HVID.CO — mttssn research

HOLD

Conviction: LOW

Hvidbjerg is a fortress-capitalised local Danish savings bank earning ROE 8.8% LTM (10.0% FY reported) against a ~10.5% cost of equity — a flat-to-slightly-negative spread that leaves it a below-Ke earner despite a sticky, growing deposit franchise (deposits +7.9% YoY, loans +11.7%). Solvency 25.4% / CET1 23.8% and LCR 456% give exceptional resilience, but at 0.96x TBV the equity is fair on the FY ROE. No margin of safety. HOLD.

Return on Equity

8.8%

Cost of equity ~9.5%

Price / Book

0.96×

Market cap / equity

Fair P/B (Gordon)

0.89×

(ROE−g)/(COE−g); g 3%

Price / Target

DKK 182 → DKK 185

+2% base; HOLD

Price / Earnings

10.9×

Market cap / net income

P / TBV

0.96×

Price / tangible book

Economic Profit

n/a

ROE 8.8% LTM (10.0% FY reported) vs ~10.5% cost of equity — a flat-to-slightly-negative spread (economic_profit null by fin design)

Equity (book)

DKK 319M

Total shareholders' equity

Thesis

Hvidbjerg Bank is a small local savings bank in Thyholm, Denmark — deposit-funded net interest and fee income, no trading complexity. The franchise is growing organically under a 'kundefokuseret vaekst' strategy: loans +11.7% and deposits +7.9% YoY, with the deposit base up from 1,042m to 1,643m DKK over five years. LTM net income 28.1m DKK on net rente/gebyr income 138.8m.

Returns are the weak leg: ROE is 8.8% on the LTM base (10.0% on FY2025 reported average equity) against a cost of equity of roughly 10.5% for a small, illiquid Danish local bank — a flat-to-slightly-negative residual-income spread. The sticky deposit franchise is real but does not yet clear the cost of equity, so this is a below-Ke earner, not a compounder.

The strength is capital: solvency (kapitalprocent) 25.4% and CET1 (kernekapitalprocent) 23.8% against a 10.5% solvensbehov leave 14.9pp of overdaekning, with LCR 456% and all four Tilsynsdiamant metrics within limits. A one-off catalyst — the agreed sale of a 1.34% BEC stake to Nykredit for ~27m DKK gross pre-tax, expected H2 2026 — lifted FY2026 pre-tax guidance to 38-43m (from 28-33m).

Valuation · residual income (equity frame) & scenarios

On the ROE/P-B frame the equity is essentially fair: Gordon fair P/TBV ~= (ROE 10.0% - g 2%)/(Ke 10.5% - g 2%) ~= 0.94x, versus the current 0.96x TBV (= P/BV, no goodwill or intangibles). On the softer LTM ROE of 8.8% the justified multiple falls to ~0.80x, making the equity modestly rich. P/E 10.9x is undemanding in absolute terms but not cheap for a bank earning below its cost of equity.

Base DKK 185 (~+2%) holds ROE near 9-10% with the BEC one-off supporting FY2026 but the through-cycle spread flat; bull DKK 220 if the omkostningsprocent glide-path delivers and rate-margin stabilises to lift ROE clear of Ke; bear DKK 150 if lower rates and loan competition compress the margin below the cost of equity and the below-Ke discount widens.

Residual-income panel unavailable: non-positive book equity.

Scenario	24m target	Upside	Prob.	Driver
Bull	DKK 220	+21%	25%	Omkostningsprocent glide-path delivers; rate-margin stabilises; ROE re-rates clear of Ke
Base	DKK 185	+2%	50%	Fair: ROE 9-10% with BEC one-off support but through-cycle spread flat; trades ~= Gordon fair P/TBV
Bear	DKK 150	-18%	25%	Lower rates + loan competition compress margin below Ke; below-Ke discount widens
Prob-weighted	DKK 185	+2%	100%	Scenario-weighted expected value

Key drivers

1. Sticky deposit franchise

Local retail deposits up 1,042m -> 1,643m DKK over 5 yrs (+7.9% YoY); loan/deposit ratio 66% — low-cost, resilient funding.

2. Organic loan growth

Loans +11.7% YoY to 1,087m DKK under the kundefokuseret vaekst strategy — the growth leg of the return.

3. Fortress capital

Solvency 25.4% / CET1 23.8% vs 10.5% solvensbehov (14.9pp overdaekning), LCR 456% — exceptional balance-sheet resilience.

4. BEC stake sale

1.34% BEC stake to Nykredit ~27m DKK gross pre-tax (H2 2026) lifts FY2026 pre-tax guidance to 38-43m.

5. Benign credit

Net impairment reversal -0.3m DKK; 12.9m DKK management overlay retained conservatively — no credit escalation.

Key risks

Below-Ke returnsROE 8.8% LTM sits under a ~10.5% cost of equity — a flat-to-negative residual-income spread; the deposit moat does not clear Ke.
Rate-margin compressionFalling Danish rates and sharp loan competition pressure the rentemarginal — the principal driver of the bear case.
Cost buildIT/AI and competence investments lift C/I to 72.6% (Q1'26); a missed omkostningsprocent glide-path erodes basisindtjening.
Sub-scale / illiquidityTiny 306m DKK market cap, thin float — high cost of equity and limited re-rating capacity.
Kursregulering volatilityBond-portfolio revaluations swing pre-tax profit (0.5m vs 3.0m DKK Q1) — earnings quality noisier than basisindtjening implies.

Conclusion

Hvidbjerg is a well-run, exceptionally capitalised small Danish savings bank with a sticky, growing deposit franchise — but it earns ROE 8.8% LTM (10.0% FY) against a ~10.5% cost of equity, a flat-to-slightly-negative spread, and trades at 0.96x TBV, essentially fair on the FY ROE. There is no margin of safety and no clear value creation over the cost of equity. HOLD, low conviction; base DKK 185 (~+2%).

An upgrade needs ROE to re-rate clear of Ke — via the omkostningsprocent glide-path and rate-margin stabilisation — or a wider price discount to TBV. Rate-driven margin compression is the principal downside; the fortress capital and BEC one-off cushion but do not close the return gap.

Footnote evidence & sources

Every adjustment traces to the cited note/page in the source filing — click to open it there. Annual report / 10-K: 📄 open · Latest interim: 📄 open

Adjustment / figure	Value	Source	Why mttssn treats it this way
Total equity (egenkapital i alt)	319	Q1 2026 periodemeddelelse, 5 aars hovedtal (Balance) 📄 p.3	Latest interim total equity 319.3 MDKK at 31.03.2026 (incl. 15.0 MDKK hybrid Tier-1); used as the stock base for ROE and P/BV.
Net income after tax (LTM)	28.055	LTM = FY2025 29.755 - Q1'25 9.3 + Q1'26 7.6 📄 p.4	LTM net income built from FY2025 annual (29.755 MDKK) minus Q1-2025 (9.3) plus Q1-2026 (7.6) after-tax results.
Net interest & fee income (Q1 2026)	35.74	Q1 2026, Resultatposter 📄 p.3	Core banking revenue line; +7.3% YoY (33.3 -> 35.7 MDKK), underlying operating momentum despite lower kursreguleringer.
Solvency ratio (kapitalprocent)	0.254	Q1 2026, Kapitalforhold 📄 p.4	Total capital ratio 25.4% vs solvensbehov 10.5% at 31.03.2026 — large capital buffer, no escalation trigger.
CET1 (kernekapitalprocent)	0.238	Q1 2026, Kapital 📄 p.3	Core capital ratio 23.8%; well above regulatory buffer stack.
Total equity FY anchor (egenkapital i alt)	312	FY2025 Balance (Passiver) 📄 p.31	FY2025 year-end equity 311.6 MDKK = shareholders' equity 296.6 + hybrid 15.0; confirms no NCI and no intangibles.
No goodwill / intangibles	0	FY2025 Balance (Aktiver) 📄 p.31	Balance sheet has no immaterielle aktiver / goodwill line, so tangible equity equals total equity and ROTE = ROE.

Quality · Buffett tenets8 / 15

Understandable business●●○

Small local Danish savings bank (Thyholm) — deposit-funded net interest + fee income, no trading complexity; legible 5-yr history (net rente/gebyr 25.7m 2022 -> 35.7m Q1'26). Simple model, but sub-scale and rate-margin exposed.

Durable moat●○○

[efficient scale · stabil] local deposit franchise: indlan grew 1,042m -> 1,643m DKK over 5 yrs (+7.9% YoY), loan/deposit ratio 66% — sticky, low-cost retail funding in a rural niche too small for entrants. But ROE-Ke spread flat-to-negative caps it (frame: ROE-Ke, LTM 8.8% vs ~10.5% Ke = -1.7pp); local scale advantage does not clear cost of equity. falsifierare: deposit outflow or margin compression as rate cuts + national-bank competition erode the funding edge.

Management & capital allocation●●○

[allokering · candor] Disciplined kundefokuseret vaekst — loans +11.7%, deposits +7.9% YoY funded from own equity (NEP met without SNP after redeeming 15m DKK in Mar'26); 12.9m DKK management overlay retained conservatively vs geopolitics/agri climate levy; candid Danish reporting, no goodwill/impairment history. Ordinary good stewardship, not a standout allocator. rod flagga: IT/AI cost build lifts C/I to 72.6% — a missed omkostningsprocent glide-path would pressure returns.

Financial strength & returns●●○

ROE 8.8% LTM (10.0% FY reported) vs ~10.5% cost of equity — a flat-to-slightly-negative spread; residual income barely positive on the FY print, negative on LTM. Offsetting: fortress capital — solvency 25.4% / CET1 23.8% vs 10.5% solvensbehov (14.9pp overdaekning), LCR 456%, all four Tilsynsdiamant metrics within limits. Balance-sheet resilience is the strength, not the return spread.

Valuation margin of safety●○○

Trades at 0.96x TBV (= P/BV, no intangibles) vs a Gordon-justified ~0.94x on FY ROE 10% / Ke 10.5% / g 2% — essentially fair, no discount. On LTM ROE 8.8% the justified multiple is ~0.80x, so the equity is modestly rich. P/E 10.9x undemanding but not cheap for a sub-Ke bank.