The BankNordik Group had net operating income of DKK 190 million in the first quarter of 2014. Even when adjusted for seasonal fluctuations, the income was slightly down, in part due to continued weak demand for loans and credit and because interest margins have contracted in the extremely competitive market for new lending, not least in the Faroe Islands.
On the other hand, the Danish banking activities continued their positive trend in the first quarter. The Danish banking activities have now been profitable for four consecutive quarters, contributing DKK 20 million to profit in Q1 2014.
The Bank continues to implement efficiency improvements, reducing operating costs to DKK 138 million in the past quarter. As a result, the Bank generated profit before impairment charges of DKK 52 million.
Loan and credit impairment charges, net, amounted to DKK 21 million, supporting the expectations for lower impairments expressed at the beginning of the year. Profit before tax and after impairment charges, non-recurring items and value adjustments was DKK 31 million, as against DKK 13 million in the first quarter of 2013.
Solvency and liquidity requirement buffers
BankNordik maintains a controlled risk profile as reflected in its solvency need of 8.8%, which is among the lowest rates in Denmark and close to the statutory minimum of 8%. The Bank's solvency ratio of 14.7% at 31 March 2014 leaves a buffer of 5.8 percentage points relative to the solvency need.
In terms of liquidity, BankNordik also has solid buffer at 2.6 times the statutory requirement.
In April, the Bank resolved to redeem subordinate loan capital of DKK 63 million provided by the Danish State. See announcement of 23 April 2014. While the Bank had an adequate equity ratio at the time, its decision to raise the loan in 2009 was considered an appropriate part of the Group's capital planning, also considering the unpredictable situation then prevailing in the financial markets. Management believes that now is an appropriate time to redeem the loan considering the Group's expected income, solvency and capital planning for the next few years. The redemption has been approved by the Danish Financial Supervisory Authority.
Accordingly, BankNordik has now reduced its subordinate loan capital to DKK 460 million. At the end of 2011, it amounted to DKK 831 million. Following redemption of the loan, the solvency ratio is about 14.1%, leaving a buffer relative to the solvency need of about 5.3 percentage points (before recognition of profit for the current financial year).
Outlook for 2014
Management maintains the full-year guidance provided at the beginning of the year. BankNordik is expected to generate profit before impairment charges, non-recurring items, value adjustments and tax of DKK 200-240 million for 2014. Impairment writedowns on loans are expected to be lower in 2014 than in 2013.
Appendix: Financial highlights – First quarter of 2014
For further information, please contact:
Janus Petersen, CEO, tel. (+298) 330 340
Árni Ellefsen, CFO, tel. (+298) 330 348
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 500 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
| DKKm |
Q1 2014 |
Q4 2013 |
Q3 2013 |
Q2 2013 |
Q1 2013 |
2013 |
| Net interest income | 133 | 133 | 143 | 151 | 147 | 574 |
| Net fee income | 46 | 53 | 43 | 48 | 44 | 188 |
| Income from insurance operations | 8 | 14 | 15 | 29 | 12 | 69 |
| Other operating income | 3 | 5 | 3 | 3 | 3 | 14 |
| Operating income* | 190 | 206 | 204 | 230 | 206 | 845 |
| Operating costs* | -132 | -139 | -136 | -142 | -141 | -558 |
| Sector costs, etc. | -6 | -4 | -4 | -8 | -8 | -26 |
| Profit before impairment charges* | 52 | 60 | 64 | 81 | 57 | 261 |
| Loan impairment charges, net | -21 | -42 | -32 | -20 | -55 | -147 |
| Operating profit* | 31 | 20 | 31 | 61 | 1 | 114 |
| Non-recurring items | -2 | -19 | 0 | 18 | -10 | -11 |
| Operating profit/(loss) before value adjustments and tax | 29 | 1 | 31 | 79 | -9 | 103 |
| Value adjustments | 2 | -10 | 16 | -16 | 22 | 11 |
| Profit/loss before tax | 31 | -9 | 47 | 63 | 13 | 114 |
| Deposits, etc. | 12,047 | 12,193 | 12,019 | 12,331 | 12,800 | 12,193 |
| Loans and advances etc. | 10,392 | 10,460 | 10,587 | 10,750 | 10,820 | 10,460 |
| Total assets | 16,584 | 17,085 | 16,876 | 17,369 | 17,817 | 17,085 |
| Equity | 2,135 | 2,156 | 2,155 | 2,125 | 2,063 | 2,156 |
| Solvency ratio | 14.7% | 14.7% | 14.5% | 15.4% | 14.9% | 14.7% |
| Liquidity relative to statutory requirement | 2.6 x | 2.8 x | 2.6 x | 2.8 x | 3.0 x | 2.8 x |
| Costs / Operating profit | 70% | 68% | 67% | 61% | 68% | 66% |
| Number of employees (FTE) at year-end | 512 | 523 | 530 | 545 | 538 | 523 |
* Excluding non-recurring items and value adjustments.
Further details are available in the Interim Report Q1 2014 available on www.banknordik.com.
