NIBC HOLDING N.V. ANNUAL REPORT 2019 TABLE OF CONTENTS 2 Annual Report NIBC Holding N.V. 2019 TABLE OF CONTENTS TABLE OF CONTENTS At a glance 5 85 SUSTAINABILITY 85 11 Performance evaluation 98 KEY FIGURES 11 SWOT analysis 100 Letter from the CEO 15 105 19 REPORT OF THE 105 REPORT OF THE 19 SUPERVISORY BOARD MANAGING BOARD Corporate Governance 118 General developments 21 Remuneration Report 123 Vision and strategy 22 In Control Report 130 Financial review 26 133 45 CONSOLIDATED FINANCIAL BUSINESS REVIEW 45 STATEMENTS Company Financial Statements 334 Other information 347 Auditor's Report 348 Profit appropriation 357 Alternative Performance Measures 358 55 Corporate responsibility reporting 366 scope RISK MANAGEMENT 55 Definitions for the non-financial key 368 Our people 75 figures Abbreviations 375 Annual Report NIBC Holding N.V. 2019 3 AT A GLANCE 4 Annual Report NIBC Holding N.V. 2019 AT A GLANCE AT A GLANCE WHO WE ARE OUR HERITAGE NIBC is a publicly listed company on the to our minority stakes in Ebury and OakNorth. Amsterdam Stock Exchange (NIBC.AS) and Together with our institutional partners, we are was founded in 1945 to finance the visionary expanding our originate-to-manage propositions, entrepreneurs who helped rebuild the developing and optimising our position in the Netherlands after World War II. Over time, financial ecosystem. We have continued to build we evolved into an enterprising bank offering on our entrepreneurial DNA to become the financing, advisory and co-investing solutions company that we are today: best suited to help to our clients. Following the 2008 crisis, we our clients at their decisive moments. Now and reinvented ourselves: being flexible and agile, in the future. with a ‘THINK YES’ mentality to match our clients’ can-do attitude. Since then NIBC has reached OUR PURPOSE many milestones with the launch of NIBC Direct and Beequip and the acquisition of Gallinat Bank Making a difference in Germany. We took steps into the fintech space at decisive moments by obtaining full ownership of Lendex, in addition OUR VALUES Our strategy is to create a sustainable franchise for the future by focusing on our greatest strengths. Our strategy is based on our three values. We are: Professional Entrepreneurial Inventive Our in-depth sector know- We are a sound and We provide bespoke ledge, expert solutions and enterprising bank focused solutions and encourage our tailored risk and portfolio on decisive moments in our people to think creatively management are the clients’ business and in life. to meet clients’ needs. foundation of our success. Our clients require a bank Structuring is part of our We are firmly focused on that can respond to their DNA. Our inventiveness the future, and work hard needs in an agile way. We ensures we can adapt to our to anticipate trends and the cultivate what we call the fast-changing world and seize impact they could have on ‘THINK YES’ mentality. opportunities. our clients and their needs. Annual Report NIBC Holding N.V. 2019 5 AT A GLANCE WHAT WE DO OUR BUSINESS MODEL We serve a corporate and retail client franchise, objectives of the bank. We are client-oriented, with a differentiated approach, bringing bespoke present at their decisive moments. We offer financial solutions to clients in chosen sectors a broad and relevant product suite for these and with a continuous focus on optimising the entrepreneurial clients. offering to our clients in line with the strategic CORPORATE CLIENT OFFERING RETAIL CLIENT OFFERING ■ Focus on mid-market corporate clients ■ Mortgages ranging from owner- ■ Focus on specific sectors and product occupied to buy-to-let solutions, ranging from advice and ■ Mortgage origination for institutional structuring to financing and investing investors ■ Growth engines originating more granular ■ Online savings exposures in niche markets EUR 9.9 billion client assets EUR 9.8 billion client assets Typical ticket size: EUR 1 - 50 million Typical ticket size: EUR 0.1 - 2.5 million TREASURY & ASSET LIABILITY MANAGEMENT RISK MANAGEMENT / CORPORATE CENTRE OUR MARKETS Focus on north-western Europe in EUR millions Corporate exposure Corporate exposure Savings Corporate exposure 1,486 6,871 1,019 1,530 FTE Mortgages FTE Savings 27 9,795 5 3,894 Savings FTE 4,577 76 FTE 603 BBB+ Stable RATING (NIBC BANK) BBB Positive BBB Stable BBB– Positive S&P Fitch BBB Stable BBB Stable 2017 2018 2019 6 Annual Report NIBC Holding N.V. 2019 AT A GLANCE OUR KEY STRATEGIC PRIORITIES We continue to drive profitable growth through cost control. We aim to make a difference for our our differentiated market approach. We focus on corporate and retail clients at their most decisive building client relationships in profitable niches moments – today and tomorrow. We have made and (sub)sectors in north-western Europe, clear choices to advance that mission, which are where we can leverage our local expertise, while summarised in our six strategic priorities for maintaining a lean organisation with disciplined growth. Continuous evolution of client franchise, expertise and propositions Further optimisation Focus on growth of asset of capital structure and portfolio in core markets diversification 1 of funding 6 2 5 3 Ongoing 4 investment in people, culture and Diversification of income innovation Building on existing agile and effective organisation 1. We strive for continuous evolution of our client franchise, expertise and propositions. 2. We aim to grow our asset portfolio in core markets by focusing on profitable niches and (sub)sectors in north-western Europe – where we can leverage our local expertise and market positions. 3. We aim to diversify our income streams. A good example is our fee-generating originate- to-manage mortgage business line, which we started in 2016. 4. Building on existing agile and effective organisation. We are firmly focused on the future and work hard to anticipate trends and the impact they could have on our clients and their needs. 5. We continue to invest in our people, culture and innovation to ensure that we stay ahead of the curve and deliver the best possible experience to our clients. 6. We strive to further optimise our capital structure and diversify our funding base, so we can continue to support our clients well into the future. Annual Report NIBC Holding N.V. 2019 7 AT A GLANCE NON-FINANCIAL HIGHLIGHTS Corporate lending NPS score NIBC Direct customer survey score 2019 2019 +47% 7.9 2018: +63% 2017: +64% 2018: 7.7 2017: 7.9 Sustainability ratings Screening corporate loans 2019 2019 Oekom 100% C+/Prime Sustainalytics 22 2018: 100% 2017: 100% RepRisk Male/female ratio AA 2019 MSCI 32% BBB 68% 2018: 69% / 31% 2017: 70% / 30% Distribution of Oekom rating Number of employees 265 companies in the industry (FTEs) 109 689 695 711 46 72 665 35 33 11 5 D- D D+ C- C C+ B- B B+ A- A A+ 2017 2018 2019 Holding Capital markets activities 8 Annual Report NIBC Holding N.V. 2019 AT A GLANCE FINANCIAL HIGHLIGHTS1 Client exposures Originate-to-manage assets in EUR millions in EUR millions 9,825 9,893 9,888 9,795 4,328 9,146 9,275 707 617 632 2,413 8,529 8,643 9,088 729 860 773 463 2017 2018 2019 2017 2018 2019 Corporate client assets Corporate client assets Retail client assets Retail client assets Owner-occupied Buy-to-let Net interest margin Cost/income ratio 2.11% 2.06% 48% 1.84% 1.89% 45% 1.64% 44% 43% 1.60% 42% 42% 2017 2018 2019 2017 2018 2019 Net interest margin Net interest margin ex. IFRS 9 Cost/income ratio Cost/income ratio ex. non-recurring Profit after tax attributable to Cost of risk shareholders and return on equity in EUR millions 13.6% 11.9% 11.8% 10.8% 9.0% 11.4% 0.73% 213 217 194 44 53 -7 0.62% 0.63% 201 160 173 2017 2018 2019 2017 2018 2019 Profit after tax ex. non-recurring Non-recurring profit Return on equity Return on equity ex. non-recurring Solvency ratios2 Leverage ratio 22.2% 22.0% 20.5% 7.7% 7.1% 6.5% 19.3% 18.5% 17.1% 2017 2018 2019 2017 2018 2019 CET I Total Capital ratio 1 2017 figures are based on IAS 39, 2018 and 2019 figures are based on IFRS 9. 2 Prior year ratios have not been adjusted. Including non-eligible profits, the 2019 ratios would be 17.7% (CET 1), 19.0% (Tier 1) and 20.5% (Total capital), fully absorbing the IMI-impact. Annual Report NIBC Holding N.V. 2019 9 KEY FIGURES KEY FIGURES NIBC ADDS VALUE FOR ITS RETAIL CLIENTS AND ITS INVESTORS WITH ORIGINATE- TO-MANAGE MORTGAGES By originating mortgages NIBC is able to serve two types of clients at the same time: retail clients and investors. When a mortgage loan-offer is made to the retail client, it is already determined whether the mortgage loan is on the balance sheet of the investor or NIBC. NIBC Direct is a lender of record and has the relationship with the retail client. For originate-to- manage mortgages and own book mortgages the processes, services and underwriting criteria are uniform, so for a retail client the experience is identical. This results in alignment of interest between Investors and NIBC. At the same time the investor can choose a tailor-made mortgage portfolio that matches their appetite. In addition NIBC offers balance sheet support to optimise our tailor-made offering to investors. With experience in originating mortgages and managing risks of our own mortgage portfolio, NIBC has extensive knowledge which is shared with the investors.