Published: 2009-07-31 18:45:24 CEST
Kvika banki hf.
Financial Statement Release
- MP Bank's results for the first half of 2009
The operations of MP Bank hf. during the first half of 2009 resulted in a
of 412 million ISK. MP Bank started its commercial banking activities in
Preparation and initial costs of those activities were high while
generation will start to be significant in the 2nd half of the year.
interest income was only 48 million ISK or considerably less than 1% on
annualized basis, while in the same period the year before it was ISK
million. Fee income decreased by 23% from the same period last year
amounted to ISK 444 million compared to ISK 578 million during the first
of 2008. Net impairment charges were ISK 192 million but were ISK 45
one year ago. The bank has now total reserves of ISK 2,263 million,
out of
which ISK 1,723 are reserves against loan impairments. That is 15.6% of
total portfolio of loans to clients. During the period a final write off
made of ISK 166 million on irrecoverable loans and claims. 

Loss due to
associated companies was ISK 72 million during the reporting period
returned a profit of ISK 83 million the year before. The loss stems from
Pension Funds Baltic which is a pension fund company operating in
50% owned by MP Bank. The progress of the company is going
according to plan
but no expenses are capitalized as goodwill. The associated
company Hraunbjarg
was delivered to shareholders of MP Bank as a special
dividend so its results
are no longer calculated in the accounts of the bank.

The equity of the bank was ISK 5,294 million ISK and total assets ISK
million. The capital ratio as calculated under the law on
institutions (CAD ratio) was 17.5% but the minimum legal requirement
is 8%. 

The liquidity of the bank was very strong at the end of the
reporting period.
Claims on the Central Bank of Iceland, holdings of Icelandic
government bonds
and deposits in foreign banks amounted to a total of ISK 35
billion. Deposits
increased substantially during the reporting period due to
the increase in
commercial banking operation or from ISK 8.6 billion at the
end of 2008 to ISK
31 billion on June 30th. 

The operational loss during
the first half of 2009 reflects the cost of
entering into new operations and
adjustments to new conditions on the Icelandic
financial market. Those
conditions were extremely adverse during the reporting
period. The Central
Bank of Iceland lowered its deposit rate significantly down
to 9.5% which led
to decreased interest income for MP Bank. At the same time
the Central Bank
kept its benchmark refinancing rate at 12% or 2.5% higher than
the deposit

In spite of the large increase in deposits MP Bank scaled back its
portfolio during the period. The Icelandic economy has far from recovered
the collapse of Kaupthing bank, Landsbanki and Glitnir bank last fall.
With a
clearer outlook the bank can restart lending programs and thereby
increase its

MP Bank became the largest broker and market
maker of government issued bonds
in the Iceland Stock Exchange during the
period, which is a large step in the
history of the bank. It is extremely
important that the government has good
access to credit markets at favorable
rates during the period of high budget
deficit. During the first half of the
year MP Bank had slight losses from this
important function but in the long
run it will most like become profitable

The currency restrictions
imposed by Icelandic authorities in late 2008 hamper
the activities of MP Bank
severely. After the collapse of the three large banks
it has not been possible
for the bank to reduce its currency exposure to the
Icelandic krona through
hedging activities. MP Bank has a branch in the EU
located in Vilnius,
Lithuania, which has foreign denominated assets which no
longer can be hedged.
During the reporting period MP Bank paid off all its
loans from non‐Icelandic
entities and is not accepting deposits outside of

The first half
of 2009 was a period of difficult and challenging adjustment for
operations of MP Bank, especially during the first months of the year.
Gunnar Karl Guðmundsson became the new CEO of the bank on June 1st.
Commercial banking activities have however started very well and client
have been far higher than expected. It is the opinion of the Board of
MP Bank
that the operational results of the bank will improve during the 2nd
half of
the year. 

Further information:

Gunnar Karl Guðmundsson, CEO
tel. +354‐8583260

Margeir Pétursson, Chairman of the Board, tel.

A copy of the Interim Financial Statement for the first 6
months of 2009 can be
accessed on the bank´s website,

press release 6 months 2009.pdf
mpb financial stmnts 06-2009.pdf