Føroya Banki: Solid Q2 and positive outcome of the Danish FSA’s investigation of the Faroese and Greenlandic property market - Nordea

Q2 2024 profit before loan losses came in at DKK 63m, DKK 7m (10%) below our estimate. This was mainly due to fee income being DKK 4m below our estimate, driven by subdued activity during the quarter. Costs were also DKK 3m higher than our estimate, mainly due to higher IT costs, which can be a bit chunky by nature. Both loan losses and market value adjustments were significantly better than our estimate, hence Q2 2024 net profit ended at DKK 87m, DKK 19m (28%) better than our estimate.

The main focus today will, however, be the positive outcome of the Danish FSA’s investigation of the Faroese and Greenlandic property market, which has triggered an increase in REA of DKK ~200m during Q2 2024. We had penciled in an impact of DKK ~700m from Q3 2024 onwards. Furthermore, we notice that this REA increase is offset by a new agreement with DLR around mortgage guarantees. Clarity on capital position should be a major relief for the market.

We hence find it likely that the share could outperform peers today, despite 2025-26 consensus estimates could be trimmed slightly on the back of this report. The 2024 net profit guidance of DKK 225-255m was reiterated. We estimate DKK 252m.

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