Kvika banki (KVIKA) Q4 2023 earnings summary

Executive summary

• FY2023 profit before tax including discontinued operations was ISK 5,245m; net operating income reached ISK 14,852m, while return on tangible equity was 12.1%.

• The insurance subsidiary TM was classified as held for sale and discontinued; a sale or listing was expected in Q2 or Q3 2024, subject to the process producing binding offers.

• The 2024 outlook was positive, supported by diversified operations, strong liquidity and capital buffers, and expected rate declines that could benefit Icelandic and UK operations.

Financial highlights

• Net operating income was ISK 14,852m versus ISK 14,479m in 2022; net interest income rose to ISK 8,021m from ISK 7,085m, while net fee income declined to ISK 5,916m from ISK 6,414m.

• Continuing-operations profit before tax was ISK 3,009m; profit after tax from discontinued operations was ISK 1,730m, bringing total net profit to ISK 4,034m versus ISK 4,913m in 2022.

• Basic and diluted EPS were ISK 0.84, down from ISK 1.02 in 2022; 2022 comparatives were restated for discontinued operations.

• Administrative expenses were ISK 10,785m versus ISK 9,092m, including ISK 438m of irregular one-off costs; net impairment charge increased to ISK 1,027m from ISK 567m.

• Total assets rose to ISK 335,397m from ISK 299,670m; customer loans increased to ISK 136,323m from ISK 107,139m and deposits to ISK 133,773m from ISK 112,245m.

Outlook and guidance

• The 2024 outlook was positive, with diversified income sources and capital and liquidity buffers described as robust and well above regulatory requirements.

• Expected lower policy rates in 2024 were viewed as a potential tailwind; in UK operations, declining rates were expected to widen interest margins after compression since 2022.

• TM sale or listing was anticipated in Q2 or Q3 2024; no assurance was given that the process would produce binding offers.

• The board proposed no 2024 dividend on FY2023 operations, while retaining the option to consider a shareholder return later, including after a potential TM sale.