2021 net profit guidance up to DKK 230-250m

Net loan loss reversals H2’21 higher than we expected

We expect a positive share price reaction

Loan loss reversals H2’21 behind the upgrade
This afternoon, BankNordik upgraded its guidance for 2021 net profit to DKK 230-250m (DKK 190-220m). The guidance upgrade crossed our preview for Q3’21 also published this afternoon, and it seems loan loss reversals likely make up the main difference between the new guidance and our 2021 net profit estimate of DKK 221m. Fires on the Faroe Islands impacting Q3’21 negatively is confirmed in the upgrade. DKK 46.8 EO DPS is to be decided on the EGM on 22 October and the share is trading exclusive of the EO dividend on 25 October. Note the 35% Faroese dividend withholding tax.

Lower targets for C/I and CET1 ahead, ROE target up
BankNordik will revise its financial goals on Q3’21, and from an analytical point of view, the Cost/Income target could move lower from the current 55% (ABGSCe 50.5% for 2023e) while the ROE target could increase from the current 8%. With capital optimisation, the CET1 target of 23% could potentially be adjusted downwards. ROE (and EPS) help could then come as additional buybacks in 2022e-23e, where we already expect the two last tranches of DKK 125m per year from the divestment of 11 Danish branches to be distributed as buybacks.

2021 normal DPS could grow with the guidance upgrade
We estimate a 2023e RONAV of 10.1%, which would be 9% with normal loan losses of 25bp. We still see a ‘22e adj. PE of 9x; as the normal DPS for 2021 could likely grow with the guidance upgrade (50% pay-out), the dividend adjusted PE for 2022 is now likely below 6x.

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