Kvika banki (KVIKA) Q3 & CMD 2024 earnings summary

Financial performance and strategic developments

• Achieved profit before tax from continuing operations of ISK 1,813 million in Q3 2024, up from ISK 234 million in Q3 2023; profit after tax including TM Insurance reached ISK 2,363 million, a significant year-on-year increase.

• Net operating income for the first nine months of 2024 was ISK 12,519 million, up from ISK 10,849 million in the same period of 2023.

• Net interest income rose 31% year-on-year, driven by 18% growth in customer loans and improved net interest margin; net fee and commission income increased 17% year-on-year, with gains across all business units.

• Administrative expenses decreased by 11% year-on-year, reflecting effective cost management and a 10% reduction in headcount; expenses for 9M 2024 were ISK 7,744 million, down from ISK 8,006 million in 9M 2023.

• Net impairment charges rose to ISK 514 million from ISK 201 million in 9M 2023.

Strategic focus and business transformation

• The sale of TM tryggingar hf. to Landsbankinn hf. was agreed for ISK 28.6 billion, pending regulatory approval, with proceeds expected to nearly double Kvika's capital and result in a post-divestment capital adequacy ratio above 40%.

• The divestment of TM will simplify operations, reduce earnings volatility, and shift focus to more stable interest and fee income.

• Loan book is expected to nearly double over the next three years, targeting ISK ~300 billion by 2027, with increased diversification across mortgages, corporate, and UK lending.

• Kvika’s multi-brand strategy in retail banking (Auður, Lykill, Netgíró, Aur, Straumur) has driven strong deposit and loan growth, with Auður surpassing 50,000 customers and expanding into corporate and mortgage products.

• UK operations, led by Ortus Secured Finance, have achieved a turnaround with doubled net interest income and a disciplined, property-secured loan book; launch of Harpa Capital Partners PE fund is imminent.

Capital, risk, and shareholder returns

• Capital adequacy ratio was 22.5% at 30 September 2024, with a CET1 ratio of 19.6%, both well above regulatory requirements; liquidity coverage ratio is 780% and net stable funding ratio is 148%.

• The Group's solvency ratio stood at 1.24, above the regulatory minimum of 1.0.

• The 2024 AGM authorized a share buy-back program, completed in September 2024, with ISK 1 billion in shares repurchased.

• No dividend will be paid in 2024 on 2023 operations, but a special dividend of ISK 20 billion is planned post-TM sale, with the remainder of capital retained for growth.

• Risk management remains a focus, with ongoing adaptation to regulatory changes and a strong emphasis on capital and liquidity management.