kepler cheuvreux swiss seminar 2018: valiant investor ... 2 kepler cheuvreux swiss seminar, march...

Kepler Cheuvreux Swiss Seminar 2018:Valiant investor presentation

Zürich 23 March 2018

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


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


“We’re simply a bank”

11 cantonsProximity to about 50% of the

population of Switzerland

5

Simple business model. Clear focus on mortgages.


“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


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


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


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 3: Stringent strategy implementation

Appendix


Stable margins despite declining interest rates

11

Average interest

rate on assets

Net interest margin

Average interest

cost in % of assets


-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


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


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


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


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 3: Strategy implementation on track

Appendix


Ambitious strategy and financial targets up to 2020

We will maintain our cautious risk profile


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.


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


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


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)


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 2: Key financials: sustainable and stable earnings

Part 3: Strategy implementation on track

Appendix


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


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


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

https://youtu.be/qa0y6tZY3qY

25

Solid 2017 full-year results

Net interest income*

Adjusted operating profit*

Group profit


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*


* Private clients without financing or assets with Valiant


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%


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


See www.valiant.ch/results

http://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


ContactMarcus Händel, Head of Investor Relations

[email protected]

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

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.

mailto:[email protected]

http://www.valiant.ch/investoren

http://www.valiant.ch/investors

kepler cheuvreux swiss seminar 2018: valiant investor ... 2 kepler cheuvreux swiss seminar, march...

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