At a meeting of the Board of Directors held on 3 March 2016, the Board and the CEO endorsed the 2015 consolidated financial statements of Kvika banki hf.

Sigurður Atli Jónsson, Chief Executive Officer:

“2015 was an eventful year – one marked by the merger of MP banki hf. and Straumur Investment Bank hf. under the name Kvika banki hf. Merging two such strong companies into one is a formidable task that makes demands on all concerned, and Kvika's employees came through with flying colours. The operational objectives of the merger have already been achieved in the first year. Adjusted total operating expenses are about 14% lower than pre-merger comparables. The combined financial strength of the two institutions is much greater than in each separately, as can be seen in Kvika's high capital adequacy and liquidity ratios. Kvika has been very well received by investors and depositors. Deposits grew during the year, we launched an issue of bills, and we were the first bank since the financial crisis to sell subordinated bonds and list them on the market.”

Strong performance from regular operations

The Bank's profit from regular operations totalled ISK 685 million in 2015, and return on effective capital was 11% after adjusting for merger costs and one-off expenses. The second half of the year was quite favourable, with the profit from regular operations totalling ISK 464m and return on effective capital 15.1%.

In the wake of the merger, the Bank has undertaken broad-based streamlining measures that will strengthen its operations in the years to come. As a result, Kvika's operating results for 2015 are affected by merger costs and one-off expenses. Including these costs, the Bank recorded an after-tax loss of ISK 483m. It should be noted that the merger affects comparisons between years, and comparison figures in the annual accounts refer only to MP banki unless otherwise specified.

Net fee and commission income for the year totalled ISK 2,608 million, an increase of ISK 878 million, or 51%, year-on-year. Net interest income was ISK 1,124 million, as compared with ISK 1,302 million in 2014. The decline is due in part to a larger proportion of liquid assets and longer-term funding, which is reflected by a steep rise in the liquidity coverage ratio. The net interest margin on loans to customers during the year was 3.4%.

Strong year-end financial position

At the end of 2015, the Kvika group's total assets amounted to ISK 61,614 million, an increase of 25% from the end-2014 total of ISK 49,344 million. Risk-weighted assets totalled ISK 28,477 million, or only 46.2% of total assets. Because of repayments and sales of loans, the total carrying amount of loans contracted slightly between years, from ISK 22,287 million in 2014 to ISK 21,593 million at the end of 2015. The ratio of loans past due more than 90 days was stable and remains a low 0.6% compared to other Icelandic banks.

The Bank's liquidity position remains strong, and the liquidity coverage ratio (LCR) was 199% at the year-end, well in excess of the regulatory requirement of 80%. Total deposits grew by ISK 1,783 million year-on-year, from ISK 29,476 million in 2014 to ISK 31,259 million at the end of 2015.

The Bank strengthened its funding during the year, issuing bills and subordinated bonds in the amount of ISK 5,770 million. Two series of bills and subordinated bonds issued by the Bank were admitted for trading on the Nasdaq Iceland exchange, and the nominal value of the Bank's outstanding listed securities totalled ISK 4,550 million at the year-end.

Cash and cash equivalents totalled ISK 19,917 million at the end of 2015, an increase of ISK 6,947 million during the year, and other liquid assets amounted to ISK 17,812 million. Cash and cash equivalents and liquid assets totalled 68% of the Bank's total liabilities at the year-end.

The Bank's capital increased markedly during the year, primarily as a result of the merger. Tier 1 capital increased by ISK 1,610 million, to a year-end total of ISK 6,379 million. Tier II capital totalled ISK 552 million at the end of the year, following the subordinated bond issue in the second half. The Bank's capital ratio (CAR) increased from 17.4% at end-2014 to 23.5% at the end of 2015. The capital position is therefore strong, and well above the Bank's minimum regulatory ratio of 11.8%.

Operational highlights

• MP banki hf. and Straumur Investment Bank hf. formally merged on 29 June 2015. The merged institution was given a new name, Kvika banki hf., and moved to new headquarters at Borgartún 25 in Reykjavík. The Bank's vision is to be a specialised investment bank with asset management as its foundation.
• Kvika was the most active broker on the Nasdaq Iceland exchange in 2015. Its total turnover amounted to ISK 1,268bn, or about 27% of total trading for the year.
• Kvika sold subordinated bonds with a nominal value of ISK 550m in 2015. It was the first time since October 2008 that an Icelandic bank has sold subordinated bonds to investors.
• Assets under management have increased markedly, totalling ISK 111bn as of end-2015, up from ISK 75bn at the beginning of the year. Of this amount, some ISK 30bn are invested in funds managed by Kvika's subsidiary, Jupiter.
• During the year, the Bank issued two bond series backed by loan portfolios, in collaboration with fund management company Stefnir. This is a new financial product that Kvika has developed in collaboration with Stefnir.
• Jupiter Fund Management had a very successful year and played an important role in Kvika's assets under management growth. Jupiter's assets under management grew 50% in 2015.
• Britain's World Finance magazine recognised Kvika as the best investment management company in Iceland in 2015. Each year, World Finance nominates companies for outstanding performance in a number of areas, and Kvika (and its predecessors) received the award for the second year in a row.
• Kvika sold its holding in Íslensk verðbréf (IV) during the year. The buyer was a diversified group of investors and key IV employees, and there were no changes in Kvika's activities as a result of the sale, as no operational integration had taken place between Kvika and IV.