Company announcement no. 12/2020
“I’m pleased to note that the measures we implemented in December 2019 to strike a better balance between the Group’s costs and earnings have produced results in the first half of 2020. Our operating costs were down by 10%, fee and commission income was up by 6% on the first half of 2019, and both our cost performance and core earnings have developed better than we anticipated when announcing the measures. In June, we raised our profit guidance due to lower impairment charges and insurance claims and an improvement in core earnings relative to expectations at the end of April,” said BankNordik CEO Árni Ellefsen.
To date, COVID-19 has had only a limited impact on the Group’s financial results, and thanks to the strong credit quality of our loan portfolio, we made a DKK 30 million reversal of loan impairment charges in the second quarter, enabling us to raise our profit guidance once more. Given the considerable uncertainty still prevailing in terms of the long-term economic impact of the current healthcare crisis, we have made a further DKK 10 million provision to cover potential losses arising in the wake of the crisis, bringing the total amount to DKK 35 million. Customer activity remains high, and based on the initiatives implemented and our solvency ratio of 24%, BankNordik stands well prepared to withstand challenges that may arise in markets in which the bank operates,” said Árni Ellefsen.
Highlights of BankNordik's interim report for the first six months of 2020:
H1 2020 vs. H1 2019
Q2 2020 vs Q1 2020
Capital ratios
At 30 June 2020, the Group’s CET1 capital ratio was 21.8% and the solvency ratio was 24%. Net income for H1 2020 is not reflected in the capital and solvency statement.
In reference to the uncertainty caused by the coronavirus crisis, BankNordik announced on 24 March 2020 that the Board of Directors did not consider it responsible or appropriate to pay out dividends for the 2019 financial year under the prevailing circumstances. While the Bank’s management and its Board of Directors believe at the present time that current economic developments do provide a basis for distributing dividends to the shareholders, BankNordik has duly noted the request by the authorities to exercise restraint in this context. Provided there are no significant changes to current economic developments, the Bank intends to reconsider, not later than at the release of the annual report for 2020, whether to pay dividends in respect of the 2019 financial year.
Outlook
Management had originally guided for FY 2020 net profit in the DKK 100-150m range, but due to the COVID-19 pandemic and the uncertainty it had caused, the Bank lowered its guidance by DKK 80m in late April 2020. Since that time, BankNordik has upgraded its guidance twice on account of economic developments. The most recent upgrade, announced on 16 July and currently still in force, was for FY 2020 net profit in the DKK 80-120m range.
The revision of the financial guidance was driven in particular by the reversal of impairment charges even with the Bank making a further DKK 10m provision to cover potential COVID-19 related losses. The costs of travel cancellation insurance claims have been lower than expected, and core earnings have improved. In addition, BankNordik now expects that COVID-19 will not have as severe an impact on its investment portfolio as originally anticipated.
This guidance is generally subject to uncertainty and will, amongst other things, depend on developments in the COVID-19 situation, 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 16.9bn and about 360 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
Highlights and ratios |
|
|
|
|
|
|
|
|
DKKm |
H1 2020 |
H1 2019 |
Index 20/19 |
Q2 2020 |
Q1 2020 |
Q4 2019 |
Q3 2019 |
Q2 2019 |
Net interest income |
177 |
167 |
106 |
90 |
88 |
87 |
83 |
83 |
Net fee and commission income |
99 |
93 |
106 |
45 |
54 |
49 |
47 |
45 |
Net insurance income |
15 |
24 |
64 |
12 |
4 |
14 |
15 |
15 |
Other operating income (less reclassification) |
17 |
22 |
74 |
8 |
9 |
14 |
13 |
11 |
Operating income |
308 |
306 |
101 |
154 |
154 |
164 |
158 |
155 |
Operating costs |
-215 |
-240 |
90 |
-106 |
-109 |
-117 |
-116 |
-119 |
Sector costs |
-1 |
0 |
|
0 |
0 |
0 |
0 |
0 |
Profit before impairment charges |
93 |
67 |
140 |
48 |
45 |
47 |
42 |
35 |
Impairment charges, net |
-2 |
72 |
-3 |
22 |
-24 |
25 |
9 |
53 |
Operating profit |
91 |
138 |
66 |
69 |
22 |
71 |
51 |
88 |
Non-recurring items |
0 |
0 |
|
0 |
0 |
-13 |
0 |
0 |
Profit before investment portfolio earnings and tax |
91 |
138 |
66 |
69 |
22 |
58 |
50 |
88 |
Investment portfolio earnings |
-17 |
12 |
-140 |
34 |
-51 |
1 |
0 |
-2 |
Profit before tax |
74 |
151 |
49 |
103 |
-30 |
59 |
50 |
86 |
Loans and advances |
9.880 |
10.053 |
98 |
9.880 |
9.971 |
9.909 |
9.983 |
10.053 |
Deposits and other debt |
13.059 |
14.156 |
92 |
13.059 |
12.903 |
14.399 |
13.557 |
14.156 |
Mortgage credit |
13.107 |
12.644 |
104 |
13.107 |
13.010 |
12.960 |
12.918 |
12.644 |
Equity |
2.167 |
2.031 |
107 |
2.167 |
2.087 |
2.112 |
2.064 |
2.031 |
Total capital ratio % |
24,0 |
19,6 |
|
24,0 |
23,4 |
22,3 |
21,0 |
19,6 |
Liquidity, excess cover % |
185,9 |
238,3 |
|
185,9 |
159,4 |
215,7 |
225,1 |
238,3 |
Operating cost/income, % |
70 |
78 |
|
69 |
70 |
71 |
73 |
77 |
Number of FTE, end of period |
363 |
390 |
93 |
363 |
359 |
377 |
383 |
390 |
Further details are available in the interim report.
The company’s interim report is prepared and presented in English.
This announcement is also available in Danish. In the event of any discrepancies, the Danish-language version shall prevail.