Investor presentation Aktia Q4 2019 Investor Presentation 14 - - PowerPoint PPT Presentation

14 FEBRUARY 2020

Q4 2019 Investor presentation

Aktia’s Q4 2019 in brief

• The comparable operating profit was EUR 19.2 million

and increased by EUR 9.0 million (+88%).

• Strong lending and high customer activity continued.
• Assets under management (AuM) amounted to EUR 9.9

(30 September 2019; 9.8) billion.

• Life insurance presented a strong result for Q4. Fair value

changes in real estate and fund investments supported the performance.

• Comparable operating expenses decreased by 8% to

EUR 35.2 million.

Recent arrangements

• Aktia announced the acquisition
• f Alandia’s life insurance portfolio.
• Aktia Asset Management to become a

wholly-owned subsidiary of Aktia Bank. Dividend proposal

• Year 2019 dividend proposal EUR 0.63

(0.61) per share.

Strong lending and high customer activity continued

Private customers

• The service model change proceeded as the merger of branch
• ffices and a reduction in office premises was realised.
• The interest in asset management products and different

investment alternatives was growing.

• Aktia’s brand renewal continued and was well received by both

customers and other stakeholders. Corporate customers

• Both the investment appetite and building volumes of corporates

continued on a good level during Q4.

• The risk level of the corporate loan book remained on a low

level.

Banking Business

Assets under management excluding custody (AuM) EUR million

5,405 5,597 6,235 7,628 8,353 9,853 2,000 4,000 6,000 8,000 10,000 12,000 2014 2015 2016 2017 2018 2019

Asset Management

• Assets under Management (AuM) amounted to EUR

9,853 (2018; 8,353) million, which is at the highest level ever.

• The activities for a more extensive range of products

continued: Aktia European High Yield Bond fund was launched.

• Aktia’s asset management was rewarded during Q4

with the Gold Award among institutional investors in the annual SFR survey. Life Insurance

• Life insurance made a strong result for Q4. Fair value

changes in real estate and fund investments contributed to the performance.

• The decreasing interest-linked stock in combination with

a better product mix of risk insurances supported the results.

Assets under Management at record high level

Asset Management

International institutional assets (UI-Aktia) Retail assets Institutional assets

Corporate Responsibility Highlights:

• Aktia reached rating level B in CDP’s (former Carbon Disclosure Project) international corporate responsibility ranking, which is over the

average in the European financial sector. In CDP Climate Change evaluation, we are among the best banks that operate in Finland.

• In the Institutional Shareholder Services Inc’s ESG analysis, where Aktia received the ranking D+, which is better than over 70% of the

international banks that ISS has evaluated. Most significant actions and results:

• We decided that corporate responsibility will be dealt regularly on the agenda of Executive Committee and Board of Directors.
• We chose UN Sustainable Development Goals and targets to guide responsibility actions.
• We created a corporate responsibility action plan for 2019–2023, in which we specified further the responsibility goals and actions.
• We created a green procurement guide, an ethical code of conduct for suppliers, a supplier responsibility risk analysis and updated a

climate policy.

• We started to build WWF’s Green Office environmental management system in our headquarters.
• The NPS satisfaction level of personal and premium customer meetings was 65.6. (Target is >50).
• The number of customer letters decreased by 23% and 0.5 million pcs from previous year. (Target is 10% annually).

Corporate Responsibility Highlights and Actions in 2019

Smaller equity funds carbon footprint than on the reference market

50 100 150

Capital Nordic Nordic Small Cap Nordic Micro Cap Europa Europe Small Cap America Global Equity Portfolio

Equity Fund, tons CO2e per MEUR invested Reference Market, tons CO2e per MEUR invested

The Carbon Footprint of Aktia’s Equity Funds

• Aktia will report every six months on the

most important indicators of our corporate responsibility programme. The indicators will be complemented in the future.

• The carbon footprint of our equity funds was
• n average approximately 51% smaller than

that of the relevant reference market. (Target < reference market).

Aktia 2023 strategy

Aktia Q4 2019 Investor presentation

New types of competition and ecosystems Macroeconomy and regulation Changing customer behavior

Our market is changing – clarifying Aktia’s role is critical to stay competitive

Low or negative interest rates Tightening regulation Transformation of work Global political instability End-of-ownership Lower customer loyalty Polarised preferences & segments Digital & physical combined New market entrants Ecosystem competition Blurred – competitor or partner? Margin erosion

Our three strategic priorities

Acquire new customers in growing cities Win in asset management

2023

Banking & Insurance Drive operational efficiency to capitalise on our challenger position

• Inorganic activities are a viable and increasingly

important means to grow for Aktia.

• Aktia assumes an active role in executing its M&A

strategy.

• Aktia is also open for opportunistic business ventures

if new opportunities in untapped or developing areas are recognised and found viable.

• Execution of inorganic activities during the strategy

period until 2023 will also secure Aktia’s growth

• ptions beyond 2023.

Inorganic growth: M&A as a part of Aktia’s strategy

AKTIA

Long-term financial targets 2023

Comparable

• perating profit

EUR 100 million

1–12/2019: EUR 68.2 million

Return on Equity (ROE) above 11%

1–12/2019: 10.3%

Comparable cost-to-income ratio under 0.60

1–12/2019: 0.66

Common Equity Tier 1 capital ratio (CET1) 1.5–3 percentage points

• ver the regulatory

requirement

31 December 2019: 3.4 percentage points over the regulatory requirement

Aktia Q4 2019 Investor presentation

Financial

• verview

Business areas

Aktia’s business areas and reporting segments

Asset Management Corporate customers

Reporting segments

Banking

Private, corporate and institutional customers of the banking business

Group Functions

Group’s central functions

• incl. financing and liquidity

management and HR

Asset Management

Asset management and life insurance business

Life Insurance Private customers

Net interest income

• 10%

EUR 77.6 (85.9) million Net commission income +1% EUR 96.4 (95.6) million Total operating income +5% EUR 221.4 (210.1) million Comparable operating income +3% EUR 211.4 (206.1) million Total operating expenses +1% EUR -143.9 (-143.0) million Comparable operating expenses

• 1%

EUR -140.4 (-141.2) million Comparable operating profit +4% EUR 68.2 (65.4) million

Key Figures 2019

(2018) EPS

EUR 0.90

(EUR 0.81) Comparable C/I ratio

0.66

(0.69) ROE

10.3%

(9.4%) CET1

14.7%

(17.5%)

76% 12% 11% 1% 75% 19% 6%

Lending Total EUR 6,429 million Deposits Total EUR 4,060 million

Structure of lending and deposits

December 31, 2019

Public entities and non-profit organisations Corporates Housing associations Households Corporates Public entities and non-profit organisations Households

Operating income Total EUR 55.2 million

19.3 25.1 8.3 2.5

Operating expenses Total EUR 35.3 million

16.9 6.8 4.9 6.7

Distribution of operating income and expenses

Q4 2019

Other operating income Net comission income Net income from life insurance Net interest income Other operating expenses Depreciation of tangible and intangible assets IT expenses Staff costs

483 524 1,309 1,418 1,368 1,326 6,107 6,429 2000 4000 6000 8000 10000 2018 2019 Lending to the public and public-sector entities Liquidity portfolio Life insurance assets

• incl. Unit Link

Other assets

Balance sheet total increased to EUR 9,697

December 31, 2019

Total assets EUR million

9,267 9,697 590 610 495 547 1,156 1,260 2,460 2,623 603 598 3,963 4,060 2000 4000 6000 8000 10000 2018 2019 Deposits from the public Liabilities to central banks and credit institutions Debt securities issued Technical provisions Other liabilities Equity 9,697 9,267

Total liabilities and equity EUR million

Income mix EUR million

85.9 95.6 21.4 7.3 210.1 77.6 96.4 30.0 17.5 221.4 50 100 150 200 250 Net interest income Net commission income Net income from life insurance Other income Total operating income 1-12/2018 1-12/2019

Total operating income increased by 5%

• 10%

+1% +40% +5%

EUR million

10.2 11.5 12.4 13.0 14.6 14.1 14.3 14.4 14.8 15.3 15.8 14.8 17.1 17.9 16.9 17.3 16.9 17.4 17.7 18.2 17.9 18.2 18.7 18.5 8.9 9.3 8.8 8.6 8.0 7.7 7.3 6.9 6.5 5.9 5.4 5.7 4.6 3.8 3.4 3.1 2.4 2.2 2.0 1.7 1.6 1.6 1.5 1.4 6.2 5.7 5.1 4.4 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 3.9 3.6 3.5 3.4 3.3 3.3 2.8 2.0 1.3 1.2 0.8 0.7 0.1

• 0.5
• 0.3
• 0.7
• 1.1
• 1.5
• 1.8
• 1.6
• 0.7
• 1.0
• 1.3
• 1.6
• 2.2
• 2.4
• 2.3
• 1.9
• 1.9

0.7

• 1.5
• 1.2
• 1.4
• 1.7
• 1.4
• 1.3

25.4 25.9 26.1 25.3 25.5 24.3 23.8 23.7 24.6 24.1 23.9 23.0 23.4 22.9 21.5 21.8 20.7 23.5 21.0 20.7 19.4 19.2 19.6 19.3

• 5

5 10 15 20 25 30 1-3/14 7-9/14 1-3/15 7-9/15 1-3/16 7-9/16 1-3/17 6-9/17 1-3/18 7-9/18 1-3/19 7-9/19 Borrowing and lending Liquidity portfolio Hedging with interest rate derivatives Other

Net interest income mix

56.1 61.1 19.5 21.0 10.2 9.6 3.8 3.6 2.4 2.3 2.3 10 20 30 40 50 60 70 80 90 100 110 1-12/2018 1-12/2019

EUR million

Net commission income mix

+1% Total 95.6

Savings and investment products includes borrowing, mutual funds, asset management and securities brokerage

◼ Other ◼ Insurance ◼ Real estate agency ◼ Lending ◼ Card and Payment services ◼ Savings and investment products Total 96.4

Banking Business: Strong lending and high customer activity continued. Impairment on credits and other commitments remained low (EUR -4.5 (-0.8) million). The increase is mainly due to an increase in the allowance for model-based credit losses (ECL) of EUR 1.6 million and to the impairment of two larger credit arrangements. Asset Management: The comparable operating profit for the period increased by 45%, which is explained by strong sales, a favourable development on the investment market and positive value changes in the life insurance operations of EUR 6.3 (-4.6) million.

Comparable operating profit per segment EUR million

25.7 26.7 11.2 1.9 65.4 67.6 22.7 38.6 5.2 1.8 68.2 74.8 10 20 30 40 50 60 70 80 Banking Business Asset Management Group Functions Other and eliminations Comparable

• perating profit

Operating profit 1-12/2018 1-12/2019

Comparable operating profit increased by 4%

• 12%

+45%

• 54%

+11% +4%

10.2 17.2 14.3 17.6 19.2 5 10 15 20 25 Q4/2018 Q1/2019 Q2/2019 Q3/2019 Q4/2019

Comparable operating profit and income per quarter

Comparable operating profit EUR million

20.7 19.4 19.2 19.6 19.3 22.6 22.7 24.0 24.6 25.1 5.1 8.3 6.6 6.8 8.3 0.4 2.3 0.8 1.9 2.5 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Q4/2018 Q1/2019 Q2/2019 Q3/2019 Q4/2019 Net interest income Net commission income Net income from life insurance Other

Comparable operating income EUR million

48.7 52.7 50.6 52.9 55.2

Q-o-Q

Outlook 2020

• The growth in the loan book and customer assets under management

is expected to continue during 2020. The continued low interest rate environment will, however, continue to put pressure on the total net interest income in 2020.

• The uncertainty regarding the future economic development brings still

uncertainty to the prognosis, which may have a considerable effect especially on the income from wealth management and investment activities in the net commission income and net income from life insurance.

• Despite the uncertainty of the economic development, the

comparable operating profit in 2020 is expected to be somewhat higher than in 2019.

The debt investment case

Credit ratings Moody's: A1 / P-1, stable Covered Bonds: Aaa S&P: A- / A-2, stable

Aktia Q4 2019 Investor presentation

• At the end of the period, the Group’s Common Equity

Tier 1 (CET1) capital ratio was 14.7%.

• After deductions, CET1 capital increased by EUR 3.9

million during Q4 which improved the CET1 capital ratio by 0.1 percentage points.

• Risk-weighted assets increased by EUR 437.7 million

which reduced the CET1 capital ratio by 2.9 percentage points.

• The change is mainly attributable to the implementation
• f the IRB approach to certain corporate exposures and

the growth in corporate lending.

• The system risk buffer of 1% (to be met with CET1

capital) entered into force on 1 July 2019.

CET1 EUR million %

16.4 16.3 16.6 17.5 16.9 16.5 15.6 14.7 20.8 20.1 20.1 20.5 19.4 18.6 20.0 18.6 3 6 9 12 15 18 21 24 100 200 300 400 500 600 700 800 Mar 31, 2018 Jun 30, 2018 Sep 30, 2018 Dec 31, 2018 Mar 31, 2019 Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Own funds Requirement CET1 Capital ratio Total capital ratio

CET1 on a solid level above the target range

Capital Adequacy

• Aktia’s Common Equity Tier 1 (CET1) Capital is at a good level at 14.7%

(3Q19 15.6%).

• Total Capital Ratio is 18.6% (3Q19 20.0%)
• Target for CET 1 over time is to exceed the regulative requirement (9.80%)

with 150–300 basis points.

• Aktia Bank Group’s leverage ratio was 4.6% (3Q19 4.7%).
• Tier 1 capital

EUR 388.1 million

• Total exposures

EUR 8,474.5 million

• The Finnish Financial Stability Authority has set the MREL requirement

for Aktia Bank at twice the minimum capital requirement, at least 8% of the balance sheet total.

• MREL requirement

EUR 670.9 million

• Own funds and eligible liabilities

EUR 796.4 million

CET1 meets regulative targets

Capital adequacy and capital requirement

Capital requirement % CET1 % 8.0% Pillar 1 min req 4.5% Pillar 2 req 1.75% Capital Conservation buffer 2.5% Counter Cyclical buffer 0.05% Systemic Risk buffer 1.00% Total CET1 % req 9.80% AT1 Capital 1.5% Tier 2 Capital 2.0% Total Capital Requirement 13.30%

(EUR million) Stage 1 Stage 2 Stage 3 ≤ 30 days 45.9 23.0 0.5 Households 36.3 21.6 0.4 > 30 ≤ 90 days 0.0 26.0 1.4 Households 0.0 23.3 1.1 > 90 days 0.0 0.0 44.4 Households 0.0 0.0 38.0 Total Households 45.9 (36.3) 49.0 (44.9) 46.3 (39.5) % of portfolio 0.71 0.76 0.72

ECL (IFRS 9)

Aktia Bank operates under strict origination criteria:

• Identification of the customer mandatory (KYC).
• Responsible lending: customer ability to pay stress tested.
• Credit personnel internally educated and examined.
• Rating and behavior based credit risk valuation.
• Collateral only in Finland.

Prudent and low-risk lending policy

Low long-term trend in non-performing loans

The liquidity portfolio consists

• f high-quality assets that can

be used to meet liquidity requirements in stressed

• situations. The unencumbered

assets in the liquidity portfolio, which can be used as a liquidity reserve, including cash and balances with central banks, had a market value of EUR 1,104 (1,155) million on 31 December 2019.

29% 58% 13%

The Liquidity Coverage ratio (LCR) was 118%.

Total Liquidity portfolio Dec 31, 2019 Sept 30, 2019 EUR million 1,326 1,410 AAA 58.5% 52.4% Aa1–Aa3 18% 19.2% A1–A3 3.2% 2.7% Baa1–Baa3 6.9% 5,9% Ba1-Ba3 0.0% 1.3% Finnish municip. (no rating) 13.4% 17.8% No rating 0.0% 0.7% Total 100.0% 100.0%

High-quality liquidity portfolio

Level 1b Level 2A LCR Level 1a

Total 7,117 EUR million

58% MEUR 4,060 23% MEUR 1,613 13% MEUR 913 3% 4% Customer deposits Covered bonds Senior debt Subordinated debt Short term + REPOs & ECB

Redemptions Millions

200 400 600 800 1,000 1,200 2020 2021 2022 2023 2024 2025-> Covered Bonds Senior Debt Subordinated Debt TLTRO

Sound funding profile

The year 2020 will bring substantial senior refinancing interest.

Aktia Bank operates under the legislation as mortgage bank (Act on Mortgage Credit Bank Operations, MCBA 688/2010) and issues the covered bonds directly from the bank’s balance sheet.

• The Aktia Bank mortgage loan portfolio is of very high quality:
• Prime residential mortgage loans and loans for Housing Co-Operatives
• Collateral located in Finland
• Low average LTV
• Aktia Bank covered bonds are CRR & UCITS, ECB repo and

CBPP eligible.

• Bank aims to comply with the ECBC covered bond label

transparency initiative.

• Stable access to the covered bond market is in high priority.
• Aktia Bank will focus on EUR 500m public benchmark Covered

Bond issues with selective private placement offerings.

Aktia Bank as covered bond issuer

11%

Pohjanmaa Etelä-Pohjanmaa

0.1%

Keski-Suomi Pirkanmaa

4.6%

Satakunta

0.1%

Varsinais-Suomi

9.5%

Uusimaa

68.9%

Keski-Pohjanmaa

1.4%

Pohjois-Savo Etelä-Savo Etelä-Karjala Pohjois-Karjala Kainuu Pohjois-Pohjanmaa Lappi

2%

Kymenlaakso

0.2%

Päijät-Häme

0.3%

Kanta-Häme

0.5%

Ahvenanmaa

Cover pools

COVER POOL 2 COVER POOL 1 Total asset pool (No substitute assets) EUR 1,874 million EUR 158 million No of loans / average loan balance 31,578 / EUR 59,352 2,241 / EUR 70,319 Types of loans First ranking residential mortgages and pledges of shares in housing companies First ranking residential mortgages and pledges of shares in housing companies Geography Finland, well diversified with concentration on growth areas Finland, well diversified with concentration on growth areas Non-performing loans > 90 days in arrears 0.0 0.0 WA indexed LTV 46.28% 36.78% Maximum LTV LTV limit: 70% LTV limit: 70% Interest base floating 97%, fixed 3% floating 97%, fixed 3% WA seasoning 69.1 months 88 months Overcollateralisation (%) 21.70% (committed 10%) 266.48% (committed 12%) Moody's Collateral Score 5.00 % 5.00 %

4Q 2019

1.4%

POOL 2

Aktia Q4 2019 Investor presentation

Finland − growing but very export driven economy

• Member of EU and Euro area
• Population: 5.5 million
• Area: 338,430 sq. Km
• GDP per capita EUR 42,502 (2018)

Credit ratings:

• Aa1 (stable) / AA+ (stable) / AA+ (stable)

The Finnish Economy

Key facts about Finland

The Finnish Economy

Growth continues, but weaker

The Finnish Economy

Macroeconomic environment

Worrying environment

Finnish housing market

Solid and stable market, a slowdown in growth projected

The good bank. And a great asset manager.

Debt Investor Relations contacts: Timo Ruotsalainen Head of Treasury +358 10 247 7211 timo.ruotsalainen@aktia.fi

Aktia Q4 2019 Investor presentation

Appendices

EUR million Q42019 Q42018 , % 1-12/2019 1-12/2018 , % Total operating income 55.2 47.7 16% 221.4 210.1 5% Net interest income 19.3 20.7

• 6%

77.6 85.9

• 10%

Net commission income 25.1 22.6 11% 96.4 95.6 1% Net income from life insurance 8.3 5.1 62% 30.0 21.4 40% Other income 2.5

• 0.7
• 17.5

7.3 141% Total operating expenses

• 35.3
• 39.4
• 11%
• 143.9
• 143.0

1% Impairments of credits and other commitments

• 0.8
• 0.1

464%

• 4.5
• 0.8

431% Operating profit 19.1 8.0 138% 74.8 67.6 11% Comparable operating profit* 19.2 10.2 88% 68.2 65.4 4% Earnings Per Share (EPS), EUR 0.23 0.09 156% 0.90 0.81 10% Return on Equity (ROE), % 10.5 4.4 140% 10.3 9.4 9% Cost-to-income ratio (comparable) 0.64 0.79

• 19%

0.66 0.69

• 4%

Common Equity Tier 1 capital ratio, % 14.7% 17.5%

• 16%

14.7% 17.5%

• 16%

Financial summary Q4 and YTD

*) Excl. items affecting comparability