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BRAbank ASA: Taking action to reduce credit risk and restore profitability

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Highlights:

  • Net loans at NOK 3 926 million, down from NOK 4 494 million in Q3’19
    • Capital constraints and sale of portfolio
  • Net profit affected by significant one-offs
    • NOK 88 million in extraordinary loan losses
    • Restructuring costs of NOK 13 million
  • New measures to improve capital adequacy in progress
    • Equity issue of NOK 65-85 million approved
    • Up to NOK 35 million in tier 2 bond issue
  • Risk management is key priority for 2020
    • Reduced risk appetite, improved credit models
  • Full effect from extensive cost program in 2020

BRAbank’s operations and growth continued to be negatively affected by capital constraints in the fourth quarter, driven by restructuring costs and higher loan losses than expected. Net loss before tax in the fourth quarter was NOK 110.1 million, while the after-tax results ended at a deficit of NOK 72.9 million.

As announced in a stock exchange notification on 20 December 2019, the Board of Directors carried out a thorough review of the valuation of the loan book. This resulted in an extraordinary loan loss provision of NOK 68 million. In addition, due to uncertainty in the valuation of non-performing loans in the second-hand market the Board of Directors has increased extraordinary provisions further by NOK 20 million to NOK 88 million.

Total loan losses were NOK 136.8 million in the quarter compared to NOK 47.2 million in the fourth quarter 2018. As a consequence, the bank’s capital adequacy was below the requirements at the end of the year.

Several measures have been taken to counteract the development. The bank announced a private placement and tier 2 bond issue, both underwritten by NOK 65 million and NOK 15 million, respectively. Both are expected to be completed in the first quarter of 2020. In addition, BRAbank has sold a Finnish portfolio of non-performing loans in the fourth quarter and is in a process of selling another non-performing portfolio.

Net interest income for the quarter was NOK 84.1 million, up from NOK 75.3 million in Q4 2018. Net interest income for the full year was NOK 348.1 million, an increase of 27.5 per cent compared to the full year 2018 (NOK 273.0 million).

“BRAbank’s operations and growth was influenced by capital restraints and extraordinary loan losses in the quarter. We have initiated a series of measures to restore profitability and reduce portfolio risk. A private placement and tier 2 bond issue are underway. Further, we are implementing our restructuring program and working to strengthen credit quality and reducing risk in all markets. I am impressed with the way my colleagues have adapted to more challenging markets and I am very committed to restore the profitability in the bank”, says Hans Ljøen, CEO of BRAbank ASA

Going forward, BRAbank will prioritise loan growth in less capital-intensive markets. Consequently, BRAbank will continue to increase the exposure in Finland relative to Norway. Operational focus will be on improving operational efficiency, reducing credit risk and commercialise BRAbank’s technology platform.

Presentation in Oslo and webcast today Thursday 20 February at 11:00 AM CET

The company will host a presentation of fourth quarter 2019 results in Oslo Thursday 20 February at 11:00 AM CET at Felix Conference Center, Bryggetorget 3, 0250 Oslo.

The presentation can be followed through live webcast here: www.brabank.no/

Material

The report and presentation will also be made available on www.brabank.no/ and www.newsweb.no.

For further information contact:

Hans Ljøen, Chief Executive Officer at BRAbank, phone: +47 481 87 750

Torbjørn Botnevik, Chief Financial Officer at BRAbank, phone: +47 982 80 233

About BRAbank

BRAbank ASA is a digital bank focused on consumer finance in the Nordics. BRAbank is a cloud-based bank with strong focus on customer experience and fintech solutions. BRAbank is based in Bergen, Norway and started operation as Monobank in November 2015 and merged with BRAbank in June 2019. The bank has experienced strong growth.

The bank offers unsecured lending to qualified private individuals in Norway, Finland and Sweden. The screening process is based on an automated evaluation system, developed using the latest technology and advanced analytics. The bank also offers attractive deposit rates on its savings accounts. Deposits up to NOK 2 million are guaranteed by the Norwegian Banks' Guarantee fund, of which BRAbank is a member.

BRAbank is an independent bank with approximately 1,300 shareholders and is listed on the Oslo Stock Exchange's Merkur Market with ticker symbol BRA-ME. BRAbank has been awarded with "Great Place to Work" three times since the start.

This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

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