Vestjysk Bank’s Q1-Q3 2020 Quarterly Report - Seite 2

Special circumstances in the period – including effects of the Coronavirus crisis on Vestjysk Bank until the reporting date
Like the rest of Denmark, the Bank was impacted by the official lockdown of the country from 12 March until 1 May 2020. The Bank follows the government’s current recommendation that employees who can work from home do so from 18 September until at least 2 January 2021. So far, the Bank has been able to maintain a reasonable level of operations during both periods, and the level of customer activity has been high.

The Bank’s advisers have contacted all business customers several times to arrange how the Bank can help them through the Coronavirus crisis and to advise them on how to apply the rescue packages provided by the Danish government and parliament. So far, the crisis has not directly impacted the Bank’s lending or individual impairment losses.

For retail customers, Vestjysk Bank has provided a range of borrowing facilities in the form of permission to skip instalments, temporary overdraft facilities and increased credit facilities to support customers hit by the lockdown. These measures have also had a limited impact on the Bank, so far.

The sector distribution of the Bank’s lending plays a positive part in this. Most of the Bank’s lending is within sectors that have not been particularly badly affected by the Coronavirus crisis. The hotel, restaurant, transport and retail sectors are the hardest hit, and these sectors only account for some 10% of the Bank’s total lending.

Vestjysk Bank’s two main sectors, agriculture and real estate, have so far been relatively unaffected by the Coronavirus crisis. However, the Coronavirus pandemic has devastated the mink industry, bringing an end to mink farming in Denmark. The Bank’s exposure to the mink industry is 0.8% of total gross lending, or DKK 121 million. The exposure has been written down to DKK 53 million, which is considered fully secured.

Until now, the crisis has not affected dairy farmers.
Pork prices dropped during the period, but remain at a satisfactory level. Because of the relatively high pork prices in the first half, pig farmers, some of which are credit-impaired, were able to repay debt to the Bank. This resulted in reversals of impairment allowances within this sector in Q3 2020. The current outbreak of African swine fever in Germany has made it difficult for the Bank’s piglet producing customers to sell their output in Germany. This caused prices of piglets to fall sharply, and a downward trend was also seen in prices of pigs for slaughter. Vestjysk Bank monitors these developments closely and made the necessary provisions for their preliminary impact on customers in the Q1-Q3 financial statements. The Bank also made an additional impairment provision for economic uncertainty to cover the increased risk.