kepler cheuvreux swiss seminar 2018: valiant investor ... 2 kepler cheuvreux swiss seminar, march...
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Kepler Cheuvreux Swiss Seminar, March 20182
Summary
• Simple business model with a clear focus on mortgages
• Very high loan quality, with 97% of loans secured
• Stable or increasing dividend since 1997
• Growth while keeping margins stable
• Interest rate risk: already low exposure further reduced
• Costs under control despite expansion
• Market expansion: new innovative branches opened
• Full integration of Triba Bank AG on track
• Funding diversified through Triple-A covered bonds
100% focus on
retail banking
Sustainable and
stable earnings
Strategy implem-
entation on track
3
Overview
Part 1: 100% Focus on retail banking in Switzerland
Part 2: Sustainable and stable earnings
Part 3: Stringent strategy implementation
Appendix
Kepler Cheuvreux Swiss Seminar, March 2018
4
Valiant: 100% focused on retail and SME banking
* 31/12/2017: 873 FTE
91 branchesFor us, having close ties
with our clients means being
where our clients are.
• Independent retail and SME bank operating
exclusively in Switzerland
• Close to clients through 91 branches, with
strong local roots in 11 cantons (~50% of Swiss
population). Digital presence across Switzerland
• Acquisition of Triba Partnerbank AG in Q3 2017
• 1,000 employees,* including 500 client advisors
• Total capital ratio: 17.2%
• Moody’s A1/P-1, stable outlook
• 100% free float. Market cap ~ CHF 1.8bn
Kepler Cheuvreux Swiss Seminar, March 2018
“We’re simply a bank”
11 cantonsProximity to about 50% of the
population of Switzerland
5
Simple business model. Clear focus on mortgages.
Kepler Cheuvreux Swiss Seminar, March 2018
“Take in the money, look after the money, lend money.”
At 31/12/2017
* Private clients without financing or assets with Valiant
76% of revenues from interest income
Net income: CHF 388m
Interest
income
76%
Other income 5%
Trading income 3%
Fee income 16%47%
32%
19%
51% of revenues from SME and self-employed
Affluent private
clients 47%
Retail clients* 2%
Medium-sized
companies 19%
Self-employed
individuals and
small companies
32%
Total income: CHF 438m
Payment Savings Pensions Funding Investment
Straightforward balance sheet
6 Kepler Cheuvreux Swiss Seminar, March 2018
Equity capitalOther liabilities (0.3)
Covered Bonds and
Swiss Pfandbriefe
Client deposits
as per 31/12/2017 (CHF27.6bn)
1.4
23.5
2.7
Other assets
Cash and due
from banks
Loans
Assets
Due to banks (0.8)
2.2
5.1
Other bonds (0.5)
Liab.& Equity
• 85% of assets in loans
• Valuation differences and provisions
account for <0.2% of total assets
• No goodwill despite a long history of
take-overs
• Client deposit coverage ratio: 79.6%
• Asset encumbrance ratio: 20.8%
• Leverage ratio: 7.2%
18.7
7
Very high quality of loans
* Increase of residential mortgages share due to new detailed allocation of properties with dual use
At 31/12/2017
93% of total loans in mortgages
• First tier mortgages: 94% (31/12/2016: 94%)
• Average residual term: 3.8 years (31/12/2016: 3.6 years)
• Loan-to-value (net): 63.0% (31/12/2016: 63.1%)
• 97% of loans are covered
(31/12/2016: 97%)
937
Due from
clients44
18
15
8
64 5
82
94 5
Residential
Commercial/
industry
Other
Office/business
Client loans: CHF 23.5bn
Mortgages: CHF 21.9bn
Mortgages: 82% residential, with 77% in Bern, Lucerne and Aargau
Achieving growth while maintaining high quality
Kepler Cheuvreux Swiss Seminar, March 2018
Bern
Lucerne
Aargau
Jura+Western
Switzerland
Other CHBasel
Fribourg
8
Low risk profile
• Long-term relationships and very
high customer loyalty
• Very transparent, stable earnings
• Easy to understand balance sheet
• Asset quality very high
• No major legal costs in 20 years
• No goodwill despite a long history of
takeovers
Moody’s deposit ratings A1/P-1, outlook stable
• Retail banking as main
income source
• Restrictive lending policy
• Diversified client portfolio
• No exposure to potential
real estate hot spots
• Prudent management
of interest rate risk
• No proprietary trading
Low
operational
risk
Low credit
risk
Low market
risk
Kepler Cheuvreux Swiss Seminar, March 2018
Low-risk retail banking business
9
21 years with stable or increasing dividends
* For the financial year 2006, an extraordinary jubilee dividend of CHF 1.40 was distributed
CHF, rebased
Stable payout ratios since 2007, increasing since 2013
as %
1.7 1.7 1.8 1.9 1.9 1.9 2.0 2.2 2.5
2.8
4.2*
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Payout ratio
target of 40-70%
of net profit
Stable, increasing distributions to shareholders since Valiant was founded in 1997
Kepler Cheuvreux Swiss Seminar, March 2018
3.1 3.1 3.2 3.2 3.2 3.2 3.2 3.23.6 3.8 4.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
34 34 36 41 40 40
55 54 50 51 53
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
50
30
70
40
** proposed
**
**
10
Overview
Part 1: 100% Focus on retail banking in Switzerland
Part 2: Sustainable and stable earnings
Part 3: Stringent strategy implementation
Appendix
Kepler Cheuvreux Swiss Seminar, March 2018
Stable margins despite declining interest rates
11
Average interest
rate on assets
Net interest margin
Average interest
cost in % of assets
Kepler Cheuvreux Swiss Seminar, March 2018
-1.00
-0.75
-0.50
-0.25
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2013 2014 2015 2016 2017
%
1.74%
1.04%
0.70%
1.64%
1.13%
0.51%
1.52%
1.13%
0.39%
1.84%
10-year CHF swap
3-month CHF Libor
5-year CHF swap
0.83%
1.01%
20172013 2014 2015 2016
1.42%
1.10%
0.32%
Interest expense more than halved since 2014
12 Kepler Cheuvreux Swiss Seminar, March 2018
CHF m
87 79 74 72 66
3126
14 119
91
72
41
1911
2013 2014 2015 2016 2017
102
129
177Client deposits
incl. funds with
negative
interest rates
Swiss Pfandbriefe
and Valiant
covered bonds
210
Other bonds
83bp
70bp
51bp
39bp
32bp
2.01% 1.91% 1.77% 1.58%
Interest expense
in bp
86
Funds with negative interest rates account for about 10% of total assets
1.29%- Interest rate p.a.
2.43 2.73 3.07 3.12 3.082.15 2.40 2.70 2.82 2.81
2013 2014 2015 2016 2017
13
Already low interest rate risk reduced further
• Duration of assets and liabilities
stable
• Interest rate risk significantly
reduced again in 2017
• Swaps stable on a low level
(<10% of total assets)
• New payer swaps added Q1 2017
Kepler Cheuvreux Swiss Seminar, March 2018
Present value sensitivity*
Duration of assets Duration of liabilities
* Present value sensitivity of economic equity as a % (+100bps)
-4.00-4.73 -4.17 -3.48 -3.01
2013 2014 2015 2016 2017
1.52 1.34 1.68 1.942.40
2013 2014 2015 2016 2017
Swap volume in CHF bn
Kepler Cheuvreux Swiss Seminar, March 201814
Costs under control
59.8
55.858.3
50
55
60
65
70
75
80
2013 2014 2015 2016 2017
65.0
Cost/Income-Ratio as %
72.669.8
64.4 64.1
58.458.3
incl. depreciation
excl. depreciation
• Strict cost control in the past.
Improving cost income ratios despite
strategy implementation
• Cost savings of CHF 10m p.a. from IT
service renewal (Basis FY 2016)
• Cost savings of 4-5 millions p.a. from
reductions of counters
• Synergies CHF 1m p.a. from Triba
effective from H2 2018
Cost reductions to partly offset investments in expansion and digitalisation
Kepler Cheuvreux Swiss Seminar, March 201815
Strengthened capital base
Total capital ratio as %, target range 15-17%*
15.0
15.8
16.817.3 17.2
2013 2014 2015 2016 2017
Upper limit for
capital ratio (17%)
Lower limit (15%)
* Valiant introduced a new upper limit of 17% for the total capital ratio in August 2017
Calling in the Tier 2
bond in April 2018
brings Valiant into
the target range of
15-17%
Total T1+T2 capital CHF 2.3bn as per 31/12/2017, thereof CHF 150m Tier 2
16
Overview
Part 1: 100% Focus on retail banking in Switzerland
Part 2: Sustainable and stable earnings
Part 3: Strategy implementation on track
Appendix
Kepler Cheuvreux Swiss Seminar, March 2018
Ambitious strategy and financial targets up to 2020
We will maintain our cautious risk profile
Kepler Cheuvreux Swiss Seminar, March 201817
Profitable growth Enhanced efficiency Capital management
• Strengthen
existing regions• Digital expansion
across Switzerland
• 10 new branches
between Lac Léman
and Lake of Constance
Geographic expansion and digitisation
• 80 additi-
onal client
advisors
• Loan growth p.a.:
2–3% in existing markets
2–3% in new regions
• Anorganic growth
• Additional growth will
be achieved with existing
middle- and back-office
resources
• Gradual upgrading of
branches
• Total capital ratio: 15–17%
• ROE: 6–8%
• Payout ratio: 40–70%
• Dividend: at least CHF 4.00
18
Market expansion progress
Expansion until 2020:
• 2 new branches p.a.
Kepler Cheuvreux Swiss Seminar, March 2018
91 existing
branches
St. Gallen
WilRheinfelden
Nyon
Vevey
FrauenfeldExpansion 2017:
2 new branches
in Brugg AR and
Morges VD
5 new branches
in Lucerne region,
from Triba Bank
Full integration of Triba on track
• Triba is a small regional bank in Lucerne• 16,000 clients served through 5 branches in the canton of Lucerne
• Around 30 employees, thereof 90% client-facing
• CHF 960m assets, CHF 3m net profit, capital ratio 17.4%
• Successful purchase offer, Valiant now owns 97%• Fair valuation at CHF 80m, offer price CHF 1450 per share
• Shares purchased in July 2017, paid out of cash
• Excellent operational and cultural fit• In line with Valiant’s strategy 2020 to expand into attractive regions
• Business model, systems and culture are very similar to Valiant
• Full integration planned by mid-2018• All employees and locations will be merged, creating
a denser branch network in central Switzerland
• Integration to be completed by mid-2018
19
Valiant: 86 branches
Triba: 5 branches
Branches Valiant (11 cantons)
Branches Triba (canton of Lucerne)
Full integration by mid-2018
Kepler Cheuvreux Swiss Seminar, March 2018
Triple A-rated covered bonds diversify our funding
20
Valiant covered bond programme
The first contractual covered bonds under
Swiss law and with a Swiss guarantor
Diversification of funding, in addition to
Swiss Pfandbriefe
Lower interest-rate risk and funding risk
Elimination of financing disadvantage vs.
competitors with government support
Funding of growth in new market areas
Long-term and continuous programme,
with annual issues of around CHF 500m
Rated Aaa by Moody’s
Kepler Cheuvreux Swiss Seminar, March 2018
Development of spread since first issue
Spread in basis points vs. mid-swap since mid-November 2017
-15
-10
-5
0
5
10
15. Nov 17 15. Dez 17 15. Jan 18
Valiant Covered
Bond (Aaa)
Covered Bond
(Aaa)
Covered Bond
(Aaa)
Covered Bond
(Aaa)
(0.15)
(0.10)
(0.05)
-
0.05
0.10
Dec 2017 Mar 2818Feb 2818Jan 2818
Two very successful issues since November 2018 (total CHF 750m)
Kepler Cheuvreux Swiss Seminar, March 201821
Outlook for 2018
• Profitable growth of 2-3%, thereof 1% from expansion
• Interest margin: fight for every basis point - as in 2017
• Strengthen turnaround in commission and fee business
• Further increase in operating profit
• 2018 profit expected to be in line with 2017
22
Overview
Part 1: 100% Focus on retail banking in Switzerland
Part 2: Key financials: sustainable and stable earnings
Part 3: Strategy implementation on track
Appendix
Kepler Cheuvreux Swiss Seminar, March 2018
59.855.8 58.3
50
55
60
65
70
75
80
2013 2014 2015 2016 2017
65.0
Cost/Income-Ratio as %
72.669.8
64.4 64.1
58.458.3
incl. depreciation
excl. depreciation
23
Improved and sustainable earnings power
Profitability stable
Stable margins despite declining interest rates
Strengthened capital base, incl. acquisition of Triba in Q3 2017
Costs under control, including strategy implementation
Total net interest margin, bps
Net profit in CHF m, ROE as % Total capital ratio as %
101
104
113 113110
2013 2014 2015 2016 2017
91.4 94.5 114.4 117.5 119.2
5.1 5.15.6 5.6
5.5
2013 2014 2015 2016 2017
15.0
15.8
16.817.3
17.2
2013 2014 2015 2016 2017
Kepler Cheuvreux Swiss Seminar, March 2018
Traditional bank counters to be partially replaced
Digital and self-service solutions a priority
24
• Goal to have 80% of branches focusing on advice,
without physical reception or cash handling
• Pilot project to analyse customer behaviour starting
in 2018
• Digitisation of client services is cost-effective and
means services can be made available to clients for
longer hours
• Around 65 jobs affected but no layoffs planned
• Recurring cost savings of between CHF 4 and 5
million are expected after completion of project
Kepler Cheuvreux Swiss Seminar, March 2018
Recurring cost savings expected to be CHF 4–5m after completion
Two modular branch offices opened in 2017, in
Brugg and Morges (Video: Modular branch)
2 innovative branch offices launched in 2017
Video-based reception allows for cost-efficient
client interaction
Increased focus on personal advice for clients
25
Solid 2017 full-year results
Net interest income*
Adjusted operating profit*
Group profit
Kepler Cheuvreux Swiss Seminar, March 2018
Triba Partnerbank AG: six months accounted for using the equity method, consolidated since 1/7/2017
* Before value adjustments in interest income
+2.0%
+6.7%
+1.5%
+0.2%
+5.2%
Loans
- of which mortgages
Operating expenses
Client deposits
Fee and commission income
Total capital ratio
+5.9%
+5.9%
+2.3%
+2.6%
+4.6%
17.2%
+2.2%
+2.2%
+0.6%
-1.4%
3.2%
Valiant
without TribaConsolidated
results
Operating performance
improved
Net interest margin stable
since Q1 2017
Loan growth tripled
(without Triba)
Turnaround in fee and
commission income
Costs under control
Dividend to be increased to
CHF 4.-
Net interest margin 110bp 110bp
Client loans: CHF 23.5bn
26
Segment view
47%
32%
19%
49%
15%
28%
8%
At 31/12/2017
Clients: ~ 390,000 Client assets: CHF 27.7bn
Medium-sized
companies
Retail clients*
Total income: CHF 438m
Self-employed
individuals and
small companies
Affluent private
clients
Retail clients*
Retail clients*
Medium-sized
companiesSelf-employed
individuals and
small companies
Medium-sized
companies
Medium-sized
companies
Affluent private
clients Self-employed
individuals and
small companies
Self-employed
individuals and
small companies
Affluent private
clients
Affluent private
clients
Retail clients*
Kepler Cheuvreux Swiss Seminar, March 2018
* Private clients without financing or assets with Valiant
Kepler Cheuvreux Swiss Seminar, March 201827
FY 2017: Maturity structure of assets and liabilities
21%
48%
17%
14%
Maturity structure of assets
<1 year
1-5 years
> 5 years
Maturity structure of liabilities
CHF 27.2bn
At sight/
callable
CHF 25.1bn
As per 31/12/2017
<1 year
1-5 years > 5 years
At sight/
callable
12%
8% 9%
71%
Kepler Cheuvreux Swiss Seminar, March 201828
FY 2017: Profit and loss statement
Consolidated profit and loss statement Valiant Holding AG
CHF m FY 2017 FY 2016 Change
Interest and discount income 382.5 392.2 -2.5%
Interest expense -86.5 -102.0 -15.2%
Net interest income (before value adjustments) 296.0 290.2 2.0%
Value adjustments for credit risk, and loan losses -0.6 10.7 -106.0%
Net interest income (after value adjustments) 295.4 301.0 -1.9%
Net fee and commission income 62.3 59.5 4.6%
Net trading income 11.7 11.4 3.2%
Net other ordinary income 18.0 17.4 3.4%
Total operating income (before value adjustments) 388.0 378.5 2.5%
Personnel expenses -123.0 -118.6 3.7%
General and administrative expenses -103.1 -102.3 0.8%
Total operating expenses -226.1 -220.9 2.3%
Depreciation, and impairments of holdings -22.7 -25.1 -9.5%
Other provisions and losses -2.4 -4.2 -44.2%
Operating result 136.2 139.0 -2.0%
Extraordinary income 28.9 13.1 119.9%
Extraordinary expenses - -0.0 n.a.
Changes in reserves for general banking risks -13.7 -8.0 71.3%
Taxes -32.2 -26.6 21.1%
Consolidated net profit (incl. minority interests) 119.2 117.5 1.5%
Minority interests 0.0 - n.a.
Net profit (excl. minority interests) 119.2 117.5 1.5%
• Interest income 76%
of total income
• Net interest margin
110bp
• Cost-income ratio
incl. depreciation
64.1%
• Normalised tax rate
in previous years:
19-20%
Key figures 2012 –2017
Key figures 2017 2016 2015 2014 2013 2012
Total assets in CHF bn 27.6 26.1 25.4 25.3 25.5 25.3
Client loans in CHF bn 23.5 22.3 22.1 21.8 21.8 21.5
Client deposits in CHF bn 18.7 18.2 18.1 17.9 17.4 17.3
Deposit/loan coverage ratio 79.6 82.1 81.9 82.2 80.0 80.7
Shareholders’ equity in CHF m 2.20 2.13 2.05 1.99 1.94 1.90
Net profit in CHF m 119.2 117.5 114.4 94.5 91.4 127.0
Risk-weighted assets CHF bn 13.2 12.7 12.7 13.1 13.5 13.8
Total capital ratio as % 17.2 17.3 16.8 15.8 15.0 12.8
Cost/income ratio as % 58.3 58.4 55.8 59.8 58.3 59.8
FTEs 873 842 821 883 885 986
29 Kepler Cheuvreux Swiss Seminar, March 2018
See www.valiant.ch/results
30
Key per-share data since 2007
VATN share 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
Book value/share in CHF 139.47 134.73 129.90 125.76 122.82 120.16 116.39 102.69 99.62 101.03 98.71
Earnings/share in CHF 7.55 7.44 7.24 5.98 5.79 8.04 8.08 7.76 8.87 9.02 8.97
P/E ratio 13.96 13.63 16.29 13.79 13.79 10.7 14.7 16.9 22.8 22.0 19.7
Dividend payout ratio % 53.0 51.1 49.7 53.5 55.3 39.6 39.6 41.2 36.1 34.4 34.0
Dividend yield as % 3.8 3.7 3.1 3.9 4.0 3.7 2.7 2.4 1.6 1.6 1.8
Dividend in CHF 4.00 3.80 3.60 3.20 3.20 3.20 3.20 3.20 3.20 3.10 3.10
Share price at
31 December in CHF105.40 101.40 118.00 82.55 79.85 86.90 118.90 131.00 202.00 198.70 176.80
Market capitalisation at
31 December in CHF m1,665 1,601 1,862 1,302 1,259 1,370 1,875 1,974 3,098 3,124 2,869
Kepler Cheuvreux Swiss Seminar, March 2018
ContactMarcus Händel, Head of Investor Relations
Phone +41 (31) 310 77 44
Information for investorsIn German: www.valiant.ch/investoren
In English: www.valiant.ch/investors
Financial calendar27 March 2018 Publication of 2017 Annual Report
3 May 2018 Q1 2018 results
23 May 2018 Valiant Holding AG AGM in Bern
9 August 2018 H1 2018 results
8 November 2018 9M 2018 results
Financial calendar and contact information
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transactions. Before you make any decision based on this information, we urgently recommend that you consult your financial or client adviser. Prospective investors should not engage in transactions of this kind unless
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performance of an investment is not a guide to future performance, i.e. the value of an investment may fall as well as rise. The preservation of value (or increase in value) of invested capital cannot be guaranteed due to
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