While preparing the provisional financial results for the third quarter, it has come to light that Kvika’s results for the quarter will probably lead to the bank’s earnings for the year being somewhere between ISK 2,500 – 2,800 m. before tax. At the beginning of the year, the bank’s earnings forecast had been ISK 1,990 m. before tax, but this estimate has been raised twice in the meantime. It was raised to ISK 2,700 m. when the results for the first quarter were published and then again up to ISK 2,900 m. with the publication of the Q2 results.
The expected change in the earnings forecast can mainly be attributed to the following factors:
- Difficult market conditions in the securities market, particularly equities.
- One-off charge entries and revaluation of specific GAMMA assets.
- A decrease in GAMMA´s unrealised performance fees due from property funds. The change has a lowering effect on earnings before tax, but the effect on after-tax earnings is, however, considerably less. When the acquisition of GAMMA was negotiated, part of the purchase price was subject to the payment of these fees. The decrease in GAMMA’s revenues is offset, on one hand, by the decrease in Kvika’s purchase price for GAMMA and, on the other hand, by a decrease in GAMMA’s tax obligations. Since Kvika’s earnings forecast is presented before tax, the decrease in these fees has a lowering effect on the forecast, even though it has little effect on profits after tax.
On 30 September, Kvika announced that the lowering of the value of two of GAMMA’s funds did not create the need to revise the earnings forecast. The decrease in the rates of these funds had an impact on the group’s results before tax, but their impact was so negligible that it did not lead to changes in the earnings forecast at that time.
No changes have been made to capitalised carry forward tax losses of the group this year. The bank has capitalised part of its carry forward tax losses to the extent that they are likely to be used to offset estimated income tax in the future, as deferred tax assets on its balance sheet. Deferred tax assets will be re-evaluated at the end of the year along with the budget for next year and the bank’s annual accounts. Since the bank’s taxable sources of income have grown during the year it is likely that the value of carry forward losses at the end of the year will increase.
Kvika banki’s Q3 results will be published on 14 November 2019.