Investor Presentation 15th June 2011, Handelsbanken
acquiring Amagerbanken
Oct. 2009
25,000
customers
5,000
customers
Feb 2010
26,000 customers
NB: Only Insurance
customers in
Iceland!
International Expansion in recent years
The Group has existed as a bank for 105 years on the Faroe
Islands, where it also runs an insurance business
In October 2009, BankNordik acquired the insurance
company Vørður on Iceland. Turned it around to return a
profit in 2010.
In February 2010, BankNordik acquired 3 bank branches in
Greenland and 9 branches in Denmark. In a recessionary
economy with focus on security among depositors
BankNordik has managed to retain staff and customers.
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Feb 2010
25,000
customers
+ AB
92,000
customers
2
Business Case: Cost efficient retail banking
•
•
•
•
Faroese branch network reduced to five branches in 2011
Rationalizations in current Danish activities
AB Branch network too large
 Several branches are too small to be cost effective and attractive
work places
 BankNordik has identified several clusters of branches to be
merged
 Number of branches lowered to appr. half the current number
 Number of employees taken over is appr. 160 (Out of 242)
 Plan for integration andadjustment of branch network is in place
BankNordik has proven experience with rationalizations
3
Integrating Danish management
4
The acquired activities

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





A loan portfolio totaling DKK 4.6 bn (guarantees of DKK 300m)
A few selected corporate/public customers with credit exposures
larger than DKK 5m totaling DKK 148m
Cooperative Housing portfolio totaling DKK 50m (after impairments)
The estimated RWA amounts to DKK 3.8 bn. Deposit surplus
amounts to DKK 1.1 bn. Securities on custody accounts amount to
DKK 10 bn.
12 of the 25 banking branches (number to be reduced before closing)
Approximately 160 employees
Expected profit from day one, excl. acquiring and conversion costs
Although normalized profit will not be expected to be reached until
2012
5
Budget of acquired activity. Important
assumptions in the budget.
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
Estimate 25% loss of volume in closed branches, and 10% loss of volume in
the rest of the branches
Risk Weighted Assets amount to DKK 3.8 bn including operational and
market risk
In calculation of capital requirement we estimate no loss of volume, and the
capital requirement is met with a mix of hybrid core capital and subordinated
debt.
Normalized impairments are fixed at 50bp based on historic mean
Interest rate margin remains 5 percentage points
6
Balance Sheet BankNordik group pr. Q1
2011, incl. AB
Balance sheet, BankNordik Group
Realized 2011
Realized 2011
Kr. 1.000
BankNordik
BankNordik
Koncern, excl AB Koncern, incl AB
Cash in Hand
Loans
Bonds
Shares
Tangible Assets
Intangible assets
Other assets
Total assets
1.061.831
8.376.167
2.524.378
301.800
156.696
485.132
608.682
13.514.685
2.228.246
2.578.246
12.616.791
2.524.378
301.800
191.696
485.132
835.132
708.682
19.406.725
Due to credit institutions
Deposits
Issued debt
Other liabilities and provisions
Hybrid Core capital
Equity
Total liabilities
316.445
8.943.328
1.199.843
848.679
203.240
2.003.151
13.514.685
316.445
14.258.731
1.199.843
875.316
753.240
2.003.151
19.406.726
0
0
1.513.616
1.784.116
Off Balance sheet
Guarantees
7
Pro forma adjusted budget
Adjusted
2011
Budget AB,
normalised
Total
Interest income
Interest expenses
627.424
176.799
264.968
105.182
892.392
Adjustments to budget
281.981
Net interest income
450.625
159.786
610.411
Net fee income
Premium income from insurance
105.228
55.319
99.629
0
204.858
55.319
Net interest, fee and insurance income
611.172
259.415
870.587
Other income
Value adjustments
Staff costs administrative expenses
Depreciation
Other costs
Impairments
6.842
0
381.035
24.847
5.216
50.000
0
5.295
156.427
6.052
0
18.333
6.842
5.295
537.462
30.899
5.216
68.333
Pre-tax profit
156.916
83.898
240.813
31.383
20.974
52.358
125.532
62.923
188.456
Tax
Net profit
for current activity:
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Budget from forecasted
range in Q1
Value adj=0
Impairments=50bp
Cost reductions of DKK
30m to be effective
from year-end 2011
8
Outlook for 2011 as announced in Q1 report
• Bank retains outlook for the full year, although we now expect to
end in the lower end of the range for pre tax profit before value
adjustments of DKK 100-140m
• We expect loan growth to pick up in the rest of the year
• Retain expectation that cost reductions amount to 0-5%
• Branch structure on the Faroes and in Denmark has been
adjusted closing 5 branches and reducing 22 FTE by year-end
• Excluding effects from acquisitions of Lív and AB
• AB not expected to contribute in 2011 as a result of extraordinary
acquisition and conversion costs
9
Industry overview of the group loan portfolio prior to AB
acquisition
Credit Exposure in %
Other
Construction
Real Estate
Fishing
Manufacturing
Trade, hotel & restaurants
Public
Private
Service
Transport, logistics &
Telecom
Uoplyst
NB. The definition of “private” is not comparable to definition of
(Tom)
“retail” as retail also includes corporate below DKK 7.5m
10
A strengthened credit risk profile:
A larger share of retail banking
•
•
•
•
•
Primarily retail customers acquired
Implies stronger credit risk profile
Retail defined as exposure less than DKK 7.5m(1m euro)
Retail exposure represents more than 2/3 of total exposure in the group after
acquisition
The share of Corporate exposure has fallen by 13 % to 27,6%
By Customer size
Retail
Corporate
Public
Currently
Including AB
55,8%
68,1%
38,0%
27,6%
6,1%
4,2%
By Customer type
Currently Incl. AB
Private
50%
59%
Corporate
44%
37%
Public
6%
4%
11
Overview of the 10 largest customers in
current BN group
Customer
1
2
3
4
5
6
7
8
9
10
To t al
Industry
Group risk
Real Est at e
-220.201
Far m in g
-168.750
Su p p ly / Fish in g
-161.183
Real Est at e
-160.000
Ser v ice
-159.930
Tr an sp o r t , Lo g ist ics & t eleco m
-140.337
Tr an sp o r t , Lo g ist ics & t eleco m
-116.135
Ret ail
-115.000
Ret ail
-110.152
Fish in g
-109.601
Classification
0b
3A
2A
3A
3A
3A
2A
3A
3A
3A
Country
Far o e Islan d s
Far o e Islan d s
Far o e Islan d s
Gr een lan d
Far o e Islan d s
Far o e Islan d s
Far o e Islan d s
Gr een lan d
Far o e Islan d s
Far o e Islan d s
-1.461.288
Although we do acquire some larger customers, none of
the acquired customers from AB will enter this top 10
customer list
12
Acquired a small number of larger corporate
customers and a co-operative housing portfolio
•
The acquisition of AB included 6 larger corporate customers with
exposures above 5 mio. DKK
Customer
1
2
3
4
5
6
To t al
Industry
Pu b lic
Pu b lic
Tr ad e
Tr ad e
Tr an sp o r t , Lo g ist ics & t eleco m
Real Est at e
Group risk
-51.000
-18.000
Classification
2a
3
2a
3
Country
Den m ar k
Den m ar k
-16.000
-13.000
-27.000
-23.000
2a
2a
2a
2a
Den m ar k
Den m ar k
Den m ar k
Den m ar k
-148.000
•
Additionally acquired a loan portfolio of 16 organizations with shared
residences for private customers with total exposure of DKK 172
million. Impairments amounted to DKK 58m, acquired for DKK 50m.
13
Stronger liquidity situation with large
deposit surplus
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BankNordik’s current liquidity policy is to be 100 % above statutory
requirement
Deposit base increased by DKK 5.3 bn, deposit surplus increased by
DKK 1,1 bn.
Excess cover relative to statutory liquidity requirements is 163 % in Q1.
Will increase with approx. 0,5 bn. due to AB
A “stress tested” deposit base with large hair cuts taken on deposits
larger than DKK 750.000 in February
DKK 3.3 bn of deposits are from customers with Nemkonto (AB is
primary banking relation). Client accounts from Law firms is a niche
business fully covered by Depository Insurance Fund.
DKK 850m are time deposits. A low level reflecting AB’s lack of
competitive advantage to attract deposits in recent years.
Less than DKK 0.5 bn are from customers with deposits not covered by
Depository Insurance Fund
14
Solvency Target maintained
• BankNordik will still aim at a level of solvency dependent on the
macroeconomic situation being bad or good of respectively
between 14–16% in the years to come
• Following completion of the Amagerbanken transaction
BankNordik still expects a capital requirement below or just above
the statutory minimum requirement of 8%
15
Required extra capital of DKK 550 million

Targeted solvency level of at least 14% long term implies required
extra capital of appr. DKK 550m to be raised by issuing hybrid core
and/or subordinated loan capital
 Seller provides DKK 300m in subordinated debt facility. Limits payment
of dividends by requiring repayment of subordinated debt of twice the
amount paid in dividends.
 Raise additional hybrid core capital and/or subordinated loan capital
totaling appr. DKK 250m
16
Reassessment of the Dividend Policy
•
As a consequence of the AB acquisition and the borrowing it enforces,
BankNordik on 19 May 2011 announced that it will issue hybrid core capital and
subordinated loan capital to strengthen its capital base and as consequence of
such issue that it will not pay dividends for a period
•
Following this announcement BankNordik has been in contact with several
potential debt investors and it seems that BankNordik may be able to pay out a
minor dividend and still attract the required subordinated loan and hybrid core
capital
•
Following the completion of the subscription of subordinated loan and hybrid core
capital, which is expected to take place on or about the 16 June 2011, BankNordik
will be able to announce the final level of allowed dividend
•
The most likely out come is that as long core capital percentage, excluding hybrid
core capital, is lower than 10 %
 Dividend payout will be maximized to 10 % of net profit, however not more than DKK
10m p.a.
•
It is further a condition from the seller (Finansiel Stabilitet) that repayment of the
subordinated loan shall be twice of any dividend pay out
•
It is expected that the dividend policy will be taken up to reconsideration, when the
core capital percentage, excluding hybrid core capital, is 10 % or higher
17
Capitalization and repayment of acquisition finance
(hybrid capital 100m and subordinated debt)
Acquisition financing, Primo (mio. dkk)
New hybrid core capital
Repayment of New hybrid core capital
Subordinated debt from Financiel Stabilitet
Subordinated debt from Insitutional investors
Total subordianed debt
Repayment, subordinated debt from FS
Repayment, subordinated debt from Other investors
Acquisition financing, ultimo
Base Capital per cent
Government
Hybrid
Capital
Core
Capital per
cent,
incl Hybrid core capital
Repayment, Government Hybrid Capital
Core Capital per cent, excl Hybrid core capital
Base Capital percent
Core Capital percent, incl Hybrid core capital
Core Capital percent, excl Hybrid core capital
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

2011, Q1
Q1 2011
100.000
100.000
300.000
300.000
150.000
150.000
450.000
450.000
00
00
550.000
550.000
2011
2012
2013
2014
2011
2012
2013
100.000
100.000
100.000
100.000
100.000
100.000
100.000
0
0
0
0 0
300.000
200.000
100.000
300.000
200.000
0 0
150.000
150.000
150.000
150.000
150.000
150.000
150.000
450.000
250.000 150.000
150.000
450.000350.000
350.000
0 0100.000
100.000 200.000
100.000
100.000
0 0
0
0
0
0 0
550.000
450.000
350.000250.000
250.000
550.000
450.000
2015
2014
100.000
50.000
50.0000
00
25.000
0
25.000
0
0
125.000
150.000
125.000
50.000
13,8%
203.000
10,8%
8,6%
13,8%
10,8%
8,6%
14,0%
13,9%
14,0%
14,1%
203.000
11,1%
11,7%203.000
12,5% 203.000
13,3%
0
9,0%
9,6%
10,5%
11,3%
14,0%
14,0%
13,6%
11,1%
11,8%
12,8%
9,0%
9,7%
11,1%
14,0%
203.000
14,0%
0
12,1%
13,6%
13,8%
12,5%
2016
2015
50.000 0
50.000
50.000
0 0
0 0
0 0
2017
2018
2016
50.000
0
0
50.000
0
0
0
0
0
0
0
0
0
0
25.000 0
00
0
0
0
13,9%
14,0%
14,2%
203.000 14,2%
103.00014,4%
14,1%
100.000
103.000
12,8%
13,5%
14,2%
14,4%
15,3%
14,7%
15,5%
14,0%
15,5%
Assuming no growth this projection
Acquisition debt will according to plan be repaid by 2017
Core capital, excl. hybrid core capital, expected to be above 10% in
2013
18
Conclusions
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Acquisition strengthens the credit risk profile, as it increases the
share of retail customers
Deposit surplus of DKK 1.1 bn. Solves funding issue to be
solved by 2013.
A high return on the invested capital is estimated
Acquisition debt planned repaid by 2016
Dividend policy reassessed to accommodate subordinated debt
19
*****
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Appendix
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22
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