Os remito el caso de Danske Bank, uno de los valores de la cartera de Oliver Kelton. Tengo el performance attribution de la cartera en excel, muy completo e ilustrativo. Recordar que Kelton se ha unido al equipo Odey y su fondo pasa a llamarse Odey Focus. Luego mando la info a la lista de distribución.
Waverton European Fund Stock Example
Danske Bank is Denmark’s dominant Bank. We started a position in August 2013. The bank traded at a material discount to its Scandinavian peers and we believed that investors were underestimating the substantial improvement in its balance sheet and the opportunity to improve ROE’s by addressing the cost base and improving income generation. A new management led by Thomas Borgen then embarked a strategic review addressing these issues. Solid execution and a further material improvement in Danske Bank’s balance sheet, helped by a faster than expected run down of the problematic Irish assets and a pick-up in the Danish economy, have enabled the bank to restore dividends and start buying back shares. Despite the significant share price gain that has accompanied this transformation we believe that there is still considerable upside to current share price levels. In particular, we see opportunity from further execution on cost cutting, Danish mortgage re-pricing, optimisation of the group’s structure, improving funding costs and a return of capital to shareholders. Danske Bank got itself into significant problems during the financial crisis and then the Eurozone crisis that ultimately required state assistance. The root of these issues were poor management, weakness in the Danish economy and housing market, and the ill-timed 2005 acquisitions of the Irish banks Northern Bank / National Irish Banks. These issues materially impacted the balance sheet and led to a funding squeeze. However, over the last three years these issues have seen a considerable reversal and the CET1 ratio now stands at a healthy 14.1%. More specifically regarding the balance sheet, the improvement in the Irish economy has enabled a rapid run down of these assets after the management decided to make Ireland noncore. Additionally, improvements in the Danish economy and a stabilisation of housing prices have helped drive a collapse in the loan loss ratio, for example down to a mere 8bp in Q1 2015, and the NPL ratio down to now circa 5%. From an operational perspective this has enabled the group to significantly improve its funding costs, first, by repaying the expensive state hybrid and now by refinancing the expensive rates taken up during the crisis. While the macroeconomic backdrop is improving for Danske Bank and loan growth has now stabilised they are currently facing a small drag from the unconventional Danish monetary policy with up to DKK900m in 2015 from negative interest rates (we believe that mitigating factors will enable them to substantially reduce this). Beyond the macroeconomic landscape we believe that management still have several levers to reach their greater than 12.5% 2018 ROE targets. First, there are opportunities to improve the franchise by improving the slightly tarnished brand equity in Denmark, growing in Norway and turning around the underperforming Swedish personal banking business. As we enter 2015 good progress has generally been made here and a new management team have been deployed for Swedish personal banking. Second, mortgage margins in Denmark are materially below other Scandinavian markets as a result of regulation that followed Nykredit’s 2003 acquisition of Totalkredit, but this is now starting to change and with circa 50% of income coming from net interest income this has scope to become a clear tailwind. Third, benchmarking their cost base against their Scandinavian peers suggests room for further improvement especially as these markets are fast evolving towards an increasingly “cashless society.” To date the new management’s execution on costs has been impressive and the 2015 targets for example, of below SEK22bn, remain credible. Finally, while the strategic review led to the divestment of the Irish assets and some personal banking franchises in the Baltics we believe that there is scope to go further in optimising the group’s structure. One such logical move would be a sale of the Northern Irish business.
Finally, with the improvement in balance sheet and better clarity on the Danish capital regime Danske Bank started to pay dividends again in 2014. The strengthening of the capital position enabled them to go further this year with the announcement if a DKK5bn buyback on top of their already attractive 4% dividend yield. In summary, we believe that Danske Bank has become an increasingly attractive, relatively low risk investment trading on undemanding multiples of P/E 11x, P/B of 1.4x, a still circa 30% discount to their highly rated Swedish peers. With the Danish market arguably now carrying less housing risk than Sweden, and management’s continued execution on improving ROE’s towards their 2018 targets we believe that both the earnings growth profile and capital return opportunities are undervalued by investors.
Danske Bank is a current holding of the Waverton European Fund as at 30 The Waverton European Fund is managed by Waverton Investment Management, which is authorised and regulated by the Financial Conduct Authority. This information is for professional investors only. This article is for information only and not intended as a recommendation to enter into investment activity.