Instabank — Investor Presentation 2018

Oct 29, 2018

Instabank

Interim Presentation – Q3/2018 – October 29th 2018

www.instabank.no instabank.no instabank.no

Important information and disclaimer

THIS PRESENTATION (THE "PRESENTATION") HAS BEEN PRODUCED BY INSTABANK ASA (THE "COMPANY" OR "INSTABANK"), SOLELY FOR USE AT THE PRESENTATION TO INVESTORS AND IS STRICTLY CONFIDENTIAL AND MAY NOT BE REPRODUCED OR REDISTRIBUTED, IN WHOLE OR IN PART, TO ANY OTHER PERSON. TO THE BEST OF THE KNOWLEDGE OF THE COMPANY AND ITS BOARD OF DIRECTORS, THE INFORMATION CONTAINED IN THIS PRESENTATION IS IN ALL MATERIAL RESPECT IN ACCORDANCE WITH THE FACTS AS OF THE DATE HEREOF, AND CONTAINS NO MATERIAL OMISSIONS LIKELY TO AFFECT ITS IMPORT.

THIS PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS RELATING TO THE BUSINESS, FINANCIAL PERFORMANCE AND RESULTS OF THE COMPANY AND/OR THE INDUSTRY IN WHICH IT OPERATES. FORWARDLOOKING STATEMENTS CONCERN FUTURE CIRCUMSTANCES AND RESULTS AND OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS, SOMETIMES IDENTIFIED BY THE WORDS "BELIEVES", EXPECTS", "PREDICTS", "INTENDS", "PROJECTS", "PLANS", "ESTIMATES", "AIMS", "FORESEES", "ANTICIPATES", "TARGETS", AND SIMILAR EXPRESSIONS. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESENTATION, INCLUDING ASSUMPTIONS, OPINIONS AND VIEWS OF THE COMPANY OR CITED FROM THIRD PARTY SOURCES ARE SOLELY OPINIONS AND FORECASTS WHICH ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL EVENTS TO DIFFER MATERIALLY FROM ANY ANTICIPATED DEVELOPMENT. NONE OF THE COMPANY OR ANY OF THEIR PARENT OR SUBSIDIARY UNDERTAKINGS OR ANY SUCH PERSON'S OFFICERS OR EMPLOYEES PROVIDES ANY ASSURANCE THAT THE ASSUMPTIONS UNDERLYING SUCH FORWARD-LOOKING STATEMENTS ARE FREE FROM ERRORS NOR DOES ANY OF THEM ACCEPT ANY RESPONSIBILITY FOR THE FUTURE ACCURACY OF THE OPINIONS EXPRESSED IN THIS PRESENTATION OR THE ACTUAL OCCURRENCE OF THE FORECASTED DEVELOPMENTS. THE COMPANY ASSUMES NO OBLIGATION, EXCEPT AS REQUIRED BY LAW, TO UPDATE ANY FORWARD-LOOKING STATEMENTS OR TO CONFORM THESE FORWARD-LOOKING STATEMENTS TO OUR ACTUAL RESULTS.

AN INVESTMENT IN THE COMPANY INVOLVES INHERENT RISKS AND IS SUITABLE ONLY FOR INVESTORS WHO UNDERSTAND THE RISKS ASSOCIATED WITH THIS TYPE OF INVESTMENT AND WHO CAN AFFORD A LOSS OF ALL OR PART OF THE INVESTMENT. SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION, INCLUDING, AMONG OTHERS, RISKS OR UNCERTAINTIES ASSOCIATED WITH THE COMPANY'S BUSINESS, ITS DEVELOPMENT, GROWTH MANAGEMENT, FINANCING, MARKET ACCEPTANCE AND RELATIONS WITH CUSTOMERS, AND, MORE GENERALLY, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN DOMESTIC AND FOREIGN LAWS AND REGULATIONS, TAXES, CHANGES IN COMPETITION AND PRICING ENVIRONMENTS AND OTHER FACTORS. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALISE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THIS DOCUMENT. THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT THE INFORMATION INCLUDED IN THIS PRESENTATION.

NO REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, ANY INFORMATION, INCLUDING PROJECTIONS, ESTIMATES, TARGETS AND OPINIONS, CONTAINED HEREIN, AND NO LIABILITY WHATSOEVER IS ACCEPTED AS TO ANY ERRORS, OMISSIONS OR MISSTATEMENTS CONTAINED HEREIN, AND, ACCORDINGLY, NONE OF THE COMPANY OR ANY OF THEIR PARENT OR SUBSIDIARY UNDERTAKINGS OR ANY SUCH PERSON'S OFFICERS OR EMPLOYEES ACCEPTS ANY LIABILITY WHATSOEVER ARISING DIRECTLY OR INDIRECTLY FROM THE USE OF THIS DOCUMENT.

THERE MAY HAVE BEEN CHANGES IN MATTERS WHICH AFFECT THE COMPANY SUBSEQUENT TO THE DATE OF THIS PRESENTATION. NEITHER THE ISSUE NOR DELIVERY OF THIS PRESENTATION SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THE AFFAIRS OF THE COMPANY HAVE NOT SINCE CHANGED, AND THE COMPANY DOES NOT INTEND, AND DOES NOT ASSUME ANY OBLIGATION, TO UPDATE OR CORRECT ANY INFORMATION INCLUDED IN THIS PRESENTATION. BY ATTENDING OR RECEIVING THIS PRESENTATION, YOU ACKNOWLEDGE THAT YOU WILL BE SOLELY RESPONSIBLE FOR FORMING YOUR OWN VIEW OF THE POTENTIAL FUTURE PERFORMANCE OF THE COMPANY.

THIS PRESENTATION SPEAKS AS OF 31 DECEMBER 2016. NEITHER THE DELIVERY OF THIS PRESENTATION NOR ANY FURTHER DISCUSSIONS OF THE COMPANY WITH ANY OF THE RECIPIENTS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.

Key figures Q3-2018

Quarterly growth in net loans of 376 MNOK + 23 % vs Q3-17

Outstanding net loans of 2,211 MNOK + 102 % vs Q3-17

Customer deposits of 2,547 MNOK + 140 % vs Q3-17

Total income of 52.3 MNOK + 71 % vs Q3-17

Net profit before tax of 9.3 MNOK + 225 % vs Q3-17

Total equity of 435 million MNOK + 84 % vs Q3-17

Return on Equity of 7,3 % vs 3,5 % in Q3-17

Key highlights & developments Q3-2018



Q3 net profit of 9.3 MNOK before tax Net profit after tax of NOK 7 MNOK, up 225 % versus Q3/17

Increased net loan growth by 376 MNOK, 20 % growth in Q3/18 Finland represented 53 % of quarterly loan balance growth

Deposits launched in Finland Deposits in Finland representing an attractive funding margin of 0,75%

Marketing campaign launched in Finland Including National Ice Hockey League TV sponsorship and radio commercials

Sales financing volume increased by 69 % from the previous quarter Driven by increased penetration at Skeidar, Instabanks largest sales finance partner

Share issue to Kistefos AS through a private placement Gross proceeds of 48.5 MNOK

Product portfolio

Unsecured consumer loans Deposit accounts Point of sales financing

• Structured as either a revolving credit facility or an amortizing loan

• Upper credit limit of NOK 500,000 in Norway and EUR 50,000 in Finland

• Offered to private individuals in Norway and Finland.

• Deposits launched in Finland at an attractive funding margin of 0,75 %

• Deposits up to NOK 2m are 100% guaranteed by the Norwegian Banks' Guarantee Fund

• Complete offering already in place:

• − Web payment solutions
• − In-shop payment solutions
• − Closed loop solutions
• − Hybrid leasing solutions
• JV profit split agreement negotiated on a partner-to-partner basis

Distribution channels

Brand distribution Agent distribution Partner distribution Brand distribution volume as of Q3-18 34%

Agent distribution volume as of Q3-18 60% Partner distribution volume as of Q3-18 6% + potential new partners

Geographical presence & potential new markets

Cross-boarder expansion strategy

• Operational platform capable of fast, agile and cost-efficient cross-boarder expansion already in place
• Strong internal focus on further cross-boarder expansion in order to unlock operational synergies, strengthen growth prospects and diversify underlying portfolio risk
• Continuous exploration of new markets Northern Europe most interesting

Launched operations in Finland

• Instabank introduced its unsecured consumer loan product in the Finnish market 22 November 2017
• Deposit launched in the Finnish market in July 2018
• The Finnish operations are run from the bank's headquarters in Oslo which underlines scalability

Project launched to enter Sweden

Sweden will be the next market entered (Q1 2019). The operation will be run from the bank's headquarters in Oslo

Continued high loan growth

• Strong emphasis on marketing to strengthen brand awareness and to boost sales in Finland
• Strong focus on sales finance through Skeidar
• Brand campaign launched and new agents onboarded in Finland

Continued profitability

Disciplined cost control

Operating expenses by category

• Other expenses
• Depreciation and amortisation Other administrative expenses
• Direct marketing costs Salary and other personell expenses

Key comments

• Operating expenses developing according to plan
• Increased «Other administrative expenses» due to investments in marketing campaigns in Finland and project costs related to preparations for the Swedish operation.

Well balanced credit risk management

MNOK

Losses on loans % of avg. gross lending (annualised)

Impairment losses Past due days at end of quarter

Balance sheet structure

Assets and liabilities & equity Key financial ratios

12

Funding costs and yields

Development in yields and funding costs Key comments

$$
13,6\% - 13,4\% - 13,2\% - 13,0\% - 12,8\% - 12,8\% - 12,9\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% - 13,0\% -
$$

• Attractive interest rate, affected by mix of products, distribution channel, and risk assessment
• Stable funding cost
• Low yield on liquidity, reflecting risk profile on portfolio

Outlook and strategy going forward

Continue growth story	 Continued growth and profitability growth will be given priority  Growth is essential because solid long term profitability will be achieved through economies of scale				Outlook for growth and net loans in MNOK
	 Key initiatives are product & geographical expansion as well as continued growth in existing markets	Total growth	2016 190	2017 1128	YTD 18 893	Total 18 1100-1300
Operational efficiency	 Maintain efficient and scalable operations through innovative and flexible IT infrastructure  Fully automated decision engine based on machine learning will ensure diligent credit risk selection
	 Continued focus on data insight, analytical capabilities and 100% digital internal / external processes	Net loans	2016	2017	YTD 18	Total 18 2400-
	 Further expansion across geographies to facilitate continued growth and risk diversification		190	1318	2211	2600
Geographical expansion	 Current focus on Northern Europe – Sweden with entry in January 2019
	 Full scale up of the Finnish operations after gaining key business relations, experience and data				= CONTINUED PROFITABLE GROWTH
	 Further expansion of product portfolio to facilitate continued growth and risk diversification
Product expansion	 Launch of an Instabank Credit Card in cooperation with Mastercard within Q4-18
	 Distribution of related products as an aggregator for subcontractors
	 Continue efforts to establish Instabank as a well-known and trusted brand in all active markets
Strengthened distribution	 Identify and secure additional partners for the already developed point of sales financing platform
	 Continuous optimization of the agent distribution network – develop new relationships in new markets

Appendix

Financial summary

Items	Q3-18	Q2-18	Q1-18	FY 2017	Q4-17	Q3-17
Operating income
Interest income	60 090	49 926	42 323	97 536	36 416	29 074
Interest expenses	11 931	10 231	9 710	17 948	7 930	4 592
Net interest income	48 159	39 695	32 614	79 587	28 486	24 482
Net commission fees and other income	4 187	5 099	5 418	21 793	3 608	6 043
Total income	52 346 44 793		38 032	101 380	32 094	30 525
Operating expenses
Salary and other personnel expenses	8 652	6 287	7 629	25 459	7 767	7 493
Other administrative expenses, of which	18 858	17 251	15 460	43 917	10 919	11 097
- direct marketing cost	11 971	10 178	9 401	31 705	7 977	8 033
Depreciation and amortisation	1 557	1 415	1 243	2 784	919	672
Other expenses	1 345	1 067	1 125	3 044	845	743
Total operating expenses	30 413 26 019		25 457	75 204	20 450	20 006
Losses on loans	12 600	9 831	7 218	22 125	7 873	7 644
Operating (loss)/profit before tax	9 333	8 943	5 357	4 051	3 770	2 875
Tax	2 333	2 235	1 339	1 751	1 680	719
Profit/loss after tax	7 000	6 708	4 018	2 301	2 090	2 156

P&L (NOK '000) Balance sheet (NOK '000)

Items	Q3-18	Q2-18	Q1-18	Q4-17	Q3-17
Assets
Loans and deposits with credit institutions	145 110	116 521	127 704	40 929	46 456
Loans to customers	2 210 903	1 834 682	1 568 603	1 317 942	1 092 977
Certificates and bonds	595 383	349 391	448 195	682 091	130 896
Deferred tax assets	1 722	4 055	6 290	7 629	9 310
Other intangible assets	25 516	22 613	20 151	17 175	9 810
Fixed assets	1 031	1 066	1 137	1 228	1 228
Other receivables, of which:	80 360	65 972	56 637	44 007	31 960
- prepaid agent commissions	54 387	46 953	42 698	36 706	29 798
Total assets	3 060 024 2 394 299		2 228 717	2 111 002	1 322 636
Liabilities
Deposits from and debt to customers	2 546 928	1 944 615	1 843 890	1 804 600	1 062 458
Other debts	24 844	18 896	21 470	12 313	12 328
Accrued expenses and liabilities	12 954	11 466	11 174	11 420	10 780
Subordinated capital	40 000	40 000	40 000
Total liabilities	2 624 726	2 014 977	1 916 534	1 828 332	1 085 567
Equity
Share capital	402 717	354 161	294 228	294 228	254 266
Retained earnings	7 581	161	(7 045)	(11 557)	(17 196)
Tier 1 Capital	25 000	25 000	25 000
Total equity	435 298	379 322	312 183	282 670	237 070
Total liabilities and equity	3 060 024	2 394 299	2 228 717	2 111 002	1 322 636

Share price and ownership

#	Shareholders	# of shares	%
1	KISTEFOS AS	26 246 150	10,0%
2	VELDE HOLDING AS	20 200 000	7,7%
3	BIRKELUNDEN INVESTERINGSSELSKAP AS	16 667 911	6,4%
4	HODNE HOLDING AS	14 385 419	5,5%
5	KAKB 2 AS	12 612 021	4,8%
6	HODNE INVEST AS	8 605 287	3,3%
7	LEIKVOLLBAKKEN A/S	8 500 000	3,2%
8	KRISTIAN FALNES AS	8 500 000	3,2%
9	MOROAND AS	8 500 000	3,2%
10	APOLLO ASSET LIMITED	8 062 741	3,1%
11	T SANDVIK AS	8 016 897	3,1%
12	NYE IDE HOLDING AS	6 276 000	2,4%
13	ALTO HOLDING AS	6 000 000	2,3%
14	SONSINVEST AS	5 108 195	1,9%
15	LEIRIN HOLDING AS	4 333 333	1,7%
16	ENZIAN AS	4 300 000	1,6%
17	CAHE FINANS AS	3 500 000	1,3%
18	VELDE EIENDOM INVEST AS	3 050 000	1,2%
19	GRUNNFJELLET AS	3 010 000	1,1%
20	HJELLEGJERDE INVEST AS	3 000 000	1,1%
	Sum Top20	178 873 954	68,2%
	Other shareholders	83 587 628	31,8%
	Total	262 461 582	100,0%

Position	Name	# of shares	% of total
CEO	Robert Berg (Sonsinvest AS)	5 108 195	1,9 %
CRO	Eivind Sverdrup (Leirin Holding AS)	4 343 833	1,7 %
CMO	Lauren Pedersen	610 871	0,2 %
CTO	Farzad Jalily	675 757	0,3 %
COO	Egil Botnen	510 800	0,2 %
	Sum management	11 249 456	4,3 %
	Other employees	6 154 650	2,3 %
	Board members	2 096 200	0,8 %
	Total	19 500 306	7,4 %

Top 20 shareholders as of 24.10.2018 Share price development since OTC listing in October 2016

Thank You

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