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Vestjysk Bank: Business doing well, taxation could normalise - ABG

2021 net profit guidance upgrade driven by a tax gain Good business momentum and DJS merger on track VB is trading at a 2023e adj. PE of 10.3x

DJS synergies to roll into Q4’21e; moderate lending growth On Thursday Vestjysk bank (VB) upgraded its guidance for 2021 net profit to DKK 1,080m (DKK 950m-1,050m) due to a high level of business activity as well as a tax gain. We expect moderate lending growth in Q4’21e of 1% q-o-q. NII could be up 2.5% q-o-q with help from NII from the write-down account. We expect Q4 fees of DKK 151m slightly up from Q3’21 and decent trading income of DKK 25m. We anticipate Q4’21e costs of DKK 257m, down 5% y-o-y (using our DJS Q4’20 estimated costs), driven by DJS synergies of DKK 20m. We expect net loan loss reversals of DKK 5m in Q4’21e, despite prices for Danish pork meat coming down to DKK 8.1/kg yesterday, which has negative implications for the 3.4% exposure to pork farming. Other sectors look good and VB has reserved DKK 258m for economic uncertainty (1.5% of lending). We believe that the bank could book a DKK 63m net tax gain in Q4, which would explain a large part of the guidance upgrade yesterday. VB consolidating profit for H2’21 could lead to CET1 being up 130bp q-o-q, to 19.1%. We expect no DPS for 2021. We now expect the tax rate to normalise in 2023 Our estimate for 2022 PTP of DKK 628m is in the middle of the new DKK 600m-650m guidance. With the Q4 tax gain announced on Thursday, we now see VB consuming its contingent tax liability of DKK 249m by the end of 2022, which means our new forecast for a 2023 net profit of DKK 499m is with a normal 2023e tax rate of 25%. We see potential in the DKK 2.8bn write-down account of VB (14.5% of gross lending), while we expect a DPS for 2022 of DKK 0.26 (6.5%yield). 2023e adj. EPS down 16% ’23 adj. EPS is down 16% due to normal taxation in ’23e. VB is now trading at a 2023 adj. PE of 10.3x. We see support from the high write-down account and M&A potential; on Thursday the CEO of Arb ... Läs mer på Introduce
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