BankNordik delivers DKK 157m operating profit for 2014

• Operating profit up by 47%
• Operational improvements, mainly in Denmark, lifted profit past guid-ance
• Operations outside the Faroes delivered more than half of the profit
• Plunging interest rates trigger DKK 250m write-down of carrying amount of goodwill - operations, liquidity and solvency unaffected
• Board recommends dividend pay-out of DKK 20m

BankNordik generated operating income of DKK 789m in 2014, a 6% drop from last year's figure of DKK 840m which was due to the very low level of interest rates. However, the Bank also managed to reduce costs by 6% (DKK 36m). The employee headcount was 506 at the end of 2014, down from 523 a year earlier and 612 just three years ago.

Recent years' efficiency improvements have enabled BankNordik to offer attractive terms to both existing and new customers. The Bank had an exceptionally good customer inflow and lending growth in the second half of 2014, especially in Denmark where lending grew by 12%. The customer inflow has lifted income from fees and insurance operations.

Profit for the year before impairment charges, non-recurring items, value adjustments and tax was DKK 242m, or slightly better than the guidance of DKK 200-240m provided at the beginning of the year.

Loan impairment charges were much lower, at DKK 85m in 2014 compared with DKK 148m in 2013. This brought the 2014 operating profit (before non-recurring items and value adjustments) to DKK 157m, a DKK 50m or 47% improvement from DKK 107m in 2013. A main driver of the improvement was the much higher operating profit from the Danish operations.

New business activities driving more than half of the profit

In recent years, the Bank has expanded its business operations outside the original market area of the Faroes and now generates more than half of its consolidated earnings from these activities. The Bank has built a much broader platform for development, and business growth in the new activities will drive its future earnings capacity. Retail customers, a relatively low risk segment, constitute some 60% of the Danish operations. Growth in this business area contributes to a desirable diversification of risk.

“We're quite pleased with our full-year results, not least considering the current market conditions and very competitive climate. We're particularly delighted to see our new activities deliver more than half of our operating profit plus a fair rate of lending growth in the second half of the year,” commented BankNordik CEO Janus Petersen.

"Like other banks, we have seen our earnings have come under severe pressure in recent years. However, BankNordik has a presence in attractive market areas, and we have a good potential for growing our business with both existing and new customers. Our performance in the second half shows that it is possible to grow in a stagnant market,” said Mr Petersen.

Solvency and liquidity remaining strong

BankNordik's solvency ratio of 14.8% at 31 December 2014 leaves a margin of 5.8 percentage points to the individual capital requirement of 9.0%, which reflects the Bank's controlled risk profile. In terms of liquidity, BankNordik also had a solid buffer at 31 December 2014, at 2.8 times the statutory requirement.

Dividend pay-out of DKK 20m

In light of the Bank's financial position and the reported operating profit, the Board of Directors recommends that the dividend pay-out should amount to DKK 20m in respect of 2014.

Reassessment of goodwill

The Bank has performed the annual impairment test of goodwill as required under the accounting regulation. As a result of the test, goodwill was written down by DKK 250m. The main reason for the impairment is the very low level of interest rates applied in the calculation of the carrying amount of goodwill from the Bank's acquisitions of activities outside the Faroes. The present currency situation and the extremely low level of interest rates further impaired goodwill. The impairment should be seen relative to the carrying amount of goodwill of DKK 730m and the equity before the write-down of DKK 2,249m.

The write-down is based on a long-term assessment of the parameters used when calculating goodwill and has no effect on the Bank's strategy, business operations, solvency or liquidity.

Outlook for 2015

BankNordik's management believes the level of interest rates will remain low and lead to a further contraction of interest margins and limited general demand for loans.

On the other hand, based on the current positive trend in customer inflow, the Bank expects a slight increase in loans and advances in 2015, as the volume of new loans and advances is expected to more than offset repayments on existing loans. Net interest income is expected to fall in 2015, while fee income is expected to rise, driven especially by the Bank's growing activities in pension, investment and mortgage-credit services.

Total operating income is expected to be slightly lower than in 2014. At the same time, costs are expected to be unchanged or slightly lower, for an operating profit before impairment charges, non-recurring items, value adjustments and tax of DKK 200-240m (2014: 242m).

Loan impairment charges, at DKK 85 million (net) in 2014 and 0.8% of loans and advances, are expected to be largely unchanged in 2015.

Expectations for future financial developments are inherently subject to risk and uncertainty, and actual results may differ substantially from the expectations expressed.

Appendix:

FY 2014 financial highlights and comparative figures

Risk Management Report 2014

Annual Report 2014

Investor Presentation of Annual Report 2014

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 17bn and 500 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on NASDAQ. www.banknordik.dk.

Financial highlights

Further details are available in the 2014 Annual Report.