Nova Ljubljanska Banka d.d. · LJSE:NLBR
Nova Ljubljanska Banka d.d — NLB Group — Q3 2023 Earnings Presentation
70 slides from Nova Ljubljanska Banka d.d's earnings presentation, 2023
Slide 1: NLB Group Presentation Q3 2023 Results
NLB Group Presentation Q3 2023 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: Leading banking and financial group in SEE
Leading banking and financial group in SEE NLB Group is the leading banking and financial group Universal NLB Group is comprised of eight banks and several with headquarters and an exclusive strategic interest in banking companies for ancillary services, which support its clients our home region ~ S
Slide 4: This is our home. A region of opportunities.
NLB Banka, Banja Luka This is our home. A region of opportunities. Market share Result after tax Total assets Active clients by total assets 20 1,022 209,958 20.5% (in EUR millions) (in EUR millions) NLB, Ljubljana NLB Komercijalna Banka, Beograd Market share Result after tax Total assets Active cli
Slide 5: Executive Summary
Executive Summary Strong 3Q performance and revised 2023 outlook Q3 2023 Highlights Important Developments • Solid recurring revenues, cost discipline and resilient asset quality leading to EUR 144.2 million in profit after tax in Q3 (18% growth QoQ) • Integration process of N Banka successfully com
Slide 6: Macro Overview
Macro Overview 6
Slide 7: NLB Group – Macro overview
NLB Group – Macro overview NLB d.d. & 7 subsidiary banks operate in Slovenia (EU member) & 5 SEE countries (convergence to EU) Slovenia EUR Serbia RSD GDP (EURbn) 60.8 GDP (EURbn) 63.5 Population (m) 2.1 Population (m) 6.8 NBS loans as % of GDP(1) 44.9% NBS loans as % of GDP(1) 40.4% NBS deposits as
Slide 8: Regional economic growth has slowed but is expected to stay above the Eurozone
Regional economic growth has slowed but is expected to stay above the Eurozone Group‘s region continued with slow growth, and is expected to grow at rates above Eurozone average, despite the demanding macro environment… 2022 2023 2024 Real GDP growth, % 6,4% 5,2% The annual growth in Q2 of 2023 most
Slide 9: Strong labour market in the region with historically low unemployment levels
Strong labour market in the region with historically low unemployment levels Labour market is expected to remain strong… Unemployment rate, % By end of the Q2 2023, unemployment rate 2022 2023 2024 14,4% 15,4% 14,7% decreased in all countries of the Group‘s region. 13,7%13,5% Nevertheless, the labou
Slide 10: NLB operates in countries with prudent monetary policy and rising interest rates
NLB operates in countries with prudent monetary policy and rising interest rates International reserves as % of GDP Central Bank interest rates evolution(1) International reserves, 2019 and Q2 2023 annualized, % GDP Deposit facility rate, 2019 (pre-Covid) – October 2023 % 6,0% 2019 (pre-Covid) 2023
Slide 11: Untapped growth potential with strong fundamentals
Untapped growth potential with strong fundamentals Low overall sector leverage… …with liquid banking sectors… Total Loans (NBS), Q2 2023, % GDP Loans / Deposits, August 2023, % (1) 100,4% 95,3% 85,5% 81,0% 79,9% 74,9% 72,1% 61,4% 67,5% 55,8% 48,3% 50,1% 44,9% 40,4% Slovenia North BiH Kosovo Monteneg
Slide 12: Key Developments
Key Developments
Slide 13: Key performance indicators of NLB Group
Key performance indicators of NLB Group Strong recurring revenues, cost control and resilient asset quality Gross loans to customers (in EURm) in EUR millions / % / bps 1-9 2023 1-9 2022 Change YoY Q3 2023 Q2 2023 Q3 2022 Change QoQ 2% Key Income Statement Data Net operating income 800.8 563.7 42% 2
Slide 14: Revenues and Cost Dynamics
Revenues and Cost Dynamics Net interest income growth outpacing cost growth, CoR remains negative despite net establishment of provisions in Q3 Costs (Group, EURm) +9% 361.6 Recurring net operating income (in EUR million) 332.6 +6% -2% +44% 113.9 123.6 120.9 801.2 1-9 2022 1-9 2023 Q3 2022 Q2 2023 Q
Slide 15: Profitability
Profitability Strong profitability with increasing contribution from Serbian market Profit a.t. – quarterly evolution (EUR million) Result before impairments and provisions by quarters (in EUR million) 144.2 168.2 120.1 122.6 146.1 124.8 90.8 107.2 91.7 69.1 180.5 136.2 155.2 100.7 95.5 2.6 13.0 6.8
Slide 16: Income Statement
Income Statement Strong operational performance increasing resilience of the NLB Group Result before impairments and provisions (Group, EURm) +90% Result before impairments and provisions amounted to EUR 439.2 million, 439.2 higher QoQ and YoY. Main drivers of yearly dynamics in recurring pre- provi
Slide 17: Resilient Operating Income Performance
Resilient Operating Income Performance Result reflects strong underlying performance, growth of net interest income and release of provisions Net profit of NLB Group – evolution YoY (in EURm) 1.4 -12.6 -29.0 11.6 0.2 248.4 -172.8 377.8 -36.8 386.9 -1.1 66.9 1-9 2022 Net interest Net fee and Other ne
Slide 18: NLB Group's Balance sheet structure
NLB Group‘s Balance sheet structure Deposit (predominately from individuals) driven balance sheet Balance sheet structure (30 Sep 2023, in EURm) 25,278 25,278 Other assets 625 Total equity 2,797 Financial assets Other liabilities Subordinated 4,653 505 Other debt debt securities Deposits from banks
Slide 19: Loan dynamics
Loan dynamics Steady loan growth, with healthy new production despite higher interest rates NLB Group NLB(i)(ii) SEE banks(i) +5% +7% 8 +3% 6 6.53% 7 8,000 5,000 5,000 7,107.2 5.66% 7,000 6,743.4 7 3,553.6 5 6 6 4,000 4,000 6,000 3,448.0 3,459.5 5 5 4.64% 4 3,220.9 5,000 5.62% 4.74% 4 3,000 3,000 4
Slide 20: Tax changes
Tax changes Announced changes in tax legislation (from the last available draft law): Tax on balance sheet • Taxable period: 2024-2028 • Tax rate: 0,2 % from balance sheet amount • Deductions: − donations paid on a special state account − higher corporate income tax due to tax rate increase (differe
Slide 21: Minimal risk from diversified securities portfolio with short duration
Minimal risk from diversified securities portfolio with short duration, coupled with ample cash buffers BB securities by asset class (NLB Group 30 September 2023) BB securities by rating (NLB Group, 30 September 2023) Subordinated bank GGB Subordinated NR 0.8% BBB 3.0% bank Corporate 3% Agency Cover
Slide 22: Performance indicators across SEE countries
Performance indicators across SEE countries North Slovenia Serbia Bosnia and Herzegovina Kosovo Montenegro Macedonia NLB Komercijalna NLB, Banka, NLB Banka, NLB Banka, NLB Banka, NLB Banka, NLB Banka, (i) Ljubljana Beograd Skopje Banja Luka Sarajevo Prishtina Podgorica NLB Group Consolidated Data on
Slide 23: Business Performance
Business Performance
Slide 24: Net interest income
Net interest income Margin pick-up on the back of NII growth Net interest margin, quarterly (in %) Net interest income of NLB Group (in EURm) 4.14% 4.33% 3.88% 3.64% 3.50% 3.46% +70% Interest income 3.20% 3.14% 2.71% 2.84% 601.5 Interest expenses 2.65% 2.27% 2.35% 1.86% 1.42% +75% 353.1 +10% Q3 2022
Slide 25: Net non-interest income
Net non-interest income Quarterly NNII affected by donations for flood recovery Net non-interest income of the NLB Group (in EURm) Net fee and commission income (in EURm) -5% Non-recurring other net non-interest income +1% 210.6 199.4 Recurring other net non-interest income 6.5 204.2 205.6 Net fee a
Slide 26: Costs
Costs # of employees(1) Inflation and integration of N Banka affecting costs -187 YoY Total costs (in EURm) 8,792 8,185 8,265 8,228 8,078 +9% Employee costs 2,591 Other general and administrative expenses 2,510 2,417 2,418 2,572 361.6 332.6 Depreciation and amortisation 35.5 35.2 6,064 5,525 5,295 5
Slide 27: Impairments and provisions
Impairments and provisions CoR -13 -23 Other impairments and provisions 13.9 Impairments and provisions for credit risk Release 26.8 5.4 Establishment 10.0 2.3 9.8 11.5 7.5 0.2 -5.1 -3.1 -6.2 -0.7 -12.8 -3.8 1-9 2022 1-9 2023 Q3 2022 Q2 2023 Q3 2023 • The Group net released EUR 26.8 million impairme
Slide 28: NLB Group Assets
NLB Group Assets Total asset growth fueled by growth in net loans to customers and cash balances Total assets of NLB Group – structure (EURm) +8% +5% +2% YtD 25,278.0 24,701.5 24,160.2 624.6 23,497.8 650.8 -13% 715.5 685.3 -5% 4,553.7 4,653.1 4,877.4 4,765.1 13,666.1 5% 13,431.8 12,925.3 13,073.0 5,
Slide 29: NLB Group Funding Structure
NLB Group Funding Structure Average cost of funding is increasing due to wholesale funding, driven by MREL requirement and deposit repricing Funding structure of the NLB Group (Group, EURm) +7% Increasing average cost of funding (quarterly data) +3% +2% 1.08% YtD 22,056.1 22,481.3 21,737.9 0% 21,100
Slide 30: NLB Group Funding Driven by Deposits
NLB Group Funding Driven by Deposits Deposit interest rates are increasing, nevertheless deposit beta remains low at 6%(1) Interest rates for customer deposits (quarterly, in %) NLB Group 0.38% NLB d.d. SEE Banks 0.38% 0.43% 0.28% 0.23% 0.25% 0.24% 0.30% 0.26% 0.12% 0.07% 0.18% 0.10% 0.05% 0.16% Q3
Slide 31: Capital
Capital Capital position enabling growth and dividend distribution Regulatory Requirem ent, Actual NLB Group as of 30 Septem ber 2023 in EUR m illions/in % Capital requirements 2023 Regulatory OCR 14.26% Requirem ent Actual Surplus 15.26% OCR+P2G 1.00% Common Equity Tier 1 capital 1,598 2,193 595 Ti
Slide 32: RWA structure
RWA structure Prudent RWA management to improve capital ratios RWA structure (in EURm) RWA for credit risk increased by EUR 229.1 million YtD mainly due to RWAs / Total 63% 59% 61% 59% ramping up lending activity in all the Group Banks. On the other hand, RWA assets decreased due to lower liquidity
Slide 33: NLB Wholesale Funding
NLB Wholesale Funding Wholesale funding is driven by MREL requirement and by ambition to further strengthen and optimize the capital structure Outstanding bonds: Type of the Interest Nominal ISIN code Issue Date Maturity First call date Bond Rate Value Evolution of MREL eligible funding, the MREL re
Slide 34: Asset Quality
Asset Quality
Slide 35: Asset Quality – NLB Group
Asset Quality – NLB Group Dec-21 Diversified corporate and retail credit portfolio, focused on core markets Mar-22 w/o N Banka Mar-22 Dec-22 Corporate and retail credit portfolio by segment (Group, 30 Sep 2023, % and EURm) Sep-23 4,060 3,847 3,932 3,649 Retail 3,516 3,575 consumer SME 3,304 3,195 3,
Slide 36: NLB Group Asset Quality
NLB Group Asset Quality Portfolio diversification reduces risk, no large concentration in any specific industry Corporate credit portfolio (Group, 30 Sep 2023, in EURm) Credit porfolio in EUR thousands ∆ 3Q ∆ YtD Corporate sector by industry NLB Group % 2023 2023 Accommodation and food service activ
Slide 37: NLB Group Asset Quality
NLB Group Asset Quality Industry diversification in manufacturing and trade Corporate credit portfolio (Group, 30 Sep 2023, in EUR million) Credit porfolio in EUR thousands Credit porfolio in EUR thousands ∆ 3Q ∆ YtD ∆ 3Q ∆ YtD Corporate sector by industry NLB Group % Corporate sector by industry NL
Slide 38: NLB Group Asset Quality
NLB Group Asset Quality High % of Stage 1 Credit portfolio (measured at amortized cost & FVTPL) Credit portfolio (1) by stages (Group, 30 Sep 2023, in EURm) in EUR million Credit portfolio Provisions and FV changes for credit portfolio Stage1 Stage2 Stage3 & FVTPL Stage1 Stage2 Stage3 & FVTPL Covera
Slide 39: Asset Quality – NLB Group
Asset Quality – NLB Group NPL ratio further decreased. NPLs are fully covered by provisions and collateral Gross NPL ratio within the planned framework (Group, EURm) NPL cash and collateral coverage(1) (Group, %) 148% 160% 161% 2,000 103.9% 110 61% 57% 98.9% 62% 100 86.1% 86.6% 99% 104% 90 41% 86% 4
Slide 40: Impairments and provisions for credit risk
Impairments and provisions for credit risk Cumulative net new impairments and provisions for credit risk (w/o off-balance, 1-9 2023, in EUR million) • In the first nine months of 2023 net release of impairments and 17.8 provisions for credit risk in the amount of EUR 26.8 million. 26.8 • In Q3 2023
Slide 41: Asset Quality – NLB Group
Asset Quality – NLB Group Corporate and retail credit portfolio split by interest rates Corporate and retail portfolio of NLB Group (30 Sep 2023) Corporate and retail portfolio of NLB d.d.(1) (30 Sep 2023) Consumer Housing Corporate (incl. SME) Consumer Housing Corporate (incl. SME) 23% 24% 32% 36%
Slide 42: Structure of loan portfolio by type of interest rate
Structure of loan portfolio by type of interest rate Net interest income sensitivity to higher rates remains intact Structure of loan portfolio by type of interest rate Average actual EURIBOR in loan portfolio as of Sep 2023, in EURm EURIBOR 5,744 Loan portfolio by type of EURIBOR (Group, 30 Sep 202
Slide 43: ESG & Digital
ESG & Digital
Slide 44: Integration of Sustainability and ESG factors in the Business Model
Integration of Sustainability and ESG factors in the Business Model ESG 17.7 TOP 15% Highlights in 3Q 2023 1 RATING Low Risk Banks 2022 2 ▪ A new Sustainalytics ESG Risk Rating assessment is underway and is expected to be published in November. ▪ Further progress in Net Zero Business Strategy and Sc
Slide 45: Sustainability Roadmap for 2023
Sustainability Roadmap for 2023 ▪ Our sustainability roadmap 2023 sets next milestones & targets for tackling environmental, social and governance considerations, and focuses on steps to achieving one most important goal – to empower all stakeholders for successful transition to low carbon, inclusiv
Slide 46: State-of-the art services & channels
State-of-the art services & channels The pioneer of banking innovation in Slovenia First Slovenian bank sending cards‘ PIN via SMS First Slovenian bank implementing Flik P2M (Person to Merchant) at all POSes First Slovenian bank enabling 24/7 opening of personal account and the only bank with full d
Slide 47: Omnichannel – future sales platform
Omnichannel – future sales platform Uniformal omnichannel digital customer experience throughout the Group Digital to take primary role especially in transaction banking and simple products contracting NLB Group # active digital & m-bank users (in 000) ✓ Full digital experience starting with new cus
Slide 48: N Banka Integration
N Banka Integration
Slide 49: Integration of N Banka into NLB was successful and within the set timeframe
Integration of N Banka into NLB was successful and within the set timeframe Highlights of integration process • The legal merger was • Proactive retention approach gave • Operational stabilization of N • A comprehensive approach • Final Cut-over finalized - no Employees Legal and M&A process Clients
Slide 50: Total integration cost to be covered by synergies by the end of 2025
Total integration cost to be covered by synergies by the end of 2025, approximately 66% of overall approved budget consumed as of end of September Integration Budget & Synergies Integration budget & realization (in EUR million, incl. VAT) Estimated Synergies (FYE, in EUR million) 16.7 15.6 14.0 11.2
Slide 51: Integration timeline: stabilization and clean-up phase
After successful finalization of integration, focus shifted to stabilization and clean-up phase that is expected to last until end of November H/l integration timeline March 2022 Today Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Legal and M&A ‒ Run DD - ECB Merger processes ‒ Merger regulatory approvals, incl. ECB appl
Slide 52: Outlook
Outlook
Slide 53: Outlook
Outlook Last Outlook Revised Outlook Last Outlook Revised Outlook for 2023 for 2023 for 2025 for 2025 KPI Regular income ~ EUR 1,000 million > EUR 1,000 million > EUR 1,000 million ~ EUR 1,100 million ~ EUR 490 million ~ EUR 500 million Flat on 2023 ~ EUR 530 million Costs level Cost of risk <15 bps
Slide 54: Appendices
Appendices Appendix 1: Business Performance 55 Appendix 2: Segment Analysis 58 Appendix 3: Financial Statements 68 54
Slide 55: Appendix 1: Business Performance
Appendix 1: Business Performance
Slide 56: Off-balance sheet items
Off-balance sheet items Derivatives Off-balance sheet items of NLB Group – structure (in EUR million) 0% in EUR million +2% 30 Sep 2023 31 Dec 2022 30 Sep 2022 FX derivatives w ith customers 166.4 215.5 213.5 6,232.2 6,106.7 6,243.2 Interest rate derivatives w ith customers 453.2 396.1 751.1 1,485.4
Slide 57: Net interest income evolution
Net interest income evolution YoY evolution (in EUR million) +70% 10.0 12.7 -31.4 601.5 74.2 -44.5 12.7 105.9 12.8 96.1 353.1 1-9 2022 Balances Loans to banks Loans to Loans to Loans to state Securities Deposits from Funding Other 1-9 2023 with CB corporate individuals customers QoQ evolution (in EU
Slide 58: Appendix 2: Segment Analysis
Appendix 2: Segment Analysis
Slide 59: NLB Group key business segments
NLB Group key business segments(3) Corporate and Retail banking in Strategic foreign Financial markets in investment banking in Non-core members Slovenia markets Slovenia Slovenia Retail (NLB & N Banka) NLB & N Banka: NLB Banka, Skopje NLB & N Banka: REAM - Key corporates NLB Banka, Banja Luka Micro
Slide 60: Retail Banking in Slovenia
Retail Banking in Slovenia in EUR millions consolidated • Significantly increased net interest income, 1-9 2023 1-9 2022 Change YoY Q3 2023 Q2 2023 Q3 2022 Change QoQ primarily due to higher volumes and margins Net interest income 185.0 70.7 114.3 162% 74.7 61.1 27.1 22% on client deposits. Net inte
Slide 61: Retail banking in Slovenia
Retail banking in Slovenia High and stable market shares across products Market share of net loans to individuals in the Bank(1) Market share of deposits from individuals in the Bank (1) 35.7% 35.6% 35.6% 36.8% 33.9% 34.7% 30.1% 26.2% 26.4% 26.9% 26.6% 27.1% 29.9% 19.4% 26.6% 26.9% 22.5% 24.4% 13.7%
Slide 62: Corporate and Investment banking in Slovenia
Corporate and Investment banking in Slovenia in EUR millions consolidated • Net interest income increase driven by higher volumes, 1-9 2023 1-9 2022 Change YoY Q3 2023 Q2 2023 Q3 2022 Change QoQ interest rates and margins on client deposits. Net interest income 74.4 36.9 37.5 101% 29.2 24.0 14.9 21%
Slide 63: Corporate & Investment Banking in Slovenia
Corporate & Investment Banking in Slovenia High market shares across products Market share of Corporate Banking in the Bank – evolution and position on the market (1) 39.2% • The Bank cooperates with almost 11,000 corporate clients and holds 33.5% 34.4% over 25% market share in loans and 22% in depo
Slide 64: Financial Markets in Slovenia
Financial Markets in Slovenia in EUR millions consolidated 1-9 2023 1-9 2022 Change YoY Q3 2023 Q2 2023 Q3 2022 Change QoQ • The Bank successfully issued its inaugural green senior preferred notes for EUR 500 million. Net interest income 34.1 30.8 3.3 11% 6.4 13.0 7.9 -51% Net interest income w /o A
Slide 65: Financial markets in Slovenia
Financial markets in Slovenia Liquid assets evolution (EURm) Well diversified banking book by geography (30 September 2023) Luxembourg Sweden Spain 7.501 7.719 3% 3% Finland 4% 6.767 612 741 4% Other 5.859 457 Netherlands 30% 5% 5.001 583 2.949 2.935 545 2.977 Austria 6% 21 EUR 2.949 bn Assets 2.952
Slide 66: Strategic Foreign Markets
Strategic Foreign Markets in EUR millions consolidated 1-9 2023 1-9 2022 Change YoY Q3 2023 Q2 2023 Q3 2022 Change QoQ • All subsidiary banks robustly profitable and earning Cost of Net interest income 307.5 213.2 94.3 44% 111.2 102.5 76.1 8% Capital (CoC) with NLB Komercijalna Banka, Beograd Intere
Slide 67: Non-Core Members
Non-Core Members in EUR millions consolidated • Non-core companies continued to 1-9 2023 1-9 2022 Change YoY Q3 2023 Q2 2023 Q3 2022 Change QoQ monetize assets in line with the divestment Net interest income 0.7 0.2 0.4 - 0.2 0.5 0.1 -62% plans. Net non-interest income -2.8 2.4 -5.2 - -0.9 -0.9 0.4
Slide 68: Appendix 3: Financial Statements
Appendix 3: Financial Statements 68
Slide 69: NLB Group Income Statement
NLB Group Income Statement 1-9 1-9 (EURm) YoY Q3 2023 Q2 2023 Q3 2022 QoQ 2022 2023 Interest and similar income 399.4 708.0 77% 267.7 233.2 142.6 15% Interest and similar expense -46.3 -106.5 -130% -46.2 -32.2 -15.8 -43% Net interest income 353.1 601.5 70% 221.5 201.0 126.7 10% Fee and commission in
Slide 70: NLB Group Statement of Financial Position
NLB Group Statement of Financial Position (EURm) 31 Dec 2022 30 Sep 2023 YtD (EURm) 31 Dec 2022 30 Sep 2023 YtD ASSETS LIABILITIES & EQUITY Cash, cash balances at central Deposits from banks 106.4 127.2 20% banks and other demand deposits at banks 5,271.4 5,815.7 10% Deposits from customers 20,027.7