Kvika banki hf.: Preliminary results for Q1 2020

In accordance with the announcement made at the company’s Annual General Meeting on 26 March of this year, the Board of Directors has decided to publish preliminary figures from the bank’s financial statements for the first quarter of 2020, which were presented to a meeting of the Board of Directors today on 21 April.

Highlights of the provisional results for Q1 2020

• Estimated earnings before tax for the quarter amounted to ISK 446 million
• The estimated Capital Adequacy Ratio was 24.2%
• The Liquidity Coverage Ratio (LCR)  was 275%
• Estimated total assets amounted to ISK 117.1 billion
• Cash and balances with the Central Bank of Iceland amounted to ISK 48.1 billion
• Loans to customers amounted to ISK 30.9 billion.

Earnings before tax amounted to ISK 446 million

Kvika banki hf. earnings before tax in the first three months of the year are estimated at ISK 446 million, which is slightly above budget for the period.

The Liquidity Coverage Ratio was 275% at the end of March, compared to 246% at the end of 2019, and far exceeded the supervisory authorities’ requirements of a minimum coverage of 100%. The estimated Capital Adequacy Ratio at the end of March was 24.2%, taking into account the 25% annual dividend policy, compared to 24.1% at the end of 2019, and was well above the 20.6% Capital Adequacy Ratio requirement of the supervisory authorities, which was last updated on 18 March 2020.

Loans to customers accounted for 26.4% of the bank’s balance sheet and amounted to ISK 30.9 billion at the end of March. The COVID-19 pandemic is likely to result in payment difficulties for some of the bank’s customers. The quality of the loan portfolio is evaluated according to, among other things, the IFRS 9 International Financial Reporting Standard, which classifies the quality of loans into three stages. At the end of March, 13.8% of loans were in stages 2 and 3, which is an increase from 31.12.2019, as can be seen in the table below.

                                                                       31.3.2020                   31.12.2019

Stage  1                                                         77.4%                         81.3%

Stage  2                                                         12.0%                         10.0%

Stage  3                                                         1.8%                           1.0%

Fair value through profit and loss            8.8%                           7.7%

The net change in impairment of loans and negative fair value changes in the loan portfolio are estimated to amount to negative ISK 165 million for the first three months of the year, which is more than double the amount in the budget for the period.

Kvika banki hf. interim consolidated financial statements for the first quarter will be published on 14 May 2020. Current budget was approved and published last January. It has been decided to re-evaluate the main assumptions in the budget, including the forecasted expansion of the bank’s loan portfolio. The results of the re-evaluation will be published alongside the interim consolidated financial statements for first quarter.