BankNordik: High loan loss reversals in a stable quarter - ABG

Profit before tax came in 8% above ABGSC

Strong quarter in the insurance business

Guidance for ’22 net profit at DKK 160-190m reconfirmed

Q2’22 profit before tax came in 8% above ABGSC estimate
The Q2’22 profit before tax came in at DKK 54m, 8% above ABGSC. NII showed a slight decrease Q-o-Q from DKK 66m in Q1 to DKK 65m in Q2. Commission income came in flat relative to Q1 but 16% above ABGSC estimate, however the weak market conditions led to a loss from the investment portfolio of DKK 16m compared to earnings of DKK 2M in Q1. Net insurance income came in at DKK 15m in line with ABGSC and 30% above Q1. Apart from the investment portfolio income the main deviation to our estimates were loan loss reversals of DKK 22m vs. ABGSC estimates of DKK 2m and DKK 10m in Q1. Cost/income ratio came in at 56% in line with ABGSC. BankNordik reiterate its guidance for 2022’e net profit of DKK 160-190m.

Solid performance in insurance and high loan loss reversals
BankNordik showed another solid quarter in its insurance business with slightly higher premiums at DKK 35m vs. DKK 34m in Q1 and lower claims at DKK 23m down from DKK 25m. Cost were flat while the loss from investment activities increased from DKK -3m in Q1 to DKK -5m in Q2. Thus, combined ratio came in at 76% compared to 86% in Q1.The negative effect from weak financial markets were more than offset by the high loan loss reversals which continue to indicate a solid quality of BankNordik’s credit portfolio.

Expect a neutral market reaction
BankNordik reports a flat development in the core banking activities regarding net interest income, commission income and cost levels.To that, the positive development in the insurance business is good news after a turbulent 2021. The decrease in net profit Q-o-Q from DKK 62m to DKK 54m was expected due to the weak equity markets and therefore we expect a rather neutral share price reaction today.
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