Avarda Bank AB · OMXSTO:AVARDA
Avarda Bank AB — TF Bank — Debt Investor Presentation (September 2019)
50 slides from Avarda Bank AB's debt investor presentation, Sep 16, 2019
Slide 1: Investor Presentation
Investor Presentation September 2019 Strictly private and confidential Strictly private and confidential
Slide 2: Disclaimer
Disclaimer TF Bank AB (publ) - Disclaimer Background This investor presentation (this "Presentation") has been produced by TF Bank AB (publ) (the "Issuer", and together with its direct and indirect subsidiaries from time to time, the "Group") solely for use in connection with the contemplated offeri
Slide 3: Disclaimer
Disclaimer No legal, credit, business, investment or tax advice An investment in the Bonds involves a high level of risk. Several factors could cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements that may
Slide 4: Disclaimer
Disclaimer Restrictions in the United Kingdom In the event that this Presentation is distributed in the United Kingdom, it shall be directed only at persons who are either (a) "investment professionals" for the purposes of Article 19(5) of the UK Financial Services and Markets Act 2000 (Financial Pr
Slide 5: Disclaimer
Disclaimer PRIIPs regulation As the Bonds are not deemed to fall within the scope of Regulation (EU) No 1286/2014 (as amended, the "PRIIPs Regulation"), no PRIIPs key information document (KID) has been prepared. For the avoidance of doubt, the target market assessment does not constitute: (a) an as
Slide 6: Transaction overview
Transaction overview Summary of indicative terms Group structure Issuer TF Bank AB (publ) Instrument Tier 2 capital (Sw: supplementärkapital) Ranking Subordinated Volume SEK 100,000,000 New contemplated SEK Denomination SEK 1,250,000 100m Tier 2 bond TF Bank AB Tenor 10 years Non-call 5 year, therea
Slide 7: Today's presenters and Agenda
Today’s presenters Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview Mattias Carlsson Mikael Meomuttel CEO CFO 4. Financials Years at TF Bank: 10 Years at TF Bank: 10 5. Asset quality, funding and liquidity Previous experience: Previous experien
Slide 8: Key investment highlights
Key investment highlights Resilient business model with more than 30 years of high returns Responsible organic growth with a diversified portfolio Healthy headroom to regulatory capital ratio requirements Scalable cost base with industry-leading efficiency 8 Strictly private and confidential
Slide 9: Agenda
Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview 4. Financials 5. Asset quality, funding and liquidity 6. Capitalisation 7. Appendices 8. Risk factors Strictly private and confidential
Slide 10: Our corporate profile
INTRODUCTION TO TF BANK Our corporate profile Our products Our geographical footprint Operating with modern and scalable infrastructure offering our retail customers online consumer loans, We serve customers in the Nordics and around the deposits and credit cards. For retailers we offer leading Balt
Slide 11: Long track-record of profitable growth
INTRODUCTION TO TF BANK Long track-record of profitable growth SEKm 2018 6,000 Acquired remaining 800 shares in Avarda. Issues SEK 100m AT1 700 5,000 2016 IPO with listing on OMX Nasdaq 600 4,000 2015 500 Acquires BB Bank in Norway. Issues its first Tier 2 bond in the 3,000 1987 amount of SEK 100m 4
Slide 12: Supportive ownership and strong share performance
INTRODUCTION TO TF BANK Supportive ownership and strong share performance Ownership Share price performance1) Largest shareholders, as of 30 June 2019 Share capital, % 160 Market cap1): SEK 2.5bn TFB Holding AB 38.56 Erik Selin Fastigheter AB 11.63 140 Tiberon AB 10.19 Merizole Holding Ltd 7.01 120
Slide 13: Financial targets and future outlook
INTRODUCTION TO TF BANK Financial targets and future outlook Financial targets Looking ahead ▪ Continue to leverage on the platform in Consumer Growth Lending Earnings per share of at least 14.50 SEK in 2020 ▪ Margin of new sales are expected to stay stable in the coming quarters, easing the downwar
Slide 14: Agenda
Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview 4. Financials 5. Asset quality, funding and liquidity 6. Capitalisation 7. Appendices 8. Risk factors Strictly private and confidential
Slide 15: Overview of the Consumer Lending segment
BUSINESS OVERVIEW Overview of the Consumer Lending segment Product area description ▪ Unsecured consumer loans offered in 8 countries, comprising Sweden, Norway, Finland, Estonia, Latvia, Lithuania, Poland and Share of the group’s loan book Austria ▪ The product offering is tailored per each market
Slide 16: Overview of the Ecommerce Solutions segment
BUSINESS OVERVIEW Overview of the Ecommerce Solutions segment Product area description ▪ Best-in-class white label check-out solution with CRM functionality for online retailers – Checkout+ Share of the group’s loan book ▪ Offers all popular payment and sales financing methods through one single int
Slide 17: Significant growth in the loan book since 2015
BUSINESS OVERVIEW Significant growth in the loan book since 2015 Loan book, Group Loan book, Consumer Lending SEKm SEKm ▪ Well-proven growth strategy 4,423 with expansion in carefully 5,625 selected niches and markets 3,466 ▪ Ability to leverage on existing 2,561 2,076 platform and expertise in new
Slide 18: Diversified portfolio with Nordic base
BUSINESS OVERVIEW Diversified portfolio with Nordic base Geographical footprint and loan book distribution Sweden ▪ Focus on profitability and Ecommerce Solutions Average loan size (Consumer Lending) 8% 12% 20% Norway Loan book ▪ Strong growth for Consumer Lending 33% 25% SEK 103,000 Finland Sweden
Slide 19: Agenda
Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview 4. Financials 5. Asset quality, funding and liquidity 6. Capitalisation 7. Appendices 8. Risk factors Strictly private and confidential
Slide 20: Significant growth in operating income exceeding 18% p.a. since 2015
FINANCIALS Significant growth in operating income exceeding 18% p.a. since 2015 Operating income and operating income margin1) Operating income margin relative peers SEKm 699 15.0% 628 12.5% 512 441 388 Average 8.1% 7.7% 8.1% 7.2% 22.4% 20.2% 17.9% 16.3% 15.0% 5.0% Peer 1 Peer 2 Peer 3 Peer 4 Peer 5
Slide 21: Lean cost base with unrivalled C/I ratio among peers
FINANCIALS Lean cost base with unrivalled C/I ratio among peers Operating expense and C/I ratio C/I ratio relative peers SEKm 267 248 77.3% 189 Average 170 50.9% 52.4% 143 49.8% 47.3% 40.3% 38.2% 38.6% 39.4% 38.2% 37.0% 37.0% Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 2015 2016 2017 2018 LTM Q2 2019 Operati
Slide 22: Impressive growth in net profit exceeding 29% p.a. since 2015
FINANCIALS Impressive growth in net profit exceeding 29% p.a. since 2015 Net profit Return on equity relative peers SEKm 218 1,2) 34.3% 192 148 109 89 17.9% Average 12.6% 14.1% 11.9% 10.1% 8.8% 2015 3) 2016 3) LTM Q2 20191) Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 2017 2018 Key takeaways ▪ Strong generati
Slide 23: Performance of each segment
FINANCIALS Performance of each segment Loan book Risk adjusted margin1) Operating profit As of Q2 2019, SEKm As of Q2 2019 As of Q2 2019, SEKm CAGR2 Margin 1,202 35 5,625 264 4,423 229 13.8% 10.8% 11.4% Consumer Lending Ecommerce Group Total Consumer Lending Ecommerce Group Total Consumer Lending Ec
Slide 24: Agenda
Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview 4. Financials 5. Asset quality, funding and liquidity 6. Capitalisation 7. Appendices 8. Risk factors Strictly private and confidential
Slide 25: Net loan loss ratio continuous to decrease
ASSET QUALITY, FUNDING AND LIQUIDITY Net loan loss ratio continuous to decrease Group net loss ratio Consumer Lending net loss ratio SEKm SEKm 6.2% ▪ Clean balance sheet policy 6.2% 4.8% 4.4% ̶ Non performing loans are 3.8% 3.7% generally sold on forward 5.1% 137 flow basis 103 113 86 85 ̶ New forwa
Slide 26: Robust asset quality
ASSET QUALITY, FUNDING AND LIQUIDITY Robust asset quality Development in loans past due Non-performing loans of Total Assets SEKm 5,322 4,188 2,869 1.2% Total Assets 2.7% SEK 7.3bn 150 66 201 61 197 87 1 Jan 2018 31 December 2018 30 June 2019 Stage 1, net Stage 2, net Stage 3, net (Non-performing) S
Slide 27: Diversified funding base and well-matched FX profile
ASSET QUALITY, FUNDING AND LIQUIDITY Diversified funding base and well-matched FX profile Diversified retail deposits Well-matched FX profile Finland, 9% 1% 8% 12% 21% Sweden, 21% 33% 30% SEK 6.2bn Germany, 40% 46% 49% Loan book Deposits from the public Norway, 30% EUR NOK SEK PLN DKK Liquidity rese
Slide 28: Agenda
Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview 4. Financials 5. Asset quality, funding and liquidity 6. Capitalisation 7. Appendices 8. Risk factors Strictly private and confidential
Slide 29: Diversified capital structure
CAPITALISATION Diversified capital structure Historical development of total capital ratio Significant headroom to capital requirements1) 17.5% 15.7% New contemplated T2 capital 1.9% Pro-forma 18.2% 18.2% headroom 17.4% 5.2% T1 + T2 1.9% 13.8% 16.2% Headroom 3.3% 15.7% 1.9% 11.9% T1 3.7% Headroom 2.
Slide 30: Agenda
Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview 4. Financials 5. Asset quality, funding and liquidity 6. Capitalisation 7. Appendices 8. Risk factors Strictly private and confidential
Slide 31: Income statement
APPENDICES Income statement SEK thousand 2015 2016 2017 2018 LTM Q2 2019 Operating income Interest income 385,846 448,870 533,198 657,241 734,945 Interest expense -37,602 -49,870 -64,557 -82,550 -93,169 Net interest income 348,244 399,000 468,641 574,691 641,776 Fee and commission income 45,882 49,0
Slide 32: Balance sheet – assets
APPENDICES Balance sheet – assets SEK thousand 2015 2016 2017 2018 Q2 2019 Assets Cash and balances with central banks 29,445 30,510 65,999 225,610 337,911 Treasury bills eligible for refinancing 60,075 60,211 60,096 70,118 61,064 Loans to credit institutions 777,811 290,152 1,062,294 1,148,863 1,04
Slide 33: Balance sheet – liabilities and equity
APPENDICES Balance sheet – liabilities and equity SEK thousand 2015 2016 2017 2018 Q2 2019 Liabilities and equities Liabilities Liabilities to credit institutions 516 - - - - Deposits and borrowings from the public 2,229,562 2,284,645 3,754,030 5,096,463 6,215,603 Other liabilities 25,925 17,853 33,
Slide 34: Overview of financial development in each segment
APPENDICES Overview of financial development in each segment Loan book Operating income CAGR, 2015 – Q2 2019 SEKm CAGR, 2015 – Q2 2019 SEKm Consumer Lending: 36.5% Consumer Lending: 15.5% Ecommerce Solutions: 42.2% Ecommerce Solutions: 30.0% 699 5,625 628 4,449 1,202 512 166 441 144 3,156 983 388 94
Slide 35: Executive Management and Board of Directors
APPENDICES Executive Management and Board of Directors Executive Management Board of Directors Mattias Carlsson Mikael Meomuttel Mari Thjømøe Tone Bjørnov John Brehmer CEO CFO Chairman (2018) Board member (2015) Board member (2010) Experience: Experience: Commitments: Commitments: Commitments: Consu
Slide 36: Agenda
Agenda 1. Transaction overview and important information 2. Introduction to TF Bank 3. Business overview 4. Financials 5. Asset quality, funding and liquidity 6. Capitalisation 7. Appendices 8. Risk factors Strictly private and confidential
Slide 37: Risk factors
RISK FACTORS Risk factors RISK FACTORS Risk factors deemed to be of importance for the Group's business and future development and risks relating to the Bonds are described below. The risk factors presented below are categorised as "RISKS RELATING TO THE GROUP" or "RISKS RELATING TO THE BONDS" on th
Slide 38: Risk factors
RISK FACTORS Risk factors Risk relating to dependence of debt collectors and partners The Group is currently collaborating with debt collectors and/or partners to sell off debt in connection with the Group's consumer lending. Receivables that are distressed are sold to debt purchasing companies. Hen
Slide 39: Risk factors
RISK FACTORS Risk factors Risks relating to operating on a highly competitive market The Group faces high competition in all the countries in which it operates. In some countries, in particular in Sweden, which is one of the Group's core markets, there are well-established and sophisticated competit
Slide 40: Risk factors
RISK FACTORS Risk factors Management risks Medium level risk Risk relating to dependency on key employees The Group's success depends on its employees, in particular key management personnel. The Group is especially dependent on the expert knowledge of its current senior management, for instance the
Slide 41: Risk factors
RISK FACTORS Risk factors Medium level risk High exposure to exchange rates The Group operates internationally and is therefore subject to unexpected changes in foreign currency exchange rates among various currencies in relating to the Issuer's accounting currency which is Swedish Krona (SEK). Appr
Slide 42: Risk factors
RISK FACTORS Risk factors Legal and regulatory risks High level risk Dependency on license to conduct banking business As a conductor of a banking business in Sweden, the Issuer has obtained the necessary banking license from the Swedish Financial Supervisory Authority (the "SFSA") which conducts fu
Slide 43: Risk factors
RISK FACTORS Risk factors Money laundering and terrorist financing Criminal activity within the banking and financial industry, in which the Group operates, has been increasingly uncovered in recent years. This area, not least the issue of money laundering and terrorist financing, received particula
Slide 44: Risk factors
RISK FACTORS Risk factors RISKS RELATING TO THE BONDS Risks related to the nature of the Bonds Medium level risk The Issuer's obligations under the Bonds are subordinated The rights of the bondholders will, in the event of the liquidation (Sw. likvidation) or bankruptcy (Sw. konkurs) of the Issuer,
Slide 45: Risk factors
RISK FACTORS Risk factors Redemption of the Bonds upon the occurrence of a capital disqualification event or a tax event The Issuer may upon the occurrence of a Capital Disqualification Event or a Tax Event (as defined in the Terms and Conditions), at its option, but in each case subject to obtainin
Slide 46: Risk factors
RISK FACTORS Risk factors The resolution act and BRRD "Write-down and conversion and bail-in" The Group is subject to the Swedish Resolution Act 2015 (Lag (2015:1016) om resolution) (the "Resolution Act"). The Resolution Act transposes BRRD into Swedish law. The powers granted to the Swedish Nationa
Slide 47: Risk factors
RISK FACTORS Risk factors Additional measures In addition to the bail-in power and the statutory write-down and conversion power, the Resolution Act provides the NDO with broader powers to implement other resolution measures with respect to distressed credit institutions, which may include (without
Slide 48: Risk factors
RISK FACTORS Risk factors U.S. Foreign Account Tax Compliance Withholding The U.S. has introduced tax legislation, the Foreign Account Tax Compliance Act (“FATCA”), which may incline the Issuer to enter into an agreement with the U.S. tax authorities, inter alia, agreeing to report and withhold tax
Slide 49: Risk factors
RISK FACTORS Risk factors The rights of bondholders depend on the Agent's actions and financial standing By subscribing for, or accepting the assignment of, any Bond, each holder of a Bond will accept the appointment of the Agent (being on the issue date Nordic Trustee & Agency AB (publ)) to act on
Slide 50: [Goodbye slide]
[Goodbye slide] 50 Strictly private and confidential
TF Bank — Debt Investor Presentation (September 2019) on 6ix