Vestjysk Bank - High loan losses Q4, but strong 2021 guidance
Q4’20 PBLL 11% above ABGSCe, but large loan losses Underlying 2021 net profit guidance well above ABGSCe We expect a positive share price reaction today Positive fee surprise Q4’20 while costs disappointed Vestjysk Bank reported Q4’20 Profit Before Loan Losses of DKK 83m, which were 11% ahead of our estimate. NII was 2% below our estimate while lending dropped 3. 6% q-o-q. Commissions were 14% above ABGSCe and 2% up y-o-y, a key positive surprise, while Q4’20 trading was high at DKK 23m.
Costs were a negative surprise Q4’20 being 11% above ABGSCe. Loan losses of DKK 25m (105bp p. a.
) was a key negative surprise with DKK 44m Q4’20 related to pork farmers and while other business was behind DKK 56m loan losses charged Q4’20, this was countered by net reversals on other agriculture (DKK 21m) and real estate (DKK 64m). CET1 of 20. 9% Q4’20 was 30bp below ABGSCe but up 90bp q-o-q.
Vestjysk is guiding adjusted for non-recurring items Vestjysk Bank is guiding for a 2021 net profit of DKK 500-550m adjusted for non-recurring costs and earnings. We expect net non-recurring elements after tax of DKK 260m in 2021 (badwill gain reduced by EO costs of DKK 185m, both related to the DJS merger); our DKK 748m net profit estimate is DKK 488m adj. for the non-recurring elements, thus underlying net profit guidance is well above ABGSCe.
Likely focus on the strong underlying guidance We expect a positive share price reaction today linked to a strong underlying guidance for 2021 while the higher than expected loan losses are likely linked to general uncertainty.
