Pareto Bank ASA

Welcome to the third quarter of the shareholding initiative. We start with the main features of the initiative. After that, the CFO, Vegard Toverud, will give us more details about the shareholding report, before I comment on business areas and market views. We will gladly answer questions at the end, and for those of you who participate digitally, you can send questions to the meeting chat. So first of all, the main features in the forecast for the third quarter. In the third quarter, Parieto Bank received a result after tax of 173.2 million. The result was a one-capital transfer after tax of 13.7%. Summe utelån endte på 19,4 milliarder ved utgangen av september. Det er en nedgang på 166 millioner fra halvårsskiftet. Så er det sånn at utlandsveksten i andre kvartal kom kraftig mot slutten av kvartalet, og dette sammen med store låneinnfrielser rett etter kvartalet, forklarer nedgangen i volum. However, the average volume of loans in the third quarter is 2% higher than in the second quarter, and this strengthened the net income. So net income increased from 10 million to 313.1 million. Pareto Bank has around 10 years of experience from Sweden, and our long-term ambition is to build a profitable and robust portfolio within our niches in the Swedish market. We currently have around 2 billion in exposure in Sweden, and in the third quarter we opened an office in Stockholm, with two employees from the Oslo office. In the third quarter, the sum of the deductions and the loss of the loan amounted to 30.9 million, and most of the individual deductions are linked to a handful of projects within the housing sector, which are affected by price growth, difficult new housing markets and a significantly higher financing cost. Here you can see the development in central key figures for the last five quarters. It is a stable picture with high profitability, good operational efficiency and robust solidity. This despite the fact that our main market, the new housing market, is still demanding. As I said, note price growth on investment factors, a selective sale and a significantly higher interest rate level. The results for the third quarter were 173.2 million. That is slightly below the second quarter, and it is 18 million higher than in the same period last year. The net net shows a nice increase from quarter to quarter, and is up by 10 million from the second quarter and 32 million from the same period last year. The increase in the net net is due to an increase in net net margin. Sum of deductions to take out loans, 30.9 million, that amounted to 0.16% of the average net and out loan in the third quarter. Therefore, trend at the same level as in the third quarter last year, and slightly higher than in the second quarter. In light of a still difficult new housing market, we have to assume that the declines in the next few quarters may be higher than what they have done historically for Pareto Bank. we have a very good loss-absorbing ability through a high profitability. You can see that the net capital transfer has been around 14% in the last five quarters, and the solidity is good. Pure core capital collection is now at 18.3%. So that was the main attraction in the forecast, and then the CFO of the bank, Vegard Toverud, will give us more details.

Thank you, Tiril. On the interest rate net, it increased by 11% compared to last year, mainly due to growth, but also compared to last year, some better margins. If we look at the 10 million we are up to compared to last quarter, this is mainly explained by the overall growth that Tiril explained earlier. Value changes for the quarter were in total 900,000 negative. Pulled down by value changes to our own fixed interest rates that we have from our customers. If we look at the costs of 57.7 million, there are around 170 million so far this year. The increase from last year, and the small increase we also had from last quarter, is due to more employees. We have now become five more employees this quarter, and we also have some higher IT costs. The bank is still very efficient and has a cost of 18.3%. The deductions were 30.9 million, I'll come back to that. And with those deductions, we end up with an income per share of 2.08 kroner. That's up 10% year over year. And this year we have an income per share of 6.39 kroner. If we look more in detail at the net income, and here is the development from last quarter, we see that it is the growth that explains the 10 million we end up with in total growth. The margins are very stable. Due to high activity, we have higher interest rates that we book on net income. This is 4.5 million. From the growth we have had, we have financed a part by letting us down on our liquidity portfolio. It reduces everything else like net and interest income with 10.4 million. But it is then important to look at this also towards our investment volume. Since we have let us down on the liquidity portfolio, we could also keep some less investment, so the two must be looked up to each other. On the other hand, we pay marginally more. That gives us 3 million in negative effect on the quarter, while we pay a little less on the market funding, which is 1 million positive. We have had one day with more interest in the quarter compared to the previous quarter, which is 2.8 million. If we look at the margin for expense, it is relatively stable. We pay marginally more for the expenses. And when our margin on the average balance goes up quarter by quarter, it is more of an expression for change in balance than that our product interest is changed. The declines in the quarter were at 30 million, and the declines included a stated loss of 30.9 million. This is roughly in line with Q3 last year, but it is up from the first two quarters this year. If we look at what we have done on the macro side, we have adjusted the probabilities for a scenario with a high drop in housing prices. At the same time, we have adjusted the probability of a scenario with a strong drop in the oil price. In total, these balance each other. We have had an increase in step 2. This increases our revenues by 4 million kvartals. So most of the revenues belong to step 3, where we had an increase of 177 million. This is, as mentioned earlier, a handful of commitments that have liquidity challenges. For step 3, we have taken 28 million in deductions, of which 5 million is interest. The bank's net capital was 18.3% at the start of Q3. This is an increase from 17.9% last quarter. This is due to both the slightly lower starting balance and the good income we had last quarter. So far this year, the bank has delivered a calm of over 14.1%. This is a figure that should be seen up against our leverage ratio of 17.8%, up from 17.1% last quarter. We still see that there is uncertainty around the implementation of CRR 3. The technical standards are not finished. something that makes it a room for uncertainty for us. Probably, the CRR3 introduction will still contribute a neutral to some positive development for pure nuclear capital at the beginning of January 1, 2025. That was what I was going to say about details now. Tyrell will say a little more about the views for our different areas.

Great. Now I will give an update on business areas and tell you a little about views. I start with a overview picture. At the beginning of September, the total exposure was 23.8 billion. Here you can see the distribution per area. Housing is the largest with an exposure of 8.7 billion, 37%. After that, the company with 6.4 billion now accounts for 28%, and then the business administration, and what we call finished housing for sale and rental, both share 13%, and ship financing is 2 billion, and then 8% of the total. And as we have explained several times now, we had some decline in volume in the third quarter, and this resulted in a strong growth in the second quarter towards the end of the quarter. And then we got some major relief right after the quarter change, associated with completion of housing projects. In summary, this is the decline, but on average, the volume was 2% higher. Here you can see the development in volume per business area, shown from quarter to quarter. We show that we got benefits and a decline in volume in housing construction. We had a flat volume of finished housing, as well as business units. We got 100 million in growth in business, and 165 million in growth in ship financing. I will comment on each area, starting with housing. Here is the total exposure of 11.8 billion, and 3.1 of these billions is then linked to finished housing that is to be sold or rented. So it's a combination of customers who have run portfolios with apartments for rehabilitation and sales, and then there is a small share of housing in projects that we have initially financed. For the rest, we have rental loans where there is an existing house. The volume is 1.6 billion. We also have rental loans without an existing house, 2.2 billion, and building credits at 4.9 billion. For the fourth quarter, we expect a relatively unchanged volume in this area. We have had good access through the third quarter, and that continues, good access to attractive projects and customers. At the same time, we had in the third quarter, and also in the fourth quarter, several large loan exemptions related to the completion of projects. This means that we collectively believe that the volume will remain quite unchanged until the end of the year. We still see a somewhat increased entrepreneur risk. There is low building activity and price growth. We also see that there is a demanding new housing market. There is a low pace for initiatives, and there is a selective new housing sale. In the long run, we still believe in a positive change, of course, but it takes some time, and it is linked to a decline in interest rates. The change will also be supported by population growth and a soft landing for the Norwegian economy with low liquidity. So that was housing, business ownership, here was the exposure of 3.1 billion at the beginning of September. For the fourth quarter we also see a relatively flat volume. We have low risk appetite here and do not expect high credit demand either. This is a sign of some increased activity in anticipation of interest rates and a soft landing for the Norwegian economy, and the values of business property have stabilized. Our next largest area of business is business. Here is the exposure as shown here at 6.4 billion. For the fourth quarter, we expect stronger growth in this area. We have had good activity in the first half of the year, and it continued in the third quarter, and there are now several large loans for payments in the future. So here we expect stronger growth. We are an attractive partner for medium-sized companies. We meet them with a very professional and specialized team, and provide credit and personal follow-up. There are still quite large differences between activity and profitability in industries in Norwegian business life, and we are of course careful to have a selective credit practice. Finally, shipping financing. Here the growth continued in the third quarter. The volume was up to 164 million. For the fourth quarter, we expect a relatively unchanged volume. There is good access to business within offshore, while the activity on shipping is somewhat more cancelled. In addition, there is a very steep down payment profile on loans in this portfolio, and this of course affects net and loan growth. When it comes to the specific markets, we still have a positive perception of the offshore market. There is good demand and little supply of tonnage. The dry bulk market also looks healthy with a low supply side growth. And when it comes to the tank market, it is doing well. Here, increased supply of tonnage may put pressure on rates in the future. And when it comes to the container market, it is a good balance, but it can be affected by the fact that the supply side increases in the future. To sum up, we expect a stronger growth in corporate financing as a result of good deal laws. We also have good deal laws within the housing sector. At the same time, we expect more vacancies towards the end of the year. The new housing market is also a market with lower activity than it has been for a while. Compared to Pareto Bank in the fourth quarter, this means that we are basing a fairly flat volume development towards the change of year. We have a long-term market growth, and we always prioritize quality and profitability ahead of volume. Our long-term focus on healthy profitability and healthy operations has given results. This is also what our shareholders benefit from. Here illustrated with average annual total return since 2014. We see that an shareholder in Pareto Bank on average has received an annual total return of 16.6% versus an investor in the main index of 9.5% and an owner of the DNB stock of 12.1%. So then we have given you a status at the beginning of September, and then we are ready to answer questions. And we are doing mannsterk today. We have both Erling and Vegard with us. Here it is just to fire loose. And then we will gradually also see if there are any questions in the chat for the meeting. So I don't know if there are any in the audience who would like to ask anything. Yes, Birgitte.

Thank you. I'm Birgitte from DMV Markets. I'm wondering, given that you have such a strong position in terms of capital and a slightly lower growth outlook for Q4, can this indicate a change in the policy for this year?

We have an exchange policy that says that we are going to share a minimum of 50%, and that exchange policy is unchanged. And then the board, in connection with the quarterly share report, will make a concrete assessment, and then you will see both the capital situation and the growth prospects.

Thank you. Difficult time, but we will see about the year shift. One more question. You have gradually increased the number of years in the last year. Do you think you have reached a desired level, or is there a need to hire more, for example in Sweden?

I think initially that we have a very good supply and can raise more volume on the supply we have. And then we see great opportunities in Sweden. We are long-term, as we have always been, and build stone by stone, so we take one step of the way there. But it can happen eventually that we increase the supply, We have previously said that we will start there with three people, and now there are two people who are in that office, and then we have a third person also from the Oslo office who will move over early next year.

Thank you.

Hi, thank you very much. Herman from Paredes Securities. I have two questions. First about the growth you expect in the company. Is it possible to say what kind of difference across sectors, what type of sector and what type of loan you expect to grow there?

I don't have details about that, but it's within the type of business we already run today, of course, between large companies. We offer loans against a good balance. It can be purchase loans, various types of bridge loans, but I don't exactly know how the payments that are there now are distributed.

Maybe we can come back with details about that. And on the bank's funding, the interest rate drop is a bit lower this quarter. What do you think about that? And how do you think the market will fix interest rates against the flows with the interest rate outlook you have in the future?

Would you like to comment? I'll take that one. Is it true that the tax collection is a bit on the downside of our target interval? It has a couple of reasons. We had a very good collection of fixed interest tax last year with campaigns that have led to a... Refinancing, that is, a lot of decline this year. We have a very good decline or a very good rate of renewal on that. But there will always be some change in terms of whether customers choose to renew contracts or not. At the same time, we also have a little conscious reduction in revenue in the currency. It is not our core business, and creates some manual work for us. So that's something we lean a little away from, and in the meantime also creates a decline in the amount of revenue. Our main focus in the future is a good diversification between business insurance and PMI insurance. That is why we continue to work with a good turnover rate on fixed income insurance from the campaign, keep a good interest rate on our other PMI insurance as a placement account. At the same time, it is also competitive in the business market. Right now we are perhaps on a A place where it is a bit difficult for customers to judge if a fixed income is right for them. But we still see in this renewal rate that there is a great interest in fixed income insurance.

Thank you. I wonder if there was a question down there?

Yes, there was actually the same question.

The question is answered. Yes, good. Is there anything in the chat?

There is nothing in the chat today.

No. Anyone else burning with something? No. Fine. Then we thank you for us and thank you for the meeting.