Q1 2021 operating profit came in at DKK 35m, on a par with our estimate. Total income was slightly ahead of our expectation, costs were in line, and loan losses were DKK 1m above. Lending growth was, however, a little subdued and lending ended up ~2% below our estimate. We thus lower 2021E-23E net interest income by 2%, although this is offset by small positive revisions to the other income items. We leave our 2022E-23E net profit roughly unchanged. Our new Gordon growth-based fair value range is DKK 179-202 (189-207) per share.
Supportive environment for fee income set to continue Fee income benefitted from high customer activity in Q1 2021 and we find it likely that the supportive environment can continue. Mortgage lending is slowly becoming more popular in the Faroese market and BankNordik made its first mortgage financing offers to corporate customers in Q1 2021. If this gains traction, we should see fee income increase at the expense of net interest income, but with much lower capital consumption. At the same time, we are also still seeing support from the gradual increases in mandatory retirement savings running to 2026. This is likely to support assets under management, as well as supporting growth in lending and/or mortgage lending, as many customers currently repay debt quickly and use their houses as “retirement savings”. The transition from bank lending to mortgages could also slow down the repayment pace.
