Instabank — Investor Presentation 2022

Nov 3, 2022

Instabank

Interim Presentation Q3 – 2022 November 3rd, 2022

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 highlights Q3-22

Profit before tax of 24.6 MNOK, after-tax 18.4 MNOK Impacted by loss on securities of 4.5 MNOK and legal advisory cost of 1 MNOK

Mortgages volume growth of 195 MNOK Mortgages represent 37 % of total net loans and 55 % of net loans in Norway

Rate hikes temporarily put pressure on the net interest margin Six-week notice period on loan interest rates increases

Net loan development

Net loan balance growth

Key comments

• Adjusted for NPL portfolio sales, growth was 159 MNOK
• Strong growth in mortgages of 195 MNOK

Net loans to customers

MNOK

• Well diversified loan book across products and markets
• Mortgages represents 55 % of net loans in Norway and 37 % of total net loans

Diversified loan portfolio

Diversified funding volume

*) Includes partner margin

Development in yields and funding cost

Development in yields and funding cost Key comments

• The Norwegian central bank introduced several rate hikes in the third quarter of 2022 to fight inflationary pressure. Higher interest rates have substantially increased our funding cost, putting pressure on our net interest margin in the short term.
• Our loan interest rates have also increased following the rate hikes from the central banks. As there is a six-week notice period in Norway, the rate increases in August and September were not effective yet for our customers in Q3-22
• Liquidity yield was negatively impacted by the market turmoil and increased interest rates. The latter influence yield on securities negatively short term, but has a long-term positive effect on yield

Total income

• Total interest income increased 4.1 MNOK from the previous quarter and 13.2 MNOK from the same quarter last year following growth in net loans
• Interest expenses increased because of increased deposit rates following the rate hikes from the Norwegian Central Bank
• Net other income was negatively impacted by an unrealised loss on securities of 4.5 MNOK 8

Operating expenses

Operating expenses breakdown

Cost/income ratio

• The reductions in operating expenses from the last quarter came from reduced marketing cost, partly offset by increased personnel cost and administrative costs
• Off the increase in operating cost of 4.9 MNOK from the same quarter last year, 1 MNOK came from legal advisory costs related to the Lunar legal proceedings and 1.6 MNOK from increased marketing costs

Credit risk

-30,0 %

-20,0 %

-10,0 %

0,0 %

Loans past due

% of gross lending

0,0

0,0 %

10,0 %

20,0 %

30,0 %

10,0

20,0

30,0

Losses per loan type

• Impairment losses for mortgages remained low at 1.5 MNOK or 0.6 % and total losses on loans benefits from an increased share of mortgages with less credit risk than for unsecured consumer loans
• The sales of two NPL portfolios had a positive impact on losses on loans, bringing NPL to gross loans down to 6.7 %

Profit development

▪ Profits in Q3-22 was negatively impacted by an unrealised loss on securities of 4.5 MNOK and legal advisory costs related to the Lunar legal proceedings

Capital adequacy

Developments in capital adequacy ratios

CET1 requirement per country and total

• Common equity Tier 1 Capital ratio increased to 19.7 % from 18.9 % per the end the previous quarter as a result of sale of NPL portfolios as well as increased share of mortgages that have lower risk weight than unsecured consumer loans
• the total capital ratio was 22.5 % at the end of Q3-22, up from 21.7 % at the end of the previous quarter, 1.9 % points above the total regulatory capital requirement of 20.6 %.
• The Norwegian Ministry of Finance has decided to increase the countercyclical capital buffer to 2.0 per cent as of 31st December 2022 and to 2.5 per cent as of 31st March 2023
• After the balance date on November 2nd, the board of directors decided that the bank would change to the standardised approach to establish the risk-weighted volume for operational risk, resulting in a positive impact on the capital adequacy by 0.7 % points based on the situation pr. 30.09.22

Produkter og markeder

Banken leverer produkter rettet mot privatmarkedet og potensielt lønnsomme nisjer i bedriftsmarkedet

Overordnet produktprioritering:

• Det er en ambisjon å oppnå en mer diversifisert utlånsbalanse.
• Lån med sikkerhet er forventet å bidra til økt avkastning på EK og redusert kredittrisiko/konsentrasjonsrisiko.

Område	Mål	Prio
Sikrede lån	Maksimeres	1
Kredittkort	Økes	2
POS	Økes	3
Usikret	Balanseres	4

Usikrede lån	Pantelån	Innskudd	Retail	Online	Kort	Bedrift
Q3-2016	Q2-2020	Q3-2016	Q4-2017	Q4-2018	Q2-2019	Tbd
Q4-2017	Tbd	Q3-2018	Q2-2020	Q2-2020	Tbd	Na
Q4-2018	Na	Q1-2019	Na	Na	Tbd	Na
Tbd	Na	Q3-2020	Na	Na	Tbd	Na

Vekst prioriteres i det eller de markeder der banken til enhver tid oppnår best avkastning, for tiden er det i Norge gjennom pantelån!

Share price and ownership

Instabank is listed at Euronext Growth at Oslo Børs, ticker "INSTA"

Top 20 shareholders as of October 31 Share price development last 12 months st 2022

#	Shareholders	# of shares	%
1	KISTEFOS AS	83 126 568	24,99%
2	HODNE INVEST AS	30 588 311	9,20%
3	VELDE HOLDING AS	29 291 116	8,81%
4	BIRKELUNDEN INVESTERINGSSELSKAP AS	18 305 911	5,50%
5	GOLDMAN SACHS BANK EUROPE SE	13 447 151	4,04%
6	BJELLA INVESTMENTS AS	13 112 021	3,94%
7	Morgan Stanley & Co. Int. Plc.	13 039 355	3,92%
7	TORSTEIN TVENGE	10 000 000	3,01%
9	HJELLEGJERDE INVEST AS	9 161 000	2,75%
10	KRISTIAN FALNES AS	8 900 000	2,68%
11	LEIKVOLLBAKKEN AS	8 500 000	2,56%
12	MOROAND AS	8 500 000	2,56%
13	SONSINVEST AS	5 108 195	1,54%
14	ALTO HOLDING AS	5 000 000	1,50%
15	BNP Paribas	4 937 134	1,48%
16	LEIRIN HOLDING AS	4 333 333	1,30%
17	CAHE FINANS AS	3 501 000	1,05%
18	BNP Paribas	2 481 183	0,75%
19	BNP Paribas	2 431 683	0,73%
20	Skandinaviska Enskilda Banken AB	2 125 405	0,64%
	Sum Top 20	275 889 366	82,94%
	Other shareholders	56 752 673	17,06%
	Total	332 642 039	100,00%

Position	Name	# of shares	% of total
CEO	Robert Berg (Sonsinvest AS)	5 608 195	1,7 %
CCO	Eivind Sverdrup (Leirin Holding AS)	4 448 833	1,3 %
CTO	Jørgen Rui	1 072 292	0,3 %
CMO	Farzad Jalily	784 417	0,2 %
CFO	Per Kristian Haug	154 935	0,0 %
CRO	Kjetil Andre Welde Knudsen	123 028	0,0 %
COO	Anne Jørgensen	99 625	0,0 %
	Sum management	12 291 325	3,7 %
	Other employees	1 420 417	0,4 %
	Board members	2 150 000	0,6 %
	Total	15 861 742	4,8 %

Share price (NOK)

Financial summary

P&L	Q3-22	Q2-22	Q1-22	FY 2021	Q4-21	Q3-21
Total income:
Interest Income using the effective interest method	98 946	94 818		90 492 320 034	90 444	85 705
Interest expenses	18 456	15 234	12 248	38 608	10 474	9 451
Net interest income	80 490	79 584		78 244 281 426	79 970	76 254
Net other income	5 737	8 395	7 138	39 684	9 786	9 969
Total income	86 227	87 979		85 382 321 110	89 756	86 223
Operating expenses:
Salary and other personnel expenses	14 048	12 567	17 291	50 324	12 345	13 136
Other administrative expenses, of which	18 658	21 965	17 775	57 311	14 732	14 848
- direct marketing cost	3 596	8 057	3 228	8 154	1 868	2 044
Other expenses	1 966	2 347	1 562	6 315	1 374	1 644
Depreciation and amortisation	3 338	3 366	3 082	14 102	3 406	3 545
Total operating expenses	38 009	40 244		39 711 128 052	31 856	33 174
Losses on loans	23 658	24 043	20 476	80 882	23 020	20 463
Operating profit before tax	24 560	23 692		25 195 112 177	34 879	32 586
Tax	6 140	5 923	4 548	28 726	9 402	8 147
Profit and other comprehensive income	18 420	17 769	20 647	83 451	25 478	24 440

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

Sheet Balance	30.09.22	30.06.22	31.03.22	31.12.21	30.09.21
Assets
Loans and deposits with credit institutions		265 388 288 835 191 450 281 279 226 519
Loans to customers		4 479 970 4 389 273 3 988 389 3 832 071 3 659 766
Certificates and bonds		755 391 842 237 933 611 679 759 682 558
Other intangible assets	21 567	22 904	25 064	25 098	25 848
Fixed assets	4 247	4 791	5 390	5 909	6 512
Derivatives	19 158	1 644	4 105	1 213	1 116
Other receivables	889	16 030	7 793	6 323	5 590
Total assets		5 546 610 5 565 713 5 155 801 4 831 653 4 607 910
Liabilities
Deposits from and debt to customers		4 702 782 4 741 687 4 344 527 4 047 128 3 852 877
Other debts	24 584	1 706	11 123	10 942	18 034
Accrued expenses and liabilities	17 979	16 154	18 729	17 941	15 817
Derivatives	2 188	2 643	1 231	338	483
Deferred tax	2 957	2 957	2 957	2 957	3 569
Tax payable	18 362	40 712	34 789	30 241	20 227
Subordinated loan capital	56 000	56 000	56 000	56 000	56 000
Total liabilities		4 824 853 4 861 859 4 469 356 4 165 546 3 967 008
Equity
Share capital	332 642	332 642	332 642	332 642	332 642
Share premium reserve	178 192	178 192	178 192	178 192	178 192
Retained earnings	170 022	152 120	134 710	114 373	89 167
Additional tier 1 capital	40 900	40 900	40 900	40 900	40 900
equity Total		721 757 703 854 686 445 666 107 640 901
Total liabilities and equity		5 546 610 5 565 713 5 155 801 4 831 653 4 607 910

Thank You

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