Vestjysk Bank - Starting 2021 with high organic lending growth
PBLL was in-line with ABGSCe, but worse quality Surprisingly high organic lending growth Q1 a positive We expect a neutral share price reaction Lower quality and higher loan losses amid large EO gains Vestjysk Bank reported Q1’21 profit before loan losses of DKK 534m which were 1% below ABGSCe. Income was 1% below but with a worse quality mix than we expected with NII 7% below ABGSCe and commissions 5% below while trading income of DKK 32m was above ABGSCe of DKK 13m. Noise from the takeover of Den Jyske Sparekasse (DJS) Q1’21 may potentially play into the deviations while the DKK 477m badwill gain Q1 was in-line with our expectations. Q1’21 lending was 3.5% above ABGSCe related to surprisingly high organic lending growth in Q1 above 6% q-o-q.
Costs of DKK 307m Q1 was in-line (DKK 69m non-recurring costs Q1). Loan losses of DKK 22m (52bp p.a.) was higher than we expected despite a DKK 79m net reversal related to pork farmers, other agriculture and SME lending was behind the negative surprise. Vestjysk Bank holds upfront charges for economic uncertainty of DKK 289m as of Q1’21 (310m Q4’20).
Vestjysk Bank booked a tax gain of DKK 82m in Q1’21 due to the takeover of DJS (ABGSCe DKK 70m). CET1 of 17.2% was 130bp above ABGSCe. Guidance looks strong, no news on the upcoming AL bid Vestjysk Bank reiterated its guidance for a 2021 net profit of DKK 500-550m excluding EO items while it now guides for a 2021 net profit of DKK 800-900m including EO items related to the takeover of DJS (ABGSCe DKK 827m).
Vestjysk Bank now has a contingent tax asset of DKK 292m and a significant writedown account of DKK 3.1bn including DKK 0.8bn taken over from DJS. The Q1 report contained no news in relation to the upcoming bid from Arbejdernes Landsbank (AL) of DKK 3.45 per share. The board of Vestjysk Bank will announce its position on the bid, after it is announced following regulatory approvals of the shares bought from Nykredit and AP Pension bringing AL up to 60.7% of the sh....