DNB BANK ASA First quarter report
2024
Unaudited
DNB Group1
Financial highlights
Income statement | 1st quarter | 1st quarter | Full year |
Amounts in NOK million | 2024 | 2023 | 2023 |
Net interest income | 15 526 | 14 600 | 61 547 |
Net commissions and fees | 2 702 | 2 634 | 11 115 |
Net gains on financial instruments at fair value | 1 183 | 2 464 | 5 283 |
Net insurance result | 203 | 154 | 1 183 |
Other operating income | 783 | 684 | 2 569 |
Net other operating income | 4 872 | 5 936 | 20 150 |
Total income | 20 398 | 20 536 | 81 697 |
Operating expenses | (7 306) | (6 863) | (28 395) |
Restructuring costs and non-recurring effects | 22 | (113) | (225) |
Pre-tax operating profit before impairment | 13 113 | 13 560 | 53 077 |
Net gains on fixed and intangible assets | (2) | 0 | 11 |
Impairment of financial instruments | (323) | 79 | (2 649) |
Pre-tax operating profit | 12 789 | 13 639 | 50 440 |
Tax expense | (2 558) | (3 137) | (10 811) |
Profit from operations held for sale, after taxes | (29) | (30) | (149) |
Profit for the period | 10 203 | 10 472 | 39 479 |
Balance sheet | 31 March | 31 Dec. | 31 March |
Amounts in NOK million | 2024 | 2023 | 2023 |
Total assets | 3 896 408 | 3 439 724 | 3 536 919 |
Loans to customers | 2 008 528 | 1 997 363 | 2 009 017 |
Deposits from customers | 1 565 992 | 1 422 941 | 1 521 390 |
Total equity | 282 605 | 269 296 | 263 790 |
Average total assets | 3 990 732 | 3 687 312 | 3 669 358 |
Total combined assets1 | 4 534 759 | 4 034 568 | 4 065 699 |
Key figures and alternative performance measures | 1st quarter | 1st quarter | Full year |
2024 | 2023 | 2023 | |
Return on equity, annualised (per cent)1 | 15.6 | 17.2 | 15.9 |
Earnings per share (NOK) | 6.48 | 6.59 | 24.83 |
Combined weighted total average spreads for lending and deposits | |||
(per cent)1 | 1.43 | 1.40 | 1.39 |
Average spreads for ordinary lending to customers (per cent)1 | 1.62 | 1.61 | 1.45 |
Average spreads for deposits from customers (per cent)1 | 1.18 | 1.14 | 1.32 |
Cost/income ratio (per cent)1 | 35.7 | 34.0 | 35.0 |
Ratio of customer deposits to net loans to customers at end of period, | |||
customer segments (per cent)1 | 77.3 | 78.6 | 74.9 |
Net loans at amortised cost and financial commitments in stage 2, per | |||
cent of net loans at amortised cost1 | 10.04 | 9.19 | 9.35 |
Net loans at amortised cost and financial commitments in stage 3, per | |||
cent of net loans at amortised cost1 | 1.07 | 1.07 | 1.17 |
Impairment relative to average net loans to customers at amortised | |||
cost, annualised (per cent)1 | (0.07) | 0.02 | (0.13) |
Common equity Tier 1 capital ratio at end of period (per cent) | 19.0 | 18.6 | 18.2 |
Leverage ratio (per cent) | 6.2 | 6.5 | 6.8 |
Share price at end of period (NOK) | 215.10 | 187.35 | 216.00 |
Book value per share | 170.44 | 158.59 | 162.92 |
Price/book value1 | 1.26 | 1.18 | 1.33 |
Dividend per share2 | 16.00 | ||
Sustainability: | |||
Finance and facilitate sustainable activities (NOK billion, accumulated) | 603.0 | 422.5 | 561.8 |
Total assets invested in mutual funds with a sustainability | |||
profile (NOK billion) | 112.6 | 30.6 | 124.3 |
Score from Traction's reputation survey in Norway (points) | 55 | 60 | 57 |
Customer satisfaction index, CSI, personal customers in Norway (score) | 69.3 | 73.6 | 71.4 |
Female representation at management levels 1-4 (per cent) | 39.0 | 39.5 | 38.8 |
- Defined as alternative performance measure (APM). APMs are described on ir.dnb.no.
- The Board of Directors proposes a dividend of NOK 16.00 per share for 2023.
For additional key figures and definitions, please see the Factbook on ir.dnb.no.
Contents | ||
Directors' report | 4 | |
Accounts for the DNB Group | ||
Income statement | 10 | |
Comprehensive income statement | 10 | |
Balance sheet | 11 | |
Statement of changes in equity | 12 | |
Cash flow statement | 13 | |
Note G1 | Basis for preparation | 14 |
Note G2 | Segments | 14 |
Note G3 | Capital adequacy | 15 |
Note G4 | Development in gross carrying amount and maximum exposure | 17 |
Note G5 | Development in accumulated impairment of financial instruments | 18 |
Note G6 | Loans and financial commitments to customers by industry segment | 19 |
Note G7 | Financial instruments at fair value | 21 |
Note G8 | Debt securities issued, senior non-preferred bonds and subordinated loan capital | 22 |
Note G9 | Contingencies | 23 |
Accounts for DNB Bank ASA (parent company) | ||
Income statement | 24 | |
Comprehensive income statement | 24 | |
Balance sheet | 25 | |
Statement of changes in equity | 26 | |
Note P1 | Basis for preparation | 27 |
Note P2 | Capital adequacy | 27 |
Note P3 | Development in accumulated impairment of financial instruments | 28 |
Note P4 | Financial instruments at fair value | 29 |
Note P5 | Information on related parties | 29 |
Information about DNB | 30 |
There has been no full or partial external audit of the quarterly directors' report and accounts, though the report has been reviewed by the Audit Committee.
DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED) / 3
Directors' report
The Norwegian economy remains resilient with a low level of unemployment. The inflationary pressure continued to ease during the first quarter, and the key policy rate is now expected to remain at 4.5 per cent until the latter part of 2024, before gradually being lowered. DNB's results for the first quarter remained strong, driven by lag effects from increased interest rates and a diversified fee platform. The capital situation is solid, and the portfolio is well- diversified and robust.
means that DNB must report in accordance with the CSRD in 2025 for the financial year 2024.
As at end-March, DNB had facilitated a cumulative total of NOK 603 billion in sustainable financing volumes and was on track to reach the target of NOK 1 500 billion by 2030. With regard to the target of NOK 200 billion in assets in mutual funds with a sustainability profile by 2025, NOK 113 billion had been invested as at 31 March 2024.
First quarter financial performance
The Group delivered profits of NOK 10 203 million in the quarter, a decrease of NOK 270 million, or 2.6 per cent, from the corresponding quarter of last year. Compared with the fourth quarter of last year, profits increased by NOK 799 million.
Earnings per share were NOK 6.48, compared with NOK 6.59 in the year-earlier period, and NOK 5.93 in the fourth quarter.
The common equity Tier 1 (CET1) capital ratio was 19.0 per cent at end-March, up from 18.6 per cent a year earlier and 18.2 in the previous quarter.
The leverage ratio was 6.2 per cent at end-March, compared with 6.5 per cent in the year-earlier period and 6.8 per cent at end- December.
Annualised return on equity (ROE) came in at 15.6 per cent in the first quarter, driven by strong results across the Group. The corresponding figures were 17.2 per cent in the first quarter of 2023, and 14.6 per cent in the fourth quarter of 2023.
Net interest income was up NOK 927 million, or 6.3 per cent, from the first quarter of 2023, but down NOK 471 million, or 2.9 per cent, from the previous quarter.
Net other operating income amounted to NOK 4 872 million, down NOK 1 065 million from the corresponding period in 2023. This can be ascribed to lower contribution from mark-to-market adjustments. However, net commissions and fees contributed positively with strong deliveries across product areas. Compared with the previous quarter, net operating income increased by NOK 880 million or 22.0 per cent.
Operating expenses amounted to NOK 7 284 million in the first quarter, up NOK 308 million from the corresponding period a year earlier, due to a further strengthening of core competence.
Compared with the previous quarter, operating expenses were down NOK 418 million, reflecting a seasonally lower activity level.
Impairment of financial instruments amounted to NOK
323 million in the first quarter, mainly driven by impairment provisions in stage 3.
Sustainability
During the first quarter, DNB established a Group project for energy efficiency. The project is intended to help promote the achievement of the goals set in DNB's transition plan, in addition to strengthening DNB's role as a driving force for sustainable transition. Initially, the focus of the project is how to achieve increased energy efficiency in real estate portfolios through sound advice and financing solutions for both corporate customers and personal customers.
DNB's rating for its reporting to CDP (formerly the Carbon Disclosure Project), an organisation that rates companies' efforts relating to climate impact, climate targets and climate risk analyses, was A- for 2023, compared with A for 2022. Despite the slight reduction, the result underscores DNB's engagement relating to climate change.
In March, the Ministry of Finance put forward its proposal for implementing the Corporate Sustainability Reporting Directive (CSRD) in Norwegian law. The Ministry proposed that the requirements should enter into force in Norway in 2024, with reporting for the first time in 2025 for the financial year 2024. This
Other events in the first quarter
During the first quarter, DNB Bank ASA completed the share buy- back programme announced on 22 December 2023, in line with the authorisation from the Annual General Meeting in April 2023. A total of 7 635 935 shares were purchased in the quarter, and following this, DNB owns a total of 33 054 725 own shares, corresponding to
2.14 per cent of the shares in the company. A proposal will be
made at the Annual General Meeting on 29 April 2024 to cancel all these shares. A proposal will also be made to redeem 17 028 192 shares from the Norwegian government, represented by the Ministry of Trade, Industry and Fisheries. The purpose of this is to ensure that the government's ownership interest of 34 per cent remains unchanged.
The technical migration of Sbanken was completed at the end of March. This entailed the transfer of Sbanken's systems, data and services to DNB's platform.
At DNB's annual security seminar in January, the Group presented its annual threat assessment focusing on security and economic crime to the Ministry of Justice and Public Security. This is the first year that DNB has published a comprehensive report covering the areas of cyber security, physical and personnel security, fraud, money laundering and sanctions.
At the end of March, for the first time ever, DNB Asset Management exceeded NOK 1 000 billion in assets under management.
In Traction's reputation survey for the first quarter of 2024, DNB scored 55 points. The goal is a result over 65 points, indicating that DNB is a well-liked bank.
DNB was given another top ranking in the Prospera survey, and customers rank the bank as best in Norway on Trade Finance. The Group was also given the top ranking in the Cash Management category, and first place in the latest Prospera Grand Total Norway.
In March, DNB won two awards at the Euromoney Private Banking Awards: best bank for family office services both in Norway and in the Nordics and Baltics. The awards are a recognition of DNB's efforts within private banking and family office services. The Family Office team in the Private Banking division manages the assets of high-net-worth families with complex and individual needs.
DNB won silver for its Ung-milliarden ('young billion') campaign at the Norwegian advertisers' association awards, ANFO Effekt, and was thus the best-ranked bank. The aim of ANFO Effekt is to showcase top-quality marketing that creates value. Through the Ung-milliarden campaign, more young people have been given the opportunity to enter the housing market, and DNB's market share in the young segment is growing steadily.
4 / DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED)
Operating expenses
1Q24 | 4Q23 | 1Q23 |
7 598 | 7 179 | 7 381 |
4 169 | 4 680 | 4 052 |
1 055 | 1 150 | 1 038 |
800 | 791 | 701 |
Amounts in NOK million | 1Q24 | 4Q23 | 1Q23 |
Salaries and other personnel expenses | (4 251) | (4 413) | (3 924) |
Restructuring expenses | (10) | (15) | (18) |
Other expenses | (2 148) | (2 298) | (2 055) |
Depreciation of fixed and intangible assets | (908) | (929) | (885) |
Impairment of fixed and intangible assets | 32 | (49) | (95) |
Total operating expenses | (7 284) | (7 703) | (6 976) |
(344) | (308) | (377) | Operating expenses were up NOK 308 million, or 4.4 per cent, | ||||
2 248 | 2 504 | 1 805 | compared with the first quarter of 2023. This was due to a higher | ||||
15 526 | 15 997 | 14 600 | number of full-time employees, relating to a further strengthening of | ||||
Net interest income increased by NOK 927 million, or 6.3 per cent, | core competence, as well as an increase in IT expenses. In | ||||||
addition, there were higher pension expenses compared with the | |||||||
from the first quarter of 2023. This was mainly due to increased | |||||||
first quarter of last year, due to the increased return on the closed | |||||||
interest rates and subsequent customer repricings, as well as | |||||||
defined-benefit pension scheme. The scheme is partly hedged, and | |||||||
higher interest on equity. The repricings implemented in October | |||||||
a corresponding gain was recognised in net gains on financial | |||||||
and November had full effect in the first quarter, and the repricing | |||||||
instruments. | |||||||
from mid-February had partial effect. There was an average | |||||||
Compared with the fourth quarter of 2023, operating expenses | |||||||
increase of NOK 22 billion, or 1.2 per cent, in the healthy loan | |||||||
were down NOK 418 million, or 5.4 per cent, reflecting a seasonally | |||||||
portfolio compared with the first quarter of 2023. Adjusted for | |||||||
lower activity-driven expenses, as well as a decrease in fees and | |||||||
exchange rate effects, volumes were up NOK 7 billion, or 0.4 per | |||||||
IT expenses. | |||||||
cent. During the same period, deposits were down NOK 22 billion, | |||||||
The cost/income ratio was 35.7 per cent in the first quarter. | |||||||
or 1.5 per cent. Adjusted for exchange rate effects, there was a | |||||||
decrease of NOK 35 billion, or 2.5 per cent. Average lending | Impairment of financial instruments by industry | ||||||
spreads widened by 1 basis point, and average deposit spreads | segment | ||||||
widened by 4 basis points compared with the first quarter of 2023. | Amounts in NOK million | 1Q24 | 4Q23 | 1Q23 | |||
Volume-weighted spreads for the customer segments widened by | |||||||
Personal customers | (111) | (117) | (70) | ||||
3 basis points. | Commercial real estate | 64 | (122) | 45 | |||
Compared with the fourth quarter of 2023, net interest income | Residential property | (79) | (67) | 23 | |||
decreased by NOK 471 million, or 2.9 per cent. This was mainly | Power and renewables | (18) | (88) | 11 | |||
due to fewer interest days in the quarter. There was an average | Oil, gas and offshore | (14) | (45) | 515 | |||
decrease of NOK 17 billion, or 0.9 per cent, in the healthy loan | Other | (165) | (482) | (445) | |||
portfolio, and deposits were up NOK 11 billion, or 0.8 per cent. | Total impairment of financial instruments | (323) | (920) | 79 | |||
Average lending spreads widened by 12 basis points, and average | |||||||
deposit spreads narrowed by 14 basis points compared with the | Impairment of financial instruments amounted to NOK 323 million in | ||||||
previous quarter. Volume-weighted spreads for the customer | the quarter. Impairment provisions amounted to NOK 111 million in | ||||||
segments widened by 1 basis point. | the personal customers industry segment. The corporate customers | ||||||
industry segments saw impairment provisions amounting to NOK | |||||||
1Q24 | 4Q23 | 1Q23 | 211 million. The impairment provisions for the quarter could | ||||
primarily be ascribed to specific customers in stage 3, spread | |||||||
2 702 | 2 927 | 2 634 | across various industry segments. Net stage 3 loans and financial | ||||
(240) | (500) | (4) | commitments amounted to NOK 21 billion at end-March 2023, | ||||
543 | (392) | 527 | which was a decrease of NOK 2 billion from the previous quarter | ||||
and at the same level as the corresponding period of 2023. The | |||||||
decrease in the quarter was driven by a few specific customers in various segments primarily relating to restructuring.
Net other operating income | 4 872 | 3 991 | 5 936 |
Net other operating income decreased by NOK 1 065 million, or
17.9 per cent, compared with the first quarter of 2023. This was mainly due to lower contribution from mark-to-market effects on financial instruments. Exchange rate effects related to additional Tier 1 (AT1) capital contributed positively. Net commissions and fees showed solid results with an increase of NOK 68 million, or 2.6 per cent. The increase was driven by a solid result from investment banking services.
Compared with the previous quarter, net other operating income increased by NOK 880 million, or 22.0 per cent, mainly due to basis swaps and exchange rate effects related to AT1 capital. Net commissions and fees were strong, as a result of a robust fee platform, despite a slight decrease of NOK 225 million, or 7.7 per cent.
Taxes
The DNB Group's tax expense for the first quarter is estimated at NOK 2 558 million, or 20.0 per cent of the pre-tax operating profit. The tax expense is affected by the estimated debt interest distribution, which is expected to reduce the tax expense for the Group in 2024.
DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED) / 5
Financial performance - segments
Financial governance in DNB is adapted to the different customer segments. Reported figures reflect total sales of products and services to the relevant segments.
Personal customers
Income statement in NOK million | 1Q24 | 4Q23 | 1Q23 |
Net interest income | 5 526 | 5 703 | 5 245 |
Net other operating income | 1 358 | 1 186 | 1 296 |
Total income | 6 884 | 6 889 | 6 541 |
Operating expenses | (2 811) | (2 911) | (2 695) |
Pre-tax operating profit before impairment | 4 072 | 3 978 | 3 845 |
Impairment of financial instruments | (67) | (149) | (147) |
Pre-tax operating profit | 4 005 | 3 829 | 3 699 |
Tax expense | (1 001) | (957) | (925) |
Profit for the period | 3 004 | 2 872 | 2 774 |
Average balance sheet items in NOK billion | |||
Loans to customers | 948.1 | 957.6 | 954.5 |
Deposits from customers | 573.2 | 582.4 | 581.5 |
Key figures in per cent | |||
Lending spreads1 | 0.96 | 0.74 | 0.91 |
Deposit spreads1 | 1.91 | 2.21 | 1.82 |
Return on allocated capital | 19.6 | 18.5 | 18.1 |
Cost/income ratio | 40.8 | 42.2 | 41.2 |
Ratio of deposits to loans | 60.5 | 60.8 | 60.9 |
1 Calculated relative to the 3-month money market rate. See ir.dnb.no for additional information on alternative performance measures (APMs).
The personal customers segment delivered strong profits and an increase in return on allocated capital of 1.5 percentage points from the first quarter last year, and 1.1 percentage points from the previous quarter.
Average loans to customers fell by 0.7 per cent from the first quarter of 2023. The mortgage portfolio decreased by 0.6 per cent. Average lending was down 1.0 per cent compared with the previous quarter. Deposits from customers fell by 1.4 per cent from the corresponding period last year, and by 1.6 per cent from the previous quarter. The ratio of deposits to loans declined by
-
percentage point, to 60.5 per cent. Combined spreads on loans and deposits widened by 6 basis points from the first quarter of 2023, and by 2 basis points compared with the previous quarter.
Net other operating income increased by 4.7 per cent from the corresponding quarter of last year. A positive development in income from long-term savings products was partly offset by a decrease in income from payment services and real estate broking. Compared with the previous quarter, there was a positive deve- lopment in income from pension products in DNB Livsforsikring, as well as seasonal variations in income from payment services and real estate broking activities.
Operating expenses increased by 4.3 per cent from the corre- sponding quarter of last year, mainly due to high IT activity. From the previous quarter, operating expenses declined by 3.4 per cent, mainly due to several non-recurring costs in the fourth quarter of last year. This effect was partly offset by seasonally high activity in DNB Eiendom.
Impairment provisions amounted to NOK 67 million in the personal customers segment in the quarter, compared with impairment provisions of NOK 147 million and NOK 149 million in the corresponding quarter of 2023 and the fourth quarter of 2023, respectively. The impairment provisions were mainly in stage 3. Overall, the credit portfolio remained robust.
DNB's market share of credit to households in Norway was
- per cent at end-February 2024. The market share of total household savings was 29.8 per cent at the same point in time, while the market share of savings in mutual funds amounted to
- per cent. DNB Eiendom had a market share of 15.1 per cent in the first quarter.
Corporate customers
Income statement in NOK million | 1Q24 | 4Q23 | 1Q23 |
Net interest income | 9 247 | 9 896 | 8 884 |
Net other operating income | 2 558 | 3 104 | 2 814 |
Total income | 11 805 | 13 000 | 11 697 |
Operating expenses | (4 226) | (4 328) | (4 031) |
Pre-tax operating profit before impairment | 7 579 | 8 672 | 7 666 |
Net gains on fixed and intangible assets | 0 | 0 | (0) |
Impairment of financial instruments | (254) | (770) | 225 |
Profit from repossessed operations | (43) | (111) | 132 |
Pre-tax operating profit | 7 282 | 7 791 | 8 023 |
Tax expense | (1 821) | (1 948) | (2 006) |
Profit for the period | 5 462 | 5 843 | 6 017 |
Average balance sheet items in NOK billion | |||
Loans to customers | 956.4 | 964.2 | 926.7 |
Deposits from customers | 857.4 | 844.5 | 867.9 |
Key figures in per cent | |||
Lending spreads1 | 2.29 | 2.26 | 2.34 |
Deposit spreads1 | 0.69 | 0.70 | 0.68 |
Return on allocated capital | 19.7 | 21.0 | 22.9 |
Cost/income ratio | 35.8 | 33.3 | 34.5 |
Ratio of deposits to loans | 89.6 | 87.6 | 93.7 |
1 Calculated relative to the 3-month money market rate. See ir.dnb.no for additional information on alternative performance measures (APMs).
The corporate customers segment delivered a satisfactory profit and a return on allocated capital of 19.7 per cent in the first quarter, down from 22.9 per cent in the corresponding quarter of 2023 and from 21.0 per cent in the previous quarter. The reduction in the return on allocated capital compared with the fourth quarter of 2023 was mainly due to lower net interest income and net other operating income.
Net interest income increased by NOK 363 million compared with the first quarter of 2023, but was down NOK 649 million compared with the previous quarter. Lending volumes were up
3.2 per cent compared with the corresponding quarter of last year. Adjusted for exchange rate effects, volumes increased by 2.1 per cent. Compared with the previous quarter, lending volumes were down 0.8 per cent, but up 0.3 per cent adjusted for exchange rate effects. Lending spreads widened by 3 basis points in the first quarter of 2024 compared with the previous quarter, but narrowed by 5 basis points compared with the corresponding quarter of 2023. Deposit volumes were down 1.2 per cent compared with the corre- sponding quarter of 2023, or 2.8 per cent adjusted for exchange rate effects. Compared with the previous quarter, deposit volumes were up 1.5 per cent, or 2.9 per cent adjusted for exchange rate effects. Deposit spreads narrowed by 1 basis point in the first quarter of 2024. The ratio of deposits to loans has remained high for some time, but in the longer term it is expected to gradually decrease.
Net other operating income amounted to NOK 2 558 million in the first quarter, down NOK 256 million from the first quarter of 2023, and down NOK 546 million compared with the previous quarter. Net gains on financial instruments at fair value amounted to NOK 85 million in the first quarter, compared with net gains of NOK 326 million in the corresponding quarter of 2023, and a net negative result of NOK 16 million in the previous quarter. Income from net commissions and fees increased by NOK 48 million from the corre- sponding quarter of last year, but was down NOK 147 million from the previous quarter. Income from Markets activities was down NOK 45 million from the corresponding quarter of last year and NOK 245 million from the previous quarter. Total income for the quarter ended at NOK 11 805 million, an increase of 0.9 per cent compared with the first quarter of 2023, but a decrease of 9.2 per cent com- pared with the previous quarter.
Operating expenses were up 4.8 per cent from the first quarter of last year, primarily driven by higher IT expenses. Compared with the previous quarter, operating expenses were down 2.4 per cent.
6 / DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED)
There were impairment provisions of NOK 254 million in the
corporate customers segment, which were mainly driven by specific customers in stage 3, spread across various industry segments. This is a decrease of NOK 515 million from the previous quarter.
DNB is well positioned for continued profitable growth in the large corporate customers segment and for building further on its market-leading position in the SME segment. The corporate customers segment has embedded DNB's net-zero ambition into key sectoral strategies, and through a wide range of advisory products and services the Group assists its customers in their green transition to more sustainable value creation.
Other operations
This segment includes the results from risk management in DNB Markets and from traditional pension products with a guaranteed rate of return. In addition, the other operations segment includes Group items not allocated to the customer segments.
Income statement in NOK million | 1Q24 | 4Q23 | 1Q23 |
Net interest income | 753 | 398 | 471 |
Net other operating income | 998 | (571) | 1 651 |
Total income | 1 750 | (174) | 2 122 |
Operating expenses | (288) | (191) | (74) |
Pre-tax operating profit before impairment | 1 462 | (364) | 2 048 |
Net gains on fixed and intangible assets | (2) | (0) | 0 |
Impairment of financial instruments | (1) | (1) | 1 |
Profit from repossessed operations | 43 | 111 | (132) |
Pre-tax operating profit | 1 501 | (254) | 1 918 |
Tax expense | 264 | 1 081 | (207) |
Profit from operations held for sale, after taxes | (29) | (138) | (30) |
Profit for the period | 1 737 | 688 | 1 681 |
Average balance sheet items in NOK billion | |||
Loans to customers | 104.7 | 108.4 | 108.0 |
Deposits from customers | 131.0 | 53.1 | 50.7 |
The profit for the other operations segment was NOK 1 737 million in the first quarter.
Risk management income was down from NOK 689 million in the corresponding quarter of last year, to NOK 571 million this quarter. The interest-rate trading performance was strong in the first quarter, although the income was slightly lower than in the corresponding quarter of last year. The bond portfolio's performance improved, as a result of narrowing credit spreads. The change in risk management income could mainly be attributed to valuation adjustments (XVA). Compared with the fourth quarter of 2023, risk management income was up NOK 325 million, mainly due to higher income from increased interest rates.
The pre-tax profit for guaranteed pension products was NOK
483 million in the first quarter, compared with NOK 429 million in the first quarter of 2023, and NOK 442 million in the last quarter of
2023. This increase can primarily be ascribed to the increased interest rates. The solvency margin without transitional rules was 257 per cent as of 31 March 2024, an increase from 189 per cent as at 31 March 2023, and an increase from 248 per cent at the end of the fourth quarter. Higher interest rates are the main driver for this increase. Somewhat increased market risk in the common portfolio has made a negative contribution to the solvency margin. At the current interest rate level, the transitional rules for technical insurance provisions have no effect, and the solvency margins with and without transitional rules are equal.
DNB's share of the profit in associated companies (most
importantly Luminor, Vipps and Fremtind) is included in this seg- ment. There was an increase in profit from these companies of NOK 24 million compared with the first quarter of 2023. Compared with the previous quarter, profit decreased by NOK 90 million mainly due to a somewhat reduced profit in Fremtind.
Funding, liquidity and balance sheet
There is still a good level of interest in the bank's issues under the short-term funding programmes, from investors in both Europe and the US. Interest rate expectations indicate lower interest rates in the medium term, which has resulted in considerable interest in all maturities of up to a year. The bank has had large liquidity buffers for some time now, so issuing activity has been slightly lower in the first quarter compared with activity last autumn. This means that there is a good level of capacity under all programmes, as well as substantial investor interest.
The bank expects to increase its issuing activity gradually in the time ahead, through issues in EUR, GBP and USD. Emphasis is being placed on issues under all the short-term funding pro- grammes, to maintain good capacity and ensure diversification. The US Commercial Paper (USCP) programme is still expected to be the largest, most important and most liquid short-term funding programme.
There was a high level of activity in the market for long-term funding from financial institutions in the first quarter. Market conditions were good throughout the quarter, driven by strong liquidity among investors and the fact that the leading economies globally have published macro figures showing a continued high level of activity, despite increased interest rates and high inflation. This has led to greater expectations in the market that a hard landing with a recession will be avoided, while at the same time the expectation of a reduction in central bank rates has been pushed somewhat further into the future, and long-term government rates have increased.
A particularly high volume of new issues in January meant that credit risk premiums remained at the same level as at the end of 2023, and issuers had to pay a higher premium to make new issues compared with the pricing in the secondary market. However, the favourable market conditions resulted in significantly lower credit risk premiums later in the quarter.
DNB obtained long-term funding amounting to a total of around NOK 44 billion in the quarter. This volume was mainly obtained through DNB Boligkreditt AS issuing covered bonds in EUR, SEK and NOK corresponding to a total of NOK 41 billion, with the remaining volume being made up of additional Tier 1 capital (AT1) issued in SEK.
The total nominal value of long-term debt securities issued by the Group was NOK 526 billion at end-March, compared with NOK 567 billion a year earlier. The average remaining term to maturity for long-term debt securities issued was 3.7 years, compared with 3.5 years a year earlier.
The short-term liquidity requirement, the Liquidity Coverage Ratio (LCR), remained stable at above 100 per cent throughout the quarter and stood at 139 per cent at the end of March. The net long-term stable funding ratio, NSFR, was 119 per cent, which was well above the minimum requirement of 100 per cent for stable and long-term funding.
Total combined assets in the DNB Group were NOK
4 535 billion at the end of March, up from NOK 4 066 billion a year earlier. Total assets in the Group's balance sheet were NOK
3 896 billion at end-March 2024, compared with NOK 3 537 billion at end-March 2023.
Loans to customers were at the same level as a year earlier. Customer deposits were up NOK 45 billion, or 2.9 per cent, during the same period. The ratio of customer deposits to net loans to customers was 77.3 per cent, down from 78.6 per cent a year earlier.
DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED) / 7
Capital position
The common equity Tier 1 (CET1) capital ratio was 19.0 per cent at end-March, up from 18.6 per cent a year earlier and 18.2 at end- December 2023.
Retained earnings in the period contributed to a 31 basis-point increase in the CET1 capital ratio, while dividends from DNB Livsforsikring had a positive effect of 8 basis points.
The CET1 capital ratio requirement for DNB at end-March was
-
per cent, while the expectation from the supervisory authorities was 16.8 per cent including Pillar 2 Guidance. The Group thus had a solid 2.1 percentage-point headroom above the current super- visory authorities' capital level expectation.
The risk exposure amount decreased by NOK 11 billion from end-December to NOK 1 089 billion at end-March.
The leverage ratio was 6.2 per cent at end-March, down from
- per cent in the year-earlier period and 6.8 per cent at end- December.
Proposition to the Storting on compulsory means of payment (cash)
The Norwegian government has proposed amendments to the provisions of the Norwegian Financial Contracts Act on consumers' right to pay with cash. According to the proposition, a consumer must be given the opportunity to pay with cash in a retail premises where a business owner on a regular basis sells goods or services to consumers, if it is possible to pay for the goods or services with other payment solutions in or in immediate connection with the retail premises. A limit of NOK 20 000 is proposed, with exemptions for the sale of goods from vending machines, sales in unstaffed retail premises and sales in premises to which only a limited circle of persons have access. Legal authority in regulations is proposed, so that special rules can be laid down for passenger transport services. The proposition also proposes an expansion of the scope of the rules on payment settlement and monetary claims in the Financial Contracts Act.
Capital adequacy
The capital adequacy regulations specify a minimum requirement for own funds based on a risk exposure amount that includes credit risk, market risk and operational risk. In addition to meeting the Pillar 1 minimum requirement, DNB must meet the Pillar 2 requirements and the combined buffer requirements under Pillar 1.
Capital and risk
1Q24 | 4Q23 | 1Q23 | |
CET1 capital ratio, per cent | 19.0 | 18.2 | 18.6 |
Tier 1 capital ratio, per cent | 21.1 | 20.0 | 20.2 |
Capital ratio, per cent | 23.6 | 22.5 | 22.0 |
Risk exposure amount, NOK billion | 1 089 | 1 100 | 1 080 |
Leverage ratio, per cent | 6.2 | 6.8 | 6.5 |
As the DNB Group consists of both a credit institution and a life insurance company, DNB has to satisfy a cross-sectoral calculation test to demonstrate that it complies with sectoral requirements: the capital adequacy requirement, in accordance with the CRR/CRD, and the Solvency II requirement. At end-March, DNB complied with these requirements by a good margin, with excess capital of NOK 51.1 billion.
New regulatory framework
Finanstilsynet's advice on systemically important institutions
Under Section 31 of the Norwegian Regulations on capital requirements and national adaptation of CRR/CRD IV (CRR/CRD IV Regulations), Finanstilsynet (the Financial Supervisory Authority of Norway) must, by the end of the first quarter each year, give the Norwegian Ministry of Finance qualified advice on which institutions should be regarded as systemically important in Norway and be required to meet a special buffer requirement of 1 or 2 per cent. According to the Regulations, systemically important institutions are to be subject to institution-specific buffer requirements.
Finanstilsynet's advice is that DNB Bank ASA should have a special buffer requirement of 2 per cent, and that KBN (the Norwegian Agency for Local Governments), Nordea Eiendomskreditt AS and Sparebank 1 SR-bank ASA should have a buffer requirement of 1 per cent.
Macroeconomic developments
The Norwegian economy has experienced slow growth during the last part of 2023 and into this year. In particular, fluctuations in the production and distribution of electricity, and in activity within fishing and aquaculture have contributed to this. If the contributions from the two industries mentioned are excluded, mainland GDP rose by
0.3 per cent from the period September‒November 2023, to the period December 2023‒February 2024. On the demand side, household consumption growth has been slow and housing invest- ment has fallen markedly. However, other investments, from main- land companies, the public sector and oil and gas companies, rose markedly last year.
Despite weak growth, registered unemployment has remained low and stable. The number of registered unemployed, adjusted for seasonal variations, was 1.9 per cent of the labour force in all months from August last year to March this year.
In March, the consumer price index rose by 3.9 per cent compared with the same month a year earlier. Core inflation, as measured by the CPI-ATEAll-item index, declined to 4.5 per cent in March. In recent months, it was particularly price growth for imported goods that slowed, while price growth for other goods and services remained at the same level. In the housing market, seasonally adjusted prices rose by an average of 0.7 per cent month on month for the first three months of this year. This was higher than, for instance, the projections of Norges Bank, and current developments indicate house price growth of around 3 per cent this year.
Norges Bank kept the key policy rate unchanged at its January monetary policy meeting. As in December, it announced that the rate will most likely remain at 4.50 per cent for some time. This was reiterated at the monetary policy meeting in March, but there, the Governor of Norges Bank stated that the key policy rate would most likely be reduced in September this year. The interest rate path presented at the meeting indicated the same trend. The prospects of interest rate cuts are linked to expectations that inflation will fall further and that unemployment will rise somewhat. The interest rate path reflects Norges Bank's attempts to strike a balance between the objective of curbing inflation on the one hand, and the objective of avoiding an excessive rise in unemployment on the other.
8 / DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED)
Future prospects
The Group's overriding financial target is a return on equity (ROE) above 13 per cent.
Norges Bank's stepwise increase of the key policy rate, from
2.75 per cent to 4.50 per cent during 2023, followed by DNB's repricing announcements, had full effect from the beginning of 2024, except for the most recently announced 25 basis-point increase, which had effect from February 2024.
The following factors will also contribute to the Group reaching its ROE target: growth in loans and in commissions and fees from capital-light products, combined with cost-control measures. The annual organic loan growth for the Group is expected to be between 3 and 4 per cent over time, but could be lower or higher in certain years. Loan growth is expected to remain muted for the first half of 2024.
DNB has an ambition to increase net commissions and fees by between 4 and 5 per cent annually, and to maintain a cost/income ratio below 40 per cent.
The tax rate going forward is expected to be 23 per cent. Due to debt interest distribution in Norwegian taxation, the tax rate is estimated to 20 per cent for 2024.
The supervisory expectation for the common equity Tier 1 (CET1) capital ratio for DNB is above 16.8 per cent. In its capital planning, DNB has set the supervisory expectation plus some headroom as its target capital level. The headroom will reflect market-driven fluctuations, including in foreign exchange, and potential minor regulatory changes. The actual ratio achieved in the first quarter was 19.0 per cent.
The Group's dividend policy remains unchanged, with a payout ratio of more than 50 per cent in cash dividends and an ambition to increase the nominal dividend per share each year. In addition to dividend payments, repurchases of own shares are being used as a flexible tool for allocating excess capital to DNB's owners. The Board of Directors has proposed a dividend for 2023 of NOK 16.00 per share, or a total of NOK 24 153 million, corresponding to a payout ratio of 63 per cent. The Board will again this year ask the Annual General Meeting for authorisation to repurchase 3.5 per cent of outstanding shares for 2024. DNB will need approvals from Finanstilsynet before announcing its share buy-back programmes.
Oslo, 22 April 2024
The Board of Directors of DNB Bank ASA
Olaug Svarva | Lillian Hattrem |
(Chair of the Board) | |
Jens Petter Olsen | Stian Tegler Samuelsen |
(Vice Chair of the Board) | |
Gro Bakstad | Jannicke Skaanes |
Christine Bosse | Kim Wahl |
Petter-Børre Furberg | |
Julie Galbo | Kjerstin R. Braathen |
(Group Chief Executive Officer, CEO) |
DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED) / 9
Accounts for the DNB Group
G - INCOME STATEMENT
1st quarter | 1st quarter | Full year | |
Amounts in NOK million | 2024 | 2023 | 2023 |
Interest income, effective interest method | 46 268 | 32 418 | 153 550 |
Other interest income | 2 073 | 1 737 | 7 095 |
Interest expenses, effective interest method | (33 163) | (19 906) | (101 757) |
Other interest expenses | 348 | 350 | 2 658 |
Net interest income | 15 526 | 14 600 | 61 547 |
Commission and fee income | 3 636 | 3 541 | 14 772 |
Commission and fee expenses | (934) | (907) | (3 658) |
Net gains on financial instruments at fair value | 1 183 | 2 464 | 5 283 |
Net insurance result | 203 | 154 | 1 183 |
Profit from investments accounted for by the equity method | 188 | 164 | 449 |
Net gains on investment properties | 3 | (1) | 43 |
Other income | 592 | 521 | 2 077 |
Net other operating income | 4 872 | 5 936 | 20 150 |
Total income | 20 398 | 20 536 | 81 697 |
Salaries and other personnel expenses | (4 261) | (3 941) | (16 320) |
Other expenses | (2 148) | (2 055) | (8 506) |
Depreciation and impairment of fixed and intangible assets | (875) | (979) | (3 794) |
Total operating expenses | (7 284) | (6 976) | (28 620) |
Pre-tax operating profit before impairment | 13 113 | 13 560 | 53 077 |
Net gains on fixed and intangible assets | (2) | 0 | 11 |
Impairment of financial instruments | (323) | 79 | (2 649) |
Pre-tax operating profit | 12 789 | 13 639 | 50 440 |
Tax expense | (2 558) | (3 137) | (10 811) |
Profit from operations held for sale, after taxes | (29) | (30) | (149) |
Profit for the period | 10 203 | 10 472 | 39 479 |
Portion attributable to shareholders | 9 789 | 10 192 | 38 166 |
Portion attributable to non-controlling interests | (1) | 0 | 2 |
Portion attributable to additional Tier 1 capital holders | 414 | 280 | 1 312 |
Profit for the period | 10 203 | 10 472 | 39 479 |
Earnings/diluted earnings per share (NOK) | 6.48 | 6.59 | 24.83 |
Earnings per share excluding operations held for sale (NOK) | 6.50 | 6.61 | 24.93 |
G - COMPREHENSIVE INCOME STATEMENT
1st quarter | 1st quarter | Full year | |
Amounts in NOK million | 2024 | 2023 | 2023 |
Profit for the period | 10 203 | 10 472 | 39 479 |
Actuarial gains and losses | (291) | ||
Property revaluation | 2 | ||
Financial liabilities designated at FVTPL, changes in credit risk | (30) | 37 | (102) |
Tax | 8 | (9) | 99 |
Items that will not be reclassified to the income statement | (23) | 28 | (292) |
Currency translation of foreign operations | 3 991 | 6 118 | 4 950 |
Currency translation reserve reclassified to the income statement | |||
Hedging of net investment | (3 188) | (5 056) | (3 845) |
Hedging reserve reclassified to the income statement | |||
Financial assets at fair value through OCI | 449 | 14 | (147) |
Tax | 685 | 1 257 | 998 |
Items that may subsequently be reclassified to the income statement | 1 937 | 2 334 | 1 955 |
Other comprehensive income for the period | 1 914 | 2 361 | 1 663 |
Comprehensive income for the period | 12 117 | 12 834 | 41 142 |
10 / DNB GROUP - FIRST QUARTER REPORT 2024 (UNAUDITED)
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
DnB Bank ASA published this content on 23 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 April 2024 05:33:08 UTC.
