Solid progress in the 3rd quarter of 2018

Interim financial statements

Announcement no. 41/2018

Solid progress in the 3rd quarter of 2018

- Strengthened market position year-to-date

“We progressed on all markets in the third quarter. Volumes increased, customer activity was high, net impairments were reversed, and we managed expenses with discipline. Tighter interest margins remained a challenge for us but the adverse effect on income was more than offset by an increase in both corporate and personal lending during the quarter,” said BankNordik CEO, Árni Ellefsen.

“We continued on the path of strengthening the quality of our customer relationships and since August we have reached out to over 7,000 customers in our peripheral customer base to establish closer personal contact, manage expectations and improve their overall banking experience. Moreover, the Group has just launched a comprehensive new digital marketing campaign in Denmark, which supports our own efforts to simplify banking and limit the use of jargon in our interactions with customers,” said Mr. Ellefsen.

Highlights of BankNordik's interim report for the first nine months of 2018:

9M 2018 vs. 9M 2017

• BankNordik reported operating profit of DKK 230m for 9M 2018, an increase of DKK 86m compared to 9M 2017 (+60%).
  • Net interest income was down by DKK 10m year-on-year, primarily due to tighter interest margins
  • Fee and commission income was down by DKK 14m, offset by an increase in other operating income, which related to the restructuring of asset management activity (MiFID II).
  • Net insurance income was flat in 9M 2018 compared to 9M 2017
  • Other operating income amounted to DKK 36m compared to DKK 20m in the same period of last year.

• Operating costs were down by DKK 8m to DKK 342m, consistent with the Group’s efforts to improve its cost structure.

• • BankNordik reversed DKK 93m in net impairment charges in 9M 2018.
• Profit before tax was DKK 286m in 9M 2018 compared to DKK 143m in 9M 2017
  • Non-recurring items amounted to an income of DKK 82m in 9M 2018, mainly owing to the sale and leaseback of the Group’s head office and a revaluation gain on BI Holding A/S
  • Value adjustments amounted to a loss of DKK 26m in 9M 2018 compared to a gain of DKK 16m in 9M 2017.
• Lending volumes were up by DKK 459m from DKK 9,549m at 30 September 2017 to DKK 10,008m at 30 September 2018
• Deposits increased by DKK 180m from DKK 12,983m at 30 September 2017 to DKK 13,163m at 30 September 2018.

Q3 2018 vs. Q2 2018

• Operating profit increased to DKK 88m in Q3 2018 from DKK 65m in Q2 2018.
  • Net interest income was up by DKK 1m in Q3 2018 compared to Q2 2018, due to an increase in lending volumes.
  • Fee and commission income was DKK 43m in Q3 2018, flat compared to Q2 2018.
  • Net insurance income was DKK 13m in Q3 2018, up from DKK 6m in Q2 2018 as claims were lower. (Q3 2017: DKK 13m)
  • Other operating income was down DKK 5m from DKK 15m in Q2 2018 to DKK 10m in Q3 2018 due to less dividend income in the period.
  • Operating costs were down by DKK 5m QoQ.
  • Net impairment charges were a DKK 39m reversal in Q3 2018 compared to a reversal of DKK 23m in Q2 2018.
• BankNordik recorded profit before tax of DKK 78m in Q3 2018 compared to a profit of DKK 59m in Q2 2018.
  • DKK 6m related to organisational adjustments was recognised as non-recurring costs in Q3 2018
  • Value adjustments amounted to a loss of DKK 3m in Q3 2018 compared to a loss of DKK 17m in Q2 2018.

Share buy-back program
In August 2018, BankNordik initiated a new share buyback programme, which will run until 30 March 2019 at the latest and allows BankNordik to acquire shares for up to DKK 15m. As of 26 October, the Group had acquired 104,700 shares YTD at an average purchase price of DKK 112 per share. BankNordik expects to continue to reward its shareholders through share repurchases.  

Capital ratios

The Group’s CET1 capital ratio fell by 0.8 percentage point quarter-on-quarter to stand at 15.5% at 30 September 2018. The total capital ratio decreased to 17.6% at 30 September 2018 from 18.5% at 30 June 2018.

The decrease in capital ratios was partly attributable to an increase in risk-weighted assets and partly due to changes in accounting guidelines for which BankNordik has chosen not to recognise net income within a given year in the capital and solvency statement until the annual report is released in audited form.

Outlook

Management expects operating profit before impairment charges to come in at the upper end of the guided range of DKK 160-200m in 2018 (9M 2018: DKK 137m). However, potential insurance claims in the final quarter of the year may have an adverse effect on the full-year results.

On 18 October 2018, BankNordik raised its guidance for 2018 net profit from DKK 190-240m as previously guided to DKK 240-280m, driven by the strong reversal of impairment charges.
This guidance is generally subject to uncertainty and will, amongst other things, depend on economic conditions, loan impairments and market value adjustments.

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 16.7bn and 385 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

* Excluding non-recurring items and value adjustments.

Further details are available in the interim report.

Attachments

• Q3 2018 Financial Report
• Q3 2018 IR Presentation

Attachments