Komplett Bank Annual Report 2020

that, he served as Chief Strategy Officer for nearly three years. According to plans, Haglund will remain in his position until the end of Q2 2021, although the final date of his departure will be decided later. The Board has initiated a process to find a new CEO for Komplett Bank. Review of the annual accounts The annual financial statements have been prepared in accord- ance with the International Financial Reporting Standards (IFRS). Komplett Bank has identified the cost-income ratio, loan loss ratio, return on equity (ROE) and adjusted return on equity (ROE adj.) as Alternative Performance Measures in addition to the financial information prepared in accordance with IFRS as adopted by the EU. Please see note 21 for further details. 2020 financial highlights: Ǵ Total income of NOK 1,100 million Ǵ Pre-tax profit of NOK 349 million Ǵ Net lending: NOK 8,361 million as at 31 December 2020 Ǵ Cost-income ratio was 33.5% 1) Ǵ Loan loss ratio was 4.3% 2) Ǵ Return on Equity (ROE) was 13.6% 3) Ǵ Adjusted return on equity (ROE adj.): 14.7% 4) Profit and Loss Income Komplett Bank’s total income was NOK 1,100 million in 2020, a reduction of NOK 75 million (-6%) compared to 2019. The reduced income was driven by lower net interest income, which declined by 6% from NOK 1,087 million in 2019, primarily due to a reduction in the loan portfolio after the Bank tightening lending because of macroeconomic uncertainty from the Covid-19 pandemic. Income from commissions and fees decreased to NOK 111 million in 2020 from NOK 125 million in 2019. Expenses from commis- sions and fees grew from NOK 39 million in 2019 to NOK 49 million in 2020. This increase was largely the result of launching credit cards in Sweden and Finland. As a result, net commissions and fees declined by 29% year-on- year to NOK 62 million in 2020. TABLE 2: INCOME NOK million 2020 2019 Change Interest income 1,172 1,254 -7% Interest expense -145 -167 -13% Net interest income 1,027 1,087 -6% Net comm. and fees 62 87 -29% Other gains/losses 12 2 575% Total income 1,100 1,176 -6% Operating expenses Operating expenses excluding marketing were NOK 365 million, roughly the same as in 2019. In total, operating expenses fell 12% in a year with negative growth in lending. Marketing costs in 2020 were NOK 23 million, down from NOK 84 million in 2019. The decline was first and foremost due to the Bank actively braking lending growth – highlighting the flexibility in Komplett Bank’s business model. TABLE 3: OPERATING EXPENSES NOK million 2020 2019 Change Salary & personnel 144 135 6% General admin 106 88 20% Direct marketing 23 84 -73% Depreciation 72 55 31% Other 43 79 -46% Total OPEX incl. marketing 388 442 -12% Losses on loans Loan losses were NOK 364 million in 2020, down from NOK 454 million in 2019. The Bank further increased macroeconomic loan loss provisions for 2020 by NOK 40 million. Loan losses adjusted for changes in macroeconomic provisions were NOK 313 million in 2020 and 348 million in 2019, 3.9% and 4.3% respectively. Underlying credit quality improved during 2020. In the fourth quarter, the amount of loans sent to collection was 41% lower than in Q4 2019. Profits and taxes Pre-tax operating profit was NOK 349 million, up from NOK 280 million in 2019. Tax expenses for the full year were NOK 86 million, up from NOK 77 million in 2019. 1) Total operating expenses, excluding marketing expense and losses on loans/net interest income and net commissions. See Note 21 of the annual financial statements for a detailed calculation. 2) Losses on loans for the year/average yearly net loans to customers as a percentage. 3) Profit for the year/average yearly equity as a %. See Note 21 of the annual financial statements for a detailed calculation. 4) Adjusted PAT / Adjusted average equity. See note 21 of the annual financial statements for a detailed calculation 32 Board of Directors’ Report