BankNordik: Great Faroese DPS splash to continue - ABG
2024 ROE targeted above 10% with normal loan losses New EO DPS of DKK 26 coming up in 2022 (yield 17%) Trading at a ’22 P/E of 7.8x and 6.5x adj. for EO DPS
ANNONS
BankNordik reported Q3’21 profit before loan losses of DKK 41m, 2% above ABGSCe, while net loan loss reversals of DKK 13m were well above ABGSCe at DKK 5m, helped by PTP 26% above ABGSCe. NII was 4% below ABGSCe, but up 1% q-o-q on deposit re-pricing and saved funding costs, while lending was flat q-o-q with Faroese lending down 1.3% q-o-q and Greenland up 11% q-o-q. Fee income was 12% above ABGSCe and up y-o-y, while insurance income of DKK 7m was better than feared after large fires on the Faroe Islands in Q3. Costs rising to DKK 59m from DKK 57m in Q3’20 was a negative surprise while CET1 of 26.1% was 30bp above ABGSCe.
2023e adj. EPS is unchanged (see page 3). BankNordik targeting a ROE above 10% in 2024, with normal loan losses of 40bp (of lending and guarantees), looks very ambitious to us, as our 10.7% ROE in 2023e comes with net loan loss reversals of 12bp. The bank has moved towards a shareholder value focus in the last five years and a new EO DPS for 2022 is coming up alongside normal buybacks. BankNordik is trading at ‘22 adj. PE of 7.8x, and 6.5x adj. for the new EO DPS in 2022.
