Post on 22-Jun-2020
17-02-2015 1
February 18, 2015
A good performance enabling Sydbank to pay a historically high dividend
2014 Annual Report
17-02-2015 2
Highlights for 2014
Key points
Profit
Income
Costs
Impairment charges
Loans and advances
Capital
Sydbank’s plan to increase profitability is generating results – ROE of 9.8% p.a.
Profit of DKK 1,052m – the best result since 2007
Core income of DKK 4,319m – 6% increase
4% increase in costs. Costs relating to DiBa resulted in increase of 8%
Impairment charges DKK 707m – at the positive end of expectations
DKK 1.9bn rise in bank loans and advances, equal to 2.9% in 2014
Dividend of DKK 7.08 per share, equal to 50% of profit for the year – all-time highDividend
CET1 ratio of 13.9% – increase of 0.5% compared with Q4 2013
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1,0361,016
9951,011
1,0551,076
1,094 1,0941,078
1,0901,101 1,101
1,0781,090
1,101 1,101
800
850
900
950
1,000
1,050
1,100
1,150
1,200
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
DKKm Core income
Realised Target 2016
Implemented measures – effect from Q1 2015• Price adjustment from Totalkredit with effect
from 1 January 2015 – projected annual effect of DKK 30m
Ongoing measures• DKKm 3bn increased volume of mortgage
loans – anticipated annual effect of DKK 40m (at 50% use).
• Increased business volume as a result of targeted advisory services.
• Possible price adjustments based on negative interest rate environment. Currently under analysis.
Difference between realised core income and target for 2016 quarterly• Q1 2014 DKK 23m• Q2 2014 DKK 14m• Q3 2014 DKK 7m• Q4 2014 DKK 7m
Strengthening of income – at the same level as in Q3
4,370
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Core income – other core income makes up for decline in net interest
• Net interest etc down by 2%
• Mortgage credit up by 36%
• Payment services up by 31%
• Other items up by 15%
Key points 2014 vs 2013
Key points Q4-14 vs Q3-14• Net interest etc down by 2%
despite rise in loans/advances
• Other items up by 3%
DKKm 12M 2014 12M 2013 Index Q4 2014 Q3 2014 Index
Net interest etc 2,521 2,568 98 631 641 98
Mortgage credit* 359 264 136 96 90 107
Payment services 219 167 131 54 57 95
Remortgaging and loan fees 127 88 144 46 33 139
Commission and brokerage 351 320 110 98 82 120
Commission etc investment funds and pooled pension plans 339 322 105 80 92 87
Asset management 174 164 106 42 45 93
Custody account fees 80 79 101 19 19 100
Other income 149 86 173 28 35 80
Total 4,319 4,058 106 1,094 1,094 100
* Set-off of loss Totalkredit 34 28 121 10 9 111
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Trading income – adversely impacted by mortgage bond market in Q4 2014
Key points:• DKK 196m recorded in 2014 vs DKK 229m in
2013• Loss of DKK 9m recorded in Q4 2014, mainly
attributable to Fixed Income department where the loss was caused by:• large drawings on callable bonds• general re-pricing of ARMs and mortgage
bonds• higher credit premium – corporate bonds• tight sector liquidity.
Trading income
DKKm Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
Fixed Income 61 43 7 18 36 32 19 -29
Equities 21 13 17 19 31 26 17 9
Money Market and Foreign Exchange 4 19 7 0 19 8 17 11
Total 86 75 31 37 86 66 53 -9
8675
31 37
86
6653
-9-20
0
20
40
60
80
100
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
DKKm
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Reduction in costs – 75% of the savings have been achieved –continued focus on target – the remaining 25% is the most difficult
2,667
52
50
50
2,619
148
50
203
2,514
2,200 2,300 2,400 2,500 2,600 2,700 2,800
Cost target 2016
Savings 2015/16
Rise in costs 2016, 2%
Rise in costs 2015, 2%
Costs 2014
Savings 2014
Rise in costs 2014, 2%
DiBa Bank
Sydbank 2013
ReductionDKK 200m
75% is done
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Costs (core earnings) – savings of DKK 200m – close to target
Indeks=100
DKKm
661649
604 600
704
661
621633
675662
617 613
500
550
600
650
700
750
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q3 2014
Costs, core earnings Cost target
• Sydbank’s costs totalled DKK 2,514m in 2013
• In addition the cost base from DiBa represented DKK 203m
• Savings plan of DKK 200m compensates for DiBa effect
• The plan has been completed when costs equal 2013, plus price increases
• Q4 2013 favourably impacted by accruals• In 2014 costs are DKK 52m higher than
the target for 2016 in 2014 prices• Savings are to be considered over 12
months.
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Implemented parts of the plan have improved C/I
Indeks=100
• Focus on improved income combined with cost savings have improved profitability
• C/I is down from 0.59 in 2013 to 0.58 in 2014
• Q4 2014 is affected by negative trading income
• When the plan to increase profitability is fully implemented in 2016, C/I will decline further.
0,59 0,59 0,59 0,57
0,62
0,58
0,54
0,58
0,40
0,45
0,50
0,55
0,60
0,65
0,70
0
200
400
600
800
1.000
1.200
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
O/IDKKm Cost / Income, C/I
Costs (core earnings) Total income C/I
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Costs (core earnings) – savings of DKK 200m – different initiatives
Indeks=100
2,2312,201 2,187
2,142
2,101
2,000
2,050
2,100
2,150
2,200
2,250
Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Employees
9794
9086
82
70
75
80
85
90
95
100
Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Branches in Denmark
Initiatives in 2014:• Reduction in staff – 130 full-time employees• 15 branches amalgamated in Denmark• 2 branches closed in Germany• Increased focus on greater efficiency• Increased focus on costs.
Initiatives in 2015:• Efficiency improvements and automation of
processes – necessary to cut costs further. Project work has been intensified.
• Electronic document management is an important element in the automation process.
Customer behaviour:• Customers’ behaviour is changing – eg online
banking, mobile banking, SWIPP, electronic archives, ATM deposits, etc.
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Annual rise in staff costs – effect of collective agreement and payroll taxMain causes of rise in costs in 2015 and 2016
Indeks=100
1.00 1.00
1.70 1.75 1.800.00 0.40
0.500.80
1.40
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2012 2013 2014 2015 2016
Pct.
Pay rise – collective agreement Rise – payroll tax
• Total rise in staff costs, excl individual adjustments:• 2015 = 2.55%• 2016 = 3.20%
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Impairment charges decline to DKK 707m – at the positive end of expectations – despite AQR and agriculture
Special conditions in 2014:Q1: Individual impairment charges due to AQR, DKK
51mQ2: Review of retail clients and higher agricultural land
prices, total positive effect of DKK 60mQ3: Collective impairment charges related to agriculture
and adjustment of collective impairment charges due to AQR, in total DKK 49m
Q4: Collective impairment charges related to agriculture, DKK 100m
1,195
1,400
1,195
1,748 1,861
707 1.30
1.661.51
2.19
2.34
0.82 0.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
-
250
500
750
1,000
1,250
1,500
1,750
2,000
2009 2010 2011 2012 2013 2014 2015e
Pct.DKKm Impairment of loans and advances etc
Impairment Impairment ratio (right axis)
319
111 129148
268
171
8048
0
50
100
150
200
250
300
Q1 Q2 Q3 Q4
DKKm Quarterly impairment charges,with and without special conditions
With special conditions Without special conditions
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Most significant impairments in Q4 2014: collective related to agriculture
Key points Q4 2014:• DKK 100m, equal to 68% of impairments for the
quarter, represent collective impairments related to agriculture.
Key points 2014:• DKK 201m, equal to 28% of total impairments, are
attributable to agriculture• DKK 161m, equal to 23% of total impairments, are
attributable to real property.
-50
-25
0
25
50
75
100
125
150
Agriculture etc
Trade Real property
Other corporate lending
Retail clients
DKKm Impairments quarterly - individual
Q1 14 Q2 14 Q3 14 Q4 14
Breakdown of impairments 2014DKKm Q1 Q2 Q3 Q4 2014Agriculture etc 0 8 58 10 76 Trade 50 24 18 -6 86 Real property 132 95 -22 -44 161 Other corporate lending 82 0 52 53 187 Total corporate 264 127 106 13 510 Retail clients 56 -30 -19 26 33 Individual impairments 320 97 87 39 543 Collective impairments -1 14 42 109 164 Total impairments 319 111 129 148 707
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Focus on agriculture – collective impairments DKK 125m in 2014Key points• Loans are down by DKK 346m, equal to 5% of
loans and advances• Impaired loans for agriculture is up with DKK
169m, equal to 4% of loans and advances• Impairment of 17.5% of loans and advances at
year-end 2014 compared to 14.8% at year-end 2013
0
100
200
300
400
500
600
700
800
900
1,000
Pig farming Cattle farming Crop production
Other agriculture
DKKm Individually impaired loans
Q4 13 Q4 14
31st December 2014
DKKmPig
farmingCattle
farmingCrop
productionOther
agriculture TotalLoans and advances 1,853 1,845 1,381 1,222 6,301 Individual impairments 288 540 42 106 976 Collective impairments 85 40 125 Loans after impairments 1,480 1,265 1,339 1,116 5,200
Impaired loans 582 897 100 188 1,767 Impaired loans as % of loans 31.4 48.6 7.2 15.4 28.0 Impairment as % impaired loans 49.5 60.2 42.0 56.4 55.2 Impairment as % loans 20.1 31.4 3.0 8.7 17.5
31st December 2013
DKKmPig
farmingCattle
farmingCrop
productionOther
agriculture TotalLoans and advances 2,018 2,005 1,354 1,270 6,647 Individual impairments 245 581 40 115 981 Loans after impairments 1,773 1,424 1,314 1,155 5,666
Impaired loans 466 842 84 206 1,598 Impaired loans as % of loans 23.1 42.0 6.2 16.2 24.0 Impairment as % impaired loans 52.6 69.0 47.6 55.8 61.4 Impairment as % loans 12.1 29.0 3.0 9.1 14.8
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Impaired bank loans and advances – 4% down in Q4 2014Breakdown of impaired bank loans and advances
1,375 1,350 1,682 1,654 1,662 1,905 2,219 2,325 2,038 2,030
3,0264,038 4,031 4,255 4,335
4,9655,287 5,156 5,090 4,834
-1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014
DKKm
Defaulted bank loans and advances Non-defaulted bank loans and advances
Individually impaired bank loans and advancesDKKm 31 Dec 2012 31 Dec 2013 31 Dec 2014Non-defaulted bank loans and advances 4,038 4,965 4,834 Defaulted bank loans and advances 1,350 1,905 2,030 Impaired bank loans and advances 5,388 6,870 6,864 Impairment charges for bank loans and advances subject to individual impairment 2,769 4,058 3,996 Impaired bank loans and advances after impairment charges 2,619 2,812 2,868 Impaired bank loans and advances as % of bank loans and advances before impairment charges 7.6 9.7 9.4 Impairment charges as % of bank loans and advances before impairment charges 3.9 5.7 5.5 Impaired as % of impaired bank loans and advances 51.4 59.1 58.2 Impairment charges as % of defaulted bank loans and advances 205.1 213.0 196.8
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Investment portfolio earnings – value adjustment of mortgage credit portfolio in Q4 2014
• Increased remortgaging activity in Q4 2014 and tight sector liquidity resulted in negative value adjustment of mortgage credit portfolio.
87
197
-7
4284
-47
44
-5-50
0
50
100
150
200
250
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
DKKm Investment portfolio earnings
Investment portfolio earnings
DKKm Q1 2014 Q2 2014 Q3 2014 Q4 2014 2014Position-taking 62 -17 37 -7 75Liquidity generation and liquidity reserves 24 -1 6 -6 23Strategic positions 0 -27 2 10 -15Costs -2 -2 -1 -2 -7Total 84 -47 44 -5 76
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Income statement – the best annual result since 2007
• Core income up by 6%
• Costs (core earnings) up by 4%
• Impairment charges down by 62% from 234bp to 82bp
• Non-recurring items, primarily Nets and integration of DiBa
• The best result since 2017
Key points 12M 14 vs 12M 13
Key points Q3 14 vs Q2 14• Core income at the same level
• Costs (core earnings) up by 2%
• Impairment charges up by 15% from 16bp to 17bp
DKKm 12M 2014 12M 2013 Index Q4 2014 Q3 2014 Index
Core income 4.319 4.058 106 1.094 1.094 100
Trading income 196 229 86 -9 53 -
Total income 4.515 4.287 105 1.085 1.147 95
Costs, core earnings 2.619 2.514 104 633 621 102
Core earnings before impairment 1.896 1.773 107 452 526 86
Impairment of loans and advances etc 707 1.861 38 148 129 115
Core earnings 1.189 -88 - 304 397 77
Investment portfolio earnings 76 319 24 -5 44 -11
Profit before non-recurring items 1.265 231 548 299 441 68
Non-recurring items, net 64 -60 - -20 -23 -
Profit before tax 1.329 171 777 279 418 67
Tax 277 -16 - 55 104 53
Profit for the period 1.052 187 563 224 314 71
Core costs / total income, C/I 0,58 0,59 0,58 0,54
Return on equity, ROE 9,8 1,8 2,0 2,9
Earnings per share, EPS 14,3 2,5 3,1 4,3
17-02-2015 17
Rise in loans and deposits in Q4 2014
• Loans and advances rose every quarter in 2014; by a total of 2.9% in 2014
• Deposits up by DKK 0.9bn in Q4 2014. Up by DKK 3.9bn for 2014, equal to 5.6%.
DKKbn
68.1
70.0
72.0
74.073.0
73.9
67.466.6 67.2 67.7 68.0 68.5
55
60
65
70
75
Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Deposits Loans
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Capital ratios have strengthened in 2014 – mainly as a result of the profit
Key points 2014:• Capital structure further
strengthened despite dividend distribution of DKK 536m
Key points Q4 2014:• CET1 ratio down by 0.9 in Q4 due to
investments in DLR shares and temporary rise in credit risk
DKKm 2013CRD IV
2013 Q3 2014 Q4 2014
Credit risk 51.160 47.616 47.191 49.417
Market risk 10.197 10.197 8.374 8.003
Operational risk 8.341 8.341 8.306 8.575
Other exposures incl. CVA 3.051 5.345 5.561 6.472
Risk-weighted assets 72.749 71.499 69.432 72.467
CET1 9.722 9.799 10.307 10.101
Tier 1 11.108 11.037 11.414 11.209
Total capital 11.430 11.586 11.787 11.596
CET1 ratio 13,4 13,7 14,8 13,9
Tier 1 ratio 15,3 15,4 16,4 15,5
Capital ratio 15,7 16,2 17,0 16,0
Individual solvency need 10,0 10,0 10,0 10,4
17-02-2015 19
Development in capital ratio in 2014
16.0
0.3
0.4
0.5
0.7
1.5
0.3
0.4
0.5
15.7
14.5 15.0 15.5 16.0 16.5 17.0
Capital at 31 Dec 2014
Rise – other items
Rise in credit risk
Decline in market risk
Expected dividend
Profit etc
Change in deductions
Redeemed capital, DiBa
Transition to CRD IV
Capital at 1 Jan 2014 Key points:• Change in deductions and most
important change in other items attributable to purchase of DLR shares. Total effect on capital ratio of around 0.5 percentage points.
• Rise in credit risk attributable to temporary exposure due to remortgaging guarantees to DLR. Effect of around 0.5 percentage points.
17-02-2015 20
Updated capital policy due to strong liquidity and capital
• Given the Group’s good liquidity and capital, the capital policy has been updated so that it provides constant support to the Group’s strategy and at the same time take into account Sydbank’s status as a SIFI as well as full implementation of capital regulations.
• The Group’s targets:
• CET1 ratio of around 13.5%
• Capital ratio of around 17.0%
• The Group will move closer to meeting the capital targets in the coming years. Adjustment of the Group’s capital structure to the capital targets will require subordinated capital to be issued after which share buybacks are believed to be an option.
• In 1H 2015 the Board of Directors will commence work on the first phase of the capital adjustment in which the possibility of issuing Tier 2 capital of approx DKK 750m will be reviewed.
17-02-2015 21
Outlook for 2015
• Based on the level of interest rates at the beginning of 2015, core income is expected to rise slightly due in part to a slight increase in bank loans and advances resulting from the measures implemented and despite continued fierce competition. The longer the current upward pressure on DKK and by extension the negative interest rate environment last, the greater the uncertainty of the projection.
• Unchanged or slightly rising trading income but very dependent on financial market developments.
• Unchanged costs (core earnings) despite general pay rises agreed for the financial sector of 1.75% and payroll tax increase of 0.80%.
• Lower impairment charges for loans and advances. Uncertainty surrounding price developments in the agricultural sector may however affect level of impairment charges.
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Q & A
17-02-2015 23
Additional information:
Karen Frøsig, CEO
tel +45 74 37 20 00, direktionen@sydbank.dk
Jørn Adam Møller, Chief Investor Relations Officer
tel +45 74 37 24 56, jam@sydbank.dk
Thank you
17-02-2015 24
Forward-looking statements
• This presentation contains statements concerning expectations of future developments, including future income as well as expected business events.
Such statements are by their nature uncertain and associated with risks as many factors – of which some may be beyond Sydbank’s control – may cause the actual developments to deviate materially from management’s expectations as expressed in this presentation.