Jyske Bank A/S · OMXCOP:JYSK
Jyske Bank A/S — Q3 2017 Earnings Presentation
48 slides from Jyske Bank A/S's earnings presentation, Oct 25, 2017
Slide 1: Jyske Bank Q3 2017
Jyske Bank Q3 2017 25 October 2017
Slide 2: Our targets
Our targets Q3 2017 • Delivering an attractive long-term return on equity of 8-12% 9.2% • Volume growth DKK 91.6bn • DKK 100bn in housing-related loans • DKK 20bn in property loans for corporate clients DKK 17.1bn • Maintaining a strong capital position 19.8% and – Long-term targets for capital rati
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 12% – Danish play – Approx. 890,000 customers – Nationwide branch network comprised of 95 personal client branches, 30 corporate br
Slide 4: Jyske Bank in brief
Jyske Bank in brief Jyske Bank Group key figures Profit Net Shareholders' Loans and Total before tax, profit, equity at year- ROE after tax, advances, Deposits, assets, Number of DKKm DKKm end, DKKm average 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: Q3 2017 highlights
Q3 2017 highlights • Net profit of DKK 748m, equal to ROE 9.2% p.a. CORE PROFIT AND PROFIT FOR THE PERIOD Index Index • Business volumes: DKKm Q3 2017 Q3 2016 17/16 Q3 2017 Q2 2017 Q3/Q2 Net interest income 1,381 1,393 99 1,381 1,386 100 – Continued growth in new home loans, total volume of DKK Net
Slide 6: ROE up due to reversal of impairment charges
ROE up due to reversal of impairment charges Net profit 1,400 21% • Delivering a net profit of DKK 748m and ROE of 9.2% p.a. in Q3 DKKm 1,200 18% 2017 1,000 15% 800 12% • A increase of 1.3 percentage points compared to Q2 2017 due to 600 9% primarily: 400 6% 200 3% – Lower core expenses – no one-off
Slide 7: NII slightly down
NII slightly down • Slightly lower NII in Q3 2017 than Q2 2017: Q3 2017 vs. Q2 2017: Development in NII 1,450 – NII supported by DKKm • Volume growth in all 3 segments 1,400 • 1 day more in Q3 than Q2 1,350 • Increase in NII from strategic ALM and risk management – NII pressured by 1,300 • Lower NII
Slide 8: Net fee income continues at high level
Net fee income continues at high level Net fee income • Net fee income in Q3 2017 of DKK 436m, DKK 423m excl. fee income re. 500 Jyske Invest Fund Management (other fees and commissions), at level with DKKm Q2 2017 and approx. 17% up compared to Q3 2016. 400 300 • The improved performance can be att
Slide 9: Value adjustments continue at more moderate level
Value adjustments continue at more moderate level • Value adjustments less impacted by clients’ transactions relating to Value adjustments under core income interest rate hedging (swaps) and lower bond holdings dampening the 350 P&L effect of narrowing of OAS spreads (credit spreads on Danish DKKm m
Slide 10: Stable trend in core expenses as expected
Stable trend in core expenses as expected Q3 2017 vs. Q2 2017: Development in core expenses • Stable core expenses – Q3 2017 down by 0.4% compared to Q3 2016 1,500 DKKm 1,450 1,400 1,350 • Core expenses in Q3 2017 down by DKK 118m compared to Q2 2017: 1,300 • No one-offs in Q3 2017 1,250 1,200 1,150
Slide 11: Net reversals
Net reversals Loan impairment charges (under core profit) • Net reversals of DKK 194m under core profit 100 DKKm – Of which reversals on agriculture account for DKK 64m 50 0 -50 • Total balance of management’s estimate of DKK 423m end of Q3 2017, -100 of which DKK 120m relate to agriculture, compare
Slide 12: Reversals on agriculture
Reversals on agriculture • Decreasing impairment ratios for both dairy and pig farmers, Commodity prices 42% and 22% respectively end of Q3 2017 versus 45% and 26% 3,5 13 end of Q4 2016 3,25 12,5 12 • Commodity price development: 3 11,5 DKK/kg – Pork: Prices reached a new high of 11.6 DKK/kg in June
Slide 13: Nordjyske Bank drives increase in investment portfolio earnings
Nordjyske Bank drives increase in investment portfolio earnings Investment portfolio earnings, quarterly • Investment portfolio earnings continue at more moderate levels 400 after the 3 quarters’ elevated earnings DKKm 350 300 • Nordjyske Bank share priced at 122 end of Q3, up from 115 end 250 of Q2
Slide 14: Banking activities
Banking activities • Increasing volume in bank loans and stable bank deposits Financials • Positive development in AUM 1,800 DKKm 1,600 1,400 • Core income at level with Q2 2017 when excluding gain on sale of real 1,200 1,000 property recognised in Q2. Fees and commissions still significantly above
Slide 15: Mortgage activities
Mortgage activities • Growth in all lending segments - most significant in Private and Commercial segment Financials 600 DKKm 500 • Core income stable – minor decline in contribution income as private 400 individuals move into products with lower margins, e.g. fixed rate loans, 300 and margin adjust
Slide 16: Leasing activities
Leasing activities • Loan volumes continue to increase Financials 150 DKKm 130 • Core income pressured by operating leases as impairments 110 90 are incurred due to expected changes in tax rules and 70 lower residual market values on certain models 50 30 10 • Core expenses develop as expected -10 Q3
Slide 17: Growth strategy
G JYSKE BANK Growth strategy
Slide 18: Continued growth in mortgage lending
Continued growth in mortgage lending Total mortgage lending (DKKbn) 308 • Net growth of more than DKK 105bn over the last 300 291 four years for the Group 261 250 231 • Net growth primarily in residential segment 202 200 • Commercial and subsidised lending growing by DKK 27bn (DKK 21bn for housing p
Slide 19: Mortgage initiatives
Mortgage initiatives Private segment: • The most competetive prices on the mortgage market • Change your mortgage loan without changing your bank • Most attractive prices are now offered to both full-line clients and mortgage-only clients • Product differentiation • We offer the broadest variety of
Slide 20: Report from Danish Competition and Consumer Authority
Report from Danish Competition and Consumer Authority In August 2016 the Danish Competition Authority concluded: • Competition on the Danish residential mortgage market could be increased • Regulation can have negative impact on the competition The report published 16 recommendations to improve comp
Slide 21: Digital initiatives
Digital initiatives Danish Competition Authority report on competition on Danish mortgage market: ”From the borrowers’ point of view the mortgage lending market is complex and many borrowers have difficulties navigating in the market” Our goal: Making lending more user friendly Best loan 2016 • Intr
Slide 22: Danish housing market
Danish housing market Development in house prices (index 2007 = 100) • Increasing house prices after the financial crisis 180 160 • Denmark has repriced unlike Sweden and Index 2007=100 140 Norway 120 • The housing burden is expected to remain at a 100 low level 80 • Debt share of disposable income
Slide 23: Focus on Copenhagen area
Focus on Copenhagen area • No price bubble in Copenhagen housing Apartments price-index 1999-2006 vs. 2010-2017 market 280 240 • Population in Copenhagen is expected to 200 increase by 15% over the next 10 years 160 • Construction of new properties in 120 Copenhagen should dampen price increases 80
Slide 24: Danish FSA introduces new measure to limit certain products
Danish FSA introduces new measure to limit certain products New FSA measure • Limit the proportion of customers with debt-to-income (DTI) above 4 and adjustable rate mortgages (ARM) or interest-only loans (IO) • Still uncertain how the measure will be implemented Illustrative example of lending rule
Slide 25: Capital and Liquidity
G JYSKE BANK Capital and Liquidity
Slide 26: Aligned with long-term capital targets
Aligned with long-term capital targets Capital ratios • Capital ratio 19.8% and CET1 ratio 16.2% end of Q3 2017 vs. long-term targets of 17.5% and 14% 25 pct – Capital structure aligned with long-term targets as subordinated debt 20 reaches 3.6% of REA end of Q3 2017 15 – Jyske Bank will on an on-go
Slide 27: Upcoming regulation
Upcoming regulation • Long-term capital targets based on fully implemented Basel IV Capital ratio and CET1 ratio capital requirements: 20 – Capital ratio 17.5% and CET1 ratio 14% 1.8 18 1.8 – Capital ratios to remain above long-term targets given the 16 2.5 16.2 implementation of new rules on impair
Slide 28: Ample liquidity
Ample liquidity Group Liquidity buffer • Liquidity buffer DKK 69bn end of Q3 2017 (DKK 77bn end of 2016) 90 DKKbn – 89% of the buffer - DKK 62bn - is eligible for repo transactions at 80 central banks (Nationalbanken or ECB) 70 – Cash placements are categorized as eligible at Nationalbanken or 60 EC
Slide 29: A frequent EUR issuer
A frequent EUR issuer Ongoing access to a diversified European investor base helps Jyske Bank Redemption profile maintain a prudent risk – and funding – profile 9 8 7 Since 2012 more than 500 different investors have bought into the Group’s senior unsecured debt, capital (Tier 2 and AT1) or EUR cove
Slide 30: Credit Quality
G JYSKE BANK Credit Quality
Slide 31: 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 32: Mortgages: Improved credit quality
Mortgages: Improved credit quality Lending in 90-days arrears (per cent of lending) Repossessed properties (DKKm/number) 500 35 1.8% Private 450 1.6% 30 Commercial 400 1.4% Subsidised 350 25 1.2% 300 20 1.0% 250 0.8% 15 200 0.6% 150 10 0.4% 100 0.2% 5 50 0.0% 0 0 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q3
Slide 33: Bank loans: the portfolio
Bank loans: the portfolio • Portfolio composition end of Q3 2017: Balance of loan – Corporates take up larger proportion, 59% vs. 53% Loans, advances and guarantees impairment charges Losses Impairment charges end of Q4 2016 as volume grows Q3 2017 Q4 2016 Q3 2017 Q3 2017 Q3 2017 – Private individua
Slide 34: Appendices: Danish Economy Q3, NPLs
Appendices: 1) Danish Economy Q3 2) NPLs
Slide 35: Danish Economy Q3
G JYSKE BANK Danish Economy Q3
Slide 36: Danish Economy Summary
Danish Economy Summary • We expect the upturn in the Danish economy to continue • Employment is up 5% since 2012 • Low interest rates, increasing house prices and export market growth stimulates demand. Export competitiveness looks healthy • The labour force is increasing from foreign labour supply
Slide 37: Danish economy – an upturn story
Danish economy – an upturn story • Overall the Danish financial sector’s operating environment is improving The upturn is set to continue over the next years The private sector is driving the 5% increase in employment 37
Slide 38: 3 kinds of stimulus support demand
3 kinds of stimulus support demand House prices recovering after burst in 08/09 Spill-over from European recovery Interest rates are at a historic low Demand has increased 38
Slide 39: Improved asset quality as defaults have normalized
Improved asset quality as defaults have normalized Unemployment is relatively low Forced house sales well below 500 properties Business bankruptcies are back to normal per month (less than 0.2% per year) 39
Slide 40: 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 saving up …so household debt has declined …and household net assets are large Net Financial Wealth-to-Income,
Slide 41: 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 41
Slide 42: House prices continues up in all regions
House prices continues up in all regions • Lately, the Zealand Region posts the largest price increase • There is a risk that very low interest rates may overheat local parts of the market • However, new regulation and a new housing tax model can potentially have a dampening effect House prices incr
Slide 43: Non-performing loans
G JYSKE BANK Non-performing loans
Slide 44: Non-performing loans
Non-performing loans • At group level NPLs amounted to 3.0% of loans and advances at the end of Q3 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 45: NPLs – Jyske Bank Group
NPLs – Jyske Bank Group JYSKE BANK GROUP DKKm 2017 Q3 2017 Q2 2017 Q1 2016 Q4 2016 Q3 Carrying amount 459,709 453,526 441,941 438,592 431,025 Balance of loan impairments charges and provisions for guarantees 5,576 5,710 5,790 5,937 6,497 Balance of discounts for acquired assets 582 714 782 879 1,144
Slide 46: NPLs – Banking activities
NPLs – Banking activities BANKING, DKKm 2017 Q3 2017 Q2 2017 Q1 2016 Q4 2016 Q3 Carrying amount 155,435 156,366 153,146 160,159 155,758 Balance of loan impairments charges and provisions for guarantees 4,734 4,858 5,007 5,182 5,723 Balance of discounts for acquired assets 242 325 383 451 523 Gross c
Slide 47: NPLs – Mortgage activities
NPLs – Mortgage activities MORTGAGE, DKKm 2017 Q3 2017 Q2 2017 Q1 2016 Q4 2016 Q3 Carrying amount 304,274 297,160 288,794 278,433 275,267 Balance of loan impairments charges and provisions for guarantees 842 851 783 755 774 Balance of discounts for acquired assets 340 389 399 428 621 Gross carrying
Slide 48: 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,