Announcement no. 11/2019
“We are pleased to deliver strong profit in 2018, driven by a significant reversal of impairment charges and the sale leaseback of BankNordik’s head office property ─ both products of the Group’s devotion to creating long-term value for our shareholders. Even though our top line was challenged by enduring interest margin compression, we were able to attract new business and build volumes,” said BankNordik CEO, Árni Ellefsen.
“We executed well on our strategy to build a customer-centred bank by strengthening our relationships and enhancing the customer experience. This has provided us with momentum to further strengthen our position as the alternative bank connection in Denmark and Greenland. On the operational side, we managed to lower expenditures by persistently driving efficiency through process streamlining and task automation,” said Mr. Ellefsen.
Highlights of BankNordik's annual financial results for 2018:
2018 results vs. 2017 results
- BankNordik reported operating profit of DKK 289m in 2018, an increase of DKK 43m compared to 2017 (+17%).
- Net interest income was down by DKK 13m year-on-year due to tighter interest margins.
- Fee and commission income was down by DKK 18m in 2018, nearly offset by an increase in other operating income of DKK 18m.
- Net insurance income was up by DKK 1m in 2018 compared to 2017.
- Operating costs were down by DKK 6m to DKK 456m due to continuous efforts to improve operational efficiency.
- Profit before tax was DKK 323m in 2018 compared to DKK 235m in 2017.
- Non-recurring items amounted to an income of DKK 72m in 2018, including income from the sale and leaseback of the Group’s head office, a revaluation gain on BI Holding A/S and losses from severance pay related to organisational adjustments.
- Value adjustments amounted to a loss of DKK 38m in 2018 compared to a gain of DKK 6m in 2017.
- Lending volumes were up by DKK 419m (4%) from DKK 9,537m at 31 December 2017 to DKK 9,956m at 31 December 2018.
- Deposits increased by DKK 800m from DKK 12,632m at 31 December 2017 to DKK 13,432m at 31 December 2018.
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- BankNordik reversed DKK 111m in net impairment charges in 2018.
Q4 2018 vs. Q3 2018
- Operating profit decreased to DKK 60m in Q4 2018 from DKK 88m in Q3 2018.
- Net interest income was down by DKK 2m in Q4 2018 compared to Q3 2018, due to margin pressure and lower average volumes during the quarter.
- Fee and commission income was DKK 42m in Q4 2018, down DKK 1m from Q3 2018.
- Net insurance income was DKK 13m in Q4 2018, flat compared to the previous quarter.
- Other operating income was down DKK 1m in Q4 2018.
- Operating costs increased by DKK 4m QoQ, mainly due to the Group’s marketing campaign launched in the fourth quarter.
- Net impairment charges were an DKK 18m reversal in Q4 2018 compared to a reversal of DKK 39m in Q3 2018.
- BankNordik recorded profit before tax of DKK 38m in Q4 2018 compared to a profit of DKK 78m in Q3 2018.
- DKK 10m in domicile impairments was recognised as non-recurring costs in Q4 2018.
- Value adjustments amounted to a loss of DKK 12m in Q4 2018 compared to a loss of DKK 3m in Q3 2018.
Capital ratios
The Group’s CET1 capital ratio was up by 0.2 of a percentage point year-on-year to stand at 17.7% at 31 December 2018. The total capital ratio increased to 19.8% at 31 December 2018 from 19.7% at 31 December 2017.
The impairment charge, triggered by the new IFRS 9 accounting policies, had a negative effect of 0.5 percentage point on the capital ratios in 2018.
Return on capital
BankNordik’s net income amounted to DKK 262m in 2018, of which DKK 70m (DKK 7 per share) will be proposed distributed as dividends.
In addition to dividends, the Group bought back 136,839 shares in 2018 at an aggregate transactional value of DKK 15m and an average purchase price of DKK 112 per share. By comparison, the Group’s book value per share was DKK 207 at year-end 2018.
Accounting for both dividends and share buybacks, the Group’s payout ratio for 2018 is expected to be 32%.
BankNordik is considering additional share buy-backs in 2019.
Outlook
In 2019, BankNordik expects to continue growing its lending volumes – both personal and corporate. Fee and commission income is expected to increase moderately in line with higher customer activity. Likewise, net insurance income is expected to continue its growth trajectory, although claims vary widely from one year to the next. Operating costs are expected to stay flat compared to 2018 and impairment charges on loans and advances are expected to remain low in 2019.
Management at BankNordik expects operating profit before impairment charges to be in the range of DKK 160–200m in 2019 (2018: DKK 179m), while net profit is expected to be in the range of DKK 100–150m (2018: DKK 262m).
This guidance is generally subject to uncertainty and will, amongst other things, depend on economic conditions, loan impairments and market value adjustments.
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 16.7bn and 393 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on Nasdaq Copenhagen.
Appendix: Financial highlights and comparative figures are provided below.
Financial highlights
| DKK million | 2018 | 2017 | Q4 2018 | Q3 2018 | Q2 2018 | Q1 2018 | Q4 2017 |
| Net interest income | 374 | 387 | 92 | 94 | 93 | 94 | 95 |
| Net fee and commission income | 172 | 190 | 42 | 43 | 43 | 44 | 47 |
| Income from insurance operations | 44 | 43 | 13 | 13 | 6 | 12 | 12 |
| Other operating income | 45 | 28 | 9 | 10 | 15 | 12 | 8 |
| Operating income* | 635 | 649 | 156 | 160 | 157 | 162 | 162 |
| Operating costs* | -456 | -462 | -115 | -111 | -116 | -115 | -112 |
| Sector costs, etc. | -1 | 0 | 0 | 0 | 0 | 0 | 2 |
| Operating profit before impairment charges* | 179 | 187 | 42 | 49 | 42 | 47 | 52 |
| Loan impairment charges, net | 111 | 60 | 18 | 39 | 23 | 31 | 51 |
| Operating profit* | 289 | 246 | 60 | 88 | 65 | 77 | 103 |
| Non-recurring items | 72 | -18 | -10 | -6 | 12 | 76 | -1 |
| Profit before value adjustments and tax | 361 | 228 | 50 | 81 | 76 | 154 | 101 |
| Value adjustments | -38 | 6 | -12 | -3 | -17 | -6 | -10 |
| Profit/loss before tax | 323 | 235 | 38 | 78 | 59 | 148 | 92 |
| Deposits, etc. DKKbn | 13.4 | 12.6 | 13.4 | 13.2 | 13.1 | 13.1 | 12.6 |
| Loans and advances, etc. DKKbn | 10.0 | 9.5 | 10.0 | 10.0 | 9.7 | 9.6 | 9.5 |
| Equity, DKKbn | 2.0 | 1.8 | 2.0 | 1.9 | 1.9 | 1.9 | 1.8 |
| Solvency ratio | 19.8% | 19.7% | 19.8% | 17.6% | 18.5% | 18.9% | 19.7% |
| Excess liquidity relative to statutory requirement | 213% | 205% | 213% | 219% | 225% | 218% | 205% |
| Operating cost/income | 72% | 71% | 73% | 69% | 73% | 71% | 69% |
| Number of FTE, end of period | 393 | 400 | 393 | 385 | 390 | 387 | 400 |
* Excluding non-recurring items and value adjustments.
Further details are available in the interim report
Attachments
