BankNordik lifts operating profit by 37% in Q1-Q3 2014

BankNordik's Q3 2014 interim report shows an improved performance, notably in the Danish banking operations and in the insurance operations. Banking operations in the Faroes continued to face an extremely competitive market for lending.

Loans and advances improved in the third quarter, driven especially by 5% lending growth in the Danish banking operations. Growing demand for new lending and credit facilities and an inflow of new customers have more than offset the reduction in the existing loan base. The growing business activity also supported fee and trading income.

Total operating income for the first nine months of 2014 was down by DKK 44m to DKK 596m from DKK 640m in the same period of 2013 primarily caused by decreasing lending rates on the Faroe Islands. The implemented rationalisations have reduced costs by DKK 27m. With loan impairment charges at less than half of last year's figure and the cost reductions, BankNordik reported profit before tax of DKK 134m for Q1-Q3 2014 against DKK 124m last year, even with value adjustments contributing DKK 15m less than last year. Half of the profit came from banking operations outside the Faroes.

“We're very pleased to see our operations improving, driven especially by our Danish activities, and that our earnings performance has been a little better than we anticipated at the start of the year,” said BankNordik CEO Janus Petersen.

Narrowing the guidance for 2014

Management now expects profit before impairment charges, non-recurring items, value adjustments and tax of DKK 220-240m for the full year 2014. This narrows the guidance to the upper half of the previous guidance range of DKK 200-240m announced at the start of the year. For the Q1-Q3 2014 period, this item was DKK 185m.

Management expects full-year loan impairment charges, which amounted to DKK 56m (net) in the Q1-Q3 period, to be substantially lower than the 2013-figure of DKK 147m.

Expectations for future financial developments are inherently subject to risk and uncertainty, and actual results may differ substantially from expectations.

Solvency and liquidity remaining strong

BankNordik's solvency ratio of 14.1% at 30 September 2014 leaves a margin of 5.3 percentage points to the relatively low capital requirement of 8.8%, which reflects the Bank's controlled risk profile. After recognition of the profit for the period, the solvency ratio would be 15%.

In step with the gradual implementation of the rules governing systemically important financial institutions (SIFIs) and the new capital adequacy rules (CRD IV) in the second half of 2015 or in 2016, the Bank's capital requirements are expected to increase to close to 14% by the end of 2019. Accordingly, BankNordik already complies with the upcoming stricter capital requirements.

In terms of liquidity requirements, BankNordik also had a solid buffer at 30 September 2014, at 2.7 times the statutory requirement.

For additional information, please contact:

Janus Petersen, CEO, tel. (+298) 330 340

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

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 513 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

  * Excluding non-recurring items and value adjustments.

Further details are available in the interim report.