As previously argued, we believe BankNordik should consider distributing the entire excess capital through share buybacks in order to avoid the Faroese withholding tax on foreign investors of a minimum of 15%. This implies a post-tax gain of DKK ~11 (7%) per share for non- Faroese investors compared to the base case of a 100% dividend payout.
Were we to include 100% buybacks instead of dividends in our estimates, this would lift 2023E EPS by ~73%. BankNordik currently trades at a capital-adjusted P/E of ~5x 2023E, 40% below Danish peers.
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