BankNordik - Sizeable distributions just around the corner
DKK 700m EO distributions planned in 2021-23 We still expect buybacks to facilitate a government exit EO DPS alternative implies a 2023e DPS adj. P/E of 3.8x Q4’20 PBLL close to ABGSCe, 2020 DPS above expectations BankNordik reported Q4’20 profit before loan losses of DKK 38m, close to our expectations of DKK 40m; this is with the Danish business moved to the discontinued line. Net interest income was 2% above ABGSCe and supported with good Faroese lending growth of 2.1% q-o-q. Costs were 2% above ABGSCe but 7% down y-o-y, while loan losses were net reversals of DKK10m.
The discontinued Danish business result was just DKK 1m before tax, owing to loan losses and high costs. CET1 was 22.6% in Q4'20 (ABGSCe 22.8%) and ~33% on a pro forma basis, factoring in the divestment of 11 Danish branches to Spar Nord from 1 February, 2021. DPS for 2020 was DKK 5 (above ABGSCe of DKK 3.7) corresponding to a payout ratio just below 30% and a yield of 3%.
23e RONAV of 9%, new DPS target implies 9% DPS yield BankNordik plans to distribute DKK 700m in 2021e-23e due to the divestment of the Danish business (we expected DKK 800m in 2021e-22e). In the 2020 report, BankNordik points to planned EO dividends of DKK 450m in 2021 and DKK 250m in 2022-23, but we expect this to be switched to buybacks if the Faroe Government is to exit its 35% stake in BankNordik as it has previously communicated to be considering. We factor in EO buybacks of DKK 450m in 2021, DKK 150m in 2022 and DKK 100m in 2023.
BankNordik is guiding for a 2021 net profit of DKK 150-200m (ABGSCe DKK 206m) while 2021 costs are guided flat and loan losses to stay low. BankNordik has lifted the DPS target to ~50% (20-40%) while the C/I ratio is now targeted 8% (ABGSCe ~9% 2023e). 2022e adj.
EPS down 7% due to new buyback assumptions Our 22e adj. EPS is down 7%. We estimate a 23e adj.
P/E of 5.2x with our buyback assumption, but with an EO DPS of DKK 73 instead, the dividend adj. 23e P/E would be 3.8x (but DPS ....