BankNordik announces positive outlook for 2012 and financial goals for the next three years

The years 2011 and 2012 are impacted by the integration of significant new activities. Not least the healthy parts of Amagerbanken from July 2011 and the acquisition of 12 Sparbank branches in 2010 have increased the Danish activities significantly. Thus, consolidation is the current focus point. Subsequently, the Bank sees good opportunities for growth in both activities and profitability, based on the obtained wider business base

| Source: BankNordik BankNordik

As announced in connection with the publication 14 November 2011 of the interim report for the third quarter of 2011, BankNordik’s Board of Directors has discussed the budget for 2012 and the financial outlook for the following two years. On this basis, the Bank's management wishes to announce its expectations for 2012 and updated medium-term financial targets (three years horizon).

Expectations for 2012

In the beginning of 2010, BankNordik acquired nine Danish and three Greenlandic branches from Sparbank, and this year the Bank has acquired the healthy parts of Amagerbanken with effect from 1 July 2011.

The broader activities in Denmark are expected to contribute significantly to the development of the profit in the coming years. So far BankNordik's results have been dominated by costs of integrating the acquired activities and sector related expenses.  As announced earlier, the integration of IT systems are planned for the beginning of 2012. Subsequently, the optimization of operations can be implemented and the financial benefits will accrue from the second half of 2012 and provide full effect from fiscal 2013.

The outlook for the results in 2012 can be summarized as follows:

  • Core earnings DKK 150-200 million in 2012 against DKK 145-175 million in 2011 and DKK 82 million in 2010 – exclusive value adjustments, taxes, sector costs and non-recurring costs.
  • Profit before value adjustments, tax and sector costs in 2012 DKK 100-170 million against DKK 50-80 million in 2011 and DKK 52 million in 2010.
  • Non-recurring costs are expected to be DKK 30-50 million in 2012 against DKK 95 million in 2011.
  • Impairment charges on loans etc. are expected to be amounting to DKK 80-120 million in 2012 (at level with BankNordik’s average impairments charges of approx. 0.8 per cent during the last fifteen years).
  • Expected ROE 8 to 10 per cent before the aforementioned non-recurring costs and 5.5 to 8.5 per cent after these costs.

"Already in 2012, we expect to deliver growth in profit as a result of the achieved larger business base. In the second half, we can begin to reap economies of scale and synergies. Thus, profitability can be improved further in the coming years," says Janus Petersen, CEO of BankNordik.

According to the agreements made on hybrid loan capital the distribution of dividends is limited to 10 per cent of net profit and a maximum of DKK 10 million provided that BankNordik’s core capital excluding the hybrid loan capital is less than 10 per cent. Earnings in the coming three years will extensively be used to reduce hybrid and subordinated loan capital.

Financial targets for the next three years

In addition to the outlook for the coming year BankNordik’s management reassessed the medium-term financial targets, covering the period of three years up to and including 2014. The main points are:

  • Return on equity (ROE) is expected to be taken up to a level of 12 per cent before tax
  • The target for the Cost/Income Ratio is a maximum of 60 per cent.
  • The target for the solvency ratio is set for 13-16 per cent of which core capital (exclusive of hybrid loan capital) must be at least 12 per cent.
  • The amount of the risk-weighted assets is expected to remain at the present level.
  • The liquidity target is an excess cover of 100 per cent compared to the statutory requirement.

At the end of the third quarter of 2011, BankNordik’s solvency ratio was calculated to 15 per cent, while the solvency requirement was 9.0 per cent. The Bank's policy is to maintain a high solvency – significantly above the required level.

The same applies for liquidity. Through the acquisition of the healthy parts of Amagerbanken BankNordik increased its deposit surplus to approx. DKK 2 billion, and the excess liquidity was 149 per cent at the end of third quarter.

 

Disclaimer

The forward-looking statements in this announcement are associated with risks and uncertainties that could entail that the actual developments will differ materially from the forward-looking statements. Risks and uncertainties include – but not exclusively – the development in the interest margin (as a change of +/-0.1 percentage points would entail a change in earnings of approximately DKK 12 million), the size of the loan portfolio (as a change of +/- DKK 0.1 billion all other things being equal would entail a change in earnings of approximately DKK 5 million), the development in impairment charges, the yield on the bank's own portfolio, fee income as well as the volume of claims in the insurance activities. Significant risks and uncertainties are further described in the Bank’s latest annual report.

BankNordik was founded over 100 years ago in the Faroe Islands. The Group has banking activities in Denmark and Greenland and the Faroe Islands and insurance activities on the Faroe Islands and Iceland. The Bank has total assets of DKK 19 billion and more than 600 employees. The Bank is subject to the Danish Financial Services Authority and is listed on NASDAQ OMX Copenhagen. BankNordik has five branches in the Faroe Islands, three in Greenland and 19 in Denmark, hereof several in the growth centres: Copenhagen, Aarhus, Odense and the Triangle area. www.banknordik.dk.

         Further information
         
         
         
         Janus Petersen, CEO, phone (+298) 330 340
         
         Árni Ellefsen, CFO, phone (+298) 230 348
         
         Investor Relations: ir@banknordik.fo