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POP Bank GroupInvestor PresentationAugust 2017
POP Bank Group is a Finnish financial group that offers retail banking services to private customers, small companies and agricultural and forestry clients, as well as non-life insurance services to private customers.
POP Bank Group consists of 26 cooperative POP Banks, POP Bank Alliance Coop, central creditinstitution Bonum Bank Plc and online insurance company Finnish P&C Insurance Ltd (brandedPOP Insurance). POP Banks formed the amalgamation of POP Banks in December 2015.
Cooperative banks themselves are over 100 years old and are owned by the members of the co-operative. POP Banks emphasize the development of the customer experience, and take pride in having the most satisfied customers in Nordic region and the best customer service in Finland.
POP Bank Group has a strong financial position and the capital adequacy is among the best bank groups in Finland.
S&P Global has affirmed a rating ‘BBB’ to Bonum Bank Plc with stable outlook.
Expected results for 2017 at least at last year’s level.
Executive Summary
Group
Alliance
History
Financials
Rating
Year 2017
2
Pekka Lemettinen commenced as CEO for POP Bank Alliance Coop in January.
The POP Bank Group’s strategy is to increase growth and profitability. The strategy will be executed through local and digital presence to retain the best customer satisfaction.
The Finnish FSA granted POP Banks the exemptions laid down in the Amalgamation Act in January and thereby the central organization can:• Exempt member credit institutions from own funds requirements and large exposures limits as in CRR
parts 2-4• Implemented in February 2017: intra-group exposures treated with 0 % risk weight in capital
adequacy calculations. Includes all loans and CET1-holdings within POP Bank Group.• Implemented in February 2017: exposures between Bonum Bank and POP Banks exempted
from large exposures limits• Exempt member credit institutions from liquidity requirements as in CRR part 6
Strategy
Waiver
Insurance
CEO
Events 2017
The number of customers in the Insurance company exceeded 100 000 in April.
3
Key Indicators of the POP Bank Group H1 2017
(EUR 1000) 1 Jan-30 Jun 2017 1 Jan-30 Jun 2016 1 Jan-31 Dec 2016
Net sales 71 748 69 395 137 449
Net interes income 30 575 30 625 62 417
% of net sales 42,6 % 44,1 % 45,4 %
Profit before tax 11 412 9 430 16 958
% of net sales 15,9 % 13,6 % 12,3 %
Total operating income 61 815 57 500 114 851
Total operating expenses -43 761 -42 820 -85 733
Cost to income ratio 70,8 % 74,5 % 74,6 %
Balance sheet total 4 310 582 4 183 457 4 229 417
Equity capital 477 063 441 054 463 021
Return on assets, ROA % 0,4 % 0,2 % 0,2 %
Return on equity, ROE % 4,0 % 2,1 % 2,3 %
Equity ratio, % 11,7 % 10,5 % 10,9 %
Common equity Tier 1 capital ratio, (CET1) % 21,3 % 20,9 % 20,9 %
Capital adequacy ratio, (TC) % 21,7 % 21,5 % 21,3 %
Impairment losses on loans and other receivables -2 743 -2 420 -6 731
* The changes in presentation of net commissions expenses and other operating expenses have been
taken into account in operating income and expenses as well as in cost to income ratio in 1 Jan - 30 Jun
2016. Cost to income ratio according to earlier presentation was 75.2 percentage.
4
POP Bank Groupand Amalgamation
POP Bank Group Development
1902-1933Founded individual co-
operative banks that are now part of POP Bank
Group and act under POP Bank brand.
1997POP Bank Group is
founded.
2012Establishing modern
online insurance company Finnish P&C
Insurance ltdfor household customers.
2014Bonum Bank, POP Banks’
own central credit institution starts
operation.
2015The Amalgamation of
POP Banks starts operation
31 December
2016Bond programme and
first bond issued
2015Bonum Bank becomes Visa Debit and Credit
Card issuer
2016S&P Global Group rating
6
Best Customer Satisfaction
• POP Banks have the most satisfied customers in the Nordic countries 2011-2013, 2015-2016 (EPSI Rating)
• The best customer service in Finland 2001–2007 and 2009–2012 (Taloustutkimus Oy)
EPSI Rating
7
Customers of the Group• In recent years the amount of customers in the banking sector has been quite stable according to the
strategic decisions made by the Group.
• The growth has focused in the insurance business customers.
8
POP Bank Group, Amalgamation of POP Banks and Joint Liability
9
POP Bank GroupSatisfied customers, profitable and well-capitalized bank business and rapidly growing new-era insurance business.
Banking Business
Insurance Business
POP Bank Group (Banking, Insurance, other functions)
2015EUR 3.3bn depositsEUR 3.0bn loansEUR 21.5m profit before tax20.2% CET1 ratio20.8% total capital ratio241 300 customers
2016EUR 3.5bn depositsEUR 3.2bn loansEUR 29.8m profit before tax20.9% CET1 ratio 21.3% total capital ratio249 900 customers
2015EUR 28m insurance premium EUR 5.2m net incomeEUR -5.2m operating loss EUR 10.4m operating expenses 81 % loss ratio 73 100 customers
2016EUR 33m insurance premiumEUR 8.1m net incomeEUR -3.3m operating loss EUR 11.3m operating expenses 77 % loss ratio91 700 customers
2015EUR 4.1bn balance sheet EUR 12.0m profit before tax
2016EUR 4.2bn balance sheet EUR 17.0m profit before tax
10
The Amalgamation of POP Banks
In the case of insolvency of the POP Bank Alliance Coop, the member banks have unlimited liability to pay the debts of POP Bank Alliance Coop.
POP Banks established an amalgamation, as defined in the Act on the Amalgamation of Deposit Banks (599/2010), on 31 December 2015.
As the central institution, POP Bank Alliance Coop is obliged to supervise and instruct the member banks according to the Act. Responsibilities include (among others):
• Risk Management• Corporate Governance• Liquidity and Capital Adequacy• Internal Auditing
Amalgamation
Responsibilities
Joint Liability
Capital Ratio
Obligation
POP Bank Alliance Coop (the central institution) and all member banks (26 POP Banks and Bonum Bank) are jointly liable for each others’ debt.
POP Bank Alliance Coop is, as the central institution, responsible for the group’s joint capital ratio.
If a member bank fails to meet its obligations, a creditor may demand payment from POP Bank Alliance Coop. Other member banks are obliged to participate in the central institution’s supporting actions.
11
POP Bank Group Strategy
2004Aktia Mortgage Bank joint venture
together with Aktia, POP Banks and
Savings banks.
2012Establishing modern online insurance
company Finnish P&C Insurance ltd for
household customers.
201Acquiring ACH Finland ltd and
transforming it to POP Banks central
bank Bonum Bank plc.
0
Vahinkosuhde
78%(72%)
1
2
3
4
5
One POP Group: New organisation and corporate culture, driving group level synergies, banks to
centralize functions, back office and robotics
Sisäinen pankkiInternal Bank providing centralised liquidity management and fund rising
Flexible and more independent IT
Best Customer Satisfaction: easy to deal with, relevant and competent, trusted
Digital presence: Building up Digital Office and expand to large cities; banking, insurance and cardsinto POP Mobile; channel neutral user experience.
New products and value added partners
Profitability and Growth: Cost and capital efficiency, simplification of products, data and processes6
Accelerating Digital Transformation 2017-2020
12
POP Bank Group Rating – ’BBB/A-2’S&P Global: Rating BBB / A-2 with stable outlook
Finnish banks (anchor rating) A-
Capital & Earnings (very strong) +2– Strong capital adequacy– Expected RAC to improve further
Liquidity & Funding (average and adequate) 0– Sound customer deposit funding
Risk position (moderate) -1– Concentration in Finland– Offset by sound collateralization
Business position (weak) - 2– Only in Finnish retail & SME sectors– Weak position in growth centers– Non-life insurance business still small
Additional: New group structure, relatively low earnings -1
POP Bank Group credit rating BBB
13
Group Balance 31st December 2016
14
Banking Segment
POP Bank Customers
• POP Banks operate throughout Finland• Customers are typically concentrated around
POP Banks’ head offices.• Focus on increasing customer potential
in growth centres.
16
Strong Capital Position Compared to Competitors
0,0 %
5,0 %
10,0 %
15,0 %
20,0 %
25,0 %
Tier 1 capital ratio Leverage ratio
POP Pankkiryhmä Oma Säästöpankki SP-ryhmä OP-ryhmä Nordea Group Hypoteekkiyhdistys Ålandsbanken Aktia
17
POP Bank Group Internal Bank
CustomerService
AnalysisAdditional
Value
Funding Sources
Bank of Finland
Markets
ECB Funding
Bond, CD and other gross
fundingPOP Banks
Payment accounts, deposits, collateral
Credit, deposit, limit
Bonum Bank
18
Deposits and Loans of POP Banks
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2011 2012 2013 2014 2015 2016
DepositsMillion €
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2011 2012 2013 2014 2015 2016
LoansMillion €
19
Low Risk and Diversified Loan Portfolio
• Loan portfolio is well diversified.
• Individual loan sizes are moderate due
to the relatively small size of individual
POP Banks.
• Loan portfolio structure: 64% private
customers, 18% agricultural
customers, 15% SMEs and 1% others.
Loan portfolio by Collaterals
Residential mortgages 65.4 %
Mortgages, other 28.0 %
Housing shares 0.9 %
Financial collateral 0.7 %
Sovereign guarantees 0.3 %
Corporate and retail guarantees 1.8 %
Non-collateralised 2.1 %
Total 100.0 %0,00%
1,00%
2,00%
3,00%
4,00%
5,00%
2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1
Loans over 90 days past due
0,000 %
0,050 %
0,100 %
0,150 %
0,200 %
2008 2009 2010 2011 2012 2013 2014 2015 2016
Credit loss from the credit portfolio annually 2008-2016
20
Funding and Liquidity Position
• LCR of the POP Banks’ Amalgamation was 220 % (31.12.2015: 202 %)
• Minimum requirement 70 % (1.1.2017 80 %)
• Internal limit 110 %
• LCR eligible assets before value adjustments 450,3 (31.12.2015: 434,3) Million euros, from which
• 15,2 (39,8) % cash or receivables from central bank
• 73,7 (48,7) % level 1 assets of extremely high liquidity
• 3,7 (6,8) % of level 2A assets
• 7,4 (4,7) % of level 2B assets
LCR eligible assets 31.12.2016
Level 1; 89 %
Level 2A; 7 %
Level 2B; 4 %
21
POP Bank Group Banking Segment 2016
4,3 bn€
Balance Sheet
3,5 bn€+ 4,9 %
Deposits
3,2 bn€+6,2 %
Credit Portfolio
20,9 % CET1
Capital Adequacy
29,8 m€*
Profit Before Tax
249 900
Customers
85
Branches
Best(EPSI-rating)
Customer Rating
* Includes the funds of 10,0 m€ refunded to member banks when the POP Banks guarantee fund was dissolved. Dissolving isan internal arrangement, so it is not included in the Group’s profit. The tax effect of EUR -2 million is included in Group’s profit.
22
Insurance Segment
Financial Development and CapitalisationCombined ratio is expected to permanently fall under 100% as of 2017. This will be achieved by improvingprofitability of both new business and existing portfolio and by increasing business volumes and performance.
Loss Ratio%
ExpenseRatio %
Combined Ratio%
2013 107 138 245
2014 94 50 144
2015 81 37 118
2016 77 34 111
2017B 74 28 102
2018P 73 24 97
2019P 73 22 95
24
POP Bank GroupInsurance Segment 2016
59,5 m€
Balance Sheet
33,0 m€(+ 17,4 %)
Premiums Earned
77 %(81 %)
Loss Ratio
34 %(37 %)
Expense Ratio
-3,3 m€(+ 1,9 m€)
Profit Before Tax
91 700
Customers
3 400 / month
New Customers(gross)
11,3 m€(10,4 m€)
OperatingExpenses
25
POP Bank GroupFinancial Information
POP Bank Group’s Profit by Segments 2016
(EUR 1 000)Banking Insurance
Segments total
Net interest income 62 688 - 62 688
Net commissions and fees 22 491 - 22 491
Net trading income 542 - 542
Net investment income 7 080 - 7 080
Net income from non-life insurance - 8 069 8 069
Other operating income* 16 325 - 16 325
Total operating income 109 125 8 069 117 194
Personnel expenses -30 097 -6 514 -36 611
Other operating expenses -38 940 -3 480 -42 420Depreciation, amortisation and impairment of property, plant and equipment and intangible assets -3 515 -1 328 -4 843
Total operating expenses -72 552 -11 322 -83 874
Impairment losses on loans and receivables -6 731 - -6 731
Profit before tax 29 842 -3 253 26 590
Income tax expense -6 778 -1 -6 779
Profit for the period 23 064 -3 254 19 810
* Includes the funds of 10,0 m€ refunded to member banks when the POP Banks guarantee fund was dissolved. Dissolving isan internal arrangement, so it is not included in the Group’s profit. The tax effect of EUR -2 million is included in Group’s profit.
27
Contact Information
Anders Dahlqvist, CEO, Bonum Bank PlcEmail: [email protected]
Tel: +358 500 440 031
Pekka Lemettinen, CEO, POP Bank Alliance CoopEmail: [email protected]
Tel: +358 40 5035 411
Timo Hulkko, Director, POP Bank Alliance CoopEmail: [email protected]
Tel: + 358 500 894 008
Jukka Päärnilä, Treasury Manager, Bonum Bank PlcEmail: [email protected]
Tel: +358 40 5787 712
28
Disclaimer
This presentation was prepared by Bonum Bank Plc (the “Bank”) and POP Bank Group (the “Group”) representatives for use in investor relations. This presentation is not intended for retail customers.
This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Bank, in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever
All official financial information of the Group, including without limitation profit and loss statement, balance sheet, and annexes is available at the Group’s public webpage www.poppankki.fi. This document is not official financial information of the Group.
This presentation may contain forward-looking statements, which are subject to risks, uncertainties, and assumptions. This presentation is being presented solely for your information and is subject to change without notice. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, actuality, fairness, or completeness of the information presented.
The contents of this presentation may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose.