On Wednesday, Berenberg initiated coverage on Danske Bank A/S (DANSKE:DC) (OTC: DNKEY), setting a "Hold" rating and a price target of DKK215.00. The firm pointed out that while Danske Bank may be a favored Nordic bank among consensus, they adopt a more cautious stance.
Berenberg highlighted limited growth prospects for the bank's lending volumes and non-interest income. Additionally, the potential for a longer wait for surplus capital distributions could lead to investor disappointment.
According to Berenberg, Danske Bank's shares have already outperformed the sector significantly, with a 50 percentage point gain since late 2022. This performance has led the firm to assess the bank as fairly valued at its current market price, which is 1.0x its tangible book value and reflects a 12-13% return on tangible equity (RoTE). The "Hold" rating comes with an anticipated 6% upside to the firm's price target.
Berenberg compared Danske Bank with Nordea, noting that Nordea offers a more defensive net interest income, a more diverse revenue mix, and superior profitability. These factors contribute to Berenberg's preference for Nordea over Danske Bank as the top Nordic banking choice.
Danske Bank's current market position and Berenberg's valuation suggest that the bank is trading at a level that aligns with its anticipated financial performance. The coverage initiation and the setting of the price target provide investors with a reference point for the bank's current valuation in the market.
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