Commissioned Research: BankNordik

BankNordik is one of the leading banks in the Faroe Islands. Besides retail and corporate banking, it also operates insurance company Trygd.

Commissioned research: Solid as a rock

In recent years, BankNordik has benefited from a strong Faroese economy with high economic growth. This has supported both lending growth and asset quality. Since 2016, the bank has also turned its focus towards the core businesses. This has led to the divestment of Icelandic insurer Vørður and the decision to end corporate banking activities in Denmark. Both initiatives released capital and strengthened the bank’s capital ratios. BankNordik currently has a CET1 ratio of 16.3% excluding YTD profit and targets a 2020 CET1 ratio of 17%. We estimate a 2020 CET1 ratio of 18.8%, as we find it likely that BankNordik will hold additional capital in the coming years, owing to uncertainty about future MREL requirements. We arrive at a fair value range of DKK 98-117 in our base case, depending on the cost of equity applied and the level of normalised loan losses.

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