BankNordik upgrades its net profit guidance for 2020

Less drag from COVID-19 on loan losses and insurance

We expect a positive share price reaction today

2020 net profit guidance raised to DKK 50-90m
Today, BankNordik upgraded its guidance for 2020 net profit to DKK 50-90m from DKK 30-80m before (previous guidance from April 27). BankNordik states that the main reasons for the raised net pro?t guidance are lower impairment charges, a lower level of travel insurance claims paid out and improvement in core earnings. Also, the stabilization and recent positive development in the ?nancial markets has had a positive impact on the return of the investment portfolio. The impact of COVID-19 situation on the Group’s ?nancial results has so far been more alleviated than expected at the end of April 2020, according to BankNordik.

Lower loan losses, lower claims and better IP result
The new guidance for 2020 net profit of DKK 50-90m is well aligned with our estimate of DKK 77m which factors in a rebound on the investment portfolio (IP) result in Q2’20 to DKK 17m (DKK 51m loss in Q1’20) and loan losses dropping to DKK 10m per quarter Q2’20 to Q4’20 (DKK 24m in Q1). There seem to a possibility that the COVID-19 drag on insurance income is below our implementation as well (we implemented a DKK 25m drag after Q1’20).

BankNordik is trading at a 2021e adj. PE of just 5.4x
We believe today’s upgrade of guidance is taking risk out for BankNordik and with BankNordik trading at a 2021e adj. PE of just 5.4x, we expect a positive share price reaction today.

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