Sydbank’s Interim Report – Q1 2020

Company Announcement No 15/2020
29 April 2020

Sydbank’s Interim Report – Q1 2020

The first 3 months of 2020 were impacted by the negative effects of covid-19 and by a positive development in the Group’s core income

Q1 2020 – highlights

• Profit of DKK 55m equals a return on equity of 1.6% p.a. after tax.
• Core income of DKK 960m is 7% higher compared with the same period in 2019.
• Costs (core earnings) constitute DKK 718m and are unchanged compared to the same period in 2019.
• Impairment charges for loans and advances represent an expense of DKK 84m compared with an income of DKK 14m in the same period in 2019.
• Total credit intermediation amounts to DKK 145.0bn – the same level as at year-end 2019.
• At the coming AGM dividend distribution for 2019 will no longer be recommended. Consequently total capital has gone up by DKK 352m, equal to a 0.6 percentage point increase in the capital ratios.
• The initiated share buyback programme of DKK 250m was terminated on 17 March 2020. Repurchases total DKK 31.3m.
• The CET1 ratio has risen by 1.2 percentage points compared to 31 December 2019 and constitutes 19.0% excluding profit for the period.

CEO Karen Frøsig comments on Sydbank’s Q1 result:
-          It is good news that in Q1 we can see the effect of the measures we have taken to ensure a better balance between income and costs. The development in core income as well as costs is completely as planned when the measures were announced. Core income is up by 7% compared with the same period in 2019 and costs are unchanged.

CEO Karen Frøsig on the effects of covid-19 on the Bank’s income:
-          We are experiencing a health crisis which will also lead to a global recession. The implications for financial markets have been considerable and we must expect a rise in the number of bankruptcies and unemployed. Expected losses on loans are increasing. However I am pleased that despite these negative effects we have achieved a positive result for Q1 2020. Moreover the Bank’s liquidity and capital base are so strong that we do not anticipate that any negative effects of covid-19 will influence our lending capacity.

Board chairman Lars Mikkelgaard-Jensen on other effects of covid-19:

• Due to the ban on gatherings of more than 10 persons the AGM has been postponed until further notice. The AGM will be held when gatherings of at least 100 persons are permitted again.
• The Board of Directors has decided to terminate the initiated share buyback programme and we have withdrawn our recommendation to the AGM to distribute dividend on the basis of the 2019 results. These decisions were made due to reasons of prudence, the authorities’ recommendations and to signal our wish to support our customers.

Outlook for 2020

• Significant negative growth is projected for the Danish economy in 2020.
• As a consequence of the income measures implemented, core income is expected to exceed the core income generated in 2019.
• Despite underlying cost inflation, costs (core earnings) are projected to be at the same level as in 2019.
• Impairment charges for 2020 will be adversely impacted by the effects of covid-19.
• With the aim of enhancing efficiency and automating processes, investments of around DKK 75m will be made. This investment is recognised under non-recurring items.  
• Profit after tax is expected to be in the range of DKK 400-800m.
• The expectations regarding impairment charges and profit after tax are subject to significant uncertainty at the moment.

        
Additional information
Jørn Adam Møller, Deputy Group Chief Executive, tel [phone]
Louise Degn-Hansen, Head of Communications, tel [phone]

Attachment

• Interim Report Q1 2020