P/F BankNordik : Investor Presentation of Interim Report Q3 2023

Sound performance

in Q3 2023

2 November 2023

Turið F Arge, CEO

"The favourable performance was mainly driven by an increase in central bank and market rates, increases in both deposits and lending, the return on the investment portfolio and a good performance by the insurance business during the quarter. Furthermore, the customer portfolio maintained its sound credit quality despite a generally volatile economic environment of rising interest rates and high inflation."

Turið F. Arge, CEO

Overview

Q3 2023 highlights

Financials

• Operating income
• Insurance
• Expenditures
• Impairment charges
• Capital ratios
  Economic outlook Disclaimer Appendices

Q3 2023 highlights

Satisfactory developments in core banking operations

• Net interest income up by 11% QoQ and up by 32% YoY, driven by higher interest rates.
• Net insurance income up by 23% QoQ and up by 26% YoY.
• Operating costs up by DKK 1m QoQ and DKK 7m YoY.
• Net impairment charges of DKK 0.5m QoQ and thereby no reversal for the first time since Q1 2021.
• Non-recurringitems of DKK 9m were due to changes in staff and management.
• Profit before tax up by 24% QoQ and up by 98% YoY.
• Outlook: Net profit guidance DKK 260-290m.
• Customers' resilience has proven strong, in the face of economic uncertainty and inflation, leading to lower impairment levels than initially expected. We do, however, see fewer reversals of impairment charges on loans compared to 2023.

Profit & Loss

DKKm		Q3 2023 Q2 2023	Index	9M 2023	9M 2022	Index
Net interest income			96	86	111	260	197	132
Net fee and commission income			19	19	103	60	65	91
Net insurance income			24	19	123	48	38	126
Other operating income			9	11	84	28	29	96
Operating income			148	135	110	395	330	120
Operating costs			-65	-64	101	-192	-185	104
Profit before impairment charges			83	71	117	202	144	140
Net impairment charges on loans			0	7	-6	15	43	35
Operating profit		l	82	78	106	217	187	116
Non-recurring items		0	-6	0	-9	0
Investment portfolio earnings			26	15	175	63	-50	224
Profit before tax			108	87	124	271	136	198
Tax			20	17	118	52	26	199
Net result			88	70	126	219	111	198
	Key Metrics
DKKbn		Q3 2023 Q2 2023	Index	9M 2023	9M 2022	Index
Loans and advances			8.8	8.7	102	8.8	8.0	110
Deposits and other debt			8.6	8.4	102	8.6	8.2	105
Mortgage credit			2.6	2.6	102	2.6	2.7	99
	Target
Operating cost / income, %	< 53.0		43.9	47.4		48.6	56.1
CET1 capital ratio, %	20.0		21.8	22.1		21.8	22.9
RoE, % (annualised)	> 12.0		20.2	16.8		16.2	7.8
RoE, excl. one-offs, % (annualised)	> 12.0		20.2	17.9		16.8	7.8
Combined ratio	85.0		66.8	76.4		84.9	87.7

Financials

•

•

•

•

•

•

Operating income - Net interest income

Operating income - Fee and commission income

Insurance - Financial results for Trygd

Operating costs

Impairment charges

Capital position

Operating income - Net interest income

Lending and deposit rates higher, as well as increase in total lending and deposit volumes

• Net interest income up by DKK 9.8m QoQ and by DKK 62.8m YoY.
• Increase in net interest income due to higher interest rates and increase in total lending volume.
• Lending volumes up by DKK 135m QoQ and by DKK 813m YoY.
• Deposits up by DKK 175m QoQ and by DKK 376m YoY.

Loans and deposits						Loans	Deposits
DKKbn
9	8.9						8.5	8.7	8.4	8.8	8.6
				8.4	8.4
		8.2	8.1
		8.0
	7.7
8
7
6
5
4
3
	Q2 2022	Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023

QoQ changes in net interest income

DKKm
120			10.2	1.5	4.6	2.4	4.0
		12.1	96.0
100
86.2
80
60
40				l
0
20
	Q2 2023	Lending	Lending	Deposit	Deposit	External	Other	Q3 2023
		volume	interest	volume	interest	funding
YoY changes in net interest income
DKKm
400				1.2	52.7
350			120.3
					31.3
300						3.4	260.0
250	197.2	21.8
200
150
100
50
0
	Q3 2022	Lending	Lending	Deposit	Deposit	External	Other	Q3 2023
		volume	interest	volume	interest	funding

Operating income - Fee and commission income

Decrease in fees from mortgage broking services and guarantees compared to 2022.

• Fee and commission income up by DKK 0.6m QoQ and down by DKK 5.7m YoY.
• Guarantee commissions down by DKK 1.3m QoQ and down by DKK 2.3m YoY, driven by a decrease in the total amount of guarantees as guarantees have been converted to loans.
• Insurance commissions down by DKK 0.2m QoQ and up by DKK 2.2m YoY.
• Mortgage-brokingservices up by DKK 48m QoQ and down by DKK 37m YoY. An increase in interest rates has led many customers to convert their mortgages to bank loans, affecting YoY performance.

Mortgage-broking services

DKKbn

3	2.7	2.7	2.6	2.6	2.6	2.6

2

1

0

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

QoQ changes in fee and commission income

DKKm

20							1.8	19.4
19			18.8	0.0	1.3
18						0.0
17
16
		Q2 2023	Investment	lLoan,	Mortgage	Other fee and	Q3 2023
				and trading	guarantee,	broking	comm.
				comm.	insurance	services	income
					comm.
YoY changes in fee and commission income
DKKm
66			65.2	1.5
65					1.2
64					0.8
63						2.3
62
61								59.5
60
59
58
57
56
	Q3 2022	Investment	Loan,	Mortgage	Other fee and	Q3 2023
				and trading	guarantee,	broking	comm.
				comm.	insurance	services	income
					comm.

Insurance - Financial results for Trygd

Good results primarily due to lower claims

Premiums and claims

DKKm

Premium income, net

Claims, net

88% Q1-Q3 2022.

• Net premium income up by DKK 1.9m QoQ and up

by DKK 1.2m YoY.

• Net claims down by DKK 2.0m QoQ and down by

DKK 4.5m YoY.

• Profit before tax up by DKK 5.7m QoQ and up by

DKK 14.4 m YoY.

120

100

80	106.1
60	68.5
40
20
0
	9M 2023

104.9
73.1		37.0
	l	17.3
9M 2022		Q3 2023

35.1 19.3

Q2 2023

	Result before tax
	DKKm
20	19.7
18			14.1
16
14
12
10
8		5.3
6
4
2
0
	9M 2023	9M 2022	Q3 2023

8.4

Q2 2023

Operating costs

Costs under pressure but cost discipline remains a focus area

• Operating costs up by DKK 1.0m QoQ and up by DKK 7.2m YoY.
• Average FTE up by 1 compared to Q2 2023.
• Furthermore, non-recurring items of DKK 9m due to changes in staff and management.

Average number of employees (FTE)

250	223	214	204	202			201
	197	199
		200	203	203	204
225	7
7
	8	8					8	8	8
			8	8	8
200	25	24	8
23
		23		22	23	23	23	23	23
175			22
150	191	183	173	171					172	172	173
	167	169	170	169
125
100
	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3
		2021			2022			2023
				Banking		Trygd		Skyn

QoQ changes in operating costs

DKKm

65			1.1	0.8		0.6	0.2
65
					64.9
65
65					0.2
65
64
64		64.0
64
64
64
63					lMarketing
63		Q2 2023	Staff	IT	Education	Other	Q3 2023
							expenses
QoQ changes in operating costs
DKKm
194				3.5	1.2	0.0	0.9	192.2
192
190			3.4
188
186	185.0
184
182
180
	Q3 2022	Staff	IT	Marketing	Education	Other	Q3 2023
							expenses

Impairment charges

Low impairment charges on diversified loan portfolio

• Net impairment charges of DKK 0.5m in Q3 2023, making this item an expense for the first time since Q1 2021.
• Discretionary management estimate of DKK 75m. Originally recognised in 2020 due to Covid. Covid-related uncertainty reduced, but the estimate has been retained due to the uncertainty caused by the war in Ukraine and macroeconomic developments.
• Strong LTV ratios for housing loans. 92% of total housing loans below LTV of 80% and 65% below LTV of 40%.

LTV for housing loans1

	8%
27%	< 40%

• 80% > 80%

65%

l

Gross lending by sector

DKKm

Net impairment charges

DKKm

	22
10	12	3	8	7	0

8%

9 bnDKK

47%

45%

5% 8%

4%

4.27 bnDKK 11%

15%

5%

Q1 2022

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Public sector			Agri. & fishing		Real estate
Private sector			Transport & HoReCa		Manufacturing & mining
Corporate sector			Trade		Other

1) Lending for housing accounts for DKK 3.7bn of total retail lending of DKK 3.9bn