BankNordik - Strong Q2 with new profitability initiatives
PBLL 2% above ABGSCe amid good lending growth New profitability initiatives announced We expect the share to climb today NII beat, high commissions but also costs above ABGSCe BankNordik reported Q2’21 Profit Before Loan Losses (PBLL) of DKK 47m which was 2% ahead of ABGSCe while Q2 operating profit of DKK 74m was 61% ahead due to DKK 27m net loan loss reversals in Q2 related to corporate clients. NII was 2% above ABGSCe linked to sequential lending growth of 2% driven by corporate lending on the Faroe Islands. Commissions of DKK 20m (ABGSCe DKK 17m) were up 54% y-o-y driven by high activity while insurance income of DKK 14m Q2 were close to our expectations. Q2 costs of DKK 61m (ABGSCe DKK 57m) were a negative surprise linked to IT projects.
Non-recurring items of DKK 4m contained a DKK 19m gain from the divestments of the Danish business (DKK 77m in Q1) while an EO expense of DKK 15m for client compensation linked to a return shortfall was as flagged. Q2 CET1 of 25.7% (31% in Q1’21) contained H1’21 net profits excl. expected dividends while the DKK 450m EO distribution for 2021 was deducted.
New profitability initiatives to boost ‘23e PTP by 7% BankNordik upgraded its guidance for 2021 net profit on July 19 to DKK 190-220m (DKK 150-200m) and today’s report confirmed net loan loss reversals as the key factor behind the upgrade. Despite of this, business momentum looks strong in Q2 and BankNordik announced initiatives alongside Q2’21 worth DKK 20-25m additional PTP per year. A DKK 5m cost reduction from a small FTE reduction is partly reflected in our estimates while a capital optimization gain of DKK 5m is fully reflected.
Charging Faroe retail clients for deposits above DKK 100,000 (250,000) with 75bp (60bp) from mid-August alongside fee adjustments seem to bring DKK 15m additional earnings per year (+7% for ’23 PTP). An EGM notice is to be issued in Sep. (EGM in Oct.) regarding the DKK 450m EO distribution for 2021; we still expect that it will come ....