Eik Banki Stands Strong Despite Loss

19-03-2010
Eik Banki Stands Strong Despite Loss

The minus DKK 297million result in 2009 is highly unsatisfactory. However, impairments are lower than in 2008, and the curve slopes downwards in 2010. This and the State backed guarantee of DKK 9.1 billion, means that the Eik Banki Group is in a strong position to take on future challenges. Implementation of new IT-platform and reorganisation have been made in 2009, and the Bank expects a positive result for 2010

The Eik banki Group has published its Annual Report 2009. The result is a loss of DKK 297 million. The result is slightly better than predicted in a Profit Warning on 23 February. The Management stresses that the result is highly unsatisfactory. During the year, however, the Group has managed to find reasonable solutions, preparing the Group for future challenges as the light appears on the economic horizon.

Net interest income has increased to DKK 518 million, whereas costs are unchanged in 2009 compared to 2008. On the other hand, fees and commission have decreased from DKK 204 million to DKK 113 million. Total deposits have increased by 2.1 per cent from DKK 14.1 billion to DKK 14.4 billion, while total loans have decreased by 1.4 per cent.

Group balance is DKK 21.6 billion.

Challenges in the Danish corporate real estate market in particular

“As we have already statet, the challenges are still in the financing of corporate real estate market on the Danish market. The Bank is, however, not exposed towards agriculture or operating financing of Danish corporations. The retail market and the other areas of operation in Denmark, as well as the Faroese market are developing in a satisfactory manner” says Marner Jacobsen, CEO of Eik Banki.

The loss can be ascribed to two factors in particular: impairments of loans are higher than expected, especially the before mentioned corporate real estate segment, and fair value adjustments of unlisted securities also contribute negatively.

New IT-platform, re-organisation, mission and vision

In 2009, the Eik banki Group has worked with rationalising, reorganising and harvesting synergies within the Group.

An agreement has been made with Skandinavisk Data Center (SDC) concerning IT-services for the entire Group. The parent company will switch to SDC in May, and in October, Eik Bank Danmark will also be on the SDC IT-platform. Thereafter, the entire Group will share one IT-platform, which is an advantage when co-ordinating bank services and optimising operations.

Reorganisation has been made within the Group, in Denmark as well as in the Faroe Islands. In Denmark, changes were made in the Management in January 2009, and at the same time an Executive Committee was established. The Corporate Lending Department was restructured and divided into a Credit Department and a Corporate Lending Department. Finally, the Mortgage Deeds Department is closing down and will be included in the Collection Department. In the Faroe Islands, the two Corporate Lending Departments have been centralised into one, while Retail Banking has been centralised into two main areas. Eik Investment Banking functions as a Group deparment with activities in Denmark as well as the Faroe Islands.

The Group has obtained hybrid core capital under Credit Package II and thereby strengthened solvency.

In April, the Bank will initiate the implementation of new Vision and Mission statements for the Group.

Lower impairments in 2010

“Although they are on a downwards slope, there is no denying that impairments are high. The Danish real estate market, however, seems to have passed the worst, and we therefore expect impairments to be lower in 2010 than in 2009, although they will still be relatively high” says Marner Jacobsen.

In total, the costs for the participation in Credit Package I amounted to DKK 114 million in 2009.

Good basis with State backed guarantee of DKK 9.1 billion

Earlier this week, the Danish State entered into an agreement with the Eik Banki Group on individual State guarantee under Credit Package II. The agreement enables the Group to take out loans of up to DKK 9.1 billion backed by The State of Denmark.

The State guarantee will be used to refinance loans, due in 2010 and 2011, and to ensure the Bank a comfortable liquidity, also after 30 September, when Credit Package I expires.

“With the State backed guarantee, the Group has a strong basis for 2010” says Marner Jacobsen, CEO.

Solvency and liquidity at a positive level

Group solvency at year-end 2009 was 11.6 per cent, which is an increase compared to year-end 2008, when Group solvency was 10.4 per cent. The parent company Eik Banki's solvency at year-end 2009 was 17.8 per cent, which is unchanged compared to 2008.

In March 2010, the Bank has obtained subordinate debt of DKK 80 million. Based on figures at year-end 2009, the solvency increased to 12.1 per cent and 18.6 per cent for the Group and Eik Banki, respectively.

Liquidity is DKK 5.1 billion, corresponding to an excess cover of 140.5 per cent of statutory requirement.

Eik Banki Group expects a positive result for the year 2010.

» Webcast w/ Marner Jacobsen, Group CEO