Q1 First quarter 2020 Sbanken group
Leading digital retail bank in Norway with 470 000 customers CAGR loan growth 9.4 % since IPO November 2015 High profitability – average ROE of 12.5 per cent last four years Most satisfied customers in the last 19 years Capitalising on investments made in SME offering and long-term savings 2
Handling of COVID-19 pandemic • Priority on customers, staff and business continuity Return on Equity* (LTM) • Fully digital business model supports normal operations • Taking lead with immediate mortgage price cut to all customers 12.7 % • 12.3 % Granted 2 200 applications for mortgage instalment deferrals 12.1 % 11.9 % 11.5 % Strong interest margin – NIM 1.85 % Increased lending growth • Customer centric approach lead to increased lending growth • Quarterly growth in home loans 2.5 % Solid capital position • CET1 increased to 16.1 % vs. minimum requirement of 12.5 % 1Q19 2Q19 3Q19 4Q19 1Q20 Increased uncertainty for Norwegian macro outlook * Adjusted for non-recurring items • Underlying loss ratio 0.15 %, home loans 0.03 % • NOK 19.5m discretionary credit loss provision for COVID-19 3
Product distribution Home loans centred in urban areas 1.7 % 2.6 % 1.3 % Home loans 6.9 % Car loans Other credit products Consumer loans 94.3 % 4.9 % Risk classification (bnNOK) 74.9 Eastern 43.6 % Norway ex. Oslo 22.8 % Secured Unsecured 19.6 % Oslo 2.3 % 4.3 2.1 1.1 0.3 0.3 Stage 1: Stage 2: Stage 3: performing under-performing impaired 4
12 month Q1-2020 Q1-2019 growth One-off items for Q1 2020 Net interest income (NOK million) 430.6 355.1 21.3 % totalling NOK 28.1 million before tax Net fee and commission (NOK million) 48.4 47.1 2.8 % • 19.5 million credit loss Profit before loan losses (NOK million) 290.0 242.8 19.4 % provision relating to outbreak of COVID-19 Net profit (NOK million) 184.0 171.6 7.3 % • 8.6 million in severance Earning per share (NOK) 1.63 1.54 pay related to cost-cutting initiatives ROE (per cent) 11.2 11.6 • Adjusted ROE 12.5 % and Cost-to-income (per cent) 38.8 40.1 cost-to-income 37.0 % Loan-loss-ratio (per cent) 0.25 0.12 NIM (per cent) 1.85 1.57 CET1 (per cent) 16.1* 14.9 * Including 70 per cent retained earnings for Q1 2020 and 100 per cent retained earnings for 2019 following the Board’s revis ed dividend proposal 5
90 1 100 85 1 000 83.0 81.6 81.5 79.9 Earnings before tax - adjusted (LTM) * 3.5 79.2 78.8 80 900 78.2 Total loans to customers (bNOK) 3.8 3.7 76.8 3.6 3.3 3.1 3.6 73.6 2.8 75 800 72.1 72.0 2.9 2.7 2.8 70 700 65 600 79.5 77.8 77.8 76.3 75.9 75.7 74.6 74.0 70.7 60 500 69.3 69.4 55 400 50 300 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Secured lending Unsecured lending Earnings before tax - adjusted (LTM) * Earnings before tax (LTM) 6
Net interest income Net fee and commission income 215 216 1.85 % 211 210 207 1.81 % 1.77 % 1 640 1 564 1 497 1 410 1 378 64 1.57 % 54 51 48 47 1.57 % 429 431 421 355 359 1Q19 2Q19 3Q19 4Q19 1Q20 Net fee and commission income 1Q19 2Q19 3Q19 4Q19 1Q20 Net interest (LTM) Net interest income Interest margin Net fee and commission income (LTM) • NIM increase with full loan book repricing effect • Positive development in card transaction income compared • NII expected to weaken in short term due to interest rate to 1Q19 cuts 7
• NOK 8.6 million in severance pay 10 related to cost reduction initiatives 13 74 • Reduction in capitalisation of 15 19 projects 20 42 46 43 • Reduced marketing towards 39 39 39 consumer loans and increased 29 mobile advertising 27 24 45 % 39 % 41 % 35 % 40 % 39 % 37 % 97 90 86 80 80 1Q19 2Q19 3Q19 4Q19 1Q20 Personnel IT Other operating expenses Marketing C/I C/I adj. 8
• Cost-income target of 34 % mid- term 707 694 • Cost-to-income of 38.8 % in the 668 651 652 quarter, 37.0 % when adjusting for one-offs relating to severance pay 39.7 % 39.1 % 38.6 % 38.6 % 37.8 % 1Q19 2Q19 3Q19 4Q19 1Q20 Operating expenses adj. (LTM) C/I adjusted for one-offs (LTM) 9
Net loan losses and loss ratio Mortgage lending and LTV 78.3 76.4 76.4 0.24% 74.8 73.1 0.22% 0.25% 0.18% 0.15% 0.12% 0.16% 170.2 60 % 60 % 59 % 59 % 59 % 113.6 145.0 97.5 69.8 54 % 53 % 53 % 53 % 53 % 15.9 17.2 8.1 13.8 11.1 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 Net loan losses (LTM) - Unsec. Net loan losses (LTM) - Sec. Mortgage lending LTV (new customers) Loss rate Loss rate - adj. LTV (existing customers) • NOK 19.5 million additional discretionary provision to account • Average LTV stable both for existing portfolio and new for adverse effects related to outbreak of coronavirus loans • No change in 2020 guidance of 0.20 % at this point in time, but uncertainty has increased 10
Funding Capital 2.3 % 20.2 % 900 7 773 3.6 3.6 2.5 3.0 4.0 1.8 % 27.8 29.5 29.2 28.3 700 28.8 16.1 % 6173 65.8 % 65.1 % 64.6 % 64.9 % 63.6 % 6006 13.0 % 55.2 53.9 52.7 52.8 50.3 12.5 % 1Q19 2Q19 3Q19 4Q19 1Q20 CET1 Tier 1 Tier 2 Total Capital Customer deposits Covered Bonds MTN Deposit-to-loan ratio AVG • • Healthy liquidity position with increased deposit ratio MoF reduced CCB to 1.0 % - CET1 target lowered to 13.0 % • towards quarter-end Strong capital position - CET1 increased to 16.1 % • • Norges Bank offering F-loans to support liquidity in the Revised dividend decision resulted in 0.5 %-points increase banking market in CET1 ratio 11
• Market value of investments fell with stock market correction in 15.8 February and March 14.0 13.9 13.3 • Net client cash flow negative 13.0 NOK 194 million in the quarter – customers redeposit funds in the bank 1 433 • 1 017 Scalable low cost model 814 785 – positioned to increase market 663 share 1Q19 2Q19 3Q19 4Q19 1Q20 FUM (bNOK) NCCF (LTM mNOK) 12
Additional ERP integrations 12 000 ERP salary payment • Disrupting the banking market Shares and mutual funds trading for small SMEs – an underserved customer group ERP integration with Fiken 5 900 • Cost-effective solutions on Debit card cutting-edge technological Remove/add users platform 5 000 3 800 New account features • COVID-19 increases uncertainty concerning 1 012 SME offering launched reaching our objectives 2 300 638 278 500 - 15 4Q20 1Q19 2Q19 3Q19 4Q19 1Q20 SME deposits (mNOK) Customers 13
Targets 2020 - 2022 Q1 2020 2019 12.5 % * 12.1 % * Return on equity 14.0 % LTM EPS growth > 10 % 4.3 % * 2.8 % * Payout ratio Up to 30 % N/A 29.9 % ** 16.1 % ** 15.6 % ** CET1 ratio 13.0 % Cost-to-income 37.0 % * 38.6 % * < 34 % ratio * Excluding non-recurring items. ** 2019 is based on proposed dividend. Q1 2020 follows the revised dividend proposal to not distribute 2019 dividends at this point in time. Note: Targets are subject to the current capital requirements. Any future regulatory changes could imply a change to the target 14
• Significantly altered the outlook for the Norwegian economy Mainland GDP 2.3 % -4.0 % • High uncertainty regarding economic forecasts Household credit growth • Record low key policy rate puts downward pressure on interest 5.0 % 4.5 % margin • Fully digital business model supports continuity Unemployment 3.9 % 6.3 % • Increased uncertainty on potential losses from unsecured exposure Housing prices 2.6 % -2.0 % • Will increase market share in savings and SME deposits Source: Statistics Norway, Norges Bank 15
Sbanken ASA and its wholly-owned covered bond subsidiary, Sbanken Boligkreditt AS, constitute the Sbanken group. This presentation contains certain forward-looking statements relating to the business, financial performance and results of the group. No representation is made that any of these forward-looking statements or forecasts will come to pass or that any forecast result will be achieved and any reader is cautioned not to place any undue reliance on any forward-looking statement. The information obtained from third parties has been accurately reproduced and, as far as the company is aware and able to ascertain from the information published by that third party, no facts have been omitted that would render the reproduced information to be inaccurate or misleading. This presentation contains alternative performance measures, or non-IFRS financial measures. Definitions and calculations are presented in our quarterly report. 16
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