17. February 2021

Financial Results of Kvika banki hf. for 2020

At a Board meeting on 17 February 2021, the Board of Directors and the CEO approved the annual financial statements of Kvika banki hf. for the year 2020.

Highlights of the Annual Financial Statements

  • Pre-tax profit amounted to ISK 2,339 million.
  • Net after-tax profit amounted to ISK 2,273 million.
  • After-tax return on equity (ROE) was 14.2%.
  • Earnings per share (EPS) were ISK 1.10.
  • Net operating income amounted to ISK 8,666 million.
  • Operating expenses amounted to ISK 5,724 million.
  • Total assets were ISK 123.2 billion.
  • Group equity amounted to ISK 19.2 billion.
  • The equity ratio was 28.3%, taking the dividend policy into account.
  • Liquidity coverage ratio (LCR) was 266 % at year-end.
  • Total assets under management were ISK 527 billion.
  • At year-end, full-time employees numbered 160.

A presentation of the results for market participants and shareholders will be held on Thursday, 18 February, at 11:30 am, in the bank's headquarters at Katrínartún 2, 105 Reykjavík. Light refreshments will be provided. Presentation for investors is attached.

Note that current official restrictions on the size of gatherings will be followed in all respects and meeting attendees are requested to register at the e-mail address fjarfestatengsl@kvika.is. The meeting will also be available on live stream using the link: https://www.kvika.is/fjarfestaupplysingar/fjarfestakynning-18-februar-2021/.

Questions can be sent by e-mail prior to or during the meeting to the e-mail address fjarfestatengsl@kvika.is.

Good results and growth in all income streams

The pre-tax profit of Kvika banki hf. in 2020 amounted to ISK 2,339 million, which was slightly above the Bank's updated forecast of a profit of ISK 2,000-2,300 million before tax. Net after-tax profit amounted to ISK 2,273 million. Return on equity (ROE) for the year was 14.2%, and ROE for the fourth quarter was 21.9%.

Net interest income amounted to ISK 1,800 million, increasing slightly YoY. Net fee and commission income amounted to ISK 5,956 million, a YoY increase of 24%. Investment income totalled ISK 833 million, an increase of 25% over the previous year. Net impairment was negative by ISK 317 million, partly due to precautionary write-downs in connection with COVID-19.

Operating expenses amounted to ISK 5,724 million, a YoY increase of 13%. The increase is mostly explained by the establishment of KKV in London during 2020 as well as one-off costs linked to the purchase of Netgíró hf. and the proposed merger with TM hf. and Lykill fjármögnun hf.

Balance sheet growth YoY, while the size of the loan portfolio remains relatively unchanged

At year-end 2020, total assets amounted to ISK 123.2 billion, as compared to ISK 105.6 billion at year-end 2019. Lending to customers amounted to ISK 29.3 billion at year-end, a decrease of ISK 0.8 billion during the year. Cash and cash equivalents, plus deposits with the Central Bank, amounted to ISK 28.9 billion at year-end, while government-guaranteed bonds totalled ISK 33.0 billion. The Bank's liquidity position is therefore very strong, with a liquidity coverage ratio (LCR) of 266% at year-end, compared with 246% at year-end 2019, far exceeding the minimum requirements of 100% coverage. The aim is to reduce this ratio in the coming months, as it is well above the bank's long-term target.

Equity amounted to ISK 19.2 billion and the risk-weighted equity ratio was 28.3 %, compared to 24.1% at the end of 2019. The equity ratio was well above the supervisory bodies’ 20.6% requirement, which was last updated on 18 March 2020.

Forecast profit for 2021 of ISK 2,600-3,000 million before tax

The 2021 budget anticipates a pre-tax profit ranging from ISK 2,600 to 3,000 million. The Bank's performance may deviate from this forecast, among other things, due to market conditions and other unforeseen events.

The aim is to complete the merger with TM hf. and Lykill fjármögnun hf. by the end of Q1. However, as regulators and shareholders' meetings have not yet approved the merger, it is not incorporated in the budget. In the event that the merger is effected, the budget assumptions will change significantly. Following a merger, a new budget will be published for the merged company.

Proposed merger of Kvika banki hf. and TM hf.

On 28 September, the Boards of Directors of Kvika banki hf. and TM hf. agreed to begin negotiations on merging the companies. Shareholders in TM hf. will receive, in consideration for their shares, 2,509,934,076 shares in the merged company. The merger is subject to the approval of supervisory bodies and shareholders’ meetings, with the latter expected to be convened in both companies before the end of March.

Marinó Örn Tryggvason, CEO of Kvika banki hf.:

“Both individuals and enterprises have faced numerous of challenges in 2020. I am proud of my colleagues, who have done exceptionally well in tackling these challenges. The results are clearly reflected in the bank's operations, which exceeded expectations this past year.

In recent years, Kvika has changed from a small bank to a strong financial undertaking. Its operations are highly successful, and the bank's financial position is strong. Its anticipated merger with TM hf. and Lykill fjármögnun hf. marks a major turning point for Kvika banki hf. The merged company will be among the most powerful enterprises in Iceland, with all the prerequisites to succeed in a climate of increased competition and innovation for customers. There are definitely exciting times ahead."