Instabank : Investor presentation 4 mai

Instabank

Investor Presentation | 4 May 2023

Solely for review in connection with the proposed equity issues - not for reproduction or distribution. The information contained herein may be subject to change without prior notice.

THIS DOCUMENT MAY NOT BE DISTRIBUTED IN, OR TO ANY PERSON RESIDENT IN THE U.S., CANADA, AUSTRALIA OR JAPAN OR TO ANY AMERICAN CITIZEN EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT OF 1933. ANY FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF APPLICABLE SECURITIES LEGISLATION.

Important information | Disclaimer (I)

This presentation (the "Presentation") has been prepared by Instabank ASA (the "Company"), with the assistance of Pareto Securities AS (the "Manager"), solely for information purposes in connection with a proposed private placement of shares by the Company. This Presentation does not constitute an offer to sell or a solicitation of an offer to buy or subscribe for, or a recommendation regarding, any securities of the Company. By attending a meeting where this Presentation is made, or by agreeing to receive this Presentation, you agree to be bound by the conditions and limitations specified herein.

This Presentation is strictly private and confidential. This Presentation and the information contained herein may not be copied, distributed, reproduced, published or passed on, directly or indirectly, in whole or in part, or disclosed by any recipient, to any other person (whether within or outside such person's organisation or firm) or published in whole or in part, by any medium or in any form or under any circumstances.

This Presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, may be identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", "will", "should", "may", "continue" and similar expressions. The forward-looking statements contained in this Presentation, including opinions and views of the Company or cited from third party sources, are based on various assumptions. The forward-looking statements are solely opinions and forecasts, and involve inherent known and unknown risks and uncertainties which are difficult or impossible to predict and are beyond the Company's control. Forward-looking statements are not guarantees of future performance, and risks, uncertainties and other factors could cause the actual results of operations, financial condition and liquidity of the Company or the industry to differ materially from the expectations expressed or implied in this Presentation by such forward-looking statements. You are cautioned not to place any undue importance on any forward-looking statement. The Company assumes no obligation, except as required by law, to update any forward-looking statements or to conform these forward-looking statements to its actual results.

The distribution of this Presentation may be restricted by law in certain jurisdictions and persons into whose possession this Presentation comes should inform themselves 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 affiliates or representatives shall have any responsibility for any such violations.

This Presentation does not purport to contain a complete description of the Company or the markets in which the Company operates. No due diligence has or will be undertaken on behalf of the Company or the Manager in connection with this Presentation and the contemplated private placement, other than carrying out a customary bring down call and obtaining certain customary written confirmations from the Company and its representatives, hereunder a Declaration of Completeness signed by the Company whereby the Company will confirm, to the best of its knowledge, that the Presentation and the other subscription material for the contemplated private placement in all material respect is correct and that there are no material omissions. No representation or warranty, express or implied, is made as to the accuracy or completeness of any information contained in this Presentation, and it should not be relied upon as such. None of the Company or the Manager or any of their respective affiliates or representatives shall have any liability arising directly or indirectly from the use of this Presentation or its contents or otherwise arising in connection with this Presentation.

An investment in the Company should be considered as a high-risk investment. An investment in the Company is only suitable if you have sufficient knowledge, sophistication and experience in financial and business matters to be capable of evaluating the merits and risks of an investment decision relating to the Company's shares, and if you are able to bear the economic risk, and to withstand a complete loss, of your investment. Certain risk factors relating to the Company are included under the caption "Risk Factors" at the end of this Presentation.

Recipients must conduct their own independent evaluation of the Company and of the information contained or referred to herein and any other disclosed information. Any decision to invest in the securities of the Company should be based solely on the recipient's own evaluation of the Company and the information in this Presentation. The contents of this Presentation are not to be construed as financial, legal, business, investment, tax or other professional advice. Each prospective investor should consult with its own financial, legal, business, tax or other adviser as to financial, legal, business and tax advice.

This Presentation does not constitute an offer of, or an invitation or recommendation to purchase or subscribe for shares. This Presentation does not constitute or form part of any public offer of securities and no one has taken any action that would permit a public offering of the Company's securities in any jurisdiction. No prospectus has been or will be prepared in connection with the private placement.

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Important information | Disclaimer (II)

This presentation is directed at persons in member states of the European Economic Area ("EEA") who are "qualified investors" as defined in Article 2(e) of Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2019, repealing Directive 2014/71/EC ("Qualified Investors"). In addition, in the United Kingdom, this presentation is addressed to and directed only at, "qualified investors" as defined in section 86(7) of the Financial Services and Markets Act 2000 who are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); or (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "Relevant Persons"). This presentation must not be acted on or relied on (i) in the United Kingdom, by persons who are not Relevant Persons, and (ii) in any member state of the EEA other than Norway, by persons who are not Qualified Investors. Any investment or investment activity to which this presentation relates is available in the United Kingdom only to persons that are both Relevant Persons and Qualified Investors, and in member states of the EEA other than Norway and the United Kingdom only to persons that are Qualified Investors, and will be engaged in only with such persons. This presentation and the information contained herein is not intended for publication or distribution, directly or indirectly, in whole or in part, in, and does not constitute an offer of securities in, the United States (as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), Canada, Australia, Japan or any other jurisdiction where such distribution or offer is unlawful. The securities of the Company have not been and will not be registered under the Securities Act or with the securities regulatory authority of any state or other jurisdiction of the United States and may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. By accepting the delivery of this presentation, the recipient warrants and acknowledges that it is outside the United States. Neither this presentation nor any copy of it may be taken, transmitted or distributed, directly or indirectly, in whole or in part, into the United States. Any failure to comply with the foregoing restrictions may constitute a violation of U.S. securities laws.

This Presentation speaks only as of the date hereof, and the material and the views expressed herein are subject to change based upon a number of factors, including, without limitation, macroeconomic and equity market conditions, investor attitude and demand, the business prospects of the Company and other specific issues. None of the Company, the Manager or their affiliates or representatives undertake any obligation to provide the recipient with access to any additional information or to update this Presentation or any information or to correct any inaccuracies in any such information. The information contained in this Presentation should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect developments that may occur after the date of this Presentation.

The Company has not authorised any other person to provide any persons with any other information related to the Company and neither the Company nor the Manager will assume any responsibility for any information other persons may provide.

The Manager and/or its employees may hold shares or other securities or interests in the Company and may, as principal or agent, buy or sell such securities. The Manager may have other financial interests in transactions involving these securities. The Manager is acting only for the Company and will not be responsible to anyone other than the Company for providing the protections afforded to clients of the Manager or for providing advice in relation to any potential offering of securities of the Company.

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 as legal venue.

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Important information | Risk factors (I)

Investing in the shares of the Company (the "Shares") and other securities issued by the Company involves inherent risks. Before making an investment decision with respect to the Shares, investors should carefully consider the risk factors set forth below, including the Company's financial information and related notes. The risks and uncertainties described herein are the principal known risks and uncertainties faced by the Company as of the date hereof that the Company believes are relevant to an investment in the Shares. An investment in the Shares is suitable only for investors who understand the risks associated with this type of investment and who can afford to lose all or part of their investment. The absence of negative experience associated with a given risk factor in the past does not mean that the risks and uncertainties described herein should be ignored prior to making an investment decision.

If any of the risks were to materialise, individually or together with other circumstances, it could have a material and adverse effect on the Company and/or its business, financial condition, results of operations, cash flows and/or prospects, which may cause a decline in the value of the Shares that could result in a loss of all or part of any investment in the Shares. The risks and uncertainties described below are not the only risks the Company may face. Additional risks and uncertainties that the Company currently believes are immaterial, or that are currently not known to the Company, may also have a material adverse effect on the Company's business, financial condition, results of operations and cash flow. The order in which the risks are presented below does not reflect the likelihood of their occurrence or the magnitude of their potential impact on the Company's business, financial condition, results of operations, cash flows and/or prospects. The risks mentioned herein could materialise individually or cumulatively. The information below is as of the date of this Presentation.

1. RISK RELATING TO THE BUSINESS OF THE COMPANY AND THE INDUSTRY IN WHICH IT OPERATES

Fluctuations and/or adverse development in economic conditions and markets may adversely affect the Company's business and results of operations

The Company'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 Company operates or will operate and elsewhere, and any adverse developments in economic conditions in Norway or other markets where the Company operates or will operate or elsewhere including global economic and financial markets could affect the Company negatively.

As the Company's revenue is mainly derived from customers based in Norway, Sweden and Finland, the Company 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 Company's profits are very sensitive to the macroeconomic development. Rising energy prices, higher interest rates and the ongoing war in Ukraine contribute to increased uncertainty in the macroeconomic environment. In addition, price levels for groceries and other goods are expected to increase. 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.

Risk related to competitive markets

The Company faces competition from both domestic and international banks and other suppliers of credit. A number of niche banks, like the Company, have started up in recent years and the competitive landscape may continue to change. Increased competition may lead to competition for customers and/or lower net margins. Also, ESG (Environment, Social and Governance) and sustainability are gaining focus among customers and other third parties, and customers may enter into a customer relationship with a competitor of the Company instead of the Company, if the competitor's ESG and sustainability profile is preferred over the Company's. If the Company is unable to compete efficiently, its competitive position may be adversely affected, which as a result, may have a material adverse effect on its business, financial condition, results of operations and/or prospects. ESG (Environment, Social and Governance) and sustainability has gained increasing focus among customers and other third parties, and

Failure or inadequacy in IT systems, processes or interfaces may adversely affect the Company's financial condition, results of operations and/or prospects.

The Company relies heavily on the uninterrupted operation of its IT systems for the efficient running of its business and operations, and, in particular in order to offer customers an online bank with 24 hours availability. The Company relies on certain financial infrastructure services that are widely used in the Norwegian financial services market to process payments and transactions, such as MasterCard and "eFaktura". In addition, the Company depends on a few third party providers for the supply of important IT services, such as Banqsoft and Basefarm. The Company's ability to conduct its business may be adversely affected by a disruption in the infrastructure that supports the business of the Company.

Risks related to reliance on third party suppliers

The Company outsources certain key functions to external partners, including, but not limited to, IT infrastructure and provision of scoring models and data. In the event that such outsourcing becomes unsatisfactory, or the Company's third party suppliers are unable to fulfil their obligations, the Company may be unable to locate new outsourcing partners on economically attractive terms, which in turn could have a material and adverse effect on the Company's business, results of operations and/or prospects

Risks related to reliance on partners

The Company relies on certain partners (Skeidar, Obs Bygg and Coop Byggmix being the most important partners) for the sale of its products. If the Company is unable to maintain its agreements with such partners, this may have a material adverse effect on its business, financial condition, results of operations and/or prospects.

Inability to maintain sufficient insurance to cover all risks related to its operations

Although the Company 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 Company's operations, which could have a material and adverse effect on the Company's business, financial condition, results of operations and/or prospects.

Risks associated with the Company's strategic initiatives and overall strategy

The overall strategy of the Company, requires the Company to make complex judgements, including anticipating customer needs and competitor activity and the likely direction of a number of macro-economic assumptions regarding the Norwegian and Nordic economy and the consumer finance sector in these areas as well as the regulatory environment the Company operates in.

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Important information | Risk factors (II)

The Company's ability to further develop and implement initiatives and the overall strategy is subject to for example execution risks, management of its cost base and limitations in its management, operational capacity and costumer and market reaction. These risks may increase by a number of external factors, including a downturn in the Norwegian, Nordic or global economy, increased competition in the consumer finance sector and/or significant or unexpected changes in the regulation of the financial services sector in Norway or the Nordic region, or the materialization of any of the risk factors mentioned herein, which may require the Company's focus and resources which could imply failure to successfully adapt and implement the Company's business strategies. The Company is planning several new initiatives in 2023, such as credit cards in Finland, simplified loan products to Norwegian businesses with a focus on SMEs, and credit cards in Germany. There can be no guarantee that any of these new initiatives will be successful.

Cyber-crime may have a material adverse effect on the Company's business, results of operations, financial position and/or prospects.

Due to its reliance on digital solutions and interfaces, the Company 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 Company's ability to protect such information, is of key importance to the Company. The Company 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 Company'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 Company 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 Company, its customers and its counterparties. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by the Company or its vendors, could damage the Company'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 Company negatively in other ways, hereunder that the Company 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 Company's business, results of operations, financial position and/or prospects.

Risks associated with people, systems and processes

The Company has a risk of loss resulting from inadequate or failed internal processes, people and systems or from external events other than those covered under other risks described here, including any kind of fraud and other criminal acts carried out against the Company as well as human errors and misconduct. 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, or deliberate misconduct, could have a material adverse effect on the Company's business, results of operations and/or prospects.

There can be no assurance that the risk controls, loss mitigation and other internal controls or actions that are applied by the Company could help prevent the occurrence of events resulting in severe interruptions, delays, the loss or corruption of data or the cessation of the availability of systems or other operational issues leading to a loss for the Company.

Further, some of the measures used by the Company to identify and mitigate risks 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, inadequate or outdated. If the risk management is insufficient or inadequate, this could have a material adverse effect on the Company.

Risks associated with non-face-to-face automated customer processes and procedures

As a digital bank, the Company offers its loan products only through its digital platforms. The customer provides information used in automated assessments, and certain input factors are collected from or verified by external sources, either by documents forwarded to the Company 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 information, and in accordance with predetermined risk policies and financial models.

There are inherent risks associated with online processing of loan applications and reliance on information provided by the customers in non-face-to- face automated processes and without personal contact. Consequently, the Company is exposed to risks relating to the accuracy and completeness of the information used in assessments under its risk policies and its financial models on which credit decisions are based, as well as risks relating to the reliability of the input provided by the customer and/or collected from third party providers. If these risks materialize, this may, as a result, have a material adverse effect on the Company's business, results of operations and/or prospects.

Continued or increased negative attention on the consumer finance segment may affect the Company's financial position, operations or it strategies.

The growth of the Norwegian consumer finance market and the corresponding growth in consumer loans to Norwegian households have led and may continue to lead to increased attention on consumer finance 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 burdensome. 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 Company is subject of the risk of continued negative attention of the consumer finance market in general as well as potential focus on the Company's operations in particular. Negative attention on consumer finance from the media and public authorities may lead to a negative development of or trigger changes in the Company's business operations. Such negative attention may influence consumer demand for the Company's products, the Company's ability to attract and retain qualified personnel as well as the general business environment the Company 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 Company operates and/or the content of industry norms relating to consumer finance which may in turn affect the Company's operations and strategies.

2. FINANCIAL RISKS

The Company's business is significantly affected by credit risk

The Company is subject to credit risk (the risk that the Company's borrowers and other counterparties are unable to fulfil their payment obligations). Adverse changes in the credit quality or behavior of the Company's customers, a general deterioration in Norwegian, Finnish, Swedish, German or global economic conditions or adverse changes arising from systemic risk in the global financial system could affect the recoverability and value of the Company's assets and require an increase in the Company's impairments. Further, a range of macroeconomic events and other factors, including but not limited to increased unemployment, reduced asset values, lower consumer spending, increased customer indebtedness, increased interest rates and/or higher default rates, may also affect the overall credit quality profile of the Company's customers. Also, errors in or changes to the Company's models and systems used to assess the credit risk may also affect the credit quality profile of the Customers. Any significant increase in the Company's credit risk may have a material adverse effect on its results of operations, financial condition or prospects.

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