Operating income totalled DKK 846m, as against DKK 895m the year before. Demand for loans remains soft, and the market for new lending is extremely competitive, putting interest margins under considerable pressure. The insurance operations made a healthy contribution to consolidated earnings.
The drop in income from banking activities were to a large extent offset by lower operating costs achieved through extensive rationalisation measures. On the other hand, the financial results were impacted by BankNordik's DKK 26m contribution to the banking industry's deposit guarantee scheme (2012: DKK 11m). This brought operating profit before impairment charges to DKK 261m, compared with DKK 292m in 2012.
The profit after loan and credit impairment charges for the year was DKK 147m (2012: DKK 115m). Most of the impairment charges relate to personal customers and small corporate customers.
The profit after impairment charges and special items but before value adjustments and tax was DKK 103m, compared with DKK 101m in 2012. This is slightly higher that the profit guidance announced on 10 January 2014.
Increasing and strengthening customer collaboration
Following BankNordik's strategic long-term expansion of its operations in 2010 and 2011 and the far-reaching restructuring that followed, the Bank was once again able to dedicate its full attention to serving its customers in 2013.
In order to focus its efforts, the Bank strengthened its services to those of its customers who make the most use of its banking services. A new loyalty programme, Nordik 360, has been launched to retain and expand the group of high-value customers. At the same time, more efficient services were provided to customers demanding fewer and less sophisticated services.
Outlook for 2014
BankNordik intends to continue developing its operations in line with its current strategy and policies.
Interest rates are expected to remain at low levels, and moderate economic growth is expected in the Bank's markets. As a result, demand for loans is expected to remain low, but the Bank will work to increase the volume of new lending in order to offset the repayments on existing loans. As a result, the Bank expects loans and advances at the end of 2014 to be at the level of the beginning of the year. The interest margin is expected to contract somewhat in the very competitive markets.
As a result, the Bank expects a drop in net interest income in 2014 relative to 2013. The same applies to the income from insurance operations. A slight improvement is expected in fee income from increases in pension, investment and mortgage-credit activities.
The Bank will retain its focus on cost savings in 2014.
Based on the above, BankNordik expects profit before impairment charges, special items, value adjustments and tax of DKK 200–240m for 2014 (2013: DKK 261m).
Net impairments on loans are expected to be lower in 2014 than in 2013.
Solvency and liquidity at healthy levels
BankNordik's risk profile is reflected in its solvency need of 8.9%, which is among the lowest in the Danish banking sector and very close to the statutory minimum solvency requirement of 8%. The Bank's solvency of 14.7% leaves a margin of 5.8 percentage points relative to the solvency need.
The Faroese and the Danish regulatory authorities have agreed to designate three of the four Faroese banks as systemically important financial institutions (SIFIs), one being BankNordik. Preliminary calculations indicate that BankNordik will be imposed a SIFI-buffer of 2.5%.
In terms of liquidity, BankNordik also has solid excess cover at 178% above the required level, equal to 2.8 times the requirement.
Audiocast Presentation of the results
In connection with publication of the Annual Report the bank hosts an audiocast presentation of the results. CEO Janus Petersen will be the host of the audiocast.
A link to the audiocast is available on www.banknordik.com.
Investors, analysts and other interested parties will be able to put forward questions by dialling in on the following dial in numbers at 10:30 GMT.
| Leader UK Freephone Dial-In: | |
| United Kingdom | 08005286702 |
| Leader Std International Dial-In: | +44 (0) 1452 554946 |
| Leader LocalCall Dial-In Numbers: | |
| Denmark, Copenhagen | 32728019 |
Appendix: BankNordik's financial highlights for 2013
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, ir@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 170,000 customers, total assets of DKK 17bn and 500 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 | 2013 | 2012 |
Q4 2013 |
Q3 2013 |
Q2 2013 |
Q1 2013 |
Q4 2012 |
| Net interest income | 574 | 613 | 133 | 143 | 151 | 147 | 154 |
| Net fee income | 188 | 195 | 53 | 43 | 48 | 44 | 54 |
| Income from insurance operations | 69 | 81 | 14 | 15 | 29 | 12 | 18 |
| Other operating income | 14 | 6 | 5 | 3 | 3 | 3 | 4 |
| Operating income* | 845 | 895 | 206 | 204 | 230 | 206 | 230 |
| Operating costs* | -558 | -592 | -140 | -136 | -142 | -141 | -137 |
| Sector costs, etc. | -26 | -11 | -4 | -4 | -8 | -8 | -7 |
| Operating profit before impairment charges* | 261 | 292 | 62 | 64 | 81 | 57 | 86 |
| Loan impairment charges, net | -148 | -115 | -41 | -32 | -20 | -55 | -35 |
| Operating profit* | 114 | 178 | 21 | 31 | 69 | 10 | 58 |
| Non-recurring items | -11 | -77 | -19 | 0 | 10 | -2 | -10 |
| Operating profit/(loss) before value adjustments and tax | 103 | 101 | 1 | 31 | 79 | -9 | 34 |
| Value adjustments | 11 | 21 | -10 | 16 | -16 | 22 | 8 |
| Profit before tax | 114 | 121 | -9 | 47 | 63 | 13 | 42 |
| Deposits, etc. | 12,193 | 12,746 | 12,193 | 12,019 | 12,331 | 12,800 | 12,746 |
| Loans etc. | 10,460 | 11,303 | 10,460 | 10,587 | 10,750 | 10,820 | 11,303 |
| Total assets | 17,085 | 17,609 | 17,085 | 16,876 | 17,369 | 17,817 | 17,609 |
| Equity | 2,156 | 2,053 | 2,156 | 2,155 | 2,125 | 2,063 | 2,053 |
| Solvency ratio | 14.7% | 14.8% | 14.7% | 14.5% | 15.4% | 14.9% | 14.8% |
| Liquidity relative to statutory requirement | 2.8 x | 2.5 x | 2.8 x | 2.6 x | 2.8 x | 3.0 x | 2.5 x |
| Costs / Operating profit | 66% | 66% | 68% | 67% | 61% | 68% | 61% |
| Number of employees (FTE) at year-end | 509 | 550 | 509 | 517 | 529 | 533 | 550 |
* Excluding non-recurring items and other special items (value adjustments etc.).
Further details are available in the 2013 Annual Report.
