Vestjysk Bank - High profitability and high yield ahead
We expect 2023e RONAV above 11% and yield of 9% Guidance for 2021 net profit on the positive side Stock trading at 22e adj. P/E of 6. 3x, P/NAV21e of 0. 73x Costs a negative surprise in Q4, more upfront loan losses 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 driven by loan transaction fees related to very high turnover on the housing market.
Commissions were a key positive surprise, while Q4’20 trading was high at DKK 23m. Costs were a negative surprise in Q4’20 coming in 11% above ABGSCe with DKK 15m in DJS merger costs as we expected (DKK 185m left for 2021). Loan losses of DKK 25m (103bp p.
a. ) was a key negative surprise with DKK 44m in Q4’20 related to pork farmers while other business was behind DKK 56m loan losses charged in Q4’20; this was countered by net reversals on other agriculture (DKK 21m) and real estate (DKK 64m). DKK 60m loan losses were charged as upfront loan losses related to economic uncertainty (balance up to DKK 310m by Q4’20).
CET1 of 20. 9% in Q4’20 was 30bp below ABGSCe but up 90bp q-o-q. We are in low end of guidance for 2021, RONAV ~11% ahead Vestjysk Bank is guiding for a 2021 net profit of DKK 500-550m excl.
non-recurring costs and earnings related to the merger with DJS announced in November 2020. We already factored the merger into our estimates and we expect net non-recurring items from the merger of DKK 260m after tax (net of merger badwill income and EO costs), thus our DKK 761m net profit estimate for 2021 corresponds to DKK 501m when mapped to the guidance of Vestjysk Bank. We expect loans losses for the merged bank of ~30bp in 2021 with Vestjysk being well reserved with a merged write-down account of ~DKK 3.
2bn. We expect a RONAV above 11% in 2022e-2023e while 25% DPS in 2021e could climb to 50% in 2022e-2023e (yield of 8-9%). 2022e adj.
EPS is down 2% Our 2.
