BankNordik: Another stable quarter before rate hikes kick in - ABG

BankNordik set to report a solid Q2 on 4 August Fee income under pressure but insurance looks strong Valuation at 5.6x 24e adj. P/E and 22e 9.7% yield Net commission income weakens a solid quarter

The Q2 focus should mainly be on how net commission income has been affected by the weak equity markets. Ahead of the rate hikes coming in H2, it is also relevant to look at the Q2’22 growth in Greenland. Lastly, the coming quarters will show if BankNordik is able to regain stability in its insurance business. We expect BankNordik to report Q2’22 profit before loan losses (PBLL) of DKK 46m, down 2% y-o-y, as we expect commissions to be down DKK 3m q-o-q to DKK 19m due to poor market conditions. We expect NII up 1.5% q-o-q, supported by lending growth in Greenland. In H2, we have factored in a boost in NII following the rate hikes in Denmark. We expect insurance income to be stabilised in Q2’22 at DKK 13m from higher premiums and unchanged claims y-o-y. Regarding costs, we believe Q2’22 will be unchanged q-o-q as BankNordik is still investing in optimisation. We expect continued net loan loss reversals from a well-collateralised loan book, but at a slower pace of DKK 2m in Q2’22. For Q2’22, we expect the CET1 ratio up 120bp q-o-q to 25%, leaving BankNordik continuously overcapitalised.

Well underway to reach 2024e targets In May, BankNordik upgraded its guidance for 2022 net profit to DKK 160-190m (DKK 130-160m) vs. our estimate of DKK 178m. BankNordik’s targets of ROE above 10% p.a. and cost/income ratio below 55% seem highly likely, in our view, with the latter seeming particularly modest, as reported C/I ratios have been ~55% in recent quarters. We expect BankNordik to remain overcapitalised in 2024e with a CET1 ratio of 21.7% vs. the company target of 20%, leaving ample room for the targeted 50% dividend payout ratio supplemented by buybacks.

High yield and still overcapitalised BankNordik is trading at a ’24e adj. P/E of 5.6x (peers at 7.8x), 9% dividend yield (6%), 5% share b ... Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/banknordik/Equity-research/2022/7/banknordik---another-stable-quarter-before-rate-hikes-kick-in/