Investor presentation - Skandia · 2020-02-14 · (liabilities proportion principle) 21,9% • The...

Investor presentationSkandiabanken

Q4 - 2019

Agenda

Introducing Skandiabanken1

Financials2

Credit portfolio3

Funding4

2

Skandiabanken

• Swedish retail bank established in 1994

• Strong and committed owner with ESG focus

• Three core business lines: Loans - Savings - Payments

• High customer satisfaction and strong brand

• Ambitious plans for growth

• Healthy funding structure with focus on retail deposits

• Solid asset quality (low-risk mortgages)

• Strong capital and liquidity position

3

• Wholly owned subsidiary of the

Skandia Group

• Approximately 360 000 customers

• A2 (Stable) rating by Moody’s

(covered bond rating AAA)

• Total assets of SEK 80 bn

• Approximately 2 percent share of

the Swedish mortgage and retail

savings markets

• CEO Johanna Cerwall

• Skandiabanken contributes with equity return, cost sharing

and strategic value to the Skandia Group

• Growth strategy focused on mortgages

• Scalable digital infrastructure

• Attractive pricing model

• Focus on Skandia Group customers

• Complementary products within savings and payments

Our strategy is set for growth

4

Growth+20% in 2019

Profit+65% in 2019

Cost efficiency-8% in 2019

Strong financialposition

Increased presence and visibility

5

Sustainable business

Skandia Group’s sustainability work is based on the owner’s instructions which

stipulates that the business shall be transparent, focused on long-term customer

relations and sustainable business

Skandia’s corporate sustainability strategy

• Transparency and long-term customer relationships

• Social responsibility

• Responsible investments

• Environmental responsibility

• Long-term employer

• Business ethics

• Skandia supports international frameworks

6

Skandiabanken and ESG

• Skandia fully compensates its direct footprint since 2012 • Gold standard carbon offsetting scheme*

• ESG policy with ambitious targets

• Transparent price structure

• High business ethics

• Translating our ESG ambition into everyday business is of very high priority

*Prony Windfarm on the New Caledonia

7

Strong resilience to money laundering

• Focus on Swedish private retail clients

• Limited products and services for corporate customers

• No foreign operations

• Digital business without branch offices

• No handling of cash notes

8

High customer satisfaction

• The Swedish Quality Index (SKI), measures customer satisfaction in its annual survey• 4th place for mortgages 71,3 (avg. 69,3)

• 1st place for corporate occupational pensions 71,6 (avg. 68,9)

• Retail customers give us high ratings • High level of service & reliability

• Our customers want to recommend us to others

• We are proud to represent simplicity and transparency

9

72,4

67,3

50

55

60

65

70

75

80

Skandiabanken Average

SKI Swedish banks, retail customers - 2019

Source: SKI (Svensk kvalitetsindex)

Agenda


Financials2

Credit portfolio3

Funding4

10

Turnaround in 2019

679

772

889

985945 938

668

812730

771

858792

13-45

149204

85140

-200

0

200

400

600

800

1 000

1 200

2014 2015 2016 2017 2018 2019

Income, Cost & Operating profit

Income Cost Operating profit

• ~85 percent of income from mortgages, profitability to improve as volumes grow

• Investments in IT infrastructure and regulatory implementations lead to lower than expected profit in 2018

• Turnaround in 2019• Increased volumes while reducing cost and risk

• Generally lower margins in mortgages driven by intensified competition

• Continued focus on cost control

11

2015 is excluding write-down of intangible assets, -246 Mkr

2016 is excluding extraordinary revenue from VISA, 43 Mkr

Business model focused on low-risk lending

• Transparent balance sheet: ~97% mortgages and liquidity reserve

• Strategic focus on low risk mortgages • No corporate lending

• Very limited consumer lending (<1%)

• Funding primarily comprised by deposits and covered bonds (>85%)

12

Mortgages

Liquidity

Other

Retail deposits

Covered bonds

Senior unsecured

Commercial paper

T2

OtherEquity

0

10

20

30

40

50

60

70

80

90

Assets Liabilities

Balance sheet (SEK bn as of Q4 2019)

Strong capital position enables growth

Figures as of Q4 2019 Skandiabanken

Own funds 21,9%

Tier 1 19,5%

CET 1 19,5%

Leverage ratio 4,9%

MREL 11,3%

MREL-eligible liabilities

(liabilities proportion principle)21,9%

• The strong capital position will enable growth to continue at current pace

• The Swedish FSA approved Skandiabanken’sinternal capital model for mortgages in 2018 • Reduced risk weights for mortgages from 35 percent

to 25 percent

• Capital release used for continued growth

• MREL-eligible liabilities on schedule to comply with regulations

1313

Low appetite for liquidity risk

238%

124%

0%

50%

100%

150%

200%

250%

Q4

201

7

Q1

201

8

Q2

201

8

Q3

201

8

Q4

201

8

Q1

201

9

Q2

201

9

Q3

201

9

Q4

201

9

Development in LCR and NSFR

LCR NSFR

• Skandiabanken has a low appetite for liquidity risk

• High and stable LCR and NSFR

• Liquidity portfolio invested in central bank, government, municipals and covered bonds

14

Agenda


Financials2

Credit portfolio3

Funding4

15

The Swedish mortgage market

• Strong legislative foundation - Konsumentkreditlag (2010:1846)

• Regulations require lenders to ensure that borrowers can afford to pay the interest also in stressed conditions

• Skandiabanken has a highly standardised and digital process for lending

• Skandiabanken has highly standardised and prudent criteria for lending

16

Competitive business model

12,2%

16,8% 15,0%

13,8%

9,3%11,5%

2,7%

6,7%

3,2%2,0%

6,8%

0%

5%

10%

15%

20%

25%

The Swedish mortgage market - 2019

New lending Stock

17

• Skandiabanken captured more than three times it’s market share in 2019

• Increased competition in retail mortgage market has lead to declining margins

• Skandiabanken compete with• Competitive and transparent pricing

• Digital banking

• Simplicity and high business ethics

Source: SCB

39

46

5658

60

71

0

10

20

30

40

50

60

70

80

2014 2015 2016 2017 2018 2019

Mortgage volume (SEK bn)

Strong growth based on a scalable model

18

Focused pricing model • Low risk mortgage clients

• Skandia pension clients

Modern IT-infrastructure• Streamlined underwriting process for mortgages

• Digital platform set for growth

Targeting >1m existing Skandia customers• Win-win for the bank and insurance business

• Skandiabanken a strategic part of Skandia

High quality mortgages

19

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Jan-1

7

Ma

r-1

7

Ma

y-1

7

Jul-1

7

Sep-1

7

No

v-1

7

Jan-1

8

Ma

r-1

8

Ma

y-1

8

Jul-1

8

Sep-1

8

No

v-1

8

Jan-1

9

Ma

r-1

9

Ma

y-1

9

Jul-1

9

Sep-1

9

No

v-1

9

Gross income-to-loan ratio - New lending

Gross income-to-loan ratio - New lending

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jan-1

7

Ma

r-1

7

Ma

y-1

7

Jul-1

7

Sep-1

7

No

v-1

7

Jan-1

8

Ma

r-1

8

Ma

y-1

8

Jul-1

8

Sep-1

8

No

v-1

8

Jan-1

9

Ma

r-1

9

Ma

y-1

9

Jul-1

9

Sep-1

9

No

v-1

9

LTV

LTV - New lending LTV - Portfolio

Distribution of mortgages

20

• ~80 percent of lending towards urban areas• Higher liquidity and transparency in pricing

• Long-term demand for housing

• Majority of lending to single-family houses• 55% Singel-family houses

• 41% Tenant owner rights

• 4% Second homes

• Continued bias towards variable rates• 77% Variable rate loans (3 month)

• 23% Fixed rate loans (1-5 years)

Stockholm66%

Other 19%

Gothenburg 10%

Malmoe 5%

Geographical distribution

Agenda


Financials2

Credit portfolio3

Funding4

21

Funding strategy

22

Target market

• Swedish krona

• Floating rate notes

Preferred mode of operation

• Reverse inquiries

• Private placements

• 1-3 syndicated prints per year

Transparent and flexible approach

• Long-term commitment

• Buy-back policy (3-6 months to maturity)

Retail deposits 53%

Covered bonds 38%

Senior unsecured 7%

Subordinated & MREL debt 1%

Share of funding as of Q4 2019

3,23,8

5,9

8,9

10,0

0,3

0,0

2,0

4,0

6,0

8,0

10,0

12,0

2020 2021 2022 2023 2024 >= 2025

Bill

ions

Maturity profile of covered bonds (SEK)

Secured funding

Funding target • 13-16 bn during 2020*

• 2.8 bn issued YTD

Focus• FRNs in SEK

• Preferred tenors 3-5 years

• Level 2 bonds available to tap

• 1-3 syndicated issues

Offer• Active buy-back policy (3-6 months to maturity)

• High quality cover pool with high OC of ~30 percent

• Equal quality inside and outside cover pool

23

*Uncertainty of the estimation is driven by the amount of new lending and retail deposit growth

1,5

2,5

1,6

0,0

0,5

1,0

1,5

2,0

2,5

3,0

2020 2021 2022 2023 2024 >= 2025

Bill

ions

Maturity profile of senior unsecured (SEK)

Unsecured funding

Senior unsecured• 1-2 bn during 2020 (500m issued YTD)

• Roll maturing bonds

• Private placements

• Diversification

• FRN or Fixed coupon

Senior non-preferred• 1bn expected in 2020

Commercial paper• To handle temporary needs

• Not a strategic source of funding

24

Estimated long-term funding needs – 2020

25

Funding need (bn) Redemptions Issues Supply

Covered bonds 3,4 13-16 10-13

Senior unsecured 1,9 1-2 +/-

Senior non-preferred - 1 1

Total* 5,3 15-19 11-14

*Uncertainty of the estimation is driven by the amount of new lending and retail

deposits

Funding - Summary

• Retail deposits account for 50 percent of total funding

• Focus on covered bonds in FRN/SEK format

• Senior unsecured to comply with regulatory demands and to support rating

• Commercial papers to manage short-term funding needs

• Continue to investigate and work towards green lending and EU Green bonds – prioritised issue

26

Appendix

27

Appendix - Stable LTV ratio & OC

0%

10%

20%

30%

40%

50%

60%

70%

2017 Q12017 Q22017 Q32017 Q42018 Q12018 Q22018 Q32018 Q42019 Q12019 Q22019 Q32019 Q4

LTV & OC

OC LTV (Indexed)

28

Appendix - Low credit losses

5,8

9,610,2

2,3

6,3

0

2

4

6

8

10

12

0

10

20

30

40

50

60

70

80

2015 2016 2017 2018 YTD Q3 - 2019

Mill

ions

Bill

ions

Credit losses

Total lending (LH) Credit losses (RH)

29

Appendix – Growing market share

30

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

Skandiabanken market share - Swedish mortgages

Share of newlending

Appendix – Historical funding

31

3

7 76 7

14

2

1 1 4 2

2

0

2

4

6

8

10

12

14

16

18

2014 2015 2016 2017 2018 2019

SE

K b

n

Historical funding volumes (SEK bn)

Covered bonds Senior unsecured Gross redemptions

Appendix - Outstanding covered bonds

32

Bond Maturity Coupon type Amount issued Min piece (MM)

SKANBK Float 02/21/20 2020-02-21 FLOATING 250 000 000 1


SKANBK Float 09/08/20 2020-09-08 FLOATING 2 500 000 000 1


SKANBK 0.43 09/13/21 2021-09-13 FIXED 300 000 000 1









SKANBK 1.97 02/02/27 2027-02-02 FIXED 250 000 000 1

As of 2020-02-13

Bonds with min.piece 1 MM cannot be tapped

Appendix - Outstanding senior bonds

33

Bond Maturity Coupon type Amount issued Min piece (MM)


SKANBK 0.07 02/28/20 2020-02-28 FIXED 500 000 000 1

SKANBK 0.34 09/14/20 2020-09-14 FIXED 300 000 000 1



SKANBK 0 3/8 03/22/21 2021-03-22 FIXED 500 000 000 2




SKANBK 1.1 08/29/22 2022-08-29 FIXED 300 000 000 1


SKANBK 0.535 11/04/22 2022-11-04 FIXED 500 000 000 2

SKANBK 0.56 05/10/23 2023-05-10 FIXED 500 000 000 2

As of 2020-02-13

Bonds with min.piece 1 MM cannot be tapped

Contacts

34

Christofer Zetterquist, CFO

[email protected]

+46 (0)8-788 20 15

Kristoffer Straume, Head of Treasury

[email protected]

+46 (0)8-463 60 12

Karl Aigéus, Treasury Dealer

[email protected]

+46 (0)8-788 22 69

Johan Skoglund, Treasury Dealer

[email protected]

+46 (0)8-788 10 47

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