Vestjysk Bank: Trading income the only cloud over strong Q2 - ABG

Strong core business only offset by trading income Hunt for new corporate customers off to good start Trading income starting to threaten FY guidance

Better than expected on fees and costs
Vestjysk delivered strongly on fee and commission income with a q-o-q increase of 8% from higher loan transaction fees, payment services and securities trading. Performance on the cost side was also positive, as total costs decreased 10% q-o-q (2% better than ABGSCe) from synergies from the DJS merger supporting both salaries and operating costs. This supported a PTP of DKK 94m, 12% below ABGSCe as we expected larger loan loss reversals and a lower loss from market value adjustments. Based on the results we have raised our expected FY commission income by 4% and lowered expected trading income (see page 4).

Best quarter of lending growth since the financial crisis Lending growth of 2.9% in Q2 was the strongest quarterly lending growth Vestjysk has shown since the financial crisis (when excluding mergers) and is also the second-highest Q2 loan growth in the peer group so far. The growth has led to a decrease in private lending of 3pp, to 49% of total lending, as a result of higher activity in corporate lending from a mix of new customers and growth from existing customers. This indicates that Vestjysk’s campaign to reach 60% of lending to corporate customers is off to a good start in the competitive environment. The lending growth was also achieved with an unchanged exposure to agriculture, in line with management’s ambitions. Loan loss reversals came in lower than we expected at DKK 16m as Vestjysk remains cautious with its exposure to troubled pig farming. We acknowledge the pressure in the segment but emphasise that Vestjysk has 12% of total lending in accumulated impairments.

Trading income sends expected PTP to low end of guidance Vestjysk reconfirmed its guidance for PTP of DKK 600m-650m. With the losses on market value adjustments in H1 we now expect a PTP of DKK 617m in the low e ... Läs mer på ABG Sundal Collier

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