Vestjysk Bank Annual Report 2020

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Danish Financial Supervisory Authority

Nasdaq Copenhagen A / S

February 23, 2021

Highlights 2020
Vestjysk Bank made an after-tax profit of DKK 303 million in 2020 and the realized profit was at the high end of the DKK 260-320 million range. Performance was affected by economic uncertainty caused by the coronavirus crisis and African swine fever in Germany. These factors impacted the Bank’s impairment provisions based on management’s estimate. The Bank increased the I 2020 provisions from DKK 180 million to total provisions of DKK 310 million in the form of a management estimate in response to economic uncertainty, corresponding to 3.3% of net loans of the bank.

In the following, the comparative figures for 2019 are affected by the Sparinvest transaction, on which Vestjysk Bank made a profit of 142 million.

  • Profit after tax of DKK 303 million, compared to DKK 478 million in 2019 (DKK 336 million excluding Sparinvest), for an annualized return on equity after tax of 9.8%.
  • Basic income of DKK 887 million, compared to DKK 1,055 million in 2019 (DKK 913 million excluding Sparinvest).
  • Value adjustments of DKK 65 million, compared to DKK 185 million in 2019 (DKK 58 million excluding Sparinvest).
  • A cost ratio of 59.8%, compared to 48.2% in 2019 (55.6% excluding Sparinvest)
  • Basic profit before depreciation of DKK 357 million, compared to DKK 547 million in 2019 (DKK 405 million excluding Sparinvest).
  • Impairment of loans and receivables, etc. of DKK 29 million (2019: DKK 64 million). Depreciations on agriculture represented a sharp recovery.
  • The Bank’s capital requirements amounted to 12.8%, consisting of an individual solvency requirement of 10.3% and a general capital conservation buffer of 2.5%.
  • The Bank’s total capital ratio was 24.7%. The excess coverage amounted to 11.9 percentage points, or DKK 1,574 million. Adjusted for the capital required to cover the MREL supplement of 1.9 percentage points as of December 31, 2020, the excess coverage was 10.0 percentage points, or DKK 1,303 million.

Merger with Den Jyske Sparekasse
In November 2020, the Bank announced its intention to merge with Den Jyske Sparekasse with Vestjysk Bank as a continuing bank.

After several difficult years, being able to seek a merger with another mid-sized bank is a milestone for Vestjysk Bank.

Shareholders finally approved the merger at extraordinary general meetings held on January 13, 2021. The Danish Financial Supervisory Authority approved the merger on January 14, 2021. Following the merger, the bank is Denmark’s eighth largest bank in terms of business volume, which is expected to be around DKK 130 billion in the future.

Our ambition is to be the strongest local bank in Denmark.

Future synergies from the merger are expected to amount to DKK 150 million per year. One-time costs related to the merger are expected to total DKK 200 million.

Special circumstances affecting the Bank during the period, including the impact so far of the coronavirus crisis
In 2020, the Bank was particularly impacted by the coronavirus crisis, which took hold in March 2020 and continued throughout 2020 and until 2021.

Despite the coronavirus crisis, the Bank has so far been able to maintain its operations and the level of customer activity has been high.

Bank advisers have been in regular contact with corporate clients to determine what the Bank can do to help them weather the coronavirus crisis and advise them on bailouts provided by the Danish government and parliament. . So far, the crisis has not had a major direct impact on the Bank’s loans or on individual write-downs.

Vestjysk Bank has made a range of facilities available to retail clients in the form of loan repayment holidays, temporary overdraft facilities and increased credit facilities to support clients directly affected by the foreclosure. So far, these measures have also had a limited impact on the Bank.

The sectoral allocation of Bank loans proved to be advantageous during the crisis. Most of the Bank’s loans are in sectors that have not been particularly affected by the coronavirus crisis. The hospitality, catering, transport and retail sectors are the hardest hit, and these sectors only account for 10% of total Bank loans.

The two main sectors of Vestjysk Bank, agriculture and real estate, have so far been relatively untouched by the coronavirus crisis. The pandemic has devastated the mink industry, however, ending mink farming in Denmark. From an overall financial perspective, the Danish government’s compensation program for mink farmers is considered adequate, and the program has had a positive effect on the Bank’s impairment losses relating to this industry in 2020. The Bank’s exposure to the mink industry is 0.7% of total gross loans, or DKK 112 million.

In the real estate sector, the bank has so far seen an effect on commercial leases, where agreements have been made to defer payment of rents due to the coronavirus crisis. Depending on the duration and depth of the crisis, this effect could increase. Private residential rentals have not been significantly affected at this point, and that is not expected to change significantly.

Our individual clients are generally doing well and are in a strong position to deal with the consequences of the coronavirus crisis. In the long term, the Bank expects losses to increase, but at a generally manageable level.

So far, the crisis has not affected dairy farmers. Pork settlement prices, however, declined during the year and stabilized at the end of 2020 at an acceptable level. Due to relatively high pork prices in the first half of the year, pig farmers, some of whom have credit problems, were able to repay their debt to the Bank. This resulted in reversals of provisions for depreciation in this sector in 2020. The current outbreak of African swine fever in Germany has made it difficult for the Bank’s piglet producer clients to sell their production in Germany. This led to a sharp drop in the prices of piglets and a downward trend was also observed in the prices of pigs for slaughter.

Brexit ended with a trade deal between the UK and the EU, under which Danish fishing vessels are allowed to fish in UK waters under temporary licenses that are expected to expire in 2026. The deal provides for a change in quotas, up to 25%. of the total EU fishing quotas transferred to the UK. The deal is deemed acceptable by the Bank’s clients in the fisheries sector compared to the dreaded no-deal Brexit scenario.

Vestjysk Bank is closely monitoring developments in the coronavirus pandemic and African swine fever.

The Bank’s DKK 310 million depreciation allowance for economic uncertainty is considered sufficient. Projections on the future consequences of the coronavirus and African swine fever crisis are naturally subject to considerable uncertainty.

Outlook for 2021
Vestjysk Bank forecasts an after-tax profit for 2021 of around DKK 500-550 million, adjusted for one-time costs and profits.

Conference call

A conference call for analysts will take place on February 23 at 9:30 a.m. (Danish time) during which CEO Jan Ulsø Madsen will comment on the 2020 Annual Report. Please use this link to register and participate in the conference call:

Please direct any inquiries regarding this announcement to Jan Ulsø Madsen, CEO, at tel. (+45) 96 63 21 04.

Vestjysk Bank A / S

Kim Duus Jan Ulsø Madsen
President CEO

Vestjysk Bank A / S
Torvet 4-5
7620 Lemvig
Phone. (+45) 96 63 20 00

CVR n ° 34 63 13 28

  • Vestjysk Bank Annual Report 2020

Lee J. Murillo

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