Sparebanken Møre og Sp. Vest i et nordisk perspektiv Bransjeseminar om egenkapitalbevis Thomas Svendsen, tlf. 22 48 79 21 11/09/2013
Norden: Forskjellig kapitalstruktur og egenkapitalavkastning 2 Source: Nordea Markets
ROE Betydelig forskjell i forventet egenkapitalavkastning mellom Norge og Sverige, og også forskjell i forventet retning 18.0 % Return on Equity 16.0 % 14.0 % 12.0 % 10.0 % 12.4 % 11.4 % 10.6 % 8.0 % 6.0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Average Norway ex DNB Average Sweden DNB 3 Source: Company Data, Nordea Markets
Pay-out ratio De norske må bygge opp EK basen i raskt tempo, med lave utbytter. Svenskene er «på plass» slik spillereglene er i dag 15.0 % 14.0 % CT1 ratio transition rule 50 % 45 % Payout ratio (of total net profit) 13.0 % 40 % 12.0 % 11.0 % 10.0 % 35 % 30 % 25 % 20 % 9.0 % 15 % 8.0 % 10 % 7.0 % 5 % 6.0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest 0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest DNB 4 Source: Nordea Markets
Danske Bank (Target 13%) DNB, no Further IRB approval (13.5%) SHB (assumed 15%)* Nordea (Target 13%) SEB (Target 13%) Swedbank (Target 15%) Nord-Norge (assumed 13.5%) Midt-Norge (assumed 13.5%) SR-Bank (assumed 13.5%) Møre (assumed 13.5%) Vest (assumed 13.5%) Ulike spilleregler medfører at det blir stor forskjell i reelt egenkapitalkrav for å drifte banker i de forskjellige landene 12.0 % Tangible equity ratios (at targeted CT1 Basel III). Norwegian IRB mortgage weight of 25% assumed 11.0 % 10.0 % 9.0 % 8.0 % 7.0 % 6.0 % 5.9% 7.2% 8.0% 7.8% 9.0% 6.6% 5.0 % 4.0 % 3.0 % 3.9% 3.3% 3.9% 3.2% 4.1% 2.0 % Target tangible equity/total asset Target tangible equity/lending 5 Source: Company Data, Nordea Markets
P/TBV 2013E Prising av bankaksjer uavhengig av egenkapitalandel, vanskelig å se at man blir kreditert for å øke solvensen 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 SEB P/TBV versus tangible equity ratio Handelsbanken Danske Bank Nordea y = 1.1633e 4.6663x R² = 0.0106 Swedbank DNB 0.0 3.0 % 3.5 % 4.0 % 4.5 % 5.0 % 5.5 % Q2 13 Tangible equity/total assets (ex. repos) 6 Source: Nordea Markets
P/TBV 2013E Prising veldig avhengig av egenkapitalavkastningen. Skilles ikke mellom metodebruken økt gearing eller forbedret drift 2.20x 2.00x 1.80x Nordic banks - PTBV versus RoTBV SHB Swedbank 1.60x 1.40x Nordea SEB 1.20x 1.00x 0.80x Danske DNB 0.60x 0.40x y = 10.871x + 0.2151 R² = 0.8068 0.20x 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% RoTBV 2013E 7 Source: Nordea Markets
Hvorfor vil eierne ha høyest mulig gearing? Noen mulige forklaringer Vanskelig å predikere på forhånd hvilken bank som går konkurs basert på egenkapitalparametere Informasjon om eiendelssiden er komplisert vanskelig tilgjengelig Konklusjon 1: Bedre med mindre ek. andel i flere bankbalanser Deler av innskuddene er statsgarantert Egenkapital erstattes med billigere seniorgjeld Oppfattes som statsgarantert gjeld Konklusjon 2: Balansestruktur med mer gjeld i stedet for ek. prefereres Taler til egenkapitalbeviseiernes disfavør I øyeblikket Den langsiktige investor kan posisjonere seg for neste trekk Økt krav til reell egenkapitalandel, Danmark, Sverige 8 Source: Nordea Markets
Ikke noe å si på driften i sparebankene : ROE er bedre enn DNB og svenskene hvis vi justerer for forskjell i kapitalstruktur 13.0 % ROE 2014E with equity ratio equal to DNB's 12.4 % 12.4 % 12.0 % 11.4 % 11.4 % 11.0 % 10.0 % 10.6 % 10.3 % 9.0 % 8.0 % 7.0 % 6.0 % DNB Average Norway ex DNB Average Sweden 2014E 2014E (@ DNB's current equity ratio) 9 Source: Nordea Markets
Sparebanken Møre og Sparebanken Vest Operasjonelle forutsetninger 10 Source: Nordea Markets
Sparebanken Møre og Sparebanken Vest Forventet avkastning på egenkapitalen i nedre enden av skalaen 20.0 % 18.0 % 16.0 % 14.0 % 12.0 % 10.0 % 8.0 % 6.0 % 4.0 % 2.0 % ROE 12.5 % 12.0 % 11.5 % 11.0 % 10.5 % 10.0 % 9.5 % 9.0 % 11.0 % 10.2 % ROE 10.6 % 9.9 % 10.0 % 9.8 % 0.0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest Simple average 8.5 % 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest Simple average 11 Source: Company Data, Nordea Markets
Sparebanken Møre og Sparebanken Vest Rentemarginene videre opp i 2014. Begge har lav andel ikke-renteinntekter Forutsetter ingen ytterligere signifikante prisøkninger 2.40 % 2.20 % 2.00 % 1.80 % Net interest margin 35.0 % 30.0 % 25.0 % 20.0 % Commission income of total income 1.60 % 15.0 % 12 % 12 % 1.40 % 1.20 % 10.0 % 5.0 % 11 % 11 % 1.00 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest 0.0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest 12 Source: Company Data, Nordea Markets
Annual growth Møre og Vest Lav forventet kostnadsvekst Vest ligger godt an med tiltak, greier Møre å holde kontroll gitt nytt vekstfokus? 10.0 % 8.0 % 6.0 % Cost growth 70.0 % 65.0 % 60.0 % 55.0 % 50.0 % Cost / Income ratio 52.3 %51.8 % 4.0 % 2.0 % 3.2 % 2.8 % 2.0 % 1.6 % 45.0 % 40.0 % 47.3 %46.8 % 0.0 % -2.0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 35.0 % 30.0 % 25.0 % -4.0 % -6.0 % Nord-Norge SMN SR-Bank Møre Vest 20.0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest 13 Source: Company Data, Nordea Markets
Møre bruker ny kapital til vekst. Vest med lav vekst. Tapsnivået er behagelig. Eller vil vi få noen uhyggelige overraskelser? 20.0 % Annual lending growth 0.50 % Loan loss ratio 0.40 % 15.0 % 0.30 % 10.0 % 0.20 % 5.0 % 7.3 % 2.8 % 0.10 % 0.13 % 0.13 % 0.12 % 0.12 % 0.0 % 3.5 % 2.6 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 0.00 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E -5.0 % Nord-Norge SMN SR-Bank Møre Vest DNB -0.10 % Nord-Norge SMN SR-Bank Møre Vest 14 Source: Company Data, Nordea Markets
Yield Kapitalisering: Møre er på plass etter emisjonen. Vest bør greie seg. Begge har relativt attraktive utbyttenivåer Møre: hvorfor hente penger og så betale ut igjen? Vest: lav egenkapitalbevisbrøk sikrer utbyttefleksibilitet 15.0 % 14.0 % 13.0 % 12.0 % 11.0 % CT1 ratio transition rule 13.4 % 13.2 % 7.0 % 6.0 % 5.0 % 4.0 % 3.0 % Nordic banks dividend yield 2013E 10.0 % 2.0 % 9.0 % 1.0 % 8.0 % 0.0 % 7.0 % 6.0 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest 15 Source: Company Data, Nordea Markets
%-points Norske banker CT1 ratio effekt av 25% IRB boliglånsvekter 0.0 % Q2 13 CT1 ratio impact with increased IRB weights to 25% 14.0 % Q2 13 Basel 2.5 CT1 ratio after 25% IRB mortgage weights -0.5 % -1.0 % 13.0 % 12.0 % 11.0 % 10.0 % 9.8 % 10.1 % 10.3 % 10.5 % 10.7 % 10.8 % 11.0 % 11.2 % 12.3 % -1.5 % 9.0 % -2.0 % -2.5 % 8.0 % 7.0 % 6.0 % -3.0 % 16 Source: Company Data, Nordea Markets
NOKbn Dynamisk modell mulig kapitalbehov NOK17bn over to år for å nå 13,5% CT1 andel 25% boliglånsvekter, vekst i RWA 3% per år i to år 20 bp ytterligere prisøkninger Utbytte per aksje/bevis på samme nivå som 2012, resten holdes tilbake Ingen AIRB, ingen tilpasninger 16.00 14.00 CT 1 demand to reach CT1 of 13.5% with 25% mortgage weights after two years with earnings and 20bps margin 14.5 increase 25 % 20 % Capital increase to reach 13.5% after two years with earnings and 20bps margin increase in percent of Q2 13 equity 21 % 18 % 17 % 12.00 10.00 8.00 6.00 4.00 2.00 0.00-2.00 2.2 1.8 0.5 0.3 0.3 0.2-0.2-0.3 15 % 10 % 5 % 0 % -5 % -10 % -15 % -20 % 12 % 11 % 8 % 4 % -3 % -15 % 17 Source: Nordea Markets
Implicit Cost of Equity Veldig høy relativ implisitt egenkapitalkostnad for de norske: MORG og SVEG fremstår som attraktive investeringer 14% 12% 10% 8% 6% 4% 2% 0% Nordic banks Implicit CoE (Gordon's growth model) 13.0% 12.9% 12.6% 12.3% 11.6% 10.5% 10.2% 9.5% 9.4% 8.9% 8.4% EPS P/E P/TBV ROTE Yield MC (NOKm) Price 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2012 2013E Rating Sparebank 1 Nord-Norge 3,162 33.6 3.8 5.0 4.8 8.9x 6.6x 6.9x 0.78x 0.73x 0.68x 9.0% 10.2% 3.4% 3.4% BUY Sparebank 1 SMN 6,070 48.3 5.5 6.3 6.6 8.7x 7.5x 7.2x 0.98x 0.89x 0.81x 12.3% 12.3% 3.1% 3.1% HOLD Sparebank 1 SR-Bank 12,404 48.5 5.6 6.2 6.5 8.6x 7.7x 7.3x 0.98x 0.90x 0.82x 12.2% 12.0% 3.1% 3.1% HOLD Sparebanken Møre 1,846 186.0 31.2 23.4 23.5 6.0x 8.0x 8.0x 0.85x 0.82x 0.74x 15.2% 10.3% 6.5% 5.4% BUY Sparebanken Vest 1,302 41.0 6.1 5.9 6.0 6.7x 7.0x 6.8x 0.82x 0.76x 0.71x 12.7% 11.4% 6.1% 6.6% BUY DNB 155,795 95.7 8.5 9.1 10.2 11.3x 10.4x 9.3x 1.29x 1.18x 1.07x 11.9% 11.8% 2.2% 2.2% BUY Average ex. DNB 8.4x 7.9x 7.6x 0.95x 0.88x 0.80x 12.2% 11.3% 4.1 % 4.0 % 18 Source: Nordea Markets
Sparebanken Møre og Sparebanken Vest Konklusjoner 19 Source: Nordea Markets
Sparebanken Møre Lett forståelig forretningsmodell, attraktiv verdivurdering Kjøp, med kursmål NOK 234 (+25%) Sparebanken Møre was established in 1985 through a merger of several savings banks in the region and can trace it s roots back to 1843. It has 30 branches in Møre and Romsdal. Møre and Romsdal s industrial composition, which is characterised by fishery and maritime sector, is reflected in the bank s lending portfolio. The bank is not a member of any product alliances and has its own 100%-owned covered bonds entity. Reasonable single digit adjusted earnings per share growth expected in the years ahead. The valuation and dividend yield is attractive and we reiterate our Buy rating. We have set a target price of NOK234/share One risk factor is to what degree the new raised equity is used for growth purposes Is not a regular stock, but EC 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % -10.0 % -20.0 % -30.0 % -40.0 % Reatil trade, Power, Shipping hotels, resturants construction4 %Transport 1 % 2 % Industry, mining 3 % Fishery 7 % Agriculture /forestry 1 % Households 63 % EPS adj. growth 3 % Commercial real estate 13 % Serices 2 % Other 1 % 0.5 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest 3.2 % Source: Nordea Markets 20
Sparebanken Vest Lavrisiko personmarkedsbank med attraktiv verdivurdering Kjøp, med kursmål NOK 50 (+23%) SVEG is Norway s sixth-largest bank and thirdlargest listed savings bank in terms of total assets. It can trace its roots back to 1823 and is the second-oldest bank in Norway. The bank's some 60 branches and customers in the county of Hordaland. Some 74% lending is to Households, mainly mortgage lending SVEG is an independent bank, but owns several subsidiaries along with other savings banks, including 45% of the life and non-life insurance company Frende Forsikring. Reasonable single digit adjusted earnings per share growth expected in the years ahead. The valuation and dividend yield is attractive. We reiterate our Buy rating. We have set a target price of NOK50/share Risk factors include the health of the residential housing market and if the bank can avoid to raise new equity. Is not a regular stock, but EC 40.0 % 30.0 % 20.0 % 10.0 % 0.0 % -10.0 % -20.0 % -30.0 % -40.0 % Power, construction Shipping 3 % 3 % Reatil trade, hotels, resturants 1 % Industry, mining 2 % Agriculture/forestr y 2 % Transport 1 % Commercial real estate 11 % EPS adj. growth Households 74 % Serices 3 % Public 0 % Foreign 0 % 2.4 % 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E Nord-Norge SMN SR-Bank Møre Vest 1.6 % Source: Nordea Markets 21
P/TBV 2013E NORWEGIAN BANKS relative valuation EPS P/E P/TBV ROTE Yield MC (NOKm) Price 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2012 2013E Rating Sparebank 1 Nord-Norge 3,162 33.6 3.8 5.0 4.8 8.9x 6.6x 6.9x 0.78x 0.73x 0.68x 9.0% 10.2% 3.4% 3.4% BUY Sparebank 1 SMN 6,070 48.3 5.5 6.3 6.6 8.7x 7.5x 7.2x 0.98x 0.89x 0.81x 12.3% 12.3% 3.1% 3.1% HOLD Sparebank 1 SR-Bank 12,404 48.5 5.6 6.2 6.5 8.6x 7.7x 7.3x 0.98x 0.90x 0.82x 12.2% 12.0% 3.1% 3.1% HOLD Sparebanken Møre 1,846 186.0 31.2 23.4 23.5 6.0x 8.0x 8.0x 0.85x 0.82x 0.74x 15.2% 10.3% 6.5% 5.4% BUY Sparebanken Vest 1,302 41.0 6.1 5.9 6.0 6.7x 7.0x 6.8x 0.82x 0.76x 0.71x 12.7% 11.4% 6.1% 6.6% BUY DNB 155,795 95.7 8.5 9.1 10.2 11.3x 10.4x 9.3x 1.29x 1.18x 1.07x 11.9% 11.8% 2.2% 2.2% BUY Average ex. DNB 8.4x 7.9x 7.6x 0.95x 0.88x 0.80x 12.2% 11.3% 4.1 % 4.0 % 1.40x 1.20x Norwegian banks - P/TBV verus RoTBV DNB 1.00x 0.80x 0.60x Møre N-Norge Vest SR SMN 0.40x 0.20x 9.5 % 10.0 % 10.5 y = 9.2276x % 11.0-0.1653 % 11.5 % 12.0 % 12.5 % 13.0 % R² = 0.255 RoTBV 2013E 22
P/TBV 2012 NORDIC BANKS relative valuation EPS P/E P/TBV RoTBV Name Price Currency 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2014E 2012 2013E 2012 2013E Rating Danske Bank 114.9 DKK 5.0 7.8 13.0 22.9x 14.8x 8.8x 0.99x 0.94x 0.88x 4.4% 6.5% 0.0% 1.3% BUY DNB 95.7 NOK 8.5 9.1 10.2 11.3x 10.5x 9.4x 1.29x 1.18x 1.07x 11.9% 11.8% 2.2% 2.2% BUY Nordea 9.1 EUR 0.8 0.8 0.9 11.9x 11.5x 10.1x 1.49x 1.40x 1.32x 13.0% 12.6% 3.8% 5.3% NO RATING SEB 69.9 SEK 5.3 6.2 6.4 13.2x 11.2x 11.0x 1.66x 1.56x 1.47x 13.1% 14.3% 3.9% 5.0% BUY Handelsbanken 286 SEK 21.6 21.5 21.8 13.3x 13.3x 13.1x 1.92x 1.84x 1.77x 15.3% 14.1% 3.8% 4.0% HOLD Swedbank 152 SEK 13.0 11.5 13.2 11.7x 13.3x 11.5x 1.87x 1.78x 1.72x 16.4% 13.7% 6.5% 6.6% BUY Average n.m. n.m. n.m. 14.0x 12.4x 10.7x 1.54x 1.45x 1.37x 12.3% 12.2% 3.4% 4.1% Yield 2.20x 2.00x 1.80x 1.60x 1.40x 1.20x 1.00x 0.80x Danske Nordic banks - PTBV versus RoTBV 0.60x 0.40x y = 10.871x + 0.2151 R² = 0.8068 0.20x 5.0% 7.0% 9.0% 11.0% 13.0% 15.0% RoTBV 2013E DNB SHB Nordea Swedbank SEB 23
Sparebanken Møre og Sparebanken Vest Appendix 24 Source: Nordea Markets
Appendix 1 - Sparebanken Møre - Vår vurdering av Q2 2013- resultatene Sparebanken Møre reported Q2 2013 operating profit of NOK 158m, 5% above our forecast, which was mainly due to lower credit losses that ended at 5 bp Q2 pre-provision profit ended up 1% above; lower non interest-income came in below and costs surprised positively. NII was up 9.3% q/q, slightly above our expectations, as price increases began filtering through, as expected. Q2 lending increased a mere 0.9% q/q after growing a substantial 2.8% in Q1. The bank is now rigged for growth after its recent equity issue. We make only small changes to our forecasts and reiterate our Buy. However, we lift our target price to NOK 234 (NOK 226). 25 Source: Nordea Markets
Appendix 2: Sparebanken Møre Balanseoppdatering per Q2 2013 We previously updated our projections to reflect the announced NOK 275m directed share issue, the NOK 100m repair offering and the NOK 10m employee offering all at NOK 185 per share and taking effect from Q3 2013. This will increase the number of outstanding equity certificates (EC) by 2.1m (or 27%) to 9.9m. The EC holders currently own 46% of profits and this ratio will increase to 49.8% post the transactions. At that time, we lifted our lending growth to 7% for 2013E and 2014E, but also lowered 2015E EPS by 7% owing to the dilution (EC up and EC ratio up). Households account for 63% of MORG's lending and the second-largest category is commercial real estate at 13%. The CT1 ratio using the Basel II standard method was 10.6% at end-q2 2013. This increases to 12.1% after the directed issues and also a reclassification of the "public dividend fund" to "gift fund". The total exercise increases the CT1 by NOK 510m. 26 Source: Nordea Markets
Appendix 3: Sparebanken Vest - Vår vurdering av Q2 2013- resultatene Sparebanken Vest reported a strong set of results, beating our forecasts by 10%. The deviation was partly due to higher net interest income, which was up 15% q/q, 4% above our forecast. The initiated price increases lifted the Q2 net interest margin by 25 bp q/q to 1.72%. Non-interest income also came in higher than expected. Costs are under control and loan losses remained low at 11 bp annualised. We upgrade our 2014-15 earnings forecasts by 4%. We reiterate our Buy rating and NOK 50 target price. Sparebanken Vest has increased prices for the mortgage lending book by an average of 28 bp, with a large effect in Q2 2013 and full effect from Q3. Furthermore, it has increased prices for its corporate lending book by an average of 40 bp, with full effect from Q2. To cap annual cost growth at 2%, Sparebanken Vest has initiated further cost cutting, including the closure of ten branches and a reduction of 60 (7%) man-labour years. 27 Source: Nordea Markets
Appendix 4: Sparebanken Vest Balanseoppdatering per Q2 2013 Under the transition rule, the Q2 2013 CT1 ratio was 10.6%, while it was 14.2% excluding the transition rule. If we assume 25% mortgage weights, the latter would be 11.5%, before A-IRB approvals. These capital ratios should be compared with an expected Basel III requirement of 11.5-12.5% for 2014, 12.5-13.5% for 2015 and 13.5-14.5% for 2016. Thus, an equity issue in Sparebanken Vest is not very likely as long as mortgage weights do not rise significantly above 25%, and the bank is well positioned relatively to its savings banks peers. However, should the transition rule be binding for a long period of time, a cashcall scenario cannot be completely ruled out. 28 Source: Nordea Markets
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