Føroya Banki (FOBANK) Q2 2024 earnings summary

Executive summary

• H1 2024 profit before tax reached DKK 175m, up DKK 13m year-over-year, driven by growth in lending, deposits, and investment returns, with credit quality remaining robust and cost control maintained.

• Lending and deposit volumes increased across Faroe Islands and Greenland, with market shares of ~40% and ~20% respectively.

• Total assets increased to DKK 13.5bn, loans and advances rose to DKK 9.0bn, and deposits climbed to DKK 9.2bn compared to year-end 2023.

• The Danish FSA's assessment of property markets impacted risk weights and capital requirements.

• Strategic review for the 2025 period is nearing completion, with updated financial objectives to be announced.

Financial highlights

• Net interest income for H1 2024 was DKK 227.6m, up 17% year-over-year, but down DKK 2.8m quarter-over-quarter as interest rates peaked.

• Net fee and commission income declined DKK 2.3m quarter-over-quarter and DKK 3.7m year-over-year, mainly due to lower guarantee commissions and removal of online banking fees.

• Net insurance income increased, with premium income up DKK 4.9m year-over-year and claims up DKK 0.5m year-over-year due to large and weather-related events.

• Net profit for H1 2024 was DKK 142.0m, up from DKK 131.1m in H1 2023.

• Operating costs rose DKK 3.8m quarter-over-quarter and DKK 4.8m year-over-year, mainly from IT and marketing expenses.

Outlook and guidance

• 2024 net profit is expected at DKK 225–255m, corresponding to a ROE of 12–14%, with guidance subject to uncertainties in impairments, market adjustments, and macroeconomic factors.

• Impairment charges for 2024 are expected to normalize at DKK 40m.

• Interest rates are expected to decline further in 2024, with full effects to be seen later in the year.