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Straumur - Burdaras hf (ICE:STRB) Developments in the global financial markets have adversely impacted most financial institutions, including Straumur, since 30 June. Straumur has taken all reasonable steps to disclose information concerning the impact upon it of these developments to its shareholders and creditors.
Insofar as it has been possible, over the last four months, Straumur has continued to follow its stated strategy of developing client-driven revenue and de-risking its balance sheet.
Straumur's balance sheet and capital position has been adversely affected by declining asset values (in respect of both financial assets and loans). Although the Icelandic part of its business is relatively small, only accounting for 26% of its client driven revenue in the first half of the year and 22% of assets as at 30 June 2008, it has, in particular, been impacted adversely by recent events in that market.
The bank has estimated its current capital position taking account of the financial consequences of trading gains and losses, fair value adjustments and impairment provisions arising from events in the global and Icelandic markets. The bank estimates that, as at 31 October 2008, the Bank has a capital adequacy ratio to be in excess of 20% and a Tier 1 ratio in excess of 18%
Straumur had a number of asset, liability and derivative balances with Landsbanki Íslands hf., Glitnir banki hf. and Kaupthing banki hf. at the date when these banks' operations were taken over by the Icelandic Financial Supervisory Authority. Straumur believes that after the settlement and set off process in respect of these balances the net impact on its capital position is positive.
Straumur's reporting currency is Euros and the bank normally hedges its net assets into Euros. The Bank also has, however, a number of assets and liabilities denominated in other currencies including the Icelandic Kroner. Over the last month due to an effective closure of the foreign exchange market in Iceland, the bank has not been able to carry out its normal hedging of net currency positions into Euros. The bank has therefore been forced to carry positions in a number of currencies. It will take steps to hedge these positions when market conditions allow. Straumur can confirm that the weakness of the Icelandic Kroner has not had a significant impact on its capital position.
Straumur has relatively modest financing needs as it is not highly leveraged (having a debt to equity ratio of 31% at 30 June 2008). It has long term bank financing of less than €400m maturing over the next 12 months. However, recent events in Iceland have put pressure on Straumur's liquidity position. The bank has managed its cash and liquidity position carefully over the last month and the position has steadily improved. Throughout the last month the bank has met its obligations as they have fallen due and is confident that this will remain the case going forward. Nevertheless, as a result of concerns about the situation in Iceland, Straumur's credit rating has been steadily downgraded by Fitch to a current Long term Issuer Default Rating of B. Importantly, Straumur has managed its relationship with its funding banks proactively and positively through recent events and is working with them on securing its liquidity position.
As a result of the events described above, Straumur has focused on reducing its balance sheet and risk profile, protecting its capital and improving its liquidity position. At 31 October, Straumur currently had gross assets of less than €5bn and risk weighted assets of less than €4bn. At the same time the Bank has taken opportunities, to develop the revenue generating capability of the organization. At the start of November recruiting a number of former Teather's staff in London in order to enhance its Corporate Finance and Securities platform in the UK.
Despite the difficult conditions which continue to prevail in most of the markets in which Straumur operates the board and management of the Bank are confident that the actions described above and its strong capital position will enable it to develop its business in line with its current strategy - focusing on client-driven revenues, diversifying its sources of income and de-risking its balance sheet.
For further information contact:
Georg Andersen Senior Vice President, Head of Corporate Communications Tel: +354 858 6707 E-mail: georg@straumur.com
