Danske Bank skriver i en betalingsanalyse af Sparekassen Sjælland-Fyn:
Sparekassen Sjælland-Fyn
Profit upgrade reveals strong core earnings base
Sparekassen Sjælland-Fyn’s profit warning on 22 April revealed a strong core income base and continued cost containment, while DKK78m (64bp) of provisions related to the COVID19 outbreak were not a surprise on par with peers. Deposit repricing, higher mortgage refinancing income and AuM inflow remain positive contributors to the earnings base, while credit concerns are still not visible. We see a fair value range of DKK95-115 per share.
• Strong start to the year on core income, despite lower profit expectations.
Sparekassen Sjælland-Fyn now expects pre-tax profits for 2020 of DKK170-210m versus DKK230-270m previously. The DKK60m lower guidance range is due to a DKK78m impairment for COVID-19 but helped by a DKK24m gain from Lollands Bank.
This leaves underlying earnings guidance for Sparekassen Sjælland-Fyn largely flat. Core NII and fee income was DKK311m in Q1 20, up 14% y/y, with remortgaging, deposit repricing and AuM growth the main drivers. This demonstrates the bank’s income resilience. Trading losses of DKK24m are not a surprise considering the market development in Q1 20.
At the same time, costs were flat year on year, leaving positive pre-provision earnings jaws not only for Q1 20 but also for FY 2020-21, as the New Ways strategy continues to deliver and income/costs in Q1 20 were 1.62x, the highest over the duration of the strategy period. The strong and continual customer inflow and excessive branch network still drive customer inflow.
COVID-19 impairments on par with those of peers. Sparekassen Sjælland-Fyn has taken a DKK78m (64bp) loan loss impairment charge against the potential negative effects of the COVID-19 outbreak. This is on par with the provisions taken by Jyske Bank (60bp) and Sydbank (62bp). Total management provisions are now DKK123m (1%), which is at the
higher end of the range for Danish peers.
• Still on the right path. In our view, Sparekassen Sjælland-Fyn continues to fire on all cylinders. We are pleased to see the bank taking loan loss provisions up front. We estimate 35% growth in core earnings and pre-tax profits over 2019-22, surpassing all other banks in our universe.
• Valuation. Sparekassen Sjælland-Fyn trades at P/E 2021E of 5.7x, which is 32% below its
Danish mid-cap peers. We estimate a fair value range of DKK95-115, 22-49% above the
current share price.
