Aktia Bank Plc’s Interim report January–March 2020: Comparable operating profit burdened by the steep market drop due to the corona pandemic
Aktia Bank Plc
Stock Exchange Release
5 May 2020 at 8 a.m.
Aktia Bank Plc’s Interim report January–March 2020: Comparable operating profit burdened by the steep market drop due to the corona pandemic
The quarter in brief
- Unrealised value changes the main reason for the low comparable operating profit of EUR 2.8 (17.2) million and the net income from life insurance of EUR -5.2 (8.3) million.
- Very strong activity among private and corporate customers during January-February supported an increase in the net interest income to EUR 19.7 (19.4) million. Demand for loans decreased in March.
- Net commission income increased to EUR 25.2 (23.2) million. Customer assets under management decreased due to large market movements but the proportion of corona related redemptions was relatively small.
- The expansion of the product selection for asset management continued during the quarter. The distribution contracts for UI-Aktia funds in Chile and Peru was signed.
- The cost level was close to unchanged compared to the previous year.
Outlook 2020 (updated)
Due to the continuously low visibility and the high volatility on the market it is still very difficult to predict the impacts on the economy. Aktia has therefore decided to suspend its outlook for 2020 for the time being. Aktia’s goal is to give an update on the outlook in connection with the half-year report to be published on 4 August 2020.
Mikko Ayub, CEO:
Aktia’s first quarter started according to our targets as the positive development from the previous year continued. January-February was busy both for private and corporate customers and the investment appetite of companies was still on a good level. We extended our product selection within asset management with a structured product for private customers and we presented the second private debt fund aimed at institutional investors. In addition, Aktia asset management’s offering was extended for the first time outside Europe when the distribution contracts for UI-Aktia funds in Chile and Peru in South America was signed.
However, the coronavirus epidemic, spreading quickly also to Finland, caused extensive and sudden negative effects for both individual Finns and the global market after a strong beginning of the year. This also had an impact on Aktia’s result for March. The steep market drop had a large negative impact due to unrealised value changes in the investment portfolio of the life insurance business and net income from life insurance decreased to EUR -5.2 (8.3) million. This was also the main reason for Aktia’s low comparable operating profit of EUR 2.8 (17.2) million. However, in April the market has clearly experienced an upturn.
The net interest income for the first quarter was higher than the previous year and amounted to EUR 19.7 (19.4) million. The demand for housing loans declined when housing transactions decreased towards the end of the period and applications for an instalment-free period increased significantly. Aktia carried social responsibility in the difficult situation and supported its customers by offering private customers an instalment-free period. Instalment-free periods were awarded more than usual also to companies. The inorganic growth in the loan book continued through the acquisition of credits to housing companies from the Mortgage Society of Finland to a total value of EUR 48 million.
Aktia’s net commission income increased as a result of the strong beginning of the year to EUR 25.2 (23.2) million.
The value of assets under management decreased with the market decline in March by EUR 1.7 billion from the year-end and amounted to EUR 8.1 billion at the end of the quarter.
The cost level was close to unchanged compared to the previous year.
Remote customer meetings have become a part of everyday business
Aktia is a conservative lender as a whole, and we have not identified individually significant risk sectors or concentrations in our loan book, which to a larger extent would be affected by the difficult situation. The visibility is, however, still weak, and we understand that the coronavirus situation is difficult especially for many companies. I would also like to point out that the current state of emergency situation in Finland should not go on longer than absolutely necessary – in society and above all in the corporate world. Aktia has carried out an estimate of the macroeconomic situation and reports model-based credit losses (ECL) of a total of EUR 1.9 million during the first quarter.
Aktia’s Annual General Meeting decided on 16 April 2020, in accordance with the proposal from the Board of Directors and the recommendations of the Finnish Financial Supervisory Authority, that the decision on the payment of dividend will be postponed. The Board of Directors may at a later date decide on a possible dividend for 2019 of EUR 0.63 per share at the most, which will be paid on 1 October 2020 at the earliest. Due to the weak visibility and the large market movements, we are for the time being suspending an outlook for the current year.
The economic impacts the coronavirus has caused private persons and companies, as well as for the entire country, is now causing a lot of worry. The renewal of the service model we started in the autumn has, however, taken a big step forward. With the help of digital banking services our customers have been able to handle their banking business from home at their convenience, and remote customer meetings have become a part of everyday business. I believe that the change will be permanent as the customers notice the advantages of the new service model.
The strategy we updated in the autumn has clearly taken Aktia as an asset manager and bank in the right direction. Despite the uncertainty on the market we will continue our determined work towards reaching our targets. I would like to thank our customers as well as Aktia’s employees for a quick adjustment to the state of emergency situation. Thanks to you I have a strong confidence in the future.
Key figures
| (EUR million) | 1Q2020 | 1Q2019 | ∆ % | 2019 | 4Q2019 | ∆ % | 3Q2019 | 2Q2019 |
| Net interest income | 19.7 | 19.4 | 1% | 77.6 | 19.3 | 2% | 19.6 | 19.2 |
| Net commission income | 25.2 | 23.2 | 9% | 96.4 | 25.8 | -3% | 25.3 | 24.8 |
| Net income from life insurance | -5.2 | 8.3 | - | 30.0 | 8.3 | - | 6.8 | 6.6 |
| Total operating income | 39.9 | 52.7 | -24% | 221.4 | 55.2 | -28% | 52.9 | 60.6 |
| Operating expenses | -35.6 | -36.1 | -1% | -143.9 | -35.3 | 1% | -37.5 | -35.0 |
| Impairment of credits and other commitments | -1.4 | -1.1 | 31% | -4.5 | -0.8 | 88% | -1.2 | -1.4 |
| Operating profit | 2.8 | 17.2 | -84% | 74.8 | 19.1 | -85% | 14.3 | 24.2 |
| Comparable operating income1 | 39.9 | 52.7 | -24% | 211.4 | 55.2 | -28% | 52.9 | 50.6 |
| Comparable operating expenses1 | -35.6 | -36.1 | -1% | -140.4 | -35.2 | 1% | -34.2 | -34.9 |
| Comparable operating profit1 | 2.8 | 17.2 | -84% | 68.2 | 19.2 | -86% | 17.6 | 14.3 |
| Cost-to-income ratio | 0.89 | 0.69 | 29% | 0.65 | 0.64 | 39% | 0.71 | 0.58 |
| Comparable cost-to-income ratio1 | 0.89 | 0.69 | 29% | 0.66 | 0.64 | 39% | 0.65 | 0.69 |
| Earnings per share (EPS), EUR | 0.03 | 0.21 | -86% | 0.90 | 0.23 | -87% | 0.16 | 0.30 |
| Comparable earnings per share (EPS), EUR1 | 0.03 | 0.21 | -86% | 0.79 | 0.23 | -87% | 0.20 | 0.16 |
| Return on equity (ROE), % | 1.4 | 9.4 | -86% | 10.3 | 10.5 | -87% | 7.4 | 13.7 |
| Comparable return on equity (ROE), %1 | 1.4 | 9.4 | -86% | 9.1 | 10.5 | -87% | 9.2 | 7.2 |
| Common Equity Tier 1 capital ratio (CET1), %2 | 15.9 | 16.9 | -6% | 14.7 | 14.7 | 8% | 15.6 | 16.5 |
1) Alternative performance measures excluding items affecting comparability
2) At the end of the period
Webcast from the results conference
A live webcast from the results event will take place on 5 May 2020 at 10 a.m. CEO Mikko Ayub and CFO Outi Henriksson will present the results. The event is held in English and can be seen live at /2020-q1-results. A recording of the webcast will be available at after the event.
AKTIA BANK PLC
For more information:
Outi Henriksson, CFO, tel. +358 10 247 6236
Lotta Borgström, Director, Investor Relations and Communications, tel. +358 10 247 6838, ir (at) aktia.fi
Distribution:
Nasdaq Helsinki Ltd
Central media
Aktia is a Finnish asset manager, bank and life insurer that has been creating wealth and wellbeing from one generation to the next for 200 years. We serve our customers in digital channels everywhere and face-to-face in our offices in the Helsinki, Turku, Tampere, Vaasa and Oulu regions. Our award-winning asset management business sells investment funds internationally. We employ approximately 750 people around Finland. Aktia's assets under management (AuM) on 31 December 2019 amounted to EUR 9.9 billion, and the balance sheet total was EUR 9.7 billion. Aktia's shares are listed on Nasdaq Helsinki Ltd (AKTIA). aktia.com.
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