sparekassen kronjylland denmark - nordea

Sparekassen Kronjylland DenmarkFinancials

Commissioned Company Research • 28 August 2020

KEY DATA

Country

Moody's

Website sparkron.dk

CAPITAL RATIOS

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

Source: Nordea estimates

ESTIMATE CHANGES

2022E2021E2020EYear0%0%0%Total revenue0%0%0%Total costs

-1%-1%1%Profit before loan losses-1%-2%17%PTPn.a.n.a.n.a.DPS (ord)n.a.n.a.n.a.EPS (adj)

Source: Nordea estimates

Solid income despite low lending growth

Sparekassen Kronjylland reported H1 2020 profit before loan losses of DKK 158m, 10% ahead of our estimate. This was mainly led by better-than-expected fee income and dividends on sector shares. Net interest income and costs were in line with our estimates. Loan losses were DKK 85m, DKK 41m (33%) better than our estimate, despite DKK 120m in COVID-19-related loan loss provisions. The underlying loan losses were hence strong with reversals of DKK ~35m. The CET1 ratio was also strong at 18.1%, 90 bp above our estimate. This was led by a decline in lending of ~5% in H1 vs H1 2019, and down ~7% y/y. We lift our 2020 net profit estimate by 18%, as we now pencil in lower loan losses in 2020. We cut 2021E-22E net profit by 1-2%, led by 2% lower net interest income due to weak lending volumes.

Lowest lending margin pressure in more than five yearsWith plenty of liquidity and capital available in many of the Danish banks, as well as low lending demand in the sector, the foundation for severe margin pressure is present. Yet we estimate that lending margin pressure was the lowest in more than five years in H1. We estimate ~4% net interest income growth in H2, mainly led by the introduction of negative deposit rates for retail customers. Furthermore we believe the recently weak lending growth could turn around in H2, when some of the government support packages expire and the headwind from large project loans expiring is likely to abate, in our view. From an asset quality perspective low lending growth during the past 12-18 months has been well timed ahead of the elevated uncertainty that suddenly came with the COVID-19 pandemic.

2020 guidance does not look too demandingSparekassen Kronjylland now expects 2020 pre-tax profit of DKK 140-180m. We believe this is conservative with H1 pre-tax profit of DKK 78m, when loan losses were elevated. We estimate 2020 pre-tax profit of DKK 180m. Significant uncertainty, however, likely underpins the cautious 2020 guidance.

Strong development in capital ratios is set to continueThe CET1 ratio ended at 18.1% in H1 2020, up ~150 bp h/h and up ~290 bp y/y. The strong development in the capital ratios was driven by lower lending volume but also a more favourable capital treatment of SME exposures. We note that the sum of the 20 largest exposures declined by ~2% h/h and ~9% y/y in H1. The sum of large exposures relative to the CET1 capital hence fell to ~98% in H1.

Nordea Markets - AnalystsMathias NielsenAnalyst

Jakob BrinkSenior Analyst, Sector Coordinator

SUMMARY TABLE - KEY FIGURES2022E2021E2020E2019201820172016DKKm1,3051,2811,2531,4021,1601,1711,124Total revenue

-1,004-981-959-939-881-866-797Total costs0.39%0.46%0.77%-0.01%0.05%-0.31%0.79%LL-ratio

256245180494289362275PTP4.4%4.4%3.4%11.0%6.4%9.3%7.8%RoE3.8%3.7%2.6%8.3%6.4%9.7%8.3%RoTBV (adj)n.a.n.a.n.a.n.a.n.a.n.a.n.a.P/E (adj)n.a.n.a.n.a.n.a.n.a.n.a.n.a.P/BVn.a.n.a.n.a.n.a.n.a.n.a.n.a.P/TBV

18.4%18.2%18.2%16.6%15.4%16.5%14.6%BIS III CT1-ratio0.000.000.000.000.000.000.00DPS (ord, DKK)n.a.n.a.n.a.n.a.n.a.n.a.n.a.Dividend Yield (ord)n.a.n.a.n.a.n.a.n.a.n.a.n.a.Total payout ratio

Source: Company data and Nordea estimates

Marketing material commissioned by Sparekassen Kronjylland

Sparekassen Kronjylland28 August 2020

H1 2020 results vs our estimatesSparekassen Kronjylland reported H1 2020 net profit of DKK 62m, DKK 42m ahead of our estimate. This was mainly led by loan losses that were DKK 41m (33%) better than our estimate, as the bank reversed DKK 35m of its previous loan loss provisions and reserved new loan loss provisions of DKK 120m related to the COVID-19 pandemic. Net interest income was in line with our estimate, but down 5% in H1 compared to H2 2020, as lending declined by ~5% during H1. Both fee income and dividends were better than expected, as were market value adjustments. Total income therefore ended 2% ahead of our estimate. Total costs ended at DKK 465m, in line with our estimate and up 1.8% y/y. The CET1 ratio was also strong at 18.1%, 90 bp above our estimate, mainly led by a 7% drop in REA due to a more favourable capital treatment of SME exposures and lower lending volume.

H1 2020 RESULTS VS OUR ESTIMATES

Actual Actual Actual y/y

Interest income 313 317 -4 -1% 330 -5% 342 -8%Interest expense -1 -5 4 -82% -8 -88% -19 -95%

313 312 0 322 -3% 322 -3%Dividends on shares etc 5 6 4 19 -43%

255 249 5 2% 284 -10% 233 9%Fees and commission expenses -12 -12 0 -1% -16 -22% -13 -2%

566 554 12 594 -5% 562Market value adjustments 39 35 4 12% 152 -74% 55 -29%Other operating income 17 19 -2 -9% 21 -16% 19 -7%

622 608 14 766 -19% 636 -2%Staff costs and administrative expenses -437 -440 3 -1% -455 -4% -431 1%Amortisation, depreciation and impairment losses -25 -24 -1 5% -27 -6% -24 5%Other operating expenses -2 -1 -1 -2 39% -1

-465 -465 0 -483 -4% -456158 143 15 283 -44% 180 -12%

Loan losses -85 -127 41 -33% -41 43Profit/loss on investments in associates and group enterprises 6 9 -3 -35% 16 -63% 13 -55%

78 26 53 257 -70% 236 -67%-16 -6 -17 -7% -44 -63%62 20 42 240 -74% 192 -68%

CET1 ratio 1.5 pp 2.8 pp

Deviation

vs. Actual

0.9 ppSource: Company data and Nordea estimates

Marketing material commissioned by Sparekassen Kronjylland 2


EstimatesWe find Sparekassen Kronjylland's new 2020 pre-tax profit guidance of DKK 140-180m a bit conservative, as the bank had pre-tax profit of DKK 78m in H1, despite elevated loan losses. We estimate DKK 180m. In this report, we lift 2020E net profit by 18%, led by the better-than-expected loan losses in H1 2020. On the other hand, we lower our 2020-22 net interest income estimates by 2% due to the weak development in lending volumes. This is partially offset by higher fee income and dividends from sector shares, and we hence lower our 2021-22 net profit estimates by 1-2%. We like that it seems that Sparekassen Kronjylland has gained better control of its cost inflation with a modest increase of 1.8% in H1, compared to ~7% cost inflation in 2019.

We lift 2020E net profit by 18% but lower 2021E-22E net profit by 1-2%Sparekassen Kronjylland now expects 2020 pre-tax profit of DKK 140-180m (previously DKK 240-300m). We believe the new guidance seems a bit conservative with H1 pre-tax profit of DKK 78m in mind, where loan losses were elevated. We estimate 2020 pre-tax profit of DKK 180m. We however note that uncertainty is also elevated currently, which also likely explains the soft 2020 guidance. We lift our 2020 net profit estimate by 18%, mainly led by the lower-than-expected loan losses in H1 2020. We lower our 2021-22 net profit estimates by 1-2%, led by ~2% lower 2020-22 net interest income estimates due to the weak development in lending volumes, partially offset by higher fee income and dividends from sector shares.

ESTIMATE REVISIONS

Interest income 618 628 641 -6% -7% -7% 657 675 685Interest expense 18 14 9 -268% -186% -143% -17 -22

636 643 650 -2% -2% -2% 647 659 664Dividends on shares etc 13 13 13 86% 86% 86% 7 7 7

511 528 544 1% 1% 1% 505 523 539Fees and commission expenses -25 -26 -27 0% 0% 0% -25 -26 -27

1,135 1,158 1,180 1,134 1,163 1,182Market value adjustments 81 82 84 5% 0% 0% 77 82 84Other operating income 37 41 41 -7% 0% 0% 40 41 41

1,253 1,281 1,305 1,251 1,286 1,307Staff costs and administrative expenses -903 -925 -949 0% 0% 0% -906 -928 -952Amortisation, depreciation and impairment losses -52 -52 -52 3% 3% 3% -51 -51 -51Other operating expenses -3 -3 -3 69% 69% 69% -2 -2 -2

-959 -981 -1,004 -959 -981 -1,005295 300 301 -1% -1% 292 304 302

Loan losses -130 -75 -65 -17% 0% 0% -157 -75 -65Profit/loss on investments in associates and group enterprises 16 20 20 -17% 0% 0% 19 20 20

180 245 256 -2% -1% 154 249 257-39 -54 -56 14% -2% -1% -34 -55 -57142 191 200 -2% -1% 120 194 201


Cost inflation coming downTotal costs grew 1.8% in H1 2020 y/y, which is clearly in the right direction after cost inflation of 7% in 2019. In H1 staff and administrative costs grew 1.3%, and the number of FTEs grew by 2 (~0.3%). We also note that we have seen fewer job postings from Sparekassen Kronjylland during 2020, which we believe could be an indication of increased cost focus in the bank. We find this a prudent strategy, as long as the revenue trends are soft.



We estimate 2% cost inflation in 2020 and 2.5% annual cost inflation in 2021-22

This is significantly down from ~7% in 2019

TOTAL COSTS, 2014-22E (DKKm)

0

200

400

600

800

1,000

1,200

2014 2015 2016 2017 2018 2019 2020E 2021E 2022EOther operating expensesAmortisation, depreciation and impairment loses on intangible assets and property, plant and equipmeStaff costs and administrative expensesTotal costs (growth, y/y)




Another jump in the capital ratiosThe capital ratios increased again in H1 2020. The CET1 ratio ended at 18.1% in H1 2020, up ~150 bp h/h and up ~290 bp y/y. This was driven by lower lending volume, more favourable capital treatment of SME exposures plus better-than-expected inflow of guaranteed capital. The sum of the 20 largest exposures declined by ~2% h/h and ~9% y/y in H1. The sum of large exposures relative to the CET1 capital hence fell to ~98% in H1, well within the threshold of the Danish FSA's supervisory diamond.

~280 bp (~18%) increase in CET1 ratio during the past 12 monthsThe CET1 ratio was very strong at the H1 2020 results, 90 bp ahead of our estimate and up ~150 bp h/h and ~280 bp y/y. The increase in the CET1 ratio was led by a more favourable capital treatment of SME exposures as well as a 5% decline in lending h/h. This prompted a 7% drop in REA h/h and a 6% drop y/y. The inflow of guaranteed capital was DKK ~20m above our estimate in H1. This added ~10 bp to the CET1 ratio. We estimate modest growth in the CET1 ratio of ~30 bp from H1 2020-22, as the IFRS 9 capital add-back is stepping down and we forecast annual lending growth of ~3%.

An estimated drop of 6% in 2020 REA is set to boost the capital ratios

CAPITAL COMPOSITION

0.00

5,000.00

2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022ETier 2 SNP REA, DKKm (rhs)


Large exposures are decliningThe sum of the 20 largest exposures has declined by ~9% since H1 2019 and by 2% since the end of 2019. We attribute this to Sparekassen Kronjylland turning more cautious on new large project loans, especially within commercial real estate. The sum of the largest 20 exposures is also down to ~98% in H1, down 20 pp y/y. This is well below the 175% threshold of the Danish FSA's supervisory diamond.



The sum of the 20 largest exposures is down by 9% y/y

The sum of the 20 largest exposures relative to the CET1 ratio is down by ~20 pp y/y and is now ~77 pp (~45%) below the Danish FSA's threshold

SUM OF 20 LARGEST EXPOSURES

122.5% 123.0%119.7%

101.2%97.8%

110%

115%

3,400.00

3,500.00

3,600.00

3,700.00

3,800.00

3,900.00

4,000.00

4,100.00

4,200.00




Reported numbers and forecastsQUARTERLY KEY DATA

CAPITAL RATIOS

2,865 3,127 3,136 3,237 3,395 3,722 3,768 3,83018,992 18,931 19,824 20,982 22,212 22,391 20,862 21,04415.1% 16.5% 15.8% 15.4% 15.3% 16.6% 18.1% 18.2%15.2% 16.7% 16.1% 16.4% 16.2% 18.2% 19.7% 19.9%17.0% 18.4% 17.9% 18.1% 17.8% 19.8% 21.5% 21.8%

Tang. Equity/Assets 13.6% 14.6% 13.8% 13.6% 13.4% 13.6% 13.3% 13.1%Tang. Equity/Lending 22.6% 23.7% 23.3% 21.9% 21.9% 24.1% 25.8% 26.0%Leverage ratio 12.5% 13.4% 12.5% 12.2% 11.9% 12.4% 12.1% 11.9%

CREDIT QUALITY

2,515 2,600Loan loss reserves 1,222 1,040 1,146 1,128 1,069 1,076 1,097 1,075

Coverage ratio 41% 43%Loan loss reserves / Total loans 8.84% 7.26% 7.69% 6.85% 6.16% 6.37% 6.83% 6.63%Impaired loans / Total loans 0.00% 17.55% 0.00% 15.80% 0.00% 11.89% 0.00% 12.32%

-0.25% -0.48% -1.01% -0.56%

Growth loan loss reserves (y/y) -4% -14% -6% 8% -7% -5% 3% 0%Growth impaired loans (y/y)

PROFITABILITY

11.1% 8.2% 8.2% 4.7% 10.2% 6.5% -2.7% -1.3%11.7% 8.6% 8.5% 4.8% 10.5% 6.7% -2.8% -1.4%

-68.9% -79.7% -73.8% -78.9% -71.9% -73.8% -91.9% -94.4%4.84% 4.53% 4.33% 4.12% 3.95% 3.67% 3.61% 3.83%

REVENUE DISTRIBUTION

52% 55% 54% 55% 51% 47% 60% 60%31% 35% 36% 36% 38% 41% 48% 46%

Net result from financial transactions 13% 6% 8% 6% 9% 9% -10%Net insurance income 0% 0% 0% 0% 0% 0% 0% 0%

5% 4% 3% 3% 3% 3% 3% 4%




QUARTERLY INCOME STATEMENT AND BALANCE SHEET

INCOME STATEMENT

Interest income 339 334 332 340 342 330 313 305Interest expense -26 -24 -19 -23 -19 -8 -1 19

313 311 313 317 322 322 313 324

Dividends on shares etc 2 0 10 0 19 4 2192 207 206 215 233 284 255 256

Fees and commission expenses -7 -10 -8 -13 -16 -12 -13500 507 521 522 562 594 566 569

Market value adjustments 79 35 44 36 55 152 39 42Other operating income 28 22 18 19 19 21 17 20Staff costs and administrative expenses -391 -418 -399 -421 -431 -455 -437 -466Amortisation, depreciation and impairment losses -25 -30 -28 -30 -24 -27 -25 -27Other operating expenses -1 -1 -1 -1 -1 -2 -2 -1Impairment losses on loans and advances etc 8 33 12 -19 43 -41 -85 -45Profit/loss on investments in associates etc 7 9 6 13 16 6 10

205 156 172 117 236 257 78 102Other (Profit from discountinued operations) 0 0 0 0 0 0 0 0

-36 -23 -29 -29 -44 -17 -16 -22169 133 143 88 192 240 62 80

434 477 437 487 451 522 474 474Loans to the public 13,823 14,330 14,897 16,456 17,341 16,897 16,058 16,218Goodwill and other intangibles 128 119 109 100 91 82 73 73

22,975 23,303 25,099 26,471 28,461 29,912 31,226 32,086

Interbank/owed to credit institutions 1,414 971 1,252 1,108 1,153 1,202 1,067 1,067Deposits 16,644 17,215 18,474 19,324 20,579 21,077 22,218 22,658Subordinated loans 358 359 359 359 359 359 360 400Minority interest 0 0 0 0 0 0 0 0

3,256 3,517 3,584 3,703 3,894 4,148 4,211 4,29122,975 23,303 25,099 26,471 28,461 29,912 31,226 32,086

GROWTH (Y/Y)

Interest income -4% -4% -2% 2% 3% -3% -8% -8%Interest expense -8% -13% -25% -2% -1% -67% -95% -351%

-4% -3% -3%

Dividends on shares etc -82% -231% 323% -247% 94% 3638% -43% -50%5% 8% 4% 13% 32% 9% -10%

Fees and commission expenses -7% -22% 16% 9% 52% 50% -2% -19%-1% -4%

Market value adjustments 1936% -46% -45% 4% 26% 322% -29% -72%Other operating income 20% -9% -35% -12% 4% 6% -7% -3%Staff costs and administrative expenses 9% 10% 2% 1% 8% 8% 1% 2%Amortisation, depreciation and impairment losses 21% -17% 1% -14% -10% 5% 0%Other operating expenses -19% 81% 26% -7% -21% 27% 134% -41%Impairment losses on loans and advances etc -185% 56% -158% 252% 118% -298% 9%Profit/loss on investments in associates etc -64% -43% -20% 19% 125% 43% -55% -36%

-16% -25% -67% -60%Other (Profit from discountinued operations)

54% -21% -20% 24% 52% -39% -63% 29%-16% -34% -68% -67%

-7% -4%Deposits 9% 8% 12% 9% 8% 7%

10% 7% 9% 14% 13% 13% 10% 7%

REA growth (BIS III) -7%




ANNUAL KEY DATA

CAPITAL RATIOS2014 2015 2016 2017 2018 2019

2,165 2,310 2,567 3,127 3,237 3,722 3,830 3,967 4,11814,282 16,084 17,549 18,931 20,982 22,391 21,044 21,781 22,35615.2% 14.4% 14.6% 16.5% 15.4% 16.6% 18.2% 18.2% 18.4%15.2% 14.9% 15.5% 16.7% 16.4% 18.2% 19.9% 19.8% 20.0%15.2% 15.2% 17.2% 18.4% 18.1% 19.8% 21.8% 21.7% 21.8%

Tang. Equity/Assets 14.0% 13.1% 12.9% 14.6% 13.6% 13.6% 13.1% 13.2% 13.3%Tang. Equity/Lending 23.7% 22.6% 21.7% 23.7% 21.9% 24.1% 26.0% 26.0% 26.2%Leverage ratio 13.0% 11.9% 11.7% 13.4% 12.2% 12.4% 11.9% 11.9% 12.1%

CREDIT QUALITY2014 2015 2016 2017 2018 2019

2,515 2,600 2,008 1,998 1,988 1,978Loan loss reserves 1,094 1,248 1,216 1,040 1,128 1,076 1,071 1,065 1,060

Coverage ratio 41% 43% 54% 54% 54% 54%Loan loss reserves / Total loans 11.10% 11.09% 9.36% 7.26% 6.85% 6.37% 6.60% 6.32% 6.10%Impaired loans / Total loans 0.00% 0.00% 0.00% 17.55% 15.80% 11.89% 12.32% 11.79% 11.39%

-0.31% -0.01%

Growth loan loss reserves (y/y) 3% 14% -3% -14% 8% -5% -1% -1% -1%Growth impaired loans (y/y) 3% -23% -1% -1% -1%

PROFITABILITY2014 2015 2016 2017 2018 20194.0% 7.7% 7.8% 9.3% 6.2% 8.1% 2.6% 3.6% 3.7%4.2% 8.1% 8.3% 9.7% 6.4% 8.3% 2.6% 3.7% 3.8%

-69.1% -69.4% -70.9% -74.0% -76.3% -72.9% -78.6% -78.5% -78.9%6.42% 6.22% 5.34% 4.57% 4.06% 3.78% 3.64% 3.69% 3.61%

REVENUE DISTRIBUTION2014 2015 2016 2017 2018 201961% 60% 58% 53% 54% 49% 49% 49% 49%29% 32% 32% 33% 36% 39% 41% 41% 42%

Net result from financial transactions 1% 0% 6% 10% 7% 9% 7% 7% 7%Net insurance income 0% 0% 0% 0% 0% 0% 0% 0% 0%

9% 7% 4% 4% 3% 3% 3% 3% 3%




ANNUAL INCOME STATEMENT AND BALANCE SHEET

INCOME STATEMENT2014 2015 2016 2017 2018 2019

Interest income 746 724 702 673 672 671 618 628 641Interest expense -109 -68 -55 -50 -43 -27 18 14 9

637 656 647 624 630 644 636 643 650

Dividends on shares etc 8 2 13 2 10 23 13 13 13310 366 369 398 422 517 511 528 544

Fees and commission expenses -10 -17 -20 -17 -19 -29 -25 -26 -27945 1,008 1,009 1,008 1,043 1,156 1,135 1,158 1,180

Market value adjustments 9 0 68 114 80 207 81 82 84Other operating income 99 80 47 49 37 39 37 41 41Staff costs and administrative expenses -604 -677 -739 -809 -820 -886 -903 -925 -949Amortisation, depreciation and impairment losses -95 -48 -56 -55 -58 -51 -52 -52 -52Other operating expenses -29 -30 -2 -2 -3 -3 -3 -3 -3Impairment losses on loans and advances etc -194 -98 -89 41 -7 2 -130 -75 -65Profit/loss on investments in associates etc 21 16 36 16 17 29 16 20 20

151 251 275 362 289 494 180 245 256Other (Profit from discountinued operations) 0 0 0 0 0 0 0 0 0

-54 -52 -53 -59 -58 -62 -39 -54 -5697 199 222 302 231 432 142 191 200

2014 2015 2016 2017 2018 2019899 381 407 477 487 522 474 474 474

Loans to the public 9,854 11,253 12,989 14,330 16,456 16,897 16,218 16,867 17,373Goodwill and other intangibles 133 155 137 119 100 82 73 73 73

16,711 19,436 21,845 23,303 26,471 29,912 32,086 33,224 34,092

Interbank/owed to credit institutions 199 475 1,219 971 1,108 1,202 1,067 1,067 1,067Deposits 12,999 14,764 15,893 17,215 19,324 21,077 22,658 23,337 24,037Subordinated loans 0 159 358 359 359 359 400 400 400Minority interest 0 0 0 0 0 0 0 0 0Shareholders equity 2,472 2,698 2,961 3,517 3,703 4,148 4,291 4,450 4,617

16,711 19,436 21,845 23,303 26,471 29,912 32,086 33,224 34,092

GROWTH (Y/Y)2014 2015 2016 2017 2018 2019

Interest income -5% -3% -3% -4% 0% 0% -8% 2% 2%Interest expense -32% -38% -18% -10% -14% -36% -168% -23% -35%

-1% -4% -1%

Dividends on shares etc -24% -69% 470% -83% 340% 131% -44% 0% 0%13% 18% 1% 8% 6% 23% -1% 3% 3%

Fees and commission expenses -4% 72% 17% -16% 12% 51% -12% 3% 3%11% -2%

Market value adjustments -84% -99% 101149% 68% -30% 160% -61% 1% 2%Other operating income -40% -19% -41% 5% -25% 5% -5% 10% 0%Staff costs and administrative expenses 7% 12% 9% 10% 1% 8% 2% 2% 2%Amortisation, depreciation and impairment losses 146% -49% 17% -3% 6% -12% 3% 0% 0%Other operating expenses -29% 2% -93% 20% 7% 4% 24% 0% 0%Impairment losses on loans and advances etc -40% -50% -9% -146% -128% -7037% -42% -13%Profit/loss on investments in associates etc 86% -21% 124% -55% 2% 72% -45% 26% 0%

-4% -20% -63%Other (Profit from discountinued operations)

58% -2% 1% 13% -3% 6% -37% 40% 4%-21% -24% -67%

-1% -4%Deposits -2% 14% 8% 8% 12% 9% 7% 3% 3%

-2% 16% 12% 7% 14% 13% 7% 4% 3%

REA growth (BIS III) 11% -6%



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This report does not cover any financial instruments issued by the subject company. It is solely a general overview of the subject company.

Risk information The risk of investing in certain financial instruments is generally high, as their market value is exposed to a lot of different factors such as the operational and financial conditions of the relevant company, growth prospects, change in interest rates, the economic and political environment, foreign exchange rates, shifts in market sentiments etc. Where an investment or security is denominated in a different currency to the investor’s currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. Past performance is not a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. When investing in individual shares, the investor may lose all or part of the investments.

Conflicts of interest Readers of this document should note that Nordea Markets has received remuneration from the company mentioned in this document for the production of the report. The remuneration is not dependent on the content of the report.

Nordea, affiliates or staff in Nordea, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned in the report.

To limit possible conflicts of interest and counter the abuse of inside knowledge, the analysts of Nordea Markets are subject to internal rules on sound ethical conduct, the management of inside information, handling of unpublished research material, contact with other units of Nordea and personal account dealing. The internal rules have been prepared in accordance with applicable legislation and relevant industry standards. The object of the internal rules is for example to ensure that no analyst will abuse or cause others to abuse confidential information. It is the policy of Nordea Markets that no link exists between revenues from capital markets activities and individual analyst remuneration. Nordea and the branches are members of national stockbrokers’ associations in each of the countries in which Nordea has head offices. Internal rules have been developed in accordance with recommendations issued by the stockbrokers associations. This material has been prepared following the Nordea Conflict of Interest Policy, which may be viewed at www.nordea.com/mifid.

Distribution restrictions This report is not intended for, and must not be distributed to private customers in the UK or the US. This research report is intended only for, and may be distributed only to, accredited investors, expert investors or institutional investors in Singapore who may contact Nordea Bank, Singapore Branch of 138 Market Street, #09-01 CapitaGreen, Singapore 048946.

This publication or report may be distributed by Nordea Bank Abp Singapore Branch, which is subject to the supervision of the European Central Bank, the Finnish Financial Supervisory Authority and the Monetary Authority of Singapore.

This publication or report may be distributed in the UK to institutional investors by Nordea Bank Abp London Branch of 6th Floor, 5 Aldermanbury Square, London, EC2V 7AZ, which is under supervision of the European Central Bank, Finanssivalvonta (Financial Supervisory Authority) in Finland and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority in the United Kingdom. Details about the extent of our regulation by the Financial Conduct Authority and Prudential Regulation Authority are available from us on request.

This report may not be mechanically duplicated, photocopied or otherwise reproduced, in full or in part, under applicable copyright laws.

Nordea Bank Abp Nordea Bank Abp, filial i Sverige Nordea Danmark, Filial af Nordea Bank Abp, Finland

Nordea Bank Abp, filial i Norge

Nordea Markets Division, Research Visiting address: Aleksis Kiven katu 7, Helsinki FI-00020 Nordea Finland

Nordea Markets Division, Research Visiting address: Smålandsgatan 17 SE-105 71 Stockholm Sweden

Nordea Markets Division, Research Visiting address: Grønjordsvej 10 DK-2300 Copenhagen S Denmark

Nordea Markets Division, Research Visiting address: Essendropsgate 7 N-0107 Oslo Norway

Tel: +358 9 1651 Fax: +358 9 165 59710

Tel: +46 8 614 7000 Fax: +46 8 534 911 60

Tel: +45 3333 3333 Fax: +45 3333 1520

Tel: +47 2248 5000 Fax: +47 2256 8650

Reg. no.: 2858394-9 Satamaradankatu 5 Helsinki

Analyst shareholdings Nordea Markets equity and credit analysts do not hold shares in the companies that they cover.No holdings or other affiliations by analysts or associates.

Fair value and sensitivity We calculate our fair values by weighting DCF, DDM, SOTP, asset-based and other standard valuation methods. Our fair values are sensitive to changes in valuation assumptions, of which growth, margins, tax rates, working capital ratios, investment-to-sales ratios and cost of capital are typically the most sensitive. It should be noted that our fair values would change by a disproportionate factor if changes are made to any or all valuation assumptions, owing to the non-linear nature of the standard valuation models applied (mentioned above). As a consequence of the standard valuation models we apply, changes of 1-2 percentage points in any single valuation assumption can change the derived fair value by as much as 30% or more. All research is produced on an ad hoc basis and will be updated when the circumstances require it

Marketing Material This research report should be considered marketing material, as it has been commissioned and paid for by the subject company, and has not been prepared in accordance with the regulations designed to promote the independence of investment research and it is not subject to any legal prohibition on dealing ahead of the dissemination of the report. However, Nordea Markets analysts are according to internal policies not allowed to hold shares in the companies/sectors that they cover.

Market-making obligations in shares or derivatives and other significant financial interest Nordea Markets has no market-making obligations in the subject company.

Investment banking transactions

In view of Nordea’s position in its markets readers should assume that the bank may currently or may in the coming three months and beyond be providing or seeking to provide confidential investment banking services to the company/companies

Issuer Review This report has not been reviewed by the subject company prior to publication.

Completion date 28 August 2020, 12:19 CET

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