NIBC BANK COVERED BOND PRESENTATION - September 2019
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NIBC BANK
COVERED BOND PRESENTATION
September 2019
1
EXECUTIVE SUMMARY
▪ Focused mid-market corporate and retail franchise with differentiated approach
▪ Return on equity of 9.7% in H1 2019 (from 10.8% in 2018)
▪ Net interest margin increased to 1.88% in H1 2019 (up from 1.84% in 2018)1
NIBC
▪ Credit loss expenses at EUR 21 million in H1 2019 (equal to H1 2018)
▪ Cost-to-income ratio at 46% in H1 2019 (from 45% in 2018)
▪ Solid capital position, with fully-loaded CET 1 ratio at 18.5%2 and leverage ratio of 7.0% at H1 2019
▪ AAA/AAA (S&P/Fitch) rated Conditional Pass-Through Covered Bonds
▪ Law-based programme, registered with the Dutch Central Bank
Covered Bond ▪ Favorable regulatory treatment
Programme
▪ Documented minimum overcollateralisation of 15%
▪ Cover pool of prime Dutch residential mortgage loans
▪ Total residential mortgage book of EUR 8.9 billion3
▪ On the back of the strong performing Dutch housing market, NPLs are low and credit loss expense in H1 2019 was
Mortgage Business negative (recovery) by EUR 4 million
▪ Origination via independent intermediaries, underwriting criteria fully controlled by NIBC
▪ In-house arrears and foreclosure management
1: NIM excluding IFRS 9 effect. Including the IFRS 9 effect, the NIM was 2.10% in H1 2019 and 2.11% in 2018 2
2: Pro forma CET1 ratio at H1 2019 is 16.1%; this includes the outcome of an Internal Model Investigation (IMI) by DNB that has resulted in 30% additional RWAs for our
corporate loan portfolios
3: Excludes buy-to-let exposure of EUR 0.7 billionTABLE OF CONTENTS
1. NIBC BUSINESS UPDATE HALF YEAR 2019 4
2. DUTCH MORTGAGE MARKET 18
3. RETAIL CLIENT OFFERING AND ASSET QUALITY 21
4. CONDITIONAL PASS-THROUGH COVERED BOND PROGRAMME 25
APPENDIX I MORTGAGE BUSINESS AT NIBC BANK 30
APPENDIX II MAIN UNDERWRITING CRITERIA 33
APPENDIX III ASSET COVER TEST 36
APPENDIX IV CONDITIONAL PASS-THROUGH SCENARIOS 38
APPENDIX V INVESTOR REPORTING AND LEGAL FRAMEWORK 40
APPENDIX VI KEY FIGURES AND BALANCE SHEET NIBC 43
3NIBC BUSINESS UPDATE
HALF YEAR 2019
4CORPORATE CLIENT OFFERING
Progressing well with rebalancing strategy
CORPORATE LOAN ORIGINATION REBALANCING THE PORTFOLIO FACTS AND FIGURES
SELECTIVE GROWTH IN CHOSEN NET PROMOTOR
ORIGINATION SECTORS OFFSET BY SCORE (NPS)
REDUCTIONS
1.0bn 9.7bn 47%
1
In EUR bn
3.7
▪ Growth in chosen sectors like
Structured Finance and Digital
Infrastructure C+
/PRIME
▪ Growth in Leasing with Beequip (+20%)
3.1
▪ Reduced exposures in Energy, Shipping
72
1
and Leveraged Finance by over EUR
200m
1.0 ▪ Continued focus of margin over
volume /OUTPERFORMER
2017 2018 H1 2019
1: FY 2018 score, survey not updated for H1 2019 5RETAIL CLIENT OFFERING
Strong mortgage origination results in market share of 4%
MORTGAGE LOAN ORIGINATION GROWTH CLIENTS
STRONG ORIGINATION MARKET SHARE ▪ Number of clients +8% since
FY 2018
▪ Total number of clients 107k
1.8bn 4.3% ▪ Number of clients -2% since
FY 2018
▪ Total number of clients 302k
MORTGAGE LOAN FACTS AND FIGURES
LOW RISK PORTFOLIO NIBC DIRECT
PORTFOLIO 12.8
In EUR bn
9.8
11.6
2.4
3.3
▪
▪
On-balance portfolio growth of EUR 300
million
Strong growth OTM portfolio from EUR
7.7 CUSTOMER
SURVEY SCORE
0.7 2.4 billion to EUR 3.3 billion SAVINGS1
0.3 0.6 0.7
0.6 ▪ Secured second mandate in OTM, NIBC DIRECT
8.2 8.6 8.9 totaling OTM mandates to EUR 4.5
2017
Owner-occupied
2018
Buy-to-let
H1 2019 ▪
billion
Growth in Buy-to-let portfolio of 4%
8.1 CUSTOMER
SURVEY SCORE
Fair value adjustment Originate-to-manage MORTGAGES1
1: FY 2018 score, survey not updated for H1 2019 6OUR STRATEGIC PRIORITIES
Further optimisation of capital structure Continuous evolution of client franchise, expertise and
and diversification of funding propositions
▪ Lower funding costs at 72bps ▪ Progressing well with the execution of the rebalancing
▪ Strong CET 1 ratio of 18.5%; pro-forma CET 1 strategy, reducing exposure in highly-cyclical sectors
following the impact of the IMI is 16.1% ▪ Strong mortgage origination across all tenors
▪ Interim-dividend reconfirmed at EUR 0.25 per
share
Focus on growth of asset portfolio in
core markets
▪ 20% growth in Leasing (Beequip)
▪ Growth in Structuring and Digital Infrastructure
▪ On-balance growth of mortgage portfolios of
EUR 300m
Ongoing investment in people, culture and ▪ Off-balance growth of mortgage portfolios of
innovation EUR 900m
▪ Second group of senior staff participated in
IMD program
▪ ‘Young NIBC’ – many activities organized Diversification of income
ranging ▪ Secured second OTM mandate and increased
from Brexit seminar, Meet the Client, Young total OTM mandate to EUR 4.5 billion
Financials network to sports and ▪ Markets business still challenging
charity/volunteering events
▪ Election of Deal of the Quarter based on
engagement (shares and likes) in Social Building on existing agile and effective organisation
Media ▪ Strategic investments in fintechs continue; contract with OakNorth
▪ NIBC Sustainability report 2019 published signed
▪ Permanent and increased focus on ‘Know-Your-Customer’ (KYC) and Anti-
Money Laundering results in further strengthening of processes on both 7
sides of the businessINCOME STATEMENT
Steady performance in H1 2019
INCOME STATEMENT PROFIT AFTER TAX AND RETURN ON COMMENTS
EQUITY ▪ Profitability remained stable in H1 2019,
IFRS 9 IFRS 9 H1 2018
vs with a profit after tax attributable to
H1 2019 H1 2018 H1 2019 shareholders of EUR 83 million in H1 2019
Net interest income 209 207 1% compared to EUR 84 million in H1 2018
13.6%
Net fee and commission income 19 21 -7%
▪ Return on equity declined to 9.7% (H1
Investment income 16 21 -24% 11.9% 2018: 10.5%) due to the higher equity base
10.5% 10.8%
Other income 7 5 37% 9.7% at 1 January 2019 compared to 1 January
9.0% 2018
Operating income 251 254 -1%
Personnel expenses 57 55 3%
▪ Net interest income remained relatively
stable with a 1% increase compared to H1
Other operating expenses 47 53 -12%
53
44 2018, but continues to be affected by the
Depreciation and amortisation 3 3 8% adoption of IFRS 9
Regulatory charges 9 9 -2% ▪ Excluding the IFRS 9 impact of EUR 19
Operating expenses 116 120 -4% million in H1 2019 and EUR 28 million in
173 H1 2018, net interest income increased by
Net operating income 135 134 1% 160
6%
Credit loss expense / (recovery) 21 21 3%
84 83 ▪ Operating expenses decreased by 4% in H1
Tax 25 23 9%
2019, mainly driven by a decrease from
Profit after tax 89 90 -2% 2017 H1 2018 2018 H1 2019 one-off expenses in H1 2018 related to the
Profit attributable to non-
IPO being partially compensated by higher
6 6 0% Non-recurring profit
controlling shareholders expenses and investments in H1 2019 for
Profit after tax
Return on equity
our IT transition program, regulatory
Profit after tax attributable to
shareholders of the company
83 84 -1%
Return on equity ex. non-recurring projects and new ventures
8PORTFOLIO VOLUMES AND SPREADS
Successful rebalancing of the portfolios at healthy spreads
CORPORATE LOAN SPREADS & VOLUMES RETAIL ASSET SPREADS & VOLUMES COMMENTS
▪ Corporate client assets:
3.06% 2.99% 3.52%
3.28% 3.29% — Corporate client assets for our own book
2.73% decreased in 2019 by 2% to EUR 9.7 billion,
2.53% reflecting the ongoing rebalancing of our
2.79% 2.77% 2.36% 2.32% portfolios:
2.54%
• The cyclical leveraged finance,
2.08% shipping and energy portfolios
1.76% decreased by EUR 0.2 billion, partially
1.53%
compensated by
2017 2018 H1 2019 2017 2018 H1 2019
Portfolio spread • An increase of EUR 0.1 billion in the
Portfolio spread Origination spread Origination spread BtL more granular receivables finance and
Origination spread owner-occupied lease receivables portfolios
9.8 9.9 9.7
0.2 — The average portfolio spread decreased to
0.3 0.2 9.1 9.6
0.2
0.2
0.2
9.3 2.73%, mainly driven by a further decrease
0.3 0.7
0.3 0.4
0.6
0.6 of the average origination spread to 2.54%,
0.5
reflecting the rebalancing of the portfolios
▪ Retail client assets:
8.2 8.6 8.9 — The own book portfolio of mortgage loans
9.0 9.0
8.7
increased in 2019 by 3% to EUR 9.6 billion
0.9 0.8 3.3
0.5 2.4 — The average portfolio spread decreased
0.7
slightly to 2.32%, even though origination
2017 2018 H1 2019 2017 2018 H1 2019 spreads improved
Corporate loans Lease receivables Owned Occupied Buy-to-Let
Investment loans Originate-to-Manage
Equity investments Fair Value Adjustment Originate-to-Manage
Note: 2017 figures include Vijlma. Spreads reflect spreads above the 3 month euribor base rate 9NET INTEREST INCOME
Further improvement of net interest margin
NET INTEREST MARGIN & NET INTEREST NET INTEREST MARGIN & FUNDING COMMENTS
INCOME SPREAD ▪ Excluding the IFRS 9 impact of EUR 19
(EUR million) million in H1 2019 and EUR 28 million in H1
2018, net interest income increased by 6%
and the net interest margin from 1.75% to
1.88%
▪ The further reduction of the effective
funding spread from 0.81% in H1 2018 to
2.11% 2.10% 0.72% in H1 2019 was the main driver
427
1.90% behind the improvement
354 1.64%
1.84% 1.88%
1.75%
207 209
0.87%
0.81%
0.73% 0.72%
2017 H1 2018 2018 H1 2019 2017 H1 2018 2018 H1 2019
Net interest margin
Net interest margin ex. IFRS 9
Funding spread
Note: 2017 figures exclude Vijlma
10NET FEE AND COMMISSION INCOME
Investments in new fee generating products are paying off
NET FEE AND COMMISSION INCOME COMMENTS
(EUR million) ▪ The end of 2018 was marked by the sale and exits of a significant part
of our fund investments, resulting in lower investment management
54 fees in H1 2019
51
7 ▪ We were able to keep the decrease of total net fee and commission
3
income in H1 2019 (EUR 19 million) limited compared to H1 2018:
4
— Owner occupied mortgage loans under management continued
11
to grow, which is reflected in the originate-to-manage fees
11 increasing from EUR 5 million in H1 2018 to EUR 7 million in H1
2019
11 — Following the decrease of NIBC's fund investments, investment
management fees decreased in H1 2019 to EUR 4 million (H1
2018: EUR 8 million)
19 21 19
2 10 — Lending related fees increased in H1 2019 to EUR 6 million,
1
5 compared to EUR 4 million in H1 2018. This development mainly
7 relates to higher structuring, underwriting and arrangement fees;
2
4 1 — M&A fees declined in H1 2019 to EUR 1 million (H1 2018: EUR 2
14 15 6 million)
8
4
2017 H1 2018 2018 H1 2019
Investment Management Lending related fees M&A
Originate-to-manage NIBC Markets
11INVESTMENT INCOME
Stable performance on a more client focused portfolio
EQUITY INVESTMENT PORTFOLIO BY TYPE EQUITY INVESTMENT PORTFOLIO H1 2019 COMMENTS
▪ Investment income is sensitive to the
H1 2019 2018 sentiment in the equity markets and can
therefore be volatile year on year
Direct
investments 89 80 ▪ Investment income decreased to EUR 16
Investments in million in H1 2019 from EUR 21 million in
1% H1 2018 due to the significant exits end
funds 100 97 14%
2018 and consequently a lower portfolio
Strategic
5% (H1 2019: EUR 238 million compared to H1
investments 34 24 37%
2018: EUR 398 million)
Real estate EUR 238
investments 13 11 million ▪ H1 2019 total investment income of EUR
16 million is fully related to revaluation
adjustments
Other 2 3
42% ▪ The on-balance equity investment
Total: 238 215 portfolio increased by 11% in H1 2019 to
EUR 238 million, driven by new
investments in fintech companies and
revaluations
▪ Substantial part of the increase in strategic
Direct investment Investments in funds
investments relates to an investment in
iwoca
Real estate investments Strategic investments
Other
12OPERATING EXPENSES
Fully loaded cost/income ratio absorbing regulatory expenses
EVOLUTION OF OPERATING EXPENSES COST/INCOME RATIO COMMENTS
▪ Operating expenses decreased by 4% in H1
2019, mainly driven by the following:
— H1 2018 expenses include expenses
239 related to the IPO (EUR 8 million)
233
4 9 — In H1 2019 one-off expenses are
included related to the completion of
several milestones in our IT transition
program;
48%
— Furthermore continuous investments
46% were made in H1 2019 in regulatory
45% projects and in our new ventures
229 230 46% ▪ Total costs related to the license to operate
are estimated between EUR 25 - 30 million
43% on an annual basis
42%
116
2017 2018 H1 2019 2017 2018 H1 2019
Cost/income ratio
Non-recurring expenses Operating expenses
Cost/income ratio ex. non-recurring
13CREDIT LOSS EXPENSE
Credit loss expense H1 2019 in line with H1 2018
DEVELOPMENT OF CREDIT LOSS EXPENSE AND KEY FIGUES ASSET QUALITY COMMENTS
COST OF RISK ▪ Credit loss expense in H1 2019 is at
H1 2019 2018 2017
0.73% the same level as in H1 2018 at EUR
Impairment coverage 21 million
0.62% 0.57% ratio 32% 31% 40%
▪ The overall development displays
Non-performing loan the stable average credit quality of
ratio 2.7% 2.8% 2.8% the corporate loan portfolio and
0.50%
Top-20 exposures / strong performance of the mortgage
0.33% portfolio, which displayed a credit
0.25% Common Equity Tier 1 72% 77% 66%
loss release in H1 2019 of EUR 4
2 5
Exposure corporate million
arrears > 90 days 1.9% 2.7% 1.7%
▪ Some challenges remain in certain
Exposure residential
portfolios, especially with respect to
mortgage loans arrears >
90 days 0.1% 0.2% 0.5% Leveraged Finance
56 54 ▪ H1 2019 displayed an improvement
1 LtV Dutch residential of the credit quality of NIBC’s
mortgage loans 69% 72% 75% portfolios, which is further reflected
21
in the development of the various
LtV BTL mortgage loans 51% 52% 57% asset quality ratios displayed in the
2017 2018 H1 2019 graphs to the left
Credit loss expense Other credit losses ▪ The non-performing loan ratio at H1
2019 of 2.7% compares to an EBA
Cost of risk Impairment ratio Q1 2019 market average of 3.1%
Cost of risk = credit loss expense divided by average RWAs
Impairment ratio = credit loss expense divided by average assets loans & mortgages 14FUNDING
Diversified funding with longer maturities
FUNDING COMPOSITION COMMENTS
▪ Continued solid funding profile, demonstrated by:
H1 2019
— Diversified funding composition
Shareholders equity
— Stable liquidity ratios at high levels of 212%
16% 9% Retail funding (LCR) and 122% (NSFR)
Secured (wholesale) ▪ Wholesale transactions issued in H1 2019,
11% funding supporting the funding profile:
ESF deposits — a EUR 500 million 8-year public covered bond
42%
Unsecured (wholesale) — a EUR 300 million 5-year public senior non-
21% funding preferred bond
▪ Retail savings increased by 4% with inflow in the
Netherlands and Belgium. The on demand portion of
savings increased further to 65%
MATURING FUNDING
▪ The senior unsecured transactions of EUR 0.6bn that
mature in the remainder of 2019 include a funding
In EUR billion 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 ≥2029 transaction of EUR 0.5bn with a spread of 2.04%
Covered bonds - - 0.5 - - - 0.5 0.5 1.0 - ▪ Funding transactions of EUR 1.4bn that mature in
-
2020 include TLTRO of EUR 0.7bn and a short term
Other secured
0.0 0.8 0.5 0.1 0.3 0.0 0.0 0.0 0.0 0.1 0.1 floating rate note of EUR 0.3bn
funding
Senior unsecured 0.6 0.6 0.1 0.5 0.9 0.3 0.1 - 0.0 0.0 0.1
Subordinated - - - - - - 0.0 - 0.0 - 0.3
Total: 0.6 1.4 0.6 1.1 1.2 0.3 0.2 0.5 0.6 1.1 0.5
15CAPITAL
Strong solvency ratios
CET 1 DEVELOPMENT IN 2019 COMMENTS
▪ The pro-forma fully loaded CET 1 ratio mid
year 2019 (including the impact from the
-0.1% 0.1% -2.4% final outcome of an internal model
investigation (IMI) in 2019 by DNB) would
be 16.1%
▪ This is comfortably above both the required
SREP-level of 10.4% set by DNB for both
NIBC Holding and NIBC Bank as of August
2018 and our medium term objective of
14%
18.5% 18.5% ▪ The pro-forma fully loaded CET 1 ratio of
16.1% 16.1% also enables NIBC to be well
prepared for Basel IV. We estimate an RWA
impact of 10-20% before mitigating actions
▪ The pro-forma fully loaded total capital ratio
of 19.5% - in combination with the senior
non preferred transaction of EUR 300m
issued in H1 2019 - places NIBC in a solid
position to address MREL
31 December Increase RWA Other 30 June 2019 Increase RWA Pro forma 30
2018 corporate (30%) June 2019
1: SREP level for CET ratio incl. fully loaded combined buffer requirements, excl. pillar 2 guidance
16HALF YEAR PERFORMANCE
Delivering upon our promises with steady performance in first half of 2019
MEDIUM-TERM
METRICS OBJECTIVES H1 2019 COMMENTS
▪ Stable net profit H1 2019 of EUR 83 million, compared to EUR
Return on Equity
10 - 12% 9.7% 84 million in H1 2018
(Holding)
▪ Return on Equity (ROE) of 9.7%, well on track to achieve
medium-term objective by year-end (H1 2018: 10.5%). With
profits being stable, ROE declines slightly due to the higher
Cost-to-income
< 45% 46% equity base
(Holding)
▪ Fully-loaded cost-to-income ratio of 46%. Including costs
related to the IT transition and regulatory projects
CET1 ▪ CET 1 ratio of 18.5%, excluding half year profit. The pro-forma
≥ 14% 18.5% H1 2019 CET 1 ratio, following the IMI announcement in June,
(Holding)
is 16.1%
▪ Interim dividend proposed of EUR 0.25 per share, leading to a
Dividend pay-out payout of EUR 37 million
≥ 50% 44%
(Holding)
Rating
BBB+ BBB+ Stable Outlook
(Bank)
Note: Financials for NIBC Holding as of H1 2019, unless otherwise stated.
17DUTCH MORTGAGE MARKET
18MORTGAGE MARKET
DUTCH HOUSEHOLDS AND MORTGAGE MARKET ECONOMIC GROWTH AND UNEMPLOYMENT IN THE
NETHERLANDS2
▪ The Netherlands contains 7.7 million dwellings
8
▪ 4.4 millions dwellings are owner occupied
▪ Confidence in the housing market is at a level of 100 in July 2019, 6
having reached its low in December 2012 at 51 and a peak in
Percentage (%)
4
November 2016 at 1211
▪ Household debt offset by high pensions and savings 2
▪ Despite the rising prices, current low interest rates keep housing
costs for homeowners at relatively low levels 0
2013 2014 2015 2016 2017 2018 2019
-2
GDP growth year-over-year Unemployment rate
AVERAGE MORTGAGE RATE3 AND HOUSE PRICE INDEX4 HOUSE SALES DEVELOPMENT4
140 8 300
130 250
Index (2015 = 100)
Percentage (%)
6
200
120 Thousands
4 150
110
2 100
100
50
90 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -
2013 2014 2015 2016 2017 2018 2019
Average mortgage rate (RHS) House price index (LHS)
Rolling 12-month housing sales
1: Source: Vereniging Eigen Huis. Monthly measurement of the Dutch homeowners association for the consumer confidence related to the housing market
2: Source: Statistics Netherlands (CBS), seasonally corrected figures 19
3: Source: Dutch Central Bank . Total weighted average interest rate of new residential mortgage contracts.
4: Source: The Netherlands’ Cadastre, Land registry and Mapping AgencyEVOLUTION OF DUTCH MORTGAGE LENDING STANDARDS
• New mortgages need • Interest deductibility
to be fully amortizing 2019 49.0%
for tax benefits • Interest deductibility • Interest deductibility
• According to the
• Code of conduct 51.0% 50.0%
• Changes to interest government policy
enforced • NHG max EUR 245k • NHG max EUR 245k
deductibility agenda the reduction
• NHG max EUR 350k • Max LTV 103% • Max LTV 101% of tax deductibility is
• NHG max EUR 290k;
only amortizing loans expected to
eligible accelerate
• Max LTV 105%
2011 2012 2013 2014 2016 2018 2019-
2015 2017
2023
• NHG max EUR 320k • Interest deductibility • European Mortgage • Interest deductibility
• Max LTV 106% 51.5% Credit Directive active 49.5%
• NHG max EUR 265k • Interest deductibility • NHG max EUR 265k
• Max LTV 104% 50.5% • Max LTV 100%
• NHG max EUR 245k
• Max LTV 102%
20RETAIL CLIENT OFFERING AND
ASSET QUALITY
21RETAIL CLIENT OFFERING
INTRODUCTION GEOGRAPHIES
▪ NIBC offers mortgages from its own balance sheet and it partners
8.9 EUR billion
with institutional investors using Originate-to-Manage mandates Owner occupied mortgage loans
▪ This dual-track strategy enables us to offer a full product range, 4.2 EUR billion
Savings
from short to long maturities, NHG and non-NHG as well as target
underserved segments such as Buy-to-Let
1.0 EUR billion
▪ NIBC does not maintain a retail branch network Savings
▪ Retail savings platform is fully internet based
▪ Mortgages are sold through partnerships with intermediaries, 4.1 EUR billion
where NIBC sets all underwriting criteria Savings
Figures for H1 2019
SAVINGS BALANCE NIBC DIRECT (EUR BLN) RETAIL CLIENT OFFERING ASSETS (EUR BLN)
9.3 8.9 9.3
12.9
1.0 1.0
0.9
11.6
4.4 4.1 9.8 3.3
4.1 2.4
0.7 0.7
0.3 0.6
0.6
3.9 3.9 4.2 8.6 8.9
8.2
2017 2018 H1 2019 2017 2018 H1 2019
Owner occupied Buy-to-let Fair value adjustment mortgages Originate-to-manage
Netherlands Germany Belgium
22RETAIL CLIENT OFFERING
MORTGAGE LOANS
▪ Total mortgage origination reached EUR 1.8bn in H1 2019 of which EUR 0.9bn for own book and EUR 0.9bn for Originate-to-Manage (OTM) mandate
▪ Portfolio of on-balance mortgages grew from EUR 9.3bn end of 2018 to EUR 9.6bn in H1 2019
▪ OTM Mandate increased to EUR 4.5bn, of which EUR 3.3bn already drawn
▪ fee generating initiative leading to income diversification
▪ flexibility to switch between on-balance sheet origination and OTM depending on market pricing
▪ strengthening client franchise
▪ Stable exposure to buy-to-let mortgage loans at EUR 0.7bn
▪ The mortgage loan portfolio displays a solid performance with negative credit loss expenses (recovery) of EUR 4 million in H1 2019
▪ Competition in the Dutch mortgage market is putting additional pressure on spreads for mainstream mortgage loans
ORIGINATION (EUR BLN) RETAIL ASSET SPREADS
3.52%
3.4 3.28% 3.29%
2.53%
1.9 1.8 2.36% 2.32%
1.8
0.7
0.9
2.08%
1.6
1.2 0.9 1.76%
1.53%
2017 2018 H1 2019 2017 2018 H1 2019
Portfolio spread Origination spread BTL Origination spread owner occupied
Own book Originate to manage
23DUTCH MORTGAGE LOANS
ARREARS >90DAYS INDEXED LOAN-TO-MARKET VALUE
Weighted-average LTIMV: 69% (H1 2019)
29%
0.5%
24%
22%
17%
17%
16%
16%
15%
15%
13%
0.2%
12%
12%
12%
10%
10%
10%
9%
9%
8%
8%
8%
0.1%
5%
2%
2%
2017 2018 H1 2019 NHG 100%
2017 2018 H1 2019
24CONDITIONAL PASS-THROUGH
COVERED BOND PROGRAMME
25COVERED BOND PROGRAMME
SUMMARY OF THE COVERED BOND PROGRAMME KEY BENEFITS
Robust Structure
Issuer: NIBC Bank N.V. ✓ Hard obligation for NIBC to redeem
NIBC set up a robust Covered
the bond at expected maturity (no
Bond Programme, benefitting Double
Bankruptcy remote Covered Bond optionality)
from a conditional pass- Guarantor: recourse:
through structure Company (CBC) ✓ Recourse on CBC in case of NIBC
default
Ratings: AAA/AAA (S&P/Fitch)
Prime Dutch residential mortgage ✓ LCR eligible (bucket: L1) and
Collateral: Regulatory:
loans1 favourable regulatory treatment
Documented
15%
minimum OC:
✓ De-linkage from issuer rating: a
Derivatives: None downgrade of the issuer rating does
Stable Ratings:
not directly affect the covered bond
ratings
Asset monitor: EY
REGULATORY Index: ✓ iBoxx eligible
Law based, registered with the
Format:
Dutch Central Bank
✓ No swap counterparties
✓ Back-up administrator
Regulated status: UCITS and CRD compliant Robust
✓ External account banks
Structure:
✓ External sub-services
Label: ECBC Covered Bond Label ✓ Live cash flows
1: Owner-occupied residential mortgages only; buy-to-let mortgages are not eligible collateral for the cover pool 26COVERED BOND PROGRAMME: CONDITIONAL PASS-THROUGH STRUCTURE
TRANSACTION STRUCTURE WHAT HAPPENS IF THE CONDITIONAL PASS-THROUGH
MECHANISM IS TRIGGERED?
▪ NIBC as issuer has a hard obligation (no option) to repay the ▪ Cash-flows received by the CBC are used to pay down the
covered bonds at scheduled maturity date relevant outstanding covered bonds
▪ Conditional pass-through structure addresses refinancing risk ▪ The CBC attempts to sell a randomly selected part of the cover
and ensures an orderly wind-down of the Cover Pool in case of pool every 6 months. The sale is only carried out when the
issuer default, avoiding the risk of a fire sale proceeds are sufficient to redeem the relevant bonds at par
▪ If the pass-through mechanism is triggered, the respective series ▪ The Amortisation Test is not allowed to deteriorate
become pass-through covered bonds
CONDITIONAL PASS-THROUGH EXPECTED INCREASE OF OC IN PASS- COMPARISON COVERED BOND
MECHANICS THROUGH SCENARIO (PER 6 MONTHS)1 STRUCTURES
50%
Issuer Event of No Bullet Hard Bullet
45%
Default Maturity Covered Bonds
40%
Yes 35%
30%
Amortisation Pass Bullet 25% Soft Bullet Extension
Test Maturity 20% Covered Bonds Period
15%
Insufficient
Fail funds at 10%
maturity
5%
All CB’s Relevant CB 0% CPT Covered Extension Period
converted to converted to Bonds
Pass-Through Pass-Through
1: Assuming all bonds in pass-through mode, 5% CPR and no losses 27COVERED BOND PROGRAMME: TRANSACTION STRUCTURE
NIBC TRANSACTION STRUCTURE
In a covered bond
structure payments to Sub-servicers
investors on the bonds
are guaranteed by the Principal
NIBC
CBC. For this guarantee Investors
a pool of Dutch prime Issuer Interest +
residential mortgages Principal
NIBC
is segregated in the
CBC Servicer
Cover Pool
Guarantee
Monthly cash flows
from the borrowers are
transferred to the CBC NIBC CBC
Collection
without first touching Security Trustee
Foundation Principal & Guarantor Pledge of
NIBC’s balance sheet Mortgage Receivables
Interest
Principal &
Mortgage
Interest
Borrowers
28NETHERLANDS SHOWS FULL COMPLIANCE WITH EBA’S BEST PRACTICES
EBA REPORT ON EU COVERED BONDS FRAMEWORKS (2016)
▪ In December 2016 the European Banking Authority (EBA) published a comprehensive analysis of regulatory developments in covered bond
frameworks in EU Member States, with a particular focus on the level of alignment with the EBA’s ‘best practices’ as formulated in 2014 to cover
areas not reflected in common EU legislation
▪ The Dutch framework was amended after publication of the 2014 ‘best practices’. Changes made include (amongst others):
▪ Required regulatory overcollateralization of 5%
▪ Liquidity buffer
▪ Requirement of appointing an external auditor
▪ Regular reporting requirements
▪ According to the analysis, the Netherlands shows full compliance with the best practices
EBA’S BEST PRACTICES
100%
50%
0%
NL DK FI RO UK FR GR BE DE IE PT SI CY PO IT SE ES LU NO AT SK CZ
Full Partial None
Source: EBA, Recommendations on harmonisation of covered bond frameworks in the EU, 20 December 2016 29APPENDIX I
MORTGAGE BUSINESS AT NIBC
BANK
30MORTGAGE BUSINESS AT NIBC BANK
NIBC BANK’S MORTGAGE BUSINESS
▪ NIBC has outsourced its origination to independent intermediaries and its standard servicing activities to a third party. This has created a highly
standardised and efficient business model
▪ Special servicing is performed in-house to ensure tailor-made solutions to optimise recoveries
▪ NIBC Bank has a dedicated team to manage the relationship with the servicers and to monitor the quality of their servicing. A major emphasis is put
on quality control and on ensuring that all processes remain ISAE 3402 compliant
IN-HOUSE PERFORMANCE OF CORE ACTIVITIES OUTSOURCING OF STANDARDISED ACTIVITIES
▪ Origination: ▪ Origination is done via dedicated independent intermediaries
▪ NIBC Bank sets the underwriting criteria ▪ The underwriting criteria are highly standardized and hard
▪ Deviations from underwriting criteria can only be made when coded in the systems of the servicers
accepted by NIBC Bank ▪ Intermediaries can only originate mortgages that meet the
▪ Servicing: underwriting criteria
▪ The arrears management is performed in-house to ensure ▪ Standard servicing activities are outsourced to specialized
tailor-made solutions to optimize recoveries mortgage servicers STATER and Quion:
▪ Payments
▪ Administration
▪ First contact point for clients
31MORTGAGE BUSINESS AT NIBC BANK
BASIC PRINCIPLES ARREARS MANAGEMENT
▪ In 2006 NIBC Bank decided to take the arrears and foreclosure management in-house since NIBC Bank was confident that it could decrease arrears
and losses via a result based approach.
▪ Employees have no insight into whether a loan has been securitized or transferred to the CBC or not.
▪ NIBC Bank uses the Salesforce CRM system in which the focus is on the client situation and performance is closely monitored through reporting and
dashboards on a daily basis.
▪ Team Early (which is part of Special Servicing) tries to get in contact with the borrower to make a payment arrangement and indicates the financial
situation. Special Servicing Mortgages (SSM) will follow up or step in depending on the situation.
NIBC Early NIBC Special Servicing
Arrears of max 2 months All clients in arrears with life events1 or arrears > 2 months
EARLY SPECIAL SERVICING MORTGAGES
▪ During the 1st month arrears clients receive (if necessary) up to 4 ▪ Specialized team including 1 account manager with extensive
letters and 5 calls. experience in (mortgage) credit management. Educated in
▪ Outbound calls within 6 days after first arrear is determined. restructuring mortgage loans.
▪ Mandate is maximum of two payment arrangements. ▪ Goal is to find the best structural solution; assess the situation and
▪ Over 90% of new arrears recover within the first 2 months. determine whether the problems are temporary or structural.
▪ Track and trace to get in contact with the client through multiple ▪ Client retention: preventing credit losses and meeting our duty of
channels (e.g. Chamber of Commerce, social media). care.
▪ Determine nature of problems (e.g. life events 2). ▪ Termination of the loan: limiting losses by maximizing foreclosure
▪ When arrear is indicated as incidental by Early the client can do a proceeds.
payment at once or a simple arrangement is setup with the client. ▪ Maximizing post-foreclosure proceeds.
▪ When client faces (temporary) financial hardship the client is
allocated to the SSM team.
1:Life events: divorce, deceased, unemployment (because of incapacity)
32APPENDIX II
MAIN UNDERWRITING CRITERIA
33MAIN UNDERWRITING CRITERIA
LAWS AND REGULATIONS AFFORDABILITY
▪ NIBC complies with: ▪ Steady income: Income is derived from the salary slip and proof of
▪ “Wet op het Financieel Toezicht” (WFT). Dutch Law employment. In case of self-employed borrowers, the annual reports
▪ Code of Conduct of Dutch Bankers Association (2013). The code of the last 3 years, the tax declaration and, for a director-owner, an
concerns e.g. minimum requirements to the borrower. income statement by the accountant is necessary.
▪ Temporary Rule of Mortgages. These guidelines concerns ▪ Comply or Explain: a predetermined test is available (comply), but
regulations to income and maximum loans and are yearly set by allows deviation if well-justified by the lender (explain). NIBC Direct
the government. origination only concerns Comply.
▪ GDPR (General Data Protection Regulation). European Law, NIBC ▪ Actual interest rate: is taken into account unless the fixed rate term is
and Stater are compliant to the requirements of the GDPR as under the 10 years. In case of shorter terms a pre-determined rate is
th
applicable per May the 25 2018. used (Q1 2019 5%) or the loan must be totally repaid at the end of
the fixed rate term (only by annuity or linear).
▪ LTI: Loan-To-Income is maximized in line with the Code of Conduct.
Calculations are based on guidelines from the NIBUD (An independent
institute focused on household expenses).
34MAIN UNDERWRITING CRITERIA LOAN AND COLLATERAL CREDIT HISTORY AND FRAUD ▪ Maximum loan amount: EUR 1.000.000. Loans above EUR 750.000 ▪ Bureau for Credit Registration (BKR): Credit history is checked at are treated as an overrule. BKR, ‘negative’ BKR-registrations which are allowed by NHG can be ▪ Maximum loan-to-Value: 100% and in case of energy saving facilities done without overrules. All the other ‘negative’ BKR registrations (EBV) 106%. must be handed to the overrule desk. The BKR registration must be ▪ NHG hurdle: EUR 290.000,- excl. EBV or EUR 307.400 incl. EBV cured. Specific criteria and surcharges are used by the overrule desk. ▪ The loan part above 80% of the Market Value has to be covered by ▪ Stichting Fraudebestrijding Hypotheken (SFH): Fraud is checked at mortality insurance that is pledged to NIBC. SFH which is located at the BKR office and coordinated by the Dutch ▪ The mortgage loan is secured by a first ranking mortgage right or a Banking Association. first and sequentially higher ranking mortgage right(s) over real ▪ A check is performed to verify the borrower’s identity. estate, an apartment right or a long lease (“erfpacht”) situated in the ▪ Kadaster (National Property Register): Additionally, a Kadaster check Netherlands. is performed to prevent illegitimate use of property. ▪ The property value is determined by a recent valuation report (
APPENDIX III
ASSET COVER TEST
36ASSET COVER TEST
Covered Bond Asset Cover Tests Minimum Cover Pool
Outstanding Bonds Test Outcome Higher of Asset Cover Test
LTV Cut-off +
other haircuts EUR 2.7bn1
109%1
1 x
Asset Percentage:
EUR 2.5bn 2 EUR 2.6bn x EUR 2.9bn
95%
3
Minimum OC:
15%
EUR 2.9bn
1
To meet the CRD requirements the LTV cut-off is included: For each mortgage receivable any amount exceeding 80%
of the indexed market value of the underlying collateral is not taken into account. Other haircuts are also included.
2
Following their analysis the rating agencies communicate a minimum asset percentage. The amount of bonds
relative to the amount of assets cannot exceed this percentage.
3
An additional feature not present in most other Dutch programmes is the 15% minimum OC, which is a hard
commitment irrespective of changing environment or rating agency opinions. By Dutch law the minimum nominal
OC is set at 5%.
1: This amount differs every month based on the characteristics of the mortgages in the portfolio. In August 2019 the cover ratio was 125.15%. 37APPENDIX IV
CONDITIONAL PASS-THROUGH
SCENARIOS
38CONDTIONAL PASS-THROUGH SCENARIOS
Conventional covered bonds: A combination of three events: bank default, sale of the pool not
possible and breach Amortisation test results in the following four scenarios:
1: The bank redeems the 2: The bonds are 3: If part of the cover pool 4: If in addition, the pool
bond at scheduled redeemed at maturity with cannot be sold to redeem deteriorates and the
maturity cash and sale of part of the the bonds at par, all bonds Amortisation test is
pool. Principal test holds to accelerate and the pool has breached, all bonds
protect later maturing to be sold, which may accelerate and the pool has
bonds result in a loss on the to be sold, which may
bonds result in a loss on the
bonds
Bond I Bond I Bond I Bond I
outstanding
outstanding
outstanding
outstanding
Bond II Bond II Bond II Bond II
time time time time
Conditional Pass-Through Covered bonds: A combination of three events: bank default, sale of the pool
not possible and breach Amortisation test results in the following four scenarios:
1: The bank redeems the 2: The bonds are 3: Pass-through is triggered 4: If in addition, the pool
bond at scheduled redeemed at maturity with at maturity if proceeds deteriorates and the
maturity cash and sale of part of the from sale of part of the Amortisation test is
pool. Amortisation test pool are not sufficient to breached, all bonds
holds to protect later redeem the bond in full become pass-through
maturing bonds bonds
Bond I Bond I Bond I Bond I
outstanding
outstanding
outstanding
outstanding
Bond II Bond II Bond II Bond II
time time time time
39APPENDIX V
INVESTOR REPORTING AND LEGAL
FRAMEWORK
40COVERED BOND PROGRAMME: INVESTOR REPORTING
INVESTOR REPORTING FOR COVERED BONDS
▪ Best in class reporting of NIBC originated and/or NIBC serviced transactions via
www.assetbacked.nl
▪ Following a European Covered Bond Council (ECBC) initiative, the Covered Bond
Label was introduced in 2012
▪ NIBC covered bonds carry the Covered Bond Label and reporting is done
according to the (Dutch) National Transparency Template and the (worldwide)
Harmonised Transparency Template
▪ Free registration (details treated confidentially) and optional subscription to
automated e-mail service (new uploads are automatically sent to recipients
inbox)
▪ Investor queries via website and investor.services@nibc.com
▪ Investor reports always timely available, including full performance information,
portfolio split and bond information
41DUTCH LEGAL FRAMEWORK AND DACB
DUTCH LEGAL FRAMEWORK FOR COVERED BONDS
▪ The Dutch Covered Bond Decree is in place since 1 July 2008. As per 1 January 2015 the legislation has been upgraded and engrained at all three
levels of legislation including the highest Law on Financial Supervision (“WFT”)
▪ The main aim of the new legislation is to increase transparency and protection for investors. It is less principle based and more rule based. Amongst
other, the following is included:
▪ Obligation to be UCITS as well as CRR compliant. No ABS as eligible assets allowed.
▪ Specific definition of Covered Bonds as a product and description of the structure
▪ Role of the Dutch Central Bank (DNB) more described, including enhanced supervisory powers
▪ Minimum OC of 105% nominal and 100% according to Article 129 CRR
▪ 6 month liquidity reserve required
▪ Post issuer default plan must be in place
▪ Minimum reporting requirements towards investors
▪ NIBC, ING, ABN AMRO, Rabobank, De Volksbank, Van Lanschot, Achmea, Aegon and Nationale Nederlanden have their Covered Bond programmes
registered with the Dutch Central Bank
DUTCH ASSOCIATION OF COVERED BOND ISSUERS
▪ As a result of the strong growth of the Dutch covered bond market, in January 2011 the Dutch issuers decided to establish the Dutch Association of
Covered Bond issuers (DACB)
▪ Aim of the DACB is to strengthen the market and product offering of Dutch covered bonds through e.g. improving transparency, standardisation and
general promotion
▪ The DACB was consulted in the making of the new regulations. More information can be found on www.dacb.nl
42APPENDIX VI
KEY FIGURES AND BALANCE SHEET
NIBC
43KEY FIGURES NIBC
EARNINGS ASSETS
IAS 39 IAS 39 IFRS 9 IFRS 9 IAS 39 IAS 39 IFRS 9 IFRS 9
€m
2016 2017 2018 H1 2019 €m 2016 2017 2018 H1 2019
Earnings Corporate & retail client offering
Corporate client assets (drawn & undrawn):
Operating income 398 559 551 251
Commercial Real Estate 1,042 1,264 1,307 1,269
Operating expenses 197 233 239 116
Energy 1,160 869 841 798
Profit after tax 104 216 229 89 Financial Sponsors & Leverage 1,682 1,596 1,353 1,262
Profit after tax attributable to shareholders 104 213 217 83 Fintech & Structured Finance 730 832 1,028 1,083
Net interest margin 1.47% 1.60% 2.11% 2.10% Infrastructure 1,742 1,763 1,639 1,579
Cost/income ratio 49% 42% 43% 46% Mid Market Corporates 1,359 1,359 1,472 1,456
Return on equity 6.0% 11.9% 13.6% 9.7 Shipping 1,512 1,297 1,370 1,300
Return on assets 0.45% 0.91% 0.99% 0.77% Total corporate loans (drawn & undrawn) 9,227 8,980 9,010 9,692
Earnings per share basic 0.71 1.46 1.48 1.13 Lease receivables 236 282 429 480
Earnings per share diluted 0.71 1.46 1.48 1.13 Investment loans 246 220 240 226
Dividend pay-out ratio 25% 45% 58% 44% Equity investments 262 343 215 238
Dividend per share 0.17 0.66 0.86 0.25 Investment property 271 0 0 0
Price/earnings ratio 5.59 6.99 Total corporate client assets (drawn & undrawn) 10,243 9,825 9,893 9,692
Price/book ratio 0.69 0.65 Retail client assets
Owner occupied mortgage loans – Netherlands 8,376 8,476 8,614 8,892
Buy-to-Let mortgage loans 371 617 632 655
Owner occupied mortgage loans – Germany (closed book) 84 53 29 23
Total retail client assets 8,831 9,146 9,275 9,570
Originate to manage assets
Corporate client assets 443 463 860 834
Retail client assets 15 729 2,413 3,263
Total originate to manage assets 458 1,192 3,273 4,097
Retail client savings
Netherlands 3,950 3,871 3,909 4,222
Germany 4,542 4,407 4,072 4,116
Belgium 1,229 1,029 940 966
Total retail client savings 9,721 9,307 8,921 9,305
44KEY FIGURES NIBC (CONTINUED)
ASSET QUALITY, SOLVENCY AND FUNDING & LIQUIDITY NON-FINANCIAL
IAS 39 IAS 39 IFRS 9 IFRS 9
€m
2016 2017 2018 H1 2019 €m 2016 2017 2018 H1 2019
Asset quality Non-financial key figures
Cost of risk 0.74% 0.62% 0.73% 0.57% NPS score Corporate Lending clients +37% +64% +63% +47%
Impairment ratio 0.76% 0.50% 0.33% 0.25% NIBC Direct customer survey score 7.6 7.9 7.7 -
Impairment coverage ratio 37% 40% 31% 32% % of new corporate loans screened against sustainability policy 100% 100% 100% 100%
NPL ratio 3.0% 2.8% 2.8% 2.7% Number of new corporate clients with increased sustainability
Top-20 exposure / Common Equity Tier 1 78% 66% 77% 72% risk assessment 28 23 25 6
Exposure corporate arrears > 90 days 2.1% 1.7% 2.7% 1.9% Fines or sanctions for non-compliance with laws and
Exposure residential mortgage loans arrears > 90 days 0.6% 0.5% 0.2% 0.1% regulations 0 1 1 -
Loan to value Dutch residential mortgage loans 78% 75% 72% 69%
Loan to value BTL mortgage loans 59% 57% 52% 51% Employees
Total number of FTEs end of financial period 716 689 695 694
Solvency information Male / female ratio 73%/27% 70%/30% 69%/31% 69%/31%
Equity attributable to shareholders of the company 1,819 1,918 1,755 1,782 Male / female ratio top management 91%/9% 88%/12% 85%/15% 85%/15%
AT1 and Subordinated liabilities 398 483 478 477 Training expenses per employee (EUR) 2,041 2,318 3,101 1,478
Group capital base 2,217 2,401 2,233 2,260 Absenteeism (trend total) 2.4% 2.2% 2.1% 1.8%
Common Equity Tier 1 capital 1,504 1,653 1,444 1,451 Employee turnover (employees started) 25.2% 16.5% 19.2% 10.9%
Balance sheet total 23,495 22,148 21,550 21,519 Employee turnover (employees left) 15.0% 20.5% 18.5% 10.9%
Risk-weighted assets 9,930 8,584 7,805 7,844
Common Equity Tier 1 ratio 15.1% 19.3% 18.5% 18.5%
Tier 1 ratio 15.1% 20.4% 19.9% 19.9%
Total Capital ratio 18.0% 22.2% 22.0% 22.0%
Leverage ratio 6.5% 7.7% 6.5% 7.0%
Funding & liquidity
LCR 124% 196% 241% 212%
NSFR 112% 117% 123% 122%
Loan-to-deposit ratio 145% 148% 152% 155%
Asset encumbrance ratio 29% 26% 26% 25%
Retail savings / total funding 46% 44% 42% 44%
Secured funding / total funding 23% 20% 21% 21%
ESF / total funding 6% 6% 7% 6%
45BALANCE SHEET NIBC
ASSETS LIABILITIES
€m €m IAS 39 IAS 39 IFRS 9 IFRS 9
IAS 39 IAS 39 IFRS 9 IFRS 9
2016 2017 2018 H1 2019
2016 2017 2018 H1 2019
Retail funding 9,721 9,307 8,922 9,305
Cash and banks 2,386 2,569 2,631 2,247
Funding from securitised mortgage loans 1,337 267 447 416
Loans 7,818 7,372 7,201 7,134
Covered bonds 2,028 2,008 2,510 2,500
Lease receivables 236 282 409 456
ESF 1,230 1,350 1,522 1,382
Mortgage loans 9,020 9,332 9,451 9,743
All other senior funding 4,673 5,725 5,562 5,308
Debt investments 1,375 913 865 923 Tier 1 and subordinated funding 398 283 278 277
Derivatives 2,006 863 210 184
Equity investments 252 333 199 220
All other liabilities 281 225 141 165
Derivatives 1,811 1,021 579 550
Total liabilities 21,675 20,027 19,592 19,537
All other assets 597 329 215 248 Equity attributable to shareholders of the
company 1,817 1,915 1,755 1,782
Total assets 23,495 22,148 21,550 21,519
Capital securities (non-controlling interest) 203 200 200
Equity attributable to non-controlling
interests 3 3 3 0
Total liabilities and shareholders equity 23,495 22,148 21,550 21,519
46Disclaimer
This presentation (including the information and opinions presented therein) is confidential and is not to
be circulated to any person or entity without prior consent of NIBC Bank N.V. References to NIBC Bank
N.V. should be interpreted to include any of its affiliates or subsidiaries.
The information presented in this presentation has been obtained or derived from sources believed by
NIBC to be reliable at the date of publication of this presentation. However, no representations are made
as to its accuracy or completeness. The information may be subject to change, and NIBC assumes no
undertaking to revise or amend the information provided, or to provide any update on any change
related thereto. NIBC accepts no liability for loss arising from the use of the information. The information
is (i) for discussion purposes only; (ii) not to be regarded as (investment) advice and (iii) not to be relied
upon in substitution for the exercise of independent and sound judgement.
Forward-looking statements
The forward-looking statements included in this presentation with respect to the business, results of
operation and financial condition of NIBC are subject to a number of risks and uncertainties that could cause
actual results to differ materially from forecasts, estimates or other statements set forth in this release,
including but not limited to the following: changes in economic conditions, changes in credit spreads or
interest rates, the results of our strategy and investment policies and objectives. NIBC undertakes no
obligation to update or revise any forward looking statement to reflect events or circumstances
that may arise after the date of this release.
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