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Eik Banki’s Power Move |
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Written by B. Tyril
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Thursday, 17 April 2008 |
2007 saw the flotation of Eik amid rapid growth, with profits soaring to new highs on the 175th anniversary of its founding — a year of celebration for Faroe’s largest commercial bank and Denmark’s online banking leader.
Eik Group had a stellar year in 2007, reporting the strongest financial results in its history with net profit from financial operations increasing by two-thirds from the previous year to 807.9m dkk (108.5m eur). The year consolidated Eik as the largest commercial bank in the Faroes and made it the number one online bank in Denmark.
Several strategic acquisitions, substantial capital gains, and healthy growth across the board helped revenues and profits soar — profit before tax rose by 51.5 percent to 465.3m dkk (62.5m eur), while profit after tax came to 393m (52.8m), up 56.9 percent.
Due to massive overall increase in activities, enabled by the acquisition of Denmark’s largest Internet bank, SkandiaBanken, and Kaupthing Bank’s Faroese branch, total assets jumped to 21.7bn dkk (2.9bn eur), from 11.8bn (1.6bn).
Likewise affected by the SkandiaBanken deal, deposits grew by 116.8 percent to 13.3bn dkk (1.8bn eur), while lending increased by 88.8 percent to 15.6bn (2.1bn).
Capital gains, mainly from shares in Iceland’s savings bank Spron and Faroese oil company Atlantic Petroleum, amounted to 192m dkk (25.8m eur), against 86m (11.5m) in 2006.
This was indeed “the best result in the history of Eik Banki,” CEO Marner Jacobsen noted. “In short, 2007 has been a very good year for the Eik Group with considerable growth,” he said with reference to the annual return on equity, which by year begin was 32.5 percent after taxes, compared to 27.3 percent the year before, well above the 15-percent target. “This will provide a good basis for continued growth,” he said.
As to the outlook for 2008, the bank expected “limited growth” on both of its key markets, the Faroes and Denmark. “Our strong strategic position is meant to ensure further growth in the coming years,” Mr Jacobsen added.
“In 2008 the Eik Group will lay emphasis on achieving the expected synergy effects of the increased activities and the acquisitions,” he said. “Particular focus will be on economy of scale and for synergies, for instance, within the IT area of the Group.”
Pressure on the interest margin is being caused by deposit rate hikes in the Faroes as well as increasing inter-bank rates in the global financial markets. “It is in this respect that the investments which the Group has made in other companies have proven to have a solid and positive effect on the result,” Mr Jacobsen said.
On liquidity, he stressed that Eik has not participated in subprime funding. “However, turmoil on the international money market is making it more expensive to borrow money,” and good liquidity more important—“and in this respect Eik is in a favorable position.”
The bank’s 4.4bn dkk (590m eur) liquidity position at year-end 2007, compared to 2.5bn (336m) one year earlier, by far exceeded the statutory minimum requirement of 2bn (268m). 2007 earnings per share were 51.57 dkk (6.92 eur) after taxes, compared to 36.02 (4.83) in 2006.
Eik Banki has approximately 11,000 shareholders in 26 countries, the majority of them Faroese, with most of the shares issued in the last couple of years. By July 2007, the bank became publicly listed on the VMF/OMX Nordic Exchange Iceland as well as the OMX Nordic Exchange Copenhagen — a major event in the Faroes, reflected in huge media attention and widespread interest in share trading.
Shortly before the initial public offering, Eik raised its capital by about 100m dkk (13.4m eur) to prepare its purchase of the Danish division of Sweden’s SkandiaBanken, which included a 120,000-strong customer base.
By December, the merger of that division with Eik Bank Denmark, and Danish investment broker Privestor together with its newsletter FinansNyt, was completed.
Meanwhile in the Faroes, Eik Banki signed an agreement with Iceland’s Kaupthing to take over its corporate and investment banking operation there.
Eik decided in early 2007 to become listed on the OMX stock exchange in Copenhagen as well as the VMF-OMX exchange in Reykjavík. The dual flotation, as opposed to exclusively betting on the Faroese/Icelandic market, was designed to strengthen Eik’s presence in Denmark, according to Mr Jacobsen. He accurately predicted that Danish investors would show a greater interest in the share once it became listed in the market of their choosing.
As one of the oldest financial institutions in the Kingdom of Denmark, Eik Banki could wholeheartedly celebrate its 175th anniversary in 2007, as it for a third consecutive year produced record-breaking results.
Link to pdf presentation...
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