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A New Piece of Faroese Banking History |
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Written by B. Tyril
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Thursday, 17 April 2008 |
2007 produced a healthy 180 million dkk (24.2m eur) pre-tax profit for Föroya Banki, marking the first-ever public listing of a Faroese financial institution, as well as the privatization of the bank — now owned by 15,000 shareholders.
Föroya Banki, one of the two leading commercial banks of the Faroe islands, reported a pre-tax profit of 180 million dkk (24.2m eur) for the financial year 2007; that’s a slightly lower profit than the 193m (25.9m) posted in the previous year, yet no sign of decline when taking into account the considerable write-offs from earlier that were reversed to adjust the 2006 bottom line.
Accordingly, the 2007 net income decreased to 144m dkk (19.3m eur), from 159m (21.3m) the year before.
Boosted by large increases in loans and growing fee revenues, the year’s net interest and fee income amounted to 339m dkk (45.5m eur), a 23-percent jump from 275m (36.9m) in 2006. At the same time, the result from net financials came to 364m dkk (48.8m eur) for 2007, leaping by 30 percent from 280m (37.6m).
Due to the establishment of a subsidiary bank in Denmark, set to commence operations this year, higher payroll-related expenditures made employee and operating expenses increase by one-third to 206m dkk (27.6m eur).
CEO Janus Petersen commented: “In conclusion, the result for 2007 is good and we intend to continue this way.”
Föroya Banki’s loans totaled 7.5 billion dkk (1bn eur) at 31st December 2007, a 39-percent increase from the previous year. According to the bank’s annual report, the increase is mainly funded through long-term loans from financial institutions.
The bank’s solvency ratio was 17.9, falling from 23.8 percent. An increase in risk-weighted items from 5.2bn dkk (0.7bn eur) to 7.4bn over the same period was primarily attributable to lending growth, the bank stated. Return on equity after tax was 11.1 percent at year’s end, slipping from 13.7 percent, while earnings per share after tax came to 14.4 dkk (1.9 eur) compared to 15.9 (2.1) the year before.
Shareholder’s equity increased slightly from just below 1.3bn dkk (approximately 0.2bn eur) to just above that figure, reflecting the recognition of the profit for the year after tax and the deduction of a 45m dkk (6m eur) dividend, or 31 percent of the net income, in line with the bank’s dividend policy of a minimum 30-percent payout ratio.
Total assets rose by one-third to 9.6bn dkk (1.3bn eur) whereas liquidity decreased, however remained well above the statutory minimum.
Mr Petersen expressed confidence in the face of international turmoil triggered by the so-called subprime mortgage meltdown. “In recent months, financial markets have been heavily affected due to the subprime crisis,” he noted. “However, this crisis has not affected Föroya Banki, and at the end of 2007 liquidity was 103 percent above statutory requirements.”
He went on to present the 2008 outlook, forecasting a financial result similar to that of 2007. “Föroya Banki expects a pre-tax profit for 2008 in the range of 165m to 185m dkk [22m to 25m eur] net interest income is expected to increase by 8-14 percent in 2008 based on a growth in the loan portfolio. Fee income is expected to increase by 8-12 percent. Employee and administrative expenses are expected to increase by 0-5 percent, mostly due to expenses connected with the establishment of a subsidiary bank in Denmark. Loans and deposits are expected to increase by 5-10 percent in 2008 in correspondence with the expected economic growth in 2008.”
It took a few years for an overhaul of Föroya Banki’s organizational structure to pave the way for a changed identity. As 2007 drew to a close, the century-old institution came out a new organization, from being fully owned by a governmental fund to attracting a shareholder base of 15,000 and becoming publicly listed on the OMX Nordic stock markets in Denmark and Iceland.
Founded in 1906, originally as a Faroese subsidiary of a Danish commercial bank, Föroya Banki was later — during the early 1990s financial debacle in the Faroes — merged with its main rival and taken over by Fíggingargrunnurin frá 1992 (The Financial Fund of 1992). After years of ambiguity at the political level, two-thirds of the ownership of the bank was privatized and, on 21st June 2007, floated on the Reykjavík and Copenhagen stock markets.
Link to pdf presentation...
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