Lea Bank ASA

Investor Presentation • Aug 14, 2020

14 August 2020

2nd quarter results presentation

Disclamer

This Presentation from Easybank ASA ("Easybank" or the "Company") includes among other things forward-looking statements. Certain such forward-looking statements can be identified by the use of forward-looking terminology such as "believe", "may", "will", "should", "would be", "expect" or "anticipate" or similar expressions, or the negative thereof, or other variations thereof, or comparable terminology, or by discussions of strategy, plans or intentions. The forwardlooking statements contained in this Presentation, including assumptions, opinions and views of the Company or cited from third party sources, reflect the current views with respect to future events and are subject to material risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. Neither Easybank nor any of its officers or employees provides any assurance as to the correctness of such forwardlooking information and statements. The Company does not intend, and assumes no obligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to its actual results.

By attending or receiving this Presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of Easybank and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of Easybank's business and the securities issued by Easybank.

This Presentation speaks as of 14 August 2020. Neither the delivery of this Presentation nor any further discussions of Easybank with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of Easybank since such date.

Table of contents

Highlights and development Q2

Financial results Q2

Outlook and merger update

Highlights Q2 2020

1	Profit before tax of NOK 19,1 million, Total income of 71,9 million
2	Annualized ROE 12,5%, EPS NOK 1,24, book value of equity per share (BVPS) NOK 10,08
3	CET1 Capital ratio of 19,6% (20,3% including YTD profit)
4	Improved credit quality, uncertainty to possible long-term impact from Covid-19
5	Merger with BRAbank proceeding according to plan

Key Figures

	IFRS9	NGAAP	NGAAP
(in MNOK)	Q2-20	Q2-19	YTD-20
Interest income	74,0	86,3	150,7
PBT*	19,1	21,5	24,1
ROE*	12,5%	12,4%	7,8%
EPS*	1,24	1,36	0,78
Cost/Income	27,1%	28,6%	28,7%
Gross loans	2 636	2 840	2 636
Consumer loans	2 509	2 628	2 509

(PBT: Profit before tax, ROE: Return On Equity (excluding tier-1 capital), EPS: Annualized Earnings per share. IFRS9 implemented from January 2020, historical numbers have not been restated)

Shareholders

Strong and stable shareholder base

Top 30 shareholder as of 12 August 2020

# Investor	Shares	Shares %
1 Skagerrak Sparebank	4 409 380	9,30 %
2 Verdipapirfondet Alfred Berg	3 844 349	8,11 %
3 Fondsavanse AS	3 072 986	6,48 %
4 Umico - Gruppen AS	2 618 779	5,53 %
5 Hjellegjerde Invest AS	2 600 000	5,49 %
6 Ladegaard AS	2 406 032	5,08 %
7 Shelter AS	1 945 486	4,10 %
8 Lindbank AS	1 838 007	3,88 %
9 MP Pensjon PK	1 458 738	3,08 %
10 Jenssen & Co AS	1 287 879	2,72 %
11 Krogsrud Invest AS	1 250 000	2,64 %
12 Nordic Private Equity AS	1 166 668	2,46 %
13 Jolly Roger AS	1 149 074	2,42 %
14 Independent Oil & Resources Plc	890 000	1,88 %
15 Byholt AS	767 159	1,62 %
16 Whitetail Webservice Ltd	705 009	1,49 %
17 Trippel-L AS	606 118	1,28 %
18 Jaras Invest AS	440 909	0,93 %
19 Ulltveit-Moe, Hildegunn Hodne	400 222	0,84 %
20 B Finans AS	400 000	0,84 %
21 Motor Trade Eiendom Og Finans AS	365 878	0,77 %
22 Conta Group AS	347 368	0,73 %
23 Wist Holding AS	338 000	0,71 %
24 Truls AS	310 000	0,65 %
Arild Hestås Invest AS 25	301 250	0,64 %
26 HHG Invest AS	300 000	0,63 %
27 Juul-Vadem Holding AS	295 000	0,62 %
28 Autobahn AS	270 364	0,57 %
29 Langsether, Skule	265 490	0,56 %
30 Haukvik, Svein Ola	260 000	0,55 %
Total top 30	36 310 145	76,61 %
Other	11 087 045	23,39 %
Total	47 397 190

• 418 shareholders as of 12 August 2020.
• The EASY share was registered on NOTC on 15 November 2016.
• Management holds a total of 2,374,016 shares, corresponding to 5.0% of shares outstanding.
• Members of the board represents a total of 2,728,305 shares, corresponding to 5.8% of shares outstanding.
• Current market capitalization of approx. MNOK 284.

Gross lending & number of customers

Volumes affected by conservative sales practice, and build up of capital buffer

NOK million

Gross lending per product

NOK million

Customers per product

Net interest income & yields

Still attractive margins –

Net Interest margin affected by increased liquidity portfolio in Q2. Funding cost will decrease going forward

Net interest income and net interest margin of total assets

NOK million / % of total assets

Credit quality - Consumer loans Positive trend in loan losses in Q2 2020

Forward flow agreement reduces downside risk

Coverage and loan loss ratio Comments

Loans past due

90+ PD = Loans in stage 3 less performing loans. IFRS9 implemented from January 2020, historical numbers have not been restated.

• IFRS9 was implemented January 1st, 2020. Under IFRS9 interest on non-performing loans are recorded as interest income, and a corresponding amount is increased under loan losses. Hence no impact on net profit, but higher loan loss ratio under IFRS9.
• The implementation of Debt register has increased NPL throughout 2019 and into beginning of 2020. However, in Q2 2020 risk performance has improved due to better quality of customers recruited after the implementation.
• Increased sale of non-performing loans the last quarters under forward flow agreement to strengthen portfolio quality. Notably, the sale of nonperforming loans in Q2 2020 is lower than previous quarters.
• Too early to assess long-term loan loss impact from Covid-19. The bank has not experienced any negative impact on default rates following the outbreak. Despite this, the bank has made additional stage 1 loan loss provisions, to allow for uncertainties around macroeconomics.
• Easybank's forward- flow agreement reduces downside risk as nonperforming loans are on an ongoing basis sold to Kredinor to a predefined price. Option to extend the forward flow agreement with Kredinor throughout 2023 with same conditions as the initial agreement from July 2017.

Overview

Satisfactory capital buffer and competitive cost/income

Income and interest margin

Profit after tax and ROE

Gross lending Opex and Cost/ income ratio

Losses and loss ratio Equity and CET1 ratio

9 * CET-1 ratio for Q1-20 and Q2-20 excludes YTD profit. Q2-19 includes YTD profit, Q3- 19 includes profit as of 1H 2019, Q4-19 includes full year profit

All numbers in NOK million (IFRS9 implemented from January 2020, historical numbers have not been restated.

Table of contents

Highlights and development Q2

Financial results Q2

Outlook and merger update

Income statement

(Amounts in thousands)	IFRS	NGAAP	IFRS	NGAAP	NGAAP
			YTD Q2	YTD Q1	Full year
	Q2 2020	Q2 2019	2020	2019	2019
Interest income	73 954	86 296	150 700	170 359	340 690
Interest expense	-14 000	-15 870	-28 348	-31 289	-62 396
Net interest income	59 954	70 427	122 352	139 069	278 294
Comission and fee income	5 987	11 649	12 487	24 000	42 552
Comission and fee expenses	-969	-14 402	-1 855	-29 163	-57 035
Net change in value on securities and currency	6 944	1 313	4 718	2 992	7 459
Other income	0	107	0	107	111
Net other income	11 961	-1 332	15 350	-2 063	-6 913
Total income	71 915	69 094	137 703	137 006	271 381
Salary and other personell expenses	-8 490	-7 713	-17 233	-15 630	-32 284
Other administrative expenses	-5 398	-8 643	-12 261	-16 144	-27 148
- of which marketing expences	-208	-2 637	-1 319	-5 531	-7 578
Depreciation	-1 726	-1 459	-3 370	-2 857	-5 940
Other expenses	-3 877	-1 952	-6 659	-4 380	-9 440
Total operating expenses	-19 490	-19 767	-39 523	-39 010	-74 812
Profit before loan losses	52 424	49 327	98 180	97 996	196 569
Loan losses	-33 295	-27 826	-74 115	-53 756	-110 390
Profit before tax	19 129	21 501	24 065	44 240	86 179
Tax	-4 448	-5 375	-5 682	-11 060	-21 571
Profit after tax	14 681	16 126	18 383	33 180	64 609

Balance sheet

(Amounts in thousands)	IFRS	NGAAP	NGAAP
	30.06.2020	30.06.2019	31.12.2019
Assets
Cash and deposits with the central bank	50 342	54 039	54 351
Loans and deposits with credit institutions	328 664	223 925	154 717
Loans to customers	2 635 836	2 840 056	2 804 258
- Loan impairment	-223 369	-85 233	-91 746
Certificates and bonds	0	0	0
Shares and other securities	597 025	352 647	457 112
Shareholding in group companies	11 192	11 148	11 192
Deferred tax asset	29 006	0	135
Other intangible assets	20 433	20 834	20 471
Fixed assets	750	1 028	872
Other assets	5 544	2 000	9 451
Other receivables	4 171	77 884	73 814
Total assets	3 459 594	3 498 330	3 494 628
Equity and liabilities
Loan from central bank	135 000	0	0
Deposits from customers	2 737 411	2 842 277	2 806 011
Other liabilities	34 224	30 998	39 090
Accrued expenses and deferred revenue	10 266	17 532	10 352
Tier 2 capital	40 000	75 000	75 000
Total liabilities	2 956 901	2 965 807	2 930 452
Share capital	331 799	331 663	331 707
Share premium reserve	127 111	127 080	127 092
Tier 1 capital	25 000	0	0
Other paid-in equity	7 194	6 990	7 159
Other equity	11 588	66 790	98 218
Total equity	502 693	532 522	564 176
Total equity and liabilities	3 459 594	3 498 330	3 494 628

Balance sheet structure

Strong funding and liquidity position

• Deposit Ratio: 119 %
• Liquidity Coverage Ratio 532 %
• Net Stable Funding Ratio 181 %

Total assets Equity and liabilities

NOK million NOK million

• Diversified customer deposits. 48% of deposits with 35 days+ notice period
• MNOK 976 in surplus liquidity placed in Norges Bank, other banks and positions with short duration and low risk

Table of contents

Highlights and development Q3

Financial results Q3

Outlook and merger update

1

23

4

5

Focus going forward

Merger with BRAbank according to plan

Execution of merger with low cost and risk

Handle impact from Covid -19

• uncertainty to possible long -term impact

Scale portfolio

within the SME market and enter into agreements that strengthen the bank's distribution network

Listing on Merkur Markets of merged bank from October

Merger with BRAbank

Creating a leading digital niche bank in B2C and SME with a Nordic footprint

Merger with BRAbank – according to plan

• ► Approval by the Norwegian Financial Supervisory Authority (FSA);
• ► Approval by the Oslo Stock Exchange of listing of the Combined Company on Merkur Market;
• ► Fulfilment of all statutory requirements for completion of the merger pursuant to the Norwegian Public Limited Liability Companies Act.

Merger with BRAbank - the roadmap for the combined bank

PHASE 1: Year 1	PHASE 2: Year 2	PHASE 3: Year 2-3
Restructure and build the combined bank	Capitalise on synergies & reprising	Further expansion and potential public listing

• ► Establish the new organisation
• ► Create common value chain for consumer loans in the Nordics
• ► Simplify product portfolio to reduce complexity and cost
• ► Manage IT migrations and phase-outs
• ► Harmonise and utilise collection agreements
• ► Quickly reach attractive profitability
• ► Capitalise on synergies to improve profitability
• ► Reach substantial self-funding capability
• ► Reprising of the combined bank as a leading digital niche bank
• ► Deliver competitive ROE
• ► Utilise B2C and B2B setup to create a differentiated and robust business model
• ► Potential public listing of company
• ► Expand to more countries