Ikano Bank - Danske Analyse

Transcription

Investment Research
30 October 2014
Ikano Bank
Issuer profile
Facts
With its origins in IKEA, Ikano Bank was founded in 1995 and serves mainly as a
consumer bank with a strong foothold in the Nordics. The bank is part of the Ikano
Group, which is fully owned by the Kamprad family, the main founders of IKEA.
Sector: Bank, financing company
Much more than a branchless consumer bank
Equity ticker: Private
Ikano Bank divides its operation in three areas: Corporate, Sales Finance and Consumer.
The Corporate business area accounts for 25% of receivables and offers leasing, object
financing, invoice purchasing and factoring. Sales Finance offers financing and sales
support mainly to retailers. Finally, the Consumer business area offers savings and loans
to private individuals. Ikano Bank has no physical branches as it only operates through its
website or business partners.
Equity book value: SEK2.5bn
Strong capitalisation, high coverage ratio but modest RoE
Corporate ticker: IKANO
Ratings
Rating agencies:
Not rated
Danske Bank Markets:
Issuer rating: BBB
Senior unsecured: BBB
Analysts:
Capitalisation is high with a common equity tier-1 (CET1) ratio at 14.7% and total capital
ratio at 17.4% end-H1 14 measured by standard method. The leverage ratio is as high as
11.9%. RoE after tax has been lagging peers the past couple of years, mainly due to an
average NIM and somewhat higher loan losses. However, the coverage ratio stands out in
the peer group, which is the result of more conservative provisioning, in our view.
Overall we view capitalisation and credit management as credit positive and profitability
as neutral.
Lars Holm
[email protected]
+45 45 12 80 41
We view Ikano Bank as a stable ‘BBB’ bank issuer
Key credit issues
We assign a ‘BBB’ rating to Ikano Bank with a stable outlook based on our view of its
business and financial risk profile. We do not include any support from the owner but do
believe the owner would be very constructive in case the bank is in a situation where
support is needed. We might consider a notch higher rating if the profitability improves
further or a formal support structure from the owner is introduced. Downside risk to our
rating includes among others deteriorating asset quality.
Strengths
 Diversified lender cooperating with
several corporate brands incl. IKEA.
 High capitalisation and high
coverage ratio of impaired loans.
 Large and stable deposit base.
Challenges
 Profitability under pressure due to
Key metrics
SEKm
Thomas Hovard
[email protected]
+45 45 12 85 05
2009
2010
2011
2012
2013
H1 14
Pre-Provision Income
608
706
801
762
728
392
Loan Losses and Provisions
416
172
241
242
295
146
Net Income
falling income and increasing costs.
 Dependent on private consumption,
257
145
414
234
190
101
Receivables
13,801
15,329
15,289
15,839
19,830
20,953
which could be hurt by slowing GDP
Risk exposure amount (REA)
14,920
15,382
16,346
16,537
20,093
20,487
growth or falling house prices.
Equity
1,498
1,420
1,809
1,944
2,370
2,504
Impaired Receiv. % Gross Loans & Guar.
10.3%
4.6%
6.1%
6.4%
5.0%
5.1%
9.6%
9.9%
11.7%
13.5%
14.0%
14.7%
12.2%
13.5%
15.1%
16.5%
16.7%
17.4%
Common Equity Tier-1 Ratio (CET1)
Total Capital Ratio
Note: We have used historical exchange rates in order to change 2009-2011 from EUR to SEK
Source: Company data, Danske Bank Markets
Important disclosures and certifications are contained from page 17 of this report.
 Mainly unsecured lending that is
likely to be hit first in an economic
downturn.
Source: Danske Bank Markets
www.danskeresearch.com
Ikano Bank
Company profile
Ikano Bank is one of four business areas in the Ikano Group that is owned by the Swedish
Kamprad family through Ikano SA, Luxembourg. Originally the Ikano Group was part of
IKEA (founded by Ingvar Kamprad) but it was spun off as an independent group in 1988.
Ikano Bank was founded in 1995 and is predominantly known as a consumer bank but it
also offers various products to corporate clients. Geographically Ikano Bank is
represented in six countries but with the by far largest operation in Sweden (76% of total
business volume in 2013) followed by the UK, Denmark and Norway. The bank does not
have any physical branches but distributes its products through its website or its business
partners. The foreign units operate as branches of the Swedish parent company, which
means that they are under supervision of the Swedish Financial Authorities.
Ikano Group
Note: Ikano is part of the Finance division
Source: Company website, Danske Bank Markets
The bank can be divided in three business areas: Corporate, Sales Finance and Consumer.
The Corporate business area offers leasing, object financing, invoice purchasing (Ikano
Bank takes on the credit risk) and factoring (customer still bears the credit risk) and
accounts for around 25% of total receivables. Sales Finance offers financing and sales
support mainly to retailers. Finally, the Consumer business area offers savings and loans
to private individuals in the form of unsecured loans, mortgage loans and Visa credit
cards. Mortgage loans are offered in cooperation with SBAB Bank AB (SBAB) under the
bank’s ‘Ikano Bolån’ brand (loans are provided and underwritten by SBAB). Deposit
products are only offered in Sweden and Denmark (started up in Denmark in 2014) and
mortgage loan products are only offered in Sweden.
Examples of business partners for
Sales Finance
Given Ikano Bank’s origins IKEA is the largest business partner within the Sales Finance
business area. However, it is important to emphasise that Ikano Bank operates
independent of IKEA and competes against other suppliers whenever IKEA looks for a
financing partner. Examples of other business partners are Audi, Hemköp, Hemtex,
Lindex, Shell and Skoda. See also table to the right.
Source: Company website, Danske Bank Markets
Total assets were SEK25.7bn end-H1 14 (SEK23.8bn end-2013) with gross receivables
accounting for SEK21.7bn (SEK20.6bn end-2013).
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Ikano Bank
Distribution of lending and business volume (2003) - geographic and by product
Note that Ikano Bank has decided to wind up its operation in the Netherlands as it never
reached a sufficient return. Given the small size we see this as immaterial for the
company (less than 1% of total assets).
Arm’s length principle to the owner
Given its historical roots one would assume a tight link between Ikano Bank and IKEA
and the other companies controlled by the Kamprad family. However, this is not the case
as the subsidiaries even within the Ikano Group generally are run with an arm’s length
principle and as such are expected to operate as independent companies. That said, Ikano
Bank has got support from its owner when it comes to capital and funding up until now
whenever needed and we generally believe this will continue also in a situation with
financial distress. As an example, Ikano Bank got SEK242m in new equity in 2013 and
has got all its SEK551m in subordinated loans from its owner.
Nevertheless, we have not included any support from the owner in our rating of the bank.
The reasons are not just the arm’s length principle but also the fact that the financial
results from Ikano Group or Ikano SA, Luxembourg are not publicly available. It is thus
impossible for us to conclude whether or not the owner has the financial strength to
support Ikano Bank in a situation of distress.
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Ikano Bank
Key credit considerations
Nordic and European macro environment
With the by far largest exposure to customers in the Nordic region, the macroeconomic
development in this region is of particular importance to Ikano Bank. This includes GDP
growth but first and foremost the unemployment rate, as it has a large impact on private
consumption and not least the level of loan losses.
As can be seen from the chart below, the Nordic region generally benefits from a low
unemployment rate, which furthermore is expected to decline the coming years on the
back of slightly higher GDP growth. In addition, the Nordic region is well known for its
relatively generous welfare entitlements for the unemployed, which means that people are
able to pay their debt even after they lose their job (at least for 1-2 years). In the largest
market, Sweden, the unemployment rate has wavered around 6-8% since 2004.
When it comes to GDP growth, the picture is much the same with the Nordic countries
faring relatively well after they got hit by the financial crisis in 2009. Finland stands out
due to the country’s large reliance on Russia, which Danske Bank Macro Research
expects to mean negative GDP growth of 0.4% for 2014 and risk is to the downside for
2015 as well. Against this background we are pleased to note that Ikano Bank’s exposure
to Finland is only around 1% of total business volume. Sweden is expected to see the
largest growth with 2.2% in 2014E and 2.6% in 2015E.
Unemployment rate in Nordic countries (Eurostat
harmonised)
GDP growth Nordic countries
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
Denmark
Finland
Source: Macrobond, Danske Bank Markets
Sweden
Euro area
Norway
The generally positive economic environment in the Nordic region in combination with,
among others, low interest rates has boosted the housing market resulting in all-time-high
prices in both Norway and Sweden. The risk of inflated prices is real and a concern to us
as it could threaten the economic stability. Near term we do not believe in a material and
swift correction but it cannot be ruled out completely. If this occurs the risks to Ikano
Bank would be through two different channels: (i) lower house prices would reduce home
equity and increase the risk of second-priority lenders (e.g. unsecured consumer credit)
and (ii) lower house prices would reduce private consumption and increase
unemployment.
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Ikano Bank
Growth in Nordic house prices
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Ikano Bank
Financial profile
Profitability and efficiency
After some strong years with double-digit returns on equity after tax (RoE) Ikano Bank’s
RoE fell to a modest 8.8% for 2013 (8.3% annualised in H1 14, 12.5% in 2012). In the
past two years costs have outgrown income, resulting in an increasing cost/income-ratio.
This development is of course negative, as it gives Ikano Bank less economic leeway
against loan losses in case they increase from the current level. However, we see the
increasing costs as a result of the bank’s business expansion the past couple of years, both
when it comes to product offering and geographic exposure. The best example of this is
the acquisition of fellow subsidiary Ikano Financial Services UK from Ikano Group in
May 2013, which added 184 employees to a new total of 719 on average for 2013. We
also note that the change of reporting currency from EUR to SEK has had a negative
impact on the 2013 earnings.
Recurring earnings power, which is profit before loan losses in % of risk exposure
amount (REA, formerly known as RWA), has fallen from 5% to 4% from 2011 to 2013
(3.8% in H1 14).
5.0%
0.0%
3.0%
2.0%
1.0%
0.0%
H1 14
10.0%
4.0%
2013
15.0%
5.0%
2012
20.0%
6.0%
2011
25.0%
64%
62%
60%
58%
56%
54%
52%
50%
48%
2010
30.0%
Profitability and efficiency
2009
Return on average equity after tax
Recurring earnings power, RHS
Adjusted cost/income
Another reason for costs outgrowing income are the stagnating margins, especially the
leasing margin (NLM). After peaking at 8.1% in 2011 the NLM dropped to 6.1% end2013 and was testing a new low at 5.5% end of H1 14. The net interest margin (NIM) has
been more stable and has in fact increased slightly since 2012 reaching a historical high
of 6.8% end-H1 14 (6.7% end-2013). As net interest income accounted for 58% of the
total income in 2013 (including depreciation that mainly relates to leasing), the NIM is
essential to higher income and as such we favour the bank’s ability to raise the level.
A NIM of 6.8% is high compared to more traditional banks. This is clearly a result of the
segments in which Ikano Bank operates. Although the segments have several suppliers,
and hence some competition, it often comes down to the individual cooperation between
the bank and the business partner (retail chains like for example IKEA). Price is normally
not the most important parameter for clients. Instead flexibility and speedy access to
credit (for ‘impulse’ buying) are very important parameters. Therefore marketing and
point-of-sale competition are clear focus areas.
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Ikano Bank
Margins (NIM and NLM)
Distribution of income 2013
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Leasing
15%
Trading
0%
Fee &
comm.
19%
NIM
Other
8%
Net
interest
58%
NLM
Note: NLM is adjusted for depreciation costs
Asset quality and credit risks
Credit is granted on the basis of credit models with the same principles for probability of
default as Basel II advanced models, i.e. advanced calculations of the likelihood that a
default event will occur for the customer. The models are supplemented with details from
credit information agencies as well as behavioural scoring models. The bank has used the
models for many years and is as such quite comfortable with its credit management. In
this context it is worth highlighting that the debtor transparency is remarkably high in
Sweden as data such as e.g. marital and employment status, age, income, fixed assets,
debt, payment record, property ownership etc. are centrally available for the banks for
every potential customer. This means that Ikano Bank can get hold of such data quickly
and based on that grant a credit in only a few minutes, often automatically or otherwise
via the call centre. Add to this that a borrower is personally liable for the loan the entire
life, even after a default and foreclosure procedure, and that the enforcement process is
quite smooth. All together this makes a very benign operational environment for
consumer banking.
Specifically for corporate clients the credits are granted on a more individual basis and
after a review by the credit department. Ikano Bank focuses on small credit exposures,
which means that the average exposure is around SEK100,000. No client accounts for
10% or more of the revenues. Moreover, a large part of the corporate lending is with good
collateral such as leasing and object financing.
When it comes to the booking of loan losses, Ikano Bank predominantly books the loan
losses as collective provisions as the customers and the products are very homogeneous.
This requires very strong credit models that can capture changes in the economic situation
for the general consumer, which the actual reported figures seem to confirm ref. below
analysis.
Reported loan losses have stabilised the past four years around 1.5% of gross receivables
after they peaked at almost 3% in 2009. We find this to be a satisfactory level seen in
light of the margins. Compared to the larger Nordic banks this is a high level but not
surprising given the nature of the majority of Ikano Bank’s business with unsecured
consumer lending. On the other hand, we note that the gross level (before individual
write-downs) of impaired receivables is somewhat higher at 5.1% of gross receivables
end-H1 14 (5% at end-2013). See further below for how these ratios compare to the peer
group.
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Ikano Bank
Ikano Bank keeps impaired loans on the balance sheet for a year before it sells them off to
a debt collector but normally it is able to collect money before then given the legal
possibilities for doing this in Sweden.
Loan loss ratio (% of gross receivables)
Impaired receivables in % of gross
receivables
3.5%
12.0%
3.0%
10.0%
2.5%
8.0%
2.0%
6.0%
1.5%
4.0%
1.0%
2.0%
0.5%
0.0%
0.0%
2009 2010 2011 2012 2013 H1
14
20092010201120122013 H1
14
The provisioning ratio stood at 71% of impaired receivables end-H1 14 (78% by the end
of 2013). We consider this a high level and credit positive.
Coverage ratio (provisions to gross
impaired receivables)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Gross receivables development
Gross loans
Gross leasing assets
25,000
20,000
15,000
10,000
5,000
0
2009 2010 2011 2012 2013 H1
14
As stated above we see unemployment as the biggest risk factor for asset quality for
unsecured consumer financing. In general the average retail customer in the Nordic
countries has experienced a long period of a reasonable benign economic environment
even during the financial crisis. We view the stable unemployment rate in the Nordics as
the main reason for this.
In the graphs below it is illustrated for Norway and the US how close the correlation is
between unemployment and losses on consumer loans. As the outlook for unemployment
in the Nordic countries is positive, this implies that asset quality transparency is relatively
high, in our view.
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Ikano Bank
Unemployment and losses on
consumer lending (US)
Unemployment and losses on
consumer lending (Norway)
5.0%
Loan loss ratio
Unemployment
4.0%
3.0%
2.0%
1.0%
0.0%
02
04
06
08
10
12
Source: Norwegian FSA, Macrobond
Capitalisation
Ikano Bank is highly capitalised with a common equity tier-1 (CET1) ratio according to
fully loaded Basel III rules of 14.7% end-H1 14 (14% end-2013) and a total capital ratio
of 17.4% (16.7% end-2013). The internal target is a total capital ratio of 17%.
Furthermore, the company uses the standard method when calculating its risk exposure
amount, which applies much higher risk-weights than internal rating based (IRB) models.
The minimum requirements in Sweden are 7% CET1 and 10.5% in total capital ratio.
This is excluding the Swedish counter-cyclical buffer of 1% and any company-specific
pillar 2 requirements. The capital requirements are expected to be fully effective from
September 2015. We expect that Ikano Bank is able to meet the requirements with a large
margin based on its current capitalisation, although we emphasise that we do not know
Ikano Bank’s pillar 2 requirement. That the capitalisation is robust can also be measured
by the more simple leverage ratio (tier-1 capital/total assets) that was as high as 11.9%
end-H1 14. This could be compared to around 4% for the largest Nordic banks.
Overall, we find the capitalisation credit positive.
Capitalisation
20%
Leverage ratio (tier-1 capital/total assets)
Common equity tier-1 (CET1)
Total capital ratio
14.0%
12.0%
15%
10.0%
8.0%
10%
6.0%
5%
4.0%
2.0%
0%
2009
2010
2011
2012
2013
H1 14
0.0%
2009
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30 October 2014
2010
2011
2012
2013
H1 14
Ikano Bank
Funding and liquidity
Of assets 59% are funded by deposits end-2013, of which 58pp is retail deposits. Deposits
are mainly offered in Sweden but since 2014 also in Denmark. All of the deposits are to
be considered demand deposits but have nevertheless shown to be a stable funding
source. The deposits are covered by the Swedish deposit insurance scheme with a cap of
EUR100,000. Ikano Bank’s goal is to have 60% of its asset funding by deposits, which it
almost fulfils.
As supplement to deposits the bank has issued senior unsecured bonds in recent years,
which makes sense considering the relatively high price the bank pays for its deposits.
We expect Ikano Bank to continue to do so on a regular basis and as long as the share of
deposits is as high as it currently is, we are not concerned. Latest issuances were a
SEK300m 3Y in February 2014 and a SEK300m 4Y in May 2014.
Examples of deposit offerings
Source: Company website September 2014,
Danske Bank Markets
Disregarding the large deposits Ikano Bank’s bond maturity profile is reasonably spread
out over the next five years as shown in the chart below to the right.
Funding profile 2013
Maturity profile of liabilities end-2013
Other
13%
Corp
deposits
1%
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Equity
10%
Sub debt
2%
Market
funds
9%
Retail
deposits
58%
Interbank
7%
1400
1200
1000
800
600
400
200
0
Demand
Deposits, (lhs)
<3m
3-12m
Sub debt
Bonds
1-5Y
Credit inst
Comparing the size of the net receivables in Ikano Bank to the total customer deposits we
get a receivables/deposits ratio of 144% end-H1 14. It used to be as low as 115% back in
2012 but the 29% loan growth in 2013, due to the acquisition of Ikano Financial Services
UK, together with the nearly zero deposit growth have increased the ratio.
Net receivables/deposits ratio
Net receivables
Customer deposits
25,000
20,000
15,000
10,000
5,000
0
2009
2010
2011
2012
2013
H1 14
The liquidity portfolio amounted to SEK3.2bn end-H1 14 (SEK3.0bn end-2013), which
corresponded to 22% of total deposits. The internal policy is that it should at least account
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30 October 2014
Ikano Bank
for 14% of deposits. The portfolio consisted of deposits with banks, short-term lending to
credit institutions and investments in liquid interest-bearing securities, which can be sold
and converted into cash on short notice.
We regard the funding and liquidity profile of Ikano Bank as satisfactory and credit
neutral.
Indicative pricing of senior bonds, ASW
250
Indicative ASW offer (bps)
225
NORDAX '16 (NR/NR)
200
175
150
125
100
IKANO '18 (NR/NR)
IKANO '17 (NR/NR)
IKANO '17 (NR/NR)
75
IKANO '16 (NR/NR)
IKANO '16 (NR/NR)
'17 (NR/NR)
IKANO '16 IKANO
(NR/NR)
SBAB '21 (A/A2)
50
IKANO '15 (NR/NR)
SBAB '16 (NR/A2)
SBAB '15 (NR/A2)
SBAB '14 (A/A2)
SBAB '18 (A/A2)
SBAB '17 (A/A2)
25
0
2014
2015
2016
2017
2018
2019
2020
2021
Peer group analysis
In this section we make a short comparison of Ikano Bank’s key ratios versus its closest
competitors. As always, such an analysis should be viewed with caution as the different
banks differ on several parameters, for instance on geographic exposure and/or business
mix, not to forget accounting methods. It nevertheless gives a reasonably fair view on
asset quality and credit management, in our view.
We start out at the very top with the NIM, which gives some indication of the intrinsic
risk in the different banks’ business profiles. However, it is important to note that product
mix and interest rate level play an important role as well. As stated above, Ikano Bank’s
NIM has been stable to slightly increasing the past couple of years, which places it in the
middle of its peer group. Highest level in the peer group is Bank Norwegian at almost
9%.
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30 October 2014
Ikano Bank
NIM
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2009
Ikano Bank
Bank Norwegian
Nordax
2010
2011
2012
2013
Eika Kredittbank
GE Money Bank
Santander Consumer Bank Nordics
Moving on to the loan loss ratio (LLR), Ikano Bank is at the very top with the reported
1.6% for 2013. At first glance this is negative, but it could be a result of a more
conservative provisioning policy and not just worse asset quality.
Loan losses in % of avg. receivables (lending and leasing)
4.00%
3.00%
2.00%
1.00%
0.00%
2009
Ikano Bank
Bank Norwegian
Nordax
2010
2011
2012
2013
Eika Kredittbank
GE Money Bank
One factor that speaks in favour of the high loan loss ratio being a result of conservatism
is the size of impaired loans in % of total receivables (mainly lending but in the case of
e.g. Ikano Bank also leasing). Only 5% of receivables are impaired, which is only second
to one other bank in the peer group. GE Money Bank is one of a kind with 32% of its
receivables being impaired. Note that Santander bought GE Money Bank AB in June
2014.
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Ikano Bank
Impaired receivables in % of receivables (lending and leasing)
40%
30%
20%
10%
0%
2009
2010
Ikano Bank
Bank Norwegian
Nordax
2011
2012
2013
Eika Kredittbank
GE Money Bank
Finally, comparing the coverage ratio (loan loss reserve in % of impaired receivables)
against the peer group, Ikano Bank stands out positively with a coverage ratio of 78% for
2013, which is a large margin to the second best, GE Money Bank, at 61%.
Coverage ratio (loan loss reserve in % of impaired receivables)
100%
80%
60%
40%
20%
0%
2009
Ikano Bank
Bank Norwegian
Nordax
2010
2011
2012
2013
Eika Kredittbank
GE Money Bank
In the table below we have summarised our analysis based on average figures for 201013. Ikano Bank is below average when it comes to profitability driven by a lower NIM
and a higher LLR, while its capitalisation and funding ratio are better off.
Peer group analysis (P/L ratios are based on average for 2010-13*, capital ratios for end-2013)
Nordax
Santander CBN
Average
NIM
Ikano Bank
6.31%
6.85%
8.50%
8.19%
5.12%
4.50%
6.58%
LLR
1.43%
1.08%
1.28%
1.58%
1.71%
0.77%
1.31%
RoE after tax
14.2%
6.6%
24.4%
6.8%
25.6%
15.5%
15.5%
CET1
14.0%
13.6%
12.8%
42.8%
12.0%
-
13.1%
Total capital ratio
16.7%
16.1%
17.9%
42.8%
14.5%
13.7%
15.8%
Receivables/deposits
141%
108%
97%
2120%
176%
768%
258%
NR/NR/NR
NR/NR/NR
NR/NR/NR
NR/NR/NR
NR/NR/NR
Baa1/NR/NR
Rating Moody's/S&P/Fitch
Eika Kredittbank Bank Norwegian GE Money Bank
* Eika Kreditbank figures only for 2011-13. Average figures are ex. GE Money Bank for capital ratios and liquidity
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Ikano Bank
Our view of Ikano Bank
We assign an issuer credit rating of ‘BBB’ to Ikano Bank. The rating is based on a review
of the rating methodologies from the rating agencies and our assessment of Ikano Bank’s
business and financial risk profile.
We see the development away from being a sole consumer bank, predominantly granting
unsecured lending, to a more diversified bank with several different product offerings,
some with good collateral such as leasing and object financing, as credit positive.
Profitability with a RoE after tax of 8.8% for 2013 is a bit too low, in our view, whilst we
find asset quality and in particular the provisioning level to be high. In our peer group
analysis Ikano Bank stands out positively when it comes to coverage ratio, which speaks
of a conservative provisioning policy.
Capital-wise Ikano Bank is well off with a CET1 ratio of 14.7% and total capital ratio of
17.4% end-H1 14 (14% and 16.7% end-2013, respectively). This is higher than most
peers and positive from a credit perspective. Deposits are used as the main funding
source, which we find positive, but after having almost complete balance between
deposits and net receivables in 2012, the ratio has increased to 144% end-H1 14
following the acquisition in the UK in 2013.
We view Ikano Bank’s link to IKEA and not least the fact that the Kamprad family is the
sole owner of Ikano Bank as credit positive. However, we have not included any support
from the owner in our rating, as the financial results from the owner are not publicly
available. Moreover, Ikano Bank is generally run as an independent company. We might
consider a notch higher rating if the profitability improves further or a formal support
structure from the owner is introduced. Downside risk to our rating includes among others
deteriorating asset quality.
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30 October 2014
Ikano Bank
Financials and key figures
Income statement (SEKm)
2008
2009
2010
2011
2012
2013
H1 14
Net interest income
699
795
853
927
915
1,081
617
Fee & Commision Income
267
329
295
403
351
356
173
-2
-8
-22
-34
-34
7
1
1,229
1,374
1,500
1,612
1,777
2,039
1,106
Trading & Fair Value Gains
Leasing Income
Other Income
79
73
124
177
280
142
117
Total Operating Income
2,272
2,562
2,749
3,085
3,290
3,625
2,014
Total Operating Expenses
1,728
1,955
2,043
2,284
2,528
2,897
1,622
543
608
706
801
762
728
392
Loan Losses and Provisions
245
416
172
241
242
295
146
Appropriations
-31
153
-327
-33
-196
-178
-122
Pre-tax Income
267
345
207
527
324
255
124
Net Income
192
257
145
414
234
190
101
2008
2009
2010
2011
2012
2013
H1 14
10,339
10,491
12,009
11,657
11,584
14,887
15,664
419
894
499
643
673
744
794
2,848
3,311
3,320
3,632
4,255
4,943
5,288
Balance sheet (SEKm)
Loans
Loan Loss Reserve
Leasing
Loan Loss Reserve Leasing
15
114
77
64
57
57
0
14,609
15,977
17,779
19,206
20,107
23,783
25,226
Risk exposure amount (REA)
8,887
14,920
15,382
16,346
16,537
20,093
20,487
Customer Deposits
6,735
8,953
10,717
12,692
13,831
14,075
14,531
Market Funds
509
2,202
2,387
2,008
1,640
2,622
3,286
Subordinated debt
241
394
554
553
542
551
566
Equity
1,340
1,498
1,420
1,809
1,944
2,370
2,504
Growth %
Total Assets
2008
2009
2010
2011
2012
2013
H1 14
Receivables, Gross
-
8.7%
7.4%
0.6%
3.6%
24.5%
5.4%
Total Assets
-
9.4%
11.3%
8.0%
4.7%
18.3%
6.1%
Risk-weighted Assets
-
67.9%
3.1%
6.3%
1.2%
21.5%
2.0%
Customer Deposits
-
32.9%
19.7%
18.4%
9.0%
1.8%
3.2%
-
12%
16%
13%
-5%
-4%
0%
Net Income
-
34%
-44%
186%
-44%
-19%
0%
2008
2009
2010
2011
2012
2013
H1 14
Impaired Receivables % Gross Receivables and Guarantees
-
10.3%
4.6%
6.1%
6.4%
5.0%
5.1%
Impaired Receivables % (Equity + Loss Reserves)
-
61%
37%
39%
40%
32%
34%
Loss Reserves % Impaired Receivables
-
66%
79%
72%
69%
78%
71%
Loss Reserves % Gross Receivables & Guarantees
-
6.8%
3.6%
4.4%
4.4%
3.9%
3.7%
Asset Quality & Market Risk
Equities & Non-Trading Assets % Adj. Equity
-
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
2008
2009
2010
2011
2012
2013
H1 14
Net Interest Margin (Including Dividends)
-
6.38%
6.18%
6.25%
6.13%
6.67%
6.77%
PPI % Avg. RWA
-
5.11%
4.66%
5.05%
4.63%
3.97%
3.83%
PPI excl Trading % Avg. RWA
-
5.18%
4.81%
5.27%
4.84%
3.94%
3.82%
Net Income % Avg. RWA
-
2.16%
0.96%
2.61%
1.42%
1.04%
0.98%
2008
2009
2010
2011
2012
2013
H1 14
Adjusted Cost % Operating Income
57%
57%
54%
54%
56%
61%
63%
Operating Expenses % Avg. Assets
23.7%
12.8%
12.1%
12.4%
12.9%
13.2%
12.9%
H1 14
Earnings
Efficiency
Liquidity
2008
2009
2010
2011
2012
2013
Avg. Customer Deposits % Avg. Total Funding
-
66%
71%
76%
82%
80%
72%
Avg. Gross Loans % Avg. Customer Deposits
-
141%
121%
106%
93%
100%
112%
-
14.4%
12.0%
1.0%
-3.9%
5.7%
8.0%
2008
2009
2010
2011
2012
2013
H1 14
Market Funds Reliance (Total Assets)
Capitalisation
Common Equity Tier-1 Ratio (CET1)
11.9%
9.6%
9.9%
11.7%
13.5%
14.0%
14.7%
Total Capital Ratio
12.7%
12.2%
13.5%
15.1%
16.5%
16.7%
17.4%
Note: We have used historical exchange rates in order to change 2008-2011 from EUR into SEK
15 |
30 October 2014
Ikano Bank
Fixed Income Credit Research
Thomas Hovard
Head of Credit Research
(+45) 45 12 85 05
[email protected]
Louis Landeman
TMT, Industrials
(+46) 8 568 80524
[email protected]
Åse Haagensen
High Yield, Industrials
(+47) 22 86 13 22
[email protected]
Mads Rosendal
Industrials, Pulp & Paper
(+45) 45 14 88 79
[email protected]
Jakob Magnussen
Utilities, Energy
(+45) 45 12 85 03
[email protected]
Brian Børsting
Industrials
(+45) 45 12 85 19
[email protected]
Gabriel Bergin
Strategy, Industrials
(+46) 8 568 80602
[email protected]
Niklas Ripa
High Yield, Industrials
(+45) 45 12 80 47
[email protected]
Bjørn Kristian Røed
Shipping
(+47) 85 40 70 72
[email protected]
Ola Heldal
TMT
(+47) 85408433
[email protected]
Wiveca Swarting
Real Estate, Construction
(+46) 8 568 80617
[email protected]
Sondre Dale Stormyr
Offshore rigs
(+47) 85 40 70 70
[email protected]
Henrik René Andresen
Credit Portfolios
(+45) 45 13 33 27
[email protected]
Øyvind Mossige
Oil services
(+47) 85 40 54 91
[email protected]
Knut-Ivar Bakken
Fish farming
(+47) 85 40 70 74
[email protected]
Lars Holm
Financials
(+45) 45 12 80 41
[email protected]
Find the latest Credit Research
Danske Bank Markets:
http://www.danskebank.com/danskemarketsresearch
16 |
30 October 2014
Bloomberg:
DNSK<GO>
Ikano Bank
Disclosures
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske
Bank’). The authors of the research report are Lars Holm, Senior Analyst and Thomas Hovard, Chief Analyst.
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the
research report accurately reflect the research analyst’s personal view about the financial instruments and issuers
covered by the research report. Each responsible research analyst further certifies that no part of the compensation
of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed
in the research report.
Regulation
Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject
to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske
Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority
(UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation
Authority are available from Danske Bank on request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’
rules of ethics and the recommendations of the Danish Securities Dealers Association.
Conflicts of interest
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske
Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any
request that might impair the objectivity and independence of research shall be referred to Research Management
and the Compliance Department. Danske Bank’s Research Departments are organised independently from and do
not report to other business areas within Danske Bank.
Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes
investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate
finance or debt capital transactions.
Danske Bank, its affiliates, subsidiaries and staff may perform services for or solicit business from Ikano Bank
and may hold long or short positions in, or otherwise be interested in, the financial instruments mentioned in this
research report. The Equity and Corporate Bonds analysts of Danske Bank and undertakings with which the
Equity and Corporate Bonds analysts have close links are, however, not permitted to invest in financial
instruments that are covered by the relevant Equity or Corporate Bonds analyst or the research sector to which the
analyst is linked.
Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing,
trading, brokerage, investment management, investment banking, custody and other financial services activities,
may be a lender to Ikano Bank and have whatever rights are available to a creditor under applicable law and the
applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit
or other information regarding Ikano Bank that is not available to or may not be used by the personnel responsible
for the preparation of this report, which might affect the analysis and opinions expressed in this research report.
As an investment bank, Danske Bank, its affiliates and subsidiaries provide a variety of financial services,
including investment banking services. It is possible that Danske Bank and/or its affiliates and/or its subsidiaries
might seek to become engaged to provide such services to Ikano Bank in the next three months.
Danske Bank has made no agreement with Ikano Bank to write this research report. Parts of this research report
have been disclosed to Ikano Bank. No recommendations or opinions have been disclosed to Ikano Bank and no
amendments have accordingly been made to the same before dissemination of the research report.
Financial models and/or methodology used in this research report
Calculations and presentations in this research report are based on standard econometric tools and methodology
as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be
obtained from the authors on request.
Risk warning
Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis
of relevant assumptions, are stated throughout the text.
17 |
30 October 2014
Ikano Bank
Expected updates
Credit Update: This research report will be updated on a quarterly basis following the quarterly results statements
from Ikano Bank.
Scandi Handbook: This research report will be updated bi-annually, usually in April and October.
See the front page of this research report for the date of first publication.
Recommendation structure
Investment recommendations are based on the expected development in the credit profile as well as relative value
compared with the sector and peers.
As at 30 September 2014 Danske Bank Markets had investment recommendations on 49 corporate bond issuers.
The distribution of recommendations is represented in the distribution of recommendations column below. The
proportion of issuers corresponding to each of the recommendation categories above to which Danske Bank
provided investment banking services in the previous 12 months ending 30 September 2014 is shown below.
Time horizon
Distribution of
recommendations
Investment banking
relationships
Outperformance relative to peer group
3 months
33%
50%
Hold
Performance in line with peer group
3 months
53%
42%
Sell
Underperformance relative to peer group
3 months
14%
14%
Rating
Anticipated performance
Buy
Changes in recommendation within past 12 months:
Date
New recommendation
Old recommendation
30 October 2014
Not Rated
N/A
General disclaimer
This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for
informational purposes only. It does not constitute or form part of, and shall under no circumstances be
considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments
(i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or
options, warrants, rights or other interests with respect to any such financial instruments) (‘Relevant Financial
Instruments’).
The research report has been prepared independently and solely on the basis of publicly available information that
Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not
untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates
and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation
any loss of profits, arising from reliance on this research report.
The opinions expressed herein are the opinions of the research analysts responsible for the research report and
reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not
undertake to notify any recipient of this research report of any such change nor of any other changes related to the
information provided in this research report.
This research report is not intended for retail customers in the United Kingdom or the United States.
This research report is protected by copyright and is intended solely for the designated addressee. It may not be
reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank’s prior
written consent.
Disclaimer related to distribution in the United States
This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer
and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S.
Securities and Exchange Commission. The research report is intended for distribution in the United States solely
to ‘U.S. institutional investors’ as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this
research report in connection with distribution in the United States solely to ‘U.S. institutional investors’.
18 |
30 October 2014
Ikano Bank
Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence
of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are
not registered or qualified as research analysts with the NYSE or FINRA but satisfy the applicable requirements
of a non-U.S. jurisdiction.
Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial
Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in nonU.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be
registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and
auditing standards of the U.S. Securities and Exchange Commission.
19 |
30 October 2014

Ikano Bank - Danske Analyse

Transcription

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