The Danish Financial Supervisory Authority Nasdaq Copenhagen A/S 22 August 2018 Vestjysk Bank's Half-Year Report 2018 H1 2018 Highlights Vestjysk Bank realised a profit after tax of DKK 119 million in H1 2018. The Bank's core operations are sound and core earnings of DKK 224 million before impairment are considered satisfactory. Impairment charges are at a lower level than they were in H1 2017. However, the overall level of impairment charges is still relatively high. The Bank's profit after tax in H1 2018 is considered satisfactory under the given circumstances. Summary of Vestjysk Bank's results in H1 2018:
- Profit after tax of DKK 119 million (H1 2017: DKK 108 million), equaling a return on equity after tax of 10.2 per cent.
- Core income of DKK 458 million kroner (H1 2017: DKK 512 million).
- Cost ratio of 51.1 (H1 2017: 49.9).
- Core earnings before impairments of DKK 224 million (H1 2017: DKK 257 million).
- Impairment of loans and receivables, etc. of DKK 95 million (H1 2017: DKK 142 million).
- The total capital ratio stood at 17.8 per cent, corresponding to excess coverage of 5.9 percentage points or DKK 866 million.
- The combined capital requirement stood at 11.9 per cent, which consists of an individual solvency need of 10.0 per cent and a capital conservation buffer of 1.875 percentage point.
- At 30 June 2018 the Bank's LCR was 243 per cent, compared with a requirement of 100 per cent.
- Implementation of the new IFRS 9 rules at 1 January 2018 resulted in additional impairment charges of DKK 225 million. The impact net of tax has been recognised directly in the Bank's equity at 1 January 2018, which has thus been reduced by DKK 207 million, equal to 9.0 per cent of shareholders' equity.
- The Bank has decided not to apply the European Commission's transitional arrangement for partial recognition of the IFRS 9 impairment rules in total capital. The DKK 207 million adverse effect of the impairment rules under IFRS 9 did thus have full effect on the Bank's capital ratios at 1 January 2018.
Organisational adjustments The Bank is currently experiencing positive developments, which include a net inflow of new customers and a generally high level of activity. However, competition is intensifying in a banking market already impacted by several years of historically low interest rates. This has placed the Bank's earnings power under pressure, and in order to maintain its competitive market strength, the Bank is making targeted efforts to keep its cost ratio at around 50. As part of these efforts, the Bank will implement organisational adjustments effective on 1 September 2018 that will reduce its headcount by about 20 FTE, corresponding to a staff reduction of about 5 per cent. Some of the redundancies are expected to be voluntary. Outlook for 2018 maintained Given an unchanged economic climate and an overall decrease in impairment losses, the Bank's total business volume is expected to have the capacity to generate profit after tax of around DKK 175-250 million. The agricultural sector has been struck by a long period of drought in 2018 that will reduce the harvest yield. The harvest must be finished before the effects can be quantified, and it is difficult to estimate the effects of the drought at the present time. Currently, the effects are generally expected to be negative, but there will be large differences from region to region and from one farm to the next. Based on its current knowledge, the Bank has reflected these expectations in its current impairment charges involving the agricultural sector. If the effects of the drought prove to be worse than anticipated and the prolonged downward trend in settlement prices of pork and milk persists or becomes further aggravated, the Bank's significant exposure to agriculture may entail an increase in impairment losses relative to Management's current estimates for 2018. Enquiries Please address any enquiries regarding the present announcement to Jan Ulsø Madsen, CEO, at tel. +45 96 63 21 04. Vestjysk Bank A/S Vagn Thorsager Jan Ulsø Madsen Chairman CEO Vestjysk Bank A/S Torvet 4-5 7620 Lemvig Denmark Phone +45 96 63 20 00 CVR no. 34631328 www.vestjyskbank.dk
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