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Vestjysk Bank A/S

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Vestjysk Bank’s Annual Report 2020


The Danish Financial Supervisory Authority

Nasdaq Copenhagen A/S


23 February 2021


2020 Highlights
Vestjysk Bank realised a profit after tax of DKK 303 million in 2020 and the realised profit was at the high end of the range of DKK 260-320 million. The performance was adversely 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 a management estimate. The Bank has increased the provisions I 2020 with DKK 180 million to total provisions of DKK 310 million in the form of a management estimate in response to the economic uncertainty, corresponding to 3.3% of the Bank’s net loans.

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


  • Profit after tax of DKK 303 million, against DKK 478 million in 2019 (DKK 336 million ex. Sparinvest), for an annualised return on equity after tax of 9.8%.
  • Core income of DKK 887 million, against DKK 1,055 million in 2019 (DKK 913 million ex. Sparinvest).
  • Value adjustments of DKK 65 million, against DKK 185 million in 2019 (DKK 58 million ex. Sparinvest).
  • A cost ratio of 59.8%, against 48.2% in 2019 (55.6% ex. Sparinvest)
  • Core earnings before impairment of DKK 357 million, against DKK 547 million in 2019 (DKK 405 million ex. Sparinvest).
  • Impairment of loans and receivables, etc. of DKK 29 million (2019: DKK 64 million). Impairment allowances on agriculture amounted to a net reversal.
  • The Bank’s capital requirements totalled 12.8%, consisting of an individual solvency need of 10.3% and a general capital conservation buffer of 2.5%.
  • The Bank’s total capital ratio was 24.7%. The excess cover was 11.9 percentage points, or DKK 1,574 million. Adjusted for capital required to cover the 1.9 percentage point MREL add-on at 31 December 2020, the excess cover was 10.0 percentage points, or DKK 1,303 million.


Merger with Den Jyske Sparekasse
In November 2020, the Bank announced plans of a merger with Den Jyske Sparekasse with Vestjysk Bank as the continuing bank.

After a number of challenging years, being in a position to seek a merger with another medium-sized bank marks an important step forward for Vestjysk Bank.

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

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

Future synergies from the merger are expected to amount to DKK 150 million annually. Non-recurring costs in relation to the merger are expected to total DKK 200 million. 


Special circumstances affecting the Bank during the period, including 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 into 2021.

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

The Bank’s advisers have been in regular contact with business customers to ascertain what the Bank can do to help them through the coronavirus crisis and to advise them in regard to the rescue packages provided by the Danish government and parliament. So far, the crisis has not had any major direct impact on the Bank’s loans or individual impairment losses.

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

The sector distribution of the Bank’s lending has proved advantageous during the crisis. Most of the Bank’s lending is in sectors that have not been particularly badly affected by the coronavirus crisis. The hotel, restaurant, transport and retail sectors are the hardest hit, and these sectors only account for 10% of the Bank’s total lending.

Vestjysk Bank’s two main sectors, agriculture and real estate, have so far been relatively unaffected by the coronavirus crisis. The pandemic has devastated the mink industry, however, bringing an end to mink farming in Denmark. From an overall financial perspective, the Danish government’s compensation package for mink farmers is considered adequate, and the package 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 lending, or DKK 112 million.

In the real estate sector, the bank are so far seeing an effect on commercial leases, where agreements have been made to defer rent payments as a result of the coronavirus crisis. Depending on the duration and depth of the crisis, this effect could widen. Private residential rentals have not been significantly affected at this point, and this is not expected to change significantly.

Our retail customers are generally doing well and are in a strong position to withstand the consequences of the coronavirus crisis. In the long term, the Bank expect to see an increase in losses, but on a manageable level overall.

Until now, the crisis has not affected dairy farmers. Pork settlement prices declined over the course of the year, however, and at the end of 2020 stabilised at a acceptable level. Because of the relatively high pork prices in the first half, pig farmers, some of which are credit-impaired, were able to repay debt to the Bank. This resulted in reversals of impairment allowances within this sector during 2020. The current outbreak of African swine fever in Germany has made it difficult for the Bank’s piglet producing customers to sell their output in Germany. This caused prices of piglets to fall sharply, and a downward trend was also seen in prices of pigs for slaughter.

Brexit ended with a trade agreement between the United Kingdom and the EU, under which Danish fishing boats are allowed to fish in UK waters under temporary licenses that are expected to expire in 2026. The agreement stipulates a shift in quotas, with up to 25% of total EU fishing quotas being transferred to the UK. The agreement is considered acceptable to the Bank’s customers in the fishing industry compared with the dreaded no-deal Brexit scenario.  

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

The Bank’s DKK 310 million impairment provision for economic uncertainty is assessed to be sufficient. Projections about the future consequences of the coronavirus crisis and African swine fever are naturally subject to considerable uncertainty.


Outlook for 2021
Vestjysk Bank guides a profit after tax for 2021 of around DKK 500-550 million adjusted for non-recurring costs and earnings.


Conference call

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

https://event.loopup.com/SelfRegistration/registration.aspx?booking=ngBc8o3UGE9V8oU7IPBB9RV2CmFnlwrrVMbotVHo4zw=

Enquiries
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 Madsen
Chairman                                       CEO




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

CVR no. 34 63 13 28

www.vestjyskbank.dk



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