2017-02-27 08:00:04 CET
2017-02-27 08:00:04 CET
REGULATED INFORMATION
BankNordik P/F - Annual Financial Report
A milestone year for BankNordik
Highlights of BankNordik's annual financial results for 2016:
(The figures below have been adjusted for divested activities related to
insurance company Vörður, unless otherwise indicated)
2016 results vs. 2015 results
-- BankNordik reported operating profit of DKK 191m for 2016, a decrease of
DKK 3m compared to 2015 (-1%).
-- Net interest income was down by DKK 55m year-on-year primarily due to
the controlled run-off of corporate lending in Denmark, but also due to
pressure on interest margins and the lower investment portfolio income.
-- Fee and commission income was DKK 34m lower, owing to a pull-back in
mortgage-broking activity to normal levels, reduced income from
corporate activities in Denmark and from investment activity.
-- Net insurance income was down by DKK 1m in 2016, primarily due to higher
claims related to harsh weather conditions in December 2016.
-- Operating costs were down by DKK 40m to DKK 459m, consistent with the
refocusing of the Group’s core activities.
-- BankNordik reversed DKK 12m in net impairment charges compared to net
impairment charges of DKK 20m for the same period last year.
-- BankNordik generated profit before tax, including discontinued activities
from Vörður, of DKK 277m in 2016 compared to a loss of DKK 332m for the
same period of last year.
-- There were no goodwill impairment charges in 2016, compared to DKK 468m in
2015
-- Non-recurring items in 2016 were an expenditure of DKK 12m versus an
expenditure of DKK 54m in 2015, which was due to severance costs
-- Value adjustments amounted to a gain of DKK 8m against a loss of DKK 41m in
2015.
-- Discontinued activities before tax relating to Vörður amounted to DKK 90m,
including a gain on the sale of DKK 84m, compared to a profit of DKK 37m in
2015.
“We are pleased with our financial results in 2016, which came in at the upper
end of our guidance. Operating income and costs were to a large extent affected
by the winding up of corporate activities in Denmark, while exceptionally low
impairment charges contributed to upholding operating profit close to last
year’s level. The underlying performance of our continuing business operations
was further challenged by the pressure on interest margins and muted loan
demand, but we remain optimistic about the outlook for the Group’s performance
in 2017,” said BankNordik CEO, Árni Ellefsen.
“Having successfully reshaped BankNordik to a more focused and low-risk banking
group, we are now determined to improve the quality of our customer
relationships going forward. BankNordik has emerged a stronger and financially
more secure bank primed to deliver an improved customer experience and reach
our long-term financial objectives,” said Mr Ellefsen.
“We strengthened the Group’s CET1 capital ratio by 2.1 percentage points in
2016, well aware of the capital requirements we face going forward. With this
in mind, and including our ability to generate strong results in the years
ahead, we will propose an extraordinary dividend at the upcoming 2017 Annual
General Meeting to reflect the sale of Vørður and the winding up of corporate
activities in Denmark. Going forward, our shareholders should bear in mind that
we still need to strengthen our capital position further when calculating our
dividend potential,” said Mr Ellefsen.
Q4 2016 vs. Q3 2016
-- Operating profit decreased to DKK 38m in Q4 2016 from DKK 53m in Q3 2016.
-- Net interest income was down by DKK 3m in Q4 2016 compared to Q3 2016,
primarily due to continued pressure on interest margins and a slight
decrease in lending volumes.
-- Fee and commission income was up by DKK 5m compared to Q3 2016,
supported by seasonal variations and provision income from NordikLív
-- Net insurance income fell by DKK 20m to a loss of DKK 7m in Q4 2016
compared to Q3 2016, caused by the extraordinarily high level of claims
resulting from harsh weather conditions in the Faroe Islands during the
period.
-- Operating costs were DKK 1m lower in Q4 2016 compared to the previous
quarter.
-- Net impairment charges were a DKK 4m reversal in Q4 2016, the same as in
Q3 2016.
-- BankNordik recorded profit before tax, including discontinued activities
from Vørður, of DKK 28m in Q4 2016 compared to profit of DKK 164m in Q3
2016.
-- Value adjustments amounted to a loss of DKK 10m in Q4 2016 compared to a
gain of DKK 12m in Q3 2016.
-- There were no discontinued activities before tax relating to Vörður in Q4
2016 compared to a profit related to Vørður in Q3 2016 of DKK 99m.
Vørður sold and corporate activities in Denmark nearly wound-up
In September 2016, BankNordik completed the sale of Vørður to Arion Banki for a
gain on the sale of DKK 84m, which amount has been recognised in the income
statement as a discontinued operation related to Vørður. By year-end 2016, 85%
of the Danish corporate portfolio had been successfully run-off. The remaining
part of the portfolio is expected to be gradually wound-up over the coming
years.
Dividends and capital ratios
BankNordik has previously anticipated extraordinary dividends in the amount of
DKK 300m related to the Group’s strategic adjustments in 2016. However, in
light of the preliminary considerations recently published by the Danish FSA
regarding the upcoming MREL-rules, this amount has been reduced to DKK 240m as
a means to retain earnings in preparation for stronger capital requirements in
the future, in particular due to BankNordik’s designation as a SIFI-institute.
Hence, at the upcoming Annual General Meeting, to be held on 31 March 2017, the
Board will propose a total dividend payment of DKK 300m for 2016 (DKK 30 per
share). The amount includes ordinary dividends of DKK 60m driven by regular
business operations and extraordinary dividends of DKK 240m related to the sale
of Vørður and the controlled run-off of corporate loans in Denmark.
The Group’s CET1 capital ratio increased by 2.1 percentage points year-on-year
to 16.0% on 31 December 2016, despite of the proposal of a total dividend
payment of DKK 300m. The solvency ratio increased to 18.3% from 16.8%.
Going forward, BankNordik will continuously monitor the regulatory landscape to
anticipate and adapt to impending capital requirements. As such, the Group is
likely to re-evaluate its dividend policy and capital ratio targets once the
requirements related to the MREL will become known.
Outlook for 2017
BankNordik expects a modest increase in private and corporate lending volumes
in 2017, while the pressure on margins is expected to flatten out after a few
years of tightening. Fee and commission income is also expected to increase
modestly in 2017, whereas income from the investment portfolio is expected to
be close to the 2016 level. Likewise, operating costs are expected to stay flat
compared to 2016.
Management expects profit before impairment charges, value adjustments and tax
to be in the range of DKK 150-190m in 2017 (2016: DKK 179m).
Impairment charges on loans and advances, including a reversal of acquired OEI
impairments, are estimated to be less than DKK 20m in 2017 (2016: reversal of
DKK 12m).
This guidance is generally subject to uncertainty and will depend on economic
conditions, including possible central bank monetary policy measures.
For additional information, please contact:
Árni Ellefsen, CEO, tel. (+298) 230 348
BankNordik has banking activities in Denmark, Greenland and the Faroe Islands
and insurance activities in the Faroe Islands. Founded in the Faroe Islands
more than a century ago, the Group has total assets of DKK 15.6bn and 415
employees. The Bank is subject to the supervision of the Danish Financial
Supervisory Authority and is listed on Nasdaq Copenhagen.
Appendix: Financial highlights and comparative figures are provided below.
Financial highlights
DKK million 2016 2015 Q4 Q3 Q2 Q1 Q4
2016 2016 2016 2016 2015
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Net interest income 413 469 100 103 98 113 111
Net fee income 192 226 51 46 50 44 52
Income from insurance 27 28 -7 12 12 9 8
operations
Other operating income 9 11 2 2 3 2 4
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Operating income* 640 734 146 163 163 168 175
Operating costs* -459 -499 -114 -113 -115 -117 -122
Sector costs, etc. -2 -21 1 -1 -1 -1 -5
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Operating profit before 179 214 33 49 47 49 47
impairment charges*
Loan impairment charges, 12 -20 4 4 3 1 -11
net
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Operating profit* 191 194 38 53 50 50 36
Non-recurring items -12 522 0 0 0 -12 -497
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Profit before value 179 -328 38 53 50 38 -461
adjustments and tax
Value adjustments 8 -41 -10 12 9 -3 -4
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Profit/loss before tax, 187 -369 28 64 60 35 -465
excl. Vørður
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Profit/loss before tax, 277 -332 28 164 61 25 -447
incl. Vørður
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Deposits, etc. DKKbn 12.7 12.7 12.7 12.8 12.9 12.5 12.7
Loans and advances, etc. 9.1 10.7 9.1 9.4 9.4 10.0 10.7
DKKbn
Equity, DKKbn 1.9 1.8 1.9 1.9 1.8 1.8 1.8
Solvency ratio 18.3% 16.8% 18.3% 19.0% 17.1% 17.2% 16.8%
Excess liquidity relative 242% 167% 242% 227% 254% 207% 167%
to statutory requirement
Operating cost/income 72% 68% 78% 69% 70% 70% 70%
Number of FTE, end of 415 459 415 416 464 477 459
period (incl. Vørður)
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* Excluding non-recurring items and value adjustments.
Further details are available in the interim report.
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