Lower costs to drive Q4’21 PBLL well up y-o-y

DKK 13 ordinary EPS for ‘21e, DKK 26 EO DPS H1’22e

Trading at a ’23 P/E of 7.5x and 5.5x adjusted for DPS

Q4e costs down 6% y-o-y from more net loan loss reversals
We expect BankNordik to report Q4’21 profit before loan losses (PBLL) of DKK 43m, which is 13% up y-o-y, mostly due to lower costs (DKK 59m Q4’21e compared to DKK 63m Q4’20). We expect NII up 1.5% q-o-q, helped by deposit re-pricing and lending growth in Greenland. Commissions could be DKK 3m up y-o-y, to DKK 19m, following good activity and price changes rolling into Q4’21. We believe insurance income could be a moderate DKK 9m, which is down from DKK 12m in Q4’20. We expect net loan loss reversals of DKK 22m in Q4’21, mostly related to the Danish legacy real estate exposure. We expect Q4’21 CET1 down 290bp q-o-q, to 23.2%, driven by BankNordik deducting the flagged EO dividend for 2022 of DKK 250m (DKK 26 per share) with a CET1 drag of 350bp. We expect BankNordik to announce an ordinary DPS for 2021 of DKK 13 (pay-out of 50%, yield of 8.7%), as the DKK 46.8 EO DPS has already been paid.

Practical limits for buybacks imply ST overcapitalization
BankNordik is guiding for a 2021 net profit of DKK 230-250m compared to our estimate of DKK 242m. We believe the second tranche of EO distributions of DKK 250m (DKK 700m total related to the divestment of Denmark) could be paid as a dividend in H1’22, as we do not believe EO buybacks of that size are possible with the Faroe Government (owns 35% of BankNordik) not being able to participate. This is also why we have cut the ordinary buyback programme for 2022e to DKK 25m from DKK 125m before, while we still see government participation in buyback auctions support DKK 125m buybacks in 2023. Consequently, we see BankNordik staying overcapitalized in 2023e with a CET1 of 22.8% (21.2%) compared to a company CET1 target of 20%.

2023e adj. EPS down 11%, mostly related to ’22 buybacks
2023e adj. EPS is down 11% (mostly ’22 bu
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