Kvika banki hf. - Announcement of 2020 First Half Results
A meeting of the Board of Directors and the CEO on 20 August 2020 approved the Interim Financial Statements of the Kvika banki hf. group for the period 1 January 2020 to 30 June 2020.
Highlights of the Interim Financial Statements for the first half of 2020
- Pre-tax profit amounted to ISK 1,016 million
- After-tax profit was ISK 924 million
- Return on equity (ROE) after tax was 11.8%
- Earnings per share amounted to ISK 0.47
- Net operating income was ISK 4,147 million
- Operating expenses totalled ISK 2,671 million
- Total assets amounted to ISK 113.1 billion
- Total equity was ISK 16.7 billion
- Capital adequacy ratio as at end of June was 26.2%, taking dividend policy into account
- Liquidity coverage ratio (LCR) was 221%
- Total assets under management were ISK 514 billion
- At end of June full-time employees numbered 145.
A presentation will be held for market participants and shareholders at Kvika's headquarters at Katrínartún 2, 105 Reykjavík, at 11:45 am on Friday, 21 August. Slides for the presentation are attached.
Strong operations in a difficult climate
The pre-tax profit of Kvika hf. for the first six months of 2020 amounted to ISK 1,016 million, slightly exceeding the forecast for the period. After-tax profit was ISK 924 million. ROE for the period was 11.8%, and 15.1% for the second quarter.
Net interest income amounted to ISK 868 million, an increase of 3% YoY. Net fee and commission income amounted to ISK 3,013 million, an increase of 3% YoY. Net financial income amounted to ISK 222 million, a YoY decrease of 41%. Net impairment was negative by ISK 209 million, primarily as a result of precautionary provisions due to COVID-19.
Operating expenses were ISK 2,671 million in the first six months of the year, increasing by 0.5% between years, or in line with estimates.
Solid capital position and high percentage of liquid assets
At the end of June 2020, total assets amounted to ISK 113.1 billion, compared to ISK 105.6 billion at year-end 2019. Lending to customers was ISK 30.3 billion as of end of June, increasing by ISK 0.2 billion during the period. The bank's liquidity is strong, with cash and balances with central bank amounting to ISK 26.9 billion as of end of June, in addition to which government-backed bonds amounted to ISK 24.5 billion. The LCR was 221% as at end of June, compared to 246% at year-end 2019, well above the 100% minimum coverage requirement.
Equity amounted to ISK 16.7 billion and the capital adequacy ratio was 26.2%, taking into account a 25% dividend policy (26.7% without regard to dividend policy), compared to 24.1% at year-end 2019, well above the 20.6% minimum regulatory requirement which was last updated by supervisory authorities on 18 March 2020.
Kvika's guidance for the year is unchanged, with forecast profit for 2020 between ISK 1,700 and - 2,300 million before tax.
UK asset management operations expanded
In June, KKV Investment Management Ltd., a subsidiary of Kvika Securities Ltd. (a subsidiary of Kvika hf. in the UK), concluded agreements to manage two UK mortgage funds. The total Net Asset Value of the funds is just over GBP 394 million, equivalent to around ISK 67 billion. Kvika’s total assets under management amounted to ISK 514 billion as of end of June, increasing by ISK 88 billion during the period.
Divestment of holding in Korta
An agreement was signed in April for the sale of Kvika's entire holding in Korta hf. to the UK fintech company Rapyd. According to the bank's current assessment, the final purchase price for its holding in Korta will be in line with the book value of the holding as of year-end 2019, and will therefore not affect Kvika's performance in this operating year.
Marinó Örn Tryggvason, CEO of Kvika:
“I am proud of the bank's performance in the first half of the year. In the previous years, systematic efforts have been directed at broadening its income base, and it is therefore gratifying to see the bank's good operating results in a demanding environment.
At a time of high uncertainty in the Icelandic economy, Kvika is well positioned to work with existing and new customers. Considerable development work lies ahead in the Icelandic economy, as interest rates have fallen sharply and the effect on asset value has likely not been fully felt as yet. Kvika operates strong asset management activities, securities brokerage and corporate advisory services, as well as specialized banking services. For all these areas of its operations, these are opportune times for the bank, which can play an important role in boosting the necessary resilience of the economy.
In recent years, special emphasis has been placed on expanding the bank's asset management operations. The scope of asset management activities has continued to grow this year. Significant growth in assets under the management of Kvika's UK subsidiary is particularly encouraging.
I would like to thank the bank’s employees for their continued success in a difficult external environment. I am proud to be part of this dedicated team. It is important that those of us working in the financial sector continue to serve customers effectively and in doing so provide the financing needed for the economy’s growth."