H1 2020 highlights
- Profit after tax was
DKK 142 million (H1 2019:DKK 163 million ), for an annualised return on equity after tax of 9.5%. - Core income of
DKK 425 million (H1 2019:DKK 453 million ). - Market value adjustments of
DKK 14 million (H1 2019:DKK 20 million ). - Cost ratio of 58.3% (H1 2019: 53.1%).
- Core earnings before impairment allowances of
DKK 177 million (H1 2019:DKK 212 million ). - Impairment of loans and receivables, etc. of
DKK 24 million (H1 2019:DKK 37 million ). Impairment allowances on agriculture amounted to a net reversal for the first half. - The Bank’s capital requirements totalled 13.0%, consisting of an individual solvency need of 10.5% and a general capital conservation buffer of 2.5%. The MREL was phased in at 1.875%, which is added to the capital requirement. The individual solvency need includes
DKK 50 million , or 0.37 of a percentage point, based on a management estimate of economic uncertainty. - The Bank’s total capital ratio was 23.3, implying an excess cover of 10.3 percentage points or
DKK 1,390 million . - The Bank’s MREL ratio was 23.3. This taken into account, the excess cover was 8.4 percentage points, or
DKK 1,136 million .
Preliminary impact of the Corona crisis on
Like the rest of
The Bank’s advisers have proactively contacted all business customers several times to arrange how the Bank can help them through the Corona crisis and to advise them on how to apply the rescue packages provided by the Danish government and parliament. So far, the crisis has not directly impacted the Bank’s lending or impairment allowances to any significant extent. This is expected to change over time, however, if the crisis persists through the coming months.
For retail customers,
The sector distribution of the Bank’s lending plays a positive part in this. Most of the Bank’s lending is within sectors that have not been particularly badly affected by the Corona crisis so far. At this point, the hotel, restaurant, transport and retail sectors are the hardest hit, and these sectors account for some 10% of the Bank’s total lending.
Vestjysk Bank’s two main sectors, agriculture and real estate, have so far been relatively unaffected by the Corona crisis. Until now, the crisis has not affected dairy farmers, whereas pork prices dropped over the course of first half. They remain at a satisfactory level, however. Because of the relatively high pork prices, pig farmers, some of which are credit-impaired, have been able to repay debt to the Bank. This resulted in reversals of impairment allowances within this sector in H1 2020. We expect this development to continue, but if the price level slides further, it could have an adverse effect on the Bank. Agriculture still faces risk factors such as the risk of an outbreak of African swine fever in
The Bank assesses that a Brexit without a trade agreement between the
In the real estate sector, we are so far seeing an effect on commercial leases in the affected sectors, where agreements have been made to defer rent payments. Depending on the duration and depth of the crisis, this effect could widen. Private residential rentals have not been affected at this point, and this is not expected to change significantly.
Our retail customers are generally doing well and are in a strong position to withstand the consequences of the Corona crisis. In the long term, we expect to see an increase in impairment allowances, but on a manageable level overall.
The situation is expected to change over the coming weeks and months. The Bank forecasts that the negative impact will spread to a wider range of sectors, particularly exporters, and that some of the Bank’s retail customers may face unemployment, for example.
We assess that the Bank’s
Outlook for 2020
On the basis of the preliminary impact of the Coronavirus situation,
Positive financial market developments in the second quarter had a favourable effect on the Bank’s investment portfolio during the period. Also, the continued favourable settlement prices for agricultural products meant that the positive trend in the Bank’s impairment allowances, particularly in respect of agricultural customers, continued throughout the second quarter of 2020.
In an announcement issued on
Enquiries
Please address any enquiries regarding the present announcement to Jan Ulsø Madsen, CEO, at tel. (+45) 96 63 21 04.
Chairman CEO
Torvet 4-5
7620 Lemvig
Tel. (+45) 96 63 20 00
CVR no. 34 63 13 28
www.vestjyskbank.dk
Attachment
- Vestjysk Banks Half-Year Report 2020
© OMX, source