Announcement 13/2009
Q1 2009 Interim Report
· Pre-tax profit DKK 51.6m in Q1 2009 - a 13.6% pro anno return on equity
· Core earnings (income from interest, fee and subsidiaries net ordinary costs)
increased to DKK 74m from DKK 28m in Q1 2008
· Net financial income increased 57% yoy
· Cost/income ratio 47% - excluding value adjustments and impairments - a
decrease from 64% in Q1 2008
· Impairments DKK 22.6m compared to DKK 16.5m in Q1 2008
· A gain of DKK 8.8m in market value adjustments compared to a loss of DKK
15.8m in Q1 2008
· Loans and advances decreased by 0.5% to DKK 7.6bn during Q1 2009
· The Group's solvency ratio is 21%
· The Group has a strong liquidity of 194% above statutory requirements
· Profit guidance for 2009 maintained at DKK 165-195m before market value
adjustments and payment to the state guarantee scheme and tax
“We are satisfied with the result in the first quarter”, says Føroya Banki CEO,
Janus Petersen. “Generating a return of 13.6% with our large equity and low
gearing is very satisfactory in the current difficult market environment. The
underlying development of our core earnings is positive, and our strong
solvency and firm credit handling have been of key importance as regards our
efforts to deal efficiently with the global financial crisis, thus enabling us
to maintain our strong 2009 guidance”, he says.
The Management is satisfied with the pre-tax profit of DKK 51.6m in Q1 compared
with a loss of DKK 3.2m in Q1 2008. The good result is mainly explained by an
increase of DKK 45m in financial income, driven by improvements on all items,
while costs increased by DKK 5.6m caused by the payment for the state bank
guarantee scheme. Net premium income from the insurance company Trygd improved
significantly from a net loss of DKK 7m in Q1 2008 to a net gain of DKK 11m in
Q1. The Group has been able to improve the interest margins in an environment
with increasing funding costs, thus net interest income increased by DKK 26m
although the loan portfolio decreased slightly.
In connection with the Group's transition to IFRS and Basel II in Q1 2009 the
loan portfolio has been reviewed intensively. This has not increased the
Group's impairment charges compared with the earlier provisions for bad debt,
which reflects the high credit quality of the loan portfolio in general.
Nevertheless, some developments in the business environment of a few corporate
customers have resulted in new impairment charges. The composition of the
corporate loan portfolio is diversified as no single segment of the corporate
sector exceeds 9% per cent of the loan portfolio. Loans to retail customers
account for 47 per cent of total loans, whereof more than 80 per cent are fully
collateralised mortgage lending.
Although the equity markets in general were negative in the first quarter of
2009 the Group realised a profit on the large portfolio of securities. This is
primarily explained by the conservative investment policy implying a large
overweight of bonds (>95% of securities portfolio), which performed well in Q1.
In January the Danish Government took some measures to ensure financial
stability. The Danish government made subordinated debt for DKK 100 billion
available for the financial institutions to apply for which can be included in
the institutions Tier 1 capital. The so-called Credit Package. This capital can
be converted into share capital.
At the same time the Danish Government announced a three year transition
scheme, covering the period from 2010 to 2013, with respect to the government
guarantee provided in the Act on Financial Stability.
Because of the Group's solid solvency ratio, the Group does not require
subordinated capital in order to perform its current business but the bank is
monitoring the strategic opportunities inherent in the Credit Package.
Føroya Banki
Janus Petersen
CEO
www.foroya.fo
