- 2020 net profit outlook narrowed from DKK 120m-160m to DKK 140m-160m
Company announcement no. 14/2020
“We’re pleased to note that the cost-saving and income-generating measures put in place at the end of 2019 yielded positive results in the first nine months of the year. Even though this has been a challenging year considering the COVID-19 situation, we were able to maintain an improved balance between costs and earnings. In the third quarter, the development in net insurance income was especially favourable. Combined with our continued focus on maintaining cost-effective operations, the overall effect of the implemented measures has been greater than initially anticipated,” said BankNordik CEO Árni Ellefsen.
“To date, the pandemic has only had a limited impact on the Group’s financial results, and our impairment charges were lower than what we expected at the start of the year. Considerable uncertainty persists in terms of the public health crisis, however, and as a result, we have made a further DKK 15m provision against potential COVID-19-related losses, taking total provisions to DKK 50m. Given our total capital ratio of 24.9%, however, we are well-equipped to tackle the challenges that the current situation poses. At the start of October, we announced new financial targets for the Group’s cost/income ratio and return on equity, and in light of our third quarter performance, we’re well on our way to meeting the new targets,” said Árni Ellefsen.
Highlights of BankNordik's interim report for the nine months to 30 September 2020:
9M 2020 vs 9M 2019
Q3 2020 vs Q2 2020
Capital ratios
At 30 September 2020, the Group’s core capital ratio was 22.6% and the total capital ratio was 24.9%. The net profit for Q3 2020 is not reflected in the solvency statement. BankNordik has made a decision to raise its capital adequacy targets as part of the gradual phasing in of the MREL requirements. As a result, the CET 1 capital target is changed from 18.5% to 19.5%, while the target for the total capital ratio is raised from 22% to 23%.
Due to the uncertainty caused by the coronavirus crisis and in light of the call by the authorities to exercise restraint, BankNordik made a decision on 24 March not to pay dividends in respect of the 2019 financial year for the time being. The Bank has since announced that unless there are significant changes to current economic developments, it 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 and subsequent financial years.
Outlook
At the start of the year, BankNordik’s management expected net profit for 2020 in the DKK 100-150m range. However, due to the uncertainty surrounding the Covid-19 pandemic, management lowered its guidance by DKK 80m at the end of April.
The limited impact of the pandemic on the Group’s financial performance to date has allowed the Bank to upgrade its guidance on 24 June, 16 July and 7 October, when the guidance for net profit in 2020 was raised to DKK 120-160m. As a consequence of continued positive developments, the Group is now narrowing its projection for the full-year net profit to the range of DKK 140-160m. The positive developments were driven especially by improved operating income and a consistent focus on reducing costs.
The outlook is subject to uncertainty relating to how the COVID-19 situation evolves, economic developments, as well as developments in loan impairments and asset prices.
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 about 360 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on Nasdaq Copenhagen.
Appendix: Q3 2020 financial highlights and comparative figures
Highlights and ratios
DKKm |
Q1-Q3 2020 |
Q1-Q3 2019 |
Index 20/19 |
Q3 2020 |
Q2 2020 |
Q1 2020 |
Q4 2019 |
Q3 2019 |
Net operating profit |
266 |
250 |
106 |
89 |
89 |
87 |
87 |
83 |
Net fee and commission income |
148 |
140 |
106 |
49 |
45 |
54 |
49 |
47 |
Net insurance income |
34 |
39 |
87 |
18 |
12 |
4 |
14 |
15 |
Other operating income (less reclassification) |
26 |
35 |
73 |
9 |
8 |
9 |
14 |
13 |
Operating income |
473 |
464 |
102 |
166 |
153 |
154 |
164 |
158 |
Operating costs |
-317 |
-355 |
89 |
-102 |
-106 |
-109 |
-117 |
-116 |
Sector costs |
-1 |
-1 |
|
0 |
0 |
0 |
0 |
0 |
Profit before impairment charges |
155 |
108 |
143 |
63 |
47 |
45 |
47 |
42 |
Impairment charges, net |
6 |
80 |
8 |
8 |
22 |
-24 |
25 |
9 |
Operating profit |
162 |
189 |
86 |
71 |
69 |
21 |
71 |
51 |
Non-recurring items |
0 |
0 |
|
0 |
0 |
0 |
-13 |
0 |
Profit before investment portfolio earnings and tax |
162 |
189 |
86 |
71 |
69 |
21 |
58 |
50 |
Investment portfolio earnings |
-6 |
12 |
-48 |
11 |
34 |
-51 |
1 |
0 |
Profit before tax |
156 |
201 |
78 |
82 |
103 |
-30 |
59 |
50 |
Net profit |
123 |
158 |
78 |
65 |
82 |
-24 |
48 |
40 |
Loans and advances |
9,829 |
9,983 |
98 |
9,829 |
9,880 |
9,971 |
9,909 |
9,983 |
Deposits and other debt |
12,892 |
13,557 |
95 |
12,892 |
13,059 |
12,903 |
14,399 |
13,557 |
Mortgage-broking services |
13,333 |
12,918 |
103 |
13,333 |
13,107 |
13,010 |
12,960 |
12,918 |
Equity |
2,230 |
2,064 |
108 |
2,230 |
2,167 |
2,087 |
2,112 |
2,064 |
Total capital ratio, % |
24.9 |
21.0 |
|
24.9 |
24.0 |
23.4 |
22.3 |
21.0 |
Core capital ratio, % |
22.6 |
18.9 |
|
22.6 |
21.8 |
21.3 |
20.2 |
18.9 |
CET 1 capital, % |
21.1 |
17.5 |
|
21.1 |
20.3 |
19.8 |
18.8 |
17.5 |
Liquidity, excess cover % |
184.4 |
225.1 |
|
184.4 |
185.9 |
159.4 |
215.7 |
225.1 |
Operating cost/income, % |
67 |
77 |
|
62 |
69 |
71 |
71 |
73 |
Number of FTE, end of period |
361 |
383 |
94 |
361 |
363 |
359 |
377 |
383 |
Further details are available in the interim report.