Føroya Banki (FOBANK) Q4 2023 earnings summary

Executive summary

• 2023 performance benefited from higher interest rates, loan and deposit growth, improved income-cost balance, investment portfolio returns and solid customer performance.

• Net profit reached DKK 308m, up from DKK 164m in 2022; customer resilience supported lower impairment charges than initially expected.

Financial highlights

• Operating income was DKK 528m vs DKK 447m in 2022; net interest income rose to DKK 360m from DKK 270m, while fee income declined to DKK 77m from DKK 88m.

• Operating costs were DKK 257m vs DKK 243m; profit before impairment charges was DKK 269m vs DKK 202m, and net impairment charges were DKK 10m vs DKK 47m.

• Operating profit was DKK 279m; investment portfolio earnings were DKK 109m, profit before tax DKK 379m and net profit DKK 308m.

• Loans and advances increased to DKK 8.9bn from DKK 8.1bn; deposits and other debt reached DKK 8.7bn from DKK 8.4bn.

Outlook and guidance

• 2024 net profit guidance is DKK 225–255m, corresponding to ROE of 12%–14%; targets remain ROE above 12%, cost/income below 53% and CET1 capital of 20%.

• Net impairment charges are expected to normalize at approximately DKK 40m in 2024; operating costs are expected to rise, including IT costs by ~8% and staff costs from modest headcount growth and ~4% general pay increases.