Our expected rate path implies ‘23e income of DKK 509m
‘24e adj. P/E of 5.1x is well below peers
Net profit guidance downgrade from suffering bond portfolio
On Monday afternoon BankNordik downgraded its guidance for 2022 net profit to DKK 140-170m (160-190m) due to market value adjustments being negatively affected by the interest rate environment hurting its bond portfolio, as has been the case for many of the small Danish banks in recent weeks. Owing to this, we increase our estimated losses on market value adjustments in Q3’22e and Q4’22e to DKK 17m and DKK 15m, respectively. Apart from the deteriorating market value adjustments we expect the core banking and insurance activities to report another solid quarter. We expect Q3 to be another confirmation of BankNordik’s strong asset quality, strengthened by the Faroese gas independence and energy prices not seeing the same steep increases as in Denmark. We expect another quarter of moderate growth in Greenland, of 2%, and a solid performance of the core insurance business apart from the investment result as the Faroe Islands have been spared from large storms and cloudbursts in Q3.
NII estimates up 7% q-o-q for Q3’22e and 14% in Q4’22e
We have now fully factored in our expected rate path, which includes two more interest rate hikes from the Danish central bank: 50bp in October and 25bp in December. In the Q3 report on 3 November, we expect a large part of the first 50bp increase from July to have an effect while we only expect a minor part of the 75bp from September to have an effect. In total, we expect a NII effect of DKK ~4m (7%) in Q3’22e with further tailwind into Q4’22e. With the full effect of our expected rate path in 2023e we estimate a y-o-y increase in NII of ~25%.
Multiples remain considerably below peer average
BankNordik is currently trading below peers at an adjusted ‘24e P/E of 5.1x vs. the peer average of 7.0x and at a ‘24e P/BV of 0.58x vs. the peer average of 0.82x. With our updated earnings scenario we expect a net profit of DKK 159m in 2022, in the high end of the new guidance range of DKK 140m-170m.
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