Monobank : Brabank ASA Q2 2020 Report

August 21, 2020 at 03:19 am EDT

Interim report 2nd quarter 2020

Turnaround complete and profitability restored

Strong improvement in underlying operation
- Pre-taxprofit NOK 17.5 million in Q2 vs a deficit of NOK 25.2 million in Q2 2019
- Underlying cost base reduced by 28 per cent compared to Q2 2019
- Lowest loan loss ratio since 2017
Well capitalised - Growth capacity restored
- Total capital ratio three percentage points above requirement
Merger with Easybank approved by extraordinary general meeting
- BRAbank shareholders will receive 50 percent of the combined bank
- Significant cost saving potential and revenue synergies identified

CEO comment

"A year ago, former BRAbank and Monobank officially merged. Focus in the new organisation was to grow and expand. However, unfavourable market development, weaker than anticipated results and capital constraints challenged us to shift focus towards risk reduction, improving risk selection and reducing the cost base. As a result, several efficiency measures were implemented and I am happy to announce that after a year the turnaround is complete, and profitability is restored. BRAbank has now a significantly more efficient organisation, a healthy loan book and solidity has been restored.", says Hans Ljøen, CEO of BRAbank ASA

Financial development

Net loans and advances to customers		Net profit after tax

3 960	4 537	4 494	3 926	3 969		5,3					13,2



					3 536
millionNOK							millionNOK	-18,9			-8,9


										-26,5

												-72,9
	Q1 19	Q2 19	Q3 19	Q4 19	Q1 20 Q2 20			Q1 19	Q2 19	Q3 19	Q1 20	Q2 20
									Q4 19

About BRAbank ASA

BRAbank ASA is a digital bank focused on consumer finance in the Nordics. The Bank is cloud based with strong focus on customer experience and fintech solutions.

Headquarter is in Bergen, Norway, the bank started its operation in November 2015. BRAbank aim to differentiates on availability and to dominate on customer experience in its market segment. With 24/7 availability, efficient loan processes combined with simple and easy to use products BRAbank has experienced strong growth.

The main products are deposits, unsecured lending to private individuals in Norway, Finland and Sweden, and credit cards in Norway and Sweden.

The screening process for loans is based on an automated evaluation system, developed using the latest technology and advanced analytics. The bank offers attractive deposit rates on its savings accounts. Deposits up to NOK 2 million are guaranteed by the Norwegian Banks' Guarantee fund of which BRAbank is a member.

BRAbank is an independent bank with approximately 1 400 shareholders and is listed on the Oslo Stock Exchange's Merkur Market with ticker symbol BRA-ME.

Operational and Financial review

Operational performance continued to improve during the second quarter driven by efficiency measures successfully implemented during the end of 2019 and the first quarter of 2020.

The underlying cost base has been reduced by 28 percent compared to second quarter 2019. The reduction includes staff and use of external consultants. The scalability in the business model is however maintained.

Credit quality has been improved and BRAbank reported a loan loss ratio of 2.2 percent in the second quarter, the lowest since 2017. During the last 12 months, BRAbank has improved its credit process and reduced risk taking in all its markets.

BRAbank has restored a healthy capital position with a three percent buffer to regulatory requirements. This is a result of measures taken during the last two quarters. This includes a private placement, a Tier 2 bond issue, disposal of a non- performing loan portfolio (before COVID-

and lower new originations causing overall reduction in the loan portfolio.

The COVID-19 outbreak and various public initiatives to slow its spread has greatly affected the economy as well as businesses and consumer activity. For BRAbank, the effect has so far been limited and operation has been executed in accordance with guidelines from the Institute of Public Health and the Directorate of Health.

The Banks digital business model has proven to be effective during the period. BRAbank is a digital bank with a cloud-

based platform and employees can operate the bank from home offices and virtual meetings is used extensively.

In Norway, the reduction in the loan book has continued, which is in line with previous communicated strategy. To optimize capital efficiency, loan growth has been prioritised in less capital-intensive markets. Consequently, BRAbank has therefore increased the exposure in Finland relative to Norway.

During the first half of 2020, BRAbank successfully implemented a new pricing strategy in Norway to better reflect the underlying credit risk. In addition, BRAbank also completed a sale of a non-performing loan portfolio, which freed up capital and reduced costs.

In Finland, demand for new consumer credit loans remain at healthy levels and the cost of customer acquisition in Finland is favourable compared to the Norwegian market. The partnership with Raisin provides low funding costs for Euro denominated consumer loans. However, due to market uncertainties related to the Covid-19 pandemic, BRAbank has chosen a cautious market approach in the second quarter.

The proposed reduction in the interest rate cap in Finland has been implemented, lowering the cap on nominal interest on new consumer loans to 10 per cent for until 31 December 2020. The new interest rate cap is expected to have limited impact for BRAbank.

Profit and loss

The merger between Monobank and former BRABank was formally completed 28 June 2019. Former BRABank is consolidated in the profit and loss statement starting third quarter 2019.

Net interest income for the second quarter of 2020 was NOK 77.9 million, a decrease of

11.5 percent compared to the second quarter of last year. The decline was primarily driven by a reduction in net loans due to a reduced loan book in Norway and a cautious approach in Finland.

Net interest income for the first half year was NOK 161.5 million, a decrease of 4.1 per cent compared to the first six months of 2019 (NOK 168.3 million)

Total income was NOK 82.0 million in the quarter, down from NOK 92.1 million in the second quarter 2019.

Operating costs amounted to NOK 36.8 million in the second quarter (NOK 72.1 million). Excluding restructuring and merger charges of NOK 3.8 million (26.6 million) operating costs amounted to NOK

33.0 million, well below the guided range. The second quarter of 2020 was the first quarter with full effects from previously announced efficiency measures.

BRAbank has communicated that quarterly operating expenditures excluding one-offs will be in the range NOK 38-41 million for 2020.

Operating expenses for the first six months of 2020 ended at NOK 79.9 million,

compared to NOK 107.1 million in the same period last year.

Cost/income ratio ended at 44.8 per cent in the second quarter of 2020, down from

48.8 per cent in the first quarter. Adjusted for non-recurring costs (relating to the merger), cost/income ratio was 40.2 per cent in the second quarter of 2020.

Operating profit before impairment provisions was NOK 40.1 million in the second quarter compared to NOK 15.2 million in the same period last year. Operating profit was negatively affected by loss from trading activities and currency of NOK 4.5 million compared to a loss of NOK

4.9 million in the comparable quarter last year.

Loan losses was NOK 23.1 million in the quarter compared to NOK 40.4 million in the second quarter 2019. This corresponds to a loan loss ratio of 2.2 percent p.a. in the quarter compared to 3.6 percent p.a. in the second quarter last year. Adjusted for a positive unrealised currency effect of NOK 8 million, the loan loss ratio was 3.0 percent p.a.

Loan losses for the first six months of 2020 ended at NOK 81.4 million, compared to NOK 82.8 million in the same period last year. Adjusted for currency effects loan losses fell to NOK 67.4 million in the first half 2020 from NOK 85.8 million in the corresponding period last year.

The result in the quarter ended at 13.2 million in the second quarter, compared to a deficit of NOK 18.9 million in the second quarter 2019.

The result for the first half year was NOK

4.3 million, up from a deficit of NOK 13.6 million in the first six months of 2019.

Balance sheet

Total assets amounted to NOK 5 578 million as of 30 June 2020, down from NOK 6 084 million at the end of the second quarter 2019. The bank's net loan balance was NOK 3 536 million (down from NOK 4 537 million a year before) including prepaid agency commissions of NOK 97 million. The composition of the loan book has changed significantly as the Finnish portfolio has increased at the expense of the Norwegian portfolio.

Of gross loans outstanding at 30 June, NOK 1 859 million was to Finnish customers, representing 48 percent of total gross loans. This represents an increase of approximately ten percentage points compared to the second quarter of 2019. The development is in line with the company's strategy.

Deposits from customers were NOK 4 645 million as of 30 June (NOK 5 153 million). BRAbank's bank deposits and liquid securities amounted to NOK 1 837 million.

Total equity was NOK 817.5 million and CET1 ratio and total capital ratio was 19.8 percent and 23.2 percent respectively. The CET1 capital requirement is 16.7 percent and total capital requirement is 20.2 percent.

Events after the balance date

The announced merger between BRAbank and Easybank was formally approved by the extraordinary general meeting (EGM) of BRAbank held on 16 July 2020. For more details of the transaction please refer to the announcement dated 12 June 2020 available on brabank.no

Risk, uncertainties and additional factors impacting BRAbank ASA

BRAbank is subject to a range of risks and uncertainties which may affect its business operations, financial condition and results of operations. The description of principal risks and uncertainties in the Financial statements and Board of Directors' Report

2019 gives a fair description of principal risks and uncertainties that may affect BRAbank in the coming period. The bank is not aware of any significant new risks or uncertainties or significant changes to those risks or uncertainties.

Outlook

On 12 June BRAbank announced a merger agreement with Easybank to create a leading consumer bank with a Nordic footprint.

The combination is intended to create significant value and benefits for both set of shareholders from consolidating to one cost base and from generating revenue synergies from complementary distribution strengths.

BRAbank's shareholders will receive 0.075724 shares in Easybank for each share in BRAbank, representing 50 percent of the total outstanding shares following the merger.

Easybank will be the surviving entity and CEO Oddbjørn Berentsen will continue as CEO for the combined bank, which will be named BRAbank and listed on Merkur Market. The headquarter will be in Oslo, Norway. Easybank's Chairman Svein Lindbak will be appointed Chairman for the combined bank, and BRAbank's Chairman Viggo Leisner will be appointed Vice Chairman.

The merger was formally approved by the extraordinary general meeting (EGM) of BRAbank held on 16 July 2020. Following the EGM's approval of the merger plan and the subsequent mandatory announcement in the Norwegian Register of Business Enterprises, a six-week creditor notice period commenced on the date of the approval. The Company will revert in due course with dates for completion of the merger.

The transaction is also subject to approval by the Norwegian Financial Supervisory Authority, Finanstilsynet.

Financial statement (unaudited)

Statement of comprehensive income

In NOK thousands	Note	Q2 2020	Q2 2019	YTD 2020	YTD 2019	2019
Interest income, effective interest method		89 114	101 859	182 601	197 285	407 950
Other interest income		1 522	4 340	6 485	6 766	12 847
Interest expenses		12 771	18 194	27 565	35 706	72 654

Net interest income	7	77 866	88 005	161 521	168 345	348 143

Commission and fee income	7	4 917	7 172	11 358	14 848	26 958
Commission and fee expenses	7	812	3 043	2 495	3 534	10 533

Total income		81 970	92 134	170 385	179 660	364 567

Net change in value on securities and currency		-4 525	-4 869	-3 319	-7 973	-11 270
Staff costs		12 340	20 820	24 416	32 233	70 030
Other administrative expenses	8	17 981	27 614	42 552	45 566	106 535
Depreciation and amortisation	6, 9	6 439	36 078	12 961	41 672	55 437
Gain from purchase on favourable terms		0	12 414	0	12 414	12 414

Total operating costs		36 760	72 098	79 929	107 057	219 589


Profit/(loss) before impairment losses		40 685	15 167	87 137	64 631	133 708

Impairment releases/(losses)	2	-23 143	-40 374	-81 413	-82 755	-297 234

Operating profit/(loss) before tax		17 542	-25 207	5 724	-18 124	-163 526

Tax charge		-4 385	6 302	-1 431	4 531	50 523

Profit/(Loss) after tax		13 156	-18 905	4 293	-13 593	-113 002
Comprehensive income
In NOK thousands

Profit after tax		13 156	-18 905	4 293	-13 593	-113 002
Other comprehensive income

Comprehensive income for the period		13 156	-18 905	4 293	-13 593	-113 002

Statement of financial position

NOK million	Note	30.06.2020	30.06.2019	31.12.2019
Assets
Loans and deposits to credit institutions	2, 4	48 003	134 450	743 771
Net loans and advances to customers	4	3 535 890	4 536 903	3 926 016
Certificates and bonds	4	1 788 654	1 242 618	1 470 919
Deferred tax asset		103 021	64 558	104 452
Other intangible assets	6	69 919	73 868	76 048
Property, plant and equipment	6, 9	10 590	14 858	13 062
Financial derivatives		11 478	0	0
Prepayments, accrued income and other assets	4	10 851	16 532	7 845
Total assets		5 578 405	6 083 787	6 342 114
Equity and liabilities
Liabilities
Deposits by customers	4	4 644 921	5 153 296	5 472 666
Provisions, accruals and other liabilities	4	51 634	82 867	63 490
Financial derivatives		0	6	422
Subordinated loan	4, 5	64 340	49 370	49 540
Tax payable		0	3 892	0
Total liabilities		4 760 895	5 289 431	5 586 118
Equity
Share capital	10	125 184	447 393	495 919
Share premium		755 554	304 034	324 931
Tier 1 capital	11	49 625	49 454	49 540
Retained earnings		-113 075	-6 525	-114 616
Not registered capital		0	0	0
Other paid in capital (options)		223	0	223
Total equity	3	817 510	794 355	755 996
Total equity and liabilities		5 578 405	6 083 787	6 342 114

Rolf Viggo Leisner	Mette Henriksen	Øyvind Oanes
Chairman of the Board
Kristin Krohn Devold	Per Georg Braathen	Bent Gjendem
		Employee representative
Nina Dyrøy	Hans Kristian Ljøen
Employee representative	CEO
		9

Statement of cash flows

In NOK thousand	30.06.2020	30.06.2019	2019
Cash flows from operating activities
Operating profit/(loss) before tax	17 542	-25 207	-163 526
Adjustment for change in provision for impairment losses	9 017	20 551	151 172
Adjustment for unrealised changes in fair value of financial	137 490	3 414	15 324
instruments

Adjustment share option programme	0	0	222,594
Depreciation and amortisation	6 439	6 182	25 541
Impairment of intangble assets	-	29 896	29 896
Net interest income	-77 866	-88 005	-348 143
Gain from a bargain purchase	0	-12 414	-12 414
Changes in loans and advances to customers	320 888	-190 226	9 224
Changes in deposits by customers	123 494	183 832	801 770
Changes in financial derivatives	-16 176	1 838	7 065
Changes in debt securities	-460 447	-25 713	-323 924
Changes in other operating assets and liabilities	7 188	29 280	-722
Interest recieved	90 636	106 423	422 331
Interest paid	-11 580	-17 598	-71 171
Net cash flows from operating activities	146 627	22 253	542 648
Cash flows from investing activities
Purchase of property, plant and equipment	-94	-406	-5413
Investment in intangible assets	-1 860	-4 223	-20 450
Payment for acquisition/merger, net of cash acquired			11
-	11 304	304

Net cash flows from investing activities	-1 953	6 675	-14 558
Cash flows from financing activities
Issue of ordinary shares	-13	0	124 922
Issued Tier 1 and Tier 2 capital	58	0	0
Paid interest tier 1 capital	-1 137	-1 077	-4 295
Paid interest subordinated loans	-1 191	-818	-3 281
Net cash flows from financing activities	-2 283	-1 896	117 346

Net increase/(decrease) in cash and cash equivalents	142 390	27 032	645 436
Cash and cash equivalents at period start	45 436	108 366	526 063
Currency effect on cash and cash equivalents	-139 823	-949	-10 455
Cash and cash equivalents at period end	48 003	134 449	1 161 044

Statement of changes in equity

			Other
			paid-in
	Share	Surplus	capital	Tier 1	Retained
In NOK thousands	capital	capital	(options)	Capital	earnings	Total
Equity at 31.12.2019	495 919	324 931	223	49 540	-114 616	755 996
Profit/(loss) for the period					4 293	4 293
Shares issued net of fees and tax	-370 735	430 623				59 888
Paid interest on Tier 1 capital					-2 252	-2 252
Other adjustmets Tier 1 capital				85	-501	-416
Equity at 30.06.2020	125 184	755 554	223	49 625	-113 074	817 510
			Other
			paid-in
	Share	Surplus	capital	Tier 1	Retained
In NOK thousands	capital	capital	(options)	Capital	earnings	Total
Equity at 31.12.2018	274 023	222 454	0	49 412	3 073	548 961
Profit/(loss) for the period					-13 593	-13 593
Shares issued net of fees and tax	173 370	81 580			5 572	260 523
Paid interest on Tier 1 capital					-2 103	-2 103
Other adjustmets Tier 1 capital				42	526	568
Equity at 30.06.2019	447 393	304 034	0	49 454	-6 525	794 355

Notes to the financial statements

Note 1 General Accounting principles

BRAbank Q2 report 2020 report is prepared in accordance with general accounting principles as described in annual report for 2019. The report has not been audited.

Note 2 IFRS 9

2.1 Gross loans, off-balance and expected credit loss
Gross loans, off-balance and loss allowance by product and country - 30.06.2020
Amounts in NOK 1000				Gross Loans			Loss allowance
	Gross book	Hereof agent	Off-balance
	value	commissions	sheet amount	Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Consumer loans
Norway	1 768 869	36 551	-	1 380 110	156 405	232 354	1 768 869	33 573	21 574	127 675	182 822
Sweden	213 084	6 091	-	158 171	21 317	33 596	213 084	3 517	3 265	13 584	20 366
Finland	1 858 759	54 125	-	1 480 989	107 909	269 862	1 858 759	42 004	18 296	93 233	153 534
Credit card loans
Norway	41 234	-	157 101	36 195	-	5 039	41 234	736	-	1 275	2 011
Sweden	13 177	-	92 364	11 567	-	1 610	13 177	183	-	317	500
Total	3 895 123	96 767	249 465	3 067 031	285 630	542 461	3 895 123	80 013	43 135	236 085	359 233

Gross loan and off-balance by risk class - 30.06.2020
Amounts in NOK 1000
	Probability of	Gross book	Off-balance
Risk class	default	value	sheet amount
A	0 - 1,2 %	189 769	119 532
B	1,2 - 2,5 %	476 787	81 103
C	2,5 - 3,8 %	516 890	26 495
D	3,8 - 5,2 %	465 894	10 334
E	5,2 - 6,9 %	362 924	4 688
F	6,94- 9,5 %	312 756	2 352
G	9,5 - 13,2 %	272 232	1 371
H	13,2- 18,4 %	259 006	1 433
I	18,4 - 28,1 %	291 122	243
J	28,1 - 90,9 %	513 796	23
K	90,9 - 100 %	233 947	1 892
Total		3 895 123	249 465

Risk classes is grouped by PD (probability of default) into groups A to K, with A being the group with lowest risk, and K being the group with the highest risk.

2.2 Changes in loan loss allowance and gross loans
Total incl. consumer loans and credit card loans - 01.04.2020 - 30.06.2020
Reconciliation of total expected credit loss
Amounts in NOK 1000		Stage 1	Stage 2	Stage 3	Total
Loss allowance as at 01.04.2020	89 129	54 412	206 674	350 216
Transfers
- transfer from stage	1 to stage 2	-5 203	5 203	-	-
- transfer from stage	1 to stage 3	-1 117	-	1 117	-
- transfer from stage	2 to stage 3	-	-13 301	13 301	-
- transfer from stage	3 to stage 2	-	2 009	-2 009	-
- transfer from stage	2 to stage 1	11 636	-11 636	-	-
- transfer from stage	3 to stage 1	2 834	-	-2 834	-
New financial assets originated	532	-	489	1 020
Derecognised financial assets (repayments and write-offs)	-3 857	-10 439	-8 241	-22 537
Change in measurement*	-11 637	17 824	32 837	39 024
Currency effects		-2 305	-936	-5 249	-8 490
Change in model or risk parameters	-	-	-	-
Other adjustments		-	-	-	-
Loss allowance as at 30.06.2020	80 013	43 135	236 085	359 233
*change in PD, LGD or EAD and 12 months vs lifetime horizon

Reconciliation of gross loans
Amounts in NOK 1000		Stage 1	Stage 2	Stage 3	Total
Gross loans as at 01.04.2020	3 435 948	384 662	498 322	4 318 931
Transfers
- transfer from stage	1 to stage 2	-126 476	126 476	-	-
- transfer from stage	1 to stage 3	-26 612	-	26 612	-
- transfer from stage	2 to stage 3	-	-78 869	78 869	-
- transfer from stage	3 to stage 2	-	8 216	-8 216	-
- transfer from stage	2 to stage 1	88 875	-88 875	-	-
- transfer from stage	3 to stage 1	9 780	-	-9 780	-
New financial assets originated	15 550	-	1 213	16 763
Derecognised financial assets (repayments and write-offs)	-157 846	-57 828	-25 384	-241 059
Partial repayments		-93 640	-2 421	-5 209	-101 269
Currency effects		-78 548	-5 730	-13 965	-98 244
Change in model or risk parameters	-	-	-	-
Other adjustments		-	-	-	-
Gross loans as at 30.06.2020	3 067 031	285 630	542 461	3 895 123

Reconciliation of gross loans for consumer loans in Norway
Amounts in NOK 1000			Stage 1		Stage 2		Stage 3	Total
Gross loans as at 01.04.2020		1 519 922		234 759		240 489	1 995 170
Transfers
- transfer from stage	1 to stage 2		-57 431		57 431		-	-
- transfer from stage	1 to stage 3		-11 912		-		11 912	-
- transfer from stage	2 to stage 3		-		-17 682		17 682	-
- transfer from stage	3 to stage 2		-		3 679		-3 679	-
- transfer from stage	2 to stage 1		66 121		-66 121		-	-
- transfer from stage	3 to stage 1		5 474		-		-5 474	-
New financial assets originated		776		-		-	776
Derecognised financial assets (repayments and write-offs)	-	93 661	-	54 060	-	23 784	-171 504
Partial repayments		-	49 179	-	1 602	-	4 792	-55 573
Currency effects			-		-		-	-
Change in model or risk parameters		-		-		-	-
Other adjustments			-		-		-	-
Gross loans as at 30.06.2020		1 380 110		156 405		232 354	1 768 869

Consumer loans in Norway
Reconciliation of expected credit loss for consumer loans in Norway
Amounts in NOK 1000		Stage 1	Stage 2	Stage 3	Total
Loss allowance as at 01.04.2020	34 862	31 655	118 924	185 440
Transfers
- transfer from stage	1 to stage 2	-2 477	2 477	-	-
- transfer from stage	1 to stage 3	-513	-	513	-
- transfer from stage	2 to stage 3	-	-2 705	2 705	-
- transfer from stage	3 to stage 2	-	904	-904	-
- transfer from stage	2 to stage 1	8 587	-8 587	-	-
- transfer from stage	3 to stage 1	1 474	-	-1 474	-
New financial assets originated	24	-	-	24
Derecognised financial assets (repayments and write-offs)	-1 979	-9 854	-7 718	-19 551
Change in measurement*	-6 404	7 684	15 630	16 910
Currency effects		-	-	-	-
Change in model or risk parameters	-	-	-	-
Other adjustments		-	-	-	-
Loss allowance as at 30.06.2020	33 573	21 574	127 675	182 822
*change in PD, LGD or EAD and 12 months vs lifetime horizon

Consumer loans in Sweden
Reconciliation of expected credit loss for consumer loans in Sweden
Amounts in NOK 1000			Stage 1		Stage 2	Stage 3	Total
Loss allowance as at 01.04.2020		3 851		3 080		11 357	18 288
Transfers
- transfer from stage 1 to stage 2		-207		207		-	-
- transfer from stage 1 to stage 3		-67		-		67	-
- transfer from stage 2 to stage 3		-		-821		821	-
- transfer from stage	3 to stage 2		-		166		-166	-
- transfer from stage	2 to stage 1		405		-405		-	-
- transfer from stage	3 to stage 1		1 094		-		-1 094	-
New financial assets originated		-		-		-	-
Derecognised financial assets (repayments and write-offs)		-118	-	30		-	-148
Change in measurement*		-1 439		1 071		2 609	2 241
Currency effects			-3	-	2		-10	-16
Change in model or risk parameters		-		-		-	-
Other adjustments			-		-		-	-
Loss allowance as at 30.06.2020		3 517		3 265		13 584	20 366
*change in PD, LGD or EAD and 12 months vs lifetime horizon
Reconciliation of gross loans for consumer loans in Sweden
Amounts in NOK 1000			Stage 1		Stage 2	Stage 3	Total
Gross loans as at 01.04.2020		176 408		21 036		28 100	225 544
Transfers
- transfer from stage 1 to stage 2		-9 549		9 549		-	-
- transfer from stage 1 to stage 3		-1 703		-		1 703	-
- transfer from stage 2 to stage 3		-		-6 438		6 438	-
- transfer from stage 3 to stage 2		-		376		-376	-
- transfer from stage 2 to stage 1		2 969		-2 969		-	-
- transfer from stage 3 to stage 1		2 294		-		-2 294	-
New financial assets originated		-		-		-	-
Derecognised financial assets (repayments and write-offs)	-	9 208	-	205		-	-9 413
Partial repayments		-	2 962	-	20		41	-2 941
Currency effects		-	78	-	13 -	16	-106
Change in model or risk parameters		-		-		-	-
Other adjustments			-		-		-	-
Gross loans as at 30.06.2020		158 171		21 317		33 596	213 084
Consumer loans in Finland
Reconciliation of expected credit loss for consumer loans in Finland
Amounts in NOK 1000			Stage 1		Stage 2	Stage 3	Total
Loss allowance as at 01.04.2020		49 425		19 678		75 030	144 133
Transfers
- transfer from stage 1 to stage 2		-2 519		2 519		-	-
- transfer from stage 1 to stage 3		-531		-		531	-
- transfer from stage 2 to stage 3		-		-9 774		9 774	-
- transfer from stage 3 to stage 2		-		939		-939	-
- transfer from stage 2 to stage 1		2 644		-2 644		-	-
- transfer from stage 3 to stage 1		153		-		-153	-
New financial assets originated		484		-		489	973
Derecognised financial assets (repayments and write-offs)		-1 649		-556		-452	-2 657
Change in measurement*		-3 702		9 069		14 193	19 560
Currency effects			-2 302		-934		-5 239	-8 474
Change in model or risk parameters		-		-		-	-
Other adjustments			-		-		-	-
Loss allowance as at 30.06.2020		42 004		18 296		93 233	153 534
*change in PD, LGD or EAD and 12 months vs lifetime horizon
								15

Reconciliation of gross loans for consumer loans in Finland
Amounts in NOK 1000			Stage 1		Stage 2		Stage 3	Total
Gross loans as at 01.04.2020		1 693 253		128 867		223 216	2 045 335
Transfers
- transfer from stage	1 to stage 2		-59 495		59 495		-	-
- transfer from stage	1 to stage 3		-12 191		-		12 191	-
- transfer from stage	2 to stage 3		-		-54 749		54 749	-
- transfer from stage	3 to stage 2		-		4 161		-4 161	-
- transfer from stage	2 to stage 1		19 784		-19 784		-	-
- transfer from stage	3 to stage 1		1 645		-		-1 645	-
New financial assets originated		13 415		-		1 213	14 628
Derecognised financial assets (repayments and write-offs)	-	53 683	-	3 564	-	1 370	-58 617
Partial repayments		-	43 268	-	799	-	382	-44 449
Currency effects		-	78 471	-	5 718	-	13 949	-98 138
Change in model or risk parameters		-		-		-	-
Other adjustments			-		-		-	-
Gross loans as at 30.06.2020		1 480 989		107 909		269 862	1 858 759

Credit card loans
Reconciliation of expected credit loss for credit card loans
Amounts in NOK 1000			Stage 1	Stage 2		Stage 3	Total
Loss allowance as at 01.04.2020		991	-		1 363	2 354
Transfers
- transfer from stage	1 to stage 2		-	-		-	-
- transfer from stage	1 to stage 3		-7	-		7	-
- transfer from stage	2 to stage 3		-	-		-	-
- transfer from stage	3 to stage 2		-	-		-	-
- transfer from stage	2 to stage 1		-	-		-	-
- transfer from stage	3 to stage 1		113	-		-113	-
New financial assets originated		24	-		-	24
Derecognised financial assets (repayments and write-offs)		-110	-		-70	-181
Change in measurement*		-92	-		405	314
Currency effects			-	-		-	-
Change in model or risk parameters		-	-		-	-
Other adjustments			-	-		-	-
Loss allowance as at 30.06.2020		919	-		1 592	2 511
*change in PD, LGD or EAD and 12 months vs lifetime horizon
Reconciliation of gross loans for credit card loans
Amounts in NOK 1000			Stage 1	Stage 2		Stage 3	Total
Gross loans as at 01.04.2020		46 365	-		6 517	52 882
Transfers
- transfer from stage	1 to stage 2		-	-		-	-
- transfer from stage	1 to stage 3		-806	-		806	-
- transfer from stage 2 to stage 3		-	-		-	-
- transfer from stage 3 to stage 2		-	-		-	-
- transfer from stage 2 to stage 1		-	-		-	-
- transfer from stage 3 to stage 1		368	-		-368	-
New financial assets originated		1 359	-		-	1 359
Derecognised financial assets (repayments and write-offs)	-	1 293	-	-	231	-1 524
Partial repayments			1 769	-	-	75	1 694
Currency effects			-	-		-	-
Change in model or risk parameters		-	-		-	-
Other adjustments			-	-		-	-
Gross loans as at 30.06.2020		47 761	-		6 649	54 410
							16

2.3 Macro Scenario Sensitivity on ECL - 30.06.2020
		Base
	ECL reported	Scenario (65	Optimistic	Pessimistic
Amounts in NOK 1000	under IFRS 9	%)	Scenario (20 %)	Scenario (15 %)
Total	359 233	358 212	346 867	380 144
Consumer loans	356 722	355 701	344 356	377 632
Credit card loans	2 511	2 511	2 511	2 511
Norway	184 834	184 387	179 313	194 127
Consumer loans	182 822	182 376	177 302	192 116
Credit card loans	2 011	2 011	2 011	2 011
Finland	153 534	152 968	146 826	164 926
Consumer loans	153 534	152 968	146 826	164 926
Credit card loans	-	-	-	-
Sweden	20 866	20 856	20 728	21 091
Consumer loans	20 366	20 356	20 228	20 591
Credit card loans	500	500	500	500

The ECL reported under IFRS 9 is a macro-weighted ECL.

The following weights have been applied for the the three scenarios: Base scenario (65 %), Optimistic (20 %) and Pessimistic (15 %).

Note 3 Capital adequacy

In NOK thousands	30.06.2020	30.06.2019	31.12.2019
Share capital	125 184	447 393	495 919
Surplus capital	755 554	304 034	324 931
Retained earnings	-117 368	-6 525	-114 616
Phase-in effects of IFRS 9	66 299	87 705	92 075
'- Deduction of deferred tax assets, other intangible assets
and additional valuation adjustments	-162 917	-94 769	-168 728
Common equity Tier 1 capital	666 751	737 838	629 581
Additional Tier 1 capital instruments	50 000	50 000	50 000
Tier 1 capital	716 751	787 838	679 581
Subordinated loan capital	64 340	50 000	50 000
Tier 2 capital	781 091	837 838	729 581
Capital requirements	30.06.2020	30.06.2019	31.12.2019
Institutions	12 706	50 751	149 850
Loans to customers 75%	2 428 423	3 144 815	2 747 950
Defaulted loans 100%	306 376	299 397	262 155
Phase-in effects of IFRS 9	60 617	78 582	84 799
Covered bonds	-	26 690
Other assets	33 252	76 290	34 149
Corporate	1 232	61 323	1 111
Regional governments or local authorities		14 041
Market risk
Operational risk	516 838	320 676	516 838
CVA risk	344	6 728	171
Total risk-weighted volume and capital requirements	3 359 787	4 079 292	3 797 023
Common equity Tier 1 capital ratio	19,8 %	18,1 %	16,6 %

Tier 1 capital ratio	21,3 %	19,3 %	17,9 %
Capital ratio	23,2 %	20,5 %	19,2 %
Minimum CET 1 capital ratio requirement	16,7 %	17,5 %	17,7 %

Capital and capital ratios without the adjustment according to IFRS 9 transitional rules

BRABank have applied the IFRS 9 transitional rules to calculate the regulatory capital, in accordance with article 473a of the Capital Requirement Regulation. The two tables below show the regulatory capital and capital ratios without the IFRS 9 transitional rules.

Capital without transitional rules	30.06.2020
Common equity Tier 1 capital	600 452
Additional Tier 1 capital instruments	50 000
Tier 1 capital	650 452
Subordinated loan capital	64 340
Tier 2 capital	714 793
Capital ratios without the transitional rules	30.06.2020
Common equity Tier 1 capital ratio	17,9 %
Tier 1 capital ratio	19,4 %
Capital ratio	21,3 %
Leverage ratio	11,9 %
	30.06.2020	30.06.2019	31.12.2019
LCR (Liquidity Coverage Ratio)	1023 %	1015 %	1947 %
NSFR (Net Stable Funding Ratio)	212 %	179 %	216 %

LCR (Liquidity Coverage Ratio) is defined as the liquid assets relative to net liquidity output 30 days forward in time in any given stress situation. NSFR (Net Stable Funding Ratio) is defined as the liquid assets relative to net liquidity output over a longer time horizon in any given stress situation. CET 1 capital ratio is the core equity instruments against the total risk-weighted assets.

Following the implementation of IFRS 9 BRAbank publishes capital ratios on a transitional rule basis (allowing for a reversal of 85% of IFRS 9 capital impact in 2019 and 70% in 2020).

Note 4 Financial instruments measured at fair value

Financial instruments at fair value	30.06.2020	30.06.2019	31.12.2019
In NOK thousands
Certificates and bonds - level 1	1 787 422	1 241 525	1 440 155
Financial derivatives - level 2	-	-	29 654
Financial assets, shares SDC - level 3	1 232	1 093	1 111
Total financial instruments at fair value	1 788 654	1 242 618	1 470 919
Level 1: Valuation based on quoted prices in an active market
Level 2: Valuation based on observable market data, other than quoted prices
Level 3: Valuation based on observable market data when valuation can not be determined in level 1 or 2.

In NOK thousands	30.06.2020	30.06.2019	31.12.2019
Loans and advances to credit institutions	48 003	134 450	743 771
Loans and advances to customers	3 535 890	4 536 903	3 926 016
Prepayments, accrued income and other assets	10 851	16 532	7 845
Total financial assets at amortized cost	3 594 743	4 687 885	4 677 632
Deposits by customers	4 644 921	5 153 296	5 472 666

Provisions, accruals and other liabilities	51 634	82 867	63 490
Subordinated loan	64 340	49 370	49 540
Total financial liabilities at amortized cost	4 760 895	5 285 533	5 585 696

Note 5 Subordinated loans

In NOK thousands

Subordinated loan	ISIN	Rate	Maturity	Costs		30.06.2020	30.06.2019	31.12.2019
Tier 2 bond	NO0010804792	3 mnd Nibor + 5%	13.09.2027		851	50 000	50 000	50 000
Tier 2 bond	NO0010877863	3 mnd Nibor + 7%	27.03.2030		300	15 000	-	-

Note 6 Intangible assets and fixed assets

	IT software	Office, furniture	Total
In NOK thousands	etc.
Acquisition cost at 01.01.2020	144 372	5 774	150 146
Additions	4 191	169	4 361
Acquisition cost at 30.06.2020	148 563	5 943	154 506
Accumulated depreciation and amortisation	-68 323	-3 301	-71 624
Depreciation and amortisation in the period	-10 320	-686	-11 006
Impairment in the period	-	-	-
*Carrying amount 30.06.2020	69 919	1 956	71 876
Useful life	5 years	3 years
Depreciation plan	Linear	Linear
	IT software	Office, furniture	Total
In NOK thousands	etc.
Acquisition cost at 01.01.2019	85 186	17 669	89 601
Additions	45 716	986	46 702
Disposals	-29 896		-29 896
Acquisition cost at 30.06.2019	101 006	18 655	119 661
Accumulated depreciation and amortisation	-17 425	-1 734	-19 855
Depreciation and amortisation in the period	-9 713	-2 063	-11 239
Accumulated depreciation and amortisation	-27 138	-3 797	-30 935
*Carrying amount 30.06.2019	73 867	14 859	88 726
Useful life	5 years	3 years
Depreciation plan	Linear	Linear
	IT software	Office, furniture	Total

In NOK thousands	etc.
Acquisition cost at 01.01.2019	85 186	4 415	89 601
Additions	59 186	1 359	60 545
Acquisition cost at 31.12.2019	144 372	5 774	150 146
Accumulated depreciation and amortisation	-18 121	-1 734	-19 855
Depreciation and amortisation in the period	-20 306	-1 567	-21 873
Impairment in the period	-29 896		-29 896
Accumulated depreciation and amortisation	-68 323	-3 301	-71 624
*Carrying amount 31.12.2019	76 048	2 473	78 522
Useful life	5 years	3 years
Depreciation plan	Linear	Linear

* Balance is excluding non-cancellable operating contracts, see note 9 for further information

The IT software is related to the development of the IT system and platform used in the Bank's operations, including loan process and integration with loan agents in Norway, Finland and Sweden. A credit card platform and the associated app is developed therein.

BRAbank and Monobank merged 28 June 2019. In relation to the merger, the bank has written down all IT software related to loan process and integration from the former BRAbank.

Note 7 Net interest income and fee income

In NOK thousands	30.06.2020	30.06.2019	31.12.2019

Interest income from loans and advances to customers	182 486	197 166	407 647
Interest income from loans and advances to credit intstitutions	115	119	303
Interest income, effective interest method	182 601	197 285	407 950
Interest and other income from certificates and bonds	6 476	6 766	12 813
Other interest	9	15	34
Other interest income	6 485	6 781	12 847
Interest expense deposits by customers	-25 509	-33 866	-68 723
Interest expense subordinated debt	-1 788	-1 635	-3 463
Other interest expenses	-269	-204	-469
Interest expenses	-27 565	-35 705	-72 654
Net interest income	161 521	168 361	348 143
Insurance commission	924	1 226	2 371
Arrangement fees	1 462	6 378	8 533
Other fees	8 971	7 244	16 053
Commission and fee income	11 358	14 849	26 958
Commission fees distribution	2 495	3 534	10 533
Commission and fee expenses	2 495	3 534	10 533

Note 8 General administrative expenses

In NOK thousands		30.06.2020	30.06.2019	31.12.2019
Sales and marketing	1 854	13 318	19 174
IT operations	15 794	5 750	20 065
External service fees	8 059	6 707	18 971
Other administrative expenses	16 845	19 792	48 327
Total general administrative expenses	42 552	45 567	106 535

Note 9 leasing agreement

Right - of-use asset	30.06.2020	30.06.2019	31.12.2019
In NOK thousands
Right - of-use asset at 01.01.	10 588	13 254	13 254
Change due to change in CPI	-	501	1 011
Depreciation	-1 955	-1 820	-3 677
Right - of-use asset at 30.06.	8 633	11 935	10 588
The company only has premises for rent in Bergen.

Lease commitments	30.06.2020	30.06.2019	31.12.2019
One to five years	5 428	8 425	7 302
Within one year	3 673	3 697	3 603
Total commitments	9 100	12 122	10 905
Interest on lease liabilities	-180	-195	-376
Repayments of contract	1 985	1 828	3 736
Total cash outflow for leases	1 804	1 633	3 360
Change of commitment due to change in CPI	-	-501	-1 011
Total change in commitment	1 804	1 133	2 349

Agreements exempt from recognition and measurement

The company rents an apartment in Marbella that is considered exempt from recognition and measurement in accordance with IFRS 16. The amount is specified below.

Costs of exempted contracts	30.06.2020	30.06.2019	31.12.2019
75	75	150

The incremental borrowing rate is 3% as of 30.06.2020

Note 10 Share capital

The Bank's 20 largest shareholders as of 31 march 2020	Roles	Number of	Ownership
shares	share
1	Braganza AB	Board member	126 987 017	20,29 %
2	Banque Internationale À Luxembourg	Board member	46 000 000	7,35 %
3	Hjellegjerde Invest AS		41 102 619	6,57 %
4	Farvatn Private Equity AS		33 544 935	5,36 %
5	Skandinaviska Enskilda Banken AB II		34 326 386	5,48 %
6	Raiffeisen Bank International Ag		24 826 567	3,97 %
7	Netrom AS		21 279 477	3,40 %
8	Songa AS		20 000 000	3,20 %
9	Sova Capital Limited		18 060 354	2,89 %
10	Thon Holding AS		14 278 281	2,28 %
11	Bara Eiendom AS		11 663 104	1,86 %
12	7 Fjell Ventures AS		10 915 678	1,74 %
13	Sportsmagasinet AS		9 941 489	1,59 %
14	Sandsolo Holding AS		7 400 000	1,18 %
15	Roger Jørgensen		7 353 489	1,17 %
16	Mj Capital AS		5 558 492	0,89 %
17	Skandinaviska Enskilda Banken AB II		34 326 386	5,48 %
18	Wenaas Kapital AS Aksjebeholdning		5 036 161	0,80 %
19	Songa Trading INC		5 014 940	0,80 %
20	Ekrem AS		4 646 854	0,74 %
Other shareholders			143 656 329	23 %
Total			625 918 558

Shares held by management, Board members and other related parties at 30 june 2020
Braganza AB	Board member	126 987 017
Banque Internationale À Luxembourg	Board member	46 000 000
Bent Hilding Gjendem	Board member	2 367 898
Tom Henning Rimestad		1 872 778
Martin Valland		1 684 730
Hans Kristian Bognø Ljøen		378 710
Henriette Vartdal		368 252
Kristin Margrethe Krohn Devold	Board member	49 210
Bård Manuel Fladvad		37 823
Torbjørn Botnevik		11 842
Rolf Viggo Leisner	CoB	3 903

Issued warrants:

There is a total of 22 750 000 issued warrants with the following subscription price:

Warrants 1:

A total of warrants 13 875 000, held by management, board members and share holders from former BRAbank. Due date is 23 May 2023:

1 March 2021: 2.94 pr share

1 March 2022: 3.09 per share

23 Februar 2023: 3.24 per share

Warrants 2:

A total of 8 875 000 warrants, held by management, board and employees, 1.5 per share with an increase of 5% per year. Due date is 23 May 2023.

1st increase: 1 September 2019
Warrants held by Management, Board of Directors and related parties:
Braganza AB	Board member	8 340 854	Warrants 1
Hilding Invest AS	Board member	2 875 000	Warrants 2
Martin Valland	CTO	1 800 000	Warrants 2
Tom Rimestad	COO	1 800 000	Warrants 2
Hans Ljøen	CEO	500 000	Warrants 2
Henriette Vartdal	CPO	100 000	Warrants 2
Total		15 415 854

Stock options

There is a total of 1 387 500 stock options held by the former BRAbank managment team with subscription price 2.94, 3 days after general assembly 2021.

Note 11 Tier 1 capital

In NOK thousands

Subordinated loan	ISIN	Rate	Maturity	Costs		30.06.2020	30.06.2019
Tier 1 bond	NO0010804784	3 mnd Nibor + 7%	Perpetual		851	50 000	50 000

Note 12 Related parties

BRAbank and BRA have an agreement regarding use of the brand name of BRA, logo and the loyalty program BRA Vänner. The agreement was signed in january 2019 and was part of the mergerplan between Monobank and former BRAbank. License fee for the agreement is MNOK 2.5 in 2019, MNOK 6.5 in 2020 and MNOK 9.5 in 2021. The parties also has an agreement related to BRA-Card, which are credit card issued by BRAbank and distributed in the channles of BRA.

BRAbank and Widerøe have a cooperation agreement regarding consumer finance, where BRAbank is the issuer of credit card and Widerøe has its brand name for distribution. The agreement was signed October 2016. Launch of the credit card in Widerøe's name was October 2018.

Note 13 Events after the balance sheet date

The extraordinary general meeting (the "EGM") of BRAbank ASA (the "Company") was held on 16 July 2020 at Starvhusgaten 4, Bergen.

All proposals on the agenda were adopted. The EGM consequently approved the merger plan dated 12 June 2020 regarding the merger between Easybank ASA and the BRAbank ASA with Easybank ASA as the surviving entity.

The merger will be carried out subject to and in accordance with the conditions set out in the merger plan, available at brabank.no

Declaration from the Board of Directors of BRAbank

ASA and the CEO

Bergen, 20 August 2020

We confirm, to the best of our knowledge, that the condensed set of financial statements for the period 1 January to 30 June 2020 has been prepared in accordance with the current accounting standard, and gives a true and fair view of the (Company's and) group's assets, liabilities, financial position and profit or loss as a whole. We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related parties transactions.

Rolf Viggo Leisner

Mette Henriksen

Øyvind Oanes

Chairman of the Board

Kristin Krohn Devold

Per Georg Braathen

Bent Gjendem

Employee Representative

Nina Dyrøy	Hans Kristian Ljøen
Employee Representative	CEO

Cover photo: Noah Rosenfield, Unsplash

BRAbank ASA, Starvhusgaten 4, 5014 Bergen

55 96 10 00 • brabank.no

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Brabank ASA published this content on 20 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 August 2020 07:19:06 UTC

BRAbank ASA Reports Earnings Results for the First Quarter Ended March 31, 2022	22-04-28	CI
BRAbank ASA Reports Earnings Results for the Fourth Quarter and Full Year Ended December 31, 2021	22-02-17	CI
Brabank Asa Reports Earnings Results for the Third Quarter Ended September 30, 2020	20-11-11	CI
Easybank ASA completed the acquisition of BRAbank ASA (OB:BRA-ME).	20-09-30	CI
BRAbank ASA will Change its Ticker to BRABK-ME from BRA-ME	20-09-25	CI
BRAbank ASA Announces CEO Changes	20-09-24	CI
BRAbank ASA Appoints Oddbjørn Berentsen as CEO	20-09-07	CI
BRAbank ASA Announces Svein Lindbak as Chairman and Viggo Leisner as Vice Chairman	20-09-07	CI
BRAbank ASA Announces Resignation of Bent Gjendem as Strategic Adviser	20-08-31	CI
Easybank ASA and Brabank ASA Enters into Agreement with Stacc AS	20-08-21	CI
Transcript : BRAbank ASA, Q2 2020 Earnings Call, Aug 21, 2020	20-08-21
Brabank Asa Reports Earnings Results for the Second Quarter Ended June 30, 2020	20-08-20	CI
Easybank ASA agreed to acquire BRAbank ASA (OB:BRA-ME) for approximately NOK 340 million.	20-06-11	CI
Transcript : BRAbank ASA, Q1 2020 Earnings Call, May 15, 2020	20-05-15
Brabank Asa Reports Earnings Results for the First Quarter Ended March 31, 2020	20-05-14	CI
BRAbank ASA announced that it has received NOK 65 million in funding from Braganza AS	20-03-17	CI
BRAbank ASA announced that it expects to receive NOK 65 million in funding from Braganza AS and another investor	20-03-04	CI
Transcript : BRAbank ASA, Q4 2019 Earnings Call, Feb 20, 2020	20-02-20
Brabank Asa Reports Earnings Results for the Fourth Quarter Ended December 31, 2019	20-01-14	CI
BRAbank ASA Announces Management Changes	19-11-27	CI
Brabank Asa Reports Earnings Results for the Third Quarter Ended September 30, 2019	19-10-28	CI
BRAbank ASA announced that it has received NOK 35 million in funding from Braganza AS	19-09-26	CI
BRAbank ASA announced that it expects to receive NOK 35 million in funding from Braganza AS and other investors	19-08-28	CI
Brabank Asa Reports Earnings Results for the Second Quarter Ended June 30, 2019	19-08-20	CI
BRAbank ASA announced that it has received NOK 37.155 million in funding	19-07-08	CI

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Monobank ASA

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