UK Car Lending

Financial results for the year 2021

At a meeting of the board of directors on February 24, 2022, the board of directors and the managing director approved the annual accounts of Kvika banki hf. (“Kvika”) for the year 2021.

Highlights of the Annual financial state for the year 2021

  • Profit before tax amounted to ISK 10,487 million (ISK 12,004 million, including the profit of TM hf. and Lykill fjármögnun hf. in the first quarter)
  • Pre-tax return on TWA was 34.7% (35.2% after tax)
  • Earnings per share for the period was ISK 2.62
  • Total assets were 246 billion ISK
  • Group equity amounted to ISK 78 billion
  • The financial conglomerate’s solvency ratio was 1.57 and its solvency ratio (CAR) was 33.8% at the end of the period
  • The group’s overall liquidity coverage ratio (LCR) was 290%
  • Total assets under management was ISK 528 billion
  • Kvika’s sustainability report for the year 2021 is published alongside the publication of the annual financial statements

A meeting for shareholders and market participants will be held at 4:15 p.m. on Thursday, February 24 at the bank’s headquarters on the 9th floor at Katrínartún 2, 105 Reykjavík where the financial results will be presented by Kvika management. The presentation will be in Icelandic and a live stream will be accessible on the following website. Additionally, a recording with English subtitles will be available on the Kvika website:

https://www.kvika.is/fjarfestaupplysingar/fjarfestakynning-24-februar-2022

Attached is a presentation to investors.

Good performance Through Ahe segments

Kvika Group’s pre-tax profit in 2021 amounted to ISK 10,487 million. Like the fusion of Kvika, TM hf. (“TM”) and Lykill fjármögnun hf. (“Lykill fjármögnun”) took place at the end of March, the operations of TM and Lykill fjármögnun are not included in the consolidated income statement for the first three months of the year. TM and Lykill fjármögnun’s first-quarter pre-tax profit was ISK 1,518 million, bringing Kvika, TM and Lykill fjármögnun’s combined pre-tax profit to ISK 12,004 million for the year.

Return on weighted tangible equity before tax was 34.7% for the year.

Kvika Group’s net interest income was ISK 4,646 million, up 158% year-on-year, with the increase in interest income mainly driven by higher size of the loan portfolio after the merger with Lykill fjármögnun, the change in the loan composition of the portfolio and liquidity, as well as a favorable development in funding costs. Net impairment amounted to positive ISK 139 million during the year compared to negative net impairment of ISK 317 million in 2020. Net finance income amounted to ISK 5,672 million as returns were good in most asset markets where the group is active. Fees and commissions continued to grow, with income net of fees and commissions amounting to ISK 6,828 million, an increase of 15% compared to the year 2020. The amortization of intangible assets resulting from the purchase price allocation amounted to ISK 319 million during the year.

Low combined ratio of TM and Good return on financial assets

TM’s combined ratio was 87.2% in the fourth quarter, compared to 94.9% for the same period in 2020. The insurance company’s investment income was ISK 1,291 million in the fourth quarter , bringing the return on the asset portfolio to 3.7% over the period. TM’s combined ratio for the full year 2021 was 88.7% and investment income was 17.7%.

Balance Sheet expands due to merging

The total assets of the Kvika Group increased by 100% or 123 billion ISK in the year 2021 and amount to 246 billion ISK. Customer loans increased by ISK 42 billion, the increase being largely due to the merger. The share of loans to individuals increased from 19% to 44% of all loans at the end of the period. Assets with banks and the Central Bank of Iceland, as well as government guaranteed securities, amounted to ISK 65 billion and total liquid assets to ISK 100 billion, an increase of 724 billion ISK over the year. The group’s total liquidity coverage ratio (LCR), excluding insurance operations, stood at 290% at the end of the year, well above the minimum requirement of 100%.

Group equity increased with the merger of Kvika, TM and Lykill fjármögnun, amounting to ISK 78 billion at the end of the year, compared to ISK 19 billion at the end of 2020. solvency of the financial conglomerate (Kvika and its subsidiaries, including TM tryggingar hf.) was 1.57 at the end of the year and the risk-weighted capital adequacy ratio (CAR) of the group, excluding the effect of TM tryggingar hf., was 33.8%, while the capital requirement, including capital buffers set by regulators, is 20.6%.

The acquisition of Ortus Secure Funding Completed

Kvika has completed the acquisition, through its UK subsidiary Kvika Securities Ltd. (“KSL”), a majority stake in alternative lender Ortus Secured Finance Ltd. (“Ortus”) from Stoðir hf. and other minority shareholders, following the signing of the Heads of Terms at the end of October 2021. Following the transaction, Kvika owns nearly 80% of the ordinary shares of Ortus, having acquired an initial minority share of 15% in 2018. The transaction will increase Kvika’s total consolidated assets by more than 7%. For 2022, Ortus is expected to generate a pre-tax profit of c. The equivalent of 900 million ISK. The acquisition has no impact on the 2021 financial results. Details of the transaction can be found in a press release dated February 24, 2022.

Change the executive Management of Kvika ggroup

The group’s organizational chart has been simplified and now consists of four main operating segments: Commercial Banking, Investment Banking, Asset Management and Insurance. Investment Banking consists of Capital Markets and Corporate Finance, which will however continue to be operated separately, in accordance with legal requirements. Bjarni Eyvinds Þrastarson will be Managing Director of Investment Banking and Baldur Stefánsson will continue to lead Corporate Finance.

Kvika Pforget Iyou Ffirst of all Sustainabibed Rreport

Along with the publication of the annual financial statements, Kvika published the company’s first sustainability report. Previously, ESG reports were published on an annual basis, but the information they contain is now part of the sustainability report. The report provides a comprehensive picture of how the company is working towards sustainability and social responsibility on a consolidated basis. The report is based on Nasdaq’s ESG 2.0 reporting guide but also takes into account GRI standards and relevant indicators are answered. The allocation and impact report for 2021 in relation to Kvika’s green financial framework is published as part of the sustainability report. Deloitte’s opinion, provided on selected information with limited certainty, can be viewed on Kvika’s website.

Revenue estimate for 2022

Kvika Group’s profit forecast for the year 2022 assumes a pre-tax profit of ISK 8.0-9.0 billion, which equates to an 18.3%-20.6% return on equity weighted body weights of the group. The profit estimate includes ISK 376 million of amortization of intangible assets due to purchase price allocation.

Marinó Örn Tryggvason, CEO of Kvika:

“2021 has been an eventful year for Kvikaas during the year the bank merged with TM and Lykill fjármögnun. The merger has exceeded expectations and the achievement of financial targets has gone better than initially expected.

The merged entity is financially strong, built on solid foundations and presents significant growth opportunities. Kvika intends to be a leader in revolutionizing financial services in Iceland and increasing competition. With the acquisitions of fintech companies Aur and Netgiro last year, the number of customers increased significantly.

Sustainability has also gained importance within the business and I’m glad to see Kvika’s first durability report was revealed. The report gives a complete picture of the group’s efforts and how Kvika addresses sustainability and social responsibility. Another step has been taken last fall when the bank released its first Green Financial Framework. Subsequently, the bank’s first green bond was issued for which demand far exceeded our expectations.”

Kvika is in a unique position as a society holds a small market share in many of its key business areas, while possessing significant financial strength, a large number of customers and the infrastructure necessary to increase its market share.

Last December, the company announced seven goals for the next three years, so the company’s strategy is clear. Goals include increasing the number of fintech users across brands, increasing market share in insurance and asset management, increasing the scale of UK operations , the improvement of the bank’s financing conditions, the fact of being a responsible player in society and the pursuit of profitable operations.

In accordance with this strategythe majority of Britons alternative lender Ortus The share capital of Secured Finance was acquired, which I believe could be One of the most interesting acquisitions that the Kvika the group has made.