BankNordik - Q1 in line with our expectations

Q1 PBLL of DKK 38m slightly above ABGSCe 2021 guidance looks conservative We expect a neutral reaction today NII above ABGSCe despite a drop in lending, very high CET1 BankNordik reported Q1’21 profit before loan losses (PBLL) of DKK 38M which was close to our expectation of DKK 37m. NII was 1% ahead of ABGSCe despite lending decreasing 2. 1% q-o-q due to normal volatility in corporate lending on the Faroe Islands while lending on Greenland was flat q-o-q. Fee income was close to our expectation as well and a bit up from Q1’20.

Insurance income of DKK 7m were below our expectation related to weather claims and a single incident in the transport sector. BankNordik charged DKK 3m loan losses related to a single Faroe exposure while it maintains a balance of DKK 52m upfront loan losses for Covid-19. Reported CET1 of 31% was a positive surprise being 40bp above ABGSCe supported by a DKK 456m drop in REA due to removing the operational risk charge from the divested Danish Business (approved by the Danish FSA).

The divestment of the Danish business lead to CET1 climbing 840bp q-o-q while the Q1 P&L gain from the divestment was DKK 77m. Large EO distribution type to be announced on Q2’21 BankNordik reiterates its guidance for a 2021 net profit of DKK 150-200m with our estimate of DKK 205m ahead of Q1 being above the range. Q1 had no news on the planned EO distribution 2021-2023 of DKK 700m.

BankNordik plans to communicate on the DKK 450m planned EO distributions for 2021 alongside Q2’21 including addressing the question of dividends versus buybacks with its different tax implication across investor groups. Q1 does not imply large changes to market expectations We do not believe market expectations for BankNordik PTP in 2022 will change much post Q1 and we expect a neutral market reaction today.