Ikke-uafhængig analyse: Vestjysk Bank – Loan book cleaning is done, time to grow

Loan book cleaning is done, time to grow

• First indication of campaign towards corporate customers
• Income again reduced due to market value adjustments
• Vestjysk now trading at a 2024e adj. P/E of 7.8x

First sign of the campaign to attract new corporate customers

Vestjysk’s report on 17 August will show the initial signs of their ability to attract more corporate customers. We expect a moderate lending growth of 1.5% q-o-q. NII could increase equally, depending on the timing of the lending growth. We expect Q2’22 fee income to be up 1% q-o-q primarily from increased payment services and loan fees, offsetting expected lower securities trading. Total costs are expected to stabilise around DKK 227m in the coming quarters after post-merger redundancies are completed and most of the current IT-investments are included in costs to BEC. Asset quality looks good with the main threat still being the bad but easing trade-off for pig farmers (5.3% of exposure), thus we expect loan loss reversals of DKK 25m, also based on Vestjysk’s large impairment account of DKK ~2bn (12% of gross lending). Vestjysk’s Q1 was affected by a loss on the bond portfolio, and the market conditions in Q2 leads to an increased expected loss on net trading income of DKK 58m. For the CET1 ratio we expect a modest increase of ~10bp in Q2.