Pareto Bank ASA

Then I would like to welcome you to a review of the first quarter's shareholding. As usual, we will start with the main features in the forecast before the bank's CFO, Erling Mark, will give us more details. After that, I will give an update on business areas and market views. We will gladly take questions at the end, and for those of you who participate digitally, you can send a question in the chat to the meeting. First, the main features of the first quarter's budget. In the first quarter, Pareto Bank received a result after tax of 176 million. The quarter's result is the best in the bank's history. The result was a one-capital transfer after tax of 14.3%. The net income was strong, ending at 300 million. The total loan increased by 410 million in the quarter to 18.9 billion. The growth came from offshore financing, financing of business ownership and financing of finished housing for sale or rental. In total, the total sum of deposits was 15.3 million. The individual deposits were 15.7 million, and were linked to a small number of engagements within the areas of financing of housing projects and business financing. The model-based deposits were reduced to 0.4 million. In this picture, we show the development in central key figures, and we compare Q1 this year with Q1 last year and Q4 last year. The result in Q1 was 176 million. The result increase of 45 million from Q1 last year was due to foreign exchange growth, stable net and interest margin, and a lower decline level. Sum out loan increased by 1.2 billion, or 7% in the course of this 12-month period. The net income margin was stable at 4.6 percent points, and the decline level was lower. The result increase of around 11 million from the fourth quarter is mainly due to a lower decline level. And you can see how the declines have been in these three quarters down to the right, expressed as the loss percentage. That is the sum of declines and losses in percentage of net income. In the first quarter, these were 15.3, or as shown here, 0.08%. If we go back one year, the decrease was 36 million, and then they were at 0.21%, and in the fourth quarter of last year, 42 million and 0.23%. So the sum of this, foreign exchange growth, stable net interest margin, and a lower decline level, caused a rise in the net capital transfer after the tax, which increased to 14.3%. So the bank is solid, pure core capital coverage was at 18.2% at the beginning of March. There is a decline from the year shift, and that is due to this foreign exchange growth of 410 million. So you've had a little insight into the first quarter figures. Erling will then give you more details.

Thank you, Tiril. Net income for the first quarter was 300 million. We had a small income change in mid-January, and then we had some outlay growth. The outlay growth was 410 million kroner in the course of the quarter, and it came towards the end of the period. So it has not particularly affected net income in this quarter. Our income volume has increased by 426 million kroner in the quarter, and that comes in the form of both fixed income and liquid income on the company's account. When it comes to fixed income, it is part of our strategy to spread the decline in fixed income agreements throughout the year. We are competitive throughout the year. Costs were 56 million for the first quarter. That was 10% higher than the same quarter a year ago. The increase comes from a degree of increase in the number of employees, but primarily a larger discount for bonuses, which was 9.7 million kroner in the first quarter this year. After the tax, this gave a record-breaking quarter result of 176 million kroner, or 2.15 kroner per share. Net income increased from 297 million kroner in the fourth quarter last year to 300 million kroner in the first quarter this year. There was one lower interest rate day in the first quarter, which contributed negatively with 3 million kroner. Otherwise, the increase in the loan volume contributed with an increase of 6 million kroner. And in this quarter, there were no other major areas of contribution to change in the net interest rate. So a stable picture. The loan margin was 5.5 percent in the first quarter. That compared to 5.5 percent in the first quarter the year before was exactly the same. And we see the same on the interest margin. It was 0.7 percent in the first quarter, the same level as it was a year ago. So we see now that it is a calm interest market. The margin is not under pressure and is on a good, stable and normal level for Pareto Bank. Netto rent margin was 4.6%, and that is also in line with what it has been in the last quarter. Let me tell you a bit about the deductions. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million kroner. In the first quarter, the deductions were 15.3 million In Trinn 2, we have loans with higher risk, and here the interest rates fell by 8.7 million kroner. That is because there was a number of loans that were taken into account and moved back to Trinn 1 as a fresh loan. And then there were single investments that were classified as credit-definitioned and moved to Trinn 3. In step 3, the individual deductions were 15.7 million kroner. This consisted of deductions on the capital at 10.7 million kroner, and on interest income, so-called peak interest, at 5 million kroner. The deductions in this quarter were moderate. Due to the higher interest rate, we can expect the declines to be at a higher level than historically in the coming periods. But this is the best picture we have right now. In the second line is a loan that has a higher risk rate. It is a special loan that is on our watch list. The declines in Trinn 2 are model-based. Here we see some developments in the exposure in Trinn 2. It fell from 832 million kroner to 619 million kroner. That's a drop of 213 million kroner. It comes, as I said, from the loan that was transferred by ASJU, and then transferred to Trinn 1 as a fresh loan, and then simple arrangements that were credit-financed and moved to Trinn 3. On the third trend, we have loans that are credit for nothing or misused. These loans are valued individually, and the deductions are valued individually. The exposure rose from 140 million kroner from 713 to 853 million kroner. The exposure consists of investments in business financing, business ownership and housing development, while the deductions are in loans for business financing and housing development. Loss is the first defense against loss. With a loss of 14.3% in the quarter, the bank can absorb a loss of 5.2% of the foreign loan. This is compared to our loss rate in the first quarter of the year at 0.3%. I will end with capital coverage. Pure core capital coverage was 18.2% at the end of the first quarter. As mentioned earlier, this was due to a growth in the volume of loans. The unweighted core capital share was 16.9% against 17.1% at the end of the year. These are still well above the long-term capital goal of the bank at 16.7%. Så da gir jeg ordet tilbake til Tiri.

Thank you. I'll update the business areas- and tell you how we see our markets in the future. I'll start with an overview picture. The total credit exposure at the beginning of March was 22.5 billion. You can see how the exposure is divided per business area. You can see that financing housing projects is the largest area- with 8.2 billion, 37% of the total exposure. Then there is corporate financing, which is 6.1 billion. In percentage, it is 27. Business ownership, 3.3 billion. As shown here, 15%. Financing of finished housing for sale or rental, 3.1 billion, and 14%. And finally, ship financing with 1.5 billion, equivalent to 7% of the total credit exposure. This picture shows the change in exposure from quarter to quarter. You can see that there was a small decline in housing projects. There was a small increase in the number of businesses. There was a relatively large increase in the financing of finished housing. There was also a nice increase in ship financing. I will now link some comments to each of these business areas, and I start with the largest financing of housing projects. Here was the total exposure of 8.2 billion, and the volume went down to 192 million in the first quarter. Over some time, we have said that we have been uncertain about the demand for financing in this area, because there is a slower pace in the implementation of housing projects. Of course, we do a review of all relevant risk conditions when we extend this type of financing. A special focus for the moment on entrepreneur risk, market risk and liquidity risk. On a general basis, the entrepreneur risk has increased. There is lower activity in this sector, and they also notice cost growth. We still have a small number of ongoing projects in steps 2 and 3, which we follow closely. Here it is a hyper customer dialogue and reporting from the customer, and also a third-party follow-up through building controllers. When it comes to the prospects, we are still uncertain about the demand for financing for housing projects in the short term, as a result of low new building activity and our adapted credit practice. After the change of year and the last few months, we see a more positive market sentiment. We see that it sells better in our projects, which is of course positive. At the same time, it is still difficult to meet the bank's requirements for foreclosures. We see that it is easier to sell more affordable housing in the Rand Zone to Oslo. In the long run, we believe in a positive turnaround. The used housing market is doing well. There is population growth, the unemployment rate is low, and it looks like we are entering a soft landing, and we have more or less reached a rent peak. So in the second quarter, a little unsure about the aftermath, we see a flat volume development, and we believe in a positive turnaround in the long run. So, the category we call business ownership. Here it was the total exposure of 6.5 billion. And we divide it into two main areas. Traditional business ownership and financing of finished homes. And when it comes to the last mentioned category, financing of finished homes, which will either be sold or rented, we got a lot of growth in the first quarter. On the snow 600 million. The increase in exposure is due to a combination of the fact that we have financed the purchase of townhouses centrally in Oslo, where the apartments will be sold one by one, and also the financing of some finished housing in projects that we have given building loan financing to. Most of the volume increase is linked to the purchase and financing of apartment portfolios. Then we have the more traditional industry area. There we got an exposure increase of 200 million in the first quarter. Let's talk a bit more about that area. We also make a thorough assessment of all relevant risk and relationship. We then set the loan calculation or one-capital requirement individually in each case as a function of that. We still have a small handful of commitments in step 2 and step 3 in this area that we closely follow up on. In this area, we see an unchanged picture from the change of year. Last year, the transaction activity was low. Income increases, increased yields and drop in property values. We think most of the fall in value is taken out. We gradually believe that the market will return, but that it may take some time. We still have a slightly limited risk appetite and expect moderate growth in the second quarter in this area. Here you can see our exposure at 22.5 billion, divided by geography and not by business area. And as you can see from this picture, we have at the beginning of March a credit exposure of 1.8 billion in the Swedish market. That corresponds to 8% of the total. And it has been quite stable at this level. Pareto Bank has 10 years of experience from the Swedish market. First, by financing a little larger professional property customers with projects in Sweden, and then also by financing Swedish customers. Since 2019, the activity in the Swedish market has increased somewhat. Since 2021, we have had individual employees who have had a special focus on Sweden. Over the past ten years, we have established a broad network of customers and co-workers. We have financed around 35 projects, which together amount to 3.2 billion. We feel that this is an exciting and attractive market for us. As I said, it started with Norwegian customers coming to us and seeking financing for housing projects in Sweden. We chose to follow those customers to Sweden. We learned that the Swedish market is dominated by... The big Swedish banks focus on the big property customers. There are some niche actors, but no one specializes in project financing, like Pareto Bank. So there is an investment in the Swedish market between the major banks and the niche actors on the type of specialized financing we offer to medium-sized companies. Therefore, we achieve a profitable risk-reward with higher margins and interest rates, and lower loan payments in this market. We have an ambition, and we have also achieved a self-rewarding that is well above the 15% that is our long-term profitability ambition. So our goal in the Swedish market is gradually to build up a robust and profitable portfolio. We do not have haste. It is about the choice of the right customers and the right projects and the right risk. And we have operated so far under what is called a cross-border contract, and that is under Norwegian constitution in Sweden. And that contract sets some limitations in relation to customer activity. We have therefore sent a request to Finansstilsynet about the possibility of establishing a branch in the Swedish market now in the first quarter. So that was ownership in total. Now I will tell you a bit about corporate financing and finally ship financing. In corporate financing, the total exposure at the beginning of March is 6.1 billion, which is stable from the beginning of last year. Here, we offer comprehensive solutions for medium-sized Norwegian companies. Investment loans, a little more general business financing. And we still have a small handful of customers who are in step 2 and step 3, which we follow closely, who notice lower demand in combination with increased financing costs and inflation. We see good growth opportunities for Pareto Bank in this market. We are an attractive and supportive financing partner for medium-sized customers. Meet them with a specialized team that is customer-oriented and has high competence. We also continuously work to strengthen the knowledge and knowledge of brand goods at Retobank. We are visible on social media, in newspapers, and a few weeks ago we were also on outdoor advertising for the first time. At the moment, there are big differences in terms of activity and profitability between different industries, and we have also adapted our credit practice to that and have a conscious relationship to that, of course. In the first quarter, we have had a strong and good deal flow, and we expect it to materialize in foreign growth towards the half-year shift. Finally, ship financing. Here it was the total exposure of 1.5 billion per quarter shift. That gave an increase of 163 million, and the growth has come in for offshore. You can see from the figure that we currently have the largest exposure towards offshore subsea, followed by bulk and then offshore supply. In this area, we direct ourselves towards Norwegian solid residences, and also towards the market for investment projects within shipping and offshore. We finance modern tonnage, and we set a requirement for a minimum of 45% of our own capital contribution. At the beginning of March, the volume of the average loan payment on the portfolio was 41%, and the credit quality is still stable and good. When it comes to the market views within shipping financing, most shipping segments are now affected by the conflict in the Middle East, and the fact that the Suez Canal is in practice closed, and that you have to sail longer distances, and that's why the rates have dropped. Specifically, we are a bit unsure about the development within bulk. The order book is in and of itself low, but we are unsure about the demand development in that market. When it comes to the tank markets, they are doing well. Here, the demand from end users is strong, and there is also a limited supply side growth. The container market is still weak, driven by a relatively large supply of tonnage. And when it comes to offshore, good market outlooks, good activity and little supply side growth. To sum up, Pareto Bank has a good history to show when it comes to putting self-capital into work. On average, we have delivered more than 15% of self-capital in the 10 years we have operated. At the same time, the bank has become increasingly more solid. The first quarter was a good start to a new year. We have a volume increase of 410 million, and we have declines of 15.3 million, which is on a moderate and more normal level if you look at Pareto Bank's history. And the sum of that makes us get a nice rise in the one-capital-throwing. It increased to 14.3%. And in nominal kroner, with a result of 176 million after tax, it is the best quarter result in the bank's history. You've got the main features in the calculations and how we perceive the markets. We're ready for questions from the audience and those participating digitally. Any questions from the audience? Vegard?

Sweden is exciting. Can you tell us what opportunities a Swedish license offers that you don't have today? And can you remind us how much of the property development portfolio will fall this year? How much do you have to fill in to have a flat volume at the beginning of the year?

If I take the first question first, then we have looked at a few different ways to organize ourselves. We have evaluated representation offices and we have evaluated operating under cross-border conditions, as we do today. Without going into too much detail, the challenge with both of these two solutions is that it is limited to how active we can be with sales work and customer activity and relationship building in Sweden. There are limitations with both of these two solutions. That is why we are now looking at the possibility of this branch, because then we can operate as if we were in Norway when it comes to sales and customer activity. then everything related to credit decisions and other types of work will still happen here with us. So what we are looking for is to place some employees over there, so that you are in that market and have closer contact with the market and the customers operating there. We are also fortunate to be part of the Pareto Group. which has had a large presence in Sweden and Stockholm for several years. So we believe that it is reasonable to place someone together with Pareto Securities in Stockholm. When it comes to the case of foreclosures and housing projects in the coming years, I don't have a good number for that now. Do you, Erling?

No, we don't have concrete numbers on that, but it will still be between 30 and 40 percent. Now we get a larger portion of the portfolio, the total portfolio, which becomes business and offshore financing, which is a little longer in the course of time, while we still have a period of time around one to two years, and maybe the projects have been a little longer now than in this period, than it has historically done. But that's the best we can say right now.

Are there any questions in the chat?

It doesn't look like it, but if anyone wants to send us a question, just do it.

Question there.

With the loan portfolio, a significant part of it is empty loans.

Around 3.2 billion out of 22.5.

Can you shed some light on how to handle this? I think a lot of this will be left behind in a year or two.

The exit, as you mentioned, is through the realization of the building project itself, and that we give a building loan when the prerequisites are met. So it is important when you give empty financing, both to look at the project as a whole, And of course, the tenant's financial strength to stand through a period where the exit comes later than expected. And of course, if I'm going to say a little exaggerated about the risks in the portfolio, then that is one of the challenges some customers have faced. You have bound capital in empty loans and that the exit has not come completely according to plan. So some customers and some of the things that are linked to downloads are connected to that. We have had customers where we have worked out solutions as a result of that. But apart from that, I can't say more precisely, because the descriptions we present today with these individuals at 15.7 is the best estimate and takes into account the type of challenges we see with customers. So that's the best answer to that.

And then there is a part of these empty loans that you see there that exists in parallel with the fact that the construction loan has been opened and that empty loans exist until the completion of the entire project. So this is not only in the pre-building phase of the project.

Then we see signs of a more positive market. We hear it from several customers and from real estate agents as well. So it can seem like the top of the interest rate, which we are more or less on, it does something with the uncertainty being exposed a bit, so you know what you have. what you have to trade for if you are going to buy an apartment or a single home or a small house, and then it is also easier to bind yourself to something that is delivered two years ahead in time, which perhaps few have wanted to do and rather gone to the used goods market at that time, and then that has made the new home sales have been low, and then it is difficult to get things started. More questions? No. The bell is ringing.

No one from the chat either. No one from the chat. No. So then we'll have a round off.

We will. Thanks for the meeting.

Have a good one.