Instabank — Investor Presentation 2023

Feb 8, 2023

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 Q4-22

Profit before tax of 29.8 MNOK, after-tax 25.4 MNOK Strong growth in Total income, cost to income ratio decreased to 36.8 % from 44.1 % in Q3-22

Growth in net loans of 191 MNOK Increased growth in Finland, net lending up 129 MNOK in the quarter

Mortgages volume growth of 116 MNOK Mortgages represents 38 % of total net loans and 58 % 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

• Increased demand from the Finnish market for consumer loans, resulting in net loan growth of 129 MNOK in the quarter
• Finland more attractive than consumer loans in Norway in terms of profitability
• Mortgages increased by 116 MNOK in the quarter and 750 MNOK in 2022

Net loans to customers

• Well diversified loan book across products and markets
• Mortgages represents 58 % of net loans in Norway and 38 % of total net loans

Development in yields and funding cost

Development in yields and funding cost Key comments

• The rate hikes we notified our lending customers in Norway about in the third quarter came into effect in the fourth quarter.
• In Finland, the customer's offset rate is adjusted based on the 3 Months Euribor rate, which increased significantly during the fall. Consequently, the yield for unsecured loans increased to 12.0 % in Q4-22 from 10.7 % in the previous quarter and mortgages yield increased to 7.1 % from 6.4 % in the previous quarter.
• The Norwegian market has had the most significant increase in deposit rates. The bank's funding cost increased to 2.0 % from 1.2 % in the previous quarter.
• The liquidity yield has until Q4-22 been negatively impacted by the market turmoil and increased market rate, but came back strong with unrealised gains of 7.2 MNOK in Q4-22 and a yield of 3.9 %

Diversified loan portfolio

Diversified funding volume

Total income

• Total interest income increased to 109.3 MNOK from 98.9 MNOK in the previous quarter, driven by growth in net loans and increased loan yield to 10.3 % from 9.8 % in the previous quarter.
• Interest expenses came in at 27.9 MNOK, up from 18.5 MNOK in the previous quarter following increased deposit rates.
• The increase in net other income came from improved yield on securities 8

Operating expenses

Operating expenses breakdown

Cost/income ratio

• The decrease in personnel expenses from the previous quarter resulted from low employee bonus provisions as well as a reversal of provisions for social security on warrants
• Administrative cost included 1.5 MNOK in one-off advisory cost
• The cost to income ratio decreased for the third consecutive quarter, demonstrating economy of scale

Credit risk

Impairment losses

MNOK 23,0 20,5 24,0 23,7 32,1 2,4 % 2,0 % 2,2 % 2,1 % 2,7 % Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Impairment losses Loan loss ratio -0,5 %

Loans past due

Losses per loan type

• Impairment losses for mortgages remained low at 0.9 MNOK or 0.2 % and was partly a result of changes in the IFRS 9 model
• Impairment losses for unsecured loans increased following the rise in loans past due, a seasonal variation that are expected to improve in Q1- 23

Profit development

• Strong growth in total income as well as good cost control resulted in net profit before tax of 29.9 MNOK and 25.4 MNOK after-tax profits
• ROE was 14.7 %, up from 12.6 in the previous quarter

Capital adequacy

Developments in capital adequacy ratios

CET1 requirement per country and total

• Instabank improved its capital ratios during the quarter, driven by a strong net profit after tax, transformation to the standardised approach to establish the risk-weighted volume for operational risk and issuance of Tier 1 and Tier 2 capital of 80 MNOK.
• Common Equity Tier 1 Capital (CET1) ratio was 19.8 %, and the total capital ratio was 24.9 %, up from 19.7 % and 22.5 % at the end of the previous quarter. The CET 1 ratio was 2.4 % above the regulatory CET1 requirement.
• The countercyclical buffer requirement increased by 0.5 percentage points for exposures in Norway at the end of the quarter.
• The Norwegian Ministry of Finance has decided to increase the countercyclical capital buffer to 2.5 per cent as of 31st March 2023

Guiding from Instabank

About the surroundings

International:

• The global economy is facing significant challenges. Growth has lost momentum, high inflation has broadened out across countries and products, and is proving persistent.
• Interest rates increases, necessary to curb inflation, heighten financial vulnerabilities.
• Russia's war in Ukraine is increasing the risks of debt distress in low-income countries and food insecurity

Demand for financing:

• The default rate for consumer loans to Norwegian customers was 11.2 % at the end of 2021, compared to 13.3 % the previous year. For Norwegian banks specialising in consumer loans, the default rate was 15.9 %, down from 19.3 % at the end of 2020.
• The number of debt collection cases related to consumer debt made up 10.7 % of the total cases for collection by all debt collection agencies in Norway at the end of 2021.
• It is reasonable to assume increased default given the decline in real wages and, not least, very high costs for energy, food, and debt servicing means that vulnerable customers can quickly lose their footing and that this will represent a brake on the market. The demand will probably be high, but the proportion who can get a loan will be all the lower.

Norway:

• Inflation is still high, but on the way down
• Expected relatively flat interest rate development over the next 12 months, then a decline.
• After falling markedly from 2020 to 2022, the unemployment rate has risen slightly from the spring 2022 and was 3.4 % in December, but still lower than pre-pandemic levels
• Wages grew by 3.9 % in 2022. With inflation of 5.8 %, this means an overall real wage decrease of 1.9 %. In 2023, a small real wage decrease of 0.2 per cent is estimated
• Housing prices increased by 1.5 % % in 2022. The Norwegian Central Bank expects a decrease in housing prices at 4.3 % in 2023

This probably means;

In 2023, there may be higher lending growth than in 2022, but in combination with higher funding costs, increasing defaults and losses that put pressure on profitability, the expectations are a moderate growth in lending and profit

Profit after tax

Financials

Profit Strong improvement in profits

ROE Strong improvement in performance

Gross loans Growth is necessary to improve profits

Cost to income

Targets for 2023

• o Increased diversification Repositioning from a typical consumer loans bank
• o Growth in lending approx.1.0 billion NOK Current excess equity and generated profits enable high growth
• o Strong profit growth

~ 20 % increase in result after-tax within reach

www.instabank.no instabank.no

Share price and ownership

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

Top 20 shareholders as of February 3 Share price development last 12 months rd,2023

#	Shareholders	# of shares	%
1	KISTEFOS AS	83 126 568	24,99%
2	HODNE INVEST AS	33 088 311	9,95%
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	TORSTEIN TVENGE	10 000 000	3,01%
7	HJELLEGJERDE INVEST AS	9 161 000	2,75%
9	KRISTIAN FALNES AS	8 900 000	2,68%
10	LEIKVOLLBAKKEN AS	8 500 000	2,56%
11	MOROAND AS	8 500 000	2,56%
12	SONSINVEST AS	5 108 195	1,54%
13	ALTO HOLDING AS	5 000 000	1,50%
14	LEIRIN HOLDING AS	4 333 333	1,30%
15	BNP Paribas	4 226 851	1,27%
16	Morgan Stanley & Co. Int. Plc.	3 675 678	1,10%
17	CAHE FINANS AS	3 501 000	1,05%
18	Apollo Asset Limited	3 200 000	0,96%
19	BNP Paribas	2 302 489	0,69%
20	BNP Paribas	2 196 182	0,66%
	Sum Top 20	268 975 806	80,86%
	Other shareholders	63 666 233	19,14%
	Total	332 642 039	100,00%

Position	Name	# of shares	% of total
CEO	Robert Berg (Sonsinvest AS)	5 708 195	1,7 %
CCO	Eivind Sverdrup (Leirin Holding AS)	4 448 833	1,3 %
CTO	Jørgen Rui	1 407 864	0,4 %
CMO	Farzad Jalily	814 417	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	12 756 897	3,8 %
	Other employees	1 393 626	0,4 %
	Board members	2 150 000	0,6 %
	Total	16 300 523	4,9 %

Share price (NOK)

Financial summary

P&L	FY 2022	Q4-22	Q3-22	Q2-22	Q1-22	FY 2021	Q4-21
Total income:
Interest Income using the effective interest method		393 623 109 328	98 946	94 818		90 492 320 034	90 444
Interest expenses	73 890	27 952	18 456	15 234	12 248	38 608	10 474
Net interest income	319 734	81 376	80 490	79 584		78 244 281 426	79 970
Net other income	37 850	16 619	5 737	8 395	7 138	39 684	9 786
Total income	357 584	97 995	86 227	87 979		85 382 321 110	89 756
Operating expenses:
Salary and other personnel expenses	55 498	11 592	14 048	12 567	17 291	50 324	12 345
Other administrative expenses, of which	77 690	19 293	18 658	21 965	17 775	57 311	14 732
- direct marketing cost	17 843	2 962	3 596	8 057	3 228	8 154	1 868
Other expenses	13 045	3 260	1 966	2 347	1 562	6 315	1 374
Depreciation and amortisation	7 789	1 915	3 338	3 366	3 082	14 102	3 406
Total operating expenses	154 023	36 059	38 009	40 244		39 711 128 052	31 856
Losses on loans	100 230	32 053	23 658	24 043	20 476	80 882	23 020
Operating profit before tax	103 331	29 884	24 560	23 692		25 195 112 177	34 879
Tax	21 091	4 480	6 140	5 923	4 548	28 726	9 402
Profit and other comprehensive income	82 240	25 403	18 420	17 769	20 647	83 451	25 478

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

Balance Sheet	31.12.22	30.09.22	30.06.22	31.03.22	31.12.21
Assets
Loans and deposits with credit institutions		191 254 265 388 288 835 191 450 281 279
Loans to customers		4 674 030 4 479 970 4 389 273 3 988 389 3 832 071
Certificates and bonds		867 806 755 391 842 237 933 611 679 759
Other intangible assets	21 197	21 567	22 904	25 064	25 098
Fixed assets	3 645	4 247	4 791	5 390	5 909
Derivatives	1 773	19 158	1 644	4 105	1 213
Other receivables	39 527	889	16 030	7 793	6 323
Total assets		5 799 233 5 546 610 5 565 713 5 155 801 4 831 653
Liabilities
from Deposits and debt to customers		4 852 281 4 702 782 4 741 687 4 344 527 4 047 128
Other debts	20 491	24 584	1 706	11 123	10 942
Accrued expenses and liabilities	17 844	17 979	16 154	18 729	17 941
Derivatives	543	2 188	2 643	1 231	338
Deferred tax	734	2 957	2 957	2 957	2 957
Tax payable	25 065	18 362	40 712	34 789	30 241
Subordinated loan capital	96 000	56 000	56 000	56 000	56 000
Total liabilities		5 012 958 4 824 853 4 861 859 4 469 356 4 165 546
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	194 541	170 022	152 120	134 710	114 373
Additional tier 1 capital	80 900	40 900	40 900	40 900	40 900
Total equity		786 275 721 757 703 854 686 445 666 107
Total liabilities and equity		5 799 233 5 546 610 5 565 713 5 155 801 4 831 653

Thank You

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