Financial results for the First Nine Months of 2021

Thursday 11. nóvember 2021

At a board meeting on 10 November 2021, the Board of Directors and the CEO approved the interim results of the Kvika banki hf. group for the period 1 January 2021 to 30 September 2021.

Highlights of the Interim Financial Statements for the First Nine Months of 2021

  • Pre-tax profit amounted to ISK 7,857 million (ISK 9,375 million including the profit of TM hf. and Lykill fjármögnun hf. in Q1)
  • Pre-tax return on weighted tangible equity was 36.4%
  • Earnings per share for the period were ISK 2.07
  • Total assets were ISK 234 billion
  • The group’s equity amounted to ISK 76 billion
  • The solvency ratio of the financial conglomerate was 1.51 and its capital adequacy ratio (CAR) was 30.8% at the end of the period
  • Overall group liquidity coverage ratio (LCR) was 171%
  • Total assets under management were ISK 512 billion
  • At the end of September, full-time employees numbered 322

A presentation meeting for shareholders and market participants will be held at 8:30 am on Thursday, 11 November in the bank's headquarters on the 9th floor at Katrínartún 2, 105 Reykjavík. The meeting will also be streamed on the website:

Very Good Performance of All Divisions

The pre-tax profit of the Kvika banki hf. group in the first 9M of 2021 amounted to ISK 7,857 million. As the merger of Kvika banki hf., TM hf. and Lykill fjármögnun hf. took place at the end of March, the operations of TM hf. and Lykill fjármögnun hf. are not included in the consolidated income statement for the first three months of the year. The pre-tax profit of TM hf. and Lykill fjármögnun hf. in the first quarter amounted to ISK 1,518 million, making the combined pre-tax profit of Kvika banki hf., TM hf. and Lykill fjármögnun hf. ISK 9,375 million for the first nine months of the year.

The return on weighted tangible equity before taxes was 36.4% for the period.

Net interest income of Kvika banki hf. amounted to ISK 2,928 million, increasing by 121% compared with the same period in 2020, with the increase in interest income primarily resulting from the altered composition of the loan portfolio and liquid assets, together with favourable trend of funding costs. Net impairment amounted to positive ISK 160 million during the period, compared with negative net impairment of around ISK 228 million during the first nine months of last year. Net financial income amounted to ISK 4,110 million, as returns were good on most of the asset markets where the group is active. Fees and commissions continued to grow, with net fee and commission income amounting to ISK 5,094 million, an increase of 18% from the same period during 2020.

Low Combined Ratio of TM and Good Return on Financial Assets

The combined ratio of TM was 83.3% in Q3, compared with 89.2% for the same period in 2020. The insurance company's investment income amounted to ISK 1,181 million in Q3, making the return on the asset portfolio 3.6% during the period.

Balance Sheet Grows Due to Merger

The total assets of the Kvika banki hf. group increased by 90% or ISK 111 billion during the first nine months of 2021 and amounted to ISK 234 billion. Customer loans grew by ISK 40 billion, with the increase largely due to the merger. The share of loans to individuals grew from 19% to 42% of all lending by the end of the period. Balances with banks and the Central Bank of Iceland, together with government-guaranteed securities, amounted to ISK 47 billion and total liquid assets were ISK 84 billion, increasing by ISK 7 billion during the 9M period. The group's total liquidity coverage ratio (LCR), excluding insurance operations, amounted to 171% at the end of the September 2021, which was well above the 100% minimum requirement.

The group’ equity increased with the merger of Kvika banki hf., TM hf. and Lykill fjármögnun hf., amounting to ISK 76 billion on 30 September 2021, compared to ISK 19 billion at the end of 2020. The solvency ratio of the financial conglomerate (Kvika banki hf. and subsidiaries, including TM tryggingar hf.) was 1.51 at the end of the period and the group's risk-weighted capital adequacy ratio (CAR), excluding the effect of TM tryggingar hf., amounted to 30.8%, while the capital requirement including capital buffers set by the regulators is 20.6%.

Share Buyback Programme Completed

During the period of July through October the bank purchased 117,256,300 of its own shares, which equates about 2.5% of issued shares in the company, for around ISK 2.9 billion. The share buyback programme is now completed.

Updated Earnings Estimate for 2021

The earnings forecast for Kvika banki hf. for the year 2021 was previously ISK 8.6 – 9.6 billion but has now been increased. Updated earnings forecast anticipates a pre-tax profit of ISK 9.8-10.3 billion (ISK 11.3 – 11.8 billion including the profit of TM hf. and Lykill fjármögnun hf. in Q1). The updated earnings guidance includes an estimated one-off cost, that will be charged in Q4, of ISK 400 million for the relocation to Katrínartún.

Marinó Örn Tryggvason, CEO of Kvika banki hf.:

Kvika’s operations are going well and in parallel with the publication of the financial results, the earnings forecast has been raised.

The bank recently issued a letter of intent to acquire a majority stake in Ortus Secured Finance. The bank bought a 15% share in Ortus in 2018 and therefore knows the company well. Ortus is a credit provider that provides property backed lending. The aim of the acquisition is to significantly improve Kvika’s return as well as increase risk diversification in operations and finances. In recent years, Kvika has successfully merged with several smaller financial companies. I believe this can be one of the most interesting and successful purchases.

Kvika is financially strong with diversified income streams. Despite the company’s size, there are a lot of opportunities to grow, and as an example the market share in retail banking is small.

In the last decade, many financial companies have been characterized by a reduction in work force. However, we have been increasing the number of employees, among other things to prepare for the expansion of the company’s operations. It is important that young and talented people get suitable jobs, and it is interesting to see younger and older employees working together with the vision that it is possible to revolutionize financial services in Iceland. At the end of the month, we will present ambitious goals that will lead to increased competition in the coming years.