Fra Danske Bank:
Strong start to 2021 but partly from one-offs
Jyske Bank’s profit upgrade indicates a solid start to 2021. However, we note that the majority of the profit upgrade was driven by temporary tailwinds from own portfolio, trading income and low loan-loss provisions. Saying that, good cost containment, high activity and slightly higher rates do leave minor tailwinds medium term. We reiterate Hold with a DKKK305 (DKK295) 12M target price.
Guidance upgrade of mixed quality. The profit upgrade came only one month after the 2020 annual report and, as such, the DKK200m earnings lift is driven mostly by volatile items. With own portfolio and trading positioned for rising rates, Q1 21 appears to have been benign, but the effects are also largely one-off.
Good activity levels, solid cost control and strong credit quality. Part of the guidance upgrade was fuelled by continued high customer activity, strong cost containment and solid credit quality, which should continue to provide some benefits into 2022-23E. As a result, we lift our medium-term estimates by 2%.
Danish banks still on five-fold recovery. We still see positive trends for NII from deposit repricing, fee income from high activity and AUM inflow, cost control, strong credit quality and solid capital build as positive drivers in 2021 and for 2022-23E.
Valuation. We downgraded Jyske Bank to Hold after the 2020 annual report, as we believed the valuation had reached a fair level. The guidance upgrade on 26 March does not materially change the investment case in our view. Normalised P/E (2022E) of 9.3x looks fair to us. We reiterate Hold with a DKK305 12M target price
