Monobank : Brabank ASA Q2 2020 Presentation

Second quarter results 2020

21 August 2020 1

Q2 Highlights

• Strong improvement in underlying operation
• • Pre-taxprofit NOK 17.5 million vs NOK -25.2 million in Q2'19
  • Underlying cost base down 28 per cent compared to Q2'20
• Credit quality continue to improve
• • No signs of deteriorating credit quality, despite COVID-19 and oil price shock
• Well capitalised
• • Capital ratio 3,5 percentage points above requirement (end July)
• Merger with Easybank approved by EGM

Net Loans

NOK million

4 537	4 494	3 969
3 960	3 926	3 536

Q1	Q2	Q3	Q4	Q1	Q2
		2019			2020

Profit after tax

NOK million

5,3					13,2
	-18,9	-26,5		-8,9
			-72,9
Q1	Q2	Q3	Q4	Q1		Q2
		2019			2020

2

Stable yield in the second quarter

Key yield & margins*

Per cent (%)

Income & profit after tax

NOK million

14,1 %

13,5 %

12,3 %

14,1 % 14,1 %

13,3 % 13,2 %

12,2 %

14,9 % 14,8 %

13,9 %

12,8 % 13,0 % 12,9 %

		92,1	95,7	98,7
87,5	88,0		86,2		88,4
	84,1	83,7	82,0
80,3							77,9

10,6 %

12,0 %

10,6 %

10,1 %

11,6 %	11,5 %	11,5 %
10,4 %	10,9 %	10,4 %

5,3

-18,9

13,2

-8,9

-26,5

Q1

Q2Q3

2019

Yield net loan to customer, Total Yield net loan to customer, Finland**

Q4Q1Q2

2020

Yield net loan to customer, Norway** Yield in % of avg net loans

					-72,9
Q1		Q2	Q3	Q4		Q1	Q2
	2019				2020
		Net interest income			Total income		Net profit after tax

4

Note (*): Former BRAbank included in key yields and margins from Q4'19

Note(**): yield = weighted average effective annual yield

Note(***): Net interest income excluding agent commissions/ Avg.net loans

Significant improvement in underlying results

Profit after tax adjusted bridge

• Net profit adjusted of NOK 12.1 million
• Restructuring charges decreasing in line with expectations

5

Effect from efficiency measures materialising

Operational expenses

NOK million

72,1

• Opex continue to decrease as efficiency measures are fully implemented
• • Q2 2020 cost base significantly below guiding
  • Guiding: NOK 38-41 million ex one offs
• New cost structure adapted to market conditions
• • Other administrative expenses lower due to various initiatives

	36,1	56,8
		6,7
	7,0	4,9
35,0
5,6	20,6	23,7
6,3
11,6		21,5
11,4	20,8
	-12,4
Q1	Q2		Q3
		2019

Staff costs

Marketing expenses

Gain from purchase on favorable terms

55,7
7,1	43,2
0,9	36,8
	6,5
31,4	1,2	6,4
	23,3	0,6
	17,4
16,3	12,1	12,3

Q4Q1Q2

2020

Other administrative expenses Depreciation and amortisation

6

Cost/income ex restructuring cost is 40% despite reduced loan book

	78,3 %
			64,6 %
		57,6 %
			48,8 %	44,8 %
39,9 %
49,4 %		49,4 %
	45,4 %
		43,5 %	40,2 %
39,9 %

Q1	Q2			Q3		Q4	Q1	Q2
		2019					2020
				Cost / Income Ratio		Cost (excl. one-offs) / Income Ratio

7

Norway: Loan loss ratio lowest since 2018

Net interest income & Net loans*

NOK million

• Reduced loan book in line with strategy
• • Cautious credit policy in uncertain times
  • Prioritize less capital intensive markets
• Improvement in credit quality
• • Improved payment behaviour
  • Sale of non-performing portfolio (Q1 20)
• Strong cashflow from non-performing portfolio
• • Performs better than model assumptions
  • Forward flow agreement with Axactor expired end May
  • Collections outsourced to 3rd party collector

3 000																80
2 500																60
2 000
1 500		51,3	52,4	55,1		49,3					40
					46,5
		2 512	2 495	2 497				41,9
1 000			2 162
									1 848	1 625		20
500
0		Q1		Q2		Q3		Q4	Q1	Q2		0
							Net loans			Net interest income Norway
						2019							2020
Loan losses & Loan loss ratio
NOK million
110										17,6 %				20%
90															15%
70
									82
50						6,6 %								10%
30						15					4,2 %
2,5 %	2,6 %									5%
10	30			27	24		2,2 %
16	17					11
-10		Q1		Q2		Q3		Q4	Q1	Q2	0%
						2019							2020
				Loan losses Norway			One-offs		Loan loss ratio

* Former BRABank included from Q2'19	8

Finland: Cautious credit policy during pandemic

Net interest income & Net loans*

NOK million

• Currency fluctuation impacts figures
• • NOK 102 million in negative currency effects on loan book
  • NOK 8 million in positive currency effect on loan losses
• Improved credit quality on new originations
• • Positive effects from improved scorecard and reduced risk taking
  • Cautious credit policy during pandemic
• Temporary regulatory changes expiring YE 2020
• • 10% interest rate cap
  • Direct marketing ban
  • Limited effect for BRAbank

2 000																		50
1 500																		40
					35,5	34,2					34,9	33,2			30
1 000
	29,0					1 751		29,3	1 901	1 705
				1 637				20
				1 448		1 543
500																		10
0		Q1		Q2		Q3		Q4	Q1	Q2		0
										Net loans			Net interest income Finland
									2019							2020
Loan losses & Loan loss ratio
NOK million
35																			11%
30			7,3 %					5,0						6,8 %			9%
25									6,6 %								7%
				5,2 %
20													21,0
																	5%
15													2,4 %
		25,0					25,0					1,9 %		3%
10			21,0
5													11,0		10,6	9,0		1%
0																			-1%
		Q1		Q2		Q3		Q4	Q1	Q2
									2019							2020
								Loan losses Finland			One-offs		Loan loss ratio

* NGAAP figures for net interest income in 2018	9

Improvement in credit quality

Loan losses								Gross loans past due (# of days)
NOK million										NOK million
					88,0						475		545		629		547	470
				20,0												515
							22,7													100		103	86
42,4	40,4		57,7	48,8					63			84				60
	35,6	23,1				176		156		189		213	189
											121
	Q1	Q2		Q3		Q4	Q1	Q2****				Q1	Q2	Q3	Q4	Q1	Q2
			2019				2020									2019					2020
				Loan losses			One-offs									31-60 PD			61-90 PD			>90 PD
	Loan loss ratio*							Non-performing loan ratio**
	Per cent (%)										Per cent (%)				13,4 %	12,9 %				13,6 %
										15%			11,5 %	11,6 %
																			11,2 %
					11,9 %			10%
		3,6 %	4,7 %	4,3 %	3,3 %	3,0 %	5%
		6,4 %				0%
							5,4 %
4,1 %	3,6 %										Q1		Q2		Q3	Q4	Q1	Q2
					2,2 %
																	2019						2020
	Q1	Q2		Q3		Q4	Q1	Q2
			2019				2020											Non-performing loan ratio**

Provisions

NOK million

500			399	447
400		338		350		359
303
300
200
100
0
Q1	Q2	Q3	Q4	Q1		Q2
			2019		2020		2021

Provisions

Total provision ratio***

Per cent (%)

		82,0 %	74,0 %	70,0 %
64,0 %	62,0 % 63,0 %

Q1

Q2

Q3

Q4

Q1

Q2

20192020

10

Note(*): loan loss ratio = monthly loan losses p.a/monthly avg. gross loans || Note(**): non-performing loan ratio = >PD90 / gross loans || Note(***): provision ratio = total provisions / >PD90

Note (****): A positive currency effect of NOK 8 million included in figure

From growth strategy to risk reduction and cost efficiency

Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020
Merger completed	High loan losses	High loan losses	Improved operations	Solid operations
Growth focus	Risk management	Risk management	Sound credit quality
Capital restraints
Product expansion	New cost measures	Capital restored	Well capitalized
Efficiency programs

12

Cost structure adapted to market conditions

• Unfavourable market development and capital constraints challenged growth strategy
• Executed extensive cost efficiency program
• Q2'20: Organisation aligned to new market conditions while maintaining scalability

Operational expenses adjusted for one-offs

NOK million
50	45,5
	6,1
40	-28 %
	32,9
30	15,8
6,4

20	7,0	13,6
10				0,6
16,6
	12,3
0
		Q2'19		Q2'20
			Staff costs		Marketing expenses
			Other administrative expenses		Depreciation and amortisation

13

Significant improvement in non-performing loans

• Reduced risk taking in all markets
• Developing and improving own scorecard and credit routines
• Monitoring and adapting credit policy to market conditions
• Repricing of loan book to better reflect underlying risk
• Compliance with debt registers

Reminder development

indexed to January 2020

110

105

100

95

90

85

80

	January	February	March	April	May	June	July
Gross loans past due
NOK million		918
1 000		785	863
800	715						745	696	708
600	475	545	629	547		470
400						515	534
200	63	84	100	103		86	60	51
213
	176	156	189		189
0		121	123
Q1	Q2		Q3	Q4			Q1	Q2	31.jul
		2019		31-60 PD		61-90 PD			>90 PD	2020

14

Well capitalized after successful measures implemented

•	Solid buffer to capital requirement
	• Buffer of 3,5 percentage points (31 July 2020)
•	Several measures successfully implemented
	•	Private placement completed
	•	Tier 2 bond issued

Reported capital adequacy*

Per cent (%)

		22,1 %
	20,5 %	1,3 %
19,1 %	1,2 %	1,3 %
1,4 %	1,2 %
1,4 %

	21,0 %
19,1 %	1,7 %
1,3 %	1,3 %
1,3 %

23,2 %

1,9 %

1,5 %

23,7 %

2,0 %

1,5 %

• Sale of NPL portfolio completed

19,5 %

19,9 %

20,2 %

• Re-allocation of liquidity completed

16,4 %

18,1 %

16,5 %

18,0 %

Q1 Q2 Q3

2019

Q4 Q1

Q2

2020

31/07

CET1		T1 *		T2 *

CET1 requirement		Total capital requirement

15

Note(*): counter cyclical buffer is weighted between Norway, Sweden and Finland

Turnaround completed

• Cost efficient and scalable operation
• Credit risk management improved
• Healthy credit quality
• Well capitalized

16

Disclaimer

This presentation (the "Presentation") has been produced by BRAbank ASA (the "Company", the "Bank", "BRAbank" or "BRA"), solely for use at the presentation to investors and is strictly confidential and may not be reproduced or redistributed, in whole or in part, to any other person. To the best of the knowledge of the Company and its board of directors, the information contained in this Presentation is in all material respect in accordance with the facts as of the date hereof, and contains no material omissions likely to affect its import.

This Presentation contains information obtained from third parties. Such information 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 certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or any of their parent or subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments. The Company assumes no obligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to our actual results.

AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES ASSOCIATED WITH THE COMPANY'S BUSINESS, SEGMENTS, DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND FOREIGN LAWSAND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS, FLUCTUATIONS IN CURRENCY EXCHANGE RATES AND INTEREST RATES AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS PRESENTATION. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT THE INFORMATION INCLUDED IN THIS PRESENTATION.

No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, none of the Company or any of their parent or subsidiary undertakings or any such person's officers or employees accepts any liability whatsoever arising directly or indirectly from the use of this document. By attending or receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the Company's business.

This Presentation speaks as of 21 August 2020. Neither the delivery of this Presentation nor any further discussions of the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date.

17

Detailed financial figures

Quarterly income figures and balance sheet

Income statement

Balance sheet

In NOK thousands

Interest income

Other interest income

Interest expenses

Net interest income

Income commissions and fees Expenses commissions and fees

Total income

Income/loss from trading activities

Staff costs

Other administrative expenses

• of which marketing expenses Depreciation and amortisation
  Gain from purchase on favourable terms
  Total operating costs

Profit/(loss) before impairment losses

2020			2019
Q2	Q1	Q4	Q3	Q2
89 114	93 487	97 774	112 891	101 859
1 522	4 963	3 177	2 905	4 340
12 771	14 794	16 835	20 114	18 194
77 866	83 656	84 116	95 682	88 005
4 917	6 442	5 290	6 819	7 172
812	1 683	3 244	3 755	3 043
81 970	88 414	86 162	98 746	92 134
-4 525	1 206	-3 803	506	-4 869
12 340	12 076	16 256	21 542	20 820
17 981	24 571	32 348	28 621	27 614
604	1 250	934	4 922	6 999
6 439	6 522	7 089	6 677	36 078
0	0	0	0	12 414
36 760	43 169	55 693	56 839	72 098
40 685	46 452	26 665	42 413	15 167

	2020			2019
In NOK thousands		Q2	Q1	Q4	Q3	Q2
ASSETS
Loans and advances to credit institutions	48 003	45 436	743 771	174 457	134 450
Debt securities	1 788 654	1 389 585	1 470 919	1 142 058	1 242 618
Loans and advances to customers	3 895 123	4 318 931	4 373 050	4 893 016	4 874 920
Provision for impairment losses	359 233	350 216	447 034	399 077	338 017
Net loans and advances to customers	3 535 890	3 968 716	3 926 016	4 493 938	4 536 903
Deferred tax asset	103 021	107 406	104 452	73 656	64 558
Other intangible assets	69 919	73 202	76 048	71 469	73 868
Property, plant and equipment	10 590	11 793	13 062	14 262	14 858
Financial derivatives	11 478	0	0	2 048	0
Prepayments accrued income and other assets		10 851	18 728	7 845	13 326	16 532
Total assets	5 578 405	5 614 866	6 342 114	5 985 217	6 083 787
LIABILITIES & EQUITY
Deposits by customers	4 644 921	4 688 086	5 472 666	5 026 924	5 153 296
Provisions, acrruals and other liabilities	51 634	52 362	63 490	67 361	82 867
Financial derivatives	0	4 697	422	0	6
Subordinated loan	64 340	64 282	49 540	49 413	49 370
Tax payable		0	0	0	3 892	3 892
Total liabilities		4 760 895	4 809 428	5 586 118	5 147 590	5 289 431

Equity

Impairment releases/(losses)

Operating profit/(loss) before tax

Tax charge

Net profit

-23 143	-58 270	-136 765	-77 714	-40 374
17 542	-11 818	-110 100	-35 302	-25 207
-4 385	2 954	37 167	8 826	6 302
13 156	-8 863	-72 933	-26 476	-18 905

Share capital + other paid in capital Surplus capital

Tier 1 capital Retained Earnings

Total equity

Total equity and liabilities

125 406	125 406	496 141	495 777	447 393
755 554	755 567	324 931	326 212	304 034
49 625	49 582	49 540	49 454	49 454
-113 075	-125 117	-114 616	-33 816	-6 525
817 510	805 438	755 996	837 626	794 355
5 578 405	5 614 866	6 342 113	5 985 216	6 083 787

19

BRAbank ASA, Starvhusgaten 4, 5014 Bergen 55 96 10 00 • brabank.no