Bigbank AS is correcting the contents of its previously released stock exchange announcement “Bigbank Unaudited Financial Results for 2022 Q3 and Nine Months” and the Bigbank Interim report Q3 2022 that was attached to the announcement. The contents of the stock exchange announcement and the Q3 2022 interim report were revised in connection with the corrections made during a review of the financial statements performed by the company’s independent auditor.
- The accounting policies for contract fees and the costs directly attributable to obtaining contracts were corrected. After the correction, contract fees are recognised using the effective interest method as appropriate for interest-like revenue and the costs directly attributable to obtaining contracts are capitalised and amortised over the terms of the underlying contracts. As a result of the correction, retained earnings and loans to customers as at 31 December 2021 were reduced by 2.8 million euros. Interest income and loans to customers as at and for the period ended 30 September 2022 were corrected by 0.5 million euros.
- Additionally, the accounting for loans with an investment risk component that have the features of a hybrid financial instrument was corrected. Before the correction, the gains arising from changes in the values of the underlying assets of relevant contracts were immediately recognised as interest income and the discounted amount was recognised as interest expense. Subsequent to the correction, the contracts were reclassified and the gains are recognised on a straight-line basis over the lives of the contracts as gains on financial assets measured at fair value through profit or loss. Due to the correction, Bigbank’s profit for the nine months of 2022 decreased by 6.6 million euros.
The above corrections have been made to both the income statement and the statement of financial position included in this stock exchange announcement and the Q3 2022 interim report.
Bigbank earned a net profit of 7.2 million euros in the third quarter and a net profit of 21.3 million euros in the nine months of 2022. Performance met expectations, although both the profits for nine months and the third quarter were lower than a year earlier (-40.8% and -7.8%, respectively). Last year, Bigbank earned a one-off bargain purchase gain on a business combination and the increase in the fair value of investment property was 2.5 million euros larger.
Third quarter net interest income grew by 2.8 million euros (15.2%) year on year, amounting to 21.3 million euros. Profit before loss allowances and income tax was 13.3 million euros. Expenses on credit loss allowances amounted to 4.2 million euros.
Bigbank’s loan portfolio grew, expanding in the nine months by 38.6% and in the third quarter by 11.9%. At the end of the third quarter, the Group’s performing loan portfolio amounted to 1.2 billion euros, exceeding the 2021 year-end figure by 350.8 million euros (39.5%). The share of loans over 90 days past due accounted for 1.3% of the total portfolio, indicating a continued improvement of the quality of the portfolio over the year, as the same indicator for the nine months of 2021was 3.0%.
The third quarter profit of the corporate banking segment amounted to 2.6 million euros, an increase of 0.7 million euros on the previous quarter. The quarterly profit figure includes net gain of 0.2 million euros on the revaluation of the underlying assets of loans with an investment risk component, which is recognised on a straight-line basis over the terms of the underlying loan contracts. Revaluation gains on loans with an investment risk component are calculated annually, based on movements in the market value of customers’ investment property and the agreed pattern of profit sharing. The corporate loan portfolio grew by 68.7 million euros (20.0%) during the quarter.
The housing loan portfolio grew by 27.7% to 186.9 million euros in the third quarter. Compared with the end of 2021, the portfolio has increased by more than 1.5 times.
Deposits from customers increased by 38.6% in nine months and by 6.5% in the third quarter. The fastest growth was again shown by savings deposits, which increased by 10.7% to 542.5 million euros in the third quarter, accounting for 43.6% of the deposit portfolio at the end of the quarter.
The Group's investment property portfolio, which includes both agricultural land and commercial real estate, grew to 47.4 million euros by the end of the quarter.
| Income statement, in thousands of euros | Q3 2022 (Restated) | Q3 2022 | 9M 2022 (Restated) | 9M 2022 |
| Net interest income | 21 308 | 28 627 | 61 045 | 68 364 |
| Net fee and commission income | 1 891 | 1 891 | 5 511 | 5 511 |
| Net income (loss) on financial assets | 51 | -161 | -252 | -464 |
| Net other operating income | 171 | 170 | 244 | 243 |
| Total net operating income | 23 421 | 30 527 | 66 548 | 73 654 |
| Salaries and associated charges | -5 279 | -5 279 | -15 787 | -15 787 |
| Administrative expenses | -4 586 | -4 586 | -12 723 | -12 723 |
| Depreciation, amortisation and impairment | -1 034 | -1 034 | -3 003 | -3 003 |
| Other gains (losses) | 804 | 804 | 673 | 673 |
| Total expenses | -10 095 | -10 095 | -30 840 | -30 840 |
| Profit before loss allowances | 13 326 | 20 432 | 35 708 | 42 814 |
| Net loss allowances on loans and financial investments | -4 186 | -4 186 | -10 744 | -10 744 |
| Profit before income tax | 9 140 | 16 246 | 24 964 | 32 070 |
| Income tax expense | -1 946 | -1 946 | -3 708 | -3 708 |
| Profit for the period | 7 194 | 14 300 | 21 256 | 28 362 |
| Statement of financial position, in thousands of euros | 30 Sep 2022 (Restated) | 30 Sep 2022 | 31 Dec 2021 (Restated) | 31 Dec 2021 |
| Cash and cash equivalents | 141 163 | 141 163 | 115 948 | 115 948 |
| Debt securities | 45 171 | 45 171 | 45 256 | 45 256 |
| Loans to customers | 1 248 194 | 1 258 177 | 893 463 | 896 238 |
| Other assets | 103 357 | 103 356 | 93 686 | 93 686 |
| Total assets | 1 537 885 | 1 547 867 | 1 148 353 | 1 151 128 |
| Customer deposits and loans received | 1 281 161 | 1 281 161 | 934 840 | 934 840 |
| Subordinated notes | 40 049 | 40 049 | 14 976 | 14 976 |
| Other liabilities | 17 521 | 17 521 | 15 191 | 15 191 |
| Total liabilities | 1 338 731 | 1 338 731 | 965 007 | 965 007 |
| Equity | 199 154 | 209 136 | 183 346 | 186 121 |
| Total liabilities and equity | 1 537 885 | 1 547 867 | 1 148 353 | 1 151 128 |
In addition to regular activities, several circumstances had an impact on the third quarter results and the Group’s future business.
The most important event of the period was the listing of Bigbank unsecured subordinated bonds on the Nasdaq Tallinn Stock Exchange on 22 September. The base amount of 10 million euros was more than two times oversubscribed. The total size of the issue was 20 million euros. 20 thousand bonds were issued with a nominal value of 1,000 euros each, a fixed annual coupon rate of 8%, and a maturity of 10 years. The 20 million euros of additional capital helps the bank sustain growth in the corporate banking and housing loan segments.
This year marks the beginning of Bigbank’s new business strategy period of 2022–2026. In order to support the new business strategy and achieve the expected return on capital, the management board of Bigbank AS has made decisions concerning the future operation of its Swedish and Bulgarian branches. In August it was decided to suspend the issue of new loans at the Swedish branch from 1 September 2022 and in October it was decided to suspend the issue of new loans at the Bulgarian branch from 1 November 2022. The Group will continue raising deposits and servicing its existing loan portfolio in both Sweden and Bulgaria.
Comments from Bigbank’s Chairman of the Management Board Martin Länts:
“Despite the turbulent external environment, we have reason to be satisfied with Bigbank’s third quarter financial performance – the period was characterised by strong growth of the loan portfolio, continued improvement of the credit portfolio and high profitability.
In the third quarter the loan portfolio showed the strongest growth in the corporate and housing loan segments, which is one of the key goals of the bank’s business strategy. An increase in the sale of Euribor-linked loan products helps us diversify our portfolio and has a positive impact on the bank’s profit in a situation where interest rates are rising and taking deposits is becoming more expensive.
This summer the rating agency Moody’s Investors Service completed the assessment of Bigbank and assigned the bank a long-term investment grade rating Baa3 and a short-term deposit rating Prime-3 to its foreign and domestic currency bank deposits. The investment grade rating that Moody’s assigned to us, as disclosed on 1 July 2022, provides assurance to our current depositors and partners about Bigbank’s operating model as well as the quality of our portfolio and supports the financing of our further international expansion.
The base volume of the issue of unsecured subordinated bonds in September was more than two times oversubscribed. This was a landmark achievement for Bigbank, indicating that investors have faith in our business strategy and ability to successfully implement it. I thank all the investors for placing their trust in Bigbank”.
The Bigbank financial statements can be found at: https://investor.bigbank.eu/reporting/
Bigbank AS (www.bigbank.eu) is an Estonian capital-based bank specialised in loans and deposits for private and business customers. In addition to operations in Estonia, the bank has branches in Finland, Sweden, Latvia, Lithuania, and Bulgaria and offers its products in the form of cross-border services also in Austria, Germany, and the Netherlands. Bigbank’s balance sheet total is more than 1.5 billion euros.
Argo Kiltsmann
Member of the Management Board
Phone: +372 5393 0833
E-mail: argo.kiltsmann@bigbank.ee
www.bigbank.ee
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