BankNordik: Targeting above 10% return of equity in 2024 led by capital optimisation - Nordea

Q3 profit before loan losses was DKK 41m against our estimate of DKK 45m. Net interest income was DKK 66m, up 1% q/q and in line with our estimate. Net commission income came in at DKK 19m, up ~27% y/y and DKK 1m above our estimate. On the negative side, insurance income came in DKK 7m, down DKK ~60% y/y due to higher-than expected claims. We estimated DKK ~11m. Operating costs was DKK 59m, down DKK 3m (4%) q/q but slightly up y/y. We estimated DKK 56m. The CET1 ratio came in at ~26.1%, 1.8 pp below our estimate. On Friday, 15 October, BankNordik adjusted its 2021 net profit guidance to DKK 230-250m (from DKK 190-220m). As so, the Q3 2021 net profit result of DKK 43m implies a Q4 net profit of DKK ~45m for the bank to reach the new guidance midpoint. We currently estimate DKK 35m, which leaves our Q4 estimates at the lower end of the guidance range. With the Q3 2021 results, BankNordik has announced new financial targets for 2024: 1) Return of equity of "more than 10%" (previously 8%). 2) cost/income “below 55%” (previously ~55%. 3) CET1 ratio of “below 20%” (previously ~23%). The new targets are based on the current interest environment and a normalised loan loss ratio of 40 bp. Also, BankNordik now expects to distribute all of the remaining DKK 250m in EO dividends from the divestment of the Danish activities in 2022 (previously split between 2022 and 2023).