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2021-11-02

Good performance in Q3 core earnings

- New financial and ESG targets are set

Company announcement no. 22/2021

“We’re pleased to present financial results for the third quarter that are better than originally expected and which made us upgrade our full-year guidance on 15 October. The positive performance was driven by improvements in our core banking operations following the divestment of the Danish business and reversals of impairment losses. The income-enhancing and cost-cutting measures implemented earlier this year have paid off, and we remain committed to running an efficient and profitable business,” said BankNordik CEO Árni Ellefsen.  

“As part of our ongoing efforts to optimise the capital structure of the BankNordik Group, we have adjusted our capital adequacy target for common equity tier 1 (CET 1) from 23% to 20% for the period to 2024 and raised our ROE target from 8% to >10%. As part of this process, we also intend to distribute DKK 250m resulting from the reduced REA following from the divestment of the Danish business sooner than previously planned and expect to distribute the entire amount in 2022. Going forward, we intend to maintain our target of a 50% payout ratio supplemented by share buybacks,” said Mr Ellefsen.

Updated financial and ESG targets

As part of its continuous efforts to optimise the business, BankNordik is raising its 2024 target for ROE after tax from 8% to >10% p.a. Management expects ongoing improvements in the core banking operations over the coming years resulting in a cost/income ratio below 55% in 2024 and a reduction of the combined ratio target from 90% to 85% for the insurance business. The Bank is optimising its capital structure and adjusting its capital adequacy target for common equity tier 1 (CET 1) from 23% to 20% for the period to 2024. The target adjustments are based on the current interest rate environment and impairment charges at a normalised level (of 0.4% of loans and guarantees).

In addition to the financial targets, BankNordik has updated its targets for selected ESG ratios. The Group has defined a more ambitious target for its direct Scope 1 CO2 emissions, which is lowered from 50 to 0 tonnes by 2025. As a new reporting feature, BankNordik will be disclosing data on gender pay gaps, the elimination of which will require a constant focus in-house going forward.

Extraordinary dividend

At BankNordik’s extraordinary general meeting held on 22 October, the shareholders voted to approve the proposed distribution of DKK 450m to shareholders of the DKK 700m dividend declared on the basis of the reduced REA resulting from the divestment of the Danish business. The Bank has previously announced that it expects to distribute the remaining DKK 250m in 2022 and 2023. Instead of this previous decision, the Bank now expects to distribute the remaining DKK 250m in 2022.

Highlights of BankNordik's interim report for the nine months to 30 September 2021:

Q3 2021 vs Q2 2021

  • Operating profit before impairment charges declined from DKK 47m in Q2 2021 to DKK 41m in Q3 2021.
    • Net interest income amounted to DKK 66m in Q3 2021, which was in line with the Q2 2021 figure.
    • Fee and commission income was down by DKK 2m from DKK 20m in Q2 to DKK 19m in Q3 2021.
    • Net insurance income amounted to DKK 7m in Q3 2021, equal to half the amount recorded for the previous quarter due to an increase in claims expenses.
    • Other operating income amounted to DKK 8m in Q3 2021, which was DKK 1m less than the Q2 figure.
    • Operating costs amounted to DKK 59m in Q3, which was DKK 2m less than in Q2 2021.
  • BankNordik maintains management’s estimated provision of DKK 52m against potential COVID-19-related losses. Net impairment charges were a reversal of DKK 13m in Q3 2021, compared to a DKK 27m reversal in Q2 2021.
  • The overall profit before tax for Q3 2021 was DKK 54m, against DKK 74 million in Q2 2021.
    • The investment portfolio yielded a negative return of DKK 1m in Q3 2021, against a loss of DKK 4m in Q2 2021.

9M 2021 vs 9M 2020

  • BankNordik reported operating profit before impairment charges of DKK 127m for the 9M period of 2021, a DKK 16m (+15%) improvement on 9M 2020.
    • Net interest income was up by DKK 3m to DKK 196m in the 9M 2021 period compared to DKK 192m in 9M 2020.
    • Fee and commission income was up by DKK 13m to DKK 57m in 9M 2021 from DKK 44m in 9M 2020.
    • Net insurance income was down by DKK 6m in the 9M 2021 period due to an increase in claims expenses relative to 9M 2020.
  • Other operating income was up by DKK 10m to DKK 26m in the 9M 2021 period compared to 9M 2020.
  • Operating costs amounted to DKK 179m in the 9M 2021 period, an increase of DKK 4m over 9M 2020.
  • Loan impairment charges were a DKK 36m net reversal for the 9M 2021 period against a DKK 5m charge in 9M 2020. BankNordik maintains management’s estimated provision of DKK 52m against potential COVID-19 related losses.
  • Profit before tax from continuing operations was DKK 237m in 9M 2021 against DKK 103m in 9M 2020.
  • The 9M 2021 profit before tax from discontinued operations amounted to DKK 9m against DKK 53m in 9M 2020.
  • The overall profit before tax was DKK 246m in 9M 2021 against DKK 156m in 9M 2020.
    • The investment portfolio yielded a negative return of DKK 9m in 9M 2021 against a loss of DKK 3m in 9M 2020.
  • Bank lending volumes were up by DKK 94m (1%) from DKK 7,501m at 30 September 2020 to DKK 7,594m at 30 September 2021.
  • Mortgage-broking services were up by DKK 325m (+14%) from DKK 2,284m at 30 September 2020 to DKK 2,609m at 30 September 2021.
  • Deposits were down by DKK 95m (1%) from DKK 7,531m at 30 September 2020 to DKK 7,435m at 30 September 2021.

Capital ratios

At 30 September 2021, the Group had a CET 1 capital ratio of 26.1% against 22.6% at 31 December 2020. The total capital ratio including MREL was 31.7% at 30 September 2021 against 26.4% at 31 December 2020. The company did not raise new MREL capital in 2020.


Guidance for 2021

At the start of the year, BankNordik’s management guided for 2021 net profit in the DKK 150–200m range. On 19 July, the Bank upgraded its guidance for FY 2021 net profit to the DKK 190–220m range, while on 15 October, the guidance was upgraded further to the DKK 230–250m range.  

The guidance is subject to uncertainty and will, amongst other things, depend on economic conditions, developments in the COVID-19 situation in the Group’s markets, loan impairments and market value adjustments.

For further information, please contact:

Árni Ellefsen, CEO, tel. (+298) 230 348

BankNordik has banking activities in 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 12bn and 199 employees. The Bank is subject to the supervision of the Danish Financial Supervisory Authority and is listed on Nasdaq Copenhagen.

 

Appendix: Q3 2021 financial highlights and comparative figures

Highlights and ratios

Highlights and ratios        
DKKmQ3 2021Q2 2021IndexQ1 2021Q4 2020Q3 2020Q1-Q3 2021Q1-Q3 2020
Net interest income6666101646565196192
Net fee and commission income1920931716155744
Net insurance income71449712182834
Other operating income (less reclassification)89919862617
Operating income1001099297101104307286
Operating costs-59-6196-59-62-57-179-175
Sector costs00 000-10
Profit before impairment charges414787383847127110
Impairment charges, net132748-310-236-5
Operating profit547473354844163106
Non-recurring items24387700820
Profit before investment portfolio earnings and tax5678711114844245106
Investment portfolio earnings-1-428-313-9-3
Profit before tax, continuing operations 5474731084948237103
Profit before tax, discontinued operations 00 9135953
Profit before tax, total 5474731185182246156
Tax111576247175033
Net profit435973944365196123
Loans and advances7.5947.5861007.4507.6087.5017.5947.501
Deposits and other debt7.4357.660977.5367.7567.5317.4357.531
Mortgage credit2.6092.5021042.4432.3752.2842.6092.284
Equity2.4102.3691022.3132.2712.2302.4102.230
Total capital ratio, incl. MREL capital, %31,731,3 36,226,424,931,724,9
CET 1 capital, %26,125,7 31,022,621,126,121,1
ROE, %7,19,7 7,47,58,110,16,9
ROE, excl. one-offs, %7,19,5 4,47,56,87,05,0
Liquidity Coverage Ratio (LCR), %185,9202,5 211,7231,1227,3185,9227,3
Operating cost/income, %5956 6062555861
Number of FTE, end of period199195102218228232199232

Further details are available in the interim report.

Attachments

Författare nordicir.com