Investor Presentation Satisfactory results in the first half of 2016 4 August 2016 Árni Ellefsen, CEO
Disclaimer This presentation contains statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements. No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein. Accordingly, none of BankNordik, or any of its principal shareholders or subsidiary undertakings or any of such person’s officers or employees or advisers accept any liability whatsoever arising directly or indirectly from the use of this document. Interim Report H1 2016 Page 2
Overview Highlights Update on strategic adjustments Financials Banking Insurance Expenditures Impairment charges Capital development Capital ratios Restructuring of subordinated capital Long-term financial objectives Outlook 2016 Retail banking Appendices Private banking Corporate banking Insurance Interim Report H1 2016 Page 3
Highlights – Satisfactory performance in Q2 leads to narrowed guidance H1 2016 financial highlights (H1 2015)* Operating income down 13% YoY to DKK 331m (DKK 379m) Operating costs fell 9% to DKK 232m (DKK 255m) Net loan impairment charges were a reversal of DKK 4m (DKK 15m) Operating profit amounted to DKK 101m (DKK 97m) Profit before tax increased to DKK 86m (DKK 73m) CET1 capital ratio of 15.1% at 30 June 2016 Q2 2016 operational highlights Vørður deal approved by Icelandic central bank and Icelandic FSA – awaiting approval from the competition authorities Corporate loan book in Denmark reduced by close to DKK 1 billion at 30 June 2016 Share buy-back programme for 2016 of up to DKK 33m initiated in May Outstanding bonds redeemed and new subordinated bonds issued *Operating figures are adjusted for discontinued operations related to Vørður Interim Report H1 2016 Page 4
Update on the divestment of Vørður and the winding up of the Danish corporate activities Divestment of Vørður Winding up of corporate activities in Denmark Not Q1 2016 H1 2016 determined DKKm 1,000m 1,500m 500m Deal approved by the Icelandic central bank and the Danish corporate loan book reduced by close to DKK Icelandic FSA 1 billion in book value at end of June 2016. Awaiting approval from the Icelandic competition authorities Transaction expected to close in second half of 2016. Interim Report H1 2016 Page 5
Satisfactory H1 2016 performance H1 2016 vs. H1 2015 DKKm H1 2016 H1 2015 Index Q2 2016 Q1 2016 Index Interest income down DKK 32m mainly from Net interest income 210 242 87 98 113 87 controlled run-off of corporate loans in Net fee and commission income 96 122 79 51 45 113 Denmark, but also due to margin pressure Net insurance income 20 10 200 11 8 138 Other operating income* 5 5 100 3 2 150 Fee income DKK 26m lower due to Operating income 331 379 87 163 168 97 normalisation of mortgage broking activity Operating costs -232 -255 91 -115 -117 98 in 2016 as well as less income from Sector costs -2 -11 18 -1 -1 100 corporate activities in Denmark Profit before impairment charges 97 112 87 47 49 96 Operating costs fell DKK 23m, consistent Impairment charges, net 4 -15 3 1 with Group’s refocusing Operating profit 101 97 104 50 50 100 Impairment charges, intang. assets 0 0 0 0 Operating profit up DKK 4m Non-recurring items -12 -14 0 -12 Q2 2016 vs. Q1 2016 Market value adjustments 7 -16 9 -3 Profit before tax, continuing 95 67 142 60 35 171 171 Interest income down DKK 15m Profit before tax, discontinued (Vørður) -9 6 1 -10 Fee income up DKK 6m Profit before tax, total 86 73 118 61 25 244 244 Operating costs fell by DKK 2m Loans and advances 9.395 10.680 88 9.395 9.961 94 Operating profit flat at DKK 50m Deposits and other debt 12.949 12.836 101 12.949 12.532 103 Loans and advances down DKK 566m Operating cost / income, % 70 67 70 70 Interim Report H1 2016 Page 6
Interest income affected by controlled run-off of corporate lending in Denmark QoQ changes in NII Net interest income (NII) down DKK 15m from Q1 2016 DKKm 120 to Q2 2016 and by DKK 32m from H1 2015 to H1 2016 115 112.5 Drop in interest income mainly owing to the winding up of 110 0,0 8.9 corporate activities in Denmark and continuous margin 0,0 105 pressure 0.6 0.5 3.3 0.0 100 3.7 97.6 0,0 0,0 0,0 Investment income decreased DKK 7m from H1 2015 to 95 H1 2016 due to risk-off positioning 90 85 Lending volumes down DKK 566m QoQ. 80 Q1 2016 Lending Lending Deposit Deposit Liquidity Other Q2 2016 volume interest volume interest management Loans Deposits Loans and deposits YoY changes in NII DKKbn DKKm 14 250 12.9 241.7 12.8 12.8 12.7 12.5 13 240 12.3 16.8 12 230 10.7 10.7 10.7 10.6 11 220 10.0 210.1 25.1 10 9.4 210 7.4 3.8 13.1 0.1 9 200 8 190 7 180 6 170 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 H1 2015 Lending Lending Deposit Deposit Liquidity Other H1 2016 volume interest volume interest management Interim Report H1 2016 Page 7
Customer activity down since H1 2015 QoQ changes in fee and commission income Net fee and commission income increased DKK 6m from DKKm 55 1.1 Q1 2016 to Q2 2016 and fell DKK 26m from H1 2015 to 50.8 50 H1 2016 0,0 2.4 8.9 44.9 0.9 0.3 45 The QoQ increase in income was mainly due to dividend 0,0 0,0 40 0, 0, income from the investment portfolio 35 The YoY fall in income was primarily related to: 30 25 Less asset management activity in H1 2016 - 20 Q1 2016 Investment Loan, Mortgage Dividends Other fee and Q2 2016 Normalisation of mortgage broking activity after a period of - and trading guarantee broking comm. high remortgaging activity in 2015 comm. and insurance services income comm. Gradual reduction in fee and commission income from - YoY changes in net fee and commission income corporate operations in Denmark consistent with the controlled run-off DKKm 130 122.0 120 11.5 1.4 110 0.3 5.4 0 100 8.3 95.7 0 0 90 0 80 70 H1 2015 Investment Loan, Mortgage Dividends Other fee and H1 2016 and trading guarantee broking comm. comm. and insurance services income comm. Interim Report H1 2016 Page 8
Insurance: Income higher, claims lower Premium and claims* Net premium income up by DKK 1m in H1 2016 compared DKKm DKKm 45 Premium income, net Claims, net to H1 2015 and remained flat from Q1 2016 to Q2 2016 40 Net claims down DKK 9m from H1 2015 to H1 2016 and 35 down DKK 2m from Q1 2016 to Q2 2016 30 25 Profit before tax of DKK 11m in H1 2016 relative to DKK 42 41 20 1m in H1 2015 and DKK 7m in Q2 2016 relative to DKK 31 15 4m in Q1 2016 21 21 22 10 12 10 Market prices have stabilised in 2016 after a period of 5 increased competition and relatively low claims. 0 H1 2015 H1 2016 Q1 2016 Q2 2016 Profit before tax* DKKm DKKm DKKm DKKm 12 10 8 6 11 4 7 2 4 1 0 Q1 2016 Q2 2016 H1 2015 H1 2016 *Vørður is excluded and figures relate to Trygd only. Interim Report H1 2016 Page 9
Operating expenses decline as BankNordik refocuses core activities QoQ changes in operating costs Operating costs fell DKK 2m from Q1 2016 to Q2 2016 DKKm 120 and DKK 23m from H1 2015 to H1 2016 117.2 1.0 1.4 Q2 2016 negatively affected by discontinuing costs 2.1 114.8 115 related to the centralisation of branch support in the Faroe Islands 110 Staff costs notably down YoY mainly due to the winding- up of corporate activities in Denmark 105 DKK 6m in amortisation of intangible assets related to customer relations discontinued – fully written off in Q4 100 2015 Q1 2016 Staff IT Other expenses Q2 2016 YoY changes in operating costs Average number of employees (FTE) DKKm 550 260 255.3 500 61 66 65 63 64 68 250 67 66 450 66 13.8 25 25 25 25 25 65 25 25 25 400 26 24 240 3.8 350 232.0 6.1 0.4 426 425 424 423 418 410 404 300 230 396 390 375 250 220 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 210 2014 2015 2016 H1 2015 Staff IT Amort. int. Other H1 2016 assets expenses Group excl. Vørður and Trygd Trygd Vørður Interim Report H1 2016 Page 10
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