Annual Report 2018 Annual Report 2018
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ANNUAL REPORT 2018 RINGKJØBING LANDBOBANK ANNUAL REPORT 2018 CONTENTS Page 2 Dear shareholder 3 Annual report - highlights 3 Main and key figures Management’s review: 6 Financial review 7 Pro forma financial statements 12 Official financial statements 24 Capital structure 30 Risks and risk management 43 Corporate governance etc. 51 Corporate social responsibility Statement and reports: 54 Management statement 55 Auditors’ reports Financial statements: 62 Statements of income and comprehensive income 62 Proposed distribution of profit 63 Core earnings 64 Balance sheet 66 Statement of changes in equity 67 Statement of capital 69 Overview of notes 70 Notes 110 Five-year main figures 112 Five-year key figures Other information: 116 Shareholders’ committee 118 Board of directors 128 General management 130 Company information 131 Corporate announcements 133 Financial calendar 135 The bank’s branches Disclaimer: This document is a translation of an original document in Danish. The original Danish text shall be the governing text for all purposes and in case of any discrepancy the Danish wording shall be applicable. ANNUAL REPORT 2018 PAGE 1 DEAR SHAREHOLDER 2018 was a really good year for Ringkjøbing Landbobank. The bank’s results coincided with an increase in customer numbers, a high degree of customer satisfaction and associated reputational benefits. Furthermore, of course, we completed our merger with Nordjyske Bank in June as planned. The merger was well received by our customers. Lending and customer numbers also con- tinued to grow in all parts of the bank. Nordjyske Bank was well-run and is a strong brand in North Jutland. We therefore decided to keep the brand name. Thus our customers in North Jutland have remained largely unaffected by the merger with Ringkjøbing Landbobank. We take this opportunity to express our thanks for the warm welcome we have received in North Jutland. The stock market also responded positively to the results and to the merger, with a 9% re- turn on the bank’s shares in 2018. This should be seen in the context of a total fall of 40% in the OMX Copenhagen Banks PI index. The pro forma financial statements for 2018 show core earnings of DKK 1,092 million and profit before special costs of DKK 1,169 million, which is 8% higher than the previous year. Special costs totalling DKK 217 million were posted in this merger year, after which profit before tax stood at DKK 952 million. We consider this highly satisfactory. The general meeting is recommended to approve an increase in ordinary dividend to DKK 10 per share. A new share buy-back programme for up to DKK 190 million is also proposed. We thus continue our policy of recent years. We will pay 64% of the bank’s profit to share- holders, and transfer the rest to equity, to support future growth in the bank’s lending. 2018 proved to be another year of high levels of customer satisfaction and in January 2019 we were designated the bank in Denmark with the best reputation. The mantra “the Cus- tomer is King” is not new to Ringkjøbing Landbobank, and our customers and staff alike appreciate this strong customer focus. Expertise, responsiveness and integrity have been key words for the many new customers we welcomed during the year. We also take this opportunity to thank our highly skilled employees. They did a fantastic job in an intensive year when we were developing the bank, converting and migrating products and maintaining close relationships with our customers. The expertise, stability, loyalty and indomitable spirit of our employees are an unsurpassed combination. 2019 looks set to be another pleasing year. Our main tasks will be to serve our current customers and continue to increase our market share by winning new customers. Our ad- ministrative goals include the IT conversion, scheduled for March. Once all our systems are on the same platform, we will spend the rest of the year streamlining them. We expect core earnings in the range DKK 950 - 1,150 million, to which the result for the securities portfolio will have to be added. Finally we would like to thank our customers and you, our shareholders, for the strong sup- port which you have shown to the bank. John Bull Fisker CEO PAGE 2 RINGKJØBING LANDBOBANK A/S ANNUAL REPORT - HIGHLIGHTS • The financial statements show a 9% increase in core earnings to DKK 1,092 million and an 8% increase in profit before special costs to DKK 1,169 million • The integration of the banks is proceeding as expected and the merger has been well received by the customers • Continued big increase in customers and 7% growth in loans to DKK 33 billion • Pay-out ratio of 64%, increase in dividend to DKK 10 per share and a new share buy-back programme of DKK 190 million • Common equity tier 1 capital ratio of 15.0% and MREL capital ratio of 25.2% • Customer satisfaction high for both brands • The bank again tops the list of Voxmeter’s reputation survey in Denmark MAIN AND KEY FIGURES - pro forma 2018 2017 2016 Main figures for the bank (DKK million) Total core income 2,001 1,917 1,861 Total expenses and depreciation -866 -845 -815 Core earnings before impairments 1,135 1,072 1,046 Impairment charges for loans etc. -43 -70 -211 Core earnings 1,092 1,002 835 Result for the portfolio etc. +77 +84 +78 Profit before special costs 1,169 1,086 913 Special costs -217 -22 -22 Profit before tax 952 1,064 891 Net profit for the year 778 848 726 Equity 7,189 6,769 6,313 Deposits including pooled schemes 36,993 35,854 34,152 Loans 33,350 31,173 28,304 Balance sheet total 49,651 46,324 43,702 Guarantees 7,829 7,858 6,682 Key figures for the bank (per cent) Profit before special costs as a percentage of average equity excluding intangible assets, p.a. 18.8 17.8 16.2 Profit before tax as a percentage of average equity, p.a. 13.6 16.3 14.6 Rate of costs 43.3 44.1 43.8 Common equity tier 1 capital ratio 15.0 15.8 15.8 Total capital ratio 18.8 17.3 17.5 MREL capital ratio 25.2 - - Key figures per DKK 1 share (DKK) Core earnings 36.5 30.9 27.6 Profit before tax 31.8 33.7 29.6 Net profit for the year 26.0 27.0 24.1 Book value 240.4 175.0 159.0 Price, end of year 340.0 321.5 292.6 Dividend 10.0 9.0 7.2 ANNUAL REPORT 2018 PAGE 3 PAGE 4 RINGKJØBING LANDBOBANK A/S MANAGEMENT'S REVIEW Page 6 Financial review 7 Pro forma financial statements 12 Official financial statements 24 Capital structure 30 Risks and risk management 43 Corporate governance etc. 51 Corporate social responsibility ANNUAL REPORT 2018 PAGE 5 FINANCIAL REVIEW Financial review The annual report for 2018 is the first for the merged bank: Ringkjøbing Landbobank and Nordjyske Bank merged on 8 June 2018, with Ringkjøbing Landbobank as the post- merger entity. The bank has drawn up two sets of statements in the 2018 annual report: both pro forma and official financial statements. The pro forma financial statements contain an income statement comprising figures for both the “old” Ringkjøbing Landbobank and the “old” Nordjyske Bank for the full year 2018, i.e. as if the merger had taken effect on 1 January 2018. The pro forma state- ments show the non-recurring and merger costs etc. in both banks as separate items. The pro forma statements are a part of the present financial review which appears in the management's review of the financial statements. The pro forma statements have been prepared to give the reader a better overview of the development in the merged bank’s profit and its financial position. The pro forma statements also contain comparative figures for 2017. The actual financial statements contain both an income statement and a statement of the alternative performance measure “Core earnings”, comprising financial figures for the “old” Ringkjøbing Landbobank for the full year 2018 plus financial figures for the “old” Nordjyske Bank for the period 9 June to 31 December 2018. They include merger costs relating to the “old” Ringkjøbing Landbobank and to the completion of the actual merger after final approval. PAGE 6 RINGKJØBING LANDBOBANK A/S FINANCIAL REVIEW - pro forma Pro forma financial statements The income statement items in the pro forma financial statements were calculated by adding up figures from Ringkjøbing Landbobank’s statement of the alternative measure of performance “Core earnings” and pro forma figures from Nordjyske Bank converted and adjusted to Ringkjøbing Landbobank’s statement of the alternative performance measure “Core earnings”. Balance sheet items and contingent liabilities as well as capital ratios as at 31 December 2017 were calculated by a simple adding up of figures from the respective financial state- ments from Ringkjøbing Landbobank and Nordjyske Bank, without any adjustments. Core earnings Note 2018 2017 DKK 1,000 DKK 1,000 Net interest income 1,147,483 1,123,481 A Net fee and commission income excluding trading income 568,551 550,297 Income from sector shares etc. 160,316 120,059 A Foreign exchange income 30,559 30,953 Other operating income 6,223 6,047 Total core income excluding trading income 1,913,132 1,830,837 A Trading income 87,664 86,094 Total core income 2,000,796 1,916,931 B Staff and administration costs 846,507 829,346 Depreciation and write-downs on tangible assets 15,871 10,957 Other operating expenses 3,399 4,651 Total expenses etc.