Aktia Bank Plc’s Interim Report January–March 2023: Aktia’s net interest income increased strongly
Aktia Bank Plc
Stock Exchange Release
11 May 2023 at 8.00 a.m.
Aktia Bank Plc’s Interim Report January–March 2023: Aktia’s net interest income increased strongly
The quarter in short
- Net interest income grew by 27% to EUR 31.8 (25.1) million from the previous year. The strong growth is mainly due to the increase in interest income in lending.
- Net commission income remained approximately at the previous year’s level at EUR 30.3 (31.3) million. The assets under management (AuM) increased from the end of the year to EUR 13.8 (13.5) billion.
- Net income from life insurance amounted to EUR 7.2 (21.4) million. The recalculated comparative figures for 2022 according to the new accounting standard IFRS 17 include considerable positive market valuations and thus make the comparison significantly more difficult.
- The business developed according to the company’s expectations, but do to the accounting standard change (IFRS 17), the comparable operating profit decreased to EUR 23.6 (35.6) million.
- The costs increased somewhat due to inflation and a higher estimated cost for the stability fee than last year.
- Credit loss provisions remained at a moderate level at EUR -0.9 million.
- The CET1 ratio, which describes Aktia’s capital adequacy, increased to 11.1 (10.8) % from the year-end.
Outlook 2023 (unchanged)
Aktia’s comparable operating profit for 2023 is expected to be clearly higher than the EUR 65.2 million reported for 2022 (under the accounting standard previously applied for the life insurance business).
The outlook has been prepared based on the following expectations:
- Net interest income is expected to be significantly higher than in 2022.
- Net commission income is expected to increase slightly in 2023.
- The life insurance business is expected to develop stably. However, the result is affected by changes in market values. The recalculated result for 2022 according to the new accounting standard IFRS 17 is exceptionally high due to accounting technical changes.
- Operating expenses are expected to be at the same level as 2022.
- Credit loss provisions are expected to be at the same level as 2022.
Juha Hammerén, Interim CEO:
The first quarter of 2023 was strong for Aktia, which pleases me especially after the challenging previous year. Net interest income grew by 27%, which is mainly explained by higher interest income due to the increase in interest rates. The increase also well exceeded the increase in funding expenses.
Provisions for potential credit losses were very moderate during the first quarter and the quality of Aktia’s loan book remained good. Due to the general market uncertainty, the housing market remained rather inactive, but in the corporate customer business lending continued to increase. The average margin for the entire loan book continued to rise. The sales and interest towards the Finnair Visa Credit card, developed in cooperation between Aktia and Finnair, were strong also outside our standard customer base, which I am particularly pleased about.
The net commission income development was stable during the beginning of the year and close to last year’s level, although Assets under Management, at EUR 13.8 billion, understandably did not reach the level of the previous year’s first quarter. The gross sales within Asset Management in the quarter were good, with net subscriptions amounting to EUR 131 million.
There was a great interest in structured products in particular, and their sales reached record levels, which increased the net commission income. In cooperation with Taaleri, Aktia launched the Article 9 fund SolarWind III at the beginning of the year, which strongly supports the green transition in the energy economy. Sales have started well, and the fund is an important complement to our range of responsible investment products. Our determined work to improve the customer experience also began to bear fruit – customer satisfaction in Private Banking improved significantly.
New accounting standard makes comparing the net income from life insurance more difficult
The life insurance business continued its stable development and the sales of risk life insurances in particular continued to grow. However, net income from life insurance was below the previous year’s comparative figures, adjusted according to the IFRS 17 accounting standard, which were exceptionally high due to the rise in interest rates at the beginning of 2022. This makes comparisons considerably more difficult. The IFRS 17 accounting standard was introduced on 1 January 2023, which greatly affected the reporting and comparative figures of Aktia’s life insurance business. Aktia published the revised figures in a stock exchange bulletin on 8 May 2023.
It should also be noted that in order to increase transparency, Aktia now for the first time reports Asset Management and Life Insurance as separate, independent segments – not as one combined entity.
The cost development in the past quarter was moderate, but the high inflation was particularly reflected in the increased IT costs, which mainly consisted of services purchased.
Aktia’s comparable operating profit in the first quarter amounted to EUR 23.6 million, which due to the new calculation of net income from life insurance was notably lower compared to the reference period (35.6). However, the transition to the IFRS 17 accounting standard makes the comparison significantly more difficult and it should be noted that recalculated comparative figures for net income from life insurance and thus for the comparable operating profit are exceptionally high. The comparable operating profit during the first quarter of last year according to the accounting standard used at the time amounted to EUR 13.3 million.
I am very pleased with Aktia’s first quarter. All income categories developed in line with our expectations, which gives us a good premise for the year ahead. The quality of Aktia’s loan book has also remained stable. However, the general economic uncertainty continues and there is no immediate relief in sight. We want to help our customers think further in their finances also in economically more challenging times.
Key figures
| (EUR million) | 1Q/2023 | 1Q/2022 | ∆ % | 2022 | 4Q/2022 | ∆ % | 3Q/2022 | 2Q/2022 |
| Net interest income | 31.8 | 25.1 | 27% | 99.2 | 24.2 | 31% | 24.0 | 25.8 |
| Net commission income | 30.3 | 31.3 | -3% | 122.0 | 29.1 | 4% | 29.9 | 31.6 |
| Net income from life insurance | 7.2 | 21.4 | -67% | 79.2 | 3.3 | 116% | 19.6 | 34.9 |
| Total operating income | 70.3 | 78.7 | -11% | 302.9 | 58.2 | 21% | 72.4 | 93.7 |
| Operating expenses | -47.1 | -43.3 | 9% | -169.4 | -44.1 | 7% | -40.3 | -41.8 |
| Impairment of credits and other commitments | -0.9 | 0.3 | – | -10.2 | -7.1 | -87% | -1.0 | -2.4 |
| Operating profit | 22.2 | 35.8 | -38% | 123.5 | 6.9 | 221% | 31.1 | 49.7 |
| Comparable operating income1 | 70.3 | 78.5 | -10% | 302.8 | 58.2 | 21% | 72.4 | 93.7 |
| Comparable operating expenses1 | -45.8 | -43.3 | 6% | -168.1 | -42.7 | 7% | -40.3 | -41.8 |
| Comparable operating profit1 | 23.6 | 35.6 | -34% | 124.7 | 8.3 | 183% | 31.1 | 49.7 |
| Cost-to-income ratio | 0.67 | 0.55 | 22% | 0.56 | 0.76 | -12% | 0.56 | 0.45 |
| Comparable cost-to-income ratio1 | 0.65 | 0.55 | 18% | 0.56 | 0.73 | -11% | 0.56 | 0.45 |
| Earnings per share (EPS), EUR | 0.25 | 0.40 | -38% | 1.37 | 0.07 | 238% | 0.34 | 0.55 |
| Comparable earnings per share (EPS), EUR1 | 0.27 | 0.40 | -33% | 1.38 | 0.09 | 194% | 0.34 | 0.55 |
| Return on equity (ROE), % | 12.2 | 19.9 | -38% | 17.0 | 3.7 | 229% | 17.6 | 28.0 |
| Comparable return on equity (ROE), %1 | 13.0 | 19.8 | -34% | 17.2 | 4.5 | 188% | 17.6 | 28.0 |
| Common Equity Tier 1 capital ratio (CET1), %2 | 11.1 | 10.6 | 4% | 10.8 | 10.8 | 2% | 10.6 | 10.4
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1) Alternative performance measures
2) At the end of the period
Reference periods 2022 have been recalculated according to the new IFRS 17 standard for insurance contracts.
Webcast from the results conference
A live webcast from the results event will take place on 11 May 2023 at 10.30 a.m. Interim CEO Juha Hammarén and CFO Outi Henriksson will present the results. The event is held in English and can be seen live at https://aktia.videosync.fi/2023-q1-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 6236
Lotta Borgström, Director, Investor Relations and Communications, tel. +358 10 247 6838, lotta.borgstrom (at) aktia.fi
Distribution:
Nasdaq Helsinki Ltd
Central media
www.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 31 December 2022 amounted to EUR 13.5 billion, and the balance sheet total was EUR 12.4 billion. Aktia’s shares are listed on Nasdaq Helsinki Ltd (AKTIA). aktia.com.
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