BankNordik: Insurance and loan loss reversals stand out - ABG

Profit before tax at DKK 54m, 8% above ABGSCe

Growth in Greenland on track

Strong quarter on insurance despite investment losses

PTP 8% over ABGSCe, loan loss reversals offset inv. losses
BankNordik’s Q2 profit before tax was DKK 54m, 8% above ABGSCe. Loan loss reversals of DKK 22m offset a loss to the investment portfolio of DKK 16m, a slightly worse-than-expected result due to the timing of a reversal from government bonds to mortgage bonds. NII was stable with a decrease of 2% q-o-q, and was 3% below ABGSCe. The CET1 ratio dropped 50bp to 23.3% on a higher REA. Positively, insurance income was in line with ABGSCe and 30% up from Q1. Fee and commission were also positive at a stable level of DKK 22m, 16% over ABGSCe. This shows that BankNordik has not suffered the same drop as Danish competitors due to less activity from the weak equity markets. It managed to keep cost/income unchanged at 56% while continuing to raise its investments in IT and digitalisation.

Continued growth in Greenland and stabilised insurance
Lending in Greenland increased by 4% q-o-q, continuing the growth path seen in recent years, while Faeroese lending declined slightly (-10bp). Mortgage credit in the Faroe Islands rose by 70bp, suggesting that the process of customers changing from bank loans to mortgage loans has slowed down; we expect the current loan distribution to be at a normalised level. The insurance business was strong with a combined ratio of 76% from 8% lower claims q-o-q and costs looking set to stabilise at DKK 4m. The strong quarter absorbed an increased loss from investment activities of DKK -5m, 66% down q-o-q.

On track toward the high end of 2022 guidance
BankNordik reconfirmed its net profit guidance for 2022 of DKK 160-190m. We estimate a net profit of DKK 183m, i.e. in the high end of the guidance range. Following the report, we have increased 2024e adj. EPS slightly to 22.4 from 21.9 (see page 3). We still expect a 50% dividend payout, corresponding to a yield of 7.6% and...
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/banknordik/Equity-research/2022/8/banknordik---insurance-and-loan-loss-reversals-stand-out/