Rune Bjerke (CEO) and Bjorn Erik Naess (CFO) of DNB. (Photo: Stig B. Fiksdal)
DNB recorded profits of NOK 3 181 million in the first quarter of 2013, up from NOK 1 794 million in the first quarter of 2012. The main reason for the increase in profits was that the effects of basis swaps were less negative in the first quarter of 2013 than in the year-earlier period.
“Overall, we are making good progress, and profits from underlying operations are almost on a level with the corresponding period in 2012. However, the first quarter reflects a weaker trend in many of DNB’s international markets. During this period, we experienced somewhat slower demand both internationally and among our largest corporate customers,” says Rune Bjerke, group chief executive.
DNB experienced a strong home mortgage trend, with average growth of 8.3 per cent compared with the first quarter of 2012. Total average lending increased by 1.8 per cent from the first quarter of 2012, but showed a slight decline from the fourth quarter. Compared with the first quarter of 2012, there was a rise in average deposit volumes of as much as 14.3 per cent.
Lending spreads widened, while deposit spreads narrowed. The volume-weighted spread increased by 0.04 percentage points from the first quarter of 2012.
In the first quarter of 2012, the effects of basis swaps (mark-to-market adjustments of derivative contracts) had a pronounced negative impact on DNB’s profits. The effect in the first quarter of 2013 was far less negative. Though these effects vary considerably from quarter to quarter, they will be balanced out over time.
Lower impairment losses
Impairment losses on loans and guarantees totalled NOK 737 million, down NOK 452 million from the fourth quarter of 2012 and NOK 46 million from the first quarter of 2012.
“The Norwegian economy remains sound and contributes to a low level of impairment for DNB. Due to the challenging situation in the shipping market, impairment losses show a certain increase, but are still within the guided level,” says Bjerke.
The common equity Tier 1 capital ratio was 10.6 per cent, while the capital adequacy ratio was 12.1 per cent, both including 50 per cent of interim profits.
Reduced costs
“We work continually to streamline our operations. We are currently in a demanding period where we are reducing the number of employees while also cutting other costs. In addition, we are holding back dividend payments and increasing margins for both companies and households. This is crucial in order to meet the capital adequacy requirements we will face over the coming years,” says Bjerke.
Adjusted for costs pertaining to non-core operations and non-recurring effects, operating expenses were reduced by 1.1 per cent from the first quarter of 2012. Thus, the Group was ahead of its target to have a stable level of operating expenses during the period up to 2015.
During the first quarter, the Norwegian Supreme Court ruled against DNB in a civil case concerning debt-financed structured products. In this connection, DNB has set aside and charged to the accounts NOK 450 million to cover compensation payments to customers.
Key figures for the first quarter of 2013
• Pre-tax operating profits before impairment were NOK 5.1 billion (3.2)
• Profit for the period was NOK 3.2 billion (1.8)
• Earnings per share were NOK 1.96 (1.10)
• Return on equity was 10.0 per cent (6.3)
• The ordinary cost/income ratio was 52.0 per cent (61.2)
Comparable figures for the first quarter of 2012 in parentheses.
