Kvika banki hf.: Earnings release 2019

At a meeting of the Board of Directors on 27 February 2020, the board and CEO approved the Consolidated Financial Statement of Kvika Banki hf. for the period 1 January 2019 to 31 December 2019.

The highlights of the Consolidated Financial Statement are:

• Profit after tax amounted to ISK 2,660 million
• Profit before tax amounted to ISK 2,501 million
• Net return on equity amounted to 21.0%
• Earnings per share amounted to ISK 1.41
• Net operating income amounted to ISK 7,426 million
• Operating expenses amounted to ISK 5,059 million
• Total assets amounted to ISK 105.6 billion
• The Group’s equity amounted to ISK 15.5 billion
• The capital ratio at the end of the year was 24.1%
• The Liquidity Coverage Ratio (LCR) was 246%
• Total assets under management (AuM) amounted to ISK 426 billion
• The number of full-time employees at the end of the year was 132
• The Board of Directors of the bank proposes that no dividends be paid in 2020 for 2019
• The earnings forecast for 2020 expects profits this year to range between ISK 2,300 – 2,700 million before tax.

A presentation for market participants and shareholders will be held at Kvika’s headquarters at Katrínartún 2, 105 Reykjavík at 16:15 on Thursday 27 February.

Steep growth in fee and commission income and good return on equity

Kvika’s earnings before tax in 2019 amounted to ISK 2,501 million compared to ISK 1,795 million in 2018 and increased by 39%. Net earnings amounted to ISK 2,660 million for the year compared to ISK 1,752 in 2018. The bank’s return on equity amounted to 21.0% and was well over the bank’s long-term return target of 15%.

There was a good growth in revenue during the year and net operating income increased by 30% Year-on-Year. All the bank’s principal revenue streams increased between years, with the most growth in fee and commission income. Net fee and commission income increased by 30%, investment income by 28% and net interest income by 4%.

Operating expenses amounted to ISK 5,059 million and increased by 26% due to increased activities during the year and were in line with budget. Impairments on loans amounted ISK 178 million during the year and were below budget. 

Total assets at the end of the year amounted to ISK 105.6 billion, compared to ISK 88.3 billion at the end of 2018. Loans to customers amounted to ISK 30.1 billion at the end of the year and increased slightly during the year. The liquidity position of the bank is strong where cash and balances in the Central Bank amounted to ISK 26.8 billion at the end of 2019. The liquidity ratio was 246%, well over the regulatory minimum requirements of 100%. Equity amounted to ISK 15.5 billion at the end of 2019 and the capital ratio was 24.1%, well above the capital requirements of the supervisory authorities.

Kvika’s earnings estimate for 2020 expects profits this year to range between ISK 2,300 – 2,700 million before tax. The estimate corresponds to a return on equity of between 15 - 18%.   

Marinó Örn Tryggvason, CEO of Kvika:

Kvika’s operations performed well in the year, there was strong growth in fee and commission income and return on equity well above our long-term target. Moreover, operating expenses were successfully kept in line with the budget and the bank yielded its best results ever.

The bank has a clear strategy as a specialised bank with an emphasis on asset management and investment activities. Over the past years Kvika has been involved in acquisitions and mergers in many domestic financial undertakings with focus on building up a company that can yield long-term results. It is pleasing to see that the core operations of the bank have continued to improve, and this is reflected in an increase in revenues, while operating expenses have been consistent with budget.

Conditions in the financial markets have been demanding, but Kvika is in a good position to take on the challenges which accompany necessary changes in the financial system as a result of, among other things, new technological solutions and ongoing streamlining. It is a source of concern to see how complex the operating environment of financial undertakings and other entities in the financial market has become. The financial system is a necessary component in the infrastructure of the society and it has not yet developed sufficiently to fulfil its role.

Despite the high level of savings in the country, it has been difficult for many companies and entrepreneurs to get access to funding. The operations and investments of companies require financing in order to maintain and increase value creation which is a necessary precondition for living standards. The healthy operation of companies is a precondition to enable them to employee staff and pay wages, which in turn is a precondition for the government to obtain tax revenue, which in turn again is a precondition that makes it possible to maintain effective public services. The development of the financial system therefore concerns everyone and it is important to ensure that it develops in line with the needs of the economy.

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