BankNordik - Divesting the Danish business

Selling its 11 Danish branches to Spar Nord We could see an EO DPS paid in 2021 The EPS dilution for removing Denmark is ~15% BankNordik to pocket a gain of DKK 70-90m in Q1’21 This morning, BankNordik announced a divestment of its Danish operations to Spar Nord. Spar Nord is to pay a goodwill of DKK 255m for taking over DKK 25bn in business volume with the 60,000 retail customers of BankNordik in Denmark. Spar Nord takes over 11 branches and 132 FTE’s in Denmark, DKK 2. 4bn of bank lending, DKK 5.

8bn of deposits and DKK 11. 1bn of mortgages. After costs for exiting the SDC platform for its Danish exposure (Spar Nord on BEC) and transaction/organisational costs, BankNordik expects to pocket a net gain of DKK 70-90m in Q1’21.

BankNordik is not selling equity to Spar Nord but rather a balance of assets (liquidity put in by BankNordik clears the balance) and liabilities. The BankNordik upside lies in the capital release BankNordik is a North Atlantic SIFI and has met a requirement for meeting SIFI level MREL requirements for its entire exposure despite being a small player in Denmark. Spar Nord is a Danish SIFI, but with a lower SIFI add-on (1%) than BankNordik (2%) and without the Systemic Risk buffer on the Faroe islands (2%), Spar Nord has a lower capital requirement for the exposure.

The Danish operation makes up ~33% of the credit exposure of BankNordik, so at the closing of the transaction BankNordik projects a CET1 ratio of 32. 5% and a solvency ratio of 36% compared to its current targets of 19. 5% and 23% respectively (group REA from DKK 9.

9bn Q3’20 to DKK 7bn), which translates into ~DKK 900m excess equity. Assuming a changed risk profile of BankNordik after the transaction, we believe the capital targets could climb, which should still leave potential for an extraordinary dividend. EPS dilution but any EO DPS should offset it We believe divesting the Danish business could cost around 15% of 22e adj.

EPS for BankNordik. The size and timing of any.