Instabank — Investor Presentation 2019

Apr 26, 2019

Instabank

Interim Presentation Q1 – 2019 April 25th 2019

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 Q1-2019

Quarterly growth in net loans of 123 MNOK - 50% vs Q1-18

Outstanding net loans of 2,604 MNOK + 66 % vs Q1-18

Customer deposits of 2,751 MNOK + 49 % vs Q1-18

Total income of 58.3 MNOK + 53 % vs Q1-18

Net profit before tax of 4.4 MNOK - 18 % vs Q1-18

Total equity of 529 MNOK + 84 % vs Q1-18

Return on Equity of 2.6 % vs 5.6 % in Q1-18

Key highlights & developments Q1-19

Net loan growth of 123 MNOK/ 5 %.

Finland performed well with a net loan growth of 148 MNOK, while net loans in Norway decreased by 50 MNOK and net loans in Sweden grew by 25 MNOK

Q1 net profit of 4.4 MNOK

Weakened by administrative cost related to strategic initiatives and a one-off increase in loan loss provisions weekened

Launched Instapay Mastercard credit card Initially targeted to POS finance customers

New share issue to existing shareholders Gross proceeds of 42.8 MNOK

Introducing Instapay MasterCard

Low interest rate

One of the market's lowest nominal interest rates at 14.9 %, but no interest free period

Distribution

Initially through Skeidar POS financing from March 19, followed by direct distribution to new and existing flexible loan customers

Setup

Instapay MasterCard is a payment instrument on top of the flexible loan product enabling customers easier access to their line of credit

Net loan development

30 000 Number of loan customers #

Norway Finland Sweden Series3

Consumer Loans Sales finance 1

Funding costs and yields

Development in yields and funding costs Key comments

• Attractive interest rate, affected by mix of products, distribution channel, and risk assessment
• Funding cost decreased as deposit rates have been lowered and deposit mix have changed in favor of EUR deposits at lower deposit rate than in Norway
• Increased liquidity yield in Q1 19

Total income

Net gains/loss on forex and securities

Operating expenses

Operating expenses detailed Cost/income ratio

MNOK MNOK

Credit risk development

0,0 % 1,0 % 2,0 % 3,0 % 4,0 % 5,0 % 6,0 % 7,0 % 8,0 % 9,0 % 10,0 %

0,0 % 5,0 % 10,0 % 15,0 % 20,0 % 25,0 % 30,0 % 35,0 % 40,0 % 45,0 %

-3,5 %

-2,5 %

-1,5 %

-0,5 %

0,5 %

1,5 %

2,5 %

Net profit

Net profit after tax Key comments

MNOK

Net profit weakened by one-off effects;

• Advisory costs of approx. 1,5 MNOK
• The bank entered into a forward flow agreement with Axactor for Finland in the quarter, leading to a reassessment of the loan loss provision ratio for nonperforming loans in Finland, resulting in a one-off

Balance sheet structure

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Assets and liabilities & equity Key financial ratios

MNOK

0%

20%

40%

60%

80%

100%

120%

140%

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, EUR 50,000 in Finland and SEK 500,000 in Sweden

• Offered to private individuals in Norway, Finland and Sweden.
• Deposits in Finland and Sweden at attractive margins of 0.8 % and 1.0 %
• 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 Q1-19 29 %

Agent distribution volume as of Q1-19 61 % Partner distribution volume as of Q1-19 10 % + potential new partners

Outlook and strategy going forward

Continue growth story	 Continued focus on profitability and volume growth leveraging economy of scale of current platform  Growth is essential because solid long term profitability will be achieved through economies of scale	Outlook for growth and net loans in MNOK
Operational efficiency	 Growth in existing markets, product expansion as well as long term geographical expansion  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	Total growth	2016 190	2017 1128	2018 1163	2019 800-1000
Geographical expansion	 Further expansion across geographies to facilitate continued growth and risk diversification  Current focus on further growth in Sweden and Finland, Northern Europe to follow long term  Full scale up of the Swedish operations after gaining key business relations, experience and data	Net loans	2016 190	2017 1318	2018 2482 = CONTINUED PROFITABLE GROWTH	2019 3300-3500
Product expansion	 Further expansion of product portfolio to facilitate continued growth and risk diversification  Distribute Instapay MasterCard to new and existing customers  Distribution of related products as an aggregator for subcontractors
Strengthened distribution	 Continue efforts to establish Instabank as a well-known and trusted brand in all active markets  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

Financial summary

Items	Q1-19	FY 2018	Q4-18	Q3-18	Q2-18	Q1-18
Operating income
Interest income	73 351	222 546	70 207	60 090	49 926	42 323
Interest expenses	13 470	46 344	14 472	11 931	10 231	9 710
Net interest income	59 881	176 202	55 735	48 159	39 695	32 614
Net commission fees and other income	-1 563		13 230 -1 475	4 187	5 099	5 418
Total income	58 317	0	189 432 54 261 52 346 44 793			38 032
Operating expenses
Salary and other personnel expenses	10 069	30 871	8 304	8 652	6 287	7 629
Other administrative expenses, of which	17 667		66 153 14 584	18 858	17 251	15 460
- direct marketing cost	6 303	38 330	6 695	11 971	10 178	9 401
Depreciation and amortisation	2 027	6 138	1 923	1 557	1 415	1 243
Other expenses	2 174	5 085	1 548	1 345	1 067	1 125
Total operating expenses	31 937		108 246 26 358 30 413 26 019			25 457
Losses on loans	21 972		47 189 17 540 12 600		9 831	7 218
Operating (loss)/profit before tax	4 408		33 996 10 363	9 333	8 943	5 357
Tax	1 102	7 945	2 038	2 333	2 235	1 339
Profit/loss after tax	3 306	26 051	8 326	7 000	6 708	4 018

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

Items	Q1-19	Q4-18	Q3-18	Q2-18	Q1-18
Assets
Loans and deposits with credit institutions	150 497	142 298	145 110	116 521	127 704
Loans to customers	2 604 823 2 481 880		2 210 903	1 834 682	1 568 603
Certificates and bonds	488 971	647 128	595 383	349 391	448 195
Deferred tax assets	-	89	1 722	4 055	6 290
Other intangible assets	29 438	27 339	25 516	22 613	20 151
Fixed assets	912	1 035	1 031	1 066	1 137
Other receivables, of which:	104 737	115 692	80 360	65 972	56 637
- prepaid agent commissions	92 027	86 381	74 098	57 823	42 698
Total assets	3 379 379 3 415 461		3 060 024	2 394 299	2 228 717
Liabilities
Deposits from and debt to customers	2 751 149	2 832 361	2 546 928	1 944 615	1 843 890
Other debts	19 941	14 313	24 844	18 896	21 470
Accrued expenses and liabilities	14 070	20 056	12 954	11 466	11 174
Subordinated capital	40 000	40 000	40 000	40 000	40 000
Tier 1 Capital	25 000	25 000	25 000	25 000	25 000
Total liabilities	2 850 160	2 931 729	2 649 726	2 039 977	1 941 534
Equity
Share capital	510 834	468 651	402 717	354 161	294 228
Retained earnings	18 385	15 081	7 581	161	(7 045)
Total equity	529 219	483 732	410 298	354 322	287 183
Total liabilities and equity	3 379	3 415 461	3 060 024	2 394 299	2 228 717

Share price and ownership

#	Shareholders	# of shares	%
1	KISTEFOS AS	83 126 568	25,0%
2	HODNE INVEST AS	27 254 360	8,2%
3	VELDE HOLDING AS	23 270 000	7,0%
4	BIRKELUNDEN INVESTERINGSSELSKAP AS	18 305 911	5,5%
5	KAKB 2 AS	12 612 021	3,8%
6	KRISTIAN FALNES AS	9 000 000	2,7%
7	LEIKVOLLBAKKEN AS	8 500 000	2,6%
7	MOROAND AS	8 500 000	2,6%
9	APOLLO ASSET LIMITED	6 562 741	2,0%
10	NYE IDE HOLDING AS	6 276 000	1,9%
11	HJELLEGJERDE INVEST AS	6 000 000	1,8%
12	ALTO HOLDING AS	5 900 000	1,8%
13	SONSINVEST AS	5 108 195	1,5%
14	ENZIAN AS	5 000 000	1,5%
15	T SANDVIK AS	4 546 897	1,4%
16	LEIRIN HOLDING AS	4 333 333	1,3%
17	CAHE FINANS AS	3 500 000	1,1%
18	VELDE EIENDOM INVEST AS	3 050 000	0,9%
19	GRUNNFJELLET AS	3 010 000	0,9%
20	VENADIS FORVALTNING AS	3 000 000	0,9%
	Sum Top20	246 856 026	74,2%
	Other shareholders	85 786 013	25,8%
	Total	332 642 039	100,0%

Position	Name	# of shares	% of total
CEO	Robert Berg (Sonsinvest AS)	5 108 195	1,5 %
CRO	Eivind Sverdrup (Leirin Holding AS)	4 343 833	1,3 %
CMO	Lauren Pedersen	610 871	0,2 %
CTO	Farzad Jalily	675 757	0,2 %
COO	Egil Botnen	200 800	0,1 %
	Sum management	10 939 456	3,3 %
	Other employees	1 523 622	0,5 %
	Board members	2 150 000	0,6 %
	Total	14 613 078	4,4 %

Top 20 shareholders as of 24.04.2019 Share price development since OTC listing in October 2016

Thank You

www.instabank.no instabank.no