BRAbank New : August 2021 AT1 AT2 Investor Presentation Brabank ASA
08/23/2021 | 09:54am EDT
Issuance of Tier 1 and
Tier 2 capital
23rd August 2021
THIS PRESENTATION AND ITS CONTENTS ARE NOT FOR DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES OF AMERICA AND THE DISTRICT OF COLUMBIA) (THE "UNITED STATES"), AUSTRALIA, CANADA, THE HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE'S REPUBLIC OF CHINA OR JAPAN, OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. THIS PRESENTATION IS NOT AN OFFER OR INVITATION TO BUY OR SELL SECURITIES IN ANY JURISDICTION.
About this Presentation: By reading this presentation and its appendices (collectively, the "Presentation"), or attending any meeting or oral presentation held in relation thereto, you (the "Recipient") agree to be bound by the following terms, conditions and limitations.
This Presentation has been produced by BRAbank ASA (the "Company", together with its subsidiaries the "Group") with assistance from SpareBank 1 Markets AS (the "Manager"), solely for information purposes in connection with a contemplated offering of subordinated bonds by the Company (the "Bonds").
The Presentation is intended for information purposes only, and does not itself constitute, and should not be construed as, an offer, invitation or recommendation to purchase, sell or subscribe for any securities in any jurisdiction and neither the issue of the information nor anything contained herein shall form the basis of or be relied upon in connection with, or act as an inducement to enter into, any investment activity. Prospective investors in the Bonds are required to read the offering material, including the term sheet and application form, and other relevant documentation which is released in relation thereto for a description of the terms and conditions of the Bonds.
Only the Company and the Manager are entitled to provide information in respect of matters described in this Presentation. Information obtained from other sources is not relevant to the content of this Presentation and should not be relied upon.
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No due diligence investigations: The Manager has not carried out any due diligence review and no technical verifications, tax or other financial due diligence or third-party verifications of the Company's legal position, financial position, prospects, forecasts and budgets have been carried out by or on behalf of the Manager.
The Recipient acknowledges and accepts the risks associated with the fact that no investigations have been carried out. The Recipient will be required to conduct its own analysis and acknowledges and accepts that it will be solely responsible for its own assessment of the Company, the transactions contemplated hereby, the market, the market position of the Company, the Company's funding position, and the potential future performance of the Company's business and securities.
No representation or warranty / disclaimer of liability: None of the Company or the Manager, or any of their respective parent or subsidiary undertakings or affiliates, or any directors, officers, employees, advisors or representatives of any of the aforementioned (collectively "Representatives") make any representation or warranty (express or implied) whatsoever as to the accuracy, completeness or sufficiency of any information contained herein, and nothing contained in this Presentation is or can be relied upon as a promise or representation by the Company or the Manager, or any of their respective Representatives. The Presentation contains certain financial key figures for the Company. These figures are based on audited financial statements or other financial reports. The financial statements as of 31 December 2020 have been subject to auditor review. 30 June 2021 have not been subject to auditor review of interim financial statements. To obtain complete information of the Company's financial position, operational results and cash flow, the financial information in this Presentation must be read in conjunction with the Company's audited financial statements and other financial information made public by the Company.
None of the Company or the Manager, or any of their respective Representatives shall have any liability whatsoever (in negligence or otherwise) arising directly or indirectly from the use of this Presentation or its contents or otherwise arising in connection with the transactions contemplated hereby, including but not limited to any liability for errors, inaccuracies, omissions or misleading statements in this Presentation.
Neither the Company nor the Manager have authorized any other person to provide investors with any other information related to the transactions contemplated hereby or the Company, and neither the Company nor the Manager will assume any responsibility for any information other persons may provide.
Risk factors: An investment in the Company involves significant risk, and several factors could adversely affect the business, legal or financial position of the Company or the value of its securities. The Recipient should carefully review the chapter "Risk Factors" in the Presentation for a description of certain of the risk factors that will apply to an investment in the Company's securities, as well as risk factors described in the financial reports of the Company. Should one or more of the risks and uncertainties materialize, actual results may vary significantly from those described in this Presentation. An investment in the Company is suitable only for investors who understand the risk factors associated with this type of investment and who can afford a loss of all or part of their investment.
No updates: This Presentation speaks as at the date set out on herein. Neither the delivery of this Presentation nor any further discussions of the Company or the Manager with the Recipient shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. Neither the Company nor the Manager assume any obligation to update or revise the Presentation or disclose any changes or revisions to the information contained in the Presentation (including in relation to forward-looking statements).
No investment advice: The contents of this Presentation shall not be construed as financial, legal, business, investment, tax or other professional advice. The Recipient should consult with its own professional advisers for any such matter and advice.
Forward-lookingstatements: This Presentation contains certain forward-looking statements relating to, inter alia, the business, financial performance and results of the Company and the industry in which it operates. Forward-looking 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.
Any 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 and are subject to risks (including those described in the chapter "Risk Factors" in the Presentation), uncertainties and other factors that may cause actual results and events to be materially different from those expected or implied by the forward-looking statements. None of the Company or the Manager, or any of their respective Representatives provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor do any of them accept any responsibility for the future accuracy of opinions expressed in this Presentation or the actual occurrence of forecasted developments.
Conflict of interest: The Manager is acting as financial advisor to the Company in connection with the transactions contemplated hereby and for no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation hereto, the contents of this Presentation or any matters referred to herein. The Manager and/or its affiliates or employees may hold shares, bonds, options or other securities of the Company and may, as principal or agent, buy or sell such securities. The Manager may have other financial interests in transactions involving such securities.
Distribution and selling restrictions: None of the Company or the Manager, or any of their respective Representatives, has taken any actions to allow the distribution of this Presentation in any jurisdiction where action would be required for such purposes. The Presentation has not been registered with, or approved by, any public authority, stock exchange or regulated market. The distribution of this Presentation, as well as any subscription, purchase, sale or transfer of securities of the Company may be restricted by law in certain jurisdictions, and the Recipient should inform itself about, and observe, any such restriction. Any failure to comply with such restrictions may constitute a violation of the laws of any such jurisdiction. None of the Company or the Manager, or any of their
respective Representatives, shall have any responsibility or liability whatsoever (in negligence or otherwise) arising directly or indirectly from any violations of such restrictions.
Neither the Company nor the Manager have authorized any offer of securities to the public, or has undertaken or plans to undertake any action to make an offer of securities to the public requiring the publication of an offering prospectus in any member state of the European Economic Area which has implemented the EU Prospectus Regulation 2017/1129 (the "Prospectus Regulation"). This Presentation does not constitute as a prospectus under the Prospectus Regulation.
In the event that this Presentation is distributed in the United Kingdom, it shall be directed only at persons who are either "investment professionals" for the purposes of Article 19(5) of the UK Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or high net worth companies and other persons to whom it may lawfully be communicated in accordance with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). Any person who is not a Relevant Person must not act or rely on this Presentation or any of its contents. Any investment or investment activity to which this Presentation relates will be available only to Relevant Persons and will be engaged in only with Relevant Persons. This Presentation is not a prospectus for the purposes of Section 85(1) of the UK Financial Services and Markets Act 2000, as amended ("FSMA"). Accordingly, this Presentation has not been approved as a prospectus by the UK Financial Services Authority ("FSA") under Section 87A of FSMA and has not been filed with the FSA pursuant to the UK Prospectus Rules nor has it been approved by a person authorized under FSMA.
This Presentation does not constitute an offer of securities for sale into the United States. The securities described herein have not been and will not 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 in the United States, and may not be offered or sold within the United States, absent registration or under an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. In the United States, the securities described herein will be offered only to qualified institutional buyers ("QIBs") within the meaning of, and as defined in, Rule 144A under the Securities Act or another transaction exempt from or not subject to the registration requirements of the Securities Act. Outside the United States, the securities described herein will be offered in accordance with Regulation S under the Securities Act to non-U.S. persons (as defined in Regulation S). The Recipient warrants and represents that (i) if it is located within the United States and/or is a U.S. person or in the United States, it is a QIB, (ii) if it is a resident in the United Kingdom, it is a Relevant Person.
Governing law and jurisdiction: This Presentation is subject to Norwegian law, and any dispute arising in respect of this
Presentation is subject to the exclusive jurisdiction of Norwegian courts with Oslo District Court (Nw: Oslo tingrett) as exclusive venue.
Risk factors (1/6)
Risk relating to the business of the bank and the industry which the bank operates
Investing in the Bonds and other securities issued by the Bank involves inherent risks. Prospective investors should consider, among other things, this Risk Factors section of this Presentation, consult his or her own expert advisors as to the suitability of an investment, and make a careful assessment of the Bank and the Bonds before making an investment decision. An investment in the Bonds is only suitable for investors who understand the risks associated with this type of investment and who can afford a loss of all or part of their investment. In particular, each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, (ii) have access to and knowledge of the appropriate analytical tools to evaluate an investment in the Bonds, (iii) have sufficient financial resources and liquidity to bear the risks associated with investment in the Bonds, (iv) understand the terms of the Bonds and the behavior of the relevant financial markets, and (v) be able to evaluate possible scenarios for economic interest rate and other factors that may affect its investment.
The risk factors included in this section are presented in a limited number of categories, where each risk factor is sought placed in the most appropriate category based on the nature of the risk it represents. The order of appearance is not intended to indicate importance of likelihood of occurrence. The absence of negative past experience associated with a given risk factor does not mean that the risks and uncertainties in that risk factor are not genuine and potential threats, and they should therefore be considered prior to making an investment decision.
Should any of the risks presented below materialize, individually or together with other circumstances, the business, financial position and operating results of the Bank could be materially and adversely affected and the price of the Bonds may decline, causing investors to lose all or part of their investment.
1. RISK RELATING TO THE BUSINESS OF THE BANK AND THE INDUSTRY WHICH THE BANK OPERATES The outbreak of COVID-19 has had an adverse impact on the Bank and may further adversely impact the Bank
The outbreak of a novel strain of coronavirus, COVID-19, has already had a significant impact on global macroeconomic conditions and financial markets and the economic environments in which the Bank operates, including in Norway. The number of reported cases of COVID-19 worldwide, as well as the number of reported deaths as a consequence of COVID-19 worldwide, significantly exceed those observed during the SARS epidemic that occurred from November 2002 to July 2003. In March 2020, the World Health Organization declared COVID-19 to be a pandemic. Given the ongoing and dynamic nature of the consequences of the COVID-19 pandemic and the government measures implemented to counter or limit the adverse impact of the outbreak, it is not possible at this time accurately to assess the ultimate impact of the outbreak for the world economy, the Norwegian economy and/or the Bank. The impact to date has included significant volatility in financial and commodities markets and it is likely that global GDP will contract for 2020 in response to the economic slowdown caused by the spread of COVID-19. At present, it is difficult to ascertain how long the outbreak of COVID-19 may last or how severe it may become and, consequently, the full impact that COVID-19 will have on the global economy, the Norwegian economy and/or the Bank's operations or its prospects. If the outbreak of COVID-19 and the measures intended to contain the outbreak continues for a prolonged period, global macroeconomic conditions would worsen even further and the global economy may experience a significant slowdown in its growth rate or even a decline. Volatility in global financial and commodities markets may also remain elevated. This volatility, if it continues, could have a material adverse effect on the Bank's customers and on the Bank's business, financial condition and results of operations.
The outbreak and the measures implemented by governmental authorities to contain the outbreak of COVID-19 have and will continue to impact the Bank's operations in a number of ways, such as: (i) volatility in the financial markets in which it operates, (ii) affecting the Bank's customer, who may as a result default on their obligations due to the Bank (such as repayments) and (iii) affect the Bank's ability to conduct its business. As a result of the foregoing factors, the outbreak of COVID-19 or any other contagious diseases may have a material adverse effect on the Bank's business, loan portfolio, financial condition (including capital and liquidity) and results of operations.
Fluctuations and/or adverse development in economic conditions and markets may adversely affect the Bank's business and results of operations
The Bank's business and financial performance have been and will continue to be affected by general economic conditions, particularly in its main market Norway but also in other markets where the Bank operates or will operate and elsewhere, and any adverse developments in economic conditions in Norway or other markets where the Bank operates or will operate or elsewhere included global economic and financial markets could affect the Bank negatively. As the Bank's revenue is derived from customers based in Norway, Sweden and Finland, the Bank is directly and indirectly subject to the inherent risks arising
from general economic conditions in the Nordic region, in particular Norway, other economies which impact the Nordic economy and the state of the Nordic and global financial markets both generally and as they specifically affect financial enterprises.
Moreover, the Bank's profits are highly sensitive to the macroeconomic development such as GDP development, interest rate levels, and currency rate development. A decline in the economy may result in weaker growth, higher losses and weaker earnings, and it may make it difficult to raise capital at the same time. By way of examples, an increase in interest rate levels may reduce margins, increase the risk of credit losses and/or result in reduced willingness to take up new loans, increased unemployment is likely to increase overall loan losses, while lower economic activity dampens growth.
BRAbank faces competition from both domestic, Nordic and international banks and other suppliers of credit. If the Bank is unable or is perceived to be unable to compete efficiently, its competitive position may be adversely affected, which as a result, may have a material adverse effect on the Bank's business, results of operations, financial condition and/or prospects. Increased competition may also lead to lower net margins than projected.
BRAbank may outsource certain key functions to external partners, including IT activities. In the event that the current outsourcing becomes unsatisfactory, or BRAbank's third party suppliers are unable to fulfil their obligations, there is a risk that the Bank may be unable to locate new outsourcing partners on economically attractive terms and/or experiences unsatisfactory service levels or even disruptions in its business critical services and operations, hereunder distributions and servicing of the Bank's products, customers' accounts and/or puts the Bank in a situation where it is unable to fulfil its regulatory obligations towards customers and/or authorities.
BRAbank relies on distributors to market and sell many of the Bank's products. Termination of or any change to these relationships may have a material adverse effect on the Bank's business, results of operations and overall financial condition.
Failure or inadequacy in IT systems, processes or interfaces may adversely affect the Bank's financial condition, results of operations and/or prospects.
The Bank relies heavily on IT systems and is exposed to the risk of failure or inadequacy in these systems, related processes and/or interfaces. BRAbank's business concept is critically dependent upon an efficient and well-functioning technological platform and related processes, in particular to offer customers digital solutions with 24 hours availability. This is a complex task driven by the Bank's product mix and the need for efficient customer interaction, and interaction and integration with third party solutions, hereunder infrastructure for financial services. The technological platform comprises both internally developed systems as well as third party solutions and the Bank therefore relies heavily on both internal processes and systems as well as processes and systems delivered or hosted by third parties and on well-functioning interfaces between the different systems and processes. Thus, the Bank is exposed to operational risks such as failure or inadequacies in these processes, systems and interfaces.
Further, changes in regulatory or operational requirements may imply material changes to the Bank's current IT systems and processes and could further lead to a change in the systems and solutions provided to the Bank by its third-party providers. Such changes may be costly and/or may interfere negatively with other systems and/or processes and may adversely affect the Bank's ability to deliver needed functionality and/or services.
The Bank's ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports the business of the Bank. Any failure, inadequacy, interruption or security failure of those systems, or the failure to seamlessly maintain, upgrade or introduce new systems, could harm the Bank's ability to effectively operate its business and increase its expenses and harm its reputation. There is a risk that customers, as a result of interruptions in the services, terminate their relationship with the Bank. These risks may in turn have a material adverse effect on the Bank's financial condition, results of operations and/or prospects.
Risk factors (2/6)
Risk relating to the business of the bank and the industry which the bank operates
Cyber-crime may have a material adverse effect on the Bank's business, results of operations, financial position and/or prospects.
Due to its reliance on digital solutions and interfaces, the Bank is exposed to risk of cyber-crime in the form of, for example, Trojan attacks, phishing and denial of service attacks. The nature of cybercrime is continually evolving. The protection of its customer and company data, and its customers' trust in the Bank's ability to protect such information, is of key importance to BRAbank. The Bank relies in part on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information, such as personal identifiable information, personal financial information, payment card data, account transcripts and loan and security data. It further relies on third parties for hosting and servicing. Despite the security measures in place, the Bank's facilities and systems, and those of its third-party service providers, may be vulnerable to cyber-attacks, security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors which exposes the Bank for cyber-crime and/or other similar events.
If one or more of such events occur, any one of them could potentially jeopardise confidential and other information related to the Bank, its customers and its counterparties. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by the Bank or its vendors, could damage the Bank's reputation, expose it to risk of litigation, increased capital requirements or sanctions from the Norwegian Financial Supervisory Authority (the "NFSA"), disrupt its operations or affect the Bank negatively in other ways, hereunder that the Bank may also be required to spend significant additional resources to modify its protective measures or to investigate and remediate vulnerabilities or other exposures. This could in turn have a material adverse effect on the Bank's business, results of operations, financial position and/or prospects.
Continued or increased negative attention on the consumer lending segment may affect the Bank's financial position, operations or it strategies.
The growth of the Norwegian retail banking market and the corresponding growth in consumer loans to Norwegian households have led and may continue to lead to increased attention on retail banking from both public authorities as well as the general media. Such attention has for a large degree focused on borrowers who due to negative development of personal finances, lack of structure on repayment plan or for other reasons have experienced that the loan and related costs has become unnecessary burdenful. Further, pending cases relating to identity fraud, whereby the current legislation entails that the person under certain circumstances has to repay the loans taken up in his/her name have also gotten negative attention from the public. Thus, the Bank is subject of the risk of continued negative attention of the retail banking market in general as well as potential focus on the Bank's operations in particular. Negative attention on retail banking from the media and public authorities may lead to a negative development of or trigger changes in the Bank's business operations. Such negative attention may influence consumer demand for the Bank's products, the Bank's ability to attract and retain qualified personnel as well as the general business environment the Bank operates in. Further, negative attention may also further affect the decision making of public authorities or trigger changes to the regulatory environment of which the Bank operates and/or the content of industry norms relating to retail banking which may in turn affect the Bank's operations and strategies.
Litigation, claims and compliance risks
The Bank may in the future become involved in various disputes and legal, administrative and governmental proceedings in Norway, Finland and/or Sweden, and other jurisdictions that potentially could expose the Bank to losses and liabilities.
Operational risks related to systems and processes and inadequacy in internal control procedures
The Bank's business is exposed to operational risks related to systems and processes, whether people related or external events, including the risk of fraud and other criminal acts carried out against the Bank. Its business is dependent upon accurate and efficient processing and reporting of a high volume of complex transactions across numerous and diverse products and services. Any weakness in these systems or processes could have an adverse effect on the Bank's results and on its ability to deliver appropriate customer service levels during the affected period. In addition, any breach in security systems, for example from increasingly sophisticated attacks by cybercrime groups could disrupt its business, result in the disclosure of confidential information and create significant financial and/or legal exposure and the possibility of damage to the Bank's reputation and/or brand.
There can be no assurance that the risk controls, loss mitigation and other internal controls or actions that are applied by the Bank could help prevent the occurrence of a serious disaster resulting in interruptions, delays, the loss or corruption of data or the cessation of the availability of systems. Further, some of the measures used by the Bank to mitigate risk are based on historical information, and there is a risk that such measures are inadequate in predicting future risk exposure. Furthermore, risk management methods may rely on estimates, assumptions and information that may be incorrect or outdated. If the risk management is insufficient or inadequate, this could have a material adverse effect on the Bank.
Inability to maintain sufficient insurance to cover all risks related to its operations
The Bank's business is subject to a number of risks, including, but not limited to fraud, disruption in the infrastructure, human errors, litigation and changes in the regulatory environment. Such occurrences could result in financial losses and possible legal liability. Although the Bank seeks to maintain insurance or contractual coverage to protect against certain risks in such amounts as it considers reasonable, its insurance may not cover all the potential risks associated with the Bank's operations, which could have a material and adverse effect on the Bank's business, financial condition, results of operations and/or prospects.
Risks relating to automated procedures and external providers
As a purely digital bank, BRAbank offers its loan products only through its digital platform. The customer provides the information that is used in the automated assessment, and certain input factors are verified by external sources, either by documents forwarded to the Bank for manual review or information automatically retrieved from external information providers. For the most part, the loan applications are determined automatically based on the input from the customer and such third-party verifications, and in accordance with predetermined financial models. There are inherent risks associated with online processing of loan applications and reliance on criteria where the information is provided by the customers, without personal contact. Consequently, the Bank is exposed to risks relating to the accuracy and completeness of its financial models on which the automated credit decision is based, as well as risks relating to the reliability of the input provided by the customer.
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