Finansiel Stabilitet - Annual Report 2017

Finansiel Stabilitet has published its 2017 annual report. The annual report (English version) will be available at the end of April.

Profit/loss

Finansiel Stabilitet posted a profit of DKK 669 million for 2017. Finansiel Stabilitet’s profit can be broken down into the three segments under Finansiel Stabilitet’s management. The Resolution Fund contributed a profit of DKK 723 million, the Bank Package I-V activities reported a loss of DKK 69 million, and the Guarantee Fund reported a profit of DKK 15 million.

Balance sheet and capital

The Group’s total assets at 31 December 2017 amounted to DKK 23.6 billion. Of this amount, the Bank Package I-V activities accounted for DKK 9.3 billion, the Guarantee Fund accounted for DKK 13.2 billion, the Resolution Fund accounted for DKK 1.8 billion, while a negative amount of approximately DKK 0.8 billion related to an intra-group balance.

Total equity stood at DKK 22.4 billion, of which DKK 13.2 billion was attributable to the Guarantee Fund, DKK 7.4 billion to the Bank Package I-V activities and DKK 1.8 billion to the Resolution Fund.

At the general meeting, Finansiel Stabilitet will recommend that dividend in the amount of DKK 2,550 million be distributed to the Danish State, equal to Finansiel Stabilitet’s receivable re. loss guarantee from the Danish State relating to Roskilde Bank. As a result of this distribution, Finansiel Stabilitet’s receivable re. loss guarantee from the Danish State relating to Roskilde Bank in the amount of DKK 8.9 billion has now been repaid in full. Accordingly, Finansiel Stabilitet has financed the loss incurred by the Danish State on the winding-up of Roskilde Bank by distributing dividends. After the distribution, equity attributable to the Bank Package I-V activities amounts to DKK 4.8 billion.

Of the Guarantee Fund’s equity, DKK 8.8 billion is attributable to the Banking Department of the Guarantee Fund. The Banking Department thus continues to meet the target level, which was set at DKK 5.8 billion in 2017. On the basis of the covered deposits of currently comprised entities, the target level for 2018 and 2019 is expected to be DKK 4.9 billion and DKK 5.2 billion, respectively.

The Resolution Fund remains in the build-up phase. In 2018, the target level is expected to be DKK 6.1 billion, and based on presently calculated covered deposits for institutions required to pay contributions it is expected to be DKK 6.5 billion in 2019.

Winding up

At 31 December 2017, loans and guarantees were recognised in the amount of DKK 1.0 billion, while the portfolio of financial assets and properties amounted to DKK 269 million. The majority of these activities related to the segment Bank Package I-V activities, while a minor portion of loans related to FS Finans V (formerly Andelskassen J.A.K. Slagelse), which is being wound up in the segment under the Resolution Fund. In total, Finansiel Stabilitet wound up loans and guarantees, financial assets and properties in the amount of approximately DKK 0.5 billion in 2017.

Lawsuits

Finansiel Stabilitet is still party to a substantial number of lawsuits which have arisen in connection with the takeover of failing banks, including liability lawsuits instituted against the former managements, etc. of eight of the failing banks taken over.

The lawsuit against the former management of Capinordic Bank was the first liability lawsuit to be heard in court. In October 2015, a judgment was delivered in the matter by which the three defendant management members were ordered to pay damages in a total amount of DKK 90.5 million. The judgment was appealed first by the defendants and subsequently by Finansiel Stabilitet. The appeal will be considered by the Danish Supreme Court in November 2018.

In June 2017, a judgment was delivered in the liability lawsuit against the former management of Amagerbanken. The judgment was given in favour of the defendants, and Finansiel Stabilitet was ordered to pay legal fees in the amount of DKK 77 million. Finansiel Stabilitet has appealed a part of the district court ruling. The appeal will be considered by the Eastern High Court during the period from January to March 2019.

In the lawsuit against the former management and auditors of Roskilde Bank, the Eastern High Court delivered a judgment in November 2017. The judgment was given in favour of all the defendants, and Finansiel Stabilitet was ordered to pay legal fees in the amount of DKK 72.5 million. Finansiel Stabilitet has appealed the judgment with respect to the CEO and the Board of Directors.

In September 2017, trial hearings commenced in the ebh bank lawsuit, and in the matter regarding Eik Bank Danmark. The trial hearing in the liability lawsuit against ebh is expected to be finalised at the end of 2018, while the trial hearing in the Eik Bank Danmark case is expected to be finalised at the beginning of 2019.

The trial hearing in the matter regarding Eik Bank Færøerne commenced in January 2018 and is expected to be finalised in mid-2019.

Investment and portfolio management

As a result of the current interest rate environment and the aim to ensure appropriate portfolio management, Finansiel Stabilitet has defined a new investment strategy. Going forward, the investment strategy will encompass the purchase of short-term mortgage bonds and covered bonds as well as Danish government bonds.

In December 2017, Finansiel Stabilitet invited tenders for two portfolio management mandates on behalf of the Guarantee Fund and the Resolution Fund. In March 2018, Finansiel Stabilitet entered into an agreement with Jyske Bank A/S on portfolio management of both mandates.

Subsequent events

On 6 March 2018, the Court of Justice of the European Union gave its final judgment in the FIH case. The Court determined that the case must be referred back to the General Court for renewed consideration. The consequences of the judgment are being considered, including whether the deposited amount from FIH of DKK 351 million can be recognised as income in 2018.

Outlook for 2018

The profit forecast for 2018 is determined for each of the three segments of the Finansiel Stabilitet Group. For the Resolution Fund, a profit of approximately DKK 600 million is expected, corresponding to the expected payments from the institutions that have an obligation to pay contributions to the Resolution Fund. For the Bank Package I-V activities, without consideration to any recognition of parts of the deposited funds from FIH, Finansiel Stabilitet expects a loss. Similarly, the Guarantee Fund is expected to report a loss for 2018.

For further information, please contact:
Henrik Bjerre-Nielsen, CEO, on tel. +45 21 14 21 11, or alternatively via the press contact, on tel. +45 24 76 35 90, e-mail: mail@finansielstabilitet.dk.