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ALTUM Investor presentation, April 2019

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ALTUM Investor presentation, April 2019

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ALTUM Investor presentation, April 2019

  1. 1. ALTUM INVESTOR PRESENTATION April 2019
  2. 2. Disclaimer This presentation and any materials distributed or made available in connection herewith (collectively, the “presentation”) have been prepared solely for your use and benefit for information purposes only and are the sole responsibility of Akciju sabiedrība "Attīstības finanšu institūcija Altum" (the “Company”), and have not been verified, approved or endorsed by any lead manager, bookrunner, underwriter or adviser retained by the Company. This presentation do not contain all of the information that is material to an investor. By accessing, downloading, reading or otherwise making available to yourself any content of the presentation, in whole or in part, you agree to be bound by the following limitations and accept the terms and conditions as set out below. No information contained in the presentation may be copied, photocopied, duplicated, reproduced, passed on, redistributed, published, exhibited or the contents otherwise divulged, released or disseminated, directly or indirectly, in whole or in part, in any form by any means and for any purpose. The presentation does not constitute or form part of, and should not be construed as, an offer, solicitation or invitation to subscribe for, underwrite or otherwise acquire, any securities of the Company or any member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or any member of its group, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. If any such offer or invitation is made, it will be done pursuant to separate and distinct documentation in the form of a prospectus and any decision to purchase or subscribe for any securities pursuant to such offer or invitation should be made solely on the basis of such prospectus and not this presentation. Any person considering the purchase of any securities of the Company must inform himself or herself independently before taking any investment decision. By accessing this presentation the recipient will be deemed to represent that they possess, either individually or through their advisers, sufficient investment expertise to understand the risks involved in any purchase or sale of any financial instrument or any other information contained herein. This presentation should not be construed as legal, tax, investment or other advice and any recipient is strongly advised to seek their own independent advice in respect of any related investment, financial, legal, tax, accounting or regulatory considerations. The presentation has been provided to you solely for your information and background and is subject to amendment. Further, the information in this presentation has been compiled based on information from a number of sources and reflects prevailing conditions as of its date, which are subject to change. The information in this presentation is subject to verification, completion and change without notice and the Company is not under any obligation to update or keep current the information contained herein. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of their respective members, directors, officers, advisers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this presentation, and any reliance you place on such information or opinions will be at your sole risk. Neither the Company nor any of its respective members, directors, officers, advisers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising, directly or indirectly, from any use of this presentation or its contents or otherwise arising in connection therewith. This presentation includes "forward-looking statements," which include all statements other than statements of historical facts, and involve known and unknown risks, uncertainties and other important factors beyond the Company’s control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Accordingly, any reliance you place on such forward-looking statements will be at your sole risk. These forward-looking statements speak only as at the date as of which they are made. Past performance of the Company cannot be relied on as a guide to future performance. No statement in this presentation is intended to be a profit forecast. This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. THIS PRESENTATION IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL. This presentation and the information contained herein are not an offer of securities for sale in the United States. No securities have been or will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or with any securities regulatory authority of any state or other jurisdiction of the United States and securities may not be offered, sold or delivered within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws and may only be sold outside of the United States in reliance on Regulation S under the Securities Act and otherwise in compliance with all applicable laws and regulations in each country or jurisdiction in which any such offer, sale or delivery of securities is made. The Company does not intend to register or to conduct a public offering of any securities in the United States. This presentation and its contents may not be viewed by persons within the United States (within the meaning of Regulation S under the Securities Act).
  3. 3. Presenters: 3 Reinis Berzins Chairman of the Board Elina Salava Financial advisor of the Board
  4. 4. CONTENT: I. General Information II. Business Overview III. Profitability and efficiency IV. Funding and Liquidity V. Risk Management VI. Key Financial and Performance indicators
  5. 5. I.GENERAL INFORMATION
  6. 6. ALTUM a strategic engine of Latvia’s economic development  100% state-owned financial institution that provides access to finance in the areas prioritized by the government and implements the state policy in the national economy  One of a few state owned companies operating in accordance with a special law issued by the Legislature of the Republic of Latvia Saeima – Law on Development Financial Institution Ministry of Economics 30% Ministry of Agriculture 30% Shareholders of Development Finance Institution ALTUM Ministry of Finance 40% We help Latvia grow MISSION To be a partner and financial expert in economic development VISION Team Excellence Responsibility VALUES
  7. 7.  Ownership by The Republic of Latvia rated A3/A/A- by Moody’s, S&P and Fitch  Clearly expressed state support- extra credit risk is covered by the public funding  Long-term issuer credit rating Baa1 assigned by Moody’s, standalone rating upgraded to baa3  Solid financial metrics: equity ratio 37.1% and liquidity ratio 227%  Track record of improving operational efficiency  Prudent corporate governance and professional management team Credit highlights
  8. 8.  Solid GDP growth and expected to remain at 3%  Moderate and slowing inflation  Unemployment level still relatively high (close to 8%) but on a firm downtrend  Strong fiscal discipline – the budget deficit does not exceed 1% Latvia macroecomic figures 2015 2016 2017 2018 2019 2020 2021 Fact Forecast GDP % 2.7 2.1 4.6 4.2 3.0 3.0 2.9 Inflation % 0.2 0.2 2.9 2.5 2.5 2.2 2.1 Unemployment % 9.9 9.6 8.7 7.7 7.4 7.0 6.8 Budget deficit % of GDP -1.4 0.1 -0.5 -0.5 Government debt % 36.8 40.5 40.1 37.0* Balance of payments current account % of GDP -0.5 1.6 0.7 -1.0 Credit rating Fitch A- A- A- A- Moody’s A3 A3 A3 A3 Standart&Poor’s A- A- A- A Sound macroeconomic fundamentals of Latvia * Data as of Q3 2018 Sources: Latvian Ministry of Finance http://www.fm.gov.lv/en/s/macroeconomics/main_macroeconomic_indicators Eurostat https://ec.europa.eu/eurostat/data/database.
  9. 9. II.BUSINESS OVERVIEW
  10. 10. Business model at glance  Long-term profitability  Extra credit risk covered by public funding – Risk coverage reserve and Portfolio loss reserve  Guarantees issued by ALTUM have 270 MEUR back-up guarantee in the Latvian state budget  No dividend payments by law Total assets 496 MEUR Number of outstanding contracts 18,280 Loans 217 MEUR Guarantees 237 MEUR VC 60 M MID TERM TENDENCIES LOANS VENTURE CAPITAL GUARANTEES LOANS GUARANTEES VENTURE CAPITAL MID TERM TENDENCIES
  11. 11. SME and…Agriculture[CELL RANGE] Individuals Financial intermediaries Loans 90 Guarantees 118 Export credit guarantees… Loans 106 Guarantees 12 Land fund 22 Guarantees 95 Loans 13 Venture capital 60 Loans 1 ALTUM portfolio map • Housing guarantees • Housing loans • Housing energy efficiency guarantees • Housing energy efficiency loans Individuals • Land purchase loans • Land fund (Reverse rent and IP) • Loan guarantees • Investment and working capital loans Agriculture • Venture capital funds – 4 generations • Loans Financial intermediaries • Investment and working capital loans • Energy efficiency & renewables loans • Loan guarantees • Export credit guarantees SME and Midcap * Data as of 31.12.2018. SME and Midcap Agriculture[ CELLRANGE ] Individuals Financial intermediarie s 529 MEUR
  12. 12. 62 MEUR 60 MEUR 208 MEUR 2016 2017 2018 Guarantees 429 MEUR (11 449) 452 MEUR (14 402) 514 MEUR (18 280) Loans Venture capital Portfolio (Contracts) Business trends 2016 – 2018
  13. 13. Key drivers for portfolio growth:  Fastest growing segment - Individuals +25 MEUR guarantees  SME and MidCap +14 MEUR corporate guarantees  Agriculture +16 MEUR land purchase loans and sales and leaseback  In 2018 total volumes are 159 MEUR (56% - guarantees, 42% - loans and 2% -venture capital investments).  In 2018 volumes for all segments increased by 40 MEUR comparing to 2017, highest growth Individuals +58% and Agriculture +51%.  Financial intermediaries segment stayed low due to the end of venture capital fund Investment period. Expected to increase in 2019 when recently signed Fund management agreements become effective. 57 74 109 103 109 126 201 204 219 69 65 61 0 100 200 300 400 500 600 2016 2017 2018 MEUR Portfolio 20 25 39 35 22 33 60 70 83 21 3 4 0 20 40 60 80 100 120 140 160 180 2016 2017 2018 MEURVolumes Financial intermediaries SME and Midcap Agriculture Individuals Client segments
  14. 14. 14 7 17 36 15 9 21 30 0 10 20 30 40 50 60 70 Acceleration funds Seed funds Venture funds Growth funds MEUR Existing - Investment at Cost at y/e 2018 New - Allocated Volume  Fund managers are selected through the public procurement process  Investment decisions are made by professional fund managers  Ticket size: up to 10% - 15% of the fund volume Venture capital: New vs Existing
  15. 15. III. PROFITABILITY & EFFICIENCY
  16. 16.  «25K project». Fully redrafted loan assessment process. Internal processes more efficient and effective. Regional capacity restructured.  Installation of new IT infrastructure in 2018 allows to boost business volume with more efficient technologies and streamlined internal processes.  Steady stable profit 429 452 514 2.9% 2.3% 2.1% 0% 2% 4% 6% 8% 10% 0 100 200 300 400 500 600 2016 2017 2018 MEUR Portfolio vs Overheads Portfolio Year overheads VS Portfolio Improving operational efficiency * Restated in 2018 4.9 2.2 8.7 4.1 2.2 4.0 6.0* 4.5 0 1 2 3 4 5 6 7 8 9 2015 2016 2017 2018 Profit dynamics Profit ALTUM Company Profit ALTUM Group
  17. 17. IV.FUNDING & LIQUIDITY
  18. 18. According to Cabinet of Ministers Regulations the public financing funds can be prolonged. In practice, the funds remain on ALTUM balance sheet and are used to finance new programmes  All borrowings are of medium or long term (from 5 to 10 years and beyond) * Data as of 31.12.2018. 18 Debt structure 34 9 12 26 15 30 3 50 16 48 0 50 100 EU Structural funds and State budget Loans from state treasury and Rural Support Service Bonds issued Loans from international Financial institutions Funding maturity profile < 1 years 1-5 years 5-10 years 10-15 years >15 years
  19. 19.  High liquidity ratio – maintained over 227%*  Diversified exposure  Current buffer – in accordance with the programme rules and agreements with the State Treasury, ALTUM has unused credit lines from the State Treasury to finance the support programmes (~94 MEUR) * Liquidity ratio: due from other credit institutions and the Treasury with a maturity of up to 1 month and available- for-sale Investment securities by the amount of the total liabilities maturing within 6 months and total financial commitments maturing within 6 months (off-balance items). Bonds issued by the Republic of Latvia 51 Cash at Banks (Aa1-Aa3) 13 Cash at Banks (Baa1-Baa3) 22 Cash at Banks (Ba1-Ba3)… Cash at State Treasury 97 Liqudity portfolio MEUR Exceptionally strong liquidity position
  20. 20. V.RISK MANAGEMENT
  21. 21.  Implementation of IFRS 9: - New provisions assessment approach - Changed scope of NPL - Provisions presented at gross, including provisions covered by risk coverage reserve  AML / CTF / Sanctions risks compliance - International standards and the best practise standards are ensured - Risk based approach implemented for clients scoring during their life time at ALTUM Enhanced Risk Management
  22. 22. Qualitative assessment of loan portfolio
  23. 23. VI. KEY FINANCIAL & PERFORMANCE INDICATORS
  24. 24. Key Financial data (TEUR) 2018 2017 2016 Net income from interest, fees and commissions 11,554 11, 602 11,024 Profit for the period 4,092 8,709 2,170 Cost to income Ratio (CIR) 77.1% 50.3% 88.4% Employees 222 230 242 Total assets 495,939 453,668 443,400 Tangible Common Equity(TCE)/Tangible Managed Assets (TMA) 37.1% 35.1% 36.5% Equity 221,590 222,848 210,406 Total risk coverage: 77,815 67,593 66,508 - Risk coverage reserve 85,276 62,651 63,636 - Risk coverage reserve used for provisions -19,268 -4,753 -4,323 - Portfolio loss reserve within Reserves (specific reserve capital) 11,807 9,695 7,195 Liquidity Ratio 180 days 227% 482% 449% Key financial and performance indicators (1)
  25. 25. Financial instruments (gross value), TEUR 2018 2017 2016 Outstanding (by financial instrument) Loans 217,131 207,585 217,429 Guarantees 236,895 182,376 147,175 Venture capital funds 59,698 62,299 64,785 Total 513,724 452,260 429,389 Number of contracts 18,280 14,402 11,449 Volumes granted (by financial instrument) Loans 66,443 51,869 59,465 Guarantees 88,765 68,615 56,109 Venture capital funds 4,149 2,638 21,356 Total 159,357 123,122 136,929 Number of contracts 5,464 4,697 4,461 Leverage for raised private funding 162% 185% 162% Key financial and performance indicators (2)
  26. 26. APPENDIX
  27. 27. Loan portfolio and Risk Coverage 8.9% 8.7% 8.9% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 0 50,000 100,000 150,000 200,000 2016 2017 2018 Provisions Loanportfolio Loan portfolio, gross % of provisions vs portfolio Provisions covered by risk coverage Altum's share of provisions TEUR 2016 2017 2018 Loan portfolio, gross 217 429 207 585 217 131 Provisions covered by risk coverage reserve 3 105 2 557 4 951 ALTUM’s share of provisions 16 179 15 438 14 426 Total provisions 19 284 17 995 19 377
  28. 28. Guarantees and Risk Coverage * Includes provisions on «onerous contracts (IAS 37) covered by risk coverage reserve for the period until y/e 2017 of EUR 7.2m disclosed in FS 2018 as a result of IFRS 9 implementation ** As of 2018 provisions measured according to IFRS 9 covers both prior standards - provisions under IAS 9 and IAS 37, comparatives for 2017 and 2016 restated to see comparable trend 12.3% 10.2% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 0 50,000 100,000 150,000 200,000 2016 2017 2018 Provisions Guarantees Guarantees, gross Provisions covered by risk coverage reserve (IAS 37) % of provisions vs portfolio Provisions covered by risk coverage reserve 13.1 13.1% TEUR 2016 2017 2018 Guarantees, gross 147 174 182 376 236 895 Provisions covered by risk coverage reserve 1 218 9 359* 13 162** ALTUM’s share of provisions 16 864 14 531 10 982 Total provisions 18 802 23 890 24 144
  29. 29.  “Risk coverage, total” is net funding available for coverage of expected credit losses of development programmes implemented by ALTUM  Adequate risk coverage for expected credit losses available before launching new programmes or products  For that purpose, respective portion of public funding is allocated at full or partial extent of total expected credit losses. After public funding is available, it is assigned either to • to Specific support program’s reserve capital as part of ALTUM’s reserve capital or • Accounted separately as provisions for risk coverage “Risk Coverage Reserve” as part of the liabilities Risk Coverage TEUR 2016 2017 2018 Risk Coverage, total 66 508 67 593 77 815 Risk Coverage Reserve 63 636 62 651 85 276 Risk Coverage Reserve used for provisions -4 323 -4 753 -19 268 Portfolio Loss reserve within Reserves (specific reserve capital) 7 195 9 695 11 807
  30. 30. www.altum.lv

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