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VJBA - Vestjysk Bank A/S News Story

DKK3.36 -0.0  -0.7%

Last Trade - 26/07/21

Mid Cap
Market Cap £480.9m
Enterprise Value £201.3m
Revenue £180.5m
Position in Universe 504th / 1850

Vestjysk Bank’s Q1 2021 Quarterly Report

Wed 19th May, 2021 7:30am
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Nasdaq Copenhagen A/S

19 May 2021

Q1 2021 Highlights

Vestjysk Bank delivered a profit after tax of DKK 548 million for Q1 2021. The
performance was significantly affected by non-recurring income and costs in
connection with the merger with Den Jyske Sparekasse.  Disregarding
non-recurring income and costs the profit after tax equals DKK 95 million
which is satisfactory.

Non-recurring income of DKK 477 million was recognised during the period as an
preliminary estimat, representing a positive difference (badwill) between the
purchase price of the investment in Den Jyske Sparekasse and the value of the
acquired net assets. The calculated negative goodwill is considered taxable
income, on which DKK 35 million is payable in tax. The continuing bank’s
earnings capacity has increased, resulting in non-recurring tax income of DKK
82 million recognised as a deferred tax asset. Non-recurring costs in
connection with the merger amounted to DKK 69 million for the period.
Therefore the income for Q1 2021 is affected by net non-recurring income of
DKK 453 million. 

The profit from ordinary banking operations was positively affected by the
continued high level of activity. Developments in the housing area were
particularly positive with a large number of real estate trades in the retail

Positive market value adjustments together with the synergies gradually
achieved from the merger with Den Jyske Sparekasse all contributed to the
positive development.

The Bank’s impairment allowances during the period were not affected to any
significant extent by the coronavirus crisis, Brexit or the outbreak of
African swine fever in Germany, but the Bank is keeping a close eye on
developments, and management maintains the impairment provision for economic
uncertainty at the level applied at 31 December 2020.

The highlights below were calculated after adjustment for non-recurring items
resulting from the merger with Den Jyske Sparekasse.
* Profit after tax of DKK 95 million.
* Return on equity of 8.4% p.a. after tax. 
* Core income of DKK 364 million.
* Market value adjustments of DKK 32 million.
* Cost ratio of 65.5. 
* Core earnings before impairment allowances of DKK 126 million.
* Impairment of loans and receivables, etc. of DKK 22 million, which equals an
impairment ratio of 0,1 %.
* The Bank’s capital requirements totalled 13.1%, consisting of an
individual solvency need of 10.6% and a general capital conservation buffer of
* The Bank’s total capital ratio was 21.1%. The excess cover was 8.0
percentage points, or DKK 1,850 million. Adjusted for the part of capital
required to cover the 1.9 percentage point MREL add-on, the excess cover was
6.9 percentage points, or DKK 1,596 million.
Merger with Den Jyske Sparekasse
The merger with Den Jyske Sparekasse is proceeding according to plan and in
line with our ambition to become the strongest local bank in Denmark. 

The redundancies effected in January 2021 meant that the Bank is well under
way to realising synergies in the total amount of DKK 150 million, which are
expected to be fully phased in by 2022. At the end of January, the number of
full-time employees was reduced by 75 compared with the headcount at 31
December 2020.

Non-recurring costs in connection with the merger were at the expected overall

The table below compares the business volume at 31 March 2021 with the
business volume at 31 December 2020 calculated on a pro forma basis. The
comparative figures at 31 December 2020 were derived in a simple calculation
of the business volumes of Vestjysk Bank and Den Jyske Sparekasse at 31
December 2020.

 Business volume                                                           31 March 2021  31 December 2020  
                                                                           DKKm           DKKm.             
 Net loans                                                                 16,849         16,285            
 Deposits                                                                  24,088         24,377            
 Pools                                                                     8,435          8,170             
 Contingent liabilities                                                    9,328          8,270             
 Custody services                                                          17,371         18,887            
 Arranged mortgage loans                                                   56,093         53,584            
 Business volume, including custody accounts and arranged mortgaged loans  132,164        129,573           

The table shows that the Bank has succeeded in increasing the business volume
following the merger, including loans to customers and arranged mortgage
loans. This is a positive result in a lending market under pressure due to the
government’s coronavirus pandemic relief packages. 

Coronavirus crisis, Brexit and African swine fever (ASF)
The Bank’s financial statements for Q1 2021 were not significantly affected
by the coronavirus crisis, Brexit or the ASF outbreak in Germany.

At 31 March 2021, the Bank’s total impairment provision in response to
economic uncertainty amounted to DKK 289 million, corresponding to 2% of total
lending. This provision based on a management estimate was in line with the
DKK 310 million provision at 31 December 2020. Since 31 December 2020, the
Bank has individualised part of the provision relating to uncertainty
regarding settlement prices and portfolio values in the agricultural sector.
As a result, the changes in the provision for economic uncertainty did not
affect the profit for Q1 2021.

The Bank believes that the state of the economy remains subject to
considerable risk, particularly in relation to the consequences of the
phase-out and winding up of the government’s coronavirus relief programmes.

In the autumn of 2020, the agricultural sector experienced plunging prices of
piglets, among other things. Generally, pig breeders have experienced price
increases in 2021.

Dairy farmers also saw price increases throughout Q1 2021, the price of milk
currently being at its highest since 2017.

Across the agricultural sector, settlement prices are now generally considered
to be at a satisfactory level.

Part of the Bank’s loans to the fishing industry is affected by quota
reductions, which are mainly due to the Brexit agreement with the United
Kingdom. The framework conditions for large parts of the Danish fishing
industry are currently pending a political agreement. The Bank’s risk in
this respect is assessed to be covered by the impairment provision for
economic uncertainty.

Of the Bank’s total loans and guarantees at 31 March 2020, 13% related to
the agricultural sector and 3% related to the fishing industry.  

Outlook for 2021
The Bank’s profit guidance for 2021 is subject to uncertainty, primarily
linked to the Bank’s agricultural and fishing industry exposure and the
economic consequences of the coronavirus crisis, including in particular the
winding up of government relief programmes. Vestjysk Bank maintains its
guidance of a profit after tax in the range of DKK 500-550 million for 2021,
adjusted for non-recurring items resulting from the merger with Den Jyske
Sparekasse. Guidance including non-recurring items and after tax is DKK
800-900 million.

Conference call

A conference call for analysts will be held on 19 May at 13:00 p.m. (Danish
time) during which CEO Jan Ulsø Madsen will comment on the Q1 2021 Quarterly
Report. Please use this link to register for and participate in the conference

Please address any enquiries regarding the present announcement to Jan Ulsø
Madsen, CEO, at tel. (+45) 96 63 21 04.

Vestjysk Bank A/S

Kim Duus    
                                   Jan Ulsø

 Vestjysk Bank A/S
 Torvet 4-5
 7620 Lemvig
 Tel. (+45) 96 63 20 00 
 CVR no. 34 63 13 28

*     Vestjysk Bank Q1 2021 Quarterly Report
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