortgage-credit institution Combination of two highly complementary business models: offer a full range of products and services to all
Slide 10: A great match
A great match 3rd largest Danish bank 4th largest Danish mortgage-credit institution Full-scale bank with core operations within retail Mortgage lender specialising in owner-occupied and commercial banking, customer driven homes, vacation homes, commercial properties trading, asset management and pr
Slide 11: Creating a leading Danish financial institution
Creating a leading Danish financial institution Firmly establishes Jyske Bank as one of the four major financial services groups in Denmark with a full product range Estimated Danish market shares1 Financial institutions Extensive distribution platforms and customer bases provide attractive opportun
Slide 12: Timing is good for a combination between Jyske Bank and BRFkredit
Timing is good for a combination between Jyske Bank and BRFkredit Jyske Bank evolution Market considerations • Strategy change in Summer 2011 focusing • Current market dynamics have motivated on non-organic growth opportunities consolidation of the Danish banking market • Non-core operations success
Slide 13: Key 2013 figures for the combined group
Key 2013 figures for the combined group New Group (Pro forma) Customers (‘000)1 ~740 ~150 ~890 Total assets (DKKbn) 262.0 233.8 480.5 Loans (DKKbn) 131.4 209.0 334.6 Deposits (DKKbn) 126.0 5.3 131.4 Issued bonds (DKKbn) 27.8 202.0 220.7 Total revenues (DKKbn) 8.2 1.9 10.0 Net profit (DKKbn) 1.8 0.3
Slide 14: Extended lending platform
Extended lending platform • Further diversifies loan book with good split between corporate, retail and mortgage lending • Attractive cross-selling opportunity of banking and mortgage-related products • BRFkredit primarily offers mortgages secured by properties in Denmark • Practically all BRFkredit
Slide 15: Fully diversified funding platform
Fully diversified funding platform • Further diversifies funding platform, with good split between bond, deposit and interbank funding • Direct access to the Danish covered bond market • Ample liquidity via tap issues and central bank eligibility Jyske Bank BRFkredit Pro forma Deposits Interbank Dep
Slide 16: Attractive synergy potential
Attractive synergy potential • Total run rate synergies of minimum DKK 600m per annum, of which approximately DKK 300m from cost synergies and DKK 300m from revenue synergies • The mix of synergies between cost and revenue depends on market conditions • Cost synergies expected to be achieved by 2017
Slide 17: Strong capitalisation post-transaction
Strong capitalisation post-transaction Basel II 2,7% (8.3%) 6,4% 16,1% 15,3% Core Tier 1 Shares Bargain BRFkredit Pro forma FY2013 issued to purchase RWA Core Tier 1 BRFholding gain¹ FY2013 ¹ Preliminary bargain purchase gain / badwill estimate based on year end 2013 balance sheet and current market
Slide 18: Focus in Q1 2014
Focus in Q1 2014 18
Slide 19: Focus in Q1 2014
Focus in Q1 2014 • ROE pre tax 9.6% - slightly below previous quarters • Net Interest Income -3% due to margin pressure and lower reinvestment rates in the liquidity portfolio • Growth in bank lending due to new mortgage products (DKK 6.3bn), other banking products decrease • Gross income unchanged
Slide 20: Profit before tax and Guarantee Fund
Profit before tax and Guarantee Fund 3,000 16% 14% 2,500 DKKm 12% 2,000 10% 1,500 8% 6% 1,000 4% 500 2% 0 0% 2009 2010 2011 2012 2013 Profit before tax Guarantee Fund ROE (pre-tax) 20
Slide 21: Strategic issues
Strategic issues 21
Slide 22: Market conditions
Market conditions • No volumes growth expected in 2014 • Fierce competition in the market; banks are pricing to lower the risk of loosing volumes • Growing Net Interest Income only via M&A activities • Significant improvement in deposit/loans ratio in most banks • Capital shortage in some banks due
Slide 23: Strategic issues 2013-2014
Strategic issues 2013-2014 Acquisition of Spar Lolland • First phase of cost cuts implemented in Q1 2013 • IT integration and second phase of cost cuts in Q2 2014 Sale of subsidiaries • Jyske Global Asset Management in Q2 2013 • Krone Kapital (acquired from Spar Lolland) in Q3 2013 • Silkeborg Data
Slide 24: Strategic issues – Capital and Liquidity
Strategic issues – Capital and Liquidity Capital • Solvency ratio 16.2% • Capital buffer 6.2 percentage points • Core Tier 1 15.1% • Unchanged capital target - Core Tier I miniumum 12% • CRD IV /CRR effect of 0.5 pp on capital base due to higher risk weighted assets and higher capital base • Jyske B
Slide 25: Q1 2014 in figures
Q1 2014 in figures 25
Slide 26: Bank loans and deposits
Bank loans and deposits New mortgage products DKK 6.3bn 140 140 120 120 DKKbn DKKbn 100 100 80 80 60 60 40 40 20 20 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 Bank loans Bank deposits Bank loans Bank deposits Bank loans: 3.1% y/y 3.6% q/q 26
Slide 27: Net Interest Income
Net Interest Income Spar Lolland: Q1 2013: DKK 26m Q2 2013: DKK 118m Q3 2013: DKK 22m Q4 2013: DKK 51m Q1 2014: DKK 40m 4,700 1,300 4,600 1,250 DKKm DKKm 4,500 1,200 4,400 1,150 4,300 1,100 4,200 1,050 4,100 1,000 4,000 950 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 3,900 2009 20
Slide 28: Return/risk-trade off
Return/risk-trade off 114 5.0% 140 6% 112 120 5% 110 DKKbn DKKbn 100 108 4% 80 106 3% 104 4.5% 60 102 2% 40 100 1% 20 98 0 0% 96 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 94 4.0% 2009 2010 2011 2012 2013 Risk weighted assets NII/RWA (rhs) Risk weighted assets NII/RWA (rhs) 28
Slide 29: Fee and commision income
Fee and commision income 2,000 600 1,800 500 DKKm DKKm 1,600 1,400 400 1,200 300 1,000 800 200 600 100 400 200 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 300 250 DKKm 200 150 100 Performance 50 related fees 0 Securities trading Money transfers and Loa
Slide 30: Net interest and fee income
Net interest and fee income 7,000 1,800 1,600 24% 6,000 31% 23% 1,400 26% 26% 25% 22% 22% DKKm 27% 28% DKKm 27% 5,000 23% 23% 1,200 23% 1,000 4,000 800 76% 77% 69% 74% 78% 78% 74% 3,000 600 72% 75% 77% 77% 73% 73% 400 2,000 77% 200 1,000 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q120
Slide 31: Value adjustments
Value adjustments 800 300 700 200 DKKm DKKm 600 100 500 0 400 -100 300 -200 200 100 -300 0 -400 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 -100 2009 2010 2011 2012 2013 300 Interest rate 200 hedging/customers DKKm 100 Q1 2013: DKK 59m Q1 2014: DKK -128m 0 -100 Sale of Nets: DKK 1
Slide 32: Gross earnings
Gross earnings 7,600 2,500 7,400 7,200 2,000 DKKm DKKm 7,000 6,800 1,500 6,600 6,400 1,000 6,200 6,000 500 5,800 5,600 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 5,400 2009 2010 2011 2012 2013 32
Slide 33: Operating expenses and employees
Operating expenses and employees 5,000 3,900 1,400 3,850 4,500 3,850 1,200 3,800 4,000 3,800 3,750 1,000 DKKm DKKm 3,500 3,750 3,700 800 3,000 3,700 3,650 2,500 3,650 600 3,600 2,000 3,600 400 3,550 1,500 3,550 200 3,500 1,000 3,500 0 3,450 500 3,450 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013
Slide 34: Core earnings before loan impairment charges
Core earnings before loan impairment charges 3,500 1,000 900 3,000 800 DKKm DKKm 2,500 700 600 2,000 500 400 1,500 300 1,000 200 100 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 34
Slide 35: Loan impairment charges
Loan impairment charges Spar Lolland: Q1 2014: DKK 81m 3,000 1,000 900 2,500 800 DKKm DKKm 700 2,000 600 500 1,500 400 300 1,000 200 100 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 35
Slide 36: Core earnings
Core earnings 2,500 800 600 DKKm DKKm 2,000 400 200 1,500 0 -200 1,000 -400 500 -600 -800 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 36
Slide 37: Earnings from investment portfolios
Earnings from investment portfolios 700 250 600 200 DKKm DKKm 500 150 400 100 300 200 50 100 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 37
Slide 38: Capital Structure
Capital Structure 38
Slide 39: Capital structure
Capital structure • Core Tier 1 target: above 12% • Optimize risk and maximize earnings • Exploit the market to buy portfolios with an acceptable risk 20 20 18 18 16 16 pct pct 14 14 12 12 10 10 8 8 6 6 4 4 2 0 2 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 20
Slide 40: Liquidity
Liquidity 40
Slide 41: Liquidity position and run-off
DKKbn 10 20 30 40 50 60 0 Start of period 1 month 2 months 3 months 4 months 5 months 6 months 7 months 8 months 31.03.2014 9 months 10 months Liquidity position and run-off 11 months 12 months 15 months 18 months 21 months 24 months 41
Slide 42: Senior unsecured funding strategy
Senior unsecured funding strategy Jyske will be a rare but regular issuer on the EMTN market Funding plans will depend on developments in the balance sheet (funding gap) – and integrated part of policy is to maintain a deposit/loan ratio in the banking activities of a min of 95 % • Focus in 2014: Is
Slide 43: Credit quality
Credit quality 43
Slide 44: Loan impairment charges and losses
Loan impairment charges and losses 3,000 1,000 900 2,500 800 DKKm DKKm 700 2,000 600 500 1,500 400 300 1,000 200 100 500 0 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 Loan impairment charges and provisions for guarantees Losses Loan impairment charges an
Slide 45: Loans and advances split by sector
Loans and advances split by sector Balance of loan impairment charges and Loans, advances and provisions for Loan impairment charges Jyske Bank A/S guarantees guarantees for the period Loss for the period Loans, advances and guarantees as well as loan impairment charges and provisions for guarantees
Slide 46: Loans and advances split by sector
Loans and advances split by sector Balance of loan Balance of loan Loan impairment impairment charges impairment charges Loss for the charges for the Jyske Bank A/S Loans, advances and provisions for Loans, advances and provisions for period/loans, period/loans, and guarantees guarantees and guarant
Slide 47: Large exposures
Large exposures per cent of capital base 35% 30% 25% 20% 15% 10% 5% 0% 2009 2010 2011 2012 2013 Q1 2014 Jyske Bank large exposures: > 10% : 0 7.5-10%: 4 47 5-7.5%: 1
Slide 48: Balance of loan impairment charges
Balance of loan impairment charges 5,000 5,000 4,500 4,500 4,000 4,000 DKKm DKKm 3,500 3,500 3,000 3,000 2,500 2,500 2,000 2,000 1,500 1,500 1,000 1,000 500 0 500 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0 2009 2010 2011 2012 2013 Balance of loan impairment charges Losses Balan
Slide 49: Balance of loan impairment charges
Balance of loan impairment charges Per cent of loans and advances Per cent of loans and advances 4.0% 3.5% 3.4% 3.5% 3.3% 3.0% 3.2% 2.5% 3.1% 2.0% 3.0% 2.9% 1.5% 2.8% 1.0% 2.7% 0.5% 2.6% Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Q42013 Q12014 0.0% 2009 2010 2011 2012 2013 49
Slide 50: Exposures by credit rating
Exposures by credit rating Corporates Retail 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 31.12.2013 31.03.2014 31.12.2013 31.03.2014 50
Slide 51: Macro Economy & Danish Banking 2014
Macro Economy & Danish Banking 2014 51
Slide 52: The Danish economy at a glance
The Danish economy at a glance Equal disposable incomes The basics OECD-ranking lowest Gini coefficient Citizens: 5.6 million (2011) Area: 43.098 sq km (0.4 % of USA) 2. Denmark Currency: Kroner (fixed exchange rate policy to the 15. Germany euro) 31. USA A welfare state Among the rich Total tax rev
Slide 53: In 2013 the private sector remained in consolidation mode
In 2013 the private sector remained in consolidation mode The private sector saving (especially from …… and the private sector has been SME and corporates) has been record high reluctant to borrow since 2009 10,0 10,0 7,5 7,5 kr. kr. 5,0 5,0 Bn. k Bn. k % of GDP % of GDP 2,5 2,5 0,0 0,0 -2,5 -2,5 -5
Slide 54: But the Danish economy is slowly coming out of recession
But the Danish economy is slowly coming out of recession Growth turned negative again in Q4, but the Danish figures are volatile. Underlying we think the improvement from Q2 and Q3 is continuing. Side 54/1
Slide 55: Improved sentiment underpins the recovery
Improved sentiment – both among consumers and in the business sector underpins the recovery 55
Slide 56: House prices increased during the past year
House prices increased during the past year House prices are up 1.9 % since the beginning of 2013 and prices on flats are up 6.2 %. 56
Slide 57: Bankruptcies in the SME sector are trending downwards
After years of suffering, banktrupcies in the SME sector are trending downwards 57
Slide 58: Household defaults are also declining
With unemployment slightly declining, and low interest rates household defaults are alo declining 25,0 25,0 20,0 20,0 Percent Percent 15,0 15,0 10,0 10,0 5,0 5,0 0,0 0,0 00 02 04 06 08 10 12 Denmark Sweden UK Euro area Norway Spain Source: Reuters EcoWin 58
Slide 59: Denmark has a healthy public sector economy
Denmark has a healthy public sector economy… Danish net saving is -0.9 % of GDP (positive contribution,1.8 %-points, from tax on capital pensions brought forward) Net saving, % of GDP 59
Slide 60: Competitiveness has improved
Competitiveness has improved Danish competitiveness deteriorated dramatically during the booming years. Danish production sector has been under some pressure and still is, but conditions are slightly better due to a gradual and ongoing improvement. Source: Ministry for economic affairs and the inter
Slide 61: Overall the Danish economy is structurally strong
Overall the Danish economy is structurally strong Net assets against the rest of the world (2010) 125 125 100 100 75 75 Denmarks net assets 50 50 against the rest of the world are significantly 25 25 % of GDP % of GDP higher today : around 40 % of GDP 0 0 -25 -25 -50 -50 -75 -75 -100 -100 -125 -125
Slide 62: … and Denmark is a AAA economy
… and Denmark is a AAA economy 62
Slide 63: The outlook: Growth is likely to stay up
The outlook: Growth is likely to stay up, overall the economy is strong • The economy is likely to continue to show improvement in 2014. The housing market is stronger, sentiment has improved, and there are also stronger ”hard” figures. • However, due to possible continued private sector saving, bot
Slide 64: Jyske Bank forecasts
€ JYSKE BANK The Danish econom 2013 Real growth (%) DKKbn 2011 2012 2013 2014* 2015* Consumer spending 905 -0.7 -0.1 0.0 0.8 1.4 Public spending 524 -1.4 0.4 0.9 0.9 0.6 Fixed gross investment 322 3.3 0.8 0.8 1.2 2.5 Inventory investment** 2 0.4 -0.3 0.2 0.0 0.0 Exports 1019 7.0 0.4 1.0 2.9 3.2 Impo
Slide 65: Danish FSA
Danish FSA • Reports in 2011, 2012 and 2013 • New stringent guidelines for impairments 65
Slide 66: Danish FSA reports 2011, 2012, 2013 and 2014
Danish FSA reports 2011, 2012, 2013 and 2014 SME customers and IRB setup • Decision making material satisfactory • No ground for changing impairment charges • IRB models satisfactory IT inspection • Principles and policies meet required demands Market Risk and Compliance • Management of market risk
Slide 67: Fact Book
Fact Book 67
Slide 68: Core earnings
Core earnings Profit for the period Q1 Q1 Q4 Q3 Q2 Q1 FY DKKm 2014 2013 Index 2013 2013 2013 2013 2013 Net interest income 1,073 1,109 97 1,147 1,141 1,258 1,109 4,655 Dividends, etc. 24 13 185 6 1 21 13 41 Net fee and commission income 424 435 97 505 367 424 435 1,731 Net interest and fee income 1,
Slide 69: Profit/loss
Profit/loss Q1 2014 Q1 2013 Earnings on Earnings on Core investment The Guaran- Re-classifi- Core investment The Guaran- Re-classifi- D KKm earnings portfolios tee Fund, etc. cation Total earnings portfolios tee Fund, etc. cation Total Net interest income 1,073 85 0 0 1,158 1,109 88 0 0 1,197 D ivid
Slide 70: Questions
Questions 70