Pareto Bank ASA

Welcome, everyone. Welcome to the first quarter of the first quarter. We start with the main features in the forecast, and then the CFO of the bank, Vegard Toverud, will give us the details in the forecast. Then I will comment on our business areas and market views. We will gladly answer questions at the end. For those of you who participate digitally, you can send questions to the chat. Pareto Bank received a result after tax of 178.5 million in the first quarter. This amounted to a self-tax after tax of 13.5%. The net income increased to 315 million, and the total loan was up from 151 million to 20.9 billion. In the first quarter, the average volume of expenses was 4% higher than in the fourth quarter, after a strong growth at the end of the year. As a result of high activity and growth in the fourth quarter, we started 2025 with a high focus on capital and a strict customer priority. We continue our long-term work by building a broad network and a robust customer portfolio in Sweden. In the first quarter, the exposure was somewhat up after strong growth throughout 2024. In the first quarter, the sum of deductions and loans was 37.1 million. The individual deductions ended at 29.4 million,----and were mainly for financing housing development. As previously mentioned, it takes time to work out---the difficult projects. Individual deductions and taking out loans will only be at a higher level in the next few quarters than what has been normal for Pareto Bank. The new housing market is still difficult, and after the change of year, the general market interest has also increased. In the next picture, we show the development in central key figures for the last five quarters. We see that in the first quarter, the GDP drop ended at 13.5%, up from 12.2% in the fourth quarter. The increased profitability was due to lower loss rates. And then we see that the total losses were 0.18% of net and loan. This is a level we are of course not satisfied with. Nevertheless, it is worth noting that in spite of an annualized loss cost of over 70 basis points, the net tax return for self-inflation ended at 13.5%. We had a very high growth in the fourth quarter, which led to a decline in net capital coverage to 17.2% at the end of the year. We had a strong capital focus in the first quarter, and net capital coverage ended at about the same level, at 17.1% at the beginning of March. The operational efficiency was still good, expressed by a cost percentage of less than 18.5% in the first quarter. You have had a quick overview of the forecast. Vegard will give us more details.

Thank you. Yes. If we start with interest rates, they increased by 15.6 million compared to the corresponding quarter last year. This is due to the strong outlay growth and activity we had last year. Compared to last quarter, there is an increase of 4 million driven by a higher outlay balance. The margins were relatively stable, but the interest rates are then affected by both volume and margin associated with a fixed interest rate campaign that we have run in Q1, which I will come back to. Our revenues increased by over a billion in the quarter. In total, we account for 12.6 million in value gains. Reduced credit claims in our liquidity portfolio, on our obligations, gave a profit of 4.5 million. In the corresponding quarter last year, the loss was 5.7 million. So that explains the big change compared to Q1 last year. In addition, we have a slightly higher compensation, interest compensation, on our currency swaps, and we have received 1 million in spending from our ownership in equity credit in the quarter. The costs are up by 10.6% compared to the corresponding quarter last year. In the quarter, we had a reduction of 1 year, but we have raised 2.4 years compared to Q1 last year. Variable profit now in the quarter is 9.1 million. Last year it was 9.7. and the reason it is slightly lower is due to the loss rates. The cost is 18.5%, which is very much in line with 18.4% in the corresponding quarter last year. The losses come in at 37 million, which is down from 55 million last quarter, but an increase in relation to Q1 in 2024. The individual loan losses are just under 30 million. It is roughly the same level as both in Q4 and Q3. The bank stated only 100,000 in losses in the quarter, and this is linked to an engagement that has now been resolved. EPS-wise, we end up at 2.16 kroner. That is in line with last year, but then up from the quarter. If we look in detail at the development in interest rates, it is the growth that is the biggest positive contribution. we have some reduction in margin. It is a combination of sinking market interest rates, some changes in the treatment of peak interest rates, and some other effects that sum up to 7.7 million. The activity-driven fees, as a result of the high activity in Q4, increased the interest rate netto by 7.1. And then, as I said, we collected a lot of income. This surplus liquidity and deposit volume is collected, where we have taken the income that we have not borrowed and put it in the obligation portfolio, liquidity portfolio. All in all, it gives a negative contribution of 9 million now in the quarter. We also pay marginally more on the income. This means that we lose 2 million more. And then there are two lower interest rates in Q1 compared to Q4, which means that we get 5 million less in interest income, and nothing else. If we look at the margins over time, they are relatively stable on the outside loan side, while we continue to see the current pressure that we experience on the inside loan side, and now in the quarter reinforced by the fixed interest campaign we ran. If we look at the loss costs, the loss in the quarter is still high, but in line with what we communicated also at the previous quarter's announcement. Fortunately, we see a decline in the quarter in Trinn 3. Although this, of course, can swing from quarter to quarter. The decline was 198 million. In spite of that, we increase the deductions to Trinn 3 volume under 30 million, or 15%. This means that we have a higher ratio to RIN 3 volumes than we had last quarter. We do this because we think it's right. As mentioned earlier, it takes time to work through the problem engagements. I think it's okay to underline that again. The individual losses of 29 million are, as I said, in line with the 31 million we had in the previous quarter. And it is only 100,000 that we see in losses, which is the result of an engagement that has already been initiated. The capital, if you look at pure core capital, was relatively stable from last quarter, down by 5 points, as the income compensates for the increased growth. We talked about the capital goal at the previous quarter presentation. And in the aftermath of that, the board, in connection with the annual report, set our capital goal to 16.3% in line with the supply expectation. This means that despite the fact that the pure core capital percentage is relatively unchanged, our buffer to the requirement has increased significantly throughout the quarter. The bank will continue to keep a buffer above the requirement, but the buffer can also not be too high if we are to reach our raw ambition of 15%. Next quarter we will report to CRR 3. And there is still uncertainty around how CRR 3 will hit the bank. Technical standards are not completed. But we continue to believe that in the end, the effects will be neutral to something positive for our pure nuclear capital.

Then I will give you an update on business areas and tell you a little about market views. I start as usual with a overview picture. The total credit exposure was 26.5 billion at the beginning of March. Housing development is still the largest area, accounts for over 40%, and the snow is 11 billion. And then there is company financing with 7.1 billion and 27% of the total. Then we have finished housing with, as shown here, 14 percent, 3.7 billion, economy, 11 percent, 2.8 billion, and finally shipping financing with 7 percent of the total exposure and 1.8 billion. In this picture, we show the growth in exposure from quarter to quarter. Our growth rate last year was higher than ever. This gave strong growth, especially in the fourth quarter. This led to us starting 2025 with a high focus on capital and priority of customers. However, and as expected, we got an exposure increase in both housing development and finished housing for sale and rental. In housing development, the exposure was up by around 1 billion, and in finished housing, the exposure increased by 350 million. we got some volume in terms of business units, business areas and shipping financing. This was due to this focus on capital as well as loan relief and repayment of loans. I'll link some comments to each area. I'll start with housing. Here, the total exposure was 14.6 billion,---divided between mortgages, building loans--and what we call residential. We got growth in both areas, as you can see from the figure. The room for growth in housing development in the future is still relatively large. There are few start-ups and low activity in this market. Our net growth is also affected by the completion of projects and the incoming loan relief in the bank. We expect a couple of big reliefs in the second quarter. All in all, we believe in moderate growth in exposure, and a low growth in expenses in the second quarter. We still see a high entrepreneur risk. It is perhaps the sector in the Norwegian economy that is most directly affected. There is low activity, thin margins at the starting point, and there has been a strong cost growth. We follow the entrepreneurs we have in the ongoing projects closely, and of course make thorough assessments in connection with new projects we give credits to. In the long term, we think there will be a change in the market when the price difference between new and used houses decreases, and also with a drop in interest rates. In the business sector, the exposure was 2.8 billion at the beginning of March, and we had some drop in volume in the quarter. That was expected. The outlook for the interest rate cut has declined, and long interest rates have risen. This means that the expected increased activity in the transaction market is withdrawing in time. We still have a low appetite for the area, and we see a weak volume development within the industry in the second quarter. Then the business area. Here we had record high activity and growth in the fourth quarter, and then we got some decline in exposure in the first quarter. This was due to the fact that we received a handful of larger loan exemptions. In the future, we expect even demand and activity, and then we also see some loan exemptions in the second quarter, so we expect a flat volume ahead of the half-year shift in the business area. Finally, Shipping Offshore. Here it was the total exposure of 1.8 billion per quarter shift, and the distribution of the different market segments is shown in the figure. In total, we believe in a flat to weak falling volume in the second quarter. The competition in offshore has increased. This also hinders our growth prospects. The offshore market as such is doing well, driven by good demand and low supply-side growth. And a potentially lower age price could lead to lower demand for tonnage in the long run. When it comes to shipping, we have a low appetite for the moment, and we also see a slightly reduced demand. Most of the segments are high in the market cycle for the moment. The shipping market in general could be affected by trade wars, if it really takes place, and lower global economic growth. So, in summary, flat to falling volume in this area before the half-year shift. As we all know, the general market demand has increased, and higher uncertainty can lead to a slowdown in investments, and it can dampen the demand after financing. So far, we have not experienced this specifically with some of our customers. We are long-term, building rock on rock, and that has created value and also given a good total return to our shareholders. We have two long-term ambitions, which is to create a one-capital transfer after tax of 15%, and to share an exchange rate of at least 50% of the annual surplus. On April 14, we paid an exchange rate of 4.15 kroner per share, corresponding to 50% of the surplus for 2024. So with that, we have gone through the quarterly report for the first quarter. And then we are ready to answer questions. And we have both questions, perhaps in the chat and in the room. We can see if there are any in the room first. There is one.