GlobeNewswire
Vestjysk Bank Annual Report 2020
Danish financial regulator Nasdaq Copenhagen A / S February 23, 2021 2020 Highlights Westjysk Bank posted an after-tax profit of DKK 303 million in 2020 and the realized profit was at the high end of the DKK 260-320 million range. Performance was negatively impacted by economic uncertainty due to the coronavirus crisis and African swine fever in Germany. These factors impacted the bank’s impairment loss provisions, which were based on an estimate made by management. The bank increased the provision I 2020 by 180 million DKK to total provisions of 310 million DKK in the form of a management estimate in response to economic uncertainty, which corresponds to 3.3% of the bank’s net loans. The comparative figures for 2019 are affected below by the Sparinvest transaction, in which Vestjysk Bank made a profit of 142 million euros. Profit after tax of DKK 303 million compared to DKK 478 million in 2019 (DKK 336 million excluding Sparinvest) with an annualized return on equity after tax of 9.8%. Core income of DKK 887 million compared to DKK 1,055 million in 2019 (DKK 913 million ex Sparspar). Value adjustments of 65 million DKK compared to 185 million DKK in 2019 (58 million DKK ex Sparinvest). An expense ratio of 59.8% compared to 48.2% in 2019 (55.6% ex Sparinvest) Core profit before impairment of 357 million DKK compared to 547 million DKK in 2019 (405 million DKK excluding Sparinvest). Impairment of loans and receivables, etc. of DKK 29 million (2019: DKK 64 million). Agricultural depreciations were a net reversal. The bank’s capital requirements were 12.8%, consisting of an individual solvency requirement of 10.3% and a general capital conservation buffer of 2.5%. The bank’s total capital ratio was 24.7%. The excess coverage was 11.9 percentage points or DKK 1,574 million. Adjusted for the capital required to cover the MREL surcharge of 1.9 percentage points as of December 31, 2020, the excess cover was 10.0 percentage points or DKK 1,303 million. Merger with Den Jyske Sparekasse In November 2020, the bank announced plans to merge Den Jyske Sparekasse with Vestjysk Bank as an ongoing bank. After a few challenging years, the opportunity to seek a merger with another medium-sized bank is an important step forward for Vestjysk Bank. The shareholders finally approved the merger at the extraordinary general meeting on January 13, 2021. The Danish Financial Supervisory Authority approved the merger on January 14th 2021. After the merger, the bank will be the eighth largest bank in terms of business volume in Denmark and is expected to be in the region of 130 billion DKK. Our goal is to be the strongest local bank in Denmark. Future synergies from the merger are expected to be DKK 150 million per year. The one-off costs related to the merger are expected to be DKK 200 million. Special circumstances affecting the bank during the reporting period, including the effects of the coronavirus crisis to date In 2020, the bank was particularly hard hit by the coronavirus crisis, which lasted in March 2020 and continued in 2020 and through 2021. So far, despite the coronavirus crisis, the bank has been able to continue operations and customer activity has been high. The bank’s advisors have been in regular contact with business clients to find out what the bank can do to help them cope with the coronavirus crisis and to provide them with regard to the rescue packages provided by the Danish government and the Danish parliament to advise. To date, the crisis has had no material direct impact on the bank’s loans or individual impairment charges. Vestjysk Bank has made a number of facilities available to retail customers in the form of loan repayment vacation, temporary overdraft facilities and increased credit facilities to assist customers directly affected by the lockdown. So far, these measures have only had a limited impact on the bank. The sectoral distribution of the bank’s loans has proven beneficial during the crisis. Most of the bank’s lending is in sectors that have not been particularly hard hit by the coronavirus crisis. The hotel, restaurant, transportation and retail sectors are hardest hit, and these sectors account for only 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 coronavirus crisis. However, the pandemic has devastated the mink industry and ended mink farming in Denmark. From a financial point of view, the Danish government’s compensation package for mink farmers is considered reasonable and the package had a positive impact on the bank’s impairment charges in relation to this industry in 2020. The bank’s exposure to the mink industry is 0.7% of total gross lending or DKK 112 million. In the real estate sector, the bank has so far seen an impact on commercial leases where agreements have been made to defer rental payments due to the coronavirus crisis. Depending on the duration and depth of the crisis, this effect could expand. Private home rentals were not significantly 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 aftermath of the coronavirus crisis. In the long term, the bank expects an increase in losses, but overall at a manageable level. So far, the crisis has not affected dairy farmers. However, prices for pork settlements fell over the course of the year and stabilized at acceptable levels in late 2020. Due to the relatively high pork prices in the first half of the year, pig farmers, some of whom are credit-constrained, were able to repay debts to the bank. This resulted in a reversal of write-downs in this sector in 2020. The current outbreak of African swine fever in Germany has made it difficult for the bank’s customers who produce piglets to sell their production in Germany. This led to a sharp fall in the price of piglets, and a downward trend was also observed for slaughter pigs. Brexit ended with a trade agreement between the UK and the EU allowing Danish fishing boats to fish in UK waters under temporary licenses, which are expected to expire in 2026. The agreement provides for a shift in quotas by up to 25% ahead of the total EU catch quotas that are transferred to the UK. The deal is seen as acceptable to the bank’s customers in the fishing industry compared to the dreaded no-deal Brexit scenario. Vestjysk Bank is closely monitoring the development of the coronavirus pandemic and African swine fever. The bank’s impairment provision of DKK 310 million for economic uncertainties is considered sufficient. Naturally, predictions about the future consequences of the coronavirus crisis and African swine fever are subject to considerable uncertainty. Outlook for 2021 Westjysk Bank has an after-tax profit of around DKK 500 to 550 million for 2021, adjusted for one-off costs and income. Conference call There will be a conference call for analysts on February 23 at 9:30 a.m. (Danish time) with CEO Jan Ulsø Madsen commenting on the 2020 annual report. You can register for and participate in the conference call using this link: https://event.loopup.com/SelfRegistration/registration.aspx?booking=ngBc8o3UGE9V8oU7IPBB9RV2CmFnlwrrVMbotVHo4zw= Inquiries Please direct all inquiries regarding this announcement to Jan Ulsø, Madsen, CEO on tel. (+45) 96 63 21 04. Vestjysk Bank A / S Kim Duus Jan Ulsø Madsen Chairman CEO Vestjysk Bank A / S Torvet 4-5 7620 Lemvig tel. (+45) 96 63 20 00 CVR no. 34 63 13 28 www.vestjyskbank.dk Annex Vestjysk Bank Annual Report 2020
