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Ringkjoebing Landbobank A/S (0FTC)
Ringkjoebing Landbobank's announcement of the financial statements for 2017 - The best profit in
the bank's history
31-Jan-2018 / 07:50 CET/CEST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
(DKK million) *2017* *2016* *2015* *2014* *2013*
Total core income 1,019 983 954 907 844
Total expenses and -334 -318 -306 -298 -273
depreciation
*Core earnings before *685* *665* *648* *609* *571*
impairment charges **for
loans*
Impairment charges for loans -10 -48 -60 -87 -120
etc.
*Core earnings* *675* *617* *588* *522* *451*
Result for the portfolio etc. +60 +44 0 +65 +21
*Profit before tax* *735* *661* *588* *587* *472*
*2017 - highlights*
· The best profit before tax and the best core earnings in the bank's history
· Profit before tax increased by 11% to DKK 735 million, which equates to a 22% return on
equity
· Core earnings increased by 9% to DKK 675 million, exceeding expectations
· High levels of customer satisfaction and the best reputation among Danish banks
· Big increase in customer numbers creates 11% increase in loans
· Rate of costs of 32.8 makes us highly competitive
· Proposed dividend increase of 25% to DKK 9 per share. A new buy-back programme for up to DKK
170 million is also proposed, increasing the total pay-out ratio to 63%
· Expectations for core earnings of DKK 600 - 675 million in 2018, plus the result for the
portfolio
Please do not hesitate to contact the bank's management if you have any questions.
Yours sincerely,
*Ringkj?f¸bing Landbobank*
John Fisker J?f¸rn Nielsen
*Management's review*
*Core income*
Net interest income was DKK 643 million in 2017 compared to DKK 665 million in 2016, a decrease
of 3%. This should be compared to an 11% increase in lending volumes, which underlines that net
interest income is influenced by the competition in the sector. This item is also influenced by
a changed mix of loans and continuing low interest rates.
Fee, commission and foreign exchange income amounted to net DKK 301 million in 2017 compared to
net DKK 271 million in 2016, an 11% increase. The primary reasons for the increase in fee income
is an increase in the income from securities trading, and the bank's income from guarantee
commission and mortgage credit commission etc. also increased.
The MiFID II provisions prohibiting commission became effective on 1 July 2017. The
implementation of the provisions means that the bank may no longer accept commission from
investment funds for arrangements under which it provides portfolio management. The bank has
consequently adapted its price structure for management fees that are charged directly to
customers. In 2017, the bank's income from asset management thus fell by DKK 13 million, which
is attributable to falling margins and increasing volumes being managed.
Earnings from sector shares increased by DKK 32 million from DKK 39 million in 2016 to DKK 71
million in 2017. The earnings derive primarily from return on the bank's ownership interests
in DLR Kredit, BankInvest Holding and PRAS. Earnings in BankInvest Holding increased because the
company has not paid out any outsourcing fees etc. since 1 July 2017. This contributed to
increasing BankInvest's earnings and consequently the value of the bank's shareholding. The
bank's earnings from DLR Kredit was affected positively by a larger equity position in this
company.
Total core income increased by 4% from DKK 983 million in 2016 to DKK 1,019 million in 2017. The
bank considers the increase satisfactory given the market conditions for the sector.
*Costs and depreciation*
Total costs including depreciation and write-downs on tangible assets were DKK 334 million in
2017 compared to DKK 318 million in 2016, an increase of 5%. Costs in 2017 were thus marginally
higher than the previously announced expectations for this item.
During the year, the bank had higher costs due to its organic growth strategy. The bank thus
increased its staff marginally and spent more money on marketing. The bank also had higher IT
expenses in 2017.
On the other hand the bank realised a fall in maintenance costs and depreciation and write-downs
on tangible assets in 2017.
The rate of costs in 2017 was marginally higher than in 2016 and was computed at 32.8 for 2017,
which continues to be the lowest in Denmark.
*Impairment charges for loans*
Impairment charges for loans amounted to DKK 10 million in 2017 compared to DKK 48 million in
2016. The falling trend from previous years thus continues for impairment charges, which are now
equivalent to 0.05% of the total average of loans and guarantees etc., compared to 0.23% in
2016.
The average credit quality of the bank's loans portfolio in general improved during 2017
compared to the already high level in 2016.
The bank's total impairment charges for loans and provisions for losses on guarantees were
reduced from DKK 937 million at the beginning to DKK 931 at the end of 2017, equivalent to 4.0%
of total loans and guarantees.
Agriculture is the customer segment with the highest individual and collective impairment
charges. Given the realised prices to producers the majority of the bank's pig and dairy
producers realised highly satisfactory results in 2017. However, prospects for 2018 for the
prices of milk and pork are again uncertain. The bank judges that the current risk of weak
operating results is to a large extent contained in the bank's considerable impairment charges
for the agricultural sector.
The portfolio of loans with suspended calculation of interest amounted to DKK 25 million at the
end of the year, equivalent to 0.11% of the bank's total loans and guarantees at the end of
the year. The portfolio thus decreased compared with the end of 2016, when the amount was DKK 60
million.
On the basis of the quality of the bank's loans portfolio and prospects for economic
development in the coming year, the bank expects total impairment charges in 2018 to remain low.
*Core earnings*
(DKK million) *2017* *2016* *2015* *2014* *2013*
Total core income 1,019 983 954 907 844
Total expenses and -334 -318 -306 -298 -273
depreciation
*Core earnings before *685* *665* *648* *609* *571*
impairment charges for loans*
Impairment charges for loans -10 -48 -60 -87 -120
etc.
*Core earnings* *675* *617* *588* *522* *451*
Core earnings were DKK 675 million, compared with DKK 617 million last year, an increase of 9%
and the best in the bank's history. At the beginning of the year, the bank announced expected
core earnings for the year in the DKK 515 - 615 million range. This range was upwardly adjusted
to DKK 600 - 665 million in connection with the presentation of the bank's interim report, and
the core earnings realised are thus above the upwardly adjusted range, which is considered
highly satisfactory.
*Result for the portfolio and market risk*
The result for the portfolio for 2017 was DKK 60 million, including funding costs for the
portfolio. The falling interest rate level and the narrowed credit spread for mortgage credit
bonds in 2017 positively affected the result for the portfolio.
Shares etc. at the end of the year amounted to DKK 621 million, DKK 20 million of which was in
listed shares etc. and DKK 601 million in sector shares etc. The bond portfolio amounted to DKK
3,953 million, and the majority of the portfolio consists of AAA-rated Danish government and
mortgage credit bonds.
The total interest rate risk - calculated as the impact on the profit of a 1 percentage point
change in the interest level - was 1.1% of the bank's tier 1 capital at the end of the year.
The bank's total market risk within exposures to interest rate risk, listed shares etc. and
foreign currency remains at a moderate level, and this policy will continue.
The bank's risk of losses calculated on the basis of a Value at Risk model (computed with a
10-day horizon and 99% probability) was as follows in 2017:
*Risk in DKK *Risk relative to
million* equity*
*end of year in %*
Highest risk of loss: 17.5 0.46%
Lowest risk of loss: 2.5 0.07%
Average risk of loss: 10.0 0.26%
End of year risk of 6.0 0.16%
loss:
Net profit for the year
The profit before tax was DKK 735 million. The profit after tax of DKK 146 million was DKK 589
million, compared with last year's DKK 539 million.
The net profit for the year is equivalent to a return on equity at the beginning of the year of
17% after payment of dividend.
*Balance sheet*
The bank's balance sheet at the end of the year stood at DKK 25,796 million compared with last
year's DKK 24,258 million.
The bank's deposits increased by 4% from DKK 18,314 million at the end of 2016 to DKK 19,110
million at the end of 2017. The bank's loans increased by 11% from DKK 17,482 million at the
end of 2016 to DKK 19,351 million at the end of 2017.
Growth in loans for the year was broadly based with a positive development in lending in all of
the bank's branches and within all niches in 2017. The only exception is the renewable energy
niche which experienced a small decrease in the loans portfolio.
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January 31, 2018 01:52 ET (06:52 GMT)
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