Føroya Banki P/F - Ársreikningur

Annual report 2009

Anouncement no. 11 / 2010

Profit increased 34% to DKK 135 million in 2009
Føroya Banki's cautious strategy continues to pay off, and going forward the
Bank will focus on harvesting the benefits from the solid platform acquired in
Denmark, Greenland and Iceland 

Highlights:
•	Pre-tax profit increased by 34% to DKK 135m
•	Interest, fee and insurance income up by 24% to DKK 497m from DKK 401m in 2008
•	Impairments, excluding payments under the guarantee to the Sector Fund,
amount to DKK 110m, corresponding to 110bp of exposures 
•	The Group's solvency ratio is 26.2% compared to 20.6% in 2008

The Group's cautious strategy continues to pay off. Føroya Banki reports a
profit before value adjustments, and payment to the Danish state, of DKK 156
million, which was DKK 8 million short of the range projected in the annual
report for 2008. The difference is primarily explained by higher than expected
impairments in the fourth quarter of 2009. Income from banking and insurance
activities increased 24% to DKK 497m. 

This result sees Føroya Banki continuing the progress of the last years. The
solvency ratio was 26% at the end of the year, and liquidity was almost to and
a half times above statutory requirements. 

 “At Føroya Banki we develop our core business continuously while sticking to
our cautious strategy of operational excellence and strict credit management”,
says Janus Petersen, CEO. “We deliver on our promises of a profitable business
and of pursuing the published intention of acquiring an international platform
for further growth. 2010 will be a year of transition with extra costs to
integration and IT, but we nevertheless project a profit in the range of DKK
150-190 million including payment to the state. And we are laying the platform
for considerable growth in the profits in the coming years.” 

International growth strategy launched
2009 was marked in particular by the Bank implementing its international growth
strategy. The Bank conducted a number of due diligence processes in Denmark and
Iceland, and the latter resulted in the acquisition of the insurance company
Vørður in the fourth quarter. 

The clear message during the course of 2009 that the Bank was ready to
participate in the consolidation of the Danish banking sector, has now been
followed by action. The Bank has acquired a part of Sparbank's branch network
in Denmark and all their activities in Greenland. Føroya Banki will take over
assets and liabilities in the 12 branches and in addition will pay for goodwill
in the amount of DKK 335m. Payment will occur simultaneously with the
transition, which is dependant upon approval from the Danish Financial
Supervisory Authority. 

We have realized that expansion possibilities on the home market are limited
and that an improvement of the Group's rate of return presupposed expansion
beyond the islands. This acquisition provides our capital strength and the
purchased distribution network a satisfactory solid foundation to create
profitable growth outside of the Faroe Islands,” says Janus Petersen, CEO of
Føroya Banki. 

The outlook is positive, but 2010 will be a year of transition
The outlook for 2010 is marked by the fact that it will be a year of transition
for the Bank in many ways. The profit guidance states that the Groups pre-tax
profit before value adjustments will be in the range of DKK 150-190 million
projecting an increase of 35-70% compared to 2009. Possible capital gain from
the planned sale of the aquaculture company Bakkafrost in Q1 2010 is not
included in this expectation.

This year of transition will be characterized by firstly, investments in the
integration of the banking platforms in the three countries, secondly by costs
related to converting the Faroese banking business from a domestic IT platform
to the Danish SDC, thirdly by more provisions stemming from a clean up in the
loan portfolio and finally by the payment to the state for the bank Packages.
The Group projects costs to increase by 50-55% in 2010. 

Impairments on loans and advances are expected to stay at the same nominal
level as in 2009 indicating relatively lower impairment levels given the 50%
enlargement of the loan portfolio following the acquisition. Impairments on the
Faroe Islands are expected to be lower, while the loan book in the Danish
activities has been assessed by the Bank to be of moderate risk, as 70% of the
portfolio has been reviewed individually. Given the latest media coverage of
the challenges in the Danish agriculture industry, it is necessary to
em-phasise that the Bank has no exposures in Danish agriculture. 

See detailed information in the annual report (“Annual Report 2009”)
Conference Call
Føroya Banki will host a conference call for analysts and investors with a live
web-cast of the presentation on the website in connection with the publication
of Annual Report 2009. 
The conference call with analysts and investors will take place on Thursday
February 25th, at 13:00 (GMT+1), 14:00 (CEST). 

If you would like to participate in the conference call, please dial the
relevant number below a few minutes before the conference starts: 

UK participants dial:                     	+ 44 208 817 9301
Danish participants dial:               	+ 45 327 147 67
US participants dial:                     	+ 1 718 354 1226
International Participants dial:      	+ 44 (0) 208 817 9301


The live presentation will be accessible on the website at www.foroya.fo. 

Føroya Banki was founded in 1906 and is a limited liability company
incorporated and domiciled in the Faroe Island. Today, Føroya Banki Group
provides financial services to the private, institutional and corporate
cus-tomer segments. Føroya Banki operates in the Faroe Islands, where it holds
in excess of 40% of the banking market and 25% of the insurance market, but the
Group also conducts business in the Danish, Greenlandic and Icelandic markets.
Føroya Banki is listed under the ticker FO-BANK on the Nasdaq OMX Nordic
Market. The Group employs approximately 450 members of staff. 

For further information:
Janus Petersen, CEO, phone +298 330 340
Johnny i Grótinum, IR, cell phone +298 230 380
www.foroya.fo/ir

Attachments:

fb annual report 2009.pdf

announcement annual report 2009_uk fb.pdf