Pareto Bank (Buy, TP: NOK62.00) - Strong first line of defence
Supported by continued margin momentum and still-firm cost efficiency, we forecast a Q2 ROE of 14%. While we acknowledge the increased uncertainty in the bank’s core segments, we view its business model – with in-depth sector knowledge and close customer relationships – as a mitigating factor. Moreover, we expect its profitable operations to provide solid loan-loss absorption capacity, with our ~43–63bp 2023–2025e loan-loss ratios (2–3x its historical average) leaving still-solid ROEs of ~13%. At a 2024e P/E of ~6.3x, we continue to find the valuation attractive and reiterate our BUY and NOK62 target price.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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