BankNordik improving H1 operating profit
Operating profit before impairment charges of DKK 131m, up from DKK 120m in the same period of last year.
BankNordik maintains full-year 2012 profit guidance in the DKK 150–200m range after impairment charges and before special items.
BankNordik's earnings performance is developing as expected. Q2 operating income amounted to DKK 221m, which was in line with the first quarter figure of DKK 219m, despite the general interest rate developments. As a result, both interest income, which is linked to the money market rates (CIBOR), and the return on the securities portfolio fell. The H1 operating income was DKK 439m.
Operating expenses for the second quarter amounted to DKK 155m, which was in line with the previous three quarters, that is, since BankNordik acquired the healthy parts of Amagerbanken effective 1 July 2011. The H1 operating expenses amounted to DKK 308m.
This brought the H1 operating profit (before impairment charges and special items) to DKK 131m, compared to DKK 120m in H1 2011.
“We are pleased to be reporting a slight improvement in our core business, not least in light of the difficult earning conditions caused by developments in interest rates,” said BankNordik CEO Janus Petersen.
Loan impairment charges (net) amounted to DKK 29m in the second quarter when calculated according to the previous rules, compared with DKK 19m in the first quarter. The Danish FSA has introduced new rules requiring, among other things, that property is recognised at the estimated value obtainable in a sale within six months. Property funding is a relatively small business area for BankNordik, but the Bank has nevertheless made value adjustments of two properties under the new rules, resulting in an extra impairment charge of DKK 25m. DKK 8m of this amount related to investment property and has been booked under value adjustments. Accordingly, total impairment charges amounted to DKK 65m (net).
This brought the H1 2012 operating profit before special items from the acquisition of Amagerbanken, value adjustments and sector costs to DKK 66m. The H1 2012 profit before tax amounted to DKK 12m.
Consolidation after strong growth
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.
“During the first half of the year, everyone at the Bank made a very committed effort to get the new structure in place. In particular, it was very important to us that our customers felt the effect as little as possible. This has paid off as customer defections have been very limited, and we now have a strong, fully integrated organisation,” said Janus Petersen.
“Looking ahead, these big and very important steps have enabled us to offer better customer service and to continue the Bank's healthy development based on our strategy of proximity to our customers, tight risk management and profitability in all operations”, said Janus Petersen.
Backed by equity of DKK 2.0bn and subordinated debt of DKK 0.8bn, BankNordic had a solvency ratio of 15.1% at 30 June 2012, as compared with the solvency requirement of 9.3%. BankNordik's policy is to retain the high solvency ratio at significantly above the required level. For cost considerations, on the other hand, the solvency ratio should not be unnecesarily high, and for that reason the Bank repaid subordinated loan capital of DKK 150m in July. This brought the solvency ratio to 13.9%.
Unchanged forecast for profit before special items
Interest income has remained under pressure in the third quarter. This is partly offset by implemented and announced lending rate increases and interest expenses avoided because the subordinated loan capital was repaid.
In addition, the drop in lending seen in the first half year appears to have stabilised, and the Bank now expects end-of-year loans and advances in line with the level of 30 June.
Costs are expected to be lower in the second half than in the first half of the year as the implemented rationalisation measures will gradually begin to take effect.
Accordingly, the Bank maintains the full-year guidance as regards operating profit (DKK 150-200m) including impairment charges of DKK 80-120m in spite of the extraordinary impairment charges taken in the second quarter.
Due to redundancy costs of DKK 11m and other restructuring costs, the full-year 2012 special items from integration and restructuring are now expected to amount to DKK 60-70m (previous forecast: DKK 30-50m).
Accordingly, BankNordik expects profit before sector costs, value adjustments and tax of DKK 80-140m (previous forecast: DKK 100-170m).
“Our agenda for the second half of 2012 will be to continue streamlining our activities, so we can enhance our efficiency. At the same time, we will maintain the close contact to our customers that we've come to be known for, and focus on growing our business from the new, broader platform we've built over the past couple of years,” said Janus Petersen.
| DKKm |
H1 2012 |
H1 2011 |
Q2 2012 |
Q1 2012 |
Q4 2011 |
Q3 2011 |
Q2 2011 |
2011 |
| Operating income* | 439 | 330 | 221 | 219 | 192 | 232 | 173 | 735 |
| Profit before impairment charges | 131 | 120 | 66 | 66 | 35 | 80 | 66 | 235 |
| Impairment charges | -65 | -32 | -46 | -19 | -37 | -17 | -8 | 101 |
| Operating profit* | 66 | 89 | 20 | 46 | -2 | 63 | 58 | 134 |
| Special items | -54 | -56 | -18 | -36 | -31 | -33 | -35 | -103 |
| Profit before tax | 12 | 33 | 2 | 10 | -33 | 30 | 23 | 31 |
| Deposits | 13,262 | 13,088 | 13,032 | 13,955 | 8,740 | 13,032 | ||
| Loans | 11,430 | 11,376 | 11,769 | 11,949 | 8,446 | 11,769 | ||
| Deposit surplus | 1,833 | 1,712 | 1,263 | 2,006 | 294 | 1,263 | ||
| Total assets | 17,876 | 17,878 | 17,086 | 18,902 | 13,289 | 17,086 | ||
| Equity | 1,957 | 1,969 | 1,958 | 2,017 | 1,993 | 1,958 | ||
| Solvency ratio | 15.1% | 14.9% | 15.6% | 15.0% | 20.3% | 15.6% | ||
| Surplus liquidity relative to statutory requirement | 2.8x | 2.7x | 2.2x | 2.5x | 3.1x | 2.2x |
* Adjusted for special items, i.e. integration and restructuring costs, value adjustments and sector costs.
Further details are available in the H1 2012 interim report.
Conference call and webcast today at 11.00 AM (CET)
BankNordik will review the financial results today at 11.00 (CET) at its customary conference call for analysts and investors. The conference call will be webcast on BankNordik's website, www.banknordik.fo.
The dial-in number for the conference call is (+45) 32 71 47 67. 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 180,000 customers, total assets of DKK 18bn and 580 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on NASDAQ OMX. www.banknordik.dk.
