BankNordik - ABGSC’s Investor Day feedback
Large EO distribution still to be addressed at Q2’21 Unique position in two fairly shielded markets Trading at a ‘22e adj. PE of 6.2x with EO buybacks Massively over-capitalised North Atlantic SIFI Today, BankNordik (BN) CFO Rune Nørregaard presented at our virtual ABGSC Investor Day. BankNordik is headquartered in the Faroe Islands, where it holds around 42% of the bank market as a North Atlantic SIFI. BankNordik has a small, rapidly growing operation in Greenland (22% market share), while 11 Danish branches have recently been divested to Spar Nord.
BankNordik also operates its own non-life insurance company in the Faroe Islands (33% market share). Following the divestment of the Danish business, BankNordik is massively overcapitalised with a pro forma CET1 of 33.7% by Q1’21 (CET1 target is 23%); this has led to BN planning for DKK 700m EO distributions in ‘21-‘23. Going for growth in Greenland and efficiency at home CFO Nørregaard outlined some interesting perspectives on how BankNordik will proceed from the divestment of its Danish branches, as BN now is a player with significant positions in two fairly shielded markets.
In Greenland, its aim is to grow while we see the Faroese market play as more about harvesting efficiency gains in order to reach the targeted Cost/Income ratio of maximum 55%. Following net loan loss reversals for BankNordik since 2015, the credit outlook is still strong, according to the CFO, who also pointed to a low impact so far from COVID-19. BankNordik is stepping up its ESG reporting, and the CFO mentioned the focus on its 2025 ESG goals, as BankNordik seeks to contribute to its two local societies.
Nørregaard repeated BankNordik’s communication about a specific plan for the DKK 450m EO distributions for 2021 to be announced alongside the Q2’21 report, and had no news on the Faroese government potentially exiting its 35% stake in BN. Current focus is on the EO distributions We view the large EO distribution o....