Komplett Bank has entered into an agreement with Modhi Finance to sell all its non-performing loans (NPL) inSweden andFinland , and with Lowell to sell NPLs inNorway , for a total gross carrying amount ofNOK 1.4 billion . Furthermore, the Bank has entered into forward flow agreements for its loan portfolios inSweden andFinland with Modhi Finance. As part of the sales process, the Bank has performed a review of its entire loan book which will result in additional loan losses ofNOK 256 million and a negative effect on total income ofNOK 290 million in Q3 2021. The Bank remains solid with an estimated CET1 ratio of 20.1% after completion of the review and transactions, and after distribution of the proposed dividend ofNOK 0.28 per share. "These transactions represent a significant reduction in balance sheet risk which is the key rationale behind the portfolio sales and the forward flow agreements. Further, the capital position remains solid, and the impact on growth and dividend capacity will be limited," commentsKomplett Bank's CEO Øyvind Oanes. Review of loan book The sold non-performing loans originate primarily in vintages from 2019 and earlier. Empirical data indicate lower collection of the residual balances of loans, with a longer history of delinquency, than previously estimated. Since 2019,Komplett Bank has implemented a number of measures to improve credit quality, contributing to volumes sent to collection and past due days levels steadily improving over the past seven consecutive quarters. As part of the portfolio sales process, and based on the offer prices received, the Bank has performed a review and impairment test of its entire loan book. The outcome of this process has resulted in increased Loss Given Default (LGD) levels and a one-time increase in loan loss provisions ofNOK 150 million . This is partly due to lower than previously expected recoverability from larger ticket loans and an increase in average balances over time.Komplett Bank's models have been updated accordingly, and a stricter write-off policy will be implemented to improve the Bank's ability to adjust to any potential future changes in customer behavior. Combined, this will reduce volumes in stage 3 and also lead to lower volumes entering stage 3 going forward, reducing the Bank's overall credit risk.Komplett Bank expects loan loss provisions in the coming quarters to be largely comparable to the levels seen in 2020 and 2021. Expected negative 2021 result The sale of non-performing loans and the additional loan loss reserves are estimated to have a negative net impact on Q3 2021 earnings ofNOK 410 million after tax, and, due to the expected loss for the full year,Komplett Bank expects no cash dividend payout based on the 2021 results. The Bank maintains its proposal to distribute the remaining dividend based on the 2019/2020 earnings ofNOK 0.28 per share, amounting toNOK 52 million in total, with an expected distribution inDecember 2021 . While the P&L effect of the sale and increased loan impairments will be booked in Q3 2021, the sold loan portfolios will remain on the balance sheet until the expected transfer date inNovember 2021 . Based on the negative impact on net earnings from the portfolio sales and the increased loan loss provisions, the Bank's CET1 ratio is expected to be 18.8% at30 September 2021 , which is still significantly above the regulatory minimum CET1 ratio requirement of 17.0%. Once the sold portfolios are transferred off the Bank´s balance sheet in November, the CET1 ratio is estimated to be 20.1%. Q3 2021 trading update - adjusted for the effects of portfolio sales and additional loan loss provisions Net loan growth adjusted for currency effects wasNOK 269 million in Q3 2021, representing a growth of 3.2% in the quarter. Total net loans at30 September 2021 wasNOK 8,569 million . Total income wasNOK 230 million in Q3, down fromNOK 241 million in Q2. The loan loss ratio in Q3 was 3.0% compared to 3.2% in Q2 2021. Total operating expenses wasNOK 105 million , down fromNOK 108 million in the previous quarter. Unaudited profit after tax wasNOK 54 million in Q3 2021, compared to a result ofNOK 50 million in Q2 2021. Including the effects of portfolio sales and additional loan loss provisions, profit after tax is negative byNOK 260 million in the quarter. "Profitability is obviously far from where it needs to be for us to deliver adequate returns over the cycle. We clearly need to focus on improving our top line as well as the operational efficiency going forward. Nevertheless, I'm encouraged to see continued loan growth and steady improvements in underlying credit quality in the quarter as we gradually return to normality following the Covid-19 pandemic," comments Oanes. Webcast and Q&A In relation to the sale of non-performing loans and the Q3 2021 trading update,Komplett Bank , represented by CEO Øyvind Oanes and CFOHenning Fagerbakke , will host a brief presentation followed by a Q&A on 21 October at 11.00 CEST. The webcast can be followed and questions can be submitted during the presentation at: https://streams.eventcdn.net/komplettbank/20211021/Norway : +47 23963688Sweden : +46 850558365Denmark : +45 78723251Finland : +35 8981710523UK : +44 3333009264United States : +1 6319131422Canada : +1 6474848337France : +33 170750721Germany : +49 69222239167Italy : +39 0236013852Spain : +34 914192767 PIN: 18178922# For further inquiries, please contact: ir@komplettbank.no Øyvind Oanes, CEOKomplett Bank ASA +47 98 90 60 60Henning Fagerbakke , CFOKomplett Bank ASA +47 95 46 37 20 This information is considered to be inside information pursuant to the EU Market Abuse Regulation article 7 and is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. Thisstock exchange announcement was published byHenning Fagerbakke , CFO,Komplett Bank ASA , on20 October 2021 at20:36 CEST .
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