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Sparisjóðabanki Íslands - Annual Results 2005   21.2.2006 13:30:07
Flokkur: Afkomufréttir   Skuldabréfafréttir      Íslenska  English
 Sparisjóðabanki Íslands 12 2005.pdf
 Sparisjóðabanki Íslands 4Q 2005.pdf
54% return on equity

54% return on equity

 

1. Icebank and highlights from the annual accounts.

Icebank (Sparisjódabanki Íslands hf.), established in 1986, is a licensed commercial bank and the central banking institution for the Icelandic savings banks and their subsidiaries. It is solely owned by the 24 savings banks in Iceland. The main role of the Bank is to provide the savings banks with international services, domestic clearing, liquidity administration, foreign exchange, external funding, syndicate lending, trade finance and specialised services of various kind. The savings banks have traditionally been the Bank’s most important customers, but the share of other customers in the Bank’s lending portfolio has been increasing steadily. These are either customers referred by savings banks to the Bank or customers in areas of business where the savings banks do not operate. 

The largest owners of Icebank are the Reykjavik Savings Bank (SPRON, 24.5%), Hafnarfjördur Savings Bank (14.7%), Engineers’ Savings Bank (14.0%) and Keflavik Savings Bank (11.6%).

The annual accounts for 2005 are prepared according to the same accounting principles as for the previous years. The main principles of the International Financial Reporting Standards (IFRS) will be implemented as from the beginning of 2006.

Highlights from the 2005 accounts:

·          Net profit amounted to ISK 2,423 million and has never been higher in the Bank’s history. In 2004, net profit amounted to ISK 806 million. This is an increase of 200.5%.

·          Return on equity (ROE) after taxes came to 54.3% in 2005, as compared to 28.5% in 2004. ROE has never been higher in the Bank’s history and is among the highest ever achieved by an Icelandic financial institution.

·          The balance sheet grew from ISK 46.1 billion at year-end 2004 to ISK 65.6 billion at year-end 2005, an increase of 42.1%. Total assets amounted to ISK 37.6 billion at year-end 2003. The change is entirely due to organic growth.

·          Loans to customers other than credit institutions increased from ISK 14.8 billion at year-end 2004 to ISK 20.9 billion at year-end 2005, or by 41%. This growth is mostly due to increased participation in syndicated loans abroad.

·          Loans to savings banks increased from ISK 9.3 billion at year-end 2004 to ISK 16.3 billion at year-end 2005. Deposits in the Bank from savings banks increased over the same period by ISK 3.1 billion and amounted to ISK 16.3 billion at year-end 2005. This means that the savings banks’ net-position in the Bank, i.e. deposits in excess of lending, declined by ISK 3.9 billion in 2005. This is in stark contrast to the trend in 2003 and 2004.

·          Net interest income continues to increase and has never been higher in the Bank’s history. It amounted to ISK 823 million in 2005, as compared to ISK 629 million in 2004. The increase is 30.9%. For the first time in many years the net interest income is sufficiently high to cover the Bank's total operating expenses in addition to the provision for losses.

·          The changed composition of the Bank’s loan portfolio has led to an increase in the total interest rate margin during the last few years. It came to 1.6% in 2005, which is the same ratio as in 2004. This ratio was 1.4% in 2003 and 1.0% in 2002.

·          Conditions in the domestic equity market were unusually favourable in 2005. This is evident from the item other operating income, which amounted to ISK 2,951 million, as compared to ISK 1,233 million in 2004. This is an increase of 139.3%.

·          Net operating income amounted to ISK 3,774 million in 2005, as compared to ISK 1,862 million in 2004. The increase is 102.7%.

·          Operating expenses increased by only 8.3% from 2004 and amounted to ISK 708 million. The increase in payroll was 10.0%, which is to a large extent due to a negotiated salary increase by the Union of Bank Employees late in 2004 and settlements with outgoing employees. The average number of employees in 2005 was 56, as compared to 55 in 2004, and the number of full-time-equivalent positions was 58 at year-end 2005, as compared to 53 one year earlier.

·          Provison for losses declined substantially, from ISK 220 million in 2004 to ISK 92 million in 2005. The provison in 2005 corresponds to 0.4% of total loans and guarantees at year-end 2005. During the last few years the Bank has been dealing with several lending projects that went wrong and where the value of the collateral turned out to be lower than expected when it had to be realized. Total accumulated provisions for losses at year-end 2005 correspond to 2.2% of total loans and guarantees. 

·          The Bank’s cost-income ratio continues to decline. It was 18.8% in 2005, as compared to 35.1% in 2004.

·          The capital adequacy ratio (CAD) was 12.5% at year-end 2005, as compared to 11.8% at year-end 2004. The Bank’s goal is to maintain the CAD-ratio in the range of 10-12%. The tier 1 capital ratio was 8.8%, as compared to 6.9% at year-end 2004.

 

The table below shows highlights from the 2005 annual accounts of Icebank and several key ratios:

 

 

Profit and Loss Account:

Million ISK

2005

2004

2003

2002

2001

Net interest income

823

629

541

492

421

Other operating income

2,951

1,233

477

494

285

Net operating income

3,775

1,862

1,018

986

706

Operating expenses

-708

-654

-589

-625

-535

Provision for losses

-92

-220

-222

-205

-220

Profit before taxes

2,975

988

206

156

-49

Taxes

-552

-181

-43

-30

64

Net profit for the period

2,423

806

163

125

15

 

Balance Sheet:

Million ISK

2005

2004

2003

2002

2001

Amounts due from credit inst.

26,493

15,389

13,865

21,599

31,327

Loans to other customers

20,898

14,818

10,973

9,186

11,300

Bonds and shares

9,349

10,304

9,927

11,168

10,587

Other assets

8,869

5,609

2,811

2,292

1,095

Total assets

65,610

46,120

37,577

44,244

54,309

 

 

 

 

 

 

Amounts due to credit inst.

42,429

33,605

27,790

33,230

44,156

Customer accounts, on demand

4,165

2,265

1,305

1,736

2,706

Borrowings

11,092

5,387

4,707

5,732

4,027

Other liabilities

1,109

493

254

218

238

Subordinated loans

1,126

1,134

1,091

1,062

1,041

Equity

5,689

3,236

2,430

2,267

2,141

Total liabilities and equity

65,610

46,120

37,577

44,244

54,309

 

Key Indicators:

 

2005

2004

2003

2002

2001

Cost-income ratio, %

18.8%

35.1%

57.9%

63.4%

75.8%

Interest rate margin, %

1.6%

1.6%

1.4%

1.0%

0.85%

Return on equity after taxes, %

54.3%

28.5%

7.0%

5.7%

0.7%

Capital adequacy ratio (CAD), %

12.5%

11.8%

14.3%

15.7%

11.5%

Tier 1 capital ratio, %

8.8%

6.9%

9.8%

11.2%

9.5%

Full-time equivalent positions, average over period

56

55

54

59

54

Full-time equivalent positions, end of period

58

53

54

53

55

 

 

2. Outlook for the remainder of 2006.

The Board of Directors has been reviewing Icebank's role, strategy and main objectives as well as the organization chart. This review will be concluded formally within a few weeks. The Bank's business and assets have grown considerably over the last two years and the Bank has expanded its lending activities abroad. The Bank has shown that it can reconcile profitably the double role of being a service and central bank for the savings banks in Iceland and having customers of its own.

Market conditions were very favourable for Icebank in 2005. This is true of the traditional lending activities of the Bank and the conditions in the markets for domestic and foreign securities and foreign exchange. The first weeks of 2006 have also been favourable, and the outlook for the main areas of operations are good. However, it is unlikely that this year will match the record year of 2005, notwithstanding the positive economic prospects in Iceland and abroad.

 

3. Annual general meeting, dividend and capital increase.

The annual general meeting of Icebank will be held on 24 March 2006. The Board of Directors will propose at the meeting that no dividend should be paid to the Bank’s shareholders for the year 2005, but that instead the net profit of the year should accrue in full to the Bank’s equity. The Board will also propose to the shareholders a twofold capital increase to support further growth of the Bank. On the one hand, an increase of 81,325,920 shares, which will be issued immediately after the meeting at the price of 7.75 (ISK 609.9 million at purchase price). On the other hand, an increase of 200,000,000 shares which, will be issued at the Board's discretion but within three years from the meeting.

 

 

- - - - - - - - - -

 

 

For further information, please contact:

Finnur Sveinbjörnsson, Managing Director, finnur@icebank.is, tel. +354-540 4000

Ólafur Ottósson, General Manager, oso@icebank.is, tel. +354-540 4000

 


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