DNB's results for 3rd quarter 2013

"Lending volumes remained virtually unchanged during the quarter, reflecting the slowdown in the Norwegian economy. Nevertheless, DNB recorded a significant underlying rise in profits and wider lending spreads. Increased spreads are vital if we are to meet the requirements imposed on Norwegian banks by the authorities. DNB will have to further increase profits over the coming years in order to comply with current requirements,” says Rune Bjerke, group chief executive.
Over the past year, DNB has increased Tier 1 capital by some NOK 200 million per week to meet the regulatory requirements. The common equity Tier 1 capital ratio, calculated according to the transitional rules, rose from 10.0 per cent in the third quarter of 2012 to 11.0 per cent, including 50 per cent of interim profits.

The interest rate increases implemented during the first half of the year contributed to a 15.9 per cent increase in net interest income and a 0.41 percentage point widening of lending spreads from the third quarter of 2012.

Reduced impairment
At NOK 475 million, impairment losses on loans and guarantees were somewhat lower than in the third quarter of 2012 and close to half the figure for the second quarter of 2013, reflecting higher shipping freight rates.

Flat nominal costs
“In addition to the low level of impairment in the third quarter, we succeeded in reaching our target to maintain a flat nominal cost level. Our restructuring measures have started to take effect, and we have reduced the number of branch offices and concentrated our production to fewer geographical locations. The average number of full-time positions has been reduced by 1 049 from the third quarter of 2012,” says Bjerke.

Operating expenses were up NOK 78 million or 1.5 per cent from the third quarter of 2012. Adjusted for non-recurring expenses, including restructuring costs, there was a reduction in expenses of NOK 17 million or 0.3 per cent.

Soft landing for the Norwegian economy
“There are signs of a slowdown in the Norwegian economy after several years of brisk growth. However, trends vary from industry to industry. There was weaker growth in the oil supplier and construction industries, while there was a slight upturn for export and domestically-oriented industries. Growth in household services appears to have been brought to a halt. Nevertheless, we believe that Norway will experience a soft landing, with an annual increase in Mainland Norway’s GDP of approximately 2 per cent over the next few years and a small increase in unemployment figures,” says Bjerke.

Impairment losses on loans are expected to show a moderate trend during the remainder of the year, whereby total impairment for 2013 may end up at the lower end of the interval NOK 3-4 billion. 

Key figures for the third quarter of 2013
• Pre-tax operating profits before impairment were NOK 6.8 billion (5.3)
• Profit for the period was NOK 4.9 billion (3.5)
• Earnings per share were NOK 3.00 (2.17)
• Return on equity was 14.4 per cent (11.9)
• The ordinary cost/income ratio was 43.4 per cent (48.4)

Comparable figures for the second quarter of 2012 in parentheses