Nova Ljubljanska Banka d.d. · LJSE:NLBR

Nova Ljubljanska Banka d.d — FY2016 Earnings Presentation

54 slides from Nova Ljubljanska Banka d.d's earnings presentation, March 2017

  1. Slide 1: NLB Group Investor Presentation FY'16 results

    NLB Group Investor Presentation FY’16 results

  2. Slide 2: Disclaimer

    Disclaimer THIS PRESENTATION AND ITS CONTENTS ARE CONFIDENTIAL AND ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN, OR TO ANY RESIDENT THEREOF, OR ANY JURISDICTION WHERE SUCH DI

  3. Slide 3: Team

    Team Nova Ljubljanska Banka (NLB) Blaž Brodnjak Archibald Kremser Chief Executive Officer (CEO) Chief Financial Officer (CFO) Chief Marketing Officer (CMO) 18+ 18+ • Responsible for Corporate and Retail Banking since December • Chief Financial Officer of NLB since July 2013 2012; CEO since February

  4. Slide 4: Overview of NLB Group

    Overview of NLB Group Investment highlights Key figures  The largest banking and financial institution in Balance sheet (EURm) Dec-15 Dec-16 Slovenia by total assets Total assets 11,822 12,039  100% owned by the Republic of Slovenia Loans to customers (gross) 8,351 7,901  Leading bank for retail

  5. Slide 5: Background to 2013 recapitalisation

    Background to 2013 recapitalisation • Severe economic NLB Group’s NPL stock vs real GDP growth (EURm) contraction in Slovenia Recapitalisation measures Slovenia during 2009 – 2013 real GDP 3.3% -7.8% 1.2% 0.6% -2.7% -1.1% drove NLB’s NPLs to growth 1• Outstanding EUR184m unprecedented levels 3,684 s

  6. Slide 6: Journey so far

    Journey so far Transformation into a sustainably profitable client-oriented group, focused on core markets Overview Going forward Key initiatives implemented • Largest retail banking group by loans, deposits and Ongoing initiatives •1 Focus on core businesses to transform Retail banking number of b

  7. Slide 7: Journey so far (continued)

    Journey so far (continued) Transformation into a sustainably profitable client-oriented group, focused on core markets Key initiatives implemented Smaller and stronger balance sheet (EURm) 21% cost base reduction from 2012 (EURm) •1 Focus on core businesses 14,335 C/I 54.6% n/m 59.4% 61.6% 60.9% and

  8. Slide 8: Investment highlights

    Investment highlights

  9. Slide 9: Investment highlights of NLB Group

    Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets The largest banking and financial group in Slovenia 1  113 branches(1) and 23.7% market share (by total assets)  Largest bank in Slovenia, leading provider of asset management(2) and a growing

  10. Slide 10: Dominant player in the Slovenian banking sector

    1 Dominant player in the Slovenian banking sector Market leader across products in Slovenia 23.4% Net loans to 4,592 customers(1) 1,936 1,856 1,779 1,695 EURm (2) 25.7% (3) Customer 6,517 deposits(1) 3,617 2,825 2,042 1,823 EURm (2) 113 Branch 70 58 56 network(1) 28 # (2) % Market share as of Sep-16

  11. Slide 11: Dominant player in the Slovenian banking sector: Retail banking

    1 Dominant player in the Slovenian banking sector Retail banking Retail net loans Retail deposits  Retail lending has been steadily growing since 2014, primarily driven by mortgages; (EURm) (EURm) Market household indebtedness remains low vs. Eurozone (22% of GDP as of 2015) 24.2% 23.9% 23.7% 30.2%

  12. Slide 12: Dominant player in the Slovenian banking sector: Corporate banking

    1 Dominant player in the Slovenian banking sector Corporate banking Corporate net loans NLB key business(2)  Corporate deleveraging post-crisis, volumes decreasing 8% on average (Market, EURm) gross loans (EURm) during 2014-16 Market  Corporate credit demand demonstrated pick-up in 2016 as economi

  13. Slide 13: Countries of presence outside Slovenia represent attractive markets

    2 NLB’s countries of presence outside Slovenia represent attractive markets, with significant growth potential  NLB's SEE footprint outside of Slovenia covers 5 countries with EUR65.6bn GDP and 15.4m population  Attractive growth markets, with 2.6% real GDP growth, EUR4k GDP/capita and 21% househo

  14. Slide 14: Top position across target SEE countries

    2 Top position across target SEE countries Unified brand across 6 markets since 2015  Leading franchise in the region based on total assets, compared to other banks present in the same countries, with network of 242 branches and 1.1m active clients(1) in SEE  The only international banking group w

  15. Slide 15: Consistent volume and revenue growth in International resulting in 14% RoE

    2 Consistent volume and revenue growth in International resulting in 14% RoE Net interest income (EURm) Operating expenses (EURm) PAT (EURm) CAGR C/I 14% 61% 54% 51% RoE 3.5% 10.5% 14.1% ratio 137 86 88 89 63 125 2 106 15 15 17 43 11 14 17 5 10 24 11 11 13 8 1 5 23 10 18 17 13 13 5 6 14 15 12 4 4 12

  16. Slide 16: Investment highlights of NLB Group

    Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets 1 The largest banking and financial group in Slovenia 2 Leading positioning in selected SEE markets with increasing contribution to group profit Return to solid profitability after restructuring

  17. Slide 17: Strong revenue performance driven by stable NIM and resilient fee income

    3 Strong revenue performance driven by stable NIM and resilient fee income Net interest income remains under pressure… EUR392m …but NIM remains stable despite monetary easing (Group, EURm) excl. NPL in Eurozone (Group, %) sale 498 4.25 4.14 NIM of 443 3.95 389 2.63% in 2016 if 2.70 normalised 330 34

  18. Slide 18: Profitability improvement in all key business segments

    3 Profitability improvement in all key business segments, with reduction of non-core losses Profitable, client-oriented group, focused on core markets Core segments consistently profitable, retail and international increasingly profitable (PBT, EURm) Gross % of Key metrics (FYE Dec-16, EURm) PBT Ass

  19. Slide 19: Successful business transformation results in sustainable profitability

    3 Successful business transformation results in sustainable profitability with 20% profit growth in 2016 Evolution of group profitability since 2014 (EURm) 2015 impact 2016 impact ROE 4.8% 6.6% 7.4% +10 +58 +23 +15 +8 110 +6 92 -5 -38 -7 -23 62           2014 PAT Impairments Net interest N

  20. Slide 20: 6% annualised cost reduction

    3 6% annualised cost reduction driven by network optimisation, HQ personnel and non-personnel reductions and Non-Core Impressive cost reduction across the board (Group, EURm) • Strong management commitment Cost / Income to strict cost containment and ratio 74.1% 60.9% 60.9% optimisation measures 368

  21. Slide 21: Double-digit increase in profit before tax since 2014

    3 Double-digit increase in profit before tax since 2014 Normalising NLB Group profit before tax (Group, EURm) One-off items • Exceptional items: 2016: • EUR7.8m gain on sale of Visa Europe to Visa Inc. • EUR5.5m success fee and gain on sale of equity investments 162 2015: 131 Project 117 30 Pine • E

  22. Slide 22: Funding structure driven by deposits and wholesale markets access

    4 Funding structure driven by deposits and complemented by established wholesale markets access Deposits accounting for 90% of funding (EURm) Strong retail franchise provides stable and price L/D 76% 75% 74% insensitive deposits base (EURm) ratio 9,439 Dec-16 8,949 9,026 Term 42% 10,540 10,513 2,824

  23. Slide 23: Well capitalised franchise

    4 Well capitalised franchise Solid capital position with large and stable deposit base  Highest quality capital (CET1) at Group and NLB d.d.(1)  Immaterial dependency on net recognised DTAs RWAs expansion in 2015 driven by one-off increase in CET1 ratio comfortably above regulatory requirements(2)

  24. Slide 24: Core foreign banks self-funded source of profits

    4 Core foreign banks represent a self-funded source of profits, with solid capital adequacy International contributes >50% of Group profit (FY-16) Core foreign banks self-funded by design Foreign (L/D ratio(1), Dec-16) Foreign strategic strategic markets markets 52% 31% 83.6% EUR2.5bn 79.2% 74.6% 76

  25. Slide 25: Investment highlights of NLB Group

    Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets 1 The largest banking and financial group in Slovenia 2 Leading positioning in selected SEE markets with increasing contribution to group profit 3 Return to solid profitability after restructuri

  26. Slide 26: Diversified loan portfolio

    5 Diversified loan portfolio Dominated by Slovenian assets, focused on core markets and cautious risk taking Credit portfolio by segment and geography • No large concentration in any specific industry or client (Group, Dec-16) segment Other Institutions Serbia 11% • NLB’s lending strategy focuses on

  27. Slide 27: NLB has driven a turnaround in asset quality

    5 NLB has driven a turnaround in asset quality Further improvements driven by active NPL management and economic recovery Gross NPL formation has been low Active workout drove gross NPL ratio Reduction of NPLs remains a key since 2014 (Group, EURm) down despite falling loan volumes focus Formation /

  28. Slide 28: Project Pine: Disposal of ca EUR500m of non-performing exposures

    5 Project Pine: Disposal of ca EUR500m of non-performing exposures Slovenia Corporate Slovenia Retail • Corporate NPL loans of • Total consumer NPL Transaction overview and rationale gross book value loans of gross book value of EUR396m of EUR104m  Competitive tender process, run by Perimeter inter

  29. Slide 29: NPLs adequately covered by provisions and collateral

    5 NPLs adequately covered by provisions and collateral, with limited off balance sheet non-performing exposures  Total coverage exceeds 100% across segments  Limited non-performing exposures from off-balance sheet items (~EUR130m) Group NPL structure (Dec-16, EURm) Corporate (Dec-16) Retail State

  30. Slide 30: Investment highlights of NLB Group

    Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets 1 The largest banking and financial group in Slovenia 2 Leading positioning in selected SEE markets with increasing contribution to group profit 3 Return to solid profitability after restructuri

  31. Slide 31: We have a clear strategy to address current challenges

    6 We have a clear strategy to address current challenges Key trends and challenges Key priorities Focus on customer experience  Omni-channel product distribution Sector and regulation Macro  Partnership programmes  End-to-end customer solutions • Regulatory interventions • Low interest rate envir

  32. Slide 32: Medium-term objectives

    6 Medium-term objectives Delivering growth, sustainable returns and attractive payout to shareholders Drivers Targets(1) 2016 Medium term  Ongoing economic recovery in Slovenia and international markets NIM 2.6% >2.7% Improving macro  Improved consumer confidence environment  Rebound from low int

  33. Slide 33: Investment highlights of NLB Group

    Investment highlights of NLB Group Largest bank in Slovenia and among top players in selected SEE markets The largest banking and financial group in Slovenia 1  113 branches(1) and 23.7% market share (by total assets)  Largest bank in Slovenia, leading provider of asset management(2) and a growing

  34. Slide 34: Appendix A: Slovenia macro and banking backdrop

    Appendix A Slovenia macro and banking backdrop

  35. Slide 35: Slovenia: Fully integrated into European institutions

    Slovenia: Fully integrated into European institutions  Member of the EU and the Eurozone EUR 38.5bn 2.6% nominal GDP real GDP growth(2)  Export-driven economy with value- EUR 19k 7.3% added export goods GDP/capita vs EUR unemployment rate(2) 11k CEE average(1)  Well educated labour force 83.1% 0.

  36. Slide 36: Slovenian economy growing at 2.9% driven by exports and private consumption

    Slovenian economy growing at 2.9% compared to 2.0% Eurozone growth, driven by exports and private consumption Real GDP growth Macro update • Slovenian economy grew by 2.9% in 2015 – stronger than Eurozone average of 2.0% 3.0% 2.9% 1.9% 2.0% 1.6% • Drivers included 4.4% exports growth and continued 1

  37. Slide 37: Strong progress with structural reforms

    Strong progress with structural reforms Key reforms implemented Privatisations attracted foreign investment Measures Asset Sector Investor Date EURm  Adoption of the fiscal rule requiring balanced budget over the Airlines 4K Invest Jan-16 n/a medium term(1) Fiscal Infrastructure Linetech Nov-15 n/a

  38. Slide 38: Slovenian banking sector turnaround

    Slovenian banking sector turnaround with vastly improved funding, asset quality and capital position Sector NPE ratio evolution(1) Overview of 2013 extraordinary measures • Significant contraction of economic activity since 2009 14.4% 13.4% paired with high indebtedness of corporate sector drove 11.

  39. Slide 39: Appendix B: Additional information

    Appendix B Additional information

  40. Slide 40: Successfully managing EC restructuring plan commitments

    Successfully managing EC restructuring plan commitments  Restructuring period to end on 31 December 2017, subject to successful completion of restructuring commitments Commitment Status  Reduction of balance sheet Ongoing Restructuring  Reduction of operating expenses   Divestment of several su

  41. Slide 41: NLB IT highlights

    NLB IT highlights Infrastructure supports business requirements with an integrated architectural approach, providing robust operations and high availability, with rigorous cost control Market leader in Slovenia, with regionally competitive mobile and e-banking solutions, and branch 1 office front-en

  42. Slide 42: Appendix C: Asset quality

    Asset quality vo } NLB Group en

  43. Slide 43: Comprehensive Group Strategy towards NPE reduction

    Comprehensive Group Strategy towards NPE reduction Solid underlying Group capabilities Key strategies A Liquidation of collateral Dedicated units  Corporation collaboration with specialised real estate team (GREAM) Restructuring Task Force for to evaluate optimal strategy for complex cases reposse

  44. Slide 44: Demonstrated impact to asset quality

    Demonstrated impact to asset quality Impact on NPL ratio (Dec-13 to Dec-16, Group, EURm) 25.6% 444 13.8% Comments -78 • Cured clients, collections and 2,798 19 collateral liquidation contributed 36% of NPL NPLs from loans granted since -630 stock reduction since Dec-13 2014(1) -143 -233 • Sale of NP

  45. Slide 45: Minimised new NPL formation and high quality of new production

    Minimised new NPL formation and high quality of new production Gross NPL formation (EURm) Total NPL formation (Group, EURm) Corporate and SME Formation Front 94 Incl. EUR56m from as % of Legacy 0 borrower with no delay gross 2.2% 1.2% 1.4% 60 0 loans 94 32 1 60 Front Core Slovenia 32 225 Legacy 4 20

  46. Slide 46: NPL cash and total coverage increased to 76% and 134%

    NPL cash and total coverage increased to 76% and 134%, respectively, in Dec-16 Coverage for the Group (%) Corporate & SME 126% 134% 119% 65% 66% 72% 128% 134% 123% 54% 60% 61% Core Slovenia Dec-14 Dec-15 Dec-16 56% 58% 54% Cash coverage Collateral coverage 123% 120% 134% 53% 54% 58% 69% 72% 76% Reta

  47. Slide 47: Appendix D: Financial statements

    Appendix D Financial statements

  48. Slide 48: Key financial data and performance NLB Group (1/2)

    Key financial data and performance NLB Group (1/2) FY’14 FY’15 FY’16 Net interest income 330 340 317 Net fee and commission income 148 147 146 Income from financial operations 38 4 20 Other Income (5) (8) (7) Operating Income 511 483 476 Staff costs (163) (163) (165) General expenses (105) (103) (96

  49. Slide 49: Key financial data and performance NLB Group (2/2)

    Key financial data and performance NLB Group (2/2) Dec-14 Dec-15 Dec-16 ASSETS Cash and balances with Central Banks 1,128 1,162 1,299 Financial instruments(1) 2,529 2,578 2,778 Loans and advances to banks (net) 271 432 436 Loans and advances to customers 7,415 7,088 6,997 Investments in associates a

  50. Slide 50: Key financial data and performance NLB d.d. (1/2)

    Key financial data and performance NLB d.d. (1/2) FY’14 FY’15 FY’16 Net interest income 227 208 175 Net fee and commission income 101 98 95 Income from financial operations 34 9 13 Other Income 3 (2) 0 Operating Income 364 313 284 Staff costs (102) (102) (103) General expenses (67) (64) (59) Depreci

  51. Slide 51: Key financial data and performance NLB d.d. (2/2)

    Key financial data and performance NLB d.d (2/2) Dec-14 Dec-15 Dec-16 ASSETS Cash and balances with Central Banks 434 497 617 Financial instruments(1) 2,038 2,087 2,295 Loans and advances to banks (net) 159 345 408 Loans and advances to customers 5,700 5,221 4,929 Investments in associates and JV 35

  52. Slide 52: Structure of NLB Group

    Structure of NLB Group NLB Group Core Slovenia sub-segments Foreign Strategic NLB d.d. Non-bank Retail(2) Markets CFO line CRO line CMO line Core foreign banks NLB Banka, Belgrade Financial markets Retail sales NLB Banka, Podgorica Investment Banking Distribution network(1) NLB Skladi and Custody NL

  53. Slide 53: Segment profitability

    Segment profitability Contribution to NLB Group Net Banking Income 2016 Contribution to Core NBI 483.9 448.2 26.3 (1) Foreign Retail 9.4 479.8 179.4 444.1 26.3 Strategic banking markets in Slovenia 40% 32% 78.9 50.2 139.8 76.8 EUR444m 137.8 Financial Corporate Retail Corporate Financial Foreign Core

  54. Slide 54: Key segment financials

    Key segment financials Core markets and activities NLB Corporate Financial Foreign Non-Core Other(3) Retail banking Group FY 2016, EURm in Slovenia banking in markets in Strategic Total Slovenia Slovenia markets P&L Net interest income 71.2 45.9 48.5 136.9 302.6 15.4 (0.7) 317.3 Net non-interest inc

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