Aktia Bank Plc’s Interim Report January–September 2022: Rising interest rates increased interest income – difficult markets weighed down results
November 04 2022 - 2:00AM
Aktia Bank Plc’s Interim Report January–September 2022: Rising
interest rates increased interest income – difficult markets
weighed down results
Aktia Bank PlcStock Exchange Release4 November 2022 at 8.00
a.m.
Aktia Bank Plc’s
Interim Report
January–September
2022:
Rising interest rates increased interest income – difficult
markets weighed down results
The quarter in
short
- Interest income from lending continued to grow strongly and the
average margin for the entire loan book continued to improve.
- Increased funding and hedging costs weighed down net interest
income.
- Net subscriptions in asset management were positive, the market
decline decreased the market values of the funds.
- Sales of international fund products expanded to three new
markets.
- Higher interest rates reduced the market value of the life
insurance business's investment portfolio, solvency rose to record
levels.
- Credit loss provisions remained at a moderate level.
Outlook 2022 (updated
27 October
2022)
Aktia's comparable operating profit in 2022 is expected to be
lower than in 2021. A key uncertainty regarding the outlook is the
development of the market value of different asset classes.
- The net interest income is expected to remain on the same level
or be slightly higher than in the third quarter. The positive
impact of the increasing short-term reference rate on private
customers’ net interest income will be gradually visible as a
result of the annual interest rate adjustments on mortgage loans
while financing costs are expected to increase.
- Commission income is expected to increase slightly during the
last quarter of the year compared to the previous quarter.
- The net income from life insurance depends on the changes in
market values. In the first three quarters of the year, rising
interest rates and market uncertainty have led to negative
unrealised value changes in the life insurance business's
investment portfolio.
- Considering the impact of inflation, the expenses are expected
to be approximately at the level of the comparable operating
expenses 2021.
- Potential credit loss provisions are expected to remain at a
moderate level while the liquidity and capital adequacy of Aktia
remain stable.
Previous outlook for 2022: Aktia's comparable operating profit
in 2022 is expected to be approximately at the same level as in
2021.
In 2021, Aktia's comparable operating profit was EUR 87.4
million.
Mikko Ayub, CEO:
The exceptional economic situation, which has marked the whole
year 2022, continued during the third quarter. Concerns over
accelerating inflation dramatically increased interest rates, and
September was a difficult month in the investment markets. The
global equity markets declined by around 8% in local currencies,
and long-term interest rates on the fixed income market continued
to rise sharply. Returns were negative across the board. The weak
development was caused by both recession fears and a much tighter
monetary policy than expected due to the high rate of inflation. It
seems that the coming months will not provide a solution to the
difficult situation.
The higher interest rates increased Aktia’s returns from lending
significantly during the quarter, but the bank's hedging and
financing costs increased even faster as central bank and
market-based funding went up in price even more rapidly. As we said
in connection with the publication of the results for the second
quarter, the rise in interest rates will not yet bring significant
benefits for the net interest income in 2022. However, the net
impact of the rise in interest rates on interest income is expected
to be considerably positive next year.
On the corporate customer side, activity levels remained very
good in the third quarter, and especially asset-based financing
continued to grow. Interest income from the corporate customer
business increased due to active pricing and volume growth. The
average margin for the entire loan book continued to rise. The
entire private customer loan book increased moderately during the
quarter. Consumers' views on the development of their personal
finance in an exceptional environment were still cautious, and
demand for mortgage loans slowed down during the third quarter. As
of yet, we have not seen any significant increase in the demand for
instalment-free periods. Credit loss provisions remained low. For
us, a good-quality loan book is of paramount importance. In this
way we are preparing for more difficult times as the economic
environment is weakening.
The market decline weighed down fund market values and
commission income over the past quarter. Despite the difficult
market situation, net subscriptions in asset management remained
positive. The development was positive for both domestic
institutions and private banking customers. Aktia also introduced
two new fund products during the third quarter: The UI-Aktia
Sustainable Corporate Bond fund, a dark green fund in accordance
with Article 9 in the EU Sustainable Finance Disclosure Regulation,
and the non-UCITS fund Aktia Alternative Investments, which invests
in alternative asset classes, were launched in September. The sale
of Aktia's international fund products expanded to Spain, Italy and
Portugal.
The life insurance business also continued to develop positively
during the third quarter. In particular, the new sales of risk life
insurances were strong. The life insurance solvency rose to record
levels. However, the rapidly rising interest rates reduced the
market value of the fixed income-oriented life insurance portfolio,
weighing the net income from life insurance.
Wealth manager bank at the core of the
strategy
We drove Aktia’s wealth manager bank strategy forward with
determination also during the past quarter. The integration of
Taaleri Wealth Management is now on the home stretch, and customer
service processes will be harmonised by the end of the year. As the
technical integration is coming to an end, we will pay even more
attention to developing the customer experience. A profitable
banking business is another important pillar of Aktia's strategy,
especially in the current interest rate environment.
It is important for me to pay particular attention to the cost
development and improving efficiency in the group in the future.
This will also free up funds for business development. A good
example of this is the strategic cooperation with the IT service
company CGI that we launched in October, which I am very pleased
about. The joint venture now being established between Aktia and
CGI will provide Aktia with a significant part of the maintenance
and development services for Aktia's banking business IT systems in
the future, which will help shift the focus from administration to
development of new and competitive products and services. Aktia
estimates that it will achieve cost savings of several million
euros over the contract period of at least five years. A part of
this will be used to develop digital services. The third quarter
costs fell slightly from the previous quarter, even though the
operating expenses included a significant amount of consulting
costs related to the strategic cooperation.
In September, Aktia decided as the first Finnish bank to
announce that it had begun to pay interest on fixed-term deposits.
The campaign exceeded our expectations and provoked an important
discussion about interest rates on bank deposits and a great deal
of interest among new customers. Deposits are an essential part of
funding for banks, and as market financing becomes more expensive,
the importance of deposits will also increase as a financial
instrument for Aktia.
Although the market environment has been turbulent over the past
year, our employees have helped Aktia's customers also through more
difficult times with their strong professional skills. For this I
would like to extend my sincere thanks to my competent colleagues.
I would also like to thank our customers for their trust in Aktia.
We work hard every day to be worthy of it.
Key figures
(EUR
million) |
3Q/2022 |
3Q/2021 |
∆ % |
1-9/2022 |
1-9/2021 |
∆ % |
2Q2022 |
∆ % |
1Q2022 |
2021 |
Net interest income |
24.0 |
23.1 |
4 % |
75.0 |
72.2 |
4 % |
25.8 |
-7 % |
25.1 |
96.2 |
Net commission income |
29.9 |
33.5 |
-11 % |
92.9 |
90.3 |
3 % |
31.6 |
-6 % |
31.3 |
124.0 |
Net income from life insurance |
3.4 |
9.7 |
-65 % |
17.9 |
30.1 |
-41 % |
12.7 |
-73 % |
1.8 |
37.7 |
Total operating income |
56.2 |
67.1 |
-16 % |
186.8 |
198.3 |
-6 % |
71.6 |
-21 % |
59.0 |
263.8 |
Operating expenses |
-42.8 |
-41.6 |
3 % |
-133.4 |
-129.2 |
3 % |
-44.7 |
-4 % |
-45.9 |
-174.4 |
Impairment of credits and other commitments |
-1.0 |
-1.0 |
1 % |
-3.1 |
-4.6 |
-33 % |
-2.4 |
-58 % |
0.3 |
-4.5 |
Operating profit |
12.3 |
24.4 |
-49 % |
50.6 |
64.3 |
-21 % |
24.7 |
-50 % |
13.5 |
84.6 |
Comparable operating income1 |
56.2 |
66.5 |
-15 % |
186.6 |
197.7 |
-6 % |
71.6 |
-21 % |
58.8 |
263.2 |
Comparable operating expenses1 |
-42.8 |
-41.6 |
3 % |
-133.4 |
-126.2 |
6 % |
-44.7 |
4 % |
-45.9 |
-171.1 |
Comparable operating
profit1 |
12.3 |
23.8 |
-48 % |
50.4 |
66.7 |
-24 % |
24.7 |
-50 % |
13.3 |
87.4 |
Cost-to-income ratio |
0.76 |
0.62 |
23 % |
0.71 |
0.65 |
10 % |
0.62 |
22 % |
0.78 |
0.66 |
Comparable cost-to-income ratio1 |
0.76 |
0.63 |
21 % |
0.71 |
0.64 |
12 % |
0.62 |
22 % |
0.78 |
0.65 |
Earnings per share (EPS), EUR |
0.14 |
0.28 |
-50 % |
0.57 |
0.72 |
-21 % |
0.28 |
-50 % |
0.15 |
0.95 |
Comparable earnings per share (EPS), EUR1 |
0.14 |
0.27 |
-49 % |
0.56 |
0.75 |
-25 % |
0.28 |
-50 % |
0.15 |
0.98 |
Return on equity (ROE), % |
6.4 |
11.4 |
-44 % |
8.3 |
10.0 |
-17 % |
12.3 |
-48 % |
6.5 |
10.0 |
Comparable return on equity (ROE), %1 |
6.4 |
11.2 |
-43 % |
8.3 |
10.4 |
-20 % |
12.3 |
-48 % |
6.5 |
10.3 |
Common Equity Tier 1 capital ratio (CET1), %2 |
10.6 |
10.4 |
2 % |
10.6 |
10.4 |
2 % |
10.4 |
2 % |
10.6 |
11.2 |
1) Alternative performance measures2) At the end of the
period
Webcast from the results conference
A live webcast from the results event will take place on 4
November 2022 at 10.30 a.m. CEO Mikko Ayub and CFO Outi Henriksson
will present the results. The event is held in English and can be
seen live at https://aktia.videosync.fi/2022-q3-results. A
recording of the webcast will be available at
www.aktia.com after the event.
AKTIA BANK PLC
For more information: Outi Henriksson, CFO, tel. +358
10 247 6236Lotta Borgström, Director, Investor Relations and
Communications, tel. +358 10 247 6838, lotta.borgstrom (at)
aktia.fi
Distribution:Nasdaq Helsinki LtdCentral mediawww.aktia.com
Aktia is a Finnish asset manager, bank and life insurer that has
been creating wealth and wellbeing from one generation to the next
for 200 years. We serve our customers in digital channels
everywhere and face-to-face in our offices in the Helsinki, Turku,
Tampere, Vaasa and Oulu regions. Our award-winning asset management
business sells investment funds internationally. We employ
approximately 900 people around Finland. Aktia's assets under
management (AuM) on 30 September 2022 amounted to EUR 13.6 billion,
and the balance sheet total was EUR 11.9 billion. Aktia's shares
are listed on Nasdaq Helsinki Ltd (AKTIA). aktia.com.
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