about valiant overview about valiant business strategy 2024 q1 2020 financial results financial...
TRANSCRIPT
About Valiant
Q1 2020 results, Business Strategy 2024
and presentation for investors
May 2020
Our key messages
• Very high loan quality with 97% of loans covered
• Simple business model with a focus on affluent mortgage clients
• Continued low exposure to interest-rate risk
• 23 years of stable or increasing dividends
• Costs under control despite faster expansion
• Growth in lending with high margins
• Accelerated expansion into new fast-growing regions
• Funding diversified through Aaa-rated covered bonds
• Ready to embark on non-organic growth
100% focus on
retail and SME
banking
Sustainable and
stable earnings
Business
Strategy
2020–2024
2
Overview
About Valiant
Business Strategy 2024
Q1 2020 financial results
Financial targets and outlook for 2020
Environmental, social and governance milestones
Appendix
3
Valiant: 100% focused on retail and SME banking
96 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 our clients with 96 branches
Strong Swiss local roots in 13 cantons
Access to >50% of Swiss population
Digital presence across the country
• ~1,000 employees
of which >50% client advisors
• Total capital ratio: 16.3%
• Moody’s A1/P-1, stable outlook
• 100% free float. Market cap ~ CHF 1.2bn
“We’re simply a bank”13 cantonsWe can reach about 50% of the
population of Switzerland
As at 31/03/2020
4
Simple business model with a focus on mortgages
“Take in the money, look after the money, lend money.”
~77% is net interest income
Total operating income: CHF 411m*
Net interest
income
77%
Other income 5%
Trading income 3%
Fee income 15%47%
32%
19%
~52% of income from SME and self-employed
Affluent private
clients 46%
Retail clients 2%
Medium-sized
companies 18%
Self-employed
individuals and
small companies
34%
Interest and commission income: CHF 424m*
Payments Savings Pensions Funding Investment
As at 31/12/2019*including interest and commission expense*excluding interest and commission expense
5
Easy-to-understand balance sheet
Equity capital
Other liabilities
Mortgage-backed ʺPfandbriefeʺ
and covered bonds
Client deposits
Total assets: CHF31.1bn
1.3
25.1
4.7
Other assets
Cash and due
from banks
Loans
Assets
Due to banks
2.3
0.5
7.3
19.4
1.6
Liab.& Equity
• More than ~80% of assets are loans
• Value adjustments and provisions
account for ~0.2% of total assets
• No goodwill despite a long history of
takeovers
• Asset encumbrance ratio: 25.7%
• Leverage ratio: 7.2%
As at 31/03/2020
6
Loan quality is very high
94% of lending is in the form of mortgages, of which
• Proportion of first mortgages: 94% (31/12/2018: 94%)
• Average residual maturity: 3.9 years (31/12/2018: 3.8 years)
• Loan-to-value (net): 63% (31/12/2018: 63%)
• 97% of loans backed by
collateral (31/12/2018: 97%)
946
Due from
customers
42
17
15
10
64 5
82
94 5
Residential
properties
Commercial/
industry
Bern & Solothurn
Lucerne
Aargau
Jura & western
Switzerland
Rest of CHBasel
Fribourg
Other
Office/business
82% is residential and 74% in Bern, Lucerne and Aargau
Volumes increased, while high loan quality was maintainedAs at 31/12/2019
7
Low risk profile
• Focus on affluent retail customers
• Long-term relationships and very
high customer loyalty
• Very transparent, stable earnings
• Easy-to-understand balance sheet
• High asset quality
• No goodwill despite a long history
of takeovers
Moody’s deposit rating: A1/P-1, outlook stable
• Retail banking as main
income source
• No exposure to large
corporates or IB services
• Restrictive lending policy
• Diversified client portfolio
• No exposure to potential
real-estate hotspots
• No proprietary trading
• Virtually no currency risk
• Prudent management of interest-rate risk
Low
operational
risk
Low
credit
risk
Low
market
risk
Characteristics of our business model
8
Credit risk stable at a very low level
Low value adjustments and provisions at ~0.2%Non-performing loans well below 0.2%
NPL / total loans Value adjustments and provisions for credit risk / total loans
Low and stable loan-to-value ratio
Loan-to-value (net)
High and stable share of 1st tier mortgages
Share of 1st tier mortgages
63% 63% 63% 63% 63% 63% 63%
2014 2015 2016 2017 2018 2019 Q1 2020
94% 93% 94% 94% 94% 94% 94%
2014 2015 2016 2017 2018 2019 Q1 2020
0.22% 0.22%0.14% 0.16% 0.13%
0.09% 0.11%
2014 2015 2016 2017 2018 2019 Q1 2020
0.34% 0.34%0.24% 0.23% 0.21% 0.21% 0.22%
2014 2015 2016 2017 2018 2019 Q1 2020
As at 31/03/2020
9
98.7 101.0 99.6 102.7 116.4 120.2 122.8 125.8 129.9 134.7 139.5 143.5 146.8
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Continued rise in book value per share
CHF, at year end
Continued rise in book value per share
1.79 1.97 2.03
1.281.02
0.72 0.65 0.660.91
0.75 0.76 0.75 0.67
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
History of price to book value
Multiple, at year end
Compounded annual growth rate: 3.4%
10
Constantly stable or increasing dividends
* For the 2006 financial year, an extraordinary jubilee dividend of CHF 1.40 was distributed
CHF
Stable payout ratios since 2007, increasing since 2013
as %
target %
of net
profit
Stable, increasing distributions to shareholders since Valiant was founded in 1997
3.1 3.1 3.2 3.2 3.2 3.2 3.2 3.23.6
3.84.00
4.405.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
34 34 36 41 40 40
55 54 50 51 53 5865
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
50
30
70
4050
70
1.7 1.7 1.8 1.9 1.9 1.9 2.0 2.2 2.52.8
4.2*
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
11
Leadership plans are in place
• Markus Gygax joined the BoD in 2019.
He has been chairman since May 2020.
• Ewald Burgener has been CEO
since May 2019.
• Hanspeter Kaspar joined as CFO
on 1 October 2019.
12
Vision
Valiant will be the bank that makes it easiest for private individuals and SMEs in Switzerland
to manage their financial affairs.
Core elements of our mission statement
• Our business policy is geared towards
long-term stability.
• We will increase our profitability by striking the right balance
between risk, return and growth.
• We will support employees in their development.
Strategy underpinned by our vision and mission statement
Risk
Growth Return
13
Overview
About Valiant
Business Strategy 2024
Q1 2020 financial results
Financial targets and outlook for 2020
Environmental, social and governance milestones
Appendix
14
Valiant is shaping a successful future
• We will achieve organic growth by adding around 170 full-time equivalents and investing
CHF 50 million
• We will extend our footprint from Lake Geneva to Lake Constance by:
- Expanding into the canton of Zurich
- Strengthening our presence in
north-western Switzerland,
French-speaking Switzerland and
eastern Switzerland
• We will deliver significant long-term growth in profit
• We intend to pay a dividend of CHF 5.00 for 2019, with a payout ratio of 50–70%
15
We have achieved a lot so far
• Rigorously implemented Strategy 2020
• Expanded into the Lake Geneva area and eastern Switzerland (from autumn 2019)
• Invested in digitisation Valiant is a modern, innovative bank
• Upgraded existing branches: client advisors remain on site
• Significantly improved key indicators and increased dividend each year
Steady improvement in group profitHigh and stable net interest margin
despite falling interest rates
CET-1 ratio strengthened
101104
113 113110 112 110
2013 2014 2015 2016 2017 2018 2019
91 95114 118 119 120 121
2013 2014 2015 2016 2017 2018 2019
13.914.7
15.616.1 16.1 16.5 16.5
2013 2014 2015 2016 2017 2018 2019
16
The five pillars of Strategy 2020–2024
Further develop
our offering
Combine in-
person and digital
channels
Grow organically
and if possible
through acquisitions
Support
employees in their
development
Simplify
processes
17
We will further develop our offering
• Further develop and expand our core competencies in
the areas of financing, investments/retirement planning
and transactions, in line with our clients’ needs.
• Give our clients comprehensive expert advice and
provide an offering that delivers the “best solution”
(e.g. comparable mortgage offering).
• Expand our offering so that it covers our clients’ entire
value chain (e.g. AgentSelly)
18
We will combine in-person and digital channels
• In-person or digital? It’s up to the client. We will ensure they get an outstanding
client experience.
• We attach great importance to providing customised support and advice –
whether in person or digitally.
• We will continue to invest in digitisation and strengthen our position as an
innovator on the Swiss financial market.
19
Growth – organic or by acquisition
140 additional client advisors
and retirement specialists 14 new branches
New branches in the Zurich area
and north-western, French-
speaking and eastern Switzerland
Covering the whole market
area with our comprehensive
offering
20
Supporting employees and simplifying processes
• Support employees in
developing their skills
• Foster the expertise our staff
need to offer clients
comprehensive advice
• Increase efficiency
• Simplify internally and externally
We are simply a bank.
21
Summary
• Strategy 2020–2024 is forward-looking and client-focused
• We will step up the pace of expansion, invest CHF 50 million and add 170
new full-time equivalents
• We will open 14 new branches
• We will combine in-person and digital channels
• We will deliver significantly higher consolidated net profit over the long term
and offer an attractive dividend yield
22
Overview
About Valiant
Business Strategy 2024
Q1 2020 financial results
Financial targets and outlook for 2020
Environmental, social and governance milestones
Appendix
23
59.855.8 58.3 55.9 57.0
50
55
60
65
70
75
80
2013 2014 2015 2016 2017 2018 2019
65.0
IT cost savings of CHF 10m p.a.
from IT (base FY 17) and 1m
p.a. from Triba (base FY 18)
Cost/income-ratio as %
72.669.8
64.4 64.1
58.458.3
incl. depreciation
excl. depreciation
Sustainable earnings power
Stable profitability
Stable margins despite declining interest rates
Stable capital base
Strict cost control, despite strategy implementation
Total net interest margin, bps
Net profit in CHF m, ROE as % Total capital ratio as %
101
104
113 113110
112110
2013 2014 2015 2016 2017 2018 2019
91.4 94.5 114.4 117.5 119.2 120.3 121.1
5.1 5.15.6 5.6 5.5 5.4 5.3
2013 2014 2015 2016 2017 2018 2019
62.361.5
As at 31/12/2019
24
3M 2020
in CHF m
3M 2019
in CHF mChange
Group profit 26.2 28.2 -7.4%**
Operating profit (pre tax) 31.5 31.4 0.1%
Net interest income* 80.2 76.8 4.5%
Net interest margin* 105bp 111bp -6bp
Fee and commission income 16.0 14.6 9.8%
Operating expenses -59.4 -57.2 3.8%
31/3/2020
in CHF m
31/12/2019
in CHF mChange
Loans
- of which mortgages
25 168
23 490
24 803
23 332
+1.5%
+0.7%
Total capital ratio as % 16.3 16.5 -0.2
** +0.7% adjusted for extraordinary income
* Before value adjustments for credit risk, and loan losses
3M 2020 highlights
25
• Valiant and the government have been helping SMEs hit by the coronavirus outbreak
• Initiatives taken by the federal government in response to the coronavirus crisis include:
Pledges to spend ~CHF 62bn (including ~CHF 42bn for COVID-19 bridge loans)
Use of the banking system to allocate money quickly and broadly
The following conditions apply to COVID-19 bridge loans:
< CHF 500’000 100% guaranteed by the federal government
> CHF 500’000 85% guaranteed by the federal government
> CHF 20 m assessed on a case-by-case basis
As at 30/4/20 Valiant had accepted ~2’400 COVID-19 loan applications
As at 30/4/20 Valiant had granted ~CHF 300m (funded at -0.75% from the SNB)
• The SNB has requested that the countercyclical capital buffer for banks be eliminated
Impact for Valiant: minimum requirement will be reduced by 1.13%
• In addition to the above measures, cantonal and municipal support has been provided to SMEs
The Swiss federal government can afford theses measures to address the financial impact
of the coronavirus crisis (low debt levels, with debt/GDP ratio at 14% for 2019)
26
Coronavirus crisis - investor update
High margin despite negative SNB-rates and Covid-19
Average interest
revenue on assets
Net interest margin
Average interest
cost on liabilities*
27
79 74 72 66 6150
26 14 11
96
3
72
41
1911
2
1
2014 2015 2016 2017 2018 2019
Interest expense down sharply
in CHF millions
102
129
177
Customer deposits
incl. funds with
negative interest
rates
Mortgage bonds,
covered bonds
Average interest rate
Other bonds
70bp
51bp
39bp
32bp
1.91% 1.77%
Interest expense in
bp
86
• Funds with negative interest rates account for more than 10% of total liabilities
25bp
69
1.58% 1.03%1.29%
19bp
55
0.70%
3M 2020
12bp
28
Interest rate risks reduced
Drop in duration gap vs. 2018
prompting a decline in PV-sensitivity.
Stable swap portfolio.
Swap volume in CHF bn
Present value sensitivity of equity capital
as % (+100 bps)
Asset duration Liability duration
3.07 3.12 3.08 3.19 3.09 3.08
2.70 2.82 2.81 2.933.08 3.03
2015 2016 2017 2018 2019 3M 2020
-4.17 -3.48 -3.01 -3.49-2.45 -2.00
2015 2016 2017 2018 2019 3M 2020
1.68 1.94 2.40 2.343.50 3.50
2015 2016 2017 2018 2019 3M 2020
29
Operating income up 4.9%
* Before value adjustments for credit risk, and loan losses
3M 2020
in CHF m
3M 2019
in CHF mChange
Net interest income* 80.2 76.8 4.5%
- value adjustments -4.9 -1.3 nm
Net interest income
(after value adjustments)75.3 75.5 -0.2%
Net fee and commission income 16.0 14.6 9.8%
Net trading income 2.7 3.2 -14.5%
Other income 1.5 1.2 23.4%
Operating income* 100.5 95.8 4.9%
30
Operating expenses up 3.8%
3M 2020
in CHF m
3M 2019
in CHF mChange
• Personnel expenses -33.4 -32.1 4.1%
• Other operating expenses -26.0 -25.1 3.4%
Operating expenses -59.4 -57.2 3.8%
Cost/Income Ratio
(before depreciation)59.1% 59.7%
Cost-Income Ratio
(after depreciation)63.7% 65.7%
31
Operating profit up 0.1%
3M 2020
in CHF m
3M 2019
in CHF mChange
• Depreciation of fixed and intangible
assets, and impairments of holdings-4.6 -5.7 -18.7%
• Changes to provisions and other value
adjustments, and losses-0.0 -0.1 nm
Operating profit 31.5 31.4 0.1%
32
Group profit -7.4%*
3M 2020
in CHF m
3M 2019
in CHF mChange
Operating profit 31.5 31.4 0.1%
• Extraordinary income 1.5 4.4 -64.8%
• Extraordinary expenses -0.0 0 nm
• Changes in reserves for general
banking risks0.0 -0.0 nm
• Taxes -6.8 -7.6 -9.7%
Group profit 26.2 28.2 -7.4%*
* +0.7% adjusted for extraordinary income
33
Loan growth of 1.5%
* Total funding (client deposits and bonds) as % of client loans
31/3/2020
in CHF m
31/12/2019
in CHF mChange
Total assets 31 083 29 906 3.9%
Client loans* 25 168 24 803 1.5%
• Mortgages 23 490 23 332 0.7%
• Due from customers 1 678 1 471 14.1%
Client deposits 19 470 19 195 1.4%
Coverage ratio on client deposits 77.4% 77.4%
Total funding ratio* 106.4% 106.7%
34
Capital ratio as %
CET-1
Tier2
Capital adequacy in target area
Upper limit 17%
Lower limit 15%
*without profit contribution for the current year
Eligible capital (m CHF) 2'074 2'126 2'203 2'273 2'182 2'218 2'217
- thereof Tier2 150 150 150 150 0 0 0
- thereof CET-1 1'924 1'976 2'053 2'123 2'182 2'218 2'217
35
Overview
About Valiant
Business Strategy 2024
Q1-2020 financial results
Financial targets and outlook for 2020
Environmental, social and governance milestones
Appendix
36
• Profitable lending growth of 3–4%
• 2020 full-year net profit in line with previous year
Financial targets
• Annual lending growth >3%
• 3% annual growth in fee and commission income
• Capital ratio: 15–17%
• Dividend: CHF 5.00 for 2019
• Payout ratio: 50–70%
• Long-term increase in consolidated net profit,
ambition to achieve a ROE of 6%, above cost of capital
• Risk policy to remain cautious
Outlook for 2020
37
Overview
About Valiant
Business Strategy 2024
Key financials
Financial targets and outlook for 2020
Environmental, social and governance milestones
Appendix
38
Environmental, social and governance milestones
39
Overview
About Valiant
Business Strategy 2024
Q1 2020 financial results
Financial targets and outlook for 2020
Environmental, social and governance criteria
Appendix
40
Ongoing market expansion
Western Switzerland (opened in):
• Morges (2017)
• Vevey (2018)
• Nyon (2019)
96 existing
branches
WilRheinfelden
Nyon
Vevey
Frauenfeld
Eastern and Northern
Switzerland
(to be opened in*):
• Frauenfeld (2020)
• Rapperswil (2020) * subject to Corona-Crisis
Morges
St.
Gallen
Rapperswil
Eastern and Northern
Switzerland (opened in):
• Rheinfelden (2019)
• St. Gallen (2019)
• Wil (2019)
Canton of Zurich
(to be opened by 2024):
• Altstetten
• Bülach
• Horgen
• Meilen
• Oerlikon
• Uster
• Winterthur
Additional branches
(to be opened by 2024):
• Muttenz (BL)
• Liestal (BL)
• Schaffhausen (SH)
• Pully (VD)
41
Revamping front-office areas and streamliningservices
Revamping front-office areas
• Client advisory service still present and strengthened
• Counters will be re-designed in 60 branches
• 18 larger branches with traditional counters to remain after
2022
• 65 FTEs affected; no layoffs foreseen
• Investment: approx. CHF 14m up to 2021
• Cost savings: approx. CHF 4-5m p.a. as of 2022
Further streamlining thanks to digitisation
• Online scheduling of meetings
• Multi-banking for SMEs
42
Valiant covered bond spread
Covered bonds: successful diversification of funding
Valiant covered bond programme
• Successful issues of CHF 1.2 billion in 2019 (vs. CHF 0.5
billion in 2018 and CHF 0.25 billion in 2017)
• All covered bonds are rated Aaa by Moody's; they
provide a broader basis for funding
• Targeted reduction in interest rate and funding risks
• Elimination of funding disadvantage vs. banks with state
guarantees
• Funding of growth in new market areas with very
favourable market conditions
• Continuous, long-term programme with annual issues of
at least CHF 500m planned
Spread as % vs. mid-swap in 2019
-
0.020
0.040
0.060
0.080
0.100
0.120
0.140
0.160
0.180
Valiant Covered Bond April-2024 Valiant Covered Bond Dec-2027
Pfandbrief-Bond Dec-2026 Credit Agricole Bond Jul-2027
As at 31/12/2019
43
Valiant with strong local roots
Roots go back to 1824,
when Ersparniskasse
Murten was created
Valiant Holding founded
Merger of
• Spar- und Leihkasse Bern
• Gewerbekasse Bern
• BB Bank Belp
Mergers with
Obersimmentalische
Volksbank
• Bank Jura Laufen
• Spar + Leihkasse
Steffisburg
• Caisse d’épargne
de Siviriez
Mergers with
• Luzerner Regiobank
• IRB Interregio Bank
Merger of all subsidiary
banks under the
Valiant Bank umbrella
1824 2012 2017200920021997
Acquisition of
Triba Partner
Bank AG
44
45%
36%
18%
Client loans: CHF 24.8bn
Segment and expense view
47%
32%
19%28%
Depreciation and other provisions: CHF 28m
Client assets: CHF 28.3bn
Medium-sized
companies
Retail clients
Operating expenses: CHF 234m
44%
56%
50%
17%
26%
7%
23%
77%
Self-employed
individuals and small
companies
General and
administrative
expenses
Retail clients
Other provisions
and losses
Medium-sized
companies
Self-employed
individuals and small
companies
Personnel
expenses
Affluent private
clients
Affluent private
clients
Depreciation, amortisation
and impairments on
holdings
As at 31/12/2019
45
The Valiant share
~54% owned by institutional shareholders
Private
shareholders
46%
Unregistered
shares 18%Non-Swiss inst.
investors 9%
Swiss inst.
investors 27%
• 100% free float
• ISIN CH0014786500, Ticker: VATN.SW
• Total 15’792’461 shares, par value of CHF 0.50
• Growing portion of institutional and foreign shareholders
• No treasury shares since 31/12/2016
• Largest shareholding: UBS Fund Management (5%)
Swisscanto Fondsleitung (3%)
Valiant share facts Dividend policy
Performance at year end since 31/12/2014
31’200 shareholders
• Stable or rising dividends since founded in 1997
• Target payout ratio: 50-70% of net profit
• Dividend for 2018: CHF 4.40
• Dividend for 2019: CHF 5.00*
*subject to approval at the next AGM
As at 31/12/2019
Source: Bloomberg
46
Key per-share data (investor workbook)
• Further data can be found in our investor workbook:
https://www.valiant.ch/results
Share data 2 0 19 2 0 18 2 0 17 2 0 16 2 0 15 2 0 14 2 0 13 2 0 12
Book value/share in CHF 146.79 143.50 139.47 134.73 129.90 125.76 122.82 120.16
Earnings/share in CHF 7.67 7.62 7.55 7.44 7.24 5.98 5.79 8.04
P/E ratio 12.84 14.17 13.96 13.63 16.29 13.79 13.79 10.70
P/B ratio 0.67 0.75 0.76 0.75 0.91 0.66 0.65 0.72
Dividend payout ratio as % 65 58 53 51 50 54 55 40
Dividend yield as % 5.1 4.1 3.8 3.7 3.1 3.9 4.0 3.7
Dividend in CHF 5.00 4.40 4.00 3.80 3.60 3.20 3.20 3.20
Share price 31 Dec in CHF 98.40 108.00 105.40 101.40 118.00 82.55 79.85 86.90
Total shares 15'792'461 15'792'461 15'792'461 15'792'461 15'792'461 15'792'461 15'792'461 15'792'461
Treasury shares 0 0 0 0 15'249 20'185 24'654 25'216
Shares outstanding 15'792'461 15'792'461 15'792'461 15'792'461 15'777'212 15'772'276 15'767'807 15'767'245
M arket cap 31 Dec in M io. CHF 1'554 1'706 1'665 1'601 1'862 1'302 1'259 1'370
47
ContactJoachim Matha, Head of Investor Relations
Phone +41 (31) 310 77 44
Information for investorsIn German: www.valiant.ch/investoren
In English: www.valiant.ch/investors
In French: www.valiant.ch/fr/investor-relations
Financial calendar
13 May 2020 Annual General Meeting
6 August 2020 6M 2020 results
5 November 2020 9M 2020 results
This document is provided solely for your information. It does not constitute an offer to sell or an invitation or recommendation to purchase or sell specific products, engage in financial transactions or conclude any legal
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
they are fully aware of the associated risks and are in a position to assume any losses incurred. Please also consult the brochure entitled “Special Risks in Securities Trading”, which you can order from us. The past
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
price fluctuations. Although all reasonable care is taken to ensure that the information provided is correct as based on reliable sources, no representation or warranty is made, express or implied, regarding the correctness,
reliability, timeliness or completeness of the information provided. To the extent permitted by law, Valiant Bank AG assumes no liability whatsoever for any loss, whether based on this information or as the result of the
risks inherent in financial markets. Neither this document nor any copy thereof may be sent to or taken into the United States or distributed in the United States or to any US persons.
Financial calendar and contact information