BankNordik's H1 interim report clearly reflects the efficiency improvements implemented in recent years. Costs were 7% lower in H1 2013 than in the year-earlier period.
Total H1 income amounted to DKK 436m, which was in line with the H1 2012 figure. The performance reflects weakened demand for loans and credit combined with higher income from insurance activities.
Operating profit before impairment charges amounted to DKK 154m in H1 2013 compared with DKK 131m in H1 2012. Both banking and insurance activities contributed to the 18% improvement.
“We reduced our costs by 7% relative to last year, and with our impairment charges being as we had anticipated, we managed the best operating profit in recent years,” said BankNordik CEO Janus Petersen.
Loan impairment charges amounted to DKK 20m in the second quarter, bringing the H1 impairment charges to DKK 75m following the substantial impairment charges taken in the first quarter. Assuming the general economy does not decline, BankNordik continues to expect writedowns for 2013 in line with the 2012-figure of DKK 115m.
The H1 operating profit after impairment charges amounted to DKK 78m, of which DKK 68m was earned in the second quarter, making this one of the Bank's best quarterly performances ever. The H1 profit before tax of DKK 77m includes non-recurring items of DKK 8m consisting of rationalisation costs of DKK 10m and a DKK 18m profit from the sale of the head office.
We introduced efficiency-improving measures in order to lift our earnings and become more competitive”, said Janus Petersen, and he continued: “Our customers stand to benefit, as lower prices form part of our new customer concept. That will slow our earnings over the next couple of quarters, but in return we hope the attractive pricing will draw in new customers and strengthen our business base for the longer term.”
Maintaining solvency and liquidity at healthy levels
The Bank has a well-diversified lending portfolio with personal customers and the public sector accounting for almost 60%, a good industry diversification and only few large exposures. This risk profile is reflected in the solvency need of 8.7%, which is very close to the statutory minimum solvency requirement of 8%. After repaying DKK 100m of state-funded hybrid capital at 1 August 2013, the Bank has a solvency ratio of 14.6% calculated on its risk-weighted assets at 30 June 2013 and a margin of 5.9 percentage points relative to the solvency need.
The implementation of the new CRD IV capital adequacy rules at 1 January 2014 is expected to lower the solvency ratio by 0.50 percentage point. This will still leave the Bank with excess cover of 5.4 percentage points, enough to cover the 5 percentage point increase in the solvency need that will result as the new rules are gradually implemented from 2016 to 2019. As a result, the Bank expects to have sufficient ongoing earnings to repay its subordinated debt and still meet the heightened solvency requirements and to possibly be categorised as a SIFI for the Faroe Islands and Greenland.
Due to its large deposit surplus and healthy liquidity, BankNordik has in many cases refrained from bidding in the market for fixed-rate deposits. In addition, customers have placed more of their savings in securities, which reduced the Bank's deposits by DKK 469m in the second quarter. Still, liquidity remained good at 2.7 times the required level at 30 June 2013.
Retaining full-year 2013 profit forecast
The BankNordik Group continues to develop in line with the announced strategy with a key focus on good customer service, profitability and risk management.
As economic growth and with it demand for loans and advances remains subdued, loans and advances should not be expected to increase. As already mentioned, loan impairment charges for 2013 are expected to be in line with the 2012 level. The Bank's financial results for 2013 and each of the next few years will include a DKK 25m contribution to building up the banking industry's deposit guarantee scheme.
BankNordik maintains its full-year guidance of profit before value adjustments and tax in the DKK 130-160m range, a strong improvement from DKK 102m in 2012.
Conference call today
BankNordik will review the financial results today at 11.00 (CET) at its customary conference call for analysts and investors. The conference call will be webcast on BankNordik's website, www.banknordik.com.
The dial-in numbers for the conference call is provided below. Participants are kindly asked to call in a few minutes before the conference begins.
| Participant Std International Dial-In: | +44 (0) 1452 555131 |
| Participant UK LocalCall Dial-In Number: | |
| United Kingdom | 08445718957 |
| Participant LocalCall Dial-In Numbers: | |
| Denmark, Copenhagen | 32728018 |
| Finland, Helsinki | 0923113289 |
| Norway, Oslo | 21563005 |
| Sweden, Stockholm | 0850630779 |
| Switzerland, Baden | 0565800004 |
| Participant FreeCall Dial in numbers: | |
| Iceland | 8009300 |
| United States | 18666828490 |
For further information, please contact:
Janus Petersen, CEO, tel. (+298) 330 340
Árni Ellefsen, CFO, tel. (+298) 330 348
Johnny í Grótinum, Investor Relations, tel. (+298) 230 380, jig@banknordik.fo
BankNordik has banking activities in Denmark, Greenland and the Faroe Islands and insurance activities in the Faroe Islands and Iceland. Founded in the Faroe Islands more than a century ago, the Group has 180,000 customers, total assets of DKK 17bn and 529 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on NASDAQ OMX. www.banknordik.dk.
Financial highlights
| DKKm | Q2 2013 | Q1 2013 | Q4 2012 | Q3 2012 | Q2 2012 | H1 2013 | H1 2012 | 2012 |
| Operating income* | 230 | 206 | 236 | 224 | 219 | 436 | 436 | 895 |
| Operating costs* | -142 | -141 | -143 | -145 | -153 | -282 | -304 | -592 |
| Profit before impairment charges | 88 | 65 | 93 | 79 | 66 | 154 | 131 | 303 |
| Loan impairment charges, net | -20 | -55 | -35 | -14 | -46 | -75 | -65 | -115 |
| Operating profit* | 68 | 10 | 58 | 65 | 20 | 78 | 66 | 188 |
| Non-recurring items | 18 | -10 | -15 | -1 | -11 | 8 | -60 | -77 |
| Sector costs, etc. | -8 | -8 | -7 | 0 | 1 | -16 | -4 | -9 |
| Operating profit/(loss) before value adjustments and tax | 79 | -8 | 36 | 64 | 9 | 70 | 2 | 102 |
| Value adjustments | -16 | 22 | 6 | 4 | -7 | 6 | 10 | 19 |
| Profit before tax | 63 | 13 | 42 | 68 | 2 | 77 | 12 | 121 |
| Deposits etc., DKKbn | 12.3 | 12.8 | 12.7 | 13.1 | 13.3 | |||
| Loans etc., DKKbn | 10.7 | 10.8 | 11.3 | 11.3 | 11.4 | |||
| Total assets, DKKbn | 17.4 | 17.8 | 17.6 | 17.8 | 17.9 | |||
| Equity, DKKbn | 2.1 | 2.1 | 2.1 | 2.0 | 2.0 | |||
| Solvency ratio | 15.4% | 14.9% | 14.8% | 13.8% | 15.1% | |||
| Liquidity relative to statutory requirement | 2.7 x | 2.9 x | 2.5 x | 2.7 x | 2.8 x | |||
| Cost/income ratio | 62% | 68% | 61% | 65% | 70% | |||
| Number of employees (FTE) at period-end | 529 | 533 | 550 | 577 | 583 |
* Adjusted for non-recurring items and other special items (value adjustments, sector costs, etc.). Further details are available in the interim report.
