BankNordic: 8% beat on net profit in Q4 but major disappointment on capital repatriation - Nordea

Q4 NII came in strong, 3% ahead of our estimate while NCI came in slightly weaker, at DKK 17m versus our estimate at DKK 21m. Insurance income was in line with our estimate while costs came in 1% below (and thus better than) our estimate. Asset quality also remained strong in the quarter with BankNordik reporting only minor loan losses of DKK 5m. Additionally, market value adjustments were very strong in Q4, coming in at DKK 46m versus our estimate at DKK 26m. Thus, net profit ended 8% above our estimate at DKK 89m. On a negative note, BankNordik reported a significant miss to their own and our estimated payout ratio for 2023E, proposing a total dividend of only DKK 80m. This corresponds to a payout ratio of 26%, deviating materially from the bank’s target payout ratio of 70%. The reason behind the weak proposed dividend is, according to the company, an ongoing consultation at the FSA on the status of the Faroese and Greenlandic property markets. However, BankNordik still maintains its 2024 target of reaching a CET1 ratio of 20% and states that in case of a negative outcome from the FSA assessment, it will manage its loan portfolio within a few months to be able to comply with the dividend policy going forward. The Faroese banks are currently displaying their views on why the Faroese and Greenlandic property markets are in fact well-developed and long-established which may ease the imposed increase in the risk-weighting of these assets and leave scope for additional payout in 2024E. Yet, we still expect the share to trade down 5-8% on the news of the weak dividend.