BankNordik's interim report for the first quarter of 2015 shows that the banking business continues to grow, as reflected by significantly higher fee income and lending growth in all three of its markets. The Group's insurance operations also reported growth in premium income, but a harsh winter season with high claims expenses caused a setback in the technical result. The sharp drop in interest rates during the quarter will put pressure on earnings going forward, but it has also produced a large capital gain on the Bank's securities portfolio.
Following a period of falling interest income, BankNordik recorded a quarter-on-quarter improvement in net interest income in Q1 2015, as well as relatively strong year-on-year growth in fee income. On the other hand, large claims expenses impacted net insurance income. This brought total operating income for the first three months of 2015 to DKK 182m, down from DKK 187m in the same period of 2014. However, a substantial improvement in value adjustments lifted the Q1 consolidated profit before tax to DKK 64m.
“We're very pleased to see our operations improving, and that our earnings are in line with our guidance, especially given the prevailing conditions of an exceptionally low level of interest rates,” said BankNordik CEO Janus Petersen.
Outlook for 2015
Management continues to expect profit before impairment charges, non-recurring items, value adjustments and tax of DKK 200-240m for the full year 2015. For the first quarter of 2015, this item was DKK 39m.
Net loan impairment charges amounted to DKK 20m in the first quarter of 2015, consisting of a statistically calculated collective impairment charge of DKK 5m and a DKK 15m write-down due to the impairment of collateral held on a particular commercial customer exposure. The Bank considers this to be an exceptional event and therefore expects a drop in impairment charges for the full year 2015 compared with the 2014 figure of DKK 85m.
Expectations for future financial developments are inherently subject to risk and uncertainty, and actual results may differ from expectations.
Solvency and liquidity remaining strong
BankNordik's solvency ratio of 14.6% at 31 March 2015 leaves a margin of 5.8 percentage points to the relatively low capital requirement of 8.9%, which reflects the Bank's controlled risk profile.
In step with the gradual implementation of the rules governing systemically important financial institutions (SIFIs) and the new capital adequacy rules (CRD IV) expectedly beginning in the second half of 2015, the Bank's capital requirement is 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 2.6 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, 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 170,000 customers, total assets of DKK 16bn and 504 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
|
DKK million |
Q1 2015 |
Q4 2014 |
Q3 2014 |
Q2 2014 |
Q1 2014 |
| Net interest income | 126 | 125 | 125 | 126 | 133 |
| Net fee income | 53 | 52 | 45 | 50 | 44 |
| Insurance income, excluding claims expenses | 1 | 22 | 26 | 20 | 8 |
| Other operating income | 2 | 3 | 3 | 4 | 3 |
| Operating income* | 182 | 202 | 198 | 201 | 187 |
| Operating costs* | -138 | -130 | -125 | -136 | -132 |
| Sector costs, etc. | -5 | -5 | -6 | -6 | -6 |
| Operating profit before impairment charges* | 39 | 68 | 67 | 58 | 49 |
| Loan impairment charges, net | -20 | -29 | -17 | -19 | -21 |
| Operating profit* | 18 | 39 | 50 | 40 | 28 |
| Non-recurring items | 0 | -262 | 0 | 1 | -2 |
| Operating profit before value adjustments and tax | 18 | -222 | 50 | 41 | 26 |
| Value adjustments | 46 | -4 | -1 | 13 | 4 |
| Profit/Loss before tax | 64 | -226 | 49 | 54 | 31 |
| Deposits, etc. DKKbn | 12.3 | 12.6 | 12.3 | 12.3 | 12.0 |
| Loans and advances, etc. DKKbn | 10.6 | 10.5 | 10.3 | 10.2 | 10.4 |
| Equity, DKKbn | 2.0 | 2.0 | 2.2 | 2.2 | 2.1 |
| Solvency ratio | 14.6% | 14.8% | 14.1% | 14.6% | 14.7% |
| Liquidity relative to statutory requirement | 2.6 x | 2.8 x | 2.7 x | 2.6 x | 2.6 x |
| Income/cost ratio | 76% | 64% | 62% | 66% | 70% |
| Number of employees (FTE) at end of period | 504 | 506 | 513 | 510 | 512 |
* Excluding non-recurring items and value adjustments.
Further details are available in the interim report.
