MP Bank performed well in H2 2009 but incurred losses due to write-offs
MP Bank's operations performed well in the second half of 2009. Profits from operations before write-offs in the second half of the year amounted to ISK 243 million compared to losses of ISK 213 million in the first half of the year. Operations were characterised by robust but stable growth.
The year 2009 was characterised by positive developments in the activities of MP Bank as its first full year as a commercial bank. The bank opened a retail branch in the middle of the year in Borgartún 26 and now offers comprehensive financial services to individuals and businesses, including deposit and lending facilities, payment cards, pension savings, import and export guarantees, currency exchange etc. The retail division of the bank now counts well over 7,000 customers, more than a thousand of which are businesses. The initial costs of launching the retail bank division were considerable and are the main reason for the increase in costs between years. The results of the retail banking division exceeded expectations, particularly considering that operations were built up from nothing and did not start until the middle of the year.
Other business areas also performed well with, for example, a substantial increase in assets and funds under management. Asset management was characterised by caution and limited to domestic assets, due to foreign exchange restrictions. In the first half of the year, the bank began to offer private banking services, which was very well received by clients. The bank's profit centres yielded good results, considering the major difficulties dominating the Icelandic economy last year. The bank strengthened its position on the Icelandic stock exchange where it played a leading role, accounting for 31.5% of traded securities.
The write-off of loans is the largest single factor impacting the bank's results. The write-offs in 2009 were due to the indirect consequences of the collapse of the banking system and not due to new loans. The bank's impairments now amount to a value equivalent to 35% of the bank's loan portfolio, as it was in September 2008. This is a much higher amount than expected as the bank had taken extensive precautionary measures in response to the overheating of the Icelandic economy.
Impairment of the bank´s assets amounted to ISK 1,356 million and the operating results of the bank are therefore negative by ISK 1,180 million, after taxes. Total assets at the end of 2009 amounted to ISK 62,567 million, representing a ISK 9,189 million increase from the previous year. The bank's liquidity position both in Icelandic króna and foreign currency is particularly good. The bank's equity amounts to ISK 5,040 million, with a CAD ratio of 14.9%.
Outlook for 2010
Despite the general bad economic climate in Iceland, which entails, among other things, currency restrictions, high levels of uncertainty, increased taxation on financial institutions and their customers and, not least, non transparent competition in the financial market, MP Bank believes it can deliver satisfactory results for 2010.
The bank will, as before, act cautiously in its operations and will ensure that the infrastructure supports the ongoing growth of the bank. New services have strengthened the bank´s foundations and reduced risk. There are plans to bring new shareholders to the bank which will increase the bank's capital position. A shareholders' meeting has authorised the Board of Directors to raise the bank's share capital by a total of ISK 600 million in nominal value. The bank has already increased its share capital by ISK 100 million.
The outlook for MP Bank is good. MP Bank is the only Icelandic bank, which has honoured all its obligations, both domestic and foreign, and which has not received any government assistance. The retail banking division has low operating costs and is therefore in a favourable competitive position. Last year's results, despite the difficult circumstances, demonstrate that there is an opportunity for growth for a private and independent commercial bank in Iceland, which can be actively involved in the restructuring of the Icelandic financial market. At the beginning of February 2010, the bank moved its headquarters to very suitable premises in Ármúli 13a.