Vestjysk bank has a market share in Denmark of ~1% with lending exposure concentrated in Jutland while the branch network stretches from the west coast over the middle of Jutland to the east. The bank has ~370 employees. Exposure is tilted towards agriculture but this has now been reduced to 15% of lending and guarantees.
A significant drop in loan loss provisions due to improved agri conditions has boosted net profits for Vestjysk in recent years, and if this continues Vestjysk could return to announcing dividends for 2021. Vestjysk was recapitalised by a group of investors in 2017 while EU restrictions were removed in April 2019: we believe Vestjysk is now open for sector consolidation.
Regulatory risks and credit risk are the biggest risks in the Vestjysk investment case. New regulations such as Basel IV, MREL and IFRS 9 will be implemented over the coming years. As cattle farming and pig farming represents ~12% of Vestjysk’s total lending exposure, the future development in dairy prices and pig prices also present a high risk for the bank.