Vestjysk Bank: Large loan loss reversals in mixed Q2 - ABG

Good underlying NII momentum and loan loss reversals
Cost help from synergies later in ‘21 than we expected
We expect a neutral market reaction today

Vestjysk Bank (VB), reported Q2’21 NII of DKK 207m which were 2% above ABGSCe despite lending down 2.5% q-o-q related to a credit clean-up; underlying NII appear in good momentum. Commissions were 3% below ABGSCe while Q2 trading income of DKK 25m were below ABGSCe of DKK 30m. Q2 costs of DKK 272m were 17% higher than we expected due to a bit higher EO costs for the DJS merger booked in Q2 than we expected and less synergies coming through in the P&L for Q2 (to become more visible in Q3). Net loan loss reversals Q2 of DKK 56m (135bp p.a.) were almost twice our expectation driven by a DKK 140m net reversal in the other business segment while VB charged DKK 74m loan losses for pork farmers in Q2 amid a significant drop in local prices for pork meat (down to DKK 9.1/KG last week). CET1 of 17.9% was in-line with ABGSCe and 70bp up q-o-q.

We expect a neutral market reaction today with good underlying NII momentum in Q2 countered by synergy gains showing up in the cost base a bit later than we expected.

Länk till analysen i sin helhet: https://www.introduce.se/foretag/vestjysk-bank/Equity-research/2021/8/vestjysk-bank---large-loan-loss-reversals-in-mixed-q2/