Let’s start a thread for this, in case forum members have any information about the company. I’m thinking about a situation where
a) Air Norwegian is on the brink of bankruptcy
b) many likely have savings in this bank
c) Sampo owns a little over 6% of the company as a financial investment
so it might be of interest to several people.
Is there any information on how heavily Bank Norwegian has lent to Air Norwegian? The airline owned the bank before Sampo came into the picture. So, in other words, if the airline goes bankrupt, what are the consequences for the bank?
Sampo is probably the largest holding in my portfolio right now, so I’m interested in this. It would be a surprise if, back when Air Norwegian was a significant owner of Finance, Finance hadn’t funded the airline. If that’s the case, it would be an even bigger surprise if Air had paid off its loans and replaced them with other loans. The company grew rapidly and needed money.
If the bank’s dividend is left unpaid, and justifiably so, that’s not a positive thing for Sampo either. Whether the reason for freezing dividend payments is consumer loans or potential credit losses from Air.
A quick Google search with my keywords didn’t yield an answer to that question either.
I’ve been wondering this too, but haven’t found an answer. The bank is currently priced quite favorably, with a P/E of just over 6 and a dividend yield over 5%. The market is clearly pricing some risk into the stock.
Norwegian Finans Holding has its own problems. In my opinion, Bank Norwegian is a payday loan shop disguised as a normal bank. Loans granted to uncreditworthy borrowers have started to fall into the bank’s lap. The Norwegian financial supervisory authority is concerned about the bank’s solvency and intends to stop dividend payments, as stated in the opening of the thread.
If I had a lot of money in a savings account with Bank Norwegian, I would start wondering if it’s best to move it elsewhere. How bad would the situation have to be for the Norwegian bank deposit guarantee, which I recall is about €100,000 per account or customer, to crumble?
The deposit guarantee is indeed €100,000 these days, so it’s not specified in crowns. I personally would trust the Norwegian deposit guarantee more than the Finnish one, but to each their own. Of course, Bank Norwegian’s bankruptcy risk is perhaps slightly higher than that of regular banks.
I myself moved the cash from the Norwegian account to my current account and AOT (All-Out-Trading account). This is mainly because if the bank were to experience any temporary payment difficulties, the money would, in the worst-case scenario, be stuck in the account when it should be invested in the market. Many people close to me have done the same.
Does any analyst follow this? It would provide more substance. The earnings development has been quite impressive previously, but how significant is the risk of financing being jeopardized (people withdrawing savings) and credit risk? Does anyone have experience with Resurs Bank?
The airline was previously a co-owner in the holding company, and I wouldn’t be surprised if the bank had financed the airline at some point. This was another point when considering potential payment difficulties for the bank. The airline’s bankruptcy risk was still real at that stage.
This is what I was wondering too, about airline debts - I just haven’t found any information about it anywhere. Also, the credit losses from payday loans at this point, combined with the fact that if people panic all at once and pull their money out, there will be problems. That’s why I already moved my own money out of there. The interest income is quite small compared to the worry.
No worries if the bank collapses, the deposit guarantee fund will compensate. I have experience with this; I once had deposits in an Icelandic bank that went bankrupt.
Replace it, of course, but how long will it take? If there’s time to wait, then there shouldn’t be much to worry about. My “war chest” for investments has been right there, and it would be unpleasant if the funds were not immediately available when needed.
@Peelo - There is certainly a regulation and a time limit for deposit guarantee compensation - but who among us has read all the fine print in contracts and insurance terms :). It’s at least certain that when money is withdrawn en masse, the bank’s position weakens. The deposit guarantee is a pretty strong thing, which is why I wouldn’t rush to empty my account. I agree with @jonnia on that.
Here’s a news article on the topic from years past:
This is why deposit insurance is also an illusion here:
If banks here were to face the same predicament as in Cyprus, the security of deposits would be as weak as in the island nation’s banks. Money would remain unwithdrawn and stuck for who knows how long, even though deposit insurance is ironclad on paper. The protection can withstand minor bumps but not a national banking crisis. Similarly, only a fraction of deposits can be withdrawn as cash.
So, the airline goes into restructuring. We might hear soon whether these two still have financial ties or not. In other words, whether the bank has loaned money to the airline and how much. One would think that the bank is currently also suffering from credit losses from payday loans and perhaps the interest rate cap/advertising regulation, which I assume is happening elsewhere, not just in Finland. And a deposit run probably isn’t good either – I’d assume many who kept their money there got a bit scared or just moved their holdings to falling stocks?
I’m a bit torn – I’d trust Norway’s bank protection more than Finland’s, but BankNorwegian is bobbing unpleasantly in the waves in my binoculars. I already moved my own funds out of there earlier.