Annual General Meeting 25 March 2011

Welcome at the Annual General Meeting of BankNordik

Disclaimer

This presentation includes statements regarding future results, which are subject to risks and uncertainties. Consequently, actual results may differ significantly from the results indicated or implied in these statements.

No representation or warranty (expressed or implied) is made as to, and no reliance should be placed on, the fairness, accuracy or completeness of the information contained herein. Accordingly, none of BankNordik, or any of its principal shareholders or subsidiary undertakings or any of such person’s officers or employees or advisors accept any liability whatsoever arising directly or indirectly from the use of this document

Slide 2

Agenda

1. The Board of Director’s report on the Bank’s activities in the past year

2. Submission of audited annual accounts for adoption and Annual Report 2010

3. Decision on distribution of profit in accordance with the adopted annual accounts

4. Election of members to the Board of Directors

5. Election of auditor/auditors

6. Proposals from the Board of Directors Proposals from the Board of Directors

a. Winding-up scheme referred to in the Danish Act No. 721 of 25 June 2010

b. Authorization to the Board of Directors to let the Bank acquire own shares

7. Miscellaneous

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1. The Board of Director’s report on the Bank’s activities in the past year

Presented by Klaus Rasmussen,

Chairman of the Board of Directors

Slide 4

2010 – A year of transition

“Our major strategic tasks in 2011 will be to create profitable growth in lending while maintaining a low risk level in our loan portfolio and a cost efficient operation.”

Presentation of the audited annual accounts and the Annual Report 2010

Presented by Janus Petersen, CEO

Slide 6

Annual Report 2010 was made public on 7th March 2011 and has been available at: www.BankNordik.fo/IR BankNordik’s Head Office in Tórshavn Has been sent to the shareholders’ who have

requested it

Slide 7

Strategic milestones reached in 2010

International expansion achieved by the acquisition of Danish and Greenlandic branches

Change of IT platform from local to Nordic IT provider Successful exit from Bank Package I

Slide 8

Highlights: Record high profits, large non-recurring items and large dividend expected in 2012

Profits before tax in 2010 DKK 416m Impairments DKK 167m (+) Other income (Bakkafrost) DKK 380m (-) Other Cost (Bank Package I and II) DKK 62m (+) Non-recurring cost DKK 30m (+) Value adjustments DKK 20m (-)

Total adjusted profits before tax in 2010 DKK 275m Profits before tax forecast 2011 DKK 100-

140m Net profits in Q4 2010 DKK 43m Proposed dividends 2011 DKK 40m Payment of accumulated dividends postponed to 2012 DKK 95m

Slide 9

2010 results deviate from forecast primarily due to divestment of Bakkafrost and increased impairments

Pre tax profit Forecast: DKK 150-190m Adjusted: Q1 DKK 470-510m

Q3 DKK 360-400m AR 2010 result : DKK 416m

Income from net insurance activities Forecast: Increase 25-40% Adjusted: Q3 20-30% AR 2010 result : 31%

Net interest and fee income Forecast: Growth 40-45% Adjusted: Q1 25-35%

Q3 20-30% AR 2010 result: 29%

Impairments Forecast: Same nominal level,

decrease in FO, some impairments in DK/GL

Adjusted Q3: DKK 180-200m AR 2010 result: DKK 167m

Costs Forecast: Increase by 70-75% AR 2010 result : Increase by 87% Adjusted* 74,8%

*(excl. non-recur. Cost DKK 30m)

Bakkafrost Divestment completed

Slide 10

Key figures in AR 2010

Net interest and fee income incl. insurance grows by 30% driven by acquisitions

Costs almost doubled driven by acquisitions and IT conversion

Impairments were significantly higher primarily in Q3 related to lower values of collateral

Net profit trebled because of divestment of Bakkafrost

Loans and advances grew by 25%, while deposits grew by 61%

Highlights DKK 1,000 2010 2009 Index     

Net interest and fee income 589.019 455.049 129

Interest and fee income and from insurance, net 643.679 496.928 130

Market value adjustments 20.037 23.915 84

Other operating income 379.409 (10.756)  

Staff cost and adm. expenses 408.088 210.778 194

Impairment charges 167.114 128.162 130

Net profit 339.435 111.047 306

Loans and advances 8.674.663 6.937.560 125

Bonds at fair value 3.497.466 1.252.056 279

Intangible assets 439.723 39.312 1119

Assets held for sale 160.794 175.908 91

Total assets 14.258.767 10.267.021 139

Due to credit institutions etc 245.249 1.498.499 16

Deposits and other debt 8.843.972 5.496.550 161

Issued bonds 2.199.843 999.843 220

Total shareholders´ equity 2.042.566 1.663.122 123

Slide 11

Key figures in Q4 2010

Interest and fee income incl. insurance decreased due to funding costs and non-performing loans

Costs higher due to extraordinary items

Impairments – corrections and Amagerbanken

Net profit turned positive again due to lower impairments

Loans and advances stable, while deposits fell

Highlights DKK 1,000 Q4 2010 Q3 2010 Index       

Net interest & fee income 147.113 154.488 95

Interest and fee income and insurance, net 164.549 170.807 96

Market value adj. (5.381) (224) 2.402

Other operating income (1.387) (119) 1.166

Staff cost & adm. exp. 111.124 102.091 109

Impairments (17.794) 150.330 (12)

Net profit 43.484 (75.853) (57)

Loans and advances 8.674.663 8.549.425 101

Bonds at fair value 3.497.466 3.463.534 101

Intangible assets 439.723 432.857 102

Assets held for sale 160.794 134.265 120

Total assets 14.258.767 15.716.802 91

Due to credit institutions etc 245.249 787.392 31

Deposits and other debt 8.843.972 9.254.447 96

Issued bonds 2.199.843 2.699.843 81

Total shareholders´ equity 2.042.566 1.979.319 103

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Increased NII driven by interest margin and acquisitions Acquired branches compensate for reduced

income on the Faroe Islands A steady growth in interest margin in the last

5 years In Q4 2010 NII decreased due to higher

funding costs (DKK 5m) and corrections related to non-performing loans (DKK 30m)

*Previous GAAP

0

2

4

6

2006 2007 2008 2009 2010

pct

Interest margin

102 100 101118 117

140

10590

108

020406080

100120140

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

DKKm

Net interest income

NII

239 291 238

404 346

7942

0

100

200

300

400

500

2006* 2007* 2008 2009 2010

DKKm

0123456789

DKKbn

Faroe Island DenmarkGreenland Loans and advances

Slide 13

Fees and insurance income on a higher level in 2010 than in 2009 due to acquisitions

Slide 14

Higher level of fees in Q4 2010 explained by a year-end correction of DKK 10m

Higher level of insurance income in 2010 explained by first full year consolidation of Icelandic insurance activities

11 1012

27

2015

32

9

16

0

10

20

30

40

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

DKKm

Net fee income

11

6

13

9

12

16 17

6

12

0

5

10

15

20

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

DKKm

Net income from insurance

Operating segments, banking

           

  Operating segments DKK mil.

FO 2010

DK 2010

GL 2010  

           

  Interest income 501 124 56  

  Interest expense 155 46 14  

  Net interest income 346 79 42  

  Net fee income 49 29 14  

  Total income 405 109 57  

  Staff costs and administrative expenses 220 101 38  

 

Dep. and. imp. of property, plant and equipment 11 3 1  

 

Impairment charges on loans and adv. etc. 181 -16 2  

  Profit before tax -28 21 16  

  Loans and advances 6295 1562 816  

  Deposits 5663 2799 482  

  Total liabilities and equity 10446 3070 816  

  C/I ratio (%) 107% 81% 72%  

  C/I ratio (excl. value adjustments and        

  Imp. on loans and advances etc.) (%) 63% 96% 69%  

         

Growth potential in Denmark

Staff costs and adm. expenses in Denmark high compared to income

Impairments in Faroe Islands increased primarily due to re-valuation of collateral in Q3 2010

Slide 15

Operating segments - insurance

Operating segments DKK 1,000 FO 2010

ICL 2010

     

Net interest income 3647 8386

Premium income, net of reinsurance 82184 159625

Claims, net of reinsurance 47149 140535

Staff costs and administrative expenses 18283 28279

Dep. and. imp. of property, plant and equipment 304 8161

Profit before tax 20344 9396

Total liabilities and equity 173678 350564

Cost/Income ratio (%) 48% 81%

Cost/Income ratio (excl. value adjustments and    

impairments on loans and advances etc.) (%) 48% 103%

Successful business model on the Faroe Islands

Improving results from Icelandic activities

Slide 16

Cost structure changed significantly

Staff costs and administrative expenses 2010 2009 Change

Staff costs:

Salaries 182.903 101.790 80%

Pensions 17.547 9.125 92%

Social security expenses 22.818 8.223 177%

Total staff costs 223.269 119.138 87%

Administrative expenses:

IT 67.531 42.876 58%

Marketing etc 24.688 8.431 193%

Education etc 5.262 5.924 -11%

Advisory services 10.621 8.615 23%

Other expenses 95.751 30.962 209%

Total administrative expenses 203.853 96.808 111%

Total staff costs 223.269 119.138 87%

Employee exp. incl. under the item "Claims, net of reinsurance"-19.034 -5.167

Total administrative expenses 203.853 96.808 111%

Total staff costs and administrative expenses 408.088 210.778 94%

Staff doubled in acquisitions causing increased costs

DKK 30m in one off costs (change in IT provider, name change, acquisitions)

Renewed focus on optimizing cost structure

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Loans and advances

Geographical diversification achieved Danish and Greenlandic activities compensate for a

decrease in Faroese lending level

Loans and advances

18%

9%

73%

Faroe Island Denmark Greenland

8,9 8,8 8,7

6,9

8,5

0

2

4

6

8

10

Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

DKKbn

Loans and advances

Slide 18

Sound risk diversification

No sector larger than 9%

Loan and advances on sector

6%8%

6%

50%

6%7%

5%

3%

9%

Public FisheriesTransport etc Building and constructionTrade, hotels etc ManufacturingProperty adm. OtherRetail

Slide 19

Large liquidity in 2010 due to end of Bank Package I

6,3 5,7

1,6 2,8

0,50,8

0

2

4

6

8

10

Loans and advances Deposits

DKKbn

Faroe Island Denmark Greenland

8,9 8,8 8,89,3

5,5

0

2

4

6

8

10

Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

DKKbn

Deposits

Slide 20

Liquidity 2010 2009Loans, advances and impairments in relation to deposits, % 103 131Excess cover relative to statutory liquidity requirements, % 293 276

The Supervisory Diamond

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Sum of large exposures < 125%

BN 22.8%

Loan growth < 20% BN 25%

Funding-ratio < 1.25

BN 0.71

Excess liquidity > 50% BN 292,9%

Property exposure < 25% BN 11%

Strategic focus areas 2010-2013

Focus on selected customer segments, pension and insurance

Training and recruitment of employees Optimizing business processes and organization Optimizing liquidity and capital structure Risk management and customer credit rating

Slide 22

Outlook 2011

Focus on C/I ratio and efficiency – cost reduction materializing in the coming tree years

Cost reduction 0-5% in 2011 Pre-tax profit before value adjustment DKK 100-140m Net interest, fee and insurance income is expected to

decrease in the range of 0-5% because of pressure on the interest margin

Impairments DKK 50-100m

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2 and 3. Submission of audited annual accounts for adoption and Annual Report 2010 and decision on distribution of profit in accordance with the adopted annual accounts

Slide 24

The Board of Directors proposes that the General Meeting adopt the annual accounts as presented in the Annual Report 2010 and approve the allocation of the DKK 339,435,000 net profit as follows: DKK 40,000,000 are paid out as dividend to the shareholders, DKK 294,176,000 are allocated to “Retained earnings” and DKK 5,258,000 to “Minority interests”.

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4. Election of members to the Board of Directors

Slide 26

Klaus Rasmussen (re-election) Education: MSc in Economics and MSc in Business Management and Auditing. Former occupation: State-authorized public accountant. Former owner of and partner in State-authorized public accountant company

Principal occupation: Self-employed with

activities as a professional Board member

Current Board positions held: Chairman of the Board of: P/F Effo, P/F

Vónin, P/F VON and Refa Frøystad Group.Board member of: P/F Effo Finans and

Qalut Vónin A/S

Date of first election to the Board: 2008

Jens Erik Christensen (re-election) Education: MSc in Actuarial Science Former occupation: CEO of Codan A/S and member of the Executive Committee of Royal & SunAlliance. Principal occupation: Self-employed with activities as a professional Board member as well as business development through the investment company Sapere Aude A/S. Current Board positions held:

Chairman of the Board of: Danish Merchant Capital A/S, Your Pension Management Luxembourg SA, Your Pension Savings Association, Luxembourg Board member of: SAS AB, Andersen & Martini A/S, Amrop A/S, Nordic Corporate Investments A/S

Date of first election to the Board: 2007

Keld Søndergaard Holm (re-election) Education: MSc in Economics and HD(F) Former occupation: Consultant at Nykredit – Business Research and Communication, Associate professor and external examiner at Copenhagen Business SchoolPrincipal occupation: Manager of Adverti

Current Board positions held:Board member of: Public Affairs Group, Deputy

chairman, The Copenhagen Institute for Future Studies and Member of precidium of the academy for future studies

Date of first election to the Board: 2008

Nils Suni Sørensen (re-election)Education: BSc in Economics and Business Administration, MBA from Lancaster University Former occupation: CEO of Faroe Seafood Principal occupation: Managing Director of Faroe Petroleum, Faroe Islands; Managing director of Greenland Oil Company A/S Current Board positions held:

Board member of: Faroe Petroleum Faroe Islands, Financing Fund from 1992, Faroe Petroleum plc. UK, Greenland Oil Company A/S

Date of first election to the Board: 2010

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5. Election of auditor/auditors

Slide 28

The Board of Directors proposes re-election of NOTA, Løggilt grannskoðanarfelag P/F and PwC Denmark as external auditors.

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6. Proposals from the Board of Directors

Slide 30

a. Winding-up scheme referred to in the Danish Act No. 721 of 25 June 2010

In 2011 the General Meetings of all Danish and Faroese banks are required to decide on the possible future use of the Danish State’s winding-up scheme administered by Finansiel Stabilitet A/S.

In case a distressed bank does not comply with the Financial Business Act’s capital adequacy requirement and the bank has been given a deadline by the Danish FSA to comply with this requirement, the distressed bank may choose to be wound up under the Finansiel Stabilitet A/S. Finansiel Stabilitet A/S will then set up a subsidiary company to take over all assets of the distressed bank.

BankNordik's Board of Directors proposes that, in line with the majority of Danish banks, that the General Meeting state that it does not want at present to consider to be wound up by Finansiel Stabilitet A/S under the Act on Financial Stability - in other words that the General Meeting decide not to decide on whether they will use the scheme or not.

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b. Authorization to the Board of Directors to let the Bank acquire own shares

The Board of Directors requests that the General Meeting renews, until the next ordinary general meeting, the following authority to allow the Bank to acquire its own shares:

“The General Meeting authorises the Board of Directors – until the next Annual General Meeting – to permit the Bank – by way of ownership or pledge - to acquire own shares up to a total nominal value corresponding to 10% of the Bank’s share capital in accordance with Article 48 in the Companies Act. When the Bank acquires own shares by way of ownership, the share price shall not deviate from the market price by more than 10%.”

Slide 32

7. Miscellaneous

Slide 33

Thank you for attending BankNordik’s Annual General Meeting 2011