MP banki improves performance

Administrative cost down by ISK 200 million

4.9.2014

MP banki´s results for 1H 2014 were negative by ISK 159 million after tax which is a significant improvement from 2H 2013. Costs related to organizational changes in Q2 amounted to ISK 100 million and exchange losses in 1H were ISK 50 million.  

Regular operations returned a profit in Q2 2014 and the outlook is good for the rest of the year.

 Strong equity ratio and liquidity  

Equity at end of 1H 2014 amounted to ISK 4.847 million. The bank´s Capital Adequacy Ratio (CAD) ratio was 15,1% at the end of 1H 2014 compared to 14,2% at yearend 2013. The CAD ratio is strong and well above both legal and internal minimum criteria.

The bank´s liquidity coverage ratio (LCR) at the end of 1H 2014 was very strong with an LCR of 139% in ISK and 272% in foreign exchange. The minimum regulatory standard from the Central Bank is 70% in ISK and 100% in foreign exchange.

 Lower cost base

In October 2013 the bank announced organizational changes by merging divisions and simplifying setup with more focus on the bank´s core functions.  Organizational changes continued in Q2 2014 with a total workforce reduction of 30% since October 2013.

The administration cost has been reduced by ISK 200 million since second half of 2013.

Organizational changes were based on the bank´s revised growth plans. The changes involve sale of assets, such as non-core business units like Lykill the bank´s asset finance operation. They also entail simplifying the bank´s business model and downsizing. At the same time the bank´s CAD ratio is getting stronger, partly due to the above mentioned actions, but also related to a reduction of risk weighted assets. The effect of the organizational changes will not be fully realized until 2H 2014.

 High deposits to loan ratio

Net interest income amounted to ISK 674 million in 1H decreasing by 12% since 2H 2013. The decrease in net interest income is due to the sale of Lykill, the bank´s asset finance operation. The interest differential calculated as ratio of average of total assets at the start and end of 1H 2014 was 2,4% or 0,2 percentage lower than the same time last year. Loans to customers amounted to ISK 23 million. 90 day defaults were 2,2% of loans to customers at end of 1H 2014. Ratio of risk weighted assets of total assets was 49% at the end of the period.

Total deposits amounted to ISK 40 million at the end of 1H 2014. The ratio of deposits to loans was 165% at the end of 1H 2014 compared to 160% at the end of year 2013.

 Good performance in Corporate Finance and Asset Management

Net fee and commission income amounted to ISK 814 million increasing by 10% since 2H 2013 taking into account performance related fees. A positive development has been in fee and commission income in 1H 2014 and reflects good performance in Corporate Finance and Asset Management. Strong growth has been in Corporate Finance and increase in Assets under management is returning an increase in fixed commission.

MP banki´s Asset Management has been awarded the best Investment Company in Iceland 2014 by the financial magazine World Finance. World Finance annually awards companies for outstanding performance. The magazine evaluated a number of asset management companies in Iceland and based the evaluation on a number of factors such as performance, transparency and service quality.   

MP banki enjoys a leading position in securities in the Icelandic market. The bank´s market share at the end of 1H 2014 was 20% in bonds and 12% in equities.

 Sigurður Atli Jónsson, CEO:

The results for 1H, and in fact the operations of the bank for the period, can be divided in two. Our former growth plan based on share capital increase did not happen. The revision of our growth plan mainly affected our commercial banking operations that depend more on equity. The revision of our growth plan has been successful and challenging at the same time as the 30% reduction of FTE´s shows. The sale of Lykill was part of these adjustments. The cost related to organizational changes amounts to ISK 100 million in 1H. We have managed to lower the bank´s cost base substantially and that will further improve the bank´s results going forward.   

The other part of the business is our Asset Management and Markets units. The organizational changes have had a very small effect in these areas of the business and we are very pleased to see good results and growing fee and commission income in those units. Developments in the domestic securities market have had some negative effects on results but we are happy to see very good results in other division within Markets such as Corporate Finance.

  MP banki's Interim Financial Statements 30 June 2014