Published: 2016-10-27 08:00:00 CEST
BankNordik P/F
Financial Statement Release

BankNordik delivers on strategy

- FY2016 guidance revised upwards

Highlights of BankNordik's interim report for the first nine months of 2016:

(The figures below have been adjusted for divested activities related to insurance company Vörður, unless otherwise indicated)

First nine months of 2016 vs. first nine months of 2015

  • BankNordik reported operating profit of DKK 153m for the first nine months of 2016, a decrease of DKK 4m compared to the first nine months of 2015 (-4%).
    • Net interest income was down by DKK 45m year-on-year primarily due to the controlled run-off of corporate lending in Denmark, but also due to pressure on interest margins and the lower investment portfolio income.
    • Fee and commission income was DKK 33m lower, owing to a pull-back in mortgage-broking activity to normal levels, reduced income from corporate activities in Denmark and from asset management activity.
    • Net insurance income was up by DKK 13m in 9M 2016, primarily due to lower claims.
    • Operating costs were down by DKK 32m to DKK 345m, consistent with the refocusing of the Group’s core activities.
    • BankNordik reversed DKK 8m in net impairment charges compared to net impairment charges of DKK 9m for the same period last year.
  • BankNordik generated profit before tax, including discontinued activities from Vörður, of DKK 249m in the first nine months of 2016 compared to DKK 115m for the same period of last year.
  • Non-recurring items in 9M 2016 were a gain of DKK 72m versus a loss of DKK 25m in 9M 2015, including the capital gain from the sale of Vørður.
  • Value adjustments amounted to a gain of DKK 18m against a loss of DKK 36m in 9M 2015.
  • Discontinued activities before tax relating to Vörður amounted to DKK 6m compared to a profit of DKK 19m in 9M 2015.

 

“I am pleased that our financial results in the third quarter were better than expected. The interest expense relief from the subordinated debt restructuring in June 2016 has materialised in higher net interest income; costs were down; and net impairments were reversed for the third consecutive quarter. In addition, total lending volumes were almost flat during the period even though we wound up DKK 140m of corporate loans in Denmark,” said BankNordik CEO, Árni Ellefsen.

  

“Heading into the final quarter of 2016, the Vørður deal has been closed, most of the corporate loans in Denmark are off the books, and the branch support unit has successfully been consolidated. We have effectively executed the strategic initiatives laid out in 2015 and are now directing all efforts towards strengthening the Group’s position within its core business areas. Despite challenging market conditions with negative short-term interest rates and low growth in lending, we remain optimistic about the Group’s growth outlook,” said Mr Ellefsen.

 

Q3 2016 vs. Q2 2016

  • Operating profit increased to DKK 53m in Q3 2016 from DKK 50m in Q2 2016.
    • Net interest income was up by DKK 5m in Q3 2016 compared to Q2 2016, primarily due to the interest expense savings resulting from the subordinate debt transactions on 24 June 2016.
    • Fee and commission income was down by DKK 4m compared to Q2 2016, mainly due to dividend income from the investment portfolio recognised in Q2 2016.
    • Net insurance income was flat compared to Q2 2016.
    • Operating costs were down by DKK 2m in Q3 2016 compared to the previous quarter.
    • Net impairment charges were a DKK 4m reversal compared to reversed charges of DKK 3m in Q2 2016.
  • BankNordik recorded profit before tax, including discontinued activities from Vørður, of DKK 164m in Q3 2016 compared to profit of DKK 61m in Q2 2016.
  • Non-recurring items were a gain of DKK 84m in Q3 2016 (related to the sale of Vørður), versus DKK 0m in Q2 2016
  • Value adjustments amounted to a gain of DKK 12m in Q3 2016 compared to a gain of DKK 9m in Q2 2016.
  • Discontinued activities before tax relating to Vörður amounted to a profit of DKK 15m in Q3 2016 compared to a profit of DKK 1m in Q2 2016.

 

Sale of Vørður completed

On 30 September 2016, BankNordik completed the sale of all shares in Vørður to Arion Banki. The proceeds after transaction costs amounted to DKK 300m, and a capital gain of DKK 84m has been recognised in the income statement under non-recurring items. The amount of capital gain includes DKK 21m linked to favorable currency fluctuation during the period of ownership, which was previously recognised under the foreign currency translation reserve.

 

Run-off of corporate loan portfolio in Denmark nearing completion

DKK 1bn of corporate lending activities in Denmark had been settled by 30 June 2016, while a further DKK 140m was wound up in Q3 2016. The remanining book value at 30 September 2016 amounted to approximately DKK 310m. Naturally, the rate of settlement has decreased in Q3 2016 and will continue to do so, as the rest of the portfolio is expected to be gradually wound-up over the coming years. 

 

Dividends and share buy-backs

As previously announced, the greater part of the anticipated extraordinary dividends of DKK 300m is expected to be proposed for approval by the shareholders at BankNordik’s 2017 Annual General Meeting, while the rest is expected to be paid-out when the winding up of the Danish corporate activities is completed.

At 21 October 2016, the Group had accumulated 94,559 shares under the share-buy back programme initiated earlier in 2016. This amounts to a total transaction value of DKK 11.3m. The programme enables BankNordik to acquire own shares up to a market value of DKK 33m in 2016 but restrictions set forth in the Safe Harbour Regulations and the Market Abuse Regulations render it unlikely that purchases under the programme will reach the upper limit before year-end.

 

Capital ratios

As of 30 September 2016, BankNordik had a total capital ratio of 19%, leaving a margin of 10.2 percentage points to the Bank’s capital requirement of 8.8%.

The CET1 capital ratio was 17% at 30 September 2016 as compared to the Bank’s target of 13%.

 

Outlook for 2016

Management raises the FY2016 guidance on profit before impairment charges, non-recurring items, value adjustments and tax from the range of DKK 160-190m to the range of DKK 175-200m (9M 2016: DKK 146m).

Net impairment charges on loans for 2016 are expected to be less than in 2015 (DKK 20m). For the first nine months of 2016, net impairment charges were a reversal of DKK 8m.

This guidance is generally subject to uncertainty and will depend on economic conditions, including possible central bank monetary policy measures.

 

 

For additional information, please contact:

Árni Ellefsen, CEO, tel. (+298) 230 348

 

BankNordik has banking activities in Denmark, Greenland and the Faroe Islands and insurance activities in the Faroe Islands. Founded in the Faroe Islands more than a century ago, the Group has total assets of DKK 15.9bn and 416 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and has a dual listing on Nasdaq Iceland and Nasdaq Copenhagen.

 

Appendix: Financial highlights and comparative figures are provided below.

 

Financial highlights

 

DKK million
 
9M 2016 9M 2015 Q3 2016 Q2 2016 Q1 2016 Q4
2015
Q3
2015
               
Net interest income 313 358 103 98 113 111 116
Net fee income 141 174 46 50 44 52 52
Income from insurance operations 33 20 12 12 9 8 10
Other operating income 7 7 2 3 2 4 2
Operating income* 494 559 163 163 168 175 180
Operating costs* -345 -377 -113 -115 -117 -122 -122
Sector costs, etc. -3 -16 -1 -1 -1 -5 -5
Operating profit before impairment charges* 146 166 49 47 49 47 54
Loan impairment charges, net 8 -9 4 3 1 -11 7
Operating profit* 153 157 53 50 50 36 60
Non-recurring items 72 -25 84 0 -12 -497 -11
Operating profit before value adjustments and tax 225 132 137 50 38 -461 49
Value adjustments 18 -36 12 9 -3 -4 -20
Profit/loss before tax, excl. Vørður 243 96 148 60 35 -465 29
Profit/loss before tax, incl. Vørður 249 115 164 61 25 -447 42
               
Deposits, etc. DKKbn 12.8 12.8 12.8 12.9 12.5 12.7 12.8
Loans and advances, etc. DKKbn 9.4 10.7 9.4 9.4 10.0 10.7 10.7
Equity, DKKbn 1.9 2.1 1.9 1.8 1.8 1.8 2.1
Solvency ratio 19.0% 15.6% 19.0% 17.1% 17.2% 16.8% 15.6%
Excess liquidity relative to statutory requirement 227% 175% 227% 254% 207% 167% 175%
Operating cost/income 70% 67% 69% 70% 70% 70% 67%
Number of FTE, end of period (incl. Vørður) 416 478 416 464 477 459 478

* Excluding non-recurring items and value adjustments.

 

Further details are available in the interim report.


Q3 2016_IR Presentation.pdf
Interim Report_Q3 2016.pdf