About Valiant: Presentation for investors January 2019
Our key messages • Simple business model with a clear focus on mortgages 100% focus on • Very high loan quality, with 97% of loans covered retail banking • 21 years with stable or increasing dividends • Growth while keeping margins stable Sustainable and • Interest rate risk: already low exposure further reduced stable earnings • Costs under control despite expansion • Market expansion: new innovative branches opened Strategy implem- • Full integration of Triba Bank AG on track entation on track • Funding diversified through Triple-A covered bonds 2 Valiant investor presentation January 2019
Overview Part 1: About Valiant Part 2: Key financials Part 3: Strategy and targets Appendix 3 Valiant investor presentation January 2019
Valiant: 100% focused on retail and SME banking • Independent retail and SME bank operating exclusively in Switzerland • Close to clients through 91 branches, with strong local roots in 11 cantons (~50% of Swiss population). Digital presence across Switzerland • Acquisition of Triba Partnerbank AG in 2017 • ~1,000 employees, thereof 58% client advisors • Total capital ratio: 16.0% • Moody’s A1/P -1, stable outlook 91 branches 11 cantons • 100% free float. Market cap ~ CHF 1.7bn For us, having close ties Proximity to about 50% of the with our clients means being population of Switzerland where our clients are. “We’re simply a bank” As per 30.9.2018 4 Valiant investor presentation January 2019
Simple business model. Clear focus on mortgages. “Take in the money, look after the money, lend money.” Payment Savings Pensions Funding Investment 76% of revenues from interest income 51% of revenues from SME and self-employed Total income: CHF 438m Total operating income: CHF 388m Retail clients* 2% Other income 5% Medium-sized 19% Trading income 3% companies 19% Affluent private Interest 47% clients 47% Fee income 16% income Self-employed 32% 76% individuals and small companies 32% At 31/12/2017 * Private clients without financing or assets with Valiant 5 Valiant investor presentation January 2019
Easy-to-understand balance sheet Total assets: CHF27.8bn as per 30/9/2018 0.8 Cash and due Due to banks 2.7 from banks • ~85% of assets in loans • Valuation differences and provisions account for <0.2% of total assets Client deposits 18.4 • No goodwill despite a long history of 23.8 Loans take-overs • Asset encumbrance ratio: 23.6% Covered Bonds and • Leverage ratio: 7.2% 6.2 Swiss Pfandbriefe Other liabilities (0.2) 1.3 2.2 Other assets Equity capital Assets Liab.& Equity Valiant investor presentation January 2019 6
Quality of loans remains very high 93% of total loans in mortgages Client loans: CHF 23.8bn Mortgages: 82% residential, with 76% in Bern, Lucerne and Aargau Mortgages: CHF 22.3bn Basel Other CH Other Office/business Bern Fribourg 4 5 6 4 5 Due from 9 Commercial/ Jura+Western clients 9 6 industry 43 Switzerland 94 15 Aargau 82 Residential 18 Lucerne • 97% of loans are covered • Average residual term of fixed mortgages: 3.8 years (from 3.9 years for H1-18) (31/12/2017: 97%) 9M 2018 results Achieving growth while maintaining high quality 7 Valiant investor presentation January 2019
Low risk profile Low-risk retail banking business • Restrictive lending policy Low credit • Diversified client portfolio risk • No exposure to potential • Long-term relationships and very real estate hot spots high customer loyalty • Prudent management • Very transparent, stable earnings Low market of interest rate risk risk • Easy to understand balance sheet • No proprietary trading • Asset quality very high • Retail banking as main • No goodwill despite a long history Low income source of takeovers operational risk Moody’s deposit ratings A1/P -1, outlook stable 8 Valiant investor presentation January 2019
Credit risk stable on a very low level High share of 1 st tier mortgages Low loan-to-value Share of 1 st tier mortgages Loan-to-value (net) 94% 93% 94% 94% 94% 63% 63% 63% 63% 63% 2014 2015 2016 2017 9M 2018 2014 2015 2016 2017 9M 2018 Non-performing loans < 0.2% of loans Value adjustments and provisions on a low level NPL / total loans Value adjustments and provisions for credit risk / total loans 0.22% 0.22% 0.34% 0.34% 0.16% 0.14% 0.24% 0.24% 0.14% 0.23% 2014 2015 2016 2017 9M 2018 2014 2015 2016 2017 9M 2018 9 Valiant investor presentation January 2019
21 years with stable or increasing dividends Stable, increasing distributions to shareholders since Valiant was founded in 1997 CHF, rebased 4.2* 2.5 2.2 1.9 2.0 1.9 1.9 1.8 1.7 1.7 2.8 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 ** 4.00 3.8 3.6 3.2 3.2 3.1 3.1 3.2 3.2 3.2 3.2 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Stable payout ratios since 2007, increasing since 2013 70 Payout ratio as % 55 54 53 51 50 target of 40-70% 50 40 40 41 36 34 34 40 of net profit 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 * For the financial year 2006, an extraordinary jubilee dividend of CHF 1.40 was distributed 10 Valiant investor presentation January 2019
Overview Part 1: About Valiant Part 2: Key financials Part 3: Strategy and targets Appendix 11 Valiant investor presentation January 2019
Improved and sustainable earnings power Stable margins despite declining interest rates Costs under control, including strategy implementation Total net interest margin, bps Cost/Income-Ratio as % 113 113 80 110 72.6 75 69.8 104 70 65.0 64.4 64.1 101 incl. depreciation 65 60 excl. depreciation 59.8 58.3 55 58.4 58.3 55.8 50 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Profitability stable Strengthened capital base, incl. acquisition of Triba in Q3 2017 Net profit in CHF m, ROE as % Total capital ratio as % 17.3 5.6 5.6 17.2 16.8 5.1 5.1 5.5 15.8 15.0 119.2 114.4 117.5 91.4 94.5 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 12 Valiant investor presentation January 2019
Costs under control despite investments in strategy Cost/Income-Ratio as % • Strict cost control in the past. 80 Improving cost income ratios despite strategy implementation 72.6 75 69.8 • Cost savings of CHF 10m p.a. from IT 70 64.1 incl. depreciation 64.4 65.0 service renewal (Basis FY 2016) 65 • Cost savings of CHF 4m p.a. from excl. depreciation 60 reductions of counters 59.8 58.3 58.4 55 58.3 • Synergies CHF 1m p.a. from Triba 55.8 effective from H2 2018 50 2013 2014 2015 2016 2017 Cost reductions to partly offset investments in expansion and digitalisation 13 Valiant investor presentation January 2019
Highlights 9M 2018 Consolidated results Group profit +1.6% Operating profit (pre tax) +8.5% Operating performance Operating profit* (pre tax) +2.8% improved again Net interest income* +3.9% Increased interest margin vs H1-18 Net interest margin 110bp Fee and commission income +2.2% Operating expenses +3.1% Prudent loan growth Loans +1.3% +1.7% - of which mortgages * Excluding value adjustments in interest income and special dividend Aduno 14 Valiant investor presentation January 2019
Increased 9M net interest margin vs 6M at 110bps 2013 2014 2015 2016 2017 % 2.00 1.84% 1.74% 1.64% 1.75 Average interest 1.52% 1.42% rate on assets 1.50 1.36% 1.13% 1.13% Net interest margin 1.25 1.10% 1.10% 1.04% 1.01% 1.00 0.70% 0.75 0.83% 0.51% Average interest 0.39% 0.50 0.32% cost in % of assets 0.25 0.26% 0.00 2013 2014 2015 2016 2017 2018 -0.25 10-year CHF swap -0.50 5-year CHF swap -0.75 3-month CHF Libor -1.00 Repayment of Tier2 bond in April 2018 reduces interest cost by CHF 6 m p.a. 9M 2018 results 15
Interest costs lowered again CHF m Interest expense 83bp in bp 210 70bp Client deposits 177 incl. funds with 51bp 91 negative 72 interest rates 129 39bp 9M 2018: 32bp 102 Other bonds 41 31 26bp 86 26 19 14 11 11 9 Swiss Pfandbriefe and Valiant 87 79 74 72 66 covered bonds - Interest rate p.a. 2.01% 1.91% 1.77% 1.58% 1.29% 2013 2014 2015 2016 2017 Funds for which Valiant charges negative interest rates account for about 10% of total liabilities Valiant investor presentation January 2019 16
Interest-rate risk remains on a low level Duration of assets Duration of liabilities • Slight reduction of the duration 3.12 3.12 3.07 3.08 2.82 2.81 2.84 2.73 2.70 gap from 31 (H1-18) to 28 bps 2.40 2014 2015 2016 2017 9M 2018 Present value sensitivity* 2014 2015 2016 2017 9M 2018 • Slight reduction vs H1-18 (-3.52) -3.01 -3.41 -3.48 -4.17 -4.73 Swap volume in CHF bn • Swaps relatively stable on a low level (<10% of total assets) 2.40 2.34 1.94 1.68 1.34 2014 2015 2016 2017 9M 2018 * Present value sensitivity of economic equity as % (+100bps) 17 Valiant investor presentation January 2019
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