It has been about 2.5 years since my first short write up of Danske Bank. I just did a simple analysis, a relative by comparing to other Banks of similar positions, and comparing price to tangible book value. My hypothesis was that the Estonia matter would eventually resolve, and the fine would be large, but not so large that it would kill the company.
Since last summer, Danske has resumed its dividend (7+7,5 DKK for 2023), and resumed its buyback program. Shares have appreciated with ~ 100% on my average purchase price. Current dividend yields 13,4 % on my purchase price.
So what do I do now? The catalyst is gone. It worked, but going forward share price will be determined by the underlying business operations. Currently price to tangible book value is slightly over 1, while it is 1.25 for the industry as a whole. (Source: investing.com)
But Danske still has a few tricks left. The sale of the Norwegian branch to Nordea is approved by the Norwegian authorities, and the proceeds here may be distributed as a dividend or share buyback or as a combination of both. As I have mentioned before, I believe this also will contribute to higher earnings, since the Norwegian branch had a lower profitability. Short term the buyback program will create greater demand for the shares.
I notice a lot of people think that interest rates are going down again. And by going down, they expect really low rates, as it was a few years ago. I also expect rates to go somewhat down, but fluctuate in a range between I.e 4-6% People seems to have great difficulty understanding that what has been the normal that they’re used to, will not return. It was an anomaly, and we’re now back in the actual normal. If I am correct in this, banks in general will do just fine.
In addition, when investors start to believe Danske is once again a stable business, dividend investors will return, and the share price might be valued on its dividend payments.
I have two accounts with Danske shares. I’m in the process of closing one down, and I sold some shares here on Friday at 200 DKK a share. I will probably sell the rest of those, but keep the main portion, until I need the money for a better idea.
For reference, here is the other articles:
https://valueinvestorsite.wordpress.com/2021/09/19/danske-a-valuation-attempt/
https://valueinvestorsite.wordpress.com/2023/07/24/danske-an-update/
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