Divestment of Danish business expected to bring extraordinary dividends of DKK 700m in 2021–2023
Announcement no. 6/2021
“We’re pleased that we succeeded in delivering strong financial results in 2020 despite the challenging and volatile economic climate caused by the pandemic. In particular, we’re proud that we’ve harvested the benefits of the strategic initiatives we implemented in December 2019, which were intended to strike a better balance between our costs and our earnings. At the end of the year, we signed a satisfactory agreement to sell the Group’s Danish business, and going forward, we intend to focus on the Faroese and Greenlandic markets and to create positive customer experiences, profitable growth and long-term value for all our stakeholders,” said BankNordik CEO Árni Ellefsen.
“As a major financial player in the Faroes and Greenland, we’re in a position to contribute to the green transition in the communities in which we operate, and we're very happy to shoulder that responsibility. As part of our efforts to build a more sustainable business, we’ve begun to measure the Group’s performance on environmental, social and governance issues using ESG performance indicators. The biggest difference we can make in this context is by encouraging and supporting our customers in making sustainable choices. We already offer financial services that make it attractive for our customers to choose green alternatives and, going forward, we plan to further develop our advisory services and products in this area. In other words, we want to contribute to a sustainable society both through our own business operations and through our customer relationships,” said Ellefsen.
Highlights of BankNordik's annual report for 2020:
FY 2020 vs FY 2019
Q4 2020 vs Q3 2020
Capital ratios
At 31 December 2020, the Group had a CET1 capital ratio of 22.6%, an increase of 3.8 percentage points relative to 31 December 2019. The total capital ratio was 26.4% at 31 December 2020, an increase from 22.3% at 31 December 2019.
Return on capital
BankNordik recorded net profit of DKK 166m for 2020, of which the Board of Directors proposes to distribute DKK 48m (equal to DKK 5 per share) as dividends. Accordingly, the Bank expects a payout ratio for 2020 of just under 30%.
The divestment of the Danish business and the capital relief derived from the transaction is expected to result in extraordinary distributions to the shareholders totalling DKK 700m (equal to DKK 73 per share). Initially, DKK 450m of this amount is expected to be distributed in 2021, while the remaining DKK 250m is expected to be distributed in 2022 and 2023.
Guidance for 2021
BankNordik expects slight increases in mortgage-broking services to personal customers and in lending to commercial customers in 2021. Increased customer activity and the resegmentation of the retail customer portfolio are expected to produce a moderate increase in fee and commission income. Income from insurance activities is also expected to increase, although the claims experience may vary significantly from one year to the next. The Bank expects 2021 operating costs to be at the 2020 level and impairment charges to remain at a low level.
Income recognised from the divestment of the Danish business is expected to amount to DKK 70-90m (DKK 55-70m after tax).
Management expects a net profit in the DKK 150-200m range (2020: DKK 166m).
This guidance is generally subject to uncertainty and will, amongst other things, depend on economic conditions, loan impairment charges and market value adjustments.
Strategic financial targets
BankNordik has revised its strategic financial targets following the divestment of the Danish business and the resulting greater focus on the corporate segment. The target for the CET1 capital ratio target will henceforth be 23.0% (31 December 2020: 22.6%), while the target for the total capital ratio is 33.0% including MREL (31 December 2020: 26.4%).
If the divestment of the Danish business had been recognised at 31 December 2020, the CET1 capital ratio would have been approximately 33%, while the total capital ratio would have been approximately 37%.
Our target going forward is for a return on equity of 8% after tax (2020: 7.6%) and for a payout ratio to the shareholders of about 50% (previously 20-40%).
For additional information, please contact:
Árni Ellefsen, CEO, tel. (+298) 230 348
BankNordik has banking activities in the Faroe Islands and in Greenland as well as insurance activities in the Faroe Islands. Founded in the Faroe Islands more than a century ago, the Group has total assets of DKK 17.3 bn and 220 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on Nasdaq Copenhagen.
Appendix: Q4 2020 financial highlights and comparative figures are provided below.
Highlights and ratios
|
|
|
|
|
|
|
|
|
DKKm |
Q1-Q4 2020 |
Q1-Q4 2019 |
Index 20/19 |
Q4 2020 |
Q3 2020 |
Q2 2020 |
Q1 2020 |
Q4 2019 |
Net interest income |
258 |
230 |
112 |
65 |
65 |
65 |
63 |
61 |
Net fee and commission income |
60 |
56 |
107 |
16 |
15 |
13 |
16 |
15 |
Net insurance income |
45 |
52 |
86 |
12 |
18 |
12 |
4 |
14 |
Other operating income (less reclassification) |
24 |
33 |
75 |
8 |
6 |
5 |
5 |
10 |
Operating income |
387 |
371 |
104 |
101 |
104 |
95 |
87 |
99 |
Operating costs |
-238 |
-250 |
95 |
-62 |
-57 |
-59 |
-59 |
-67 |
Sector costs |
-1 |
0 |
|
0 |
0 |
0 |
0 |
0 |
Profit before impairment charges |
149 |
120 |
124 |
38 |
47 |
36 |
28 |
33 |
Impairment charges, net |
5 |
69 |
7 |
10 |
-2 |
16 |
-18 |
21 |
Operating profit |
154 |
189 |
81 |
48 |
44 |
52 |
10 |
53 |
Non-recurring items |
0 |
-5 |
|
0 |
0 |
0 |
0 |
-5 |
Profit before investment portfolio earnings and tax |
154 |
184 |
83 |
48 |
44 |
52 |
10 |
48 |
Investment portfolio earnings |
-2 |
-3 |
67 |
1 |
3 |
15 |
-21 |
-3 |
Profit before tax, continuing operations |
152 |
182 |
84 |
49 |
48 |
66 |
-11 |
46 |
Profit before tax, discontinued operations |
54 |
78 |
70 |
1 |
35 |
37 |
-18 |
14 |
Profit before tax, total |
206 |
260 |
79 |
51 |
82 |
103 |
-30 |
59 |
Tax |
40 |
53 |
76 |
7 |
17 |
21 |
-5 |
11 |
Net profit |
166 |
207 |
80 |
43 |
65 |
82 |
-24 |
48 |
Loans and advances |
7,608 |
7,363 |
103 |
7,608 |
7,501 |
7,479 |
7,416 |
7,363 |
Deposits and other debt |
7,756 |
8,701 |
89 |
7,756 |
7,531 |
7,581 |
7,468 |
8,701 |
Mortgage credit |
2,375 |
2,036 |
117 |
2,375 |
2,284 |
2,121 |
2,057 |
2,036 |
Equity |
2,272 |
2,112 |
108 |
2,272 |
2,230 |
2,167 |
2,087 |
2,112 |
Total capital ratio, % |
26.4 |
22.3 |
|
26.4 |
24.9 |
24.0 |
23.4 |
22.3 |
Core capital ratio, % |
24.1 |
20.2 |
|
24.1 |
22.6 |
21.8 |
21.3 |
20.2 |
CET 1 capital, % |
22.6 |
18.8 |
|
22.6 |
21.1 |
20.3 |
19.8 |
18.8 |
Liquidity, excess cover % |
195.6 |
215.7 |
|
195.6 |
184.4 |
185.9 |
159.4 |
215.7 |
Operating cost/income, % |
61 |
67 |
|
62 |
55 |
62 |
68 |
67 |
Number of FTE, end of period |
228 |
238 |
96 |
228 |
232 |
228 |
228 |
238 |
* Excluding non-recurring items and value adjustments.
Further details are available in the annual report.