Sparekassen Kronjylland

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Sector:
Market cap (m):
Denmark
Financials
N/A
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Share price (close):
DKK 0.00

Latest Reports

Commissioned Research: More focus on profitability
Sparekassen Kronjylland reported H1 2021 profit before loan losses of DKK 194m, DKK 21m (12%) above our estimate. This was led by higher-than-expected fee income and lower costs, while net interest income was in line with our estimate. The bank reported loan-loss reversals of DKK 43m, while the pandemic-related management buffer was reduced to DKK 247m (previously DKK 279m), hence still indicating a positive development in the underlying asset quality. Management raised its 2021 pre-tax profit guidance to DKK 420-480m (previously DKK 180-280m) amid the H1 report. We estimate DKK 464m. We raise 2021E-23E net profit by 8-37%, led by 7-10% higher profit before loan losses and lower loan losses.

Commissioned Research: A guidance upgrade seems inevitable
We expect Sparekassen Kronjylland to continue to benefit from the current sector tailwinds – a strong economic recovery and high activity level – supporting fee income and asset quality. We hence lift H1 2021E pre-tax profit by DKK 28m (18%) to DKK 183m, bringing the 2021E pre-tax profit up to DKK 341m. This is mainly driven by a better-than-expected development in asset quality. Our estimate is significantly above the current guidance range of DKK 180-280m, and we expect the bank to raise its guidance alongside the H1 report. We raise net interest income for 2021E-23E by 2-4%, led by a positive margin expansion, due to a revision of the threshold for negative rates on deposits. Conversely, we expect to see upward pressure on costs, due to the branch opening in Roskilde. We expect to see a CET1 ratio of 18.9% for H1 2021, up 30 bp from 2020. Marketing material commissioned by Sparekassen Kronjylland.

Commissioned Research: Low loan losses despite high management buffer
Sparekassen Kronjylland reported H2 2020 profit before loan losses of DKK 183m, which was DKK 11m (7%) ahead of our estimate. This was mainly led by better-than-expected market value adjustments and lower costs, while net fee income was slightly below our estimate. The key positive in the report was loan losses of only DKK ~6m, which was DKK 69m (93%) below our forecast. The underlying asset quality hence remains solid and at the end of 2020 the bank had a management buffer of DKK 279m in loan loss provisions related to the COVID-19 pandemic. This corresponds to ~1.7% of the total lending book, which is among the highest in the sector. - Marketing material commissioned by Sparekassen Kronjylland

Commissioned Research: Past the trough
We estimate an H2 2020 pre-tax profit of DKK 107m, bringing the 2020 pre-tax profit up to DKK 185m. This is slightly above the guidance range of DKK 140-180m. We lift 2020E pre-tax profit by 3%, led by 5% higher fee income estimates following better-than-expected activity in H2 2020. This is partially offset by an increase in 2020E loan losses of DKK 30m, as we find it likely that management will remain cautious and book additional management estimated loan loss provisions. We expect loan losses to drop by ~56% y/y in 2021. We estimate a 2020 CET1 ratio of 18.2%, up 10 bp from H1 2020 and up 160 bp y/y. Marketing material commissioned by Sparekassen Kronjylland.

Commissioned Research: Solid income despite low lending growth
Sparekassen Kronjylland reported H1 2020 profit before loan losses of DKK 158m, 10% ahead of our estimate. This was mainly led by better-than-expected fee income and dividends on sector shares. Net interest income and costs were in line with our estimates. Loan losses were DKK 85m, DKK 41m (33%) better than our estimate, despite DKK 120m in COVID-19-related loan loss provisions. The underlying loan losses were hence strong with reversals of DKK ~35m. The CET1 ratio was also strong at 18.1%, 90 bp above our estimate. This was led by a decline in lending of ~5% in H1 vs H1 2019, and down ~7% y/y. We lift our 2020 net profit estimate by 18%, as we now pencil in lower loan losses in 2020. We cut 2021E-22E net profit by 1-2%, led by 2% lower net interest income due to weak lending volumes. - Marketing material commissioned by Sparekassen Kronjylland.

Commissioned Research: Strengthening the bank in tough times
Similar to other banks, we expect that Sparekassen Kronjylland had elevated loan loss provisions in H1 2020 due to the COVID-19 outbreak. Actual losses will likely be very low, but it is prudent to make provisions due to increased uncertainty. On the positive side, the bank has launched a number of initiatives to minimise the adverse impact. First, we note that the bank significantly lowered its risk appetite in 2019, which improved the starting point for 2020. Second, it introduced negative retail deposit rates from 1 July. Third, we believe its cost focus has been intensified. We lower 2020E net profit by 40% amid the elevated loan losses, and lift 2021E-22E net profit by 7-17% to reflect improved underlying profitability. Marketing material commissioned by Sparekassen Kronjylland.

Commissioned Research: Solid H2 2019 results
On 27 February 2020, Sparekassen Kronjylland reported its H2 2019 results, showing pre-tax profit of DKK 257m, 6% ahead of our estimate. This was mainly driven by a DKK 30m (12%) beat on fee income, while market value adjustments were also DKK 16m better than expected. Costs were slightly (2%) higher than expected. Led by higher management estimated loan losses for certain sectors, loan losses were also higher than expected in H2 2019. We note that lending growth of 2.7% in 2019 was well below the ~10-15% annual lending growth seen in 2015-18, and the sum of large exposures relative to the CET1 capital was 103%, down 22 pp y/y. This is well in line with management's comments about taking a more cautious stance to new lending. We lift 2020E-21E net profit by 0-2%.

Commissioned Research: Risk appetite coming down
We find it likely that Sparekassen Kronjylland has lowered its risk appetite during H2 2019, as some large loan facilities have not been renewed. We estimate 2019 profit before loan losses and income from associates of DKK 432m, which is DKK 154m above 2018. The majority of this increase is led by the extraordinary income of DKK ~100m from the sale of SparInvest as well as strong remortgaging activity. Due to the lower lending growth estimates, we lower our 2020-21 net profit estimates by 8-12%. Lower lending growth and large exposures should, all else equal, add support to the credit strength of the bank, in our view, while the negative net profit estimates revisions on the other hand lead to a lower loss absorption capacity.

Commissioned Research: Solid start to the year
On 29 August, Sparekassen Kronjylland reported its H1 2019 results, showing net profit of DKK 192m, which was 7% ahead of our estimate. This was mainly driven by a 2% beat on net interest income and a beat on both loan loss reversals and profit in associates and group enterprises. On the negative side, costs came in 2% ahead of our estimate, owing to increased spending on compliance and IT-related matters and also increased cost pressure due to salary inflation. The CET1 ratio came in at 15.3%, 20 bp below our estimate, as both credit risk and market risk were inflated by the high remortgaging activity. Led by the beat in the first half of 2019, we lift our 2019 net profit estimate by ~5% but lower 2020E-21E net profit by ~2% owing to the uptick in costs.

Commissioned Research: A savings bank with solid roots
Sparekassen Kronjylland has almost 190 years of experience since it was founded in Randers, where its headquarters are still located. Over the years, the bank has built a strong footprint in the Eastern part of Jutland in the surrounding area of Randers, where it also has the highest concentration of branches today. While the bank in recent years has expanded its geographical reach to most of Denmark, leading to high lending growth, its asset quality has also improved. Lending with objective evidence of impairment or substantial weakness in creditworthiness has declined by DKK 700m (~16%) since 2016, while total lending and guarantees have increased by DKK ~8bn (~33%).

Equity analysts

Analyst
Director, Sector Coordinator

Key persons

CEO: Klaus Skjødt

CFO: Allan W. Hjæresen

Chairman: Peter H. Christensen

Numbers
Export to Excel
Nordea
DKKm
2017
2018
2019
2020
2021E
2022E
2023E
EPS (rep.)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
EPS (adj.)
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
DPS
0.00
0.00
0.00
0.00
0.00
0.00
0.00
NII growth
-3.6%
0.1%
1.0%
-7.1%
3.0%
5.0%
3.6%
Staff costs growth
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Total expenses growth
8.7%
1.7%
6.7%
1.4%
3.0%
2.2%
1.9%
Operating profit growth
44.9%
-22.9%
31.8%
-44.3%
82.9%
-20.6%
-4.4%
Net profit to equity growth
36.3%
-25.5%
41.3%
-42.6%
75.7%
-26.2%
-3.2%
Loans to the public growth
10.3%
14.8%
2.7%
-3.6%
5.1%
3.5%
3.0%
BIS III CT1-ratio
16.5%
15.4%
16.6%
18.6%
18.4%
18.9%
19.3%
BIS II Trans. T2-ratio
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Leverage ratio
13.4%
12.2%
12.4%
12.1%
11.9%
12.2%
12.3%
Nordea Markets estimates published on Aug 30, 2021
Source: Company data, Nordea estimates
Per share data and multiples
Export to Excel
Nordea
DKK and %
2017
2018
2019
2020
2021E
2022E
2023E
P/E
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
P/E (adj.)
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
P/BV
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
P/TBV
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Dividend yield
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
RoE (adj.)
9.3%
6.2%
8.1%
4.3%
7.0%
4.8%
4.4%
RoTBV (adj.)
9.7%
6.4%
8.3%
4.3%
7.1%
4.9%
4.5%
C/I (adj.)
74.0%
76.3%
72.9%
76.9%
76.3%
76.1%
75.5%
NII-margin (adj.)
4.6%
4.1%
3.8%
3.5%
3.6%
3.6%
3.7%
Payout ratio
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
LLR /Impaired loans
41.4%
43.4%
53.6%
44.2%
42.7%
42.7%
42.7%
LL-ratio
-0.3%
0.0%
0.0%
0.5%
-0.3%
0.2%
0.3%
Nordea Markets estimates published on Aug 30, 2021
Source: Company data, Nordea estimates

Source: Refinitiv