Interim Report 2019-06

Business volume amounted to SEK 63,622 m (69,272), adjusted for intermediated mortgage ... continue to deliver simple and fair solutions for the many ...

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Interim Report 2019-06

IKANO BANK AB (publ), corporate ID no. 516406-0922

Ikano Bank AB (publ) Interim Report 30 June 2019 Results for the first half-year 2019 (comparative figures in brackets are as of 30 June 2018 unless otherwise stated)

      

Business volume amounted to SEK 63,622 m (69,272), adjusted for intermediated mortgage volumes that ceased during 2018 (5,340 mSEK) the business volume decreased marginally Lending, including leasing, amounted to SEK 37,369 m (37,621) Deposits from the public amounted to SEK 26,253 m (26,311) Operating profit before loan losses increased to 431 mSEK (398) Net interest income decreased marginally, totalling SEK 971 m (978) The common equity Tier 1 capital ratio was 15.3 percent (14.5) and the total capital ratio was 17.6 percent (16.7) The liquidity reserve was SEK 2,352 m (2,404) and the total liquidity portfolio amounted to SEK 5,463 m (5,583)

Outlook for the remainder of 2019 We see positive effects from the improvement work and continue to work together according to plan to streamline and invest in our business. This includes further investments in our offering and especially its digitalisation, as well as regulatory compliance. We are continuing to invest in our IT platform to secure long-term profitable growth and customer benefits. At the same time, management has a strong focus on cost control. The Bank’s strategy to act and grow in the UK market as a branch also after Brexit remains.

Key ratios

30 Jun 2019

30 Jun 2018

31 Dec 2018

Total Capital ratio

17.6%

16.7%

17.2%

Common equity Tier 1 Capital ratio

15.3% 4.3%

14.5% 4.4%

14.9% 4.4%

2.6%

6.5%

4.9%

Leverage ratio

12.2%

11.4%

11.8%

C/I-ratio before loan losses

70.6%

72.0%

71.1%

1.8%

0.9%

1.3%

Investment margin Return on adjusted equity

Loan loss ratio

For definitions of alternative performance measures used to describe the Bank's operations see the Bank's Annual Report for 2018, available on the Bank's website: www.ikanobank.se/om-banken/ekonomisk-information.

Lending including leasing, SEK m

Deposits from the public, SEK m

Ikano Bank’s Interim Report is available on the Bank’s website: www.ikanobank.se/om-banken/ekonomisk-information.

INTERIM REPORT JUNE 2019

1

IKANO BANK AB (publ), corporate ID no. 516406-0922

Statement by the CEO Work continues as planned The half-year result is in line with our expectations. The underlying business is stable but our ambition is to improve the key ratios. We have accelerated the improvement work where a number of activities are underway and we are already beginning to see the effects of this proactive work. Profit before loan losses increased compared to the previous period. The growth in the period came mainly from the Swedish operations where the Corporate segment is growing. Loan losses increased slightly compared to previous period when excluding a portfolio sale which impacted the result in 2018 positively. Also after loan losses the result increases in most markets. We are firmly rooted in the vision and values characteristic for our company and to deliver on our promise; on fair terms. We are focusing more on the commercial area and improved customer experience and together with our partners we continue to deliver simple and fair solutions for the many people. Our organisation is now gaining a clearer distribution of responsibilities as well as increased focus on entrepreneurship and decision making. We have an almost completely new management team in place to drive the improvement work in the Bank and look forward to getting a new CFO and a new CRO 1 September. The local and central credit risk organisations have been strengthened during the period. Investments in the IT platform continue, now with an increased focus on digitalisation and improving the customer experience. We generally see increased execution power throughout the company. We are continuing to streamline our way of working; by automating simple but time-consuming processes we can have more time to help our customers, improve quality and lower costs in our ongoing operations. Investment in Robotic Process Automation (RPA) technology is an example of how we work with this in the Bank. A number of processes are already underway and we continue to improve efficiency in our markets and functions. During the period we have implemented initiatives to lower our costs and at the same time become a more competitive Bank with an increased focus on business creation activities, and revenues are now growing faster than costs. We have many ongoing activities to further improve growth and profitability. In June, a new invoicing solution was launched in Norway and Finland as part of increasing our growth.

2

Preparations for Brexit are made in close cooperation with both the British and Swedish authorities. We are committed to the UK market. Ikano Bank continues to have high customer satisfaction and we are proud to once again be named one of Sweden's top 100 Career Companies in 2019. The fact that we also have a strong confidence in the capital market was evidenced by the three MTN issuances that were oversubscribed in the spring. We see positive effects from the improvement work and the work continues as planned to further strengthen the Bank's position as the entrepreneur-driven Bank in the spirit of Ingvar Kamprad; a Bank where we with simple and fair solutions create opportunities for a better everyday life for the many people. Henrik Eklund

About Ikano Bank Ikano Bank has three business lines: Consumer, Sales Finance and Corporate. The Consumer business line conducts traditional banking operations that focus on private individuals by offering simple and attractive savings and loan services. Sales Finance administers and markets finance solutions for partners, and Corporate offers leasing solutions as well as factoring services to businesses. Ikano Bank has operations in Sweden, the UK, Norway, Denmark, Finland, Germany, Austria and Poland. Sweden is the largest market, where the Bank also has the broadest offering for all target groups. Ikano Bank offers a selection of the Bank’s services in the other geographical markets. Ikano Bank has no physical offices for customers, but delivers its services digitally.

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

The Bank’s results for the first halfyear 2019 compared to the corresponding period of 2018

The Bank’s position as of 30 June 2019 compared to 31 December 2018

Operating results before loan losses increased

Deposits from the public are an important part of the Bank's funding and have shown stable growth for several years. Deposits from the public rose by 0.2 percent to SEK 26.3 bn (26.2). In the Swedish market, deposit volumes and margins are somewhat lower while both volumes and margins grew in the international markets. The average interest rate margin remains unchanged.

Operating results for the first half of 2019 decreased by 58.2 percent to SEK 98 m (235), but the result before credit losses increased with 8.2 percent to SEK 431 m (398). During the comparison period, a portfolio sale in Germany resulted in a net income of SEK 128 m. The portfolio sale is also the main reason to the difference in the loan loss levels between the periods. Net interest income decreased with 0.7 percent to SEK 971 m (978) while the ne leasing income was up by 9.9 percent to SEK 243 m (222). Net commission income increased by 21.4 percent to SEK 189 m (156). Total income was up 5.4 percent while total costs increased 5.0 percent, with IT costs accounting for the largest increase together with higher depreciation of leasing assets due to growth in the Corporate segment. Marginally lower net interest income and higher net commission income Net interest income developed differently in the markets. Overall it decreased marginally by SEK 7 m or 0.7 percent to SEK 971 m (978). In Sweden, UK and Poland, net interest income increased, mainly as a result of better margins. Net commission income increased by 21.4 percent to SEK 189 m (156). This is a result of lower lending related commission costs as well as an increase in commission income from insurance. Increased net leasing income Net leasing income increased by 9.9 percent compared to the same period last year and amounted to SEK 243 m (221). Both leasing volumes and margins increased, mainly driven by growth in Sweden. Increased operating expenses due to volume growth leasing Operating expenses increased by 5.0 percent to SEK 2,772 m (2,639). The increase is partly due to the volume growth in the Corporate segment, the related higher depreciation of leasing assets and partly due to higher IT costs. The growth rate for costs is down from the previous period. Higher loan losses Overall, net loan losses increased by SEK 170 m to SEK 332 m (163). This increase is mainly due to the portfolio sale of non-performing loans which affected loan losses positively by SEK 155 m during the same period 2018. Loan losses measured as a percentage of average total lending increased to 1.8 percent (1.3), also as a result of the portfolio sale during the same period last year. This is marginally higher than the Bank’s historic loan loss level.

Stable deposits from the public

Decreased loans to the public and increased leasing The Bank's loans to the public decreased by 0.9 percent to SEK 27.0 bn (27.3) after provisions for loan losses. The decrease is mainly due to lower utilisation of credit cards. Volumes of private loans increased somewhat. Leasing assets held on behalf of customers increased by 4.3 percent to SEK 10.3 bn (9.9) as a result of continued strong demand for financing with our partners. Growth in total business volumes The total business volume rose by 0.4 percent to SEK 63.6 bn (63.4). Increased leasing volumes, mainly in the Swedish market, are the main contributor to the total increase in business volume. Good liquidity and strong demand for the Bank’s certificates and bonds The Bank's liquidity portfolio remained largely at the same level on 30 June 2019 as at year-end and amounted to SEK 5.5 bn (5.6), which equals 21 percent of the Bank's total deposits from the public. The Bank continuously obtains funding in the Swedish capital market and demand for the Bank's short certificate programme continues to be good. In addition to ongoing issuance of commercial papers, three new MTN bonds were issued during the first half of the year with a total nominal amount of SEK 1,300 m. The maturities were between two and four years and the issues were met with strong interest from the market. In addition to the new issues, a repurchase to the nominal amount of SEK 680 m was also made; repurchases are made to proactively manage future debt maturities and to extend the maturity profile. The own funds amounted to SEK 6.6 bn per 30 June 2019, compared to the capital requirement of SEK 3.0 bn. The total capital ratio amounted to 17.6 percent (17.2) and the Common Equity Tier 1 ratio was 15.3 percent (14.9).

INTERIM REPORT JUNE 2019

3

IKANO BANK AB (publ), corporate ID no. 516406-0922

Other information

Post balance sheet events

Ikano Bank AB (publ), corporate identity number 516406-0922, is an incorporated bank with its registered office in Älmhult and its head office in Malmö, Sweden. Ikano Bank is owned by Ikano S.A. with its registered office in Luxembourg. Originally part of IKEA, Ikano S.A. (the “Ikano Group”) became a separate group in 1988. Ikano Group conducts business within banking, real estate, production, insurance and retail. Ikano Bank has operated its business under a banking license since 1995.

No significant events have occurred after the end of the reporting period that affected the financial statements for the first half-year 2019.

Operations Ikano Bank AB (publ) conducts banking operations regulated by the financial supervisory authorities of Sweden, the UK, Norway, Denmark, Finland, Germany, Austria and Poland. There are three business lines: Corporate, Sales Finance and Consumer. The operations in Denmark, Norway, Finland, the UK, Germany and Poland are operated as branches, while Austria is serviced under cross-border operations.

Board of Directors and management During the year Olle Claesson has resigned as a member of the Board of Directors. Viveka Strangert and Lars Ljungälv have been appointed to the Bank’s Board of Directors. After a period as interim CEO, the Board of Directors has appointed Henrik Eklund as CEO on a permanent basis.

4

Outlook We see positive effects from the improvement work and continue to work together according to plan to streamline and invest in our business. This includes further investments in our offering and especially its digitalisation, as well as regulatory compliance. We are continuing to invest in our IT platform to secure long-term profitable growth and customer benefits. At the same time, management has a strong focus on cost control. The Bank’s strategy to act and grow in the UK market as a branch also after Brexit remains.

Next reporting date Ikano Bank reports its results half-yearly. The Year-end Report for 2019 will be available on the Bank’s website at the end of February 2020. Ikano Bank publishes information on capital adequacy and liquidity on a quarterly basis on its website. This Interim Report has not been reviewed by the Bank’s auditors.

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

Income statement Note

SEK 000

Jan-Jun 2019 Jan-Jun 2018 Jan-Dec 2018

Interest income

3

1 171 429

1 180 590

Interest expense

3

-200 025

-202 636

-402 997

971 404

977 954

1 935 129 3 790 090

Net interest income

2 338 126

Leasing income

4

1 981 703

1 839 412

Commission income

5

342 528

334 406

689 518

Commission expense

5

-153 686

-178 830

-336 354

188 842

155 576

353 164

13 568

10 433

-462

46 918

53 879

151 913

3 202 435

3 037 254

6 229 834

-894 282

-856 655

-1 749 367

-1 784 783 -92 581 -2 771 646

-1 663 823 -118 801 -2 639 279

-3 436 676 -209 344 -5 395 387

430 789

397 975

834 447

-332 400

-162 553

-475 938

98 389

235 422

358 510

Net commission income Net gains and losses on financial transactions Other operating income

6

Total income General administrative expenses Depreciation/amortisation and impairments of tangible and intangible assets

4

Other operating expenses Total expenses before loan losses Profit before loan losses Loan losses, net

7

Operating result Appropriations

8

Tax expense Net result for the period

-

-

320 000

14 402

-113 446

-137 302

112 791

121 976

541 208

Report on total comprehensive income SEK 000 Net profit for the period

Jan-Jun 2019 Jan-Jun 2018 Jan-Dec 2018 112 791

121 976

541 208

122 957

189 669

86 933

8 255

-599

-6 630

-9 667

-9 744

5 315

Tax related to changes in translation differences for the year Tax related to changes in fair value through other comprehensive income

-39 487

-

-34 716

-2 207

132

1 725

Tax related to changes in fair value of cash flow hedges Other comprehensive income for the period, net of tax

2 060 81 911

2 144 181 602

-1 137 51 490

Total comprehensive income for the period, net of tax

194 702

303 578

592 698

Other comprehensive income Items that can be reclassified to net profit for the period Translation difference for the period, foreign branches Changes in fair value through other comprehensive income Fair value changes for cash flow hedges

INTERIM REPORT JUNE 2019

5

IKANO BANK AB (publ), corporate ID no. 516406-0922

Balance sheet SE K 000

Note

30 J u n 2019 30 J u n 2018

31 D ec 2018

A s s ets Cash Treasury bills Loans to credit institutions Loans to the public

9

Bonds and other interest-bearing securities Shares and participations Intangible assets Tangible assets

- Leasing assets - Equipment Other assets Deferred tax assets Prepaid expenses and accrued income To ta l a s s ets

18 771 1 392 905 1 692 677

2 013 1 132 105 2 139 134

35 735 1 282 293 2 150 846

27 047 365

27 650 741

27 289 123

2 441 595

2 349 522

2 231 935

39 775

23 594

29 299

342 675 10 338 902

403 341 9 997 762

378 747 9 916 416

10 321 672

9 970 022

9 898 120

17 229

27 740

18 296

1 094 460

976 540

1 019 595

116 158 302 426 44 827 710

129 151 304 037 45 107 940

115 452 281 869 44 731 310

L ia b il it ies , p ro v is io n s a n d eq u it y Liabilities to credit institutions

1 830 499

2 139 247

2 250 366

26 311 038

26 206 463

Deposits from the public

10

26 253 174

Issued securities

11

7 486 696

7 484 189

7 138 497

829 972 1 353 965

902 115 1 378 012

1 000 226 1 292 919

191 029

179 778

181 123

35 680 100 859

34 388 90 554

34 663 91 362

Other liabilities Accrued expenses and deferred income Provisions

- Provisions for pensions - Deferred tax liabilities - Other provisions

54 490

54 836

55 098

865 289

860 294

839 330

38 810 623

39 254 673

38 908 924

378 157

698 157

378 157

Share capital

537 517 78 994

545 949 78 994

548 965 78 994

Statutory reserve

193 655

193 655

193 655

264 868

273 300

276 316

Fund for fair value

5 101 414 286 016

4 609 161 334 218

4 895 264 204 105

Retained earnings

4 702 607

4 152 967

4 149 951

112 791

121 976

541 208

5 638 931 44 827 710

5 155 110 45 107 940

5 444 229 44 731 310

Subordinated liabilities To ta l l ia b il ities a n d p ro v is io n s Un ta xed res erv es E q u ity Res t ricted eq u it y

Fund for development expenses No n - res t ricted eq u ity

Net result for the period To ta l eq u it y To ta l l ia b il ities , p ro v is io n s a n d eq u it y

6

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

Statement of changes in equity Restricted equity

Non-restricted equity Fund for fair value Fund for develop-

SE K 000 O p en in g b a l a n ce 2018- 01- 01 IFRS 9 transition effect

Share capital

Statutory reserve

ment expenses

Fair value reserve

Cash flow

Retained

Net result

hedge reserve

earnings or losses

for the period

Translation reserve

To ta l eq u ity

78 994 -

193 655 -

243 021 -

26 919 -13 522

130 774 -

8 444 -

4 104 642 -205 257

283 861 -

5 070 310 -218 779

78 994

193 655

243 021

13 397

130 774

8 444

3 899 385

283 861

4 851 531

Appropriation of profits Change in fund for development expenses

-

-

33 295

-

-

-

283 861 -33 295

-283 861 -

-

Net result for the year Other comprehensive income for the year To ta l co mp reh en s iv e in co me fo r th e yea r

-

-

-

-

-

-

52 217

4 178

-

541 208 -

541 208

-4 905

-

-

-

-4 905

52 217

4 178

-

541 208

592 698

Adju s ted o p en in g b a l a n ce 2018- 01- 01

51 490

Shareholders contribution Cl o s in g b a l a n ce 2018- 12- 31

-

-

-

-

-

-

-

-

-

78 994

193 655

276 316

8 492

182 991

12 622

4 149 951

541 208

5 444 229

O p en in g b a l a n ce 2019 - 01- 01

78 994

193 655

276 316

8 492

182 991

12 622

4 149 951

541 208

5 444 229

Appropriation of profits Change in fund for development expenses

-

-

-

-

-11 448

-

-

-

541 208 11 448

-541 208 -

-

Net result for the period Other comprehensive income for the period

-

-

-

-

-

-

83 470

-7 607

-

112 791 -

112 791

6 048

To ta l co mp reh en s iv e in co me fo r th e p erio d

-

-

-

6 048

83 470

-7 607

-

112 791

194 702

78 994

193 655

264 868

14 540

266 462

5 014

4 702 607

112 791

5 638 931

Cl o s in g b a l a n ce 2019 - 06 - 30

81 911

Cash flow statement Jan-Jun 2019

Jan-Jun 2018

J a n - D ec 2018

+98 389 +2 002 210

+235 422 +1 381 964

+358 510 +3 404 402

b efo re ch a n g es in w o rkin g ca p ita l

+2 100 599

+1 617 386

+3 762 912

Cash flows from changes in working capital Ca s h fl o w s fro m o p era tin g a ctiv ities

-2 528 895 -428 297

-1 528 894 +88 492

-3 434 521 +328 391

Ca s h fl o w s fro m in v es tin g a ctiv ities

-8 813

-46 397

-58 102

Ca s h fl o w s fro m fin a n cin g a ctiv ities

-112 711

+245 477

+76 870

-549 821 +2 169 819

+287 572 +1 808 435

+347 159 +1 808 435

+78 592

+32 043

+14 225

+1 698 590

+2 128 050

+2 169 819

SE K 000 O p era tin g a ctiv ities Operating profit Adjustment for non-cash items Ca s h fl o w s fro m o p era tin g a ctiv ities

Ca s h fl o w fo r th e p erio d Cash and cash equivalents at beginning of the year Exchange rate difference in cash and cash equivalents Ca s h a n d ca s h eq u iv a l en ts a t th e en d o f th e p erio d

The cash flow statement has been prepared using the indirect method. Reported cash flow includes only transactions that involve incoming or outgoing payments. Cash and cash equivalents are defined as cash and bank

balances with central banks and lending to credit institutions, of SEK 1,712 m (2,141) less deductions for current liabilities to credit institutions of SEK 12 m (13).

INTERIM REPORT JUNE 2019

7

IKANO BANK AB (publ), corporate ID no. 516406-0922

Notes 1 Accounting principles This Interim Report has been prepared in accordance with IAS 34 and also complies with the Swedish Annual Accounts Act for Credit Institutions and Securities Companies (ÅRKL), the Swedish Financial Supervisory Authority’s regulations and general guidelines regarding annual reporting for credit institutions and securities companies in accordance with the applicable transitional rules (FFFS 2008:25), as well as the Swedish Financial Reporting Board’s recommendation, RFR 2 Accounting for Legal Entities. Accordingly, the Bank applies statutory IFRS. Per 1 January 2019 IFRS 16 Leasing Standards came into effect, replacing IAS 17 Leasing Standards. IFRS 16 implies changes for the lessee's lease accounting, while the lessor is expected to report consistent with current rules in IAS 17. As Ikano Bank applies the exemption in

RFR 2 for legal entities, IFRS 16 does not affect Ikano Bank's financial reports significantly, since the exemption continues to apply for IFRS 16 in 2019. RFR 2 allows for legal entities to report financial lease agreements as operational leases in the income statement and balance sheet. No other new standards are expected to have any significant impact on the Bank's financial reports 2019 or later in addition to the ones outlined here. In other respects, the applied accounting policies and assessments in the Interim Report coincide with those applied in the Annual Report for 2018. This Interim Report is presented in Swedish kronor (SEK), rounded to the nearest thousand (SEK 000) unless otherwise stated.

2 Operating segments Jan-Jun 201 9 S EK m Interest income Interest expense T otal net interest inc om e Payment service commissions Lending commissions Compensation, mediated insurance Other commissions C om m ission inc om e Commission expenses C om m ission, net Leasing income Depreciation on leasing assets Leasing inc ome, net N et interest, fee and leasing inc om e

Other income Other direct expenses O perating m argin before net loan

Sweden

Denmark

Norway

Finland

United

Germany/

Kingdom

Austria

Poland

Shared

Total before

functions

eliminations

305

35

-41 264

-8 27 -

38 -26 12

6 10 24 0 40 -15 25

1 1 0 2 -3 0

0 0 -8 -8

-

-

-

-

218

289

27

3 -4 33

12 -11 219

0 -13 277

2

-34 0 0

-238 -4 -23

-

-

46 -18

392 -132 260

159 -40 119

100 -45 55

14 -6 8

301 -95 206

5 84 67 3 160 -66 93

1 20 14 2 36 -7 29

-

-

29 19 5 53 -23 30

0 11 2 0 14 -3 11

1 003 -887 116 470

532 -467 65 213

311 -265 47 132

136 -120 16 34

13 -19 464

11 -5 218

4 -9 128

-444 -5 15

-186 -2 31

-108 -1 18

73 554 -210

21 249 -74

204 -92

-

-7 24

-

-

18

0

Eliminations

Total

269 -237 32

1 575 -603 971

-403 403

-

12 190 128 12 343 -150 192

-

-

24

1 982 -1 739 243 1 407

-1 27

386 0 410

431 -62 1 776

-371

61 -62 1 405

-234 -5 38

-26 0 2

-391 0 19

-1 661 -16 98

372 -1 -

-1 289 -18 98

0 0 0

-

0 0

39 -15

633 78 -123

726 1 170 -532

-726 -

0 -23

-10 27

-1 1

32 51

14 113

36 1 1

-

-

-371 -

1 171 -200 971 12 190 128 12 343 -150 192 1 982 -1 739 243 1 407

losses and operational expenses Other expenses Allocated overhead expenses O perating result Of which:

Total internal income Total external income Total internal expenses Tax Net res u l t fo r th e p erio d

15

532 -

For more information on segment reporting see note 2 Accounting principles in the Annual Report 2018.

8

INTERIM REPORT JUNE 2019

1 170 14 113

IKANO BANK AB (publ), corporate ID no. 516406-0922

Jan-Jun 201 8 S EK m Interest income Interest expense T otal net interest inc om e Payment service commissions Lending commissions Compensation, mediated insurance Other commissions C om m ission inc ome Commission expenses C om m ission, net Leasing income Depreciation on leasing assets Leasing inc ome, net N et interest, fee and leasing inc ome Other income Other direct expenses O perating m argin before net loan

Sweden

Denmark

Norway

Finland

United

Germany/

Kingdom

Austria

Poland

Shared

Total before

functions

eliminations

Eliminations

Total

377 -114 263

165 -41 124

111 -40 71

14 -6 9

285 -86 199

316 -42 274

33 -8 25

230 -217 13

1 531 -553 978

-350 350 -

1 182 -204 978

5 85 51 12 154 -66 87

1 18 15 1 35 -8 27

-

1 11 2 0 13 -4 9

39 0 0 39 -17 22

6 9 23 0 39 -14 25

-

30 16 6 52 -29 24

1 1 0 2 -2 0

0 0 0 0 0

13 194 108 19 334 -142 192

-

13 194 108 19 334 -142 192

907 -813 94 444

513 -449 64 214

301 -255 46 141

119 -102 17 35

-

-

-

221

299

25

13

1 839 -1 618 221 1 391

-

1 839 -1 618 221 1 391

10 -24 430

11 -6 219

3 -7 137

2 -3 34

13 -12 223

-4 -42 253

3 -1 27

495 -5 503

534 -100 1 825

-470 -470

64 -100 1 355

-432 -10 -13

-175 -6 39

-134 -3 0

-36 -1 -2

-244 -6 -27

-76 -5 171

-25 0 2

-437 0 66

-1 559 -31 235

454 16 -

-1 106 -14 235

60 575 -317

17 258 -67

-

-

-

-

-

213 -83

47 -15

0 0

0 0

38 -16

699 21 -84

775 1 151 -582

-775 -

-

-10 29

0

-

-1 -28

-57 114

0 2

-46 20

-113 122

losses and operational expenses Other expenses Allocated overhead expenses O perating result Of which:

Total internal income Total external income Total internal expenses Tax Net res u l t fo r th e p erio d

-13

-2

Jan-Dec 201 8 S EK m Interest income Interest expense T otal net interest inc om e Payment service commissions Lending commissions Compensation, mediated insurance Other commissions C om m ission inc om e Commission expenses C om m ission, net Leasing income Depreciation on leasing assets Leasing inc ome, net N et interest, fee and leasing inc om e Other income Other direct expenses O perating m argin before net loan

Sweden

Denmark

Norway

Finland

749 -229 520

329 -83 247

215 -82 133

29 -12 17

12 173 117 20 322 -136 186 1 880 -1 687 193 900

2 36 27 2 66 -17 50 1 043 -915 129 425

61 36 12 109 -60 48 610 -517 93 274

1 22 4 0 27 -9 18 257 -223 33 68

77 -39 938

22 -10 438

8 -13 269

-870 -3 65

-362 -4 72

-248 -1 20

119 1 236 -602

35 514 -142

424 -168

-

-

-

-11 61

-7 13

-

United

Germany/

Kingdom

Austria

Poland

Shared

Total before

functions

eliminations

582 -

Eliminations

1 151 -113 122

Total

566 -177 389

627 -81 546

67 -16 52

472 -441 31

3 055 -1 120 1 935

-717 717 -

2 338 -403 1 935

-

2 1 1 4 -5 -1 51

0 0 0 -1 -1 30

27 394 233 35 690 -298 392 3 790 -3 342 448 2 775

-

79 -37 43 432

13 20 49 1 82 -33 49 595

27 394 233 35 690 -298 392 3 790 -3 342 448 2 775

4 -6 66

22 -26 428

-4 -50 541

4 -2 54

874 -5 899

1 006 -150 3 631

-858

149 -150 2 774

-71 1 -4

-472 -4 -48

-298 -6 237

-50 1 5

-886 -1 13

-3 256 -16 359

875 -17 -

-2 382 -33 359

-

0 0

0 0 0

-

93 -29

76 -28

1 327 0 -145

1 482 2 343 -1 114

-1 482 -

-

-

-

320

320

-10 -58

-87 151

0 5

-23 310

-137 541

-

80 -1 0

-858 -

losses and operational expenses Other expenses Allocated overhead expenses O perating result Of which:

Total internal income Total external income Total internal expenses Appropriations Tax Net res u l t fo r th e y ea r

65

-4

1 114

-

2 343 320 -137 541

External income SE K m

J a n - J u n 2019

J a n - J u n 2018

J a n - D ec 2018

411 864 495 48 1 818

376 917 499 9 1 801

761 1 773 962 132 3 628

Corporate Sales Finance Consumer Other To ta l extern a l in co me

Ikano Bank, or each segment individually, has no single customer representing 10 percent or more of total revenues.

INTERIM REPORT JUNE 2019

9

IKANO BANK AB (publ), corporate ID no. 516406-0922

Balance sheet Balance sheet 30 Jun 2019 SEK m Fixed assets other than financial instruments

Sweden

351 88 33 117 33 556 30 692

Deferred tax assets Other assets Total assets Liabilities and provisions 30 Jun 2018 SEK m Fixed assets other than financial instruments

Sweden

409 99 32 885 33 394 30 574

Deferred tax assets Other assets Total assets Liabilities and provisions 31 Dec 2018 SEK m Fixed assets other than financial instruments

Sweden

Deferred tax assets Other assets Total assets Liabilities and provisions

385 88 32 961 33 434 30 594

Denmark

Norway

4 6 436 6 440 5 094

Denmark

Denmark

5 5 961 5 967 4 695

Finland

1 3 648 3 648 3 331

Norway

United Kingdom

0 1 131 1 132 1 210

0 3 400 3 401 3 054

Norway

13 5 657 5 670 4 392

Finland

0 4 6 077 6 081 6 013 United Kingdom

0 1 187 1 187 1 261

Finland

0 3 294 3 294 2 985

2 8 6 077 6 086 5 965 United Kingdom

0 1 127 1 127 1 202

1 4 5 932 5 937 5 849

Germany/ Austria

4 25 7 845 7 874 6 294 Germany/ Austria

6 22 7 719 7 747 6 247 Germany/ Austria

5 24 7 890 7 918 6 423

Poland

Eliminations

-14 243 -14 243 -14 243

1 587 588 697

Poland

Eliminations

-13 282 -13 282 -13 282

1 657 658 767

Poland

Eliminations

-13 685 -13 685 -13 685

1 739 740 845

Total

360 116 44 352 44 828 38 811

Total

431 129 44 548 45 108 39 255

Total

397 115 44 219 44 731 38 909

3 Net interest Jan-Jun 2019

SEK 000

Jan-Jun 2018

Jan-Dec 2018

Interest income Loans to credit institutions Loans to the public Interest bearing securities

0

750

-1 642

1 164 680

1 179 117

2 337 836

6 749

723

1 932

Total

1 171 429

1 180 590

2 338 126

Of which: interest income from financial assets not measured at fair value through profit or loss interest income from non-performing loans

1 164 680 34 310

1 179 867 40 029

2 336 193 67 515

Interest expense Liabilities to credit institutions Deposits from the public

-17 412

-20 197

-40 078

-102 336

-103 980

-203 773

Of which: deposit guarantee fee

-18 823

-19 448

-34 218

Issued securities

-21 071

-12 902

-27 638

Derivatives

-37 231

-42 627

-85 693

- hedge accounting - not hedge accounting

-2 636

-4 720

-8 037

-34 595

-37 907

-77 656

Subordinated liabilities

-12 055

-11 550

-23 303

Other interest expenses

-9 919

-11 380

-22 512

Of which: resolution fee

-8 929

-10 600

-18 834

-200 025

-202 636

-402 997

-162 793 971 404

-160 009 977 954

-317 304 1 935 129

Total

Of which: interest income from financial assets not measured at fair value through profit or loss Total net interest income

10

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

4 Leasing income SE K 000 Leasing income, gross Less: Depreciation according to plan L ea s in g in co me, n et Leasing income from financial lease agreements Depreciation according to plan for assets that are financial lease agreements, but are recognised as operating leases

Jan-Jun

Jan-Jun

J a n - D ec

2019 1 981 703 -1 738 562

2018 1 839 412 -1 618 115

2018 3 790 090 -3 341 934

243 142

221 297

448 156

1 981 703

1 839 412

3 790 090

-1 738 562

-1 618 115

-3 341 934

L ea s in g in co me, n et fo r fin a n cia l l ea s e a g reemen t s

243 142

221 297

448 156

Interest income Interest expenses

5 501 -65 251

4 705 -54 420

9 531 -112 991

L ea s in g , n et

183 391

171 582

344 696

Jan-Jun

Jan-Jun

J a n - D ec

2019

2018

2018

12 484 189 627

12 829 194 236

26 922 394 184

140 417

127 341

268 412

342 528

334 406

689 518

Other commissions To ta l

-3 755 -119 856 -30 074

-1 326 -150 300 -27 204

-3 127 -280 605 -52 622

-153 686

-178 830

-336 354

Co mmis s io n , n et

188 842

155 576

353 164

Jan-Jun 2019 16 306 -

Jan-Jun 2018 12 234 -

30 611

41 645

J a n - D ec 2018 29 262 57 133 65 518

46 918

53 879

151 913

5 Net commission SE K 000 Co mmis s io n in co me Payment service commissions Lending commissions Other commissions To ta l Co mmis s io n exp en s es Payment service commissions Lending commissions

6 Other operating income SE K 000 Realised gain arising from the disposal of tangible assets One-off revenue SBAB Other operating income To ta l

INTERIM REPORT JUNE 2019

11

IKANO BANK AB (publ), corporate ID no. 516406-0922

7 Loan losses, net SE K 000 Sta g e 1 - A s s ets w ith o u t s ig n ifica n t in crea s e in cred it ris k s in ce in itia l reco g n it io n Change in provisions of receivables from stage 1 Net co s t fo r th e p erio d fo r l o a n l o s s es - s ta g e 1

Jan-Jun

Jan-Jun

J a n - D ec

2019

2018

2018

-14 198

6 428

28 020

-14 198

6 428

28 020

Sta g e 2 - As s ets w ith s ig n ifica n t in crea s e in cred it ris k s in ce in itia l reco g n it io n b u t n o t cred it- imp a ired Change in provisions of receivables from stage 2 Write-off and removal of receivables from stage 2 Recoveries from previously determined loan losses for stage 2 Net co s t fo r th e p erio d fo r l o a n l o s s es - s ta g e 2

33 957

2 861

16 963

-291 422 178 828

-92 407 27 380

-227 416 61 502

-78 637

-62 166

-148 952

-25 999

120 850

182 830

Sta g e 3 - Cred it - imp a ired a s s ets Change in provisions of receivables from stage 3 Write-off and removal of receivables from stage 3 Recoveries from previously determined loan losses for stage 3 Net co s t fo r th e p erio d fo r l o a n l o s s es - s ta g e 3

-304 537 90 970

-469 857 242 192

-984 609 446 773

-239 566

-106 815

-355 006

Net co s t fo r th e p erio d fo r l o a n l o s s es - To t a l

-332 400

-162 553

-475 938

8 Tax expense for the period SEK 000

30 Jun 201 9

3 0 Jun 201 8

31 Dec 201 8

Current tax expense

19 645

-52 526

-56 594

Prior year's tax expense

-2 029

-1 525

-4 320

Changes in deferred tax

-3 214

-59 395

-76 388

T otal tax expense for the period

14 402

-113 446

-137 302

1) Tax liabilities/claims related to foreign exchange rate effects for branches that initially has been recognised through OCI in the balance sheet, have been recognised in the tax expense for the period due to being offset against current refundable foreign tax expenses or tax losses.

12

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

9 Loans to the public SE K 000

30 J u n 2019

30 J u n 2018

31 D ec 2018

9 262 841 18 681 825

9 585 270 19 053 310

9 567 734 18 581 041

27 944 666

28 638 580

28 148 775

23 637 531

23 753 798

23 273 351

3 511 393 795 740

3 944 743 940 039

4 080 083 795 342

27 944 664 795 740

28 638 580 940 039

28 148 775 795 342

-133 324 -282 963

-135 522 -308 534

-111 610 -286 305

-481 014

-543 783

-461 737

-897 300

-987 839

-859 652

23 504 207 3 228 430

23 618 276 3 636 209

23 161 741 3 793 778

O u t s ta n d in g receiv a b l es , g ro s s - Swedish currency - Foreign currency To ta l O u t s ta n d in g receiv a b l es p er s t a g e, g ro s s - stage 1 - stage 2 - stage 3 To ta l o u ts ta n d in g receiv a b l es p er s ta g e, g ro s s

Of which: non-performing loans P ro v is io n s Provisions for assets in stage 1 Provisions for assets in stage 2 Provisions for assets in stage 3 To ta l p ro v is io n s Ca rryin g a mo u n t, n et - stage 1 - stage 2 - stage 3 To ta l ca rryin g a mo u n t, n et

314 727

396 256

333 605

27 047 365

27 650 741

27 289 123

10 Deposits from the public SE K 000

30 J u n 2019

30 J u n 2018

31 D ec 2018

P u b l ic Swedish currency Foreign currency

12 364 291 13 888 883

13 101 139 13 209 899

12 757 321 13 449 142

To ta l

26 253 174

26 311 038

26 206 463

D ep o s its s p ecified b y ca teg o ry o f b o rro w er Corporate sector Household sector

1 314 471

1 039 897

1 373 023

24 938 702

25 271 141

24 833 440

To ta l

26 253 174

26 311 038

26 206 463

30 J u n 2019 2 088 688

30 J u n 2018 2 184 981

31 D ec 2018 1 989 784

5 398 008

5 299 208

5 148 713

7 486 696

7 484 189

7 138 497

11 Issued securities SE K 000 Certificates of deposits Bonds To ta l

INTERIM REPORT JUNE 2019

13

IKANO BANK AB (publ), corporate ID no. 516406-0922

12 Related parties The Bank has related party relationships with companies within the Ikano Group. Transactions with these companies are stated below. Consolidated financial statements are prepared by Ikano S.A., Luxembourg.

Transactions with related parties are priced on commercial market-based terms. No nonperforming loans are attributable to the outstanding receivables from related parties.

SE K 000

Period

Ikano S.A. Ikano S.A.

30 J u n 2019 30 J u n 2018

Income -

Ikano S.A.

31 D ec 2018

-

Other Group companies

30 J u n 2019

Other Group companies Other Group companies

30 J u n 2018 31 D ec 2018

Expenses -15 089

Receivables

Liabilities

with related

with related

parties -

parties 13 837

-14 460 -29 711

15 513 -

22 405 2 350

200

-26 632

3 172

874 623

-

-23 919

7 135

873 827

268

-50 605

7 240

851 273

13 Memorandum items SE K 000 Pledged assets

30 J u n 2019 none

30 J u n 2018 none

31 D ec 2018 none

693 2 958 889

669 2 965 120

693 1 802 242

35 697 908

39 234 098

37 028 758

Contingent liabilities Loan commitments, irrevocable Unused credit limits

Unused credit limits means card limits and loan commitments arranged externally. Commitments consisting of granted unused credit can be

terminated effective immediately to the extent this is permitted under the Swedish Consumer Credit Act. The Bank has no pledged assets.

14 Financial assets and liabilities The following table provides information on the measurement of fair value of the financial instruments that are measured at fair value in the balance sheet (excluding items included in hedge accounting). The breakdown of how fair value is determined is based on the following three levels:

14

-

-

Level 1: according to prices listed on an active market for the same instrument Level 2: based on directly or indirectly observable market data that is not included in level 1 Level 3: based on input that is not observable in the market

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

Financial assets and liabilities As described in the section Accounting principles, the transition to IFRS 9 has resulted in a number 30 J u n 2019 SE K 000 Fin a n cia l a s s ets a t fa ir v a l u e th ro u g h p ro fit o r

of changes in the classification of financial assets and liabilities.

L ev el 1

loss Interest rate derivatives

L ev el 2

-

Currency derivatives Shares and participations

L ev el 3

To ta l

-

-

-

-

58 363

58 363

38 240

1 535

-

1 560 646 1 272 852

880 949 120 053

-

2 441 595 1 392 905

-

16 306

39 775

Fin a n cia l a s s ets a t fa ir v a l u e th ro u g h o th er co m p reh en s iv e in co me Bonds and other interest-bearing securities Treasury bills Fin a n cia l l ia b il ities a t fa ir v a l u e th ro u g h p ro fit or loss Interest rate derivatives Currency derivatives

-

10 811

16 306 10 811

30 J u n 2018 SE K 000

L ev el 1

L ev el 2

L ev el 3

To ta l

Fin a n cia l a s s ets a t fa ir v a l u e th ro u g h p ro fit o r loss Interest rate derivatives Currency derivatives

-

14 702

-

14 702

22 059

1 535

-

23 594

Bonds and other interest-bearing securities

1 388 866

2 349 522

1 132 105

960 656 -

-

Treasury bills

-

1 132 105

-

7 581 91 734

-

91 734

Shares and participations Fin a n cia l a s s ets a v a il a b l e fo r s a l e

Fin a n cia l l ia b il ities a t fa ir v a l u e th ro u g h p ro fit or loss Interest rate derivatives Currency derivatives

7 581

31 D ec 2018 SE K 000 Fin a n cia l a s s ets a t fa ir v a l u e th ro u g h p ro fit o r loss

L ev el 1

L ev el 2

L ev el 3

To ta l

Interest rate derivatives

-

Currency derivatives Shares and participations

-

169 161

-

27 764

1 535

Bonds and other interest-bearing securities

1 306 864

2 231 935

1 282 293

925 071 -

-

Treasury bills Fin a n cia l l ia b il ities a t fa ir v a l u e th ro u g h p ro fit or loss

-

1 282 293

-

7 715 -

-

7 715 -

-

169 161 29 299

Fin a n cia l a s s ets a t fa ir v a l u e th ro u g h o th er co m p reh en s iv e in co me

Interest rate derivatives Currency derivatives

INTERIM REPORT JUNE 2019

15

IKANO BANK AB (publ), corporate ID no. 516406-0922

Financial instruments that have been offset in the balance sheet or are subject to netting agreements Ikano Bank is party to derivative contracts under the International Swaps and Derivatives Association’s (ISDA) master agreement, which means that when a counterparty cannot fulfil its obligations, the agreement is cancelled and all outstanding dealings between the parties are settled with a net amount. ISDA agreements do not meet the criteria for offsetting in the balance sheet since offsetting is only permitted due to a

party’s inability to settle, and also where the intention to reach a net settlement exists. No amounts have been offset in the balance sheet in 2019. Ikano Bank receives and submits collateral for derivatives in the form of bank deposits in accordance with the standard terms in the ISDA Credit Support Annex.

Amounts not offset in balance sheet

30 J u n 2019 SE K 000 Derivatives

Offsetting in the Net in balance Gross value 58 363

balance sheet

Netting

Issued/Received

-

sheet 58 363

agreements -24 779

collateral -44 897

Net value -

To ta l fin a n cia l a s s ets

58 363

-

58 363

-24 779

-44 897

-

Derivatives

27 117

-

27 117

-24 779

-2 716

-378

To ta l fin a n cia l l ia b il ities

27 117

-

27 117

-24 779

-2 716

-378

Amounts not offset in balance sheet

Offsetting in the Net in balance

30 J u n 2018 SE K 000 Derivatives

Gross value 14 702

balance sheet

Netting

-

sheet 14 702

agreements -14 702

Issued/Received collateral

Net value -

-

To ta l fin a n cia l a s s ets

14 702

-

14 702

-14 702

-

-

Derivatives

99 315

-

99 315

-14 702

-92 240

-7 627

To ta l fin a n cia l l ia b il ities

99 315

-

99 315

-14 702

-92 240

-7 627

Amounts not offset in balance sheet

31 D ec 2018 SE K 000 Derivatives To ta l fin a n cia l a s s ets

Offsetting in the Net in balance balance sheet sheet 169 161 169 161 169 161

Gross value 169 161

Netting Issued/Received agreements collateral -7 715 -139 363

Net value 22 083

-7 715

-139 363

22 083

Derivatives

7 715

-

7 715

-7 715

-

-

To ta l fin a n cia l l ia b il ities

7 715

-

7 715

-7 715

-

-

15 Risks and uncertainty factors The Bank’s earnings are affected by external changes that the company has no control over. The Bank’s earnings performance is affected by factors including macroeconomic change such as unemployment, as well as fluctuations in interest and exchange rates. Risk management is an integrated component of the Bank’s daily operations. In its business operations, the Bank is exposed to several risks such as credit risk, operational risk and business risk, but it must also manage liquidity risk, foreign exchange risk and interest rate risk. The Board of Directors and CEO are ultimately responsible for risk management at Ikano Bank. Risk management is intended to

16

ensure that the risks do not exceed the risk mandates set by the Board. The Bank’s risks are controlled centrally, but the responsibility for risk management rests primarily with local business units. This means that operating businesses own and manage the risk in daily operations. The central risk control function is responsible for monitoring and evaluating risk management. Apart from what is stated in this Interim Report, more details are provided in Ikano Bank’s Annual Report for 2018 and Ikano Bank’s annual “Capital adequacy and risk management” report, available at www.ikanobank.se.

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

16 Capital management and capital adequacy The below information is provided regarding own funds and own funds requirements in accordance with among others regulation (EU) No 575/2013 and the Swedish Financial Supervisory Authority’s (SFSA) regulations regarding prudential requirements and capital buffers (2014:12). The capital requirements regulations help to strengthen resilience against financial losses and thereby protect the Bank's customers. The regulations state that the Bank's own funds shall cover the minimum statutory own funds requirements, referred to as Pillar 1 requirements, which for Ikano Bank include the requirements for credit risk, credit valuation adjustment risk (CVA risk), operational risk and foreign exchange risk. In addition, the own funds requirements include further identified risks in the operation in accordance with the Bank's internal capital adequacy assessment process and the requirements stipulated by the Board of Directors, also referred to as Pillar 2 requirements and statutory requirements for capital buffers. Ikano Bank has quantified tolerance levels for the CET 1 ratio and total capital ratio above regulatory requirements. The margins represent buffers adapted to the Bank's risk profile in order to cover identified risks based on probability and financial impact. To meet the anticipated expansion of loans, maintain strategic freedom of action and also handle external changes, the Board of Directors has also expressed target levels for the Bank’s capital ratios as part of the risk appetite framework. To ensure that Ikano Bank's capital situation is satisfactory to cover the risks that the Bank is or may be exposed to, an internal capital and liquidity adequacy assessment (ICAAP/ILAAP) is conducted at least annually. The ICAAP/ILAAP is the Board's tool for assessing the need for changes in the own funds requirement. In the assessment process stress tests and scenario analyses are carried out to assess potential additional own funds requirements, including strategic decisions or external events that affect the business and its development. As a part of this process, a risk analysis is performed to ensure underlying risks are adequately addressed and mirror the Bank’s actual risk profile and capital requirements. The risk control function is responsible for monitoring the process of the Bank's capital adequacy assessment. Capital requirements

resulting from the ICAAP are regularly reported to the SFSA. As of 30 June 2019, the Bank had own funds of SEK 6.6 bn (6.4) of which SEK 5.8 bn are common equity Tier 1. The statutory own funds requirement for Pillar 1-risk amounted to SEK 3.0 bn (3.0). After a statutory minimum for common equity Tier 1 capital has been allocated to cover 75 percent of the total own funds requirement calculated in accordance with Pillar 1, a further SEK 3.5 bn remain available as common equity Tier 1 capital. The Internal own funds requirement in addition to Pillar 1 requirements totalled SEK 733 m and is covered by available capital. The total capital ratio was 17.6 percent with a Tier 1 capital ratio of 15.3 percent. The combined buffer requirement for Ikano Bank consists of the capital conservation buffer and the countercyclical capital buffer. According to the law (2014:966) regarding capital buffers the capital conservation buffer shall consist of a common equity Tier 1 capital equivalent to 2.5 percent of the Bank´s total risk exposure amounts. For Ikano Bank, the capital conservation buffer totals SEK 941 m and is covered by the available common equity Tier 1 capital. The institution-specific countercyclical buffer is determined by multiplying the total risk exposure amount with the weighted average of the countercyclical buffer rates applicable in those countries where the relevant credit exposures of the institution are located. The institution-specific countercyclical buffer for the Bank has been determined at 1.22 percent or SEK 460 m after weighting the applicable geographic requirements, which for the Bank mainly means Sweden, Norway and the UK. Ikano Bank’s combined buffer requirement is SEK 1,402 m. Per 1 January 2018, the new accounting standards IFRS 9 Financial Instruments entered into force. As mentioned in the Annual Report 2017, Ikano Bank has notified the SFSA of its decision to apply the transition rules introduced with article 473a capital requirements regulation (EU) No 575/2013 regarding the one-off effect. For the Bank, this effect was SEK 222 m after tax that will be gradually phased in into the capital adequacy over five years. The table on page 19 provides a comparison of Ikano Bank’s own funds as well as capital and leverage ratios with and without the application of transitional arrangements for IFRS 9.

INTERIM REPORT JUNE 2019

17

IKANO BANK AB (publ), corporate ID no. 516406-0922

Summary of own funds, risk exposure amount and own funds requirements SEK 000

30 Jun 2019

30 Jun 2018

31 Dec 2018

Tier 1 capital

5 773 319

5 506 488

5 555 103

Tier 2 capital

865 289

860 294

839 330

6 638 608

6 366 782

6 394 433

37 649 965

38 088 420

37 282 567

3 011 997

3 047 074

2 982 605

Total capital ratio

17.6%

16.7%

17.2%

Tier 1 capital ratio

15.3%

14.5%

14.9%

Common equity Tier 1 capital ratio

15.3%

14.5%

14.9%

3 514 322

3 221 183

3 318 149

Own funds Total risk exposure amount Total own funds requirements

Available common equity Tier 1 capital Available common equity Tier 1 capital in relation to Total risk exposure amount Capital conservation buffer Counter-cyclical capital buffer

9.3%

8.5%

8.9%

941 249

952 211

932 064

460 417

401 248

427 328

1 401 666

1 353 459

1 359 393

30 Jun 2019

30 Jun 2018

31 Dec 2018

5 638 931

5 155 110

5 444 229

78 994

78 994

78 994

Statutory reserve

193 655

193 655

193 655

Fund for development expenses

264 868

273 300

276 316

Fund for fair value

286 016

334 218

204 105

Retained earnings

4 702 607

4 152 967

4 149 951

Combined buffer requirement

Specification of own funds SEK 000 Equity reported in the balance sheet Share capital

Net result for the period

112 791

121 976

541 208

Untaxed reserves (78,6% of which)1)

297 231

544 562

294 962

5 936 162

5 699 673

5 739 191

Intangible assets

-342 675

-403 341

-378 747

Cash flow hedge

-5 014

-844

-12 622

Value adjustments due to the requirements for prudential valuation

-3 943

-

-3 720

188 790

211 001

211 001

Total common equity Tier 1 capital

5 773 319

5 506 488

5 555 103

Total Tier 1 capital

5 773 319

5 506 488

5 555 103

Subordinated liabilities

865 289

860 294

839 330

Total Tier 2 capital

865 289

860 294

839 330

6 638 608

6 366 782

6 394 433

CET1 capital before regulator y adjustments CET1 capital: regulatory adjustments

Adjustment for IFRS 9 one-off effect according to transitional arrangements

Tier 2 capital

Total own funds 1) Calculated according to each year’s applicable tax rate.

18

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

Specification of risk exposure amount and own funds requirements 30 J u n 2019 SE K 000

Risk e xposure a mount

30 J u n 2018

O wn funds re quire me nts

Risk e xposure a mount

31 D ec 2018

O wn funds re quire me nts

Risk e xposure a mount

O wn funds re quire me nts

Cred it ris k a cco rd in g to th e s ta n d a rd is ed a p p ro a ch Regional governments or local authorities Institutional exposures Corporate exposures Retail exposures Equity exposures Past due items

11 530

922

11 221

898

11 304

904

457 274

36 582

510 692

40 855

513 564

41 085

4 020 684

321 655

4 234 101

338 728

3 872 700

309 816

23 098 712

1 847 897

23 296 194

1 863 696

22 712 835

1 817 027

39 775

3 182

23 594

1 888

29 299

2 344

1 005 573

80 446

1 274 134

101 931

1 181 492

94 519

Covered bond exposures

109 405

8 752

111 136

8 891

107 746

8 620

Other items

434 366

34 749

514 494

41 160

428 674

34 294

29 177 318

2 334 185

29 975 566

2 398 046

28 857 614

2 308 609

O p era tio n a l ris k a cco rdin g to th e b a s ic in dica to r a p p ro a ch

5 071 525

405 722

5 056 084

404 487

5 056 084

404 487

Fo reign exch a n ge ris k a cco rdin g to th e s ta n d a rd is ed a p p ro a ch

3 382 332

270 587

3 043 256

243 460

3 328 850

266 308

18 789

1 503

13 514

1 081

40 019

3 202

37 649 965

3 011 997

38 088 420

3 047 074

37 282 567

2 982 605

To ta l cred it ris k

CV A a cco rdin g to th e s ta n d a rd is ed meth o d To ta l

Leverage ratio The Leverage ratio is a measure that provides an alternative to the risk-based capital requirement. The purpose is that it should be a clear and simple measure of capital strength. The measurement shows capital as a percentage of asset size, without considering the actual risk level of the assets. To date there is no legal minimum Leverage ratio. A minimum Leverage ratio of 3 per cent is introduced when the revised

Capital Requirements Regulation comes into effect 2021. The Leverage ratio is calculated using the Tier 1 capital as a percentage of total assets. For the Bank, the leverage ratio by 30 June 2019 is 12.2 percent (11.4) and thus above the future binding measure.

Comparison of own funds and capital and leverage ratios with and without the application of transitional arrangements for IFRS 9 SEK m

30 Jun 2019

30 Jun 2018

31 Dec 2018

Common Equity Tier 1 (CET1) capital

5 773

5 506

5 555

Common Equity Tier 1 (CET1) capital as if IFRS 9 transitional arrangements had not been applied

5 585

5 295

5 344

Tier 1 capital

5 773

5 506

5 555

Tier 1 capital as if IFRS 9 transitional arrangements had not been applied

5 585

5 295

5 344

Total capital

6 639

6 367

6 394

Total capital as if IFRS 9 transitional arrangements had not been applied

6 450

6 156

6 183

Inphasing

37 650 104

38 088 164

37 283 126

Total risk-weighted assets as if IFRS 9 transitional arrangements had not been applied

37 546

37 925

37 157

Common Equity Tier 1 (as a percentage of risk exposure amount)

15.3%

14.5%

14.9%

Common Equity Tier 1 (as a percentage of risk exposure amount) as if IFRS 9 transitional arrangements had not been applied

14.9%

14.0%

14.4%

Tier 1 (as a percentage of risk exposure amount)

15.3%

14.5%

14.9%

Tier 1 (as a percentage of risk exposure amount) as if IFRS 9 transitional arrangements had not been applied

14.9%

14.0%

14.4%

Total capital (as a percentage of risk exposure amount)

17.6%

Total capital (as a percentage of risk exposure amount) as if IFRS 9 transitional arrangements had not been applied

17.2%

16.7% 16.2%

17.2% 16.6%

Available c apital

R isk-w eighted assets Total risk-weighted assets

Capital ratios

Leverage ratio Leverage ratio total exposure measure

47 514

Leverage ratio

12.2%

48 402 11.4%

47 259 11.8%

Leverage ratio as if IFRS 9 transitional arrangements had not been applied

11.8%

11.0%

11.4%

INTERIM REPORT JUNE 2019

19

IKANO BANK AB (publ), corporate ID no. 516406-0922

17 Liquidity Ikano Bank's liquidity is managed within the framework of the Bank's liquidity portfolio. The liquidity portfolio consists of deposits with banks, short-term lending to credit institutions and also investments in liquid interest-bearing securities, which can be sold and converted into cash on short notice. The Bank also has other liquidity creating measures at its disposal, such as immediately accessible overdraft facilities as well as committed credit facilities. The composition and size of the Bank's liquidity portfolio and liquidity reserve is regulated in the Bank’s steering documents, which are adopted by the Bank's Board of Directors. To ensure that the liquidity of Ikano Bank is adequate, an internal liquidity adequacy assessment (ILAAP) is performed at least annually. This process is a tool used by the Board of Directors to assess the need for changes in the liquidity requirement in the event of changed circumstances. The liquidity portfolio is divided into three categories: Intra-day liquidity, liquidity reserve and an operational portfolio. The Bank's liquidity reserve and operational portfolio shall always total at least 10 percent of deposits from the public. In addition to the liquidity reserve, the Bank shall maintain an intraday liquidity of at least 4 percent of deposits from the public. Consequently the liquidity portfolio shall always amount to at least 14 percent of deposits from the public. The liquidity reserve, together with other operating liquidity, is invested in interest-bearing securities in the markets where the Bank operates. Steering documents define that quality levels of securities included in the Bank's liquidity reserve are in line with the LCR Delegated Act. Intra-day liquidity manages the Bank’s daily payment commitments. The liquidity in this portfolio shall be available within one day, and

20

shall consist of funds in bank accounts, investments available the next banking day (overnight) and committed bank overdraft facilities in the Bank’s cash pool. The liquidity reserve shall constitute a separate reserve of high-quality liquid assets, which are to be quickly convertible in case of market stress situations that affect the Bank’s funding options. The liquidity reserve is invested in interest-bearing securities with a high credit rating in the Swedish market. The assets are to be available for realisation and conversion into cash at short notice. Unused bank overdraft facilities are not included in the liquidity portfolio. The Bank’s operating liquidity is managed in the investment portfolio. The assets in the portfolio consist of interest-bearing securities in the Swedish market. Investments in this portfolio are to have a minimum rating of BBB+ (rating according to Standard and Poor’s). The Bank's liquidity reserve amounts to SEK 2.4 bn and consists of high quality assets, liquid in private markets and eligible as collateral with the Swedish Central Bank. The liquidity portfolio as of 30 June 2019 totalled SEK 5.5 bn excluding overdraft facilities and constitutes 21 percent of deposits from the public. It includes cash and balances with banks, the liquidity reserve and other interest-bearing securities with a value of SEK 1.5 bn. None of the assets are being utilised as collateral and no non-performing loans exist. In addition to the liquidity portfolio, committed credit facilities for a total of SEK 2.7 bn are available. As of 30 June 2019, the Bank's liquidity coverage ratio (LCR) totalled 166 percent. This measure shows how the Bank's highly liquid assets relate to net outflows over a thirty-day period under strained market conditions. A statutory limit for the liquidity coverage ratio of 100 percent is applied since 1 January 2018.

INTERIM REPORT JUNE 2019

IKANO BANK AB (publ), corporate ID no. 516406-0922

Summary of liquidity reserve 30 J u n 2019 To ta l 1 277

SE K m Securities issued by regional governments and governments Securities issued by financial companies Covered bonds L iq u id ity res erv e

SE K

E UR

D KK

862

-

166 1 094

6 718

160 306

2 537

1 585

467

Operating liquidity invested in securities

1 305

1 305

Cash and balances with central banks and other banks

1 629

To ta l l iq u id ity p o rtfo l io Distribution accross currencies (%) O th er l iq u idity crea tin g mea s u res Unused committed credit facilities

O th er

70

376 -

-

109

376

-

-

-

-

-

418

73

879

106

152

5 471

3 309 60%

540 10%

988 18%

483 9%

152 3%

2 748

514

1 395

603

236

-

30 J u n 2018 To ta l 1 134 158 1 111

SE K m Securities issued by regional governments and governments Securities issued by financial companies Covered bonds L iq u id ity res erv e

GB P

SE K

E UR

39 -

D KK -

914 -

GB P 40 -

O th er -

181 -

704

158 159

2 404

1 618

318

Operating liquidity invested in securities

1 077

1 077

-

-

-

-

Cash and balances with central banks and other banks

2 101

1 394

25

260

126

296

To ta l l iq u id ity p o rtfo l io

5 582

Distribution accross currencies (%) O th er l iq u idity crea tin g mea s u res Unused committed credit facilities

4 089 73%

342 6%

370 7%

484 9%

296 5%

3 096

512

1 396

952

236

-

31 D ec 2018 To ta l 1 282 154 1 072

SE K m Securities issued by regional governments and governments Securities issued by financial companies Covered bonds L iq u id ity res erv e

SE K

E UR

70

178

110

359

D KK

O th er

644

68

170

-

2 508

1 612

344

105

447

-

Operating liquidity invested in securities

1 006

1 006

-

-

-

-

Cash and balances with central banks and other banks

2 126

593

245

788

140

359

To ta l l iq u id ity p o rtfo l io

5 640

Distribution accross currencies (%) O th er l iq u idity crea tin g mea s u res Unused committed credit facilities

3 211 57%

589 10%

893 16%

587 10%

359 6%

2 822

822

1 168

605

226

-

The Bank’s long-term funding plan aims at a welldiversified funding, taking into account the allocation of risks and financing costs. Deposits from the public are regarded as the main funding source and the Bank aims to maintain a minimum ratio of deposits to total assets of 50 percent. Additional information

-

GB P

154 190

968 -

38 -

277 -

about the Bank's capital adequacy and liquidity risk management can be found in the Annual Report for 2018 and the information on capital adequacy and risk management for 2018. The documents are published on the Bank's website www.ikanobank.se.

INTERIM REPORT JUNE 2019

21

IKANO BANK AB (publ), corporate ID no. 516406-0922

Malmö, Sweden, 27 August 2019 The Board of Directors and the CEO certify that this Interim Report gives a true and fair view of the Bank’s operations, financial position and results of operations, and describes significant risks and uncertainties faced by the Bank.

Mats Håkansson Chairman

Diederick van Thiel Board member

Lars Thorsén Board member

Yohann Adolphe Board member

Heather Jackson Board member

Viveka Strangert Board member

Lars Ljungälv Board member

Henrik Eklund CEO

22

INTERIM REPORT JUNE 2019