BankNordik generated operating income of DKK 226m in the third quarter. The performance was as expected and in line with the performance of recent quarterly periods, but it was achieved in spite of lower interest income from bonds in the securities portfolio and from loans and advances carrying rates of interest linked to the money market.
Operating costs were DKK 147m, this amount being lower than each of the last four quarters, i.e. the period since BankNordik acquired the healthy parts of Amagerbanken effective 1 July 2011.
This brought the profit for the quarter before impairment charges to DKK 79m, as compared with DKK 66m in each of the first two quarters of the year. For the 9M period, the profit before impairment charges and special items amounted to DKK 210m.
“We're pleased that we've managed to maintain and in fact improve earnings from our day-to-day operations, not least considering the current difficult interest rate environment. That is a good indication of the strength of BankNordik,” said BankNordik CEO Janus Petersen.
Profit for the first nine months of the year amounted to DKK 80m before tax and DKK 71m before value adjustments and sector costs. BankNordik maintains its full-year guidance of profit before tax, value adjustments and sector costs of DKK 80-140m.
Low impairment charges
Net impairment charges on loans and advances amounted to just DKK 14m in the third quarter, or substantially less than in previous quarters, bringing impairment for the 9M period to DKK 79m.
The operating profit before special items was DKK 65m. Special items amounted to a net income of DKK 3m in the third quarter and consisted almost entirely of value adjustments.
“The integration with Amagerbanken was almost fully completed before the summer. This was a very demanding process for everyone involved, and we incurred significant costs in the first half of the year. The present quarterly report is the first one without any such non-recurring costs, and our Danish operations are now reporting a decent profit of DKK 28m,” said Janus Petersen.
Equity of DKK 2.0bn and supplementary capital of almost DKK 0.7bn gave BankNordik a solvency ratio of 13.8% at 30 September 2012, after the Bank had repaid DKK 150m worth of subordinated loan capital. By comparison, the solvency need was 8.9%. BankNordik's policy is to retain the high solvency ratio at significantly above the required level.
The same applies to the Bank's liquidity, which at 30 September 2012 was 2.6 times the required level.
BankNordik's financial highlights
| DKKm |
Q3 2012 |
Q2 2012 |
Q1 2012 |
Q4 2011 |
Q3 2011 |
Q1-Q3 2012 |
Q1-Q3 2011 |
2011 |
| Operating income* | 226 | 221 | 219 | 192 | 232 | 665 | 562 | 754 |
| Operating costs* | -147 | -155 | -153 | -157 | -152 | -455 | -362 | -519 |
| Profit before impairment charges* | 79 | 66 | 66 | 35 | 80 | 210 | 200 | 235 |
| Impairment charges on loans | -14 | -46 | -19 | -37 | -17 | -79 | -49 | -86 |
| Operating profit* | 65 | 20 | 46 | -2 | 63 | 131 | 152 | 149 |
| Non-recurring costs | –1 | -11 | -48 | -55 | -35 | -60 | -44 | -99 |
| Operating profit before value adjustments and sector costs | 64 | 9 | -2 | -57 | 28 | 71 | 108 | 50 |
| Value adjustments, sectors cost, etc. | 4 | -6 | 11 | 24 | 2 | 9 | -44 | -20 |
| Profit before tax | 68 | 2 | 10 | -33 | 30 | 80 | 64 | 31 |
| Loans and advances, etc. | 13,101 | 13,262 | 13,088 | 13,032 | 13,955 | |||
| Loans etc. | 11,271 | 11,430 | 11,376 | 11,769 | 11,949 | |||
| Total assets | 17,841 | 17,876 | 17,878 | 17,086 | 18,902 | |||
| Equity | 2,013 | 1,957 | 1,969 | 1,958 | 2,017 | |||
| Solvency ratio | 13.8% | 15.1% | 14.9% | 15.6% | 15.0% | |||
| Surplus liquidity relative to statutory requirement | 2.6x | 2.8x | 2.7x | 2.2x | 2.5x |
* Adjusted for non-recurring costs for integration and restructuring purposes and other special items (value adjustments, sector costs, etc.).
BankNordik acquired activities from Amagerbanken effective 1 July 2011.
Further details are available in the Q3 interim report.
A more efficient organisation
BankNordik acquired considerable operations from Sparbank in 2010 as well as the healthy parts of Amagerbanken in 2011. This meant that, in terms of deposits, the Bank's operations more than doubled in the two years. As a result, it was necessary to implement changes to in-house procedures, involving both customer service and the ongoing efforts to enhance efficiency. These are two important goals for BankNordik. In addition, branches have been merged in Denmark and in Greenland, and the overall headcount has been reduced.
As announced on 29 October 2012, management recently took additional steps to simplify the organisation and reduce the staff. These steps will ensure a management structure with a short chain of command between day-to-day customer-directed operations and the executive management, and the changes are to make the Bank more efficient and enhance its profitability and competitive strength.
Guidance for FY profit maintained
Interest income remains under pressure and the Bank has responded by announcing changes to its interest rates. The downward trend in loans and advances seen since the start of the year has continued but seems to have stabilised, and loans and advances are expected to remain at the current level by year end.
Running an efficient and profitable business is an inherent part of BankNordik's general strategy. Consistently with this strategy, the Bank has taken steps to reduce its current costs further by making organisational adjustments.
As a result, the guidance for the full-year results is unchanged. BankNordik continues to expect profit before tax, value adjustments and sector costs of DKK 80–140m for 2012.
Conference call and webcast today at 12.30 (CET)
BankNordik will review the financial results today at 12.30 (CET) at its customary conference call for analysts and investors. The conference call will be webcast on BankNordik's website, www.banknordik.com.
The dial-in numbers for the conference call are as follows:
Denmark: +45 32 72 80 18
UK: +44 1452555131
USA: +1 8666 828 490
Participants are kindly asked to call in a few minutes before the conference begins.
For further information, please contact:
Janus Petersen, CEO, tel. (+298) 330 340
Árni Ellefsen, CFO, tel. (+298) 330 348
Investor Relations: ir@banknordik.fo
BankNordik was founded more than 100 years ago in the Faroe Islands. The Group has banking activities in Denmark, Greenland and the Faroe Islands and insurance activities in the Faroe Islands and Iceland. The Group has total assets of DKK 18bn and 560 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on NASDAQ OMX. www.banknordik.dk.
