BankNordik P/F
H1 report: BankNordik improves operating profit by 18%

BankNordik P/F 

13.08.2013 07:52

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In terms of operating profit, the second quarter was BankNordik's best
performance in recent years. The cost reductions implemented in 2012 and in
early 2013 brought the H1 profit before tax to DKK 77m. 

BankNordik's H1 interim report clearly reflects the efficiency improvements
implemented in recent years. Costs were 7% lower in H1 2013 than in the
year-earlier period. 

Total H1 income amounted to DKK 436m, which was in line with the H1 2012
figure. The performance reflects weakened demand for loans and credit combined
with higher income from insurance activities. 

Operating profit before impairment charges amounted to DKK 154m in H1 2013
compared with DKK 131m in H1 2012. Both banking and insurance activities
contributed to the 18% improvement. 

'We reduced our costs by 7% relative to last year, and with our impairment
charges being as we had anticipated, we managed the best operating profit in
recent years,' said BankNordik CEO Janus Petersen. 

Loan impairment charges amounted to DKK 20m in the second quarter, bringing the
H1 impairment charges to DKK 75m following the substantial impairment charges
taken in the first quarter. Assuming the general economy does not decline,
BankNordik continues to expect writedowns for 2013 in line with the 2012-figure
of DKK 115m. 

The H1 operating profit after impairment charges amounted to DKK 78m, of which
DKK 68m was earned in the second quarter, making this one of the Bank's best
quarterly performances ever. The H1 profit before tax of DKK 77m includes
non-recurring items of DKK 8m consisting of rationalisation costs of DKK 10m
and a DKK 18m profit from the sale of the head office. 

We introduced efficiency-improving measures in order to lift our earnings and
become more competitive', said Janus Petersen, and he continued: 'Our customers
stand to benefit, as lower prices form part of our new customer concept. That
will slow our earnings over the next couple of quarters, but in return we hope
the attractive pricing will draw in new customers and strengthen our business
base for the longer term.' 

Maintaining solvency and liquidity at healthy levels

The Bank has a well-diversified lending portfolio with personal customers and
the public sector accounting for almost 60%, a good industry diversification
and only few large exposures. This risk profile is reflected in the solvency
need of 8.7%, which is very close to the statutory minimum solvency requirement
of 8%. After repaying DKK 100m of state-funded hybrid capital at 1 August 2013,
the Bank has a solvency ratio of 14.6% calculated on its risk-weighted assets
at 30 June 2013 and a margin of 5.9 percentage points relative to the solvency
need. 

The implementation of the new CRD IV capital adequacy rules at 1 January 2014
is expected to lower the solvency ratio by 0.50 percentage point. This will
still leave the Bank with excess cover of 5.4 percentage points, enough to
cover the 5 percentage point increase in the solvency need that will result as
the new rules are gradually implemented from 2016 to 2019. As a result, the
Bank expects to have sufficient ongoing earnings to repay its subordinated debt
and still meet the heightened solvency requirements and to possibly be
categorised as a SIFI for the Faroe Islands and Greenland. 

Due to its large deposit surplus and healthy liquidity, BankNordik has in many
cases refrained from bidding in the market for fixed-rate deposits. In
addition, customers have placed more of their savings in securities, which
reduced the Bank's deposits by DKK 469m in the second quarter. Still, liquidity
remained good at 2.7 times the required level at 30 June 2013. 

Retaining full-year 2013 profit forecast

The BankNordik Group continues to develop in line with the announced strategy
with a key focus on good customer service, profitability and risk management. 

As economic growth and with it demand for loans and advances remains subdued,
loans and advances should not be expected to increase. As already mentioned,
loan impairment charges for 2013 are expected to be in line with the 2012
level. The Bank's financial results for 2013 and each of the next few years
will include a DKK 25m contribution to building up the banking industry's
deposit guarantee scheme. 

BankNordik maintains its full-year guidance of profit before value adjustments
and tax in the DKK 130-160m range, a strong improvement from DKK 102m in 2012. 



Conference call today

BankNordik will review the financial results today at 11.00 (CET) at its
customary conference call for analysts and investors. The conference call will
be webcast on BankNordik's website, www.banknordik.com. 

The dial-in numbers for the conference call is provided below. Participants are
kindly asked to call in a few minutes before the conference begins. 

Participant Std International Dial-In:  +44 (0) 1452 555131
                                                           

Participant UK LocalCall Dial-In Number:             
United Kingdom                            08445718957

Participant LocalCall Dial-In Numbers:            
Denmark, Copenhagen                       32728018
Finland, Helsinki                       0923113289
Norway, Oslo                              21563005
Sweden, Stockholm                       0850630779
Switzerland, Baden                      0565800004

Participant FreeCall Dial in numbers:             
Iceland                                    8009300
United States                          18666828490



For further information, please contact:

Janus Petersen, CEO, tel. (+298) 330 340

Árni Ellefsen, CFO, tel. (+298) 330 348

Johnny í Grótinum, Investor Relations, tel. (+298) 230 380, jig@banknordik.fo



BankNordik has banking activities in Denmark, Greenland and the Faroe Islands
and insurance activities in the Faroe Islands and Iceland. Founded in the Faroe
Islands more than a century ago, the Group has 180,000 customers, total assets
of DKK 17bn and 529 employees. The Bank is subject to the supervision of the
Danish Financial Supervisory Authority and is listed on NASDAQ OMX.
www.banknordik.dk. 



Financial highlights

DKKm                            Q2     Q1     Q4     Q3     Q2    H1    H1  2012
                              2013   2013   2012   2012   2012  2013  2012      
--------------------------------------------------------------------------------
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Operating income*              230    206    236    224    219   436   436   895
Operating costs*              -142   -141   -143   -145   -153  -282  -304  -592
--------------------------------------------------------------------------------
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Profit before impairment        88     65     93     79     66   154   131   303
 charges                                                                        
Loan impairment charges,       -20    -55    -35    -14    -46   -75   -65  -115
 net                                                                            
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Operating profit*               68     10     58     65     20    78    66   188
Non-recurring items             18    -10    -15     -1    -11     8   -60   -77
Sector costs, etc.              -8     -8     -7      0      1   -16    -4    -9
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Operating profit/(loss)         79     -8     36     64      9    70     2   102
 before value adjustments                                                       
 and tax                                                                        
Value adjustments              -16     22      6      4     -7     6    10    19
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Profit before tax               63     13     42     68      2    77    12   121
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Deposits etc., DKKbn          12.3   12.8   12.7   13.1   13.3                  
Loans etc., DKKbn             10.7   10.8   11.3   11.3   11.4                  
Total assets, DKKbn           17.4   17.8   17.6   17.8   17.9                  
Equity, DKKbn                  2.1    2.1    2.1    2.0    2.0                  
Solvency ratio               15.4%  14.9%  14.8%  13.8%  15.1%                  
Liquidity relative to        2.7 x  2.9 x  2.5 x  2.7 x  2.8 x                  
 statutory requirement                                                          
Cost/income ratio              62%    68%    61%    65%    70%                  
Number of employees (FTE)      529    533    550    577    583                  
 at period-end                                                                  
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* Adjusted for non-recurring items and other special items (value adjustments,
sector costs, etc.). Further details are available in the interim report.
News Source: NASDAQ OMX



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Language:     English
Company:      BankNordik P/F
              
               
              Faeroe Islands
Phone:        
Fax:          
E-mail:       
Internet:     
ISIN:         FO0000000088
WKN:          
 
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